Big Flower Plants Roots In High Yield Market

At the time when investors were supposed to be hunkering down and simply waiting out the year, some issuers are deciding to test the water with high yield offerings. And there are a few, while not officially announced, that are at least being talked up by Wall Street pros and buy-siders alike.

Big Flower Press, for example, is expected to come to the market in the next few weeks with a sizable high yield offering to help pay for some recent announcements.

Although company officials refused to comment, there were announcements last week of tender offers totaling $600 million. In addition, there was an announcement that the company is seeking shareholder approval for a merger with BFH Merger Corp., an affiliate with Thomas H. Lee Co. and Evercore Capital Partners.

Those companies are looking to buy out the equity and take the firm private, buy-siders said.

"Big Flower will need to come to the high yield market with a fair bit of financing," said an outside analyst last week.

New York-based Big Flower provides advertising and marketing services to retail media and manufacturing customers as well as advertising agencies, according to published reports.

Elsewhere in the new issues market, Kansas City-based Frontier Refining is bringing a $190 million deal via Bear, Stearns & Co. The deal, illustrative of the growing dichotomy in the energy sector, will depend on the coupon, said Tom Parker, a Chase Securities analyst. Currently at 10.75%, the question becomes whether that's acceptable to investors, Parker said.

The chasm between the good names and the lower-tier names in high yield energy has never been greater, investors said. The good names, on the strength of increasing oil prices per barrel, have never traded tighter in the secondary market. They are at spreads of 120 to 130 basis points over Treasurys.

But the lower tier has seen disappointing results and plummeting bond prices in the secondary. So where the buy-side deems the Frontier transaction is yet to be seen.

Other, even bigger deals in the market include Voice Stream, Metromedia and Spanish Broadcasting.

VoiceStream, the wireless communications company that is seeking a roll-up of the GSM technology (HYR 10/25/99), is poised to hit the market with a mammoth $1 billion offering of senior notes and senior discount notes. VoiceStream recently bought Aerial and OmniPoint and also is looking for funds for future acquisitions as well, investors said.

Metromedia is putting the final touches on a $600 million deal of 10-year senior notes that is part of a $2.2 billion shelf registration. And Miami-based Spanish Broadcasting is looking to raise $235 million in 10-year senior subordinated notes in conjunction with an initial public offering.

Also in the offing is a $400 million deal from Global Crossing that will help finance its bridge loan that paid for Racal Electronics' phone business.

Deals of The Week

Buhrmann U.S. Inc. sold $350 million of high yield notes, via Deutsche Banc Alex. Brown, structured as senior subordinated notes. The deal carried a rating of B2 from Moody's Investors Service and single-B from Standard & Poor's. The issue, which carried a coupon of 12.25%, priced at 98.5920 to yield 627 basis points over Treasurys.

It is initially callable in 2004 at 106.25, and then prices decline in subsequent years to 105, 103.75, 102.5, 101.25 and par in each year thereafter.

Burhmann is a Netherlands-based office products supplier.

U.S. Unwired, for its part, was able to price a Caa1/CCC+ issue worth $400 million last week. The zero-coupon deal, structured as senior discount notes, was priced at 52.3060 to yield 713 basis points over Treasurys.

The deal is callable for the first time in 2004 at 106.688, and then prices fall in succeeding years to 104.458, 102.229 and par.

U.S. Unwired provides cellular and paging services, and it concentrates on the Louisiana, Mississippi, Alabama and Kansas markets.