Savers, Inc. out; Movie Gallery up; El Paso better on good earnings, debt progress

By Paul Deckelman and Paul A. Harris

New York, Aug. 7 - Savers, Inc. was heard by high yield syndicate sources Monday to have pulled its prospective issue of eight-year senior subordinated notes from the forward calendar, opting instead to raise the capital it needs via a private placement transaction.

Elsewhere, pre-deal market price talk emerged on Allis Chalmers Energy Inc.'s planned add-on offering to its outstanding 9% senior notes due 2015. However, a trader said that the day's new-deal activities were something of an anticlimax after last week's exciting session, which saw more than $6 billion of new paper come to market.

Things weren't much livelier in the secondary market, where traders from several shops independently remarked that "not a lot happened."

There was some higher activity in the 11% notes due 2012 of Movie Gallery Inc., although no one saw any fresh news out about the Dothan, Ala.-based operator of the Number-Two U.S. video rental chain.

One trader suggested a renewal of market scuttlebutt that the company may soon raise capital in a rights offering to shareholders. He saw the bonds up a point at 80.5 bid, 81.5 offered, although that was a little off from their highs for the day around 81 bid.

A market source at another desk saw the bonds up 1¼ points at 80 bid.

Another trader noted that the company is slated to come out with its latest quarterly results early this week, suggesting that investors are hopeful that the company - whose bonds and shares endured a powerful shakeout earlier this year - will show better results.

That optimism was the apparent catalyst for the rise in Movie Gallery's Nasdaq-traded shares, which jumped 62 cents (10.25%) to finish at $6.67. However, volume of 2.6 million was about the average turnover.

Elsewhere, El Paso Corp.'s bonds were trading at better levels after the Houston-based natural gas exploration, production and pipeline company reported second-quarter earnings solidly in the black versus a year-earlier net loss - the second consecutive quarter that El Paso has posted a profit.

Company executives meantime told analysts on a conference call following the release of the results that El Paso was on track toward realizing its target of bringing its net debt levels down to about $14 billion by year end from current levels around $14.4 billion and from Dec. 31, 2005 levels of $16.1 billion. They also spoke glowingly of the positive changes attributable to the company's recently signed $2.25 billion credit agreement (see related story elsewhere in this issue).

A trader commented that the quarterly numbers "were pretty good," helping the 7% notes due 2011 firm to 99.5 bid, 100.5 offered.

A market source at another desk saw the 7¾% notes due 2013 of El Paso's subsidiary, El Paso Production Holdings up nearly a full point at 102.25.

Yet another source saw the El Paso bonds better by about ¼ point across the board, its 6¾% notes due 2007 at 100.625, and its 9 5/8% notes due 2012 at 109.75.

HCA lower

A trader saw HCA Corp.'s bonds down about ½ point on the session, quoting the Nashville-based hospital operator's widely followed 6½% notes due 2016 as having dipped to 78.25 bid, 79.25 offered. He linked the retreat to uncertainty created by market rumors that another potential suitor could step forward and try to top the $22 billion being offered by several private equity firms and members of the company's senior management. He said there was talk that yet another equity firm, Apollo Management, might team up with investment firm Warburg Pincus to make a bid.

Two weeks ago, HCA's bonds were getting clobbered on rumors that a big debt-funded leveraged buyout was in the works, and they continued to fall when the rumors proved to be true. However, over the last few sessions, the bonds have been rebounding from their previously oversold condition.

The trader also saw HCA competitor Tenet Healthcare Corp.'s bonds continuing to hold, and even expand the gains they made along with HCA's. He saw Dallas-based Tenet's 6 3/8% notes due 2011 at 85.5 bid, 86.5 offered, up 1/2.

Chiquita, Dole rise

And he saw better levels for Chiquita Brands International Inc.'s bonds and those of its chief fresh fruit and vegetable rival, Dole Foods Inc., continuing a trend seen late last week after the bonds of both companies got beaten down.

Chiquita's 7½% notes were up about ¼ point at 87.5 bid, 88.5 offered, while Dole's 8 5/8% notes due 2009 were at 97 bid, 98 offered, up ¾ point in an otherwise remarkably dull, range-bound session.

Looking ahead to FOMC

A high yield syndicate official, specifying that there had been very few trades during the Monday session, marked the broad market unchanged on the day.

This source expressed the belief that the new issue market, along with all the rest of the capital markets, is standing by to see whether the Federal Reserve's Federal Open Market Committee, which meets Tuesday, will leave its short-term interest rate unchanged at 5¼% after raising the rate from 1% with 17 successive 25 basis points moves in 17 successive meetings dating back to June 2004.

