Dave & Buster's prices eight-year deal; AK up on takeover buzz; bankrupt Dana climbs

By Paul Deckelman

New York, March 3 - Dave & Buster's Inc. was heard by high yield syndicate sources to have served up a $175 million offering of eight-year notes Friday, part of the funding for the pending leveraged buyout of the Dallas-based restaurant chain operator.

That put the cap on a week which also saw pricings from Bon-Ton Stores Inc. and Quebecor World Inc.

Primaryside players also saw new-deal announcements from a familiar junk bond name, Level 3 Communications Inc., as well as Angiotech Pharmaceuticals Inc. And timing and other issue details emerged on Alliant Techsystems Inc.'s planned offering of 10-year bonds.

In the secondary market, AK Steel Corp. notes were heard to have firmed smartly on speculation - so far unconfirmed - that the Middletown, Ohio-based specialty steels maker might be a takeover target for larger sector rival United States Steel Corp.

Also on the upside was Dana Corp., which - to little surprise - sought protection from its junk bond holders and other creditors due to a Chapter 11 filing. The Toledo, Ohio-based maker of driveshafts, axle systems and other automotive components for original equipment manufacturers such as General Motors Corp. and Ford Motor Co., thus becomes the latest in a series of auto parts makers to skid off the road and into the bankruptcy courts, bedeviled by a witches' brew of falling orders plus higher raw materials costs and heavy labor expenses.

Dave & Buster's above talk, trades up

Dave & Buster's priced its $175 million offering of senior notes due 2016 at par to yield 11¼% - somewhat outside pre-deal market price talk envisioning a yield in the 11% neighborhood.

A market source said that he had heard that the deal was "well oversubscribed," and the new bonds had traded up to 101 bid when they were freed for secondary dealings.

The deal came to market via bookrunner JP Morgan. Proceeds, along with $100 million of term loan financing and a $108 million equity contribution by private equity company Wellspring Capital Management, will go to fund the leveraged buyout of the company by a Wellspring affiliate in a deal valued at $375 million, including the assumption of outstanding debt.

Level 3 launches

Elsewhere in the primary market, Level 3 Communications unveiled plans to sell $400 million of new five-year and seven-ear senior notes in a two-part offering via by book-running manager Merrill Lynch & Co., along with co-managers Credit Suisse, Morgan Stanley & Co. and JP Morgan.

The deal - the tranche sizes of which are yet to be determined - will be sold to investors via a short roadshow that begins Monday and a Tuesday investor call, with pricing expected on Thursday.

Level 3, a Broomfield, Colo.-based telecommunications company and broadband operator, plans to use the proceeds to fund the $386 million cash purchase price of Level 3's acquisition of rival broadband operator WilTel Communications Group LLC, with any left-over net proceeds going towards funding the $67.5 million cash portion of Level 3's pending $137 million cash-and-stock acquisition of Progress Telecom, a St. Petersburg, Fla.-based wireless and land-line phone service provider.

Angiotech to bring $250 million

Also climbing onto the upcoming week's forward calendar is Angiotech Pharmaceuticals; the Vancouver, B.C.-based maker of specialty pharmaceuticals said that it will sell $250 million of eight-year senior subordinated notes to help fund its recently announced $810 million acquisition of American Medical Instruments Holdings Inc.

New-deal sources said the deal will be brought to market via joint bookrunners Credit Suisse and Merrill Lynch & Co. It will be sold to potential investors via a roadshow that will get under way on Tuesday.

Alliant to price Monday

And Alliant Techsystems Inc., whose $400 million offering of 10-year senior subordinated notes emerged earlier in the week, is expected by junk market sources to be pricing its fast-moving offering by Monday afternoon, following an 11 a.m. ET investor conference call with potential buyers.

Banc of America Securities is the sole underwriter for the Minneapolis-based high-tech defense contractor's deal, the proceeds of which will go to fund the previously announced tender for its $00 million of outstanding 8½% notes due 2011.

Dave & Buster's up, Bon-Ton down

Several secondary market traders saw the new Dave & Buster's 11 ¼% senior notes due 2014 to have traded up to levels as high as 101.5 bid, 102 offered from their par issue price earlier in the session, amid respectable demand for the oversubscribed issue.

"It went pretty well," said a trader who saw the new bonds hit that peak level.

However, the same could not be said of Bon-Ton Stores Inc.'s new 10¼% senior notes due 2014.

"They did not fare as well," he said of the York, Pa.-based department store operator's new bonds, which had priced late Thursday at par. He saw them trading Friday afternoon at 99.25 bid, 99.75 offered.

Another trader saw those bonds actually open a little higher, at 100.125 bid, 100.625 offered. "But then they crapped out" later in the day, he said. He also saw the bonds at 99.25-99.75.

Level 3 existing bondsgain

The trader saw Level 3's existing bonds "up a little," apparently given a lift by news of the upcoming issue. He quoted its benchmark 9 1/8% notes due 2008 a point better at 98 bid, 99 offered, although its 10¾% notes due 2011 were half a point easier at 93 bid, 94 offered.

Another trader saw the 9 1/8s doing even better, up 1¾ points on the day at 97.75 bid, 98.75 offered.

