Slim New Issues Come From European Market


The new issues market had a lackluster performance again last week, as only two deals priced by press time. Both of them were from the European market, and one of them was actually from late the previous week, after press time.

These two companies, Telewest Communications and United Pan-Europe Communications, are both repeat issuers from the recent past, are both cable plays, and at least one of them increased its offering substantially this time around.

All of that reflects what investors have said for months: there is a healthy appetite for the well-known, liquid names, especially in the media sectors.

Other names that are said to be looking at high yield issues include Felco Lodging Trust Inc., a Texas-based real estate investment trust that focuses on hotel properties. It is reportedly looking to do a $200 million offering. Deutsche Banc Alex. Brown, Chase Securities and Morgan Stanley Dean Witter are said to be the lead managers on that deal.

Telewest, the second largest cable company in the U.K., priced a $900 million transaction, which was an increase over the original size of $493 million.

The first tranche was for $350 million and carried a rating of B1 from Moody's Investors Service and single B-plus from Standard & Poor's Ratings Service. It featured a 9.875% coupon and priced at 98.4450 to yield 340 basis points over Treasurys.

The tranche is initially callable in 2005 at 104.938, and then prices fall in subsequent years to 104.938, 101.646, and par thereafter.

The second tranche, worth GBP180 million, also carried a rating of B1 from Moody's and single B-plus from S&P. It carried a coupon of 9.875% and priced at 98.445 to yield 432 basis points over Treasurys.

It is first callable in 2005 at 104.938, and then prices fall in succeeding years to 103.292, 101.646. and par.

Telewest's third tranche had a face value of $450 million, but as a zero coupon issue, it priced at 57.4060 and it yielded 465 basis points over Treasurys. It carried a B1 rating from Moody's and single B-plus by S&P.

The call schedule for the tranche is as follows: first call is in 2005 at 105.688, and then prices fall to 103.791, 101.846, and par in each year thereafter.

The other big deal was a repeat offering for cable company United Pan-Europe. That deal came on the heels of a $1 billion offering in conjunction with an $870 million stock offering in October, and a $1.5 billion bond issue in July.

One London-based buy sider said that some European portfolio managers are getting irritated at the company for the continued debt issuance because with each new issue, the previous ones usually trade down as the supply of UPC debt increases.

For its part, this issue was segmented in several tranches. The largest, with a face value of $1 billion, priced at 51.224 and carried a 13.75% coupon. It carried a rating of B2 from Moody's and single B from S&P.

The deal is initially callable in 2005 at 106.875, and then prices fall to 104.583, 102.292, and par in each subsequent year.

The second tranche, for $600 million, carried a coupon of 11.25% and priced at 98.2540 to yield 475 basis points above Treasurys. It carried a rating of B2 from Moody's and single-B from S&P.

And the third major piece of UPC's deal was for $300 million. It carried a coupon of 11.5% and priced at 99.2610 to yield 500 basis points over Treasurys.

First call on that tranche is in 2005 at 107.26, and then prices decline in subsequent years to 104.84, 102.42 and par.