The high yield syndicate official also said that Fed almost certainly will hold, and suggested that in time to come it could even turn around and decrease the rate.

"There is some speculation that they have gone too far," the source said.

"Any indication of a turnaround would be a good thing for any market."

Others sources said much the same thing.

However some of the sources who spoke to Prospect News on Monday seemed more inclined to give the Fed "pause" scenario a "50-50" chance.

A trickle of news

Although there was no news flow to speak of on Monday, in the new issue market news did circulate on a couple of the smaller offerings on the forward calendar.

Houston-based oilfield services provider Allis-Chalmers Energy talked an $80 million add-on to its 9% senior notes due Jan. 15, 2014 (B3/B-) at a dollar price range of 100.00 to 100.50.

The RBC Capital Markets-led acquisition, debt refinancing and general corporate purposes deal is expected to price shortly after midday on Tuesday.

Meanwhile Bellevue, Wash.-based thrift retailer Savers, Inc. abandoned its $140 million Rule 144A notes offering, opting instead to raise the cash via a private placement

Last week the company launched an offering of eight-year senior subordinated notes (Caa1/CCC+) via bookrunner CIBC World Markets.

An informed source told Prospect News on Monday that the company was taking advantage of attractive pricing in the private placement market.

According to market sources CIBC will act as placement agent for the private placement.

A tale of Two Cities

A high yield syndicate official pronounced late Monday afternoon that the Dog Days have descended on the junk market, and forecast that the primary is likely to remain generally - although not totally - quiet in the run-up to the Labor Day break.

Another sell-sider assured Prospect News that the primary market is not likely to see anything close to last week's five-session total of $6.25 billion of issuance which rendered the July 31 week the biggest in terms of dollar-denominated issuance in well over half a year - since the week of Dec. 19, 2005, which saw $7.73 billion price.

Last week's big deals included Ford Motor Credit Co.'s $2.25 billion, a combined $1.68 billion equivalent from Nielsen Finance LLC, Nielsen Finance Co., and VNU Group BV, Ashtead Group plc's $650 million, Qwest Corp.'s $600 million, and Station Casinos, Inc.'s $400 million.

However during the quiet Monday session, as the sell-side parsed last week's business, sources pointed out that five of last week's deals came restructured.

Taking them in alphabetical order, on Monday, July 31, MxEnergy Holdings Inc. priced a downsized, restructured $190 million issue of six-month Libor plus 750 basis points five-year senior secured floating-rate notes (CCC+) at 97.50, wide of the revised dollar price talk. Talk had been revised to six-month Libor plus 750 basis points at 98 from the earlier talk of six-month Libor plus 725 to 750 basis points at 99.

Call protection was extended for the life of the notes from two years. The equity clawback was extended to three years from two years. And the issue was downsized from $200 million.

On the same day the Nielsen/VNU deal came with a restructuring that saw a €200 million tranche from VNU Group BV, the holding company, added during marketing. Those 10-year senior discount notes were priced at 58.337 to yield 11 1/8%, on top of price talk that had been revised from Euribor plus 625 to 650 basis points.

The Nielsen/VNU deal also saw covenant changes, according to market sources.

Meanwhile, last Friday PNA Group, Inc. priced a $250 million issue of restructured 10-year senior notes (B3/B-) at par to yield 10¾%, at the wide end of the revised 10 5/8% area price talk, which had been increased from earlier talk of 10¼% to 10½%.

The notes were sold via Rule 144A with registration rights that were added in a restructuring of the deal. It had initially been marketed without registration rights. The deal also underwent covenant changes during marketing, according to market sources.

Last Thursday TFS Acquisition Corp. (Textron Fastening Systems) priced a $193.87 million issue of restructured eight-year senior secured floating-rate notes (Caa1/B-).

The structure was changed from 10-year non-call-five senior secured fixed notes.

Finally, on Tuesday U.S. Shipping Partners LP and U.S. Shipping Finance Corp. priced a downsized and restructured $100 million issue of eight-year senior secured notes (Caa1/B-) at par to yield 13%.

The issue was initially marketed with a senior unsecured structure, and was twice downsized during marketing (from $200 million to $175 million, and ultimately to $100 million). It priced with a yield that came 100 basis points beyond the original 11¾% to 12% price talk.

"It's a tale of two cities," one literary-minded sell-sider asserted, noting that while Ford Credit, Station Casinos, Qwest and Ashtead were upsized and tended to price tight to the price talk, the VNU holdco notes, MxEnergy, PNA Group, Textron and U.S. Shipping deals all underwent structural changes, some had covenant changes and some came at the wide end - or actually "wide of" - the price talk.

Another high yield syndicate official readily agreed, saying that the primary is currently a "bifurcated market."

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