Nextel, Rural Cellular, Omega Health price; Nortel falls as CFO suspended

By Paul Deckelman and Paul A. Harris

New York, March 15 - Nextel Communications Inc., became the latest large, well-known high yield issuer to opportunistically tap the junk bond market on Monday, pricing a $500 million offering of 10-year notes at a discount late in the session. That capped a session which had seen scheduled offerings from Rural Cellular Corp. and Omega Healthcare Investors Inc. price, the Rural Cellular deal structured as a two-parter including both fixed-rate and floating-rate notes.

In the secondary market, Nortel Networks Corp. bonds were lower on the news that the Brampton, Ont.-based telecommunications equipment maker had put two of its top executives, including the chief financial officer, on paid leave in conjunction with its previously announced accounting review, which is expected to lead to a restatement of results.

The Ides of March found the high yield primary market turning out a quartet of junk tranches that generated just over $1.196 billion for the three issuers that brought them.

Meanwhile the market learned of one roadshow start and another pair of companies made moves toward the ring.

Two wireless telecoms, one REIT price

Alexandria, Minn.-based wireless services provider Rural Cellular Corp. completed Monday's biggest transaction, pricing $510 million of senior secured notes (B2/B-) in fixed- and floating-rate tranches.

The company sold $350 million of eight-year fixed-rate notes at par to yield 8¼%, at the tight end of the 8¼%-8½% price talk.

Rural Cellular also sold $160 million of six-year floating-rate notes at par to yield Libor plus 450 basis points. Talk on the floaters was Libor plus 450-475 basis points.

Lehman Brothers and Banc of America Securities ran the books.

Also ringing in during the session with a drive-by was Reston, Va. wireless company Nextel Communications, Inc., which sold $500 million of 5 7/8% 10-year senior notes (B2/B+) at 97.243 to yield 6¼%.

The print came wide of the 6% area price talk, with Credit Suisse First Boston and JP Morgan running the books.

Finally, Timonium, Md.-based real estate investment trust Omega Healthcare Investors Inc., which focuses on the long-term care industry, sold $200 million of 10-year senior notes (B1/BB-) at par to yield 7%.

Deutsche Bank Securities, UBS Investment Bank and Banc of America Securities ran the books on the deal which came at the tight end of the 7%-7¼% price talk.

ITC^DeltaCom starts roadshow

ITC^DeltaCom, a Westpoint, Ga.-based integrated telecommunications and technology services provider, will present an offering of $300 million of second priority senior secured notes in two tranches on a roadshow during the week of March 15, with pricing expected late in the week.

The company intends to sell seven-year non-call-four fixed-rate notes and six-year non-call-two floating-rate notes, with tranche sizes to be determined.

Banc of America Securities and Bear Stearns & Co. are joint bookrunners on the debt-refinancing deal.

Cinemark unveils bond deal

Cinemark, Inc. announced in a Monday press release that it intends to offer $360 million of 10-year senior discount notes.

Proceeds, together with the purchase of Cinemark, Inc. common stock by an investor group led by Madison Dearborn Partners, LLC., will be used to finance a the company's recapitalization.

No timing or syndicate names were heard on the bond deal.

Also in the press release Cinemark USA, Inc. announced its plans to amend and restate its existing credit facility to provide for an approximately $270 million term loan. Lehman Brothers will lead the bank deal.

On Monday Madison Dearborn agreed to buy the Plano, Tex.-based movie theater owner-operator, which has over 3,000 screens in the U.S. and Latin America, for $1.5 billion.

An announcement was also heard on Monday from Agco Corp. The Duluth, Ga. manufacturer and distributor of agricultural equipment and parts intends to sell $250 million of euro-denominated senior subordinated notes and $250 million of common stock in a debt refinancing.

Deutsche Bank says fund flows in trading zone

In its organ of high yield strategy, One-Stop Weekly, Deutsche Bank takes the view that the up-and-down action seen in the flows of cash in and out the high yield mutual funds during the latter part of the first quarter represents a comfortable range.

"Just like secondary trading levels, weekly funds flows, too, seem to have found a comfortable trading band, fluctuating between plus and minus $400 million for the last four weeks," commented David Bitterman and Andrew W. Van Houten, co-heads of high yield for Deutsche, in an issue published last Friday.

"Although the most recent net flow figure of $308 million is more than twice as high as [he previous] week's number, it is well under the 2003 average inflow of $772 million. On the other hand, the primary market shows none of the signs of stability that the...mutual fund flows seem to exhibit."

Bitterman and Van Houten noted that after steadily declining to a year-to-date low of $1.3 billion for the week ended Feb. 26, the weekly issuance figure jumped more than fourfold to $5.3 billion for the week ending March 5. They further reported that for the week ending March 12 the number was slightly smaller with $3.9 billion pricing, in a total of 20 deals.

