DriveTime, Pregis deals price; Calpine bonds lower on asset-sale controversy

By Paul Deckelman and Paul A. Harris

New York, Sept. 27 - DriveTime Automotive Group/DT Acceptance Corp. priced a downsized and restructured offering of five-year notes Tuesday, though at a steep discount to par, high-yield syndicate sources said. Also getting in on the action, they said, was Pregis Corp., which brought a two-tranche, dual-currency deal to market.

In secondary dealings, Calpine Corp.'s bonds were seen lower amid the latest legal wrangling between the San Jose, Calif.-based power generating company and some of its bondholders over its use of proceeds from a recent asset sale.

Elsewhere, some of the casino names seemed better, even though Pinnacle Entertainment Corp. said that the recent Gulf Coast hurricanes would surely impact its results for the second half of the year.

Pregis completes two tranches

Overall the primary market - at least the dollar-denominated portion of it - showed no sign of shaking off its recently acquired malaise. Two dollar-denominated tranches, totaling $223.5 million of proceeds, were both priced at significant discounts to par and both came well wide of the price talk.

The biggest of the day's tranches, representing a face amount of $150 million, came from Lake Forest, Ill.-based Pregis Corp., in a deal brought to market in order to help fund the $530 million acquisition of Pactiv Corp.'s North American and European protective and flexible packaging businesses by an affiliate of AEA Investors LLC.

On Tuesday Pregis priced a $150 million issue of 11 7/8% eight-year senior subordinated fixed-rate notes (Caa1/CCC+) at 98.102 to yield 12¼%, 50 basis points beyond the wide end of the 11½% to 11¾% price talk.

The sale generated $147.2 million of proceeds.

However Pregis also sold euro-denominated senior secured second-lien bonds (B3/B-) on Tuesday. And that transaction was a different story altogether.

The €100 million issue of 7.5-year notes priced at par to yield three-month Euribor plus 475 basis points, at the tight end of the 475 to 500 basis points price talk.

Credit Suisse First Boston had the books.

DriveTime does downsized deal

In addition to Pregis's $150 million dollar-denominated tranche, Phoenix, Ariz.-based DriveTime Automotive Group and DT Acceptance Corp. jointly priced dollar-denominated bonds Tuesday.

In terms of the proceeds it generated, DriveTime's deal was nearly halved, to $76.36 million from $150 million.

The restructured $80 million face amount issue of 11¼% five-year senior notes (B2/B-) priced at 95.451 to yield 12½%, 150 basis points beyond the wide end of the 10¾% to 11% price talk.

UBS Investment Bank and Bear Stearns & Co. ran the books for the debt repayment and general corporate purposes deal.

In addition to being downsized, the note was restructured with a maturity that was reduced to five years from eight years, and call protection that was reduced to three years from four years.

Neiman Marcus on Wednesday

Meanwhile on Tuesday, the downsized LBO deal from The Neiman Marcus Group Inc. continued to generate discussion in the primary market.

With its bank loan seeing huge demand from the institutional loan market - more than $5 billion of commitments, one source told Prospect News - Neiman Marcus downsized its bond deal by $975 million to $1.20 billion from $2.175 billion on Monday. The company shifted that $975 million amount to its term loan B.

Neiman Marcus completely dropped its proposed $850 million tranche of eight-year senior secured notes.

The company downsized to $700 million from $750 million its tranche of 10-year senior notes (B2/B-), which it talked at a yield in the 8¾% area, and also downsized to $500 million from $575 million its tranche of 10-year senior subordinated notes (B3/B-), which it talked at 10% area.

The books are expected to close mid-day on Wednesday, with pricing to follow.

Credit Suisse First Boston, Banc of America Securities, Deutsche Bank Securities and Goldman Sachs & Co. are the bookrunners.

Of the downsizing, sources on Tuesday seemed to paint a "good-news bad-news" scenario.

On the "good-news" side, sources not from the above-mentioned quartet of bookrunners pointed out a league table advantage that would accrue from the downsizing of the Neiman Marcus deal.

Also on the "good-news" side, a source pointed out that with the primary market said to be in a situation in which there is too much supply, a $975 million decrease in that supply should be meaningful.

However on the "bad-news" side one buy-side source told Prospect News that it remains to be seen whether the market actually is willing and able to take a big LBO deal from a retail name, albeit one that targets the upscale consumer. This source also pointed out that the above-mentioned 19 point monthly drop in consumer confidence reported by the Conference Board could hardly be good news for such a deal.

China's Fosun brings $500 million

Elsewhere Tuesday the forward calendar continued to grow as Chinese corporate issuer Fosun International Ltd. was heard to be poised to begin a roadshow Wednesday in Singapore for its $500 million offering of seven-year senior notes (Ba3/BB-). A U.S. roadshow will commence early next week.

Morgan Stanley and Citigroup are the bookrunners for the debt refinancing deal from the Shanghai-based company which has operations in the steel, real estate and pharmaceutical sectors.

Late Tuesday a sell-side source professed the belief that with roadshows in Asia, Europe and the United States, Fosun would probably attract attention from high yield buyers in addition to emerging markets accounts.

Pregis up in trading

When the new Pregis dollar-denominated 11 7/8% subordinated notes due 2013 were freed for secondary dealings, a trader saw the bonds as having moved up to 98.75 bid, 99.75 offered, rising from their 98.102 issue price.

