Tenet gains as court case deadlocked; Tekni-Plex off on earnings; Avio brings euro deal

By Paul Deckelman and Paul A. Harris

New York, Feb. 15 - Bonds of Tenet healthcare were seen to have "popped up" late in the day Tuesday on the prospect that a deadlocked jury in a California court case involving the Santa Barbara, Calif.-based hospital owner would end with no finding of liability against Tenet. On the downside, Tekni-Plex Inc.'s bonds fell after the company reported disappointing earnings, although the subordinated bonds, which got hit the hardest initially on the earnings news, managed to bounce off their lows and recover at least some of their lost ground.

In the primary market, activity was relatively restrained; the major new deal of the day was actually a split-rated, two-part offering for Enterprise Products Partners LP Also, Aero Invest 1 SA sold an upsized offering of euro-denominated notes.

In trading, Tenet "popped up" a trader said, "the only notable thing" he had seen during the session, noting "their court case in California may lead to lessened liability for the company, or none at all."

He quoted Tenet's bonds up about a point across the board, with its 6 3/8% notes due 2011 having firmed to 94 bid, 95 offered from 93 bid, 94 offered at the opening, and its 6½% notes due 2012 up a point at 93.5 bid, 94.5 offered. Tenet's 7 3/8% notes due 2013 were ¾ point better at 95.75 bid, 96.75 offered, while its 9 7/8% notes due 2014 rose to 108 bid, 109 offered from 106.875. The company's 9¼% notes due 2015 ended at 104 bid, 105 offered, up from 103.25 bid, 104.25 offered. Even its long bond, the 6 7/8% notes due 2031, rose to 85.5 bid, 86.5 offered about a ¾ point gain on the day.

"I wouldn't have expected much movement on a piece that long," the trader said, especially on an issue that is generally "not actively traded," since it's more of a staple of the buy-and-hold insurance companies rather than the more opportunistic mutual fund accounts.

Another trader said the Tenets were "definitely up," quoting the 6 3/8% notes due 2011 and the 7 3/8% notes due 2013 both up 1½ points, at 94 bid, 94.5 offered and 96 bid, 96.5 offered, respectively.

Tenet is on trial at the federal court in San Diego for allegedly paying doctors for referrals to its San Diego hospital.

Prosecutors claim that hospital administrators paid more that $10 million in kickbacks disguised as physician-relocation agreements to encourage doctors to refer more patients to Alvarado Hospital. After several days of deliberations, jurors said late Monday that they were deadlocked.

U.S. District judge James Lorenz said he would instruct jurors to resume deliberations. The jurors must decide whether Alvarado and its former chief executive are guilty of one count of conspiracy and 19 counts of violating an anti-kickback law.

Tekni-Plex down

Elsewhere, Tekni-Plex's bonds were bouncing around at lower levels after the Somerville, N.J.-based packaging maker posted earnings that were below market expectations.

That caused its subordinated 12¾% notes due 2010 to fall 86.5 bid, 87.5 offered, a trader said, down from their close Monday at 91.5 bid, 92.5 offered.

But after the company its conference call, he continued, "they bounced off those lows" to end at 88 bid, 89 offered - still down three points on the day.

The company's senior 8¾% notes due 2013 "didn't get hit as badly as the subs," and so had no bounce; he saw them closing at 98 bid, 99 offered, down from 99 bid,100.5 offered.

Qwest higher on results

Also on the earnings front, Qwest Communications International Inc. bonds were seen up a point on the session, making up for the losses the bonds posted the day before on the news that MCI Inc. had rejected the Denver-based telecommunications company's reported $7.3 billion takeover offer in favor of a $6.745 billion offer from the more financially secure Verizon Communications Inc.

On Tuesday, Qwest appeared to have pretty much closed the book on any idea of a continued pursuit of an unwilling MCI, and it reported fourth-quarter and full-year 2004 numbers. The company narrowed its overall net loss from year-earlier levels and reported having made some progress in its efforts to trim down its $17 billion debt load.

It also said for the record that it was continuing to look at its options in the MCI matter, although the company's chief executive officer noted that that agreement had been inked by the board of both MCI and Verizon, and counseled that Qwest would "wait and see how it all unfolds" rather than plunging in with a renewed bid (see related story elsewhere in this issue).

Qwest's 7¼% notes due 2011 firmed to 97.75 bid, 98.75 offered, up from 96.25 bid, 97.25 offered, a trader said. Its 6 3/8% notes due 2008 were up a point at 97.25 bid, 98.25 offered, while its 6 7/8% notes due 2033 were ¾ point better at 92.25 bid 94.5 offered.

However, another trader said that while Qwest's bonds were "propelled up a point" initially on the apparently better numbers, he saw the bonds giving up most of the gains following the conference call, citing investor fears that Qwest might decide to continue pursuing MCI with a sweetened - i.e. more expensive - bid. He quoted the company's 7.90% notes due 2010 having come off their peak level at 100.5 bid to end the day essentially unchanged at 98.5 bid, 99.5 offered.

MCI dips

MCI's bonds, meantime, were seen off about half a point from the levels they reached Monday on the news the company had accepted the Verizon takeover offer - whether because of an attack of buyer's remorse, now that the company has made its decision, or perhaps just plain profit-taking, particularly on the handsome gains notched by its the Ashburn, Va.-based long-distance operator's 8.735% notes due 2014. Those bonds had firmed into the lower teens over par from prior levels about 10 points lower over the space of several sessions.

