Leiner prices eight-year deal; Wiser, Lucent rise on M&A related activity

By Paul Deckelman and Paul A. Harris

New York, May 24 - Leiner Health Products Inc. was heard by high-yield syndicate sources to have priced an issue of eight-year subordinated notes Monday - and the new bonds were seen having firmed smartly when they were freed for secondary dealings. With market sentiment seeming a little better than it had been about a week to 10 days ago, when prospective new deals were being pulled from the calendar left and right amid deteriorating market conditions, one of those deals has reappeared, with Samsonite Corp. heard getting ready to price its $325 million two-part offering, possibly as early as Tuesday or Wednesday.

Among established secondary names, Lucent Technologies Inc. and The Wiser Oil Co. bonds were seen higher in the wake of merger and acquisition news about the two companies in separate deals, with Lucent an acquirer, and Wiser an acquiree.

The final week in the run-up to Memorial Day 2004 got underway in the primary market with one deal pricing - a deal that came at the tight end of talk and traded up notably in the secondary.

Meanwhile one new roadshow start was heard and one recently pulled two-part offering was revived.

Also notable Monday was the number of market sources who told Prospect News that they planned to spend part of their Monday evenings tuned to the scheduled speech by President George W. Bush on the prosecution of the Iraq war going forward and the impending hand over of power to Iraqi authorities.

Leiner comes tight, trades up

Leiner Merger Corp. (Leiner Health Products Inc.) priced the session's only transaction, according to sources who spoke to Prospect News well after Monday's close.

The Carson, Calif.-based manufacturer of supplements, diet aids and pharmaceuticals sold $150 million of eight-year senior subordinated notes (B3/CCC+) at par to yield 11%.

The deal, led by UBS Investment Bank, Credit Suisse First Boston and Morgan Stanley, came at the tight end of the 11%-11¼% - a fact of which two sell-side sources took note.

Commenting that the new Leiner notes due 2012 were seen trading at 102 bid, 103 offered, one of the sell-siders said: "I guess it shows that this market is still open."

Another sell-sider concurred, adding: "When they trade up like that you know they left a little money on the table."

Samsonite returns to carousel

Samsonite Corp., which postponed its $325 million equivalent two-part deal on May 14, returned to the high-yield market on Monday with a slightly restructured deal.

This time around both tranches from the Denver-based manufacturer of luggage and travel-related products are reduced by one year in maturity.

Price talk is for a yield in the 8 7/8% area on $200 million of seven-year non-call-four senior subordinated notes (B3/B-), with pricing expected to take place Tuesday.

The fixed-rate tranche previously postponed had an eight-year non-call-four structure.

Merrill Lynch & Co. and Deutsche Bank Securities are joint bookrunners.

Meanwhile price talk is three-month Euribor plus 437.5 basis points area on €105 million of six-year non-call-two floating-rate notes (B1/B+), which are expected to price on Wednesday.

The floating-rate tranche that Samsonite postponed had a seven-year non-call-two structure.

Deutsche Bank Securities is on the left for the floating-rate tranche, for which Merrill Lynch & Co. will be joint bookrunner.

Meanwhile one new roadshow start was heard during the session.

E*Trade Financial Corp. will go on the road Tuesday with $400 million of seven-year senior notes, which is expected to price during the week of May 31.

Morgan Stanley will run the books for the debt refinancing deal from the New York City-based online brokerage company.

Also expected to price that week is the $350 million two-part deal from Appleton, Wis. carbonless paper and printing products company Appleton Papers Inc.

The company is expected to sell $150 million of seven-year senior notes (B2/BB-) and $200 million of 10-year senior subordinated notes (B3/B+).

Bear Stearns & Co. and UBS Investment Bank are the underwriters of the debt refinancing deal.

Of the present week's business, price talk is 9½% area on Concentra Operating Corp.'s upcoming $150 million of eight year senior subordinated notes (B3/B-), which are expected on Tuesday afternoon via Credit Suisse First Boston and Citigroup.

Celanese steals spotlight in possible $3 billion week

One sell-side source told Prospect News late Monday that total new issuance for the May 24 week - just four-and-a-half sessions, with Friday's early pre-holiday close - is expected to approach $3 billion.

Grabbing the spotlight, according to this official, will be the BCP Caylux Holding (Celanese AG) $1.565 billion equivalent offering of 10-year senior subordinated notes to be sold in dollar and euro tranches (B2/B-).

