Host Hotels, Hexion price deals; Charter moves up

By Paul Deckelman and Paul A. Harris

New York, Oct. 27 - Host Hotels & Resorts Inc. was heard by high yield syndicate sources on Friday to have successfully priced a $500 million issue of eight-year notes, while Hexion Specialty Chemicals Inc. brought an $825 million two-part issue to market. That brought to a close a busy week which saw mega-deals price from Metro PCS and Michaels Stores Inc., as well as smaller deals from issuers including Levels 3 Communications Inc. and Cablecom Luxembourg.

Yet another really big deal appeared on the horizon, as Canadian transportation equipment maker Bombardier Inc. was heard getting ready to sell €1.8 billion equivalent in a dual-currency multi-part deal that will include both fixed- and floating-rate notes. And price talk emerged on a downsized offering for Encore Medical Finance LLC.

In the secondary arena, traders described a generally dull day, though here and there there were patches of activity.

One was Charter Communications Inc., which was seen having gotten some wind in its sails from the strong quarterly results reported by industry leader Comcast Corp., which on Thursday posted higher profits on record subscriber growth numbers. However, fellow cabler Adelphia Communications Corp., whose bonds have recently been rising, sometimes two or three points a day, were seen slightly lower to at best unchanged.

Also among the communications and media names Clear Channel Communications Inc.'s bonds - still investment grade, for the moment - were seen having widened out for a second consecutive session, as speculation that the San Antonio-based radio broadcasting giant might go private in a leveraged buyout transaction scared bondholders and caused its spreads over Treasuries to widen out markedly.

All three major ratings agencies have warned that they will look at the company with an eye to a downgrade in the event that such a thing takes place.

In total, Friday's primary market session saw three issuers raise slightly more than $1.544 billion of proceeds in four tranches, as the high-volume new deal market continued to chew its way through a forward calendar that now soars above the $12 billion mark.

Hexion wide of talk

Friday's biggest issuer, in terms of dollar amount, was Hexion Specialty Chemicals.

The Columbus, Ohio-based company priced $825 million of eight-year secured second-priority notes (B3/B-) in a Friday transaction, according to an informed source.

Hexion priced a $625 million tranche of fixed-rate notes at par to yield 9¾%, 12.5 basis points beyond the wide end of the 9½% area price talk.

Hexion also priced a $200 million tranche of floating-rate notes at par to yield three-month Libor plus 450 basis points, again 12.5 basis points beyond the wide end of the 425 basis points area price talk.

Credit Suisse and JP Morgan were joint bookrunners for the debt recapitalization deal.

Host $500 million drive-by

In quick-to-market action, Host Hotels & Resorts, LP priced a $500 million issue of 6 7/8% eight-year notes (Ba1/BB) at 99.245 to yield 7%, on top of price talk which had called for a yield of 7% at a slight discount.

Deutsche Bank Securities and Merrill Lynch & Co. were joint bookrunners for the debt refinancing and general corporate purposes deal from the Bethesda, Md.-based lodging concern.

Cap Cana upsizes

One Friday deal came upsized and priced inside of talk. And interestingly it was a transaction with one foot firmly anchored in the red hot emerging markets space.

Dominican Republic-based resort developer Cap Cana SA priced an upsized $250 million issue of seven-year senior secured amortizing notes (B3/B) at par to yield 9 5/8%, 12.5 basis points inside of the 9¾% to 10% price talk.

Bear Stearns & Co. led the Rule 144A/Regulation S deal.

Counting the Friday deals, the final full week of October 2006 came to a close having seen slightly more than $4.30 billion price in 10 dollar-denominated tranches, topping the previous week's $3.7 billion in 11 tranches.

With only two sessions remaining before October comes to a close, month-to-date issuance came to $17.46 billion in 32 tranches. The same time-frame in 2005, Oct. 1 to the Oct. 29 close, saw just $2.81 billion price in 15 tranches.

And year-over-year, 2006 issuance continues to distance itself from that of 2005.

At Friday's close the market had seen slighly more than $109.35 billion for 2006 to date, nearly 36% higher than the $81.27 billion of 2005 issuance to the Oct. 27 close.

Bombadier brings €1.8 billion

The euro calendar built out substantially on Friday as Bombardier Capital Funding LP and Bombardier Inc. announced preparations to begin roadshowing a €1.8 billion equivalent three-part notes offering (Ba2/BB).

The debt refinancing deal is being led by joint bookrunners Deutsche Bank Securities, JP Morgan and BNP Paribas.

It features euro-denominated seven-year senior floating-rate notes, dollar denominated eight-year fixed-rate senior notes and euro-denominated 10-year fixed-rate senior notes.

Also from the euro market, Spanish gaming firm Codere Finance SA expects to price a €150 million add-on to its 8¼% senior notes due June 15, 2015 (B2/B) on Tuesday via Credit Suisse, Barclays Capital and Morgan Stanley.

Proceeds will be used to fund an acquisition and a license renewal, as well as to refinance debt and for general corporate purposes.

The original €335 million issue priced at par in June 2005. Subsequently the company priced a €165 million add-on priced at 106.25 in April 2006.

The pending transaction will take the total issue size to €650 million.

Whopper week ahead

Finally, heading into the October-November crossover period, Halloween week figures to see terms unmasked on a pair of mega-deals.

Idearc Inc., the new company formed by the spin off of Verizon Communications directories business, is expected to price $2.85 billion of 10-year senior notes (B2/B+) on Wednesday.

JP Morgan and Bear Stearns have the books.

