DaVita brings giant two-part deal, US Oncology, Exide also price; Triton falls on earnings warning

By Paul Deckelman and Paul A. Harris

New York, March 15 - DaVita Inc successfully priced a $1.35 billion two-part mega-deal Tuesday, according to high-yield syndicate sources, easily the largest of three new bond issues that came clattering down the chute. Also pricing were deals for US Oncology Holdings - like DaVita, a medical name - and Exide Technologies Inc., the latter deal a downsized issue.

In secondary dealings, the market meandered around for much of the day, but a number of issues weakened just before things wrapped up, chief among them being Triton PCS Holdings Inc. Although the Berwyn, Pa.-based mobile phone company swung to a net gain in the fourth quarter and 2004 from a year earlier, that was mostly due to a big one-time gain; operating results were below expectations, and the company warned about weak 2005 earnings. Tekni-Plex Inc.'s efforts to seek authority for incurring more debt were seen as the likely catalyst behind a fall in that company's bonds Tuesday.

Slightly over $2 billion of new deals priced during Tuesday's primary market session, as dialysis company DaVita, Inc. completed its $1.35 billion two-part issue, which sources had said was going well.

Of the five tranches that priced during the session one was upsized, one was downsized, one came at talk and three priced on the wide end of price talk.

"It looks like the primary market is open," one investment banker said late in the session, adding that even if some issues had priced at the wide end of price talk, high-yield issuers continue to get a bargain.

"The new issue supply is limited," the sell-sider said. "And there is still a lot of cash that needs to be put to work."

Needing to own the benchmark

Amid the persistent buzz that DaVita Inc.'s $1.35 billion two-part deal was doing well, one sell-side source said early Tuesday, before terms emerged, that a "benchmark-sized deal" such as DaVita would predictably get plenty of attention from institutional investors.

"People want to own the benchmark deals," the source said.

DaVita priced $500 million of eight-year senior notes (B2/B) at par to yield 6 5/8%, at the wide end of the 6½% area price talk, and $850 million of 10-year senior subordinated notes (B3/B) at par to yield 7¼%, right on top of price talk.

JP Morgan ran the books for the debt refinancing deal from the El Segundo, Calif., kidney dialysis services provider.

Recapping the company's adventures on the way to the high-yield market, DaVita extended its roadshow into this week after announcing that it had received a subpoena from the U.S. Department of Justice requiring it to produce documents related to, among other things, pharmaceutical and other services provided to patients, relationships with pharmaceutical companies, financial relationships with physicians and joint ventures.

Downsized, restructured Exide at wide end of talk

Exide Technologies, Inc., the Lawrenceville, N.J., car battery maker, got a somewhat different reception from high yield investors as it priced its deal on the Ides of March.

The company priced a downsized, restructured $290 million issue of eight-year senior secured second-lien notes (Caa1/B) at par to yield 10½%, at the wide end of the 10¼% to 10½% price talk.

The company had originally been in the market with senior unsecured notes.

Deutsche Bank Securities and Credit Suisse First Boston were the bookrunners for the deal, proceeds from which are pegged to repay the company's debt and provide it with greater liquidity.

The company shifted $60 million to an offering of convertible floating-rate notes from the original $350 million senior notes offering.

One investor, speaking on background, told Prospect News that he had passed on the deal.

The investor's biggest concern was that on top of an already heavy debt load Exide still needs to fund a massive pension underfunding and resolve tax uncertainties.

"They will not hear from the IRS until Thursday as to whether or not they need to take $50 million of this deal to pre-pay some of the liability - yet they are funding the high yield and convert today," the investor commented.

"Management also refuses to raise a small amount of equity that would put the whole Pension Benefit Guaranty Corp. issue behind them, so the PBGC now wants a second lien on all the company's assets. That is unheard of."

US Oncology drives through with $250 million

Also pricing at the wide end of price talk on Tuesday was US Oncology Holdings, which completed a quick-to-market $250 million issue of 10-year senior floating-rate notes (Caa1/B-).

The bonds priced at par to yield six-month Libor plus 525 basis points, on the wide end of the Libor plus 500-525 basis points talk.

Wachovia Securities, JP Morgan and Citigroup were joint bookrunners for the dividend-funding deal from the Houston medical oncology services company.

And CHC Helicopter Corp. priced an upsized $150 million add-on to its 7 3/8% senior subordinated notes due May 1, 2014 (B2/B) at 103.50 on Tuesday, resulting in a 6.745% yield to worst, according to an informed source.

Merrill Lynch & Co. ran the books for the debt refinancing deal.

The Vancouver, B.C.-based company priced the original $250 million issue at 99.455, on April 21, 2004 to yield 7.453%, and so realized substantial interest savings with Tuesday's transaction.

Three off-the-run names

Timing was heard Tuesday from three off-the-run high-yield credits.

White Birch Paper Co. (Bear Island Paper Co.) launched a $400 million two-part offering of senior notes (B) which are expected to price late next week.

Credit Suisse First Boston has the books.

The Toronto-based newsprint company is selling 10-year non-call-five fixed rate-notes and seven-year non-call-two floating-rate notes. Tranche sizes remain to be determined.

Elsewhere Sunstate Equipment LLC, in conjunction with Sunstate Equipment Co., will kick off a roadshow Wednesday for a $175 million offering of seven-year non-call-two second-priority senior secured floating-rate notes.

Banc of America Securities has the books for the debt refinancing and dividend funding deal from the rental tools and equipment company.

