Dex drive-by leads $1.3 billion, €150 million new deal parade; Denny's up on sale numbers

By Paul Deckelman and Paul A. Harris

New York, Nov. 3 - Dex Media Inc. let its fingers do the walking Monday and plucked $750 million from the high-yield market as the telephone directory publisher priced a quickly shopped two-part 10-year senior notes deal that was heard by market sources to have been solidly oversubscribed by would-be investors. Other names pricing in Monday's market included American Tower Corp., Jenoptik AG and Manitowoc Co., all of which upsized their deals from previously talked-about levels to take advantage of the seemingly insatiable junk market demand for new paper.

That strong new-deal demand was seen by traders as having stolen the spotlight from the secondary market; they said that relatively speaking, there was little going on, with everyone's attention largely focused on new deals either pricing or heard to be beginning road shows in advance of pricing.

The primary market churned out $1.3 billion in dollar-denominated business as the week of Nov. 3 got underway. Altogether a fistful of tranches, the majority of them surprises, priced on Monday.

And in a market that is presently said to be infested with paper-starved high yield investors, two of those tranches came upsized, one priced inside of price talk and three others came at the tight end of talk.

"I think it's getting a little unreal," said one sell-side source who spoke to Prospect News shortly after mid-day. "People seem like they are in a hurry to get invested because they know the clock is ticking.

"We have three full weeks to go before the Thanksgiving week, and the accounts don't know what to expect after Thanksgiving.

"They have cash and they want to put it to work now. That is why you are seeing deals price at these levels."

Dex Media, Inc. dove into the junk market Monday with a drive-by $750 million in two pieces (Caa1/B) - a deal that was done by the end of the day.

The company priced $500 million of 10-year senior notes at par to yield 8%, less than price talk of 8 1/8%-8¼%. Dex Media, Inc. also sold $250 million proceeds of 10-year senior discount notes at 64.393 to yield 9%. Price talk was for a yield of 9%-9¼%.

JP Morgan and Banc of America Securities were bookrunners on the quick-to-market offer from the Denver-based yellow pages directories company.

One market source told Prospect News that the Dex deal was three times oversubscribed.

American Towers Inc., a unit of American Tower Corp., also dialed in with a drive-by deal during the week's opening session. The Boston company priced an upsized $400 million - from an announced size of $350 million - of eight-year senior subordinated notes at par to yield 7¼%, at the tight end of the 7¼%-7½% price talk. Credit Suisse First Boston ran the books on the refinancing deal.

Wisconsin crane-maker Manitowoc Co. Inc. also upsized its deal on Monday, pricing $150 million of 10-year senior unsecured notes (B1/B+) at par to yield 7 1/8%, increased from $125 million and coming at the tight end of the 7¼% area price talk. Deutsche Bank Securities and Lehman Brothers were joint bookrunners.

On the other side of the Atlantic Ocean, Jenoptik AG sold €150 million of 7 7/8% seven-year notes (Ba3/BB-/BB) at 98.678, Monday to yield 8 1/8%.

The bookrunners were Goldman Sachs and HVB.

Meanwhile Monday the market heard news of deals in the pipeline.

A brief roadshow will be conducted on Wednesday for Triad Hospitals, Inc.'s offering $450 million of 10-year senior subordinated notes (B), which are expected to price late Wednesday or early Thursday.

Merrill Lynch & Co. and Banc of America Securities are joint bookrunners on the deal from the Plano, Tex.-based owner of hospitals and ambulatory surgery centers.

In addition, a brief roadshow will commence Tuesday for an offering from MSW Energy Holdings II of $225 million seven-year senior secured notes (Ba2/BB-), also expected to price late in the present week.

Credit Suisse First Boston will run the books on the Montvale, N.J. firm's deal.

And there is a Wednesday roadshow start for Tekni-Plex Inc.'s offering of $200 million of 10-year second priority senior secured notes, via Lehman Brothers and Citigroup.

The Somerville, N.J.-based packaging products manufacturer's deal is expected to price in the middle of the Nov. 10 week.

Syndicate names were heard Monday on a deal from Michael Foods, Inc. The $150 million of senior subordinated notes will come via bookrunners UBS Investment Bank, Bank of America Securities and Deutsche Bank Securities. Proceeds will be used to help finance the LBO of the Minnetonka, Minn. diversified food processor by Thomas H. Lee Partners.

Well after Monday's close Charter Communications, Inc. announced that it intends to bring $500 million of senior notes due 2010, with proceeds going to repay debt under the revolving credit facilities of the company's subsidiaries and for general corporate purposes.

The St. Louis-based cable company postponed a $1.7 billion two-tranche offering (CCC-) on Aug. 14, citing market conditions.

Citigroup, Banc of America Securities and JP Morgan had been joint bookrunners on that deal.

According to an informed source who spoke to Prospect News late Monday, no timing or syndicate names were known at that time on the new Charter offering.

