Host Marriott prices upsized deal; Cablevision off on VOOM turmoil; funds see $96.3 million outflow

By Paul Deckelman and Paul A. Harris

New York, March 3 - Host Marriott Corp. was heard by high-yield syndicate sources to have priced an upsized offering of 10-year notes on Thursday. Another big deal which came to fruition was Allied Waste Inc., which did a $600 million bond offering. WCI Communities Inc. also priced a bond deal. Meantime, price talk emerged on Levi Strauss & Co.'s planned $550 million two-part, dual-currency offering. And DaVita Inc. was heard to be lining up a really big deal - $1.35 billion to be exact, also in two parts.

In the secondary market, Cablevision Systems Corp. bonds were seen down about a point as the family feud between company chairman Charles Dolan and his chief executive officer son James over the future of the company's money-losing VOOM satellite TV service escalated. Colllins & Aikman Products Co. bonds firmed smartly in early dealings, continuing the positive momentum seen in the market late Wednesday, but gave back some of those hefty early gains after the company received a credit ratings downgrade.

And after trading had wound down for the day, market participants familiar with the weekly high-yield mutual fund flow numbers compiled by AMG Data Services of Arcata, Calif., told Prospect News that $96.3 million more left the funds than came into them in the week ended Wednesday - the third consecutive week in which the funds have bled money, including the $218 million outflow seen the previous week, ended Feb. 24.

Net outflows have totaled $421.6 million over those three weeks, according to a Prospect News analysis of the AMG figures. The fund flow numbers are considered a measure of junk market liquidity trends.

Outflows have now been seen in six weeks out of the nine since the start of the year. The year-to-date 2005 cumulative outflow rose to some $1.346 billion from $1.25 billion the week before, according to the Prospect News analysis. The figures exclude distributions and count only those funds that report on a weekly basis.

However, sources on both the buy- and sell-sides have been telling Prospect News for over half a year that with pension funds, hedge funds, insurance funds and crossover buyers increasingly active in high yield, the week-to-week mutual fund flow numbers have become diminished as an indication of the liquidity of the high yield asset class.

Meanwhile the primary market saw $1.450 billion price in three drive-by refinancing deals during the Thursday session. Host Marrriott LP checked out with the biggest sum of investor cash in its luggage, pricing an upsized $650 million in the middle of price talk.

And turning to the pipeline, DaVita Inc., an El Segundo, Calif., independent kidney dialysis services provider, announced roadshow dates for $1.350 billion in two parts.

Host Marriott upsizes by $150 million

Thursday's biggest new issue came from Bethesda, Md., luxury hotel company Host Marriott LP, which priced an upsized $650 million issue of 10-year senior notes (Ba3/B+) at par yield 6 3/8%.

The Goldman Sachs-led deal came in the middle of the 6 ¼% to 6 ½% price talk and was increased from $500 million.

An informed source told Prospect News that the order book on the Marriott deal had built quickly, and that the transaction had gone well.

Allied Waste Industries Inc., meanwhile, priced a $600 million issue of 10-year senior secured notes (B2/BB-/B+) at par to yield 7¼%, also in the middle of talk, in this case 7 1/8% to 7 3/8%.

JP Morgan, UBS Investment Bank, Credit Suisse First Boston and Wachovia Securities ran the books for the deal from the Scottsdale, Ariz., waste disposal company.

And WCI Communities Inc. priced its $200 million issue of 10-year senior subordinated notes (Ba3/B+) at par on Thursday to yield 6 5/8%, right on top of price talk.

UBS Investment Bank and Banc of America Securities were the bookrunners the Bonita Springs, Fla., master communities building company's deal.

Proceeds from all three of the issues that priced during the session - all three of which are set to mature on the Ides of March, 2015 - will be used to refinance debt.

DaVita to hit the road with $1.35 billion

With sources reporting that the high-yield market looked healthy and that the primary market is definitely open, the forward calendar continued to build on Thursday.

DaVita Inc., an El Segundo, Calif., independent kidney dialysis services provider, is set to begin a Friday roadshow for its $1.350 billion two-part offering.

The company plans to sell $500 million of eight-year non-call-four senior notes (expected ratings B1/B+) in addition to $850 million of 10-year non-call-five senior subordinated notes (expected ratings B2/B).

JP Morgan has the books for the debt refinancing deal.

The high yield fashion front

Little remained in the wake of Thursday's three transactions.

One deal is positioned on the forward calendar as business expected to be concluded prior to Friday's close.

IT Holding Finance SA plans to price a €35 million add-on to its 9 7/8% senior notes due Nov. 15, 2012 (B3/B+).

The debt refinancing deal, which will be led by Merrill Lynch & Co. and Banca IMI, is talked at 100 to 100.50.

The original €150 million, which priced at 96.645 on Oct. 21, 2004 to yield 10½%, had been downsized by the precise amount of the add-on which the Milan, Italy, fashion brands holding company hopes to price on Friday: €35 million. Talk on the original issue had widened out by 50 basis points to 10½% from 10% area.

Moving on to business that is expected to price Monday, price talk was heard on Levi Strauss & Co.'s approximately $550 million two-part offering of senior notes (Caa3/B-).

