Hungarian Telephone, Pfleiderer deals price; Calpine pulls back after surge; Tribune tumbles on numbers

By Paul Deckelman and Paul A. Harris

New York, April 20 - The high yield primary sphere ended the week Friday with pricings for non-U.S. issuers - German timber products company Pfleiderer Finance BV's upsized euro-denominated issue of perpetual subordinated hybrid bonds, and Hungarian Telephone and Cable Corp. priced a €200 million floating-rate notes issue on top of lowered price talk.

That concluded a week which saw a relative handful of deals moving about, including pricings for Energy Partners Ltd., which brought a $450 million two-part issue to market, and Cimarex Energy Co., which weighed in with an upsized issue of 10-year senior notes. Both of those bond issues were seen by traders as having firmed solidly once they began aftermarket dealings.

In secondary activity among established issues, meanwhile, Calpine Corp. - whose bonds were seen up anywhere from 2 to about 4 points on Thursday, powered by the news that the bankrupt electric generation company had reached a settlement with its bondholders that will effectively eliminate more than $8 billion of debt - was seen on Friday having pulled back from the highs at which its bonds had ended the previous day.

Also on the downside, Tribune Co.'s bonds were lower, after the Chicago-based media giant swung to a first-quarter loss from a year-earlier profit.

Bonds of another Windy City-based issuer, Bally Total Fitness Holding Corp., were seen a little better, though on no fresh news about the often troubled gym chain operator.

A high yield syndicate official said that the broad market traded up by as much as ¼ point on Friday morning but trailed off somewhat as the day wound down.

The source marked junk up 1/8 to ¼ on the day.

Meanwhile the relative quiet that pervaded the primary market throughout much of the April 16-20 week continued during the Friday session.

Week's new issue tally $1.475 billion

The April 16-20 week came to a close with just $1.475 billion of issuance pricing in 6 dollar-denominated tranches.

Considering that in the previous week, April 9 to April 13, the market saw just slightly more than $2.0 billion of issuance in eight tranches, according to Prospect News data, the April 9 to April 20 fortnight, or two-week period, produced the least amount of issuance relative to any comparable period that has thus far passed in 2007.

That is to say, all pairs of consecutive weeks in 2007 to date have generated more dollar-denominated issuance than the the most recent pair.

During the Thursday and Friday sessions sources at the investment banks advised Prospect News that the present lull in issuance will end, but perhaps not in the immediate future, and perhaps not dramatically.

It bears mentioning that year-to-date issuance at Friday's close stood at $54.62 billion, more than 36% higher than the $39.84 billion of issuance which had priced by the April 20 close of the record-breaking year of 2006.

Pfleiderer upsized, tight to talk

Pfleiderer Finance BV, the holding company for German timber products maker, Pfleiderer AG, priced an upsized €275 million issue of perpetual subordinated hybrid bonds (B1//BB-) at par on Friday.

The deal was increased from €250 million

The notes, which become callable in seven years, will pay a fixed 7 1/8% coupon until the first call, after which they will bear interest at a floating rate of three-month Euribor plus 423 basis points.

The fixed coupon was printed at the tight end of the 7¼% area price talk.

ABN Amro and Barclays Capital ran the books for the debt refinancing related to an aquisition.

Hungarian Telephone atop lowered talk

Also on Friday Hungarian Telephone and Cable priced a €200 million issue of six-year floating-rate at par to yield three-month Euribor plus 300 basis points, atop price talk that had been lowered from 325 basis points.

Merrill Lynch & Co., BNP Paribas and Calyon Securities were joint bookrunners for the acquisition deal which was run off of the high yield desk.

The company, 62% owned by Danish Telecom, TDC, with its remaining shares traded on Nasdaq, has headquarters in Budapest and Seattle.

Countrywide launches £640 million

Meanwhile the only addition to the new deal calendar Friday also came from Europe.

Countrywide plc (Castle Holdco 4, Ltd.) will start a roadshow in London on Monday for its £640 million three-part notes offer.

The London-based estate agent is offering a £370 million tranche of seven-year senior secured notes, a £100 million tranche of seven-year senior secured toggle notes and a £170 million tranche of eight-year senior unsecured notes.

Credit Suisse, Deutsche Bank Securities and Goldman Sachs & Co. are joint bookrunners for the acquisition financing.

The week ahead

The week commencing on April 23 promises a somewhat higher total of issuance than the meager amount seen during the week past.

Featured are four deals topping the $400 million mark.

In descending order they are:

• Swiss petroleum refiner and market, Petroplus Finance Ltd., with a $1.20 billion two-part offering of senior notes via Morgan Stanley;

• OSI Restaurant Partners, LLC's $700 million offering of eight-year senior notes (Caa1), via Banc of America Securities LLC and Deutsche Bank Securities;

• Clarke American Corp.'s $615 million two-part offering of eight-year senior notes (Caa1), being lead by Credit Suisse, Bear Stearns & Co., Citigroup and JP Morgan; and

• USI Holdings Corp.'s $425 million offering of high-yield notes in two tranches via Goldman Sachs & Co. and JP Morgan.

