Qwest, Local TV deals price; Cablevision off on buyout; healthcare names injured

By Paul Deckelman and Paul A. Harris

New York, May 2 - Qwest Communications International Inc. brought a quickly shopped and eventually upsized offering of 10-year bonds to market on Wednesday, although the new paper received a tepid reception when it freed for secondary dealings.

That was not the case, however, for calendar name Local TV Finance LLC, whose issue of senior toggle notes did move up once they hit the aftermarket.

Both new deals were priced at the tight end of price talk.

Primaryside activity was otherwise quiet, except for news of an upcoming deal from Europcar.

In the secondary market, Cablevision Systems Corp.'s bonds retreated on the news that the Bethpage, N.Y.-based cable system operator and sports team and arena owner's board of directors had agreed to an offer by its founding Dolan family to take the company private for $36.26 per share, or about $10.6 billion. The Dolans have lined up some $15 billion of new borrowings as part of the financing for the transaction. Including assumed debt, the deal values Cablevision at around $22 billion.

Elsewhere, certain healthcare names, including Tenet Healthcare Corp. and LifeCare Holdings Inc. were looking a little green around the gills - down several points, a trader said, on expectations that government Medicaid reimbursements might be less than expected.

Also on the downside were the bonds of Movie Gallery Inc. - pushed lower, a trader said, by investor reaction to poor numbers from video rental industry leader Blockbuster Inc., whose bonds, ironically, were little moved.

Chiquita Brands International Inc.'s bonds were better, even though the Cincinnati-based fruit and vegetable importer reported a quarterly loss versus a year-earlier profit and Standard & Poor's put its ratings under scrutiny for a possible downgrade.

A sell-side source said that the broad junk market was flat to slightly better on Wednesday.

Qwest drives through

Qwest Corp., a subsidiary of Qwest Communications International Inc., priced an upsized $500 million issue of 10-year non-callable senior notes (Ba1/BB+/BBB-) at par to yield 6½%, at the tight end of the 6½% to 6 5/8% price talk.

JP Morgan, Banc of America Securities LLC and Merrill Lynch & Co. were joint bookrunners for the quick-to-market transaction which was upsized from $400 million.

Denver-based Qwest will use the proceeds for general corporate purposes including debt repayment, and funding and refinancing investments in its telecommunications assets.

Local TV tight to talk

Also pricing Wednesday was Local TV Finance, LLC and Local TV Finance Corp.'s $190 million issue of eight-year senior toggle notes (Caa1/CCC+).

The notes came at par to yield 9¼%, at the tight end of the 9¼% to 9½% price talk.

UBS Investment Bank was the left bookrunner, and Deutsche Bank Securities was the joint bookrunner for the acquisition financing.

Europcar taps a pair

Beyond the Qwest and Local TV deals the U.S. primary market was "scary quiet," one sell-side source said after the Wednesday close.

From France, Europcar Group, the car rental arm of Volkswagen, got cranking with €255 million of add-ons to two issues that were priced a year ago.

The Paris-based company plans to do a €130 million add-on to its three-month Euribor plus 350 basis points senior subordinated secured floating-rate notes due May 15, 2013 (existing ratings B1/B). The original €300 million issue priced at par on May 9, 2006.

In addition Europcar plans to do a €125 million add-on to its 8 1/8% senior subordinated unsecured fixed-rate notes due May 15, 2014 (existing ratings B2/B). The currently outstanding €250 million priced at par on May 9, 2006.

The Deutsche Bank-led deal is expected to price on Friday.

Only one other deal is expected to price before the end of the week.

On Tuesday Saint Acquisition Corp., which will be used to acquire Swift Transportation Co., Inc., set the price talk for its $835 million two-part offering of second-priority senior secured notes (B-).

The Phoenix-based freight company is talking its eight-year floating-rate notes at Libor plus 650 basis points and talking its 10-year fixed-rate notes at the 11½% area.

Morgan Stanley is the left bookrunner for the offering which is expected to price on Thursday or Friday. Wachovia Securities and JP Morgan are joint bookrunners.