Also expected to price a huge bond deal during the course of the week is Sabine Pass LNG LP, a subsidiary of Houston-based Cheniere Energy Inc.

Sabine is marketing $2.15 billion of senior secured first-lien notes in tranches that will mature in 2013 and 2016.

Credit Suisse has the books.

New Hosts move up, Hexion doesn't

When the new Host Hotels 6 7/8% notes due 2014 were freed for secondary dealings, a trader saw those bonds at 100.125 bid, up from their 99.245 issue price earlier in the session.

Another trader pegged those bonds a little better, at 100.25 bid, 100.5 offered.

He also saw Hexion's new eight-year senior secured fixed-rate notes straddling their par issue price, at 99.875 bid, 100.125 offered, while its floating-rate notes were unchanged from issue at par bid, 100.25 offered.

The trader also saw Metro PCS's new 9¼% senior notes due 2014, which had priced at par Thursday and then moved up to levels around 100.75-101 bid after they broke, moving back down in Friday's activity, ending at 100.625 bid, 101 offered.

Another trader, however, saw the bonds hanging in at 101 bid, 101.125 offered, with "a nice high market there. The new-deal spigot," he observed, "is on."

Bombardier's 6.3% notes due 2014 seemed to get a boost from the news of the company's upcoming big new bond deal, rising ½ point to 92.5.

Charter's hot but Adelphia's not

A market source saw Charter's 8% notes due 2012 up ¼ point at 102.5, but at another desk a source saw the St. Louis-based cable operator's 10% notes due 2014 up 2 points on the session to 80 bid, while its zero-coupon notes due 2012 were up more than 3 points at 86.5, and its zeros due 2014 were 4 point winners at 84.25. So were its 11 1/8% notes due 2011 and 2014, at 90 bid and 84 bid, respectively.

Charter's Nasdaq-traded shares were meantime up 17 cents (8.02%) to $2.29 on volume of 30.4 million, about triple the norm. That was on top of a 12% rise in Thursday's trading.

There was no fresh positive news out about the company itself - although some news reports did cite market speculation that Charter, looking for ways of paring down its $17 billion mountain of debt, might sell its valuable Los Angeles properties to Time Warner Cable after the latter's corporate parent, Time Warner Inc. spins off part of its cable business in an initial public offering.

The main factor seen pushing the Charter bonds and shares up, however, was just investor optimism about the cable sector after the strong Comcast numbers.

That general theme of cable sector confidence has been seen helping give the bonds of bankrupt Adelphia Communications a boost lately.

The Greenwood Village, Colo.-based cabler's paper had already been moving steadily upward in anticipation of its coming emergence from Chapter 11, where the company has languished since 2002, when the formerly high-flying Adelphia was laid low by revelations of massive financial irregularities, which exploded into an accounting scandal that led to the ouster of its founding Rigas family from positions of executive power, and the eventual prosecution on fraud charges of founder John Rigas and several member of his family.

However, on Friday, the upside momentum seemed to have been interrupted, with a market source seeing Adelphia's 79 7/8% notes due 2007 down a point at 79 bid.

Another trader said that there was not as much activity in Adelphia Friday as there had been earlier in the week, and saw its 10¼% notes due 2011 "pretty much unchanged" at 81 bid, 82 offered.

While Adelphia's 10¼% notes that had been slated to come due on Nov. 1 were seen perhaps a skosh firmer at 77 bid, 78.5 offered, "there was not a lot of activity in the short paper," he said.

At yet another desk, a source saw Adelphia's bonds slightly lower, with the 2011 101/4s down ½ point at 81.5 bid, and its 8 5/8% notes due 2008 down ¾ point at 78.25.

Clear Channel wider on LBO fears

Also in the media and communications constellation, Clear Channel Communications' bonds - still considered high-grade, for now, at least - were seen having widened out amid buyout talk swirling around the big broadcaster.

On Thursday, when the LBO stories hit the market, a trader saw the company's 5½% notes due 2014 widen out "by a hundred basis points," to bid levels about 335 basis points off comparable Treasuries, offered levels 325 bps over.

In Friday's dealings, the price erosion continued. A trader saw the 5½% notes due 2016 about 20 bps wider at 357 bps bid, 345 bps offered, the equivalent, he said, of a dollar price at 81.25 bid, 82 offered.

He also saw Clear Channel's five-year bonds 20 bps cheaper at 255 bps bid, 245 bps offered.

The company said Thursday that it had hired Goldman Sachs to help it evaluate strategic alternatives. News reports said the company was in talks with private equity groups Providence Equity Partners, Blackstone Group and Kohlberg Kravis Roberts. Other reports said a second group, including Bain Capital and Thomas H. Lee Partners as well as, possibly, Texas Pacific Group was also in the hunt.

Huntsman easier on bad numbers

Elsewhere, bonds issued by Huntsman Corp. and its subsidiaries were seen easier on Friday as the Woodlands, Tex.-based chemicals maker reported a wider third-quarter loss.

"Their numbers were pretty weak," a trader said, quoting the company's benchmark 7 3/8% notes due 2015 about a point lower on the session at 99.5 bid, 100.5 offered.

Even as it reported a wider loss, company officials were telling investors and analysts on their conference call that Huntsman was proceeding with its previously announced plans to get out of the commodity petrochemicals business and concentrate on more lucrative and less cyclical areas of the chemical business. They said proceeds from the expected divestitures would go wholly to debt paydown, and they touted a $2 billion reduction in net debt which has been achieved since 2004 (See related story elsewhere in this issue).

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