A trader saw those 10-year bonds at 113 bid, 114 offered and its 7.688% notes due 2009 at 105 bid, 106 offered, both down a half. MCI's 6.908% notes due 2007 were unchanged at 102.5 bid, 103 offered.

One deal prices

A single high-yield issue priced Tuesday in the primary market, as Aero Invest 1 SA (Avio) brought its upsized floating-rate PIK note on top of price talk.

Meanwhile there was a slight buildup in the new issue calendar as Sanmina-SCI announced a $300 million offering that will price either on Wednesday or Thursday, and Rural/Metro Corp. specified a Thursday roadshow start for its $190 million two-part offering.

Still, however, the forward calendar lingers below $1 billion of new issues thought to be in the market.

And sources advised Prospect News on Tuesday not to look for meaningful buildup during the approach to - or in the immediate wake of - Presidents Day, with an early close Friday followed by a three-day weekend, followed by a four-day week that commences on Tuesday, Feb. 22.

Not exactly indigestion

"It's a typical pre-Presidents Day week," one sell-side source said when Prospect News inquired about the meager forward calendar.

"Also we've seen a heavy flow thus far into 2005," the investment banker added, stating that almost $20 billion had priced over the last three weeks.

"So I wouldn't call it indigestion, but we could be seeing a minor pullback."

Showing people enough yield

Another sell-side source generally assented to recent market color which holds that issuers are reticent to bring deals out ahead of making the corporate disclosures required by the Sarbanes-Oxley legislation.

"There is some credence to that, but the secondary market is still weak," the sell-sider said.

"Issuers know that, so I think people are a little bit tentative."

However, the source added, plenty of cash remains to be put to work in the high-yield asset class.

"There is a ton of liquidity out there on the buy-side," said the source. "It's just a matter of showing people enough yield so that they can get comfortable putting the cash to work."

Avio upsizes

The only junk bond deal to price Tuesday was from Aero Invest 1 SA (Avio) which priced an upsized €375 million issue of 10-year senior floating-rate PIK notes (CCC+) at 99.0, to pay a coupon that floats at six-month Euribor plus 850 basis points, which is right on top of the price talk.

Goldman Sachs & Co. had the physical books for the Turin, Italy, aerospace components manufacturers' debt refinancing and shareholder distribution funding deal that was upsized from €350 million.

Enterprise attracts junk attention

Elsewhere on Tuesday, high-yield accounts paid some attention to Enterprise Products Operating LP's split-rated $500 million two-part senior notes transaction (Baa3/BB+), according to a syndicate source.

The company sold $250 million of 5% 10-year notes at 99.379 to yield 5.08%, with a spread to Treasuries of 98 basis points. That was at the tight end of the Treasuries plus 98 to 100 basis points price talk.

Enterprise Products also sold $250 million of 5 ¾% 30% notes at 98.691 to yield 5.843%, with a 136 basis points spread to Treasuries. Again the notes priced at the tight end of the Treasuries plus 136 to 138 basis points price talk.

Citigroup, JP Morgan and Lehman Brothers ran the books for the debt refinancing deal from the Houston-based natural gas and natural gas transportation, and storage services provider.

Sanminas's $300 million to price this week

San Jose, Calif.-based electronic components-maker Sanmina-SCI showed up Tuesday with a $300 million offering of eight-year non-call-four senior subordinated notes that it plans to price on Wednesday or Thursday.

Citigroup, Banc of America Securities and Merrill Lynch are joint bookrunners for the debt refinancing deal.

And Rural/Metro Corp. will start a roadshow on Thursday for its $190 million two-part offering, via Citigroup.

At the operating company level Rural/Metro Operating Co. LLC is offering $140 million of 10-year non-call-five senior subordinated notes (Caa1/CCC+).

Meanwhile at the holding company level Rural Metro Delaware Inc. is offering $50 million (proceeds) of 11-year non-call-five senior PIK for life discount notes (Caa2/CCC+).

The Scottsdale, Ariz. ambulance company will use the proceeds to repay debt.

Talk, new structure for CPI Holdco

CPI Holdco Inc.'s restructured $80 million offering of 10-year senior floating-rate cash or PIK notes (Caa1/B-) were talked at six-month Libor plus 575 basis points, with pricing expected on Wednesday via UBS.

The bond has been restructured to provide an additional year of call protection, and is now non-callable for two years.

The company specified that the first coupon payment will be made in cash and cash will be the default method of payment.

Market sources told Prospect News that the red herring for the deal specifies that the coupon will step up 100 basis points every time the issuer opts to pay in kind, as opposed to paying in cash, with a maximum 400 basis points step up.

As to the added year of call protection, one sell-sider observed that Innophos Investments Holdings Inc. also had to change what it had originally brought to market as a non-call-one into a non-call-two last week.

On Feb. 8 the company priced the restructured $120 million issue of 10-year senior floating-rate PIK notes (Caa2/CCC+) at par to yield three-month Libor plus 800 basis points.

"That's not surprising, given the PIK structure," the source commented.

Pricing is also imminent on the high-yield tranche from FPL Group subsidiary FPL Energy National Wind Portfolio LLC, which is selling $100 million offering of senior secured bonds due March 25, 2019 (Ba2).

The source said that the deal, which is being led by Credit Suisse First Boston, is heard to be going well, with pricing expected on Wednesday or Thursday.

Finally on Tuesday Masonite International Corp. canceled its proposed bond offering because shareholders are expected to turn down the Kohlberg Kravis Roberts & Co.'s leveraged buyout proposal.

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