And Iaai Finance Corp. (Insurance Auto Auctions Inc.) will run a March 16 to March 24 roadshow for its $150 million offering of eight-year non-call-three senior subordinated notes, via Deutsche Bank Securities and Bear Stearns & Co.

The Westchester, Ill., provider of automotive total loss and specialty salvage services will use the proceeds to finance the acquisition of the company.

Price talk on Progress Rail, Hayes Lemmerz

Finally on Tuesday price talk of 7 5/8% to 7 7/8% was heard on Progress Rail Services Corp./Progress Metal Reclamation Co.'s $200 million of seven-year senior notes (B2), expected on Thursday via Morgan Stanley and JP Morgan.

And HLI Operating Co. Inc. (Hayes Lemmerz International Inc.)'s €120 million of seven-year non-call-four senior notes (B2) were talked at 10¾% to 11%.

Pricing is expected on Wednesday via Citigroup and Merrill Lynch & Co.

Exide around par in trading

The DaVita and US Oncology deals priced way too late in the day for any meaningful aftermarket activity. Earlier, when Exide's new 10 ½% notes due 2013 were freed for secondary dealings, they were seen by traders having gyrated around before settling in essentially unchanged from their par issue price.

A trader saw the bonds trade as high as 100.5 bid during the morning, before dropping back later in the day to 98.875 bid, 100.375 offered.

At another desk, a trader saw the Lawrenceville, N.J.-based electric power storage system maker's issue trade as high as 100.5 bid before ending the day at par bid, 100.5 offered.

Rayovac down on acquisition

Outside of the new-deal sphere, the bonds of another battery company - Rayovac Corp. - were seen lower, after the Atlanta-based company announced plans to acquire German pet supplies maker Tetra GmbH for €415 million (about $560 million).

While Rayovac shareholders were clearly pleased, taking the company's New York Stock Exchange-traded shares up $3.89 (9.46%) to $45, on volume of 1.9 million shares, three times the norm, bondholders were less sanguine, apparently wary that the company will issue debt to fund the purchase. No actual funding plans were announced, although Rayovac may shed some more light on that when it discusses the acquisition on conference call with analysts on Thursday morning.

Rayovac's 7 3/8% senior subordinated notes due 2015 was quoted as having dropped to 98.75 bid, 99.5 offered from morning levels at 100.5 bid, 101.5 offered.

Triton plunges at day's end

But the day's leading decline, far and away, a trader said, was Triton PCS, which "was getting murdered in the last half hour" of the day's dealings.

"Triton's numbers were out," he said, "and they were atrocious. Missed by a mile."

That drove the company's 8½% senior notes due 2013 down to 92.5 bid, 93.5 offered, well down from opening levels around 97 bid, 98 offered. Triton's subordinated 9 3/8% notes due 2011 swooned to 78 bid, 79 offered from 84.5 bid, 85.5 offered previously, while its 8¾% notes due 2011 retreated to 75.5 bid, 76.5 offered from 82 bid, 83 offered.

"They just got murdered," he said. "It was the disaster of the day."

Triton posted fourth-quarter net income after preferred dividends of $802.5 million ($9.86 per share) a sharp turnaround from the company's year-earlier loss of $34.7 million (52 cents per share). However, that profit was almost entirely due to a one-time gain of $848.5 million on transactions with Cingular and AT&T Wireless. Excluding that gain, Triton actually posted a loss of 68 cents per share in the latest quarter - far wider than the 50 cents per share operating loss that Wall Street had been expecting.

Besides failing to meet expectations for the quarter, Triton also warned of lower earnings ahead. The company's chairman and chief executive officer, Michael E. Kalogris, cautioned in a statement issued by the company that there was "continued confusion in the marketplace, which resulted in fewer subscribers at the end of the year than we expected. Additionally, the longer time frame for transitioning subscribers and integrating our new networks means we won't realize projected synergies this year. The combination of these factors will result in 2005 adjusted EBITDA being significantly lower than previously thought," the Triton executive said.

Tekni-Plex hit by debt request

Also on the downside, the trader said, was Tekni-Plex, after the Somerville, N.J.-based packaging maker announced late in the day that it had begun a consent solicitation seeking the approval of its 12¾% senior subordinated noteholders to giving the company the authority to take on new debt, thus giving it more financial flexibility. Tekni-Plex is currently prohibited by its bond indenture from incurring any new debt.

The trader saw the company's bonds "weaker at the end of the day," with its 12¾% senior notes due 2010 dropping to 85 bid, 86 offered from 86.5 bid, 87.5 offered previously. Its 8¾% subordinated notes were about half a point lower at 97 bid, 98 offered.

Lucent, Amkor, Toys lower

Other downsiders he saw included Lucent Technologies Inc.'s 6.45% notes due 2029, off half a point to 92.5 bid, 93.5 offered, and Amkor Technology's 10½% notes due 2009 which eased a point to 94.5 bid, 95.5 offered.

"In general, the overall tone of the market seemed down half a point to a point," he said, "although it accelerated in certain securities, like Triton and Tekni-Plex, accelerating in the last hour of the trading day."

Another trader noted weakness in Toys 'R' Us Inc.'s bonds, after the Wayne, N.J.-based toy and children's products retailer announced that it was "indefinitely" delaying release of its fourth-quarter earnings figures so it could reflect changes in how it accounts for leases.

Toys 'R' Us' 7 7/8% notes due 2013 went home at 96 bid, 97 offered, down from 97.75 bid, 98.5 offered at the opening, and its 7 3/8% notes due 2018 dropped to 86.75 bid, 87.75 offered, down from 88.5 bid, 89.5 offered.

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