The San Francisco apparel-maker's dollar-denominated seven-year non-call-two notes are talked at Libor plus 475 basis points.

Meanwhile the euro-denominated eight-year non-call-four notes are talked at a yield in the 8¾% area.

The company also plans to price an add-on to its 9¾% senior notes due Jan. 15, 2015. No talk was heard on that portion of the financing.

Tranche sizes remain to be determined.

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

Also eyeing the high-yield runway from the apparel sector is German upscale women's clothing maker Escada, which announced Thursday that it plans to sell €175 million of bonds, subject to market conditions.

Deutsche Bank Securities is expected to lead the deal, which is believed to be imminent.

Host Marriott little moved in trading

When the new Host Marriott 6 3/8% notes due 2015 were freed for secondary dealings, "they weren't trading so well," a trader said, quoting the new issue at par bid, 100.25 offered, unchanged from their par issue price earlier in the session. At another desk, a trader saw the bonds get as good as 100.5 bid on the break, but then come back in to finish unchanged.

The WCI 6 5/8% notes due 2015 were even more lackluster after being freed for aftermarket dealings, trading as low as 99.125 bid, par offered, well down from their par issue price, although they managed to climb back up to 99.75 bid, 100.25 offered.

"I don't believe those bonds were above par at all today," a trader said.

The new Allied Waste Industries 7¼% notes due 2015 priced too late in the session for any kind of meaningful aftermarket activity, a trader said.

Cablevision lower

Back among the established issues, traders saw Cablevision's paper down about a point on the session, with its 7¼% notes due 2008 dropping to 105.5 bid, 106.5 offered on the latest turmoil surrounding the fate of VOOM.

"In general, the bonds were down half a point to a point," said a trader, although he called the retreat "nothing too dramatic - yet."

At another desk, Cablevision's 7 5/8% notes due 2011, its 7.875% notes due 2007 and its 8 1/8% notes due 2009 were all seen down about ¾ point, closing at bid levels of 109.5, 106.5 and 109.5, respectively.

The bonds of Cablevision's Rainbow National Services unit - VOOM is a part of Rainbow - were down even further, with its 8¾% notes due 2012 dropping to 111.75 from 113, and its 10 3/8% notes due 2014 off a full point at 118.

The VOOM saga seems to have turned into a soap opera as melodramatic as any that the Bethpage, N.Y.-based cable operator presents to its mostly New York-area subscribers, with Charles Dolan and his son James facing off over the fate of the money-losing satellite TV venture, which the elder Dolan has championed from its inception, but which the younger Dolan sees as a useless drain on the company finances.

In December, James Dolan led a boardroom revolt that ended with his father forced to announce plans to sell the underperforming VOOM. Cablevision made a deal to sell VOOM's satellite and certain other assets to Echostar Communications Corp. for $200 million, while trying to find a buyer for the rest of the assets. Charles Dolan and another son, Tom, announced plans to buy VOOM from the company themselves, but failed to have a deal nailed down by a Monday deadline. That prompted James Dolan to issue a memo declaring that the plug was being pulled on VOOM altogether.

His father, however, still contends that he will be able to line up financing and negotiate a deal to acquire VOOM, and has been given another week's time by Cablevision's board.

Dolan meantime exercised his power as the company's leading shareholder to name several appointees to the board, who are seen in some quarters as likely to side with him.

Cablevision also disclosed in filing Thursday that the Securities and Exchange Commission is investigating recent trading in the company's shares.

S&P cuts Collins & Aikman's gains

Elsewhere, Collins & Aikman bonds - which had been seen ending trading Wednesday on a solidly positive note, bouncing back from the oversold condition of the previous several sessions - looked like they were going to continue that momentum Thursday, and firmed smartly in early dealings, with the company's 12 7/8% subordinated notes due 2012 seen trading as high as around 70 bid, a four-point rise, and its 10¾% senior notes due 2011 seen up more than a point, as high as 94 bid.

"They started relatively strong," a trader said, "but then the downgrade [by Standard & Poor's, one notch to B from B+] took the wind out of their sails "and caused the bonds to surrender some of their early gains and end only modestly higher.

The 12 7/8% notes finished the day at 68.75 bid, 69.75 offered, the trader said, "still up a legitimate three points on the day," while the 10 7/8s backed off from their 94ish context at 92 bid, 93 offered, which he called "essentially unchanged."

S&P, in downgrading the Troy, Mich.-based automotive component maker's bonds a notch - and keeping the company on notice that it might cut the ratings again, cited concerns about the auto supplier's access to cash amid an increasingly difficult operating environment.

SPX Corp. bonds were slightly lower, after the Charlotte, N.C. -based diversified industrial manufacturer reported financial results that included losses for the fourth quarter and for all of 2004, versus year-earlier profits. Its 6¼% notes due 2011 eased to 108.5 bid from 108.875, while its 7½% notes due 2013 dipped a quarter-point to 111. The company also outlined ambitious debt and leverage reduction plans on a conference call following the release of the numbers (see related story elsewhere in this issue).

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