AK Steel jumps on takeover talk

Back among established issues with no new-deal influences, traders saw AK Steel's bonds gain handsomely after the Pittsburgh Post-Gazette reported Friday that Pittsburgh-based U.S. Steel was in talks to acquire AK Steel for an undisclosed amount of stock and cash.

A trader saw both issues of the company's bonds - its 7¾% notes due 2012 and its 7 7/8% notes due 2009 - jump in morning trading to bid levels around par, from 95.5 bid, 96 offered and 97.5 bid, 98 offered, respectively.

The bonds apparently held their gains; another trader saw the former up four points on the day and the latter 1½ points higher at just below par.

Yet another trader, who saw the bonds at similar levels, termed the rise in the 73/4s "pretty significant."

AK's new York Stock Exchange-traded shares jumped $2.65 (23.37%) to $13.99. Volume of 19.3 million shares was around six times the norm.

The Post-Gazette said it had gotten hold of a U.S. Steel internal document that indicated that management had told the steel giant's directors on Tuesday that they had given their counterparts at AK Steel a preliminary price. The newspaper did not specify how much U.S. Steel had purportedly offered for its rival although using Friday's prices AK Steel's equity capitalization would be worth about $1.25 billion.

Spokesmen for both companies declined to comment on the news reports.

One of the traders thought that the timing of the story was "very strange - it shows up in the midst of a lockout" by management at the company's main plant in Middletown. Some 2,700 workers represented by the Armco Employees Independent Federation had been off the job for three days in a dispute over their lack of a contract. The old pact expired at midnight Tuesday. Talks aimed at ending the lockout had been scheduled for Friday afternoon, but were scrubbed by the union as it sought to learn more about the purported U.S. Steel offer to AK.

"It makes you wonder who was able to disseminate that information, which was on an internal memo that ended up at the Post-Gazette," he said. He said it was his own speculation - neither yet confirmed or denied by anyone - that whoever leaked the memo to the paper was "trying to insinuate that the company is worth a lot and they [the union workers] shouldn't be forced to take any cuts" in their wages or fringe benefits. He reiterated that his hypothesizing was "purely speculation."

He said that there was "no real change" in U.S. Steel's bonds, with its 9¾% notes due 2010 steady at 108.25 bid, 109.25 offered.

Another traded did see some movement to the downside in U.S. Steel, with the 93/4s a point down at 107.5 bid, 108.5 offered, and its 10¾% notes due 2008 at 109 bid, 110 offered, down 1½ points.

Dana gains on filing

Apart from the steel issues, Dana was clearly the name of the day, as traders saw brisk activity in the company's bonds following its bankruptcy filing. Those bonds had been trading flat, or without their accrued interest, since Wednesday, when Dana said that it had missed the coupon payments due March 1 on its 6½% notes due 2009 and its 7% notes due 2029.

Following the mid-morning announcement of the bankruptcy filing (see related story elsewhere in this issue), a trader saw those '09 bonds having jumped two points to 69.5, while another saw the bonds actually breach the psychologically important 70 level, moving up to 69 bid, 71 offered.

By the afternoon, a trader said, the bonds had been on a wild and crazy ride, with the 61/2s having opened at 67 bid, 68 offered, then having dipped to 65 bid, 67 offered, before finishing at 69 bid, 70 offered. The 5.85s, he said, traded about a point cheaper after the filing.

A trader at another shop saw the 61/2s due 2008 up two points at 69 bid, 70 offered, while the 5.85s were up 3½ points at 67.5 bid, 68.5 offered, and the 7s of both 2028 and 2029 were four points better at 69 bid, 70 offered, and all trading flat.

Yet another trader saw Dana's '09 bonds up two points, at 68.5 bid, 69.5 offered, and likewise observed "big volatility in the rest of the sector."

Other auto names gyrate

That included Visteon Corp., whose 8¼% notes due 2010 opened at 78 bid, then "caved in" during the morning to hit lows of 75, before ending unchanged at 78 bid, 79 offered.

Lear Corp's 8.11% notes due 2009 were likewise staggering around, dropping to 85 bid from 88 at the opening, although those bonds worked their way back up to 87.5 bid, 89 offered.

ArvinMeritor Inc.'s 8¾% notes due 2012 dropped to 96.5 bid, 97.5 offered around mid-day, before coming back to end unchanged at 97.5 bid, 98.5 offered.

While the parts suppliers were swooning, however, GM and Ford and their various financing arms were largely unchanged, with GM's benchmark 8 3/8% notes due 2033 steady at 69.75 bid, 70.25 offered, while its General Motors Acceptance Corp. financial arm's 8% notes due 2031 were also steady at 88.75 bid, 89.25 offered.

Ford's 7.45% notes due 2031 were down perhaps ¼ point at 70 bid, 70.5 offered and its financing unit's 7% notes due 2013 "didn't stray very much at all," finishing at 86.5 bid, 87 offered.

Chip names lower

News that semiconductor giant Intel Corp., delivered bearish guidance pushed the junk tech names lower, with rival chip maker Advanced Micro Devices' 7¾% notes due 2012 a point down at 105 bid, 106 offered, and semiconductor testing and packaging services provider's Amkor Technology Inc.'s 7¾% notes due 2013 also a point down at 93.25 bid, 94.25 offered.

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