Cablevision $2 billion mega-deal prices, also Sealy, Service; bondholders say 'hooray for Hollywood'

By Paul Deckelman and Paul A. Harris

New York, March 30 - Cablevision Systems Corp. was heard by high-yield syndicate sources to have priced its three-part $2 billion offering late Tuesday on the busiest primary-side day volume-wise in some weeks; also heard having successfully brought smaller deals to market were Service Corp. International, Sealy Mattress Co., Encore Acquisition Co. and Prestige Brands. Price talk meanwhile emerged on Boyd Gaming Corp.'s upcoming offering of 10-year notes, which could price as soon as Wednesday.

In secondary market activity, Hollywood Entertainment Corp.'s 9 5/8% notes due 2011 were being quoted up sharply on continued investor reaction to Monday's news that the Portland, Ore.-based movie-rental chain operator will be going private in a management-led buyout. Airline issues were hitting some turbulence after some ministers of the Organization of Petroleum Exporting Countries said the cartel would go ahead with planned production cuts, which is sure to boost the price of crude oil and such derivatives as jet fuel.

And Trump Atlantic City Funding bonds were heard easier, after the independent auditors for A.C.'s parent company included a "going concern" warning in Trump Hotels & Casino Resorts Inc.'s 10-K report.

In total, the primary market saw sales of $3 billion in six tranches during Tuesday's session, with $2 billion of that action coming in three pieces from Bethpage, N.Y. entertainment, media and telecommunications company Cablevision.

"The party continues," observed one sell-side official as deal terms circulated the market late Tuesday.

"There are only one or two things that could stop it now I think.

"One of those would be another billion dollar-plus outflow [from high yield mutual funds].

"Another factor that could have some influence on the activity in the primary market is the hedge funds. They're not mainstream high yield participants. They're all total return-driven. And after milking the cow last year and realizing a healthy return in the neighborhood of 30%, they could now be moving money out of high yield because there's not enough juice (or milk, as the case may be) in high yield from a total return perspective.

"This is going to be a coupon-clipping year. You'll be able to realize 7½% to 8%.

"But in the main, spread tightening is behind us."

Cablevision does $2 billion

Cablevision priced what was by far the session's biggest deal - a quick-to-market $2 billion in three-tranches.

CSC Holdings, Inc., the operating company, sold $500 million of eight-year fixed-rate senior notes (B1/BB-) at par to yield 6¾%, on top of the 6¾% area price talk.

Citigroup, Banc of America Securities, Bear Stearns & Co., Merrill Lynch & Co. and Wachovia Securities were joint bookrunners on the tranche.

Cablevision Systems Corp., the holding company, sold $1 billion of eight-year fixed-rate senior notes (B3/B+) at par to yield 8%, at the wide end of the 7¾%-8% price talk.

Citigroup, Banc of America Securities, Bear Stearns & Co. and Morgan Stanley ran the books on the holding company's fixed-rate tranche.

And Cablevision Systems also sold $500 million of five-year senior floating-rate notes (B3/B+) at par to yield six-month Libor plus 450 basis points.

JP Morgan and Credit Suisse First Boston were the bookrunners on the holding company floaters.

"Cablevision had a lot of bonds out there - bonds that trade a lot - so people know the company," one informed source commented late Tuesday.

"This deal was to refinance existing debt. They were just taking bonds that were out there and replacing them with new ones, so it was not that complicated.

"But everybody's got a view on Cablevision, which is perhaps why it was possible to do $2 billion in a drive-by."

Four other issuers bring $1 billion

Also pricing Tuesday was a downsized $390 million sold by Sealy Mattress Co., a subsidiary of High Point, N.C., bedding manufacturer Sealy Corp. The deal was reduced from $490 million.

The company priced its 10-year senior subordinated notes (Caa1/B-) at par to yield 8¼%, at the tight end of the 8¼%-8½% price talk, with Goldman Sachs & Co. and JP Morgan running the books.

Meanwhile Houston funeral company Service Corp. International sold $250 million of 6¾% 12-year senior notes (B1/BB-) at 99.50 to yield 6.812%. Price talk was for a yield in the 6 7/8% area on the debt refinancing deal led by Merrill Lynch & Co.