Qwest holds at issue, Local TV up

When the new Qwest 6½% notes due 2017 were freed for secondary dealings, they didn't get very far at all. A trader saw the bonds at just par bid, 100.25 offered, essentially unchanged from their par issue price earlier in the session. Another quoted them at par bid, 100.5 offered.

However, the reception was considerably better for Local TV's 9¼% toggle notes due 2015, which traded up to 101.25 bid, 102 offered from their par issue price.

Also among the newly priced issues, a trader saw Edison Mission Energy's new bonds unchanged from the slight gains which they notched on Tuesday after having priced at par earlier that session, with its 7.20% notes due 2019 still at 100.125 bid, 100.25 offered, while its 7 5/8% notes due 2027 remained at 100.75 bid, 101.25 offered.

Cablevision bopped by buyout

Back among the established names, Cablevision's buyout deal was the big news of the day, and its bonds reacted accordingly.

With bondholders worried about the prospect of heavy additional borrowing to fund the buyout and no doubt miffed that current financing plans do not include any buyback of their securities, a market source saw the company's 8% notes due 2012 fall to just below par bid in active trading from Tuesday's levels in the 104 area. Its 9.82% notes due 2009, on the other hand, hung in at around the same 106 context where they had traded on Tuesday.

At another desk, a trader called those 8s 2½ point losers at 99.5 bid, 100.5 offered.

The company's CSC Holdings Inc. bonds were also seen lower, with its 7 5/8% notes due 2018 dropping to below 99 from prior levels around 102, and its 6¾% notes due 2012 falling back to around the 97.5 neighborhood from prior levels above par.

However, another source saw the 7 5/8s down only a point at the 102 bid, 102.5 offered level, while its 8 1/8% notes due 2009 were down ¼ point at 104.

But while the bondholders jeered, the equity holders cheered - Cablevision's New York Stock Exchange-traded shares jumped 9.89% following the announcement, up $3.23 to $35.90 on heavy volume of nearly 20 million shares, almost 14 times the usual turnover.

The Dolans, including company founder and chairman Charles F. Dolan and his son James, the president and chief executive officer, control an estimated 74% of the company's voting shares but only 20% of its publicly traded class A shares, whose holders elect the independent directors for Cablevision's board. Even with board approval, the buyout deal still needs the approval by holders of a majority of the outstanding class A shares not owned by the Dolan family or by the company's other directors or executive officers.

The Dolans had made three prior offers to take Cablevision private, in June 2005, last October and this past January, at prices ranging from $21 per share to $30 per share. But each of those offers was rejected as inadequate by the board, which finally gave in this time around and accepted the sweetened bid.

Cablevision bondholders have been wary of those going-private deals, since they inevitably would involve heavy new borrowing. January's $30 per share offer, for instance, was to have been partially funded by the issuance of $2.75 billion of new junk bonds and $10 billion of new bank credit facilities - financing deals which were shelved when the buyout was nixed by the board, which caused the existing bonds to go up.

In announcing the latest deal, Cablevision said that it had lined up some $15.5 billion of debt financing via Merrill Lynch & Co., Bear, Stearns & Co. Inc., and Bank of America, although exact details on the timing and the structure of the financing will be fleshed out. The borrowed money will be used to fund the $10.6 billion merger consideration to be paid to the non-Dolan shareholders, and to refinance some current bank debt. The company's existing notes and debentures will remain outstanding. The financing will also include $2.1 billion in equity to be contributed to the transaction by the Dolan Family Group, through the reinvestment of its existing Cablevision shares in the new privately-held firm.

Standard & Poor's put Cablevision's ratings, and those of its Rainbow Media Enterprises Inc. unit, including their respective BB corporate credit ratings, on CreditWatch with negative implications, with the agency citing its concerns that the buyout deal could lead to "a significant degradation of credit measures if the transaction were to be significantly debt-financed, with no sale of assets and accompanying debt paydown." Moody's Investors Service and Fitch Ratings also put the ratings under scrutiny for a possible downgrade.

