Energy Partners deal prices; Charter gains on S&P move; Clear Channel gyrates

By Paul Deckelman and Paul A. Harris

New York, April 18 - Energy Partners Ltd. successfully priced its $450 million two-part transaction which saw the fixed-rate tranche price on top of talk while the floating-rate notes priced at the wide end of talk. When the new bonds were freed for secondary market dealings, traders saw them firm solidly in line with the recent pattern of aftermarket appreciation for the new deals.

Among the established secondary market names, Charter Communications Inc.'s bonds were seen better - although market participants were divided on how much improved - after Standard & Poor's raised the St. Louis-based cable operator's corporate credit and related debt levels one notch to B- from CCC+ previously, citing its successful bank debt refinancing.

Clear Channel Communications Inc.'s bonds "took a hit" in morning dealings, a trader said, on the news that the two private-equity firms that are buying out the San Antonio, Tex.-based media and entertainment company had sweetened their bid - stoking bondholder fears of even more borrowing to fund the deal. But the bonds were heard to have come back, as even the improved offer has apparently failed to sway large stockholders opposed to the deal on present terms.

News of a big asset sale by Mirant Corp. failed to help the Atlanta-based power generating company's bonds - with a trader explaining that the deal had already been priced in and, in fact, would actually yield less in the way of proceeds than originally hoped for.

Out of the distressed-debt precincts came word that Delphi Corp.'s bonds were lower on market speculation that the planned acquisition of the bankrupt Troy, Mich.-based automotive parts supplier by a private-equity firm may be limping along in the breakdown lane.

A high yield syndicate official told Prospect News that the broad market was better on Wednesday.

The source said that the high yield-tracking CDX 100 index was 4 bps tighter on the session, and added that on-the-run bonds, as well as the existing paper of home builders, had improved.

Energy Partners brings $450 million

New Orleans-based Energy Partners priced a $450 million two-part senior unsecured notes transaction (Caa1/B-) on Wednesday.

The independent oil and natural gas exploration and production company priced a $150 million tranche of six-year floating-rate notes at par to yield three-month Libor plus 512.5 basis points, on the wide end of the Libor plus 500 basis points area price talk.

In addition Energy Partners priced a $300 million tranche of seven-year fixed-rate notes at par to yield 9¾%, on top of the 9¾% area price talk.

Banc of America Securities was the bookrunner for the debt refinancing and share buyback deal.

Sinking floaters

A sell-side source, noting that the Energy Partners fixed-rate notes came on top of the price talk while the floating-rate notes came at the wide end, recalled last week's offering by KAR Holdings, Inc. of $1.025 billion in three-part high yield notes, and pointed out that whereas the $450 milion seven-year fixed-rate tranche came on the tight end of price talk, KAR Holdings' $150 million tranche of seven-year senior floating-rate notes priced at par to yield three-month Libor plus 400 basis points, on the wide end of the Libor plus 375 to 400 basis points price talk.

Hence, like Energy Partners, KAR seemed to see a tighter execution on the fixed-rate tranche than on the floater.

The sell-sider conceded that presently interest in floating-rate notes among the accounts is low.

The reason, said the source, is that there is considerably less call protection than that which comes with the typical fixed-rate notes.

The KAR floater came with just two years of call protection. The new Energy Partners floater has just one year of call protection.

"There's no room for that bond to run," the sell-sider asserted.

Elsewhere, a buy-side source said that it is difficult putting in the kind of work that a bond deal requires when you are liable to be taken out of the paper in two years, or, in the case of the Energy Partners floating-rate notes, in just one year.

Peermont prices two-parter

Elsewhere, in a deal that came from an emerging markets issuer but was also marketed to high-yield accounts, South African gaming and lodging firm Peermont Global priced ZAR 5.887 billion equivalent of bonds in two tranches on Wednesday.

Peermont Global (Pty.) Ltd. priced €520 million of seven-year senior secured notes (B3/B) at par to yield 7¾%, at the tight end of the 7 7/8% area price talk.

Meanwhile Peermont Global II (PTY) Ltd. priced a ZAR 887 million tranche of non-rated eight-year senior PIK notes at par to yield 18%, at the tight end of the 18% to 18¼% price talk.

Citigroup was the bookrunner for the acquisition financing.

Energetic trading in new Energy Partners

When the new Energy Partners bonds moved over to the aftermarket, traders saw both tranches of notes heading higher.

One quoted its 9¾% senior notes due 2013 "doing pretty well all afternoon" at 101.875 bid, 102.375 offered, up from their par issue price earlier in the session. Its floating-rate seniors due 2014 had firmed to 101 bid, 101.5 offered.

At another desk, the traders were quoting the new bonds even better, with the fixed-rate notes at 102 bid, 102.25 offered, while the floaters had moved up to 101.75 bid, 102.25 offered.

The rise in the bonds was in line with recent strength shown in new issues, as secondary investors have snapped up such names as Cimarex Energy Co., whose upsized $350 million of 7 1/8% notes due 2010 priced at par on Tuesday and promptly moved higher, and those of KAR Holdings Inc., United Surgical Partners International Inc. and iPCS Inc., each of whose new notes firmed solidly after their respective pricings last week.

Charter 11s champs on S&P move

Back among the established names, Charter Communications bonds were seen to have moved up smartly in the wake of a Standard & Poor's ratings upgrade for the sometimes-troubled cable systems operator, one of the nation's largest.

Its CCH I subsidiary's 11% notes due 2015 were quoted by one source as much as 3 points and change higher on the day at 105.875, in very active trading following the ratings boost.