Prestige Brands Inc., the Bonita Springs, Fla. consumer products company, sold $210 million of eight-year senior subordinated notes (Caa1/CCC+) at par to yield 9¼%. Price talk was the 9% area.

Citigroup and Banc of America Securities ran the books acquisition financing deal.

And Encore Acquisition Co. sold $150 million of 10-year senior subordinated notes (B2/B) at par to yield 6¼%, at the tight end of the 6¼%-6 ½% price talk.

Goldman Sachs & Co. ran the books on the deal from the Fort Worth, Tex.-based independent energy company engaged in the acquisition, development and exploitation of North American oil and natural gas reserves.

Delco to start roadshow for $275 million

The roadshow starts Thursday for Delco Remy International, Inc.'s offering of $275 million of bonds in two tranches, both of which are expected to price in the middle of the week of April 5.

The company plans to sell $125 million of five-year second priority senior secured floating-rate notes and $150 million of eight-year senior subordinated notes.

Credit Suisse First Boston and Deutsche Bank Securities will run the books on the debt refinancing deal from the Anderson, Ind. automotive products company.

Meanwhile price talk emerged Tuesday on WMG Acquisition Corp.'s two-tranche offering of 10-year senior subordinated notes (B3/B-).

The books will close at the end of the day Wednesday and the deal will price on Thursday.

Price talk is 7½% area on the $465 million dollar piece, downsized from $615 million. And talk is 8¼%-8½% on the £100 million sterling tranche.

Deutsche Bank Securities, Bank of America Securities, Lehman Brothers, Merrill Lynch & Co. are bookrunners.

Price talk of 6½%-6¾% emerged Tuesday on Boyd Gaming Corp.'s upcoming $300 million of 10-year senior subordinated notes (B1/B+/B), which are expected to price on Wednesday via Deutsche Bank Securities, Bank of America Securities and CIBC World Markets.

Price talk is 9 3/8%-9 5/8% on Cablecom Luxembourg SCA's planned €290 million of 10-year senior notes (Caa1/CCC+), expected to price on Thursday via Deutsche Bank Securities.

And the price talk is 9¼% on Mission Resources Corp.'s $130 million of seven-year senior notes (Caa2/CCC), expected to price on Wednesday.

Guggenheim Capital Markets LLC is the bookrunner.

Cablevision old bonds mixed

While Cablevision was clearly the big deal of the day, it surfaced way too late for any kind of aftermarket activity. The Bethpage, N.Y.-based cable operator and sports team owner's existing bonds were meantime "kind of a mixed bag," said a market source, who quoted its 7 7/8% notes due 2007 half a point firmer at 108 bid, while its 7 5/8% notes due 2011 dipped to 105.25 bid from prior levels at 106.

Also on the new-deal front, Service Corp.'s new 6¾% notes due 2016 "are dead," quipped a trader, who quoted the Houston-based funeral home and cemetery operator's issue at 99.75 bid, up only slightly from their 99.5 issue price, on moribund activity.

Not to be outdone, a trader at another desk characterized the new Sealy Mattress bonds as "extra-soft queen-size," after the High Point, N.C.-based mattress and bedding maker's new issue first firmed as high as 101 bid, 101.5 offered on the break, before giving up those gains to come back down and end at par bid, 100.5 offered.

A trader saw Encore Acquisition's new 6¼% notes due 2014 quoted at 101 bid, 102 offered, up from their par issue price, but cautioned that there was "no real trading going on" in the independent E&P company, "it was just quoted up."

Hollywood Entertainment moves up

Back among existing issues, Hollywood Entertainment Corp.'s 9 5/8% notes were certainly being quoted considerably higher, with at least two desks pegging the bonds at 115 bid and another seeing them "definitely higher than 110," and estimating them going home around 112.

In Monday's dealings, the bonds were heard to have firmed more moderately to around 104.5 bid from prior levels at 99, on the news that a management-led group, working with the Los Angeles-based private equity firm Leonard Green & Partners, will take the company private in an $890 million buyout, which translates to $14 per share, near the level to which the shares jumped Monday, a 27% gain.