Cablevision is the fifth-largest cable operator in the nation, behind industry leader Comcast, Time Warner Cable, Charter Communications and Cox Cable, the latter of which also recently went private. However, it is, along with Time Warner, one of the two dominant cable operators in the New York area, the country's largest and most lucrative television market.

Besides being a cable operator, Cablevision, like many other cable operators, is now pushing into areas which traditionally have been the bailiwick of telephone companies, offering voice telephone and high-speed internet service, which it markets to customers by bundling it with its cable service.

The company also owns Manhattan's famed sports arena, Madison Square Garden, the professional teams that play there - including hockey's New York Rangers, now in the NHL playoffs after enjoying a successful season, and the New York Knicks basketball team, whose members are now watching the NBA playoffs on TV after the latest in a long string of losing seasons - as well as two New York regional sports networks that carry the teams' games, among other programming. It agreed just days ago to sell its interest in two other regional sports networks it owns, one in New England and the other serving the San Francisco/Oakland area, to network partner Comcast for $570 million in cash.

Cablevision also operates another famed New York entertainment venue, Radio City Music Hall, under a lease arrangement.

Healthcare names not so robust

Elsewhere, a trader saw LifeCare Holdings' 9¼% notes due 2013 tumble by 4 points to 76 bid, 78 offered. At another desk, the bonds were seen 4½ points lower at 76.5 bid.

The first trader opined that the fall was probably because of "bigger cuts in Medicare [reimbursements by the government] across the industry than anticipated."

Another healthcare name seen on the sick list Wednesday, probably for that same reason, was Dallas-based hospital operator Tenet, whose 9 7/8% notes due 2014 dropped some 2 1/8 points to just below 102, on very busy trading.

On the other hand, one healthcare name which seemed to be doing quite well was Tenet's larger rival, HCA Corp., whose 6½% notes due 2016 were ¼ point better at 87 bid, 88 offered. The first trader noted that the Nashville-based hospital operator's quarterly results are due out on Thursday, and "they traded up in front of those numbers."

Numbers boost Iron Mountain, Cooper

The trader saw several other names up on better numbers, including Iron Mountain Inc., whose 6 5/8% notes due 2016 were ½ point ahead at 97 bid, 98 offered, and Cooper Tire, whose 8% notes due 2019 were also up ½ point at 98.5 bid, 99.5 offered.

Blockbusters numbers hurt rival

On the other hand, bad numbers had sort of a boomerang effect on Movie Gallery's bonds - because the numbers did not belong to the Dothan, Ala.-based Number-Two U.S. video rental store chain operator, but rather to its larger rival, industry leader Blockbuster.

Traders said those numbers depressed Movie Gallery's 11% notes due 2012, which were seen around 86 bid, 87 offered, down 2 points.

Ironically, Blockbuster's own 9% notes due 2012 were seen hanging in around the same 102 area at which they had finished on Tuesday, although one or two sources had them down maybe 1/8 or ¼ point.

The Dallas-based video rental giant - which in recent years has started to move away from its reliance on brick-and-mortar video stores and make more use of on-line rentals, something Movie Gallery is just now belatedly getting into - reported that its first-quarter loss was $46.4 million (26 cents per share), versus its year-earlier loss of $1.9 million (3 cents per share). Wall Street had been expecting a 15 cents per share loss.

Chiquita up despite loss, downgrade threat

Also posting a loss was Chiquita Brands, which had a year-ago profit. Even so, a source called its 7½% notes due 2014 a point better at 92 bid, while another saw those bonds even better at 92.5, although he termed it up only ½ point.

Not everyone was so sanguine about the bonds. Yet another trader saw both the 71/2s and the company's 8 7/8% notes ½ point lower at 92 bid, 92.75 offered and 96.75 bid, 97.75 offered, respectively.

That source noted that S&P had put the Chiquita bonds on CreditWatch with a negative bias.

Chiquita announced late Tuesday that it lost $3.4 million (8 cents per share) in the first quarter - a sharp deterioration from a year earlier, when it made $19.5 million (46 cents per share). The per-share loss was about double what Wall Streeters were looking for.

The company cited the impact of costs related to getting out of unprofitable farm leases in Chile, among other factors leading to its loss.

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