On the other hand, a trader elsewhere, while seeing Charter's 11¾% notes due 2014 as having moved up ½ point to par bid, 101 offered, opined that it was "not a huge jump," while another agreed that it "didn't move that much," seeing the company's 8% Charter Communications Operating Co. notes due 2012 up "a little" at 104.5. Yet another source saw those same bonds at 104.75, but likewise had them up only by about ¼ point.

S&P, in upping Charter's ratings to B- from CCC+ previously, also removed the company from its previous position on CreditWatch with negative implications. The outlook on the company's approximately $19 billion of debt is now stable.

The ratings agency cited Charter's recent success in refinancing certain of its bank loans in upgrading its debt.

"This refinancing materially reduces what would have otherwise been problematic near-term debt maturities," S&P credit analyst Richard Siderman wrote in his upgrade message, adding that "in particular, it assuages our former concerns over the company's ability to meet 2007 and 2008 debt maturities amid heavy capital spending related to rolling out new services."

S&P kept the current B+ rating on some $8 billion in senior secured credit facilities and its B rating on a $350 million third-lien term loan.

The agency further left Charter's recovery rating was left at 1 - a sign that S&P anticipates full recovery of principal in the event of a default.

Not so clear for Clear Channel

Elsewhere, a trader said that Clear Channel's bonds "took a hit early on" on the news that Thomas H. Lee Partners LP and Bain Capital Partners LLC had raised their buyout bid on the radio and outdoor advertising giant to $19.35 billion, or $39 per share, from $19 billion, or $37.60 per share previously, in a last-ditch effort, just a day before a scheduled shareholder vote on the proposed deal, to get some balky large shareholders to get with the program. However, news reports indicated that those big holdouts were not impressed with the roughly 4% increase in the buyout price and still oppose the deal. The shareholder vote which was to have taken place Thursday has now been pushed off till May 8.

Bondholders - scared that any kind of substantially improved offer for the company will mean that much additional leverage in terms of borrowings to fund the buyout - breathed a sign of relief, and the bonds headed back up from their earlier lows.

A trader saw a "rebound in the afternoon" that lifted the company's 7¼% notes due 2027 off their early lows to finish about unchanged at 88 bid, 89.5 offered.

However, another source saw those bonds finishing at the 91.5 level, well up from their lows around 87 and up as well from Tuesday's close around 88.5.

On the other hand, the widely traded 5½% notes due 2014 were seen having shrunk to around the 84.625 level by the close, below its 87ish finish on Tuesday.

The better offer by Thomas H. Lee and Bain was aimed at mollifying two of the company's largest shareholders, Fidelity Management & Research and Highfields Capital Management LP, Clear Channel's largest and third-largest holders, respectively. They collectively hold about 15% of the stock. Both have said that the original offer badly undervalued the company, and published reports Wednesday indicated that neither was budging from that position.

Analysts have indicated that any offer below around $41 per share is unlikely to win the two-thirds of shareholder votes needed for the buyout to take place.

Besides the $19 billion-plus cash price for the company, the buyout transaction envisions the assumption of about $8 billion of debt, bringing its total value to the $27 billion area.

Clear Channel had planned to tap the junk market for $4.1 billion and the bank debt market for a whopping $17.375 billion to help finance the deal under the existing offer. Bondholders fear that any increase in the price the two buyout shops and the founding Mays family would offer that would be substantial enough to win over the reluctant shareholders is likely to require additional borrowing, further increasing the company's leverage and adding an even bigger cushion of debt to the capital structure above the existing bonds.

Mirant deal no help to bonds

Just as shareholders were not very impressed with that sweetened offer for Clear Channel, bondholders were likewise underwhelmed by the news that Mirant will sell its Caribbean business to a subsidiary of Marubeni Corp. for $1.08 billion.

That translates to a cash price of about $732 million plus the assumption by the buyer of $350 million in debt. The deal also includes power purchase obligations of about $153 million and estimated working capital at closing. Mirant estimates that it will garner net proceeds of some $565 million after payment of transaction costs estimated to be about $14 million.

Junk investors were very blasé about the asset sale, which one trader said "didn't have much to do with what happened today." He saw Mirant's 9 1/8% notes due 2031 unchanged at 109 bid, 110 offered.

Another trader quoted the 8.30% notes due 2011 about unchanged at 105.75 bid, 106.5 offered.

"The asset sale was widely expected, and the proceeds were less than expected," he declared, in calling the news a non-event as far as junk trading was concerned.

Delphi bonds drop

In the distressed autosphere, Delphi was deemed "very active" by one trader, pegging the company's 7 1/8% note due 2029 down 1½ points at 109 bid, 110 offered.

Another saw Delphi lower on "rumblings" that its buyout deal was in trouble, calling the bonds down 1 to 1¼ points, with the 6.55% notes due 2006 at 110, the 7 1/8% 2029s at 109.625, and its 6½% notes due 2013 down nearly 2 points at 108.125, on considerable trading activity.

The first trader said the drop was due to the threat that Cerberus Capital Management LP may pull out of a $3.4 billion offer to buy the automotive parts producer. According to news reports, sources close to the negotiations say the private equity firm is concerned the company cannot generate enough profits to make the investment worthwhile.

Ongoing discussions with the United Auto Workers union have also swayed the firm. The union has resisted wage cuts proposed by the firm, which it says are essential to the struggling company's survival.

But, Delphi could go another way: there is a rival bid of $4.7 billion by Dallas-based Highland Capital Management LP. Cerberus is also looking at acquiring bankrupt Tower Automotive Inc.

Stephanie N. Rotondo contributed to this report.

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