Rogers sells $2.35 billion in five-part mega-deal; Hollywood off on third acquisition offer

By Paul Deckelman and Paul A. Harris

New York, Nov. 19 - Rogers Wireless Inc. completely dominated the high-yield market Friday, as the Toronto-based Canadian wireless operator brought a gigantic, well-oversubscribed five-part bond offering successfully to market. After pricing amid investor clamor for the issue, the bonds were equally well received in secondary dealings, firming sharply by the time the market closed up shop for the day and the week.

The Rogers bonds completely overshadowed other secondary activity, including the failure of yet another new offer to buy Hollywood Entertainment Corp. to strengthen the Portland, Ore.-based video rental chain operator's bonds - in fact, they lost ground on the day, although that might just be because of the overall sloppiness of the market.

Friday's $3 billion day in the high yield primary market, led by the five-tranche $2.350 billion equivalent Rogers Wireless Inc. mega-deal, brought the epic week of Nov. 15 to a resounding conclusion.

During the past five sessions the market saw $7.27 billion price in 28 tranches ($6.77 billion of U.S. dollar business).

According to one investment banker who works on a high yield syndicate desk in order to find a bigger week in the new issue junk market it is necessary to turn back the calendar nearly 4½ years to the second week of May 1999 during which $7.55 billion of bonds were sold. Prospect News' data goes back to Jan. 1, 2001 and shows no bigger week during that period for U.S. dollar offerings.

Quest for paper unabated

Even in the face of the historically heavy volume of new issuance during the Nov. 15 week, investors have told Prospect News that the demand for paper remains high and the competition among bond buyers is fierce.

"We haven't been able to buy as many bonds as we have wanted to," one investor told Prospect News on Friday.

"I find it amazing that the firms let people get away with padding and flipping and all that crap," the investor added. "They really should concentrate more on getting good customers and making sure the bonds are priced properly and not screwing their customers.

"All that they are succeeding in doing is generating trading volume.

"If you intend to buy the bonds and put them away, why are you getting screwed by the hedge funds and the flippers? Why are they getting preferential treatment?

"There's more of that going on right now than there was six months ago," the investor said.

"The psychology of the market has shifted from worrying about getting the deal done to where now they're padding."

Rogers Wireless does year's biggest deal

In 2004's largest high-yield transaction to date, Rogers Wireless Inc. sold $2.350 billion of bonds in five tranches on Friday, with Citigroup in the lead.

The company sold the following tranches:

* $550 million of six-year senior secured floating-rate notes (Ba3/BB/BB+) at par to yield three-month Libor plus 312.5 basis points, at the tight end of the Libor plus 325 basis points area price talk;

* $550 million of senior secured fixed-rate notes due March 15, 2015 (Ba3/BB/BB+) at par to yield 7½%, at the tight end of the 7½% to 7¾% price talk;

* $470 million of eight-year senior secured fixed-rate notes (Ba3/BB/BB+) at par to yield 7¼%, at the tight end of the 7¼%-7½% price talk;

* C$460 million of seven-year senior secured fixed-rate notes (Ba3/BB/BB+) at par to yield 7 5/8%, on top of the 7 5/8% area price talk; and

* A downsized $400 million of eight-year senior subordinated notes (B2/B/BB-) at par to yield 8%, on top of the price talk that had the subordinated note coming 75 basis points behind the eight-year secured notes.

The above-quoted investor, specifying that even at $2.35 billion the Rogers Wireless deal was massively oversubscribed, said that the single floating-rate tranche appeared particularly attractive.

"It's pretty attractive just on a spread basis," said the buy-sider. "They're talking about 325 versus Libor. But either the eight-year or the 10-year was 335. So with the floater you're taking no duration risk but ending up with the same spread. That's pretty attractive to me. And Libor versus Treasuries is worth at least 10 and usually more."

In the market concurrently with the Rogers Wireless deal was an offering from another subsidiary of Toronto-based Rogers Wireless Communications Inc., Rogers Cable Inc.

Rogers Cable priced $420 million equivalent of senior secured second priority notes (Ba3/BB+) in two tranches on Friday, with Citigroup and JP Morgan running the books.

The company sold $275 million of notes due March 15, 2015 at par to yield 6¾%, inside of the 7% area price talk.

Rogers Cable also sold C$175 million of seven-year notes at par to yield 7¼%, which was right on top of the 7¼% area price talk.

Park Ohio on top of talk

Apart from the mammoth issuance from Rogers, two other deals priced during the Friday session.

Park-Ohio Holdings priced a slightly upsized $210 million issue of 10-year senior subordinated notes (Caa1/CCC+) at par to yield 8 3/8%. The deal was increased from $200 million.

The Lehman Brothers and JP Morgan-led issue came right on top of the 8 3/8% area price talk.

And Eschelon Operating Co., the Minneapolis-based voice, data and internet services provider, priced a $65 million add-on to its 8 3/8% senior second secured notes due March 15, 2010 (Caa1/CCC+) at 79.0, resulting in 14.132% yield to worst.

Pricing came wide of the 80.0-80.25 price talk.

The sale generated $51.35 million of proceeds.

Jefferies & Co. ran the books.

The original $100 million issue priced at 84.813 on March 10, 2004 to yield 12%.

