Though the last junk issue was on Sept. 6, several capital markets officials and investors believe junk issuance could start up again this week. The only deal that may actually be on the road is a $275 million deal from Sweetheart Cup Inc., according to a senior capital markets official. This deal is led by Jefferies & Co., but Jefferies executives could not be reached at press time. Jim Potesky, industrials and food analyst in the leveraged finance division of Credit Suisse Asset Management, says the deal has appeal because Sweetheart makes products that will still be attractive in the continuing downturn.
Another deal Potesky describes as counter-cyclical, and one he feels could get done fairly soon, is a $150 million offering by Advance Stores (B-), a do-it-yourself auto supply retail chain.
Fred Cohen, head of high-yield capital markets at Banc of America Securities, said early last week that his firm planned to announce and launch a healthcare deal early this week. His firm had been scheduled to lead a $200 million deal for Insight Health (B3/B-), but he would not confirm that this was the one he was alluding to. BofA was also to bring another healthcare deal, and two media deals shortly in the next few weeks, assuming some stability in the equity markets. But the Dow Jones Industrial Average has fallen several hundred points since then, and Cohen could not be reached late in the week.
Several other healthcare deals had been on the calendar, and Diane Vazza, head of global fixed-income research at Standard & Poor's, believes those, along with selected project finance deals which she declines to mention, will be the first to get done.
Among the healthcare deals, the most widely anticipated is a $500 million offering by HealthSouth (Ba1/BBB-). Ed Massaro, head of high-yield capital markets at UBS Warburg, says the deal was ready to price on September 12 or 13, but was postponed in the wake of the attacks and is now "day to day." He points out that HealthSouth has no immediate financing needs, but sought to take advantage of what it had seen as a favorable pricing environment. He says the 25 basis points of widening the name has seen in the secondary market is probably not a deal killer, though significant further widening--he would not say exactly how much--might cause the company to call the deal off. One analyst says price talk was 7.75% before the disaster. Massaro says there had not been price talk before the disaster. Last Friday, HealthSouth's 6 7/8% notes of '05 yielded 7.8%, and the analyst says it is safe to assume that a deal would now come at a slight premium to that level. Massaro would not comment.