And entering the euro pipeline, Monday, was Amsterdam nonfood retailer Vendex KBB NV, which is expected to bring a high yield bond offering of €200 million via ING. That deal is expected to price mid to late November.

"The market is still at absurd levels," commented one sell-side official, late on Monday. "People are still buying. The money just has not gone away.

"And everyone seems to be predicting a fall-off in new issue activity because we are heading into a holiday period.

"If new issuance falls off where is all of that money going to go? It either has to go into new deals or old deals, or out of high yield altogether.

"For now it's staying in high yield."

This official expressed the expectation that for the remainder of the 2003 calendar year, in weeks that have five full business days, less than $2.75 billion per week, average, of new issuance will price.

Meanwhile on the emerging markets front, Monday, ABS-CBN Broadcasting postponed its $150 million five-year senior secured notes offer (Ba3/B+). The Philippine broadcaster cited market volatility as its reason for the postponement.

Price talk of 9¼% area had been heard on the notes.

And Philippine National Bank is expected to begin a roadshow on Nov. 14 in Manila for $140 million of lower tier II subordinated bonds due 2013 (Ba1), according to market sources, via JP Morgan.

The new Dex 8% senior notes due 2013 were quoted as having freed at 101 bid, 101.5 offered, up from their par issue price.

Meantime, several traders said that they had seen no activity in Dex's existing bonds - despite the fact that one would think news the proceeds of the new issue will be used to pay a dividend to equity holders might lead to some bondholder dismay. In this case, one would be wrong, the attractiveness of the new deal apparently convincing most current noteholders to stay right where they are.

Another trader said he saw the existing Dex notes "unchanged to off a quarter [point] - but nothing of any consequence."

Secondary traders generally saw not much of any consequence doing Monday; one said "the market's hot - and illiquid. There's just nothing going on. The market's firm - but just in the secondary, nothing's going on and it sounds like the new-issue calendar is building up huge. People's attentions are elsewhere."

For instance, he saw little or no activity in the widely held bonds of Charter Communications Holdings LLC, even as its corporate parent reported a third-quarter swing to a profit of $36 million (7 cents a share) from a loss of $167 million (57 cents a share). However, it should be noted that latest figure included such one-time boosts as a $267 million gain related to a debt exchange transaction, and a $91 million gain from the sale of a Washington state cable system.

On top of that, Charter's $1.21 billion of revenues fell far short of analysts' expectations, with Charter-watchers blaming aggressive price promotions that Charter launched to win subscribers away from satellite services. Among the promotional tactics was offering two-month free trial periods for all its products. Charter chief executive officer Carl Vogel said on a conference call that the company intends to continue its sweeping promotional offers for the remainder of the year.

Charter was "nothing exciting," said the trader, quoting the St. Louis-based cabler's 10% notes due 2011 and 8 5/8% notes due 2009 as having both lost half a point on the session, at 79.5 bid, 80 offered.

At another desk, a trader saw Charter actually up half a point on the day, its 10¾% notes due 2009 at 83.5 bid, 84 offered and its 8¼% notes due 2007 at 89.5 bid, 91.5 offered.

Still another trader saw Charter "flat to off a touch in the morning," although he alone of the market participants surveyed saw a relatively significant move; he quoted the 8 5/8s as having ended down about a point and a half at 79.75 bid, 80. 75 offered.

There was also little change, if any seen in the bonds of Dynegy, despite the announcement that the Houston-based energy company was selling its Illinois Power Co. to Exelon Corp., parent of Chicago's Commonwealth Edison Co., in a $2.25 billion deal which includes Exelon's assumption of $1.8 billion of Illinois Power debt.

"Dynegy doesn't change a whole lot," the trader said, "there was not a lot of action."

"That stuff is trading so tight to begin with," another trader said. "It's too high-quality for us."

At yet a third trading desk, a trader pegged the company's 10 1/8% notes due 2013 at 110.5 bid, 111 offered, while its 8¾% notes due 2012 were at 98 bid, 99 offered. The 7 1/8% notes due 2018 were at 82.5 bid, 83.5 offered.

And even with a new bond deal clattering out of the chute Monday, a trader saw "not much change" in American Tower Corp.'s existing 9 3/8% notes, seen at 103 bid, 104 offered, and its zero-coupon discount notes, pegged at 67.5. He did acknowledge, however, that the company's senior bonds had moved up to that 103 level from 101-102 a couple of days earlier.

One issue which definitely seemed to be heading up was Denny's , the restaurant chain operator formerly known as Advantica. Its 11¼% subordinated notes due 2008 were seen early in the morning as having firmed to around the 63.5-64 bid level, well up from Friday's closing levels in the upper 50s to around 60. The gains were attributed to the Spartanburg, S.C.-based restaurant chain operator's 3.9% gain in sales last month at outlets which had been open at least a year. Denny's less volatile 12¾% senior notes due 2007 were seen up about a point and a half at 101.5 bid.

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