Several traders said that they had not seen the new DriveTime 11¼% notes due 2010.

Market weak

Back among the established issues, a trader said that "overall, the market was ¼ to ¾ of a point weaker, depending on what sector and what name. There was general weakness across the board, from what I could see. I don't think it really had anything to do with consumer confidence" - which suffered its biggest plunge in 15 years, the Conference Board said Tuesday, amid consumer jitters about high energy prices in the wake of Hurricane Katrina heading into the home heating season - "as the Treasury market hung in there, but high yield was a little softer."

For instance, he saw "weakness in retail, weakness in gaming, weakness in healthcare."

HealthSouth down

In the latter sector, he said, HealthSouth Corp. "was taking a beating today; Tenet Healthcare is coming back but they're still near their lows, nowhere near where they were a week ago before [Hurricane Rita]. So generally, to me, the tone was difficult."

Specifically among the healthcare names, he said, HealthSouth's 10¾% notes due 2008, which had recently traded as high as 103.5 bid, 104.5 offered, opened the day at 100.25 bid, 101.25 offered, but moved down to 99.25 bid, 99.75 offered by the day's end, while its 8½% notes due 2008 lost half a point to 97.5 bid, 98.5 offered.

He saw no fresh news out on the Birmingham, Ala.-based rehabilitation and diagnostic services provider, other than the long sentence laid on former chief financial officer Weston Smith; despite Smith's status as a whistleblowing government witness in the feds' unsuccessful prosecution of ex-chief executive Richard Scrushy, he was still sentenced to 27 months in jail and paying $1.5 million in forfeited assets.

Scrushy, Smith and a number of other former HealthSouth executives were named by prosecutors as figures in a pervasive scheme to loot the company, which teetered on the edge of bankruptcy last year, but which managed to turn itself around without a court filing. Scrushy was recently acquitted of all of the charges against him.

Calpine down as dispute goes on

Elsewhere, Calpine's bonds were lower, with one market source quoting its 8½% notes due 2008 falling two points to 59.5 bid, its 10½% notes due 2010 retreating to 70 bid from 72.5, its 8½% notes due 2011 two points down at 54.5 bid, and its 8¾% notes due 2013 a point lower at 70.5.

A trader at another desk saw the company's secured 9 7/8% notes due 2011 half a point lower at 72 bid, 72.5 offered, although he saw its unsecured notes down more sharply, with the 7¾% notes due 2009 a point lower at 52 bid, 54 offered, while the 81/2s of '08 were a point lower at 59.5 bid, 60.5 offered.

Calpine bonds have been on the slide since last week on news that some of the bondholders are up in arms over Calpine's having spent money from a recent asset sale to buy natural gas assets rather than using it to buy back bonds. Calpine announced that it was filing suit to force the trustee for one issue of is notes to release about $400 million of proceeds from that asset sale which the trustee had frozen in the wake of the controversy.

Pinnacle gains

Elsewhere, even though Pinnacle Entertainment warned that its results for the latter half of the year will almost certainly be affected by Hurricanes Katrina and Rita, the Las Vegas-based gaming operator's bonds were seen continuing to firm, perhaps on investor relief that Hurricane Rita did not do much additional damage to its riverboat gaming operations in Louisiana and coastal Mississippi.

A trader saw the company's 8¼% notes due 2012 were up nearly two points at 101.25, while its 8¾% notes due 2013 were unchanged at 102.75.

At another desk, Pinnacle' 81/4s were seen up 1½ points at 100.5 bid, while competitor Isle of Capri Casinos' 7% notes due 2014 ended at 98 bid, up 1/2.

Another source saw Biloxi, Miss.-based gamer Isle's 7s at 97.25 bid, and its 9% notes due 2012 at 106, both down a quarter.

Very late in the session - with no time left to really affect trading - news came across the tape that Mississippi Gov. Haley Barbour proposed allowing the casino companies to build their gaming as far as 1,500 feet inland - something the companies have been seeking in the wake of Katrina, which completely destroyed Pinnacle's Casino Magic barge-based casino in Biloxi, heavily damaged Premiere Entertainment Biloxi's almost-completed Hard Rock Casino there, and which unmoored or otherwise damaged to some degree a number of casinos built on boats in Louisiana and Mississippi. Opponents of gaming in Mississippi are expected to oppose the measure.

Delphi steady

Delphi Corp.'s bonds were being called by a trader unchanged on the day, with the troubled Troy, Mich.-based automotive components provider's 6.55% notes due 2006 at 70 bid, 72 offered, its 6½% notes due 2009 at 66 bid, 68 offered, and its 6½% notes due 2013 at 64 bid, 66 offered.

Delphi said late Tuesday that it was continuing its talks with former corporate parent General Motors Corp. and the United Auto Workers union. Those talks are aimed at winning some relief from its heavy employee costs from GM and the UAW. Delphi has said it must have that assistance worked out before Oct. 17 - when the newer, tougher bankruptcy laws take effect.

GM - which is meantime holding its own talks with its Canadian auto workers' union affiliate, in hopes of heading off a strike - was seen lower on the day, its flagship 8 3/8% notes due 2033 at 77.625 bid, 80.125 offered, down 1 3/8 points.

Rival auto giant Ford Motor Co.'s benchmark 7.45% notes due 2031 were also lower, by about 1½ points at 78 bid, 78.5 offered.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.