No price talk or precise timing was heard late Monday on the Kronnberg, Germany industrial chemical company's deal, which is being led by Morgan Stanley, Deutsche Bank Securities and Banc of America Securities.

Geopolitics, oil, interest rates, inflation

One sell-side official who spoke to Prospect News late Monday said that the impact of geopolitical uncertainty and high crude oil prices taken in conjunction with rising interest rates and possible inflation, could start to have an impact on the capital markets.

"Right now there is really no direction in the high-yield market," said this source. "The high yield is trying to take its cue from the equity market, which right now is just moving sideways."

As was the case with other sources who spoke to Prospect News during Monday's session, this sell-side source expressed an interest in the speech to be given Monday night by president Bush.

"I think people will be interested to hear what the plan is, because it is getting to be late in the game, both in terms of the hand over of power and in terms of the coming U.S. presidential elections," the official commented.

An informal survey of market sources who carry on periodic correspondence with Prospect News revealed that a majority planned to tune in the Bush speech.

Leiner up in trading

When the new Leiner Health Products 11% senior subordinated notes due 2012 were freed for secondary dealings, they traded up to 102 bid, 103 offered from their par issue price earlier in the session, a trader said, declaring: "It sounds like a pretty good break."

At another shop, a trader saw the new bonds doing even better, at 102.25 bid, 103.

M&A dominates trading

Back among the established issues, M&A related activity seemed to be a driver on what was otherwise being described as, in the words of one participant, "a pretty dull day."

There were three separate deals involving high-yield issuing companies.

Lucent better

Murray Hill, N.J.-based telecommunications equipment maker Lucent said it planned to buy Telica, a Marlboro, Mass.-based provider of voice over internet protocol communications systems, for $295 million in stock and options.

A market source saw Lucent's longer-dated paper firming on the news, quoting its 6½% bonds due 2028 as having firmed to 73.25 bid from Friday's levels around 72, while the company's 6.45% bonds due 2029 had moved up to 73.5 bid from 72.25 Friday, although he pegged its shorter issues, such as the benchmark 7¼% notes due 2006 and the 5 ½% notes due 2008 as both unchanged, around 100.5 bid and 92 bid, respectively.

A trader agreed that the Lucent 6.45s were "up a little," to 73.5 bid, 74.5 offered from 72 bid, 73 offered on Friday.

Another trader, while also seeing the long paper move up pretty nicely - up about a point to 73.5 bid, 74.5 offered on the 6.45s - said that all of the Lucent bonds were up; "they were tighter all day," he said, also quoting the 5½% 2008 notes as having moved to 92 bid, 93 offered from 91.5 bid, 92.3 offered on Friday, for a half-point gain.

He pointed out that from a bondholder perspective "the deal looks good," since "they're not going to take on any leverage" to get it done.

"I don't know how leveraged that company is," he said of Telica, a privately held, relatively obscure company - "but they couldn't be any more leveraged than Lucent" already is. The Lucent announcement of the Telica deal made no mention of Lucent having to assume any debt. As of March 31, Lucent, according to its most recent quarterly filing with the Securities and Exchange Commission, had $4.214 billion of long-term debt on its balance sheet, plus another $907 million of debt scheduled to come due over the next year.

At a cost of estimated stock dilution of a penny or two for fiscal 2005 and a neutral impact in fiscal 2006, Lucent thus improves its position in the growing market for VoIP technologies, thought to be the cutting edge for the next generation of telephony.

"Telica significantly strengthens Lucent's Accelerate portfolio for large-scale VoIP networks that deliver multimedia voice, video and data services to enterprises and consumers," Lucent said in a statement. "The acquisition of Telica will enhance Lucent's ability to bridge next-generation and legacy networks for its wireline and wireless customers."

A trader meantime saw Nortel Networks Corp.'s 6 1/8% notes due 2006 up half a point, at 97.25 bid, 97.75 offered; the bonds of the Brampton, Ont.-based telecom equipment maker, a Lucent competitor, are affected by the same industry dynamics and frequently move up or down in tandem with those of its U.S. rival.

Wiser rises to call price

Also on the merger front, Wiser Oil, a Dallas-based independent energy exploration and production company, has agreed to be acquired by Denver-based E&P operator Forest Oil Corp. in a $330 million transaction that includes Forest's assumption of $160 million of outstanding Wiser debt, including $125 million of 9½% senior subordinated notes due 2007.