Late Friday sources told Prospect News that no price talk had surface with respect to any of these four deals.

And during the Thursday and Friday sessions sources also professed the belief the the high-yield primary market is presently ripe for drive-by deals.

However none of these sources claimed to have the names of any prospective quick-to-market issuers.

Market is quietly higher

Back among the established issues, a trader called Friday "one of the most uneventful days that I've seen."

He said that volume was very light and suggested that spring fever had gotten the better of a lot of market participants. After a weak of dreary, wet weather in New York and other business centers in the Northeast that included tremendous rains and flooding in some areas, "everyone saw the sun outside" and wondered what that unfamiliar bright ball in the sky was. "It certainly shocked me," he quipped.

Friday was "kind of a slower day" than Thursday had been, another market source opined. "It was slow, then it would pick up, and then slow back down. There was not a ton of consistency."

He said that his impression, amid the light trading, was that the market had "a stronger tone as a whole."

Yet another trader said that he "didn't see very much happening." He pegged the widely followed CDX index of high yield performance up about ¼ point on the day at 100.75-100.875.

Calpine gives back gains

Among specific issues, though, Calpine was probably the most noticed name, and it moved to the downside, surrendering most of the gains which the bankrupt San Jose, Calif.-based company's bonds had notched on Thursday.

Calpine "continued strongly" in the early going, a trader said, but then "backed off about a point to two points" from the highs the name hit Thursday to end lower.

He saw its Calpine Canada Energy Partners 8½% notes due 2008 at 119.5 bid, 120.5 offered and the parent's 8½% notes due 2011 at 120.5 bid, 121.5 offered, both down from about the 122 bid, 123 offered area seen Thursday.

Calpine's 8¾% notes due 2007 were down a point at 120.

Another trader quoted the 2011s down 3 full points at 120 bid, 121 offered.

The company's bonds had pushed upward on Thursday on the news that it had reached a settlement agreement with the holders of some $12 billion of defaulted bond debt.

Under the terms of the preliminary agreement with bondholders holding defaulted ULC1 bonds of its bankrupt Canadian unit, should the deal be approved, the company would eliminate more than $8 billion of claims, converting the $12 billion of multiple claims relating to the bonds to a single $3.5 billion claim.

That deal is subject to approval from the bankruptcy court in the United States and the equivalent courts in Canada, where the Calpine unit is the subject of an insolvency proceeding under the Companies' Creditors Adjustment Act, Canada's version of Chapter 11.

Some $2 billion of the defaulted ULC1 bonds were issued in 2001 by Calpine Canada Energy Finance ULC, an indirect wholly-owned Canadian subsidiary of Calpine, now in insolvency. These ULC1 bond obligations were guaranteed by parent Calpine.

With the more than $12 billion of claims scheduled to be replaced by the single nominal claim of about $3.5 billion, Calpine said, the bondholders have agreed that their actual recovery will be no greater than principal, accrued pre-petition and post-petition interest at the contract rate, plus fees.

Tribune tripped up

Elsewhere, Tribune's 5¼% notes due 2014 were seen having tumbled nearly 4 points on the day, to around the 82.25 mark. Those bonds were among the most actively traded issues of the day, according to a market source.

Tribune - which is being taken private by billionaire media mogul Sam Zell in a $34 per share buyout offer - posted a first-quarter loss of $15.6 million (six cents per share), versus a year-earlier profit of $ 102.8 million (33 cents per share), reflecting the difficulties of the U.S. newspaper industry. Besides the eponymous Chicago Tribune, the company also owns such newspapers as the Los Angeles Times, the New York-area suburban daily Newsday and the Baltimore Sun. Its non-newspaper holdings including 23 television stations, and the Chicago Cubs baseball team, which it plans to sell.

The buyout deal is being funded with some $13 billion of debt, including a $2.1 billion issue of new junk-rated senior or senior subordinated notes, backed up by $2.1 billion of bridge financing.

Sallie Mae trading like junk

"The name that's getting everyone's attention, and that nobody hasn't traded," a trader said, is the nominally investment-grade SLM Corp. - the student loan entity better known as Sallie Mae, being taken private in a $25 billion buyout that has sparked fears of greater leverage and a possible ratings cut to junk.

Despite its - for the moment - officially still high-grade ratings, the credit, he said, "is trading at BB levels, 235 bps or 240 bps off the curve.

"What happens is a lot of the high-grade guys are selling ... because once it gets below investment grade, people have to get out."

He saw its 4½% notes due 2010 trading at around 95. Its 5 3/8% notes due 2014 were trading on a spread basis at 245 bps bid, 235 bps offered over, "but they're going to trade in dollars soon - and you can take that to the bank." That particular issue had widened out by 25 bps since Thursday, "and they're going to keep getting wider. The junk guys smell blood in the water. People will short them, and the high-grade accounts will have to sell them. It's sort of a self-fulfilling prophecy."

Bally better

Back on the upside, the Bally 9 7/8% notes due 2007 were a point better on the day at 82.5 bid, while its 10½% notes due 2011 were up ½ point at 96.5, though nobody saw any news on the company, which has said a Chapter 11 filing is possible if it cannot restructure its debt.

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