"Furthermore," they added, "the forward calendar shows that $8.2 billion worth of new deals are waiting in the pipeline - the second highest figure recorded over the last two years."

Rural Cellular, Omega up in trading

The new Nextel 5 7/8% notes due 2014 priced too late in the session for any aftermarket dealings.

When the new Rural Cellular 8¼% notes due 2012 were freed for secondary dealings, they were seen having shot up to 102 bid, 103 offered from their par issue price, while the floating-rate notes due 2010, which had also priced at par, pushed up to 101.5 bid, 102 offered.

The new Omega Healthcare 7% notes due 2014 "did well" on the break, a trader said, firming to 102.375 bid, 103.375 offered, up from their par issue price.

"Healthcare seems to be holding up pretty well," the trader said, acknowledging that it's certainly an industry whose services will always be in demand, particularly as the big Baby Boom generation gets older and requires more medical services.

Calpine Corp.'s new Calpine Generating paper hovered in Monday's trading around the levels at which it had priced on Friday. The San Jose, Calif.-based power generating company's new first-priority notes/loan - so called because it can be traded in either the bond or the bank debt market - was quoted at 100.5 bid, 101 offered, up slightly from Friday's par issue price; its second-priority notes/loan dipped to 97 bid, 98 offered from its pricing at 98.5; a bank debt market source indicated that this might be because this particular paper is held by "more hedge fund guys", who are more likely to dump an issue if it starts to fall back than the usual buy-and-hold bank-debt investor.

As for the new Calpine pure bonds, the third-priority floating-rate notes straddled their par issue price, at 99.75 bid, 100.25 offered, while the sole fixed-rate instrument in the $2.4 billion financing package, the 11½% notes due 2011, dipped to 99 bid, par offered from their Friday issue price at par.

Calpine's existing 8½% notes due 2010 meantime fell back to 91 bid from 92.5 on Friday, while its 8½ notes due 2011 retreated to 74 bid, down from 76.25.

Nortel loses

Back among the existing issues not linked to a new deal, Nortel's 6 1/8% notes due 2006 were lower on the news that the company had put CFO Douglas Beatty and controller Michael Gollogly on paid news.

This abrupt latest development in the formerly high-flying telecom equipment maker's fortunes came less than a week after it had warned that it would likely restate its results - for the second time in six months - and would delay filing its 2003 results with the Securities and Exchange Commission. The results had previously been expected by March 30.

Nortel is the latest major high yield name to have to review its accounting procedures and possibly restate results.

The news "knocked its bonds right down." said a trader, who quoted the 6 1/8s as having fallen to 101.25 bid, 101.75 offered from prior levels at 102 bid, 102.5 offered.

However, he said, the bonds of Nortel sector peer Lucent Technologies Inc, - which often move up and down in tandem with those of its Canadian rival - "were well bid for [Monday] and held their own."

He saw the Murray Hill, N.J. telecom equipment maker's benchmark 7¼% notes due 2006 hanging in at 103.75 bid, 104.75 offered, little changed despite Nortel's troubles.

At another desk, the Nortel bonds were seen having fallen even further, from 104 bid down to 101.5.

Nortel's New York Stock Exchange-traded shares plunged $1.19 (18.51%) to $5.24, on very heavy volume of 222 million shares, about five times the norm.

Elsewhere, a market source reported that El Paso Corp.'s 7¾% notes due 2010 were two points down, at 86 bid, while its 7 7/8% notes due 2012 fell to 88.5 bid, 90.5 offered.

Tenet down ahead of earnings

Tenet Healthcare Corp. bonds were heard to have retreated, ahead of the Santa Barbara, Calif.-based hospital operator's release of fourth-quarter and 2003 results, scheduled for after the market close.

Tenet's 5% notes due 2007 lost half a point to end at 92 bid, 93 offered; its 6 3/8% notes due 2011 were a point lower at 84.5 bid, 85.5 offered; its 6½% notes due 2012 were likewise a point down at 84 bid, 85 offered; its 7 3/8% notes due 2013 went down to 87 bid, 88 offered from prior levels at 88.5 bid, 89.5 offered, although its 6 7/8% notes due 2031 bucked the trend, a trader said, firming a quarter point to 80.25 bid, 82.25 offered, leading him to wonder "what's going on with that particular issue.

"Most people in the market," he said, "feel there's more to lose than gain here," looking ahead to the company's scheduled Tuesday conference call.

"But people feel that way about everything these days - which is probably a good sign" for Tenet, he added.

After the market closed, Tenet released its numbers, and sure enough, they are daunting for investors - the company reported a fourth-quarter loss of $954 million ($2.05 per share) versus a net loss of $31 million (6 cents per share), for the three months ended December 2002. The latest quarter includes the effects of a $1.4 billion earnings charge, announced in January, related to a writedown in the value of hospitals the company plans to sell.

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