A trader saw Wiser's bonds move up to 101.5 bid, "the call price," and go out at 101.5 bid, 102 offered, up from Friday's levels at 99 bid, par offered. He said that there was no doubt that Forest, a much better-rated company (bonds at Ba3/BB versus Wiser's Caa3/CCC), will call those bonds. The trader meantime saw Forest's 8% notes due 2008 having fallen two points on the session to end at 105 bid, 106 offered, apparently on the prospect of Forest assuming or redeeming the Wiser debt.

At another desk, however, the Forest notes were estimated to have been unchanged, at 106; its 8% notes due 2011 were seen at 107 bid and its 7¾% notes due 2014 at 101.5, both unchanged on the session.

Wiser's New York Stock Exchange-traded shares jumped $2.51 (31.30%) to $10.53 Monday on volume of nearly 1.6 million, some 40 times the usual activity level.

OmniCare lower on NeighborCare bid

The third M&A story to hit the tape during Monday's session was the biggest deal of the day, with Omnicare Inc. offering to acquire NeighborCare Inc. in a deal worth about $1.5 billion, which would include the assumption by OmniCare of NeighborCare's debt, estimated at about $250 million.

OminiCare, a Covington, Ky.-based provider of professional pharmacy, related consulting and data management services for skilled nursing, assisted living and other institutional healthcare providers, had previously offered to acquire its Baltimore-based rival, NeighborCare, in a similar bid which was rejected by the latter company's board. However, NeighborCare said in a statement Monday that it would review the latest acquisition proposal.

Certainly, NeighborCare investors are hoping that management says "yes" this time. Its Nasdaq-traded shares jumped $10.24 (57.95%) to $27.91 on volume of 12.7 million, more than 30 times the usual turnover.

On the bond side, a trader said that NeighorCare's 6 7/8% notes due 2013 were trading around 98.5 bid, not far from the 97-99 context around which they had already been trading.

On the other hand, he saw the OmniCare 6 1/8% notes due 2013 quoted as low as 91 bid, well down from Friday's closing level around 96 bid, although he cautioned that the 91 "could just be a really lousy bid." At the very least though, he said the credit "certainly was down two or three points on the news."

At another desk, the slide was seen considerably less pronounced, with the OmniCare 6 1/8s only pegged down a point, in the 95 area.

Nextel Partners speech helps

Apart from merger driven activity, things were "kinda quiet, with things only up a quarter to a half point."

A trader saw Nextel Partners Inc.'s bonds "definitely up," following an upbeat presentation by the Kirkland, Wash,-telecommunications company's chairman/chief executive officer/president John Chapple at the Lehman Brothers Global Wireless Conference.

He quoted Nextel Partners' 8 1/8% notes due 2011 as having firmed to 101 bid, 102 offered from 99.75 bid, 100.75 offered previously. He saw Nextel Communications Inc.'s bonds also up, with the 7 3/8% notes due 2015 a point better at 99.75 bid, 100.75 offered.

Ahead of the conference appearance by its CEO, the company said that it was reaffirming its 2004 outlook.

Nextel Partners said in a statement that it is "on solid ground to meet or exceed its 2004 objectives."

Nextel Partners - which sells Nextel Communications' wireless service in smaller and rural markets - said in April that it expects 2004 service revenue of more than $1.2 billion. The company aims to add 340,000 new customers during the year.

R.J. Reynolds falls

On the downside, a trader saw the bonds of R.J. Reynolds Tobacco Holdings Inc. lower in the wake of a court ruling against Reynolds and such industry peers as Altria Group Inc. - the parent of Phillip Morris - and Loews Corp. Federal judge Gladys Kessler ruled that the government can seek $280 billion in tobacco industry profits as part of its case against cigarette manufacturers, clearing the way for the biggest civil racketeering suit in history. The Justice Department claims the tobacco companies earned the money through fraud - a contention the cigarette makers deny. Kessler said in her ruling that the Reynolds and the other companies could be ordered to hand over the money if the DoJ proves its case and also prove that the billions surrendered would prevent future wrongdoing.

The trader saw the R.J. Reynolds 7¼% notes due 2012 down 2½ points to 92.5 bid, 94.5 offered, and its 7¾% notes due 2006 a point lower at 102.5 bid, 103.5 offered.

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