But while some market sources saw the Hollywood bonds considerably higher, others were more cautious, pegging the bonds as moving up perhaps to the 104 level from par and noting that there didn't seem to be much actual trading going on in the credit.

aaiPharma climbs

Another name seen higher was aaiPharma Inc., whose 11% notes due 2010 were quoted up more than seven points on the session at 88.5 bid, following Monday's abrupt announcement that chief executive officer Dr. Philip Tabbiner will resign his post and his director's seat, although he will remain with the Wilmington, N.C.-based pharmaceuticals company in a consulting capacity. Tabbiner is to be replaced by the company's founder and former CEO, Dr. Frederick D. Sancilio, who led the company from 1979 to 2002, when Tabbiner replaced him.

The company gave no explanation for the management shuffle. Skeptics were left to read between the lines as to whether the shakeup is related to the company's recent troubles.

aaiPharma has been in the harsh spotlight of bad publicity ever since its March 1 announcement that it discovered what it termed "unusual sales" in two product lines - the pain-killer Darvocet and Brethine, an asthma drug - during the second half of 2003. aaiPharma withdrew its previously issued earnings guidance for the 2004 first quarter and full year, appointed a board committee and an outside law firm to investigate the apparent sales irregularities, and delayed filing its 10-K with the Securities and Exchange Commission. The report was to be filed on March 15, and the company got an extension to Tuesday.

But late in the day Tuesday, well after the market had closed, the company announced that it would not be able to file the 10-K that day, citing the continued work of the internal investigating committee. It said that while the panel was making progress in its probe, "no timetable has been set for the completion of the review, the completion of the audit of the Company's 2003 financial statements, or the filing of the Form 10-K."

The new delay in filing the 10-K opens another can of worms for aaiPharma, which said in its statement that its failure to file on Tuesday constitutes a default under its senior secured credit facility. The lenders have informed aaiPharma that it will now be barred from making any borrowings from its $100 million revolving credit facility. On top of that the lenders have the right to block the company from making a scheduled $9.6 million interest payment on the 11% notes that is due on April 1.

Trump surprise

The 10-K notice filed Tuesday by Trump Hotels & Casino Resorts, meanwhile contained an unpleasant surprise of sorts for bondholders.

Auditors Ernst & Young didn't exactly tell company CEO and frontman Donald J. Trump "you're fired," the way The Donald does to eager wannabe Trump executives on his new hit TV show, "The Apprentice". But the accountants did warn that should the debt-laden Atlantic City, N.J.-based casino operator fail to gain bondholder approval for a previously announced debt restructuring plan that would pump $400 million from Credit Suisse First Boston into the company in exchange for a majority stake, "the Company's operating results will increasingly become uncertain. These conditions raise substantial doubt about the Company's ability to continue as a going concern."

"There's so much news swirling around [Trump] right now," a trader said. "Is his hair real? How's his TV show? Can they pay the debt? Are the new bondholders going to accept a discount? That kind of stuff."

He characterized the Trump A.C. 11¼% first mortgage bonds due 2006 as "kind of stabilizing" at lower levels following the bonds' rise last week, when they jumped in tandem with a stock rise spurred by positive investor sentiment about the planned Credit Suisse First Boston investment and the publicity "The Apprentice" has brought to the Atlantic City gaming operations. He quoted the bonds at 83.25 bid, 84.25 offered, down from recent highs around 85 bid.

Given Trump's own checkered and controversial history, he didn't think the "going concern' warning would come as a shock to too many people.

"Anybody who knows the story" could have expected it, he said. "He's been doubted for a while, now. I doubt this will have a dramatic effect on the bonds - but we'll see."

The Trump Holdings & Funding 11 5/8% notes due 2010 were meanwhile "still holding" around par bid, 101 offered, "despite all the speculation about Trump coming to them with some below-par tender six months after the deal."

The trader also saw airline paper "a point weaker across the board" on statements out of Vienna, where OPEC's oil ministers are to decide on likely output cuts; several ministers said that the cartel would vote to go ahead with the cuts next month, even though oil prices are already at extremely high levels due to tight supply. Such cuts would drive up crude prices and in turn, prices of distillate products, such as jet fuel.

He quoted Delta Airlines' 8.30% notes due 2029 about a point lower at 56.25 bid, 57.25 offered, while Northwest Airlines's 8 7/8% notes due 2006 likewise lost a point of altitude, dipping to 86 bid, 87 offered.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.