Wynn to roll Monday for $1.1 billion

The $3 billion Friday session blew out most of what had been a massive forward calendar, leaving $1.5 billion and change left to price in the three-session run-up to the long Thanksgiving weekend.

Most of that issuance is expected to come from Wynn Las Vegas, in the market with $1.1 billion offering of 10-year senior first mortgage notes (B2/B+).

Price talk of 6¾% area was heard on Friday, with pricing expected on Monday afternoon.

Deutsche Bank Securities, Banc of America Securities, Bear Stearns, JP Morgan and SG Corporate & Investment Banking are joint bookrunners on the deal.

The above-quoted buy-sider won't be at the table when the Wynn wheel is given a turn on Monday.

"I've owned it in the past," the investor said. "But the sector is getting so rich that it's tough to do anything."

World Directories' €545 million post-Thanksgiving

The first solid evidence of post-Thanksgiving primary market business surfaced on Friday in the form of a euro-denominated deal.

The U.S. roadshow began Friday for WDAC Subsidiary Corp. (World Directories)'s €545 million equivalent of 10-year non-call-five senior notes, to be sold in dollar and euro tranches.

The U.S. roadshow runs through Monday and will be followed by a Nov. 23-29 European roadshow.

JP Morgan, Goldman Sachs & Co. and Credit Suisse First Boston are joint bookrunners for the debt refinancing deal from The Netherlands-based telephone book and yellow pages company.

Rogers up in trading

When the new Rogers Wireless bonds were freed for secondary dealings, "they were all up pretty big," a trader declared, pegging the new 7¼% senior secured notes due 2012 at 102.275 bid, 103.875 offered, up from their par issue price. He also saw the new 7½% senior secureds due 2014 at 103.625 bid, 104.125 offered and the new 8% senior subordinated notes due 2012 at 103.5 bid, 104, both up from a par issue price.

"They had a nice move [Friday], to say the least," he added.

Another trader was even more graphic in describing what a blowout Rogers was.

"The whole day was RCN [Rogers' stock-ticker symbol]," he said. "It was like a riot, a feeding frenzy. That was the whole day," to the exclusion of just about everything else.

He saw all of the new Rogers issues, except for the floating-rate notes due 2010, as having pushed as high as 104 bid, 104.5 offered after being freed for secondary market dealings, before they all came off those highs a little to settle in with a still extremely handsome gain of nearly four points at 103.75 bid, 104.25 offered.

"Outside of Rogers, you didn't miss much else," he said in describing the day. He said the rest of the market "was so-so," with some profit-taking and "some liquidations. Because [Rogers] was such a big deal, even though people were flush with cash, they had to sell some issues" to get in on the Rogers action.

Junk down with governments

The first trader said that other than the excitement generated by Rogers, the junk bond market "was down about 5/8 point," following the lead of Treasuries, which pushed lower after Federal Reserve Board chairman Alan Greenspan's remarks following a panel discussion at a banking conference in Frankfurt in which the Fed boss opined during the question-and-answer period that "rising interest rates have been advertised for so long and in so many places that anyone who has not appropriately hedged this position by now obviously is desirous of losing money" - virtually a sure sign that rates will continue to rise.

Greenspan also said that the growing U.S. trade deficit is undermining the dollar and making dollar-denominated investments, such as American stocks and bonds, particularly Treasuries, less attractive to foreign investors.

As Treasuries took it on the chin, the junk market "had an unexpected downdraft." While "some of the new deals" did better, particularly the Rogers bonds, overall, the trader said, the junk market drifted lower.

Hollywood Entertainment slips

With activity away from the Rogers deal seen quiet, probably the non-story of the day, at least from a junk bond point of view, was the news that yet a third potential buyer has emerged for Hollywood Entertainment - video rental company Movie Gallery Inc., which offered to acquire its rival. It did not say how much it was offering for Hollywood but it was thought by analysts and other industry watchers that it would have to offer at least $12.50 per share - or roughly $760 million - to be competitive.

Movie Gallery sought to trump the $700 million, $11.50 per share offer made last week by industry leader Blockbuster Inc., arguing in its statement that the move by Number One video chain Blockbuster to buy Number Two Hollywood would likely run afoul of federal antitrust regulators, while its own offer would not.

Blockbuster, in turn hoped to trump the earlier $10.25 per share buyout offer by a group headed by Leonard Green & Partners LP, a Los Angeles buyout firm, and including Hollywood's CEO.

But while news of the third offer sent Hollywood shares surging, with a gain of 85 cents (7.3%) to $12.53 on the Nasdaq, its bonds actually were in retreat. Hollywood's 9 5/8% notes due 2011- which had reached highs around 114 after the Leonard Green offer, which looked to be dead earlier in the year, was revived - had retreated to around 108 bid when Blockbuster made its offer. In Friday's dealings, a source saw the bonds down another half a point to 107.5, while another source saw them losing a full point to close at 107.

Another bond market non-story - also in the entertainment sphere - was Sirius Satellite Radio.

Although its stock was up solidly Friday on the news that veteran radio industry heavyweight Mel Karmazin has been hired as the satellite broadcaster's new CEO, the company's 14½% notes due 2009 ended at 107.5, while its 15% notes due 2008 went home at 108, both unchanged on the session.

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