Downsized KAR mega-deal prices, Iasis also; Clear Channel trades down on possibly higher LBO

By Paul Deckelman and Paul A. Harris

New York, April 13 - KAR Holdings Inc. priced a slightly downsized $1.05 billion three-part bond deal on Friday, high yield syndicate sources said. All three tranches of the new bonds were seen by traders to have moved solidly higher when they were freed for aftermarket dealings.

Also pricing was a quickly-marketed $300 million issue of PIK loan paper for Iasis Healthcare Corp.

OSI Restaurant Partners LLC was heard getting ready to hit the road on Tuesday to market its eight-year notes deal to potential investors.

In the secondary market, Clear Channel Communications Inc.'s bonds were running into static, as the San Antonio, Tex.-based media company's prospective leveraged buyout purchasers mulled wither to sweeten their LBO offer to win over some balky large shareholders - which would mean that the company would likely have to borrow even more money than currently planned in order to get the deal done.

Calpine Corp., meantime, continues to rise, on investor expectations that private-equity shops will make generous bids for all, or at least a big piece, of the bankrupt San Jose, Calif.-based power generating company.

Well after the Friday close, a high yield syndicate official told Prospect News that the broad market was "better" on Friday.

KAR prices $1.025 billion

In the primary market KAR Holdings completed its downsized $1.025 million three-part transaction on Friday. An informed source said that it was very well oversubscribed.

KAR priced a downsized $1.025 billion three-part high-yield notes transaction on Friday.

The Westchester, Ill., automotive specialty salvage services provider priced a $150 million tranche of seven-year senior floating-rate notes (B3/CCC) at par to yield three-month Libor plus 400 basis points, on the wide end of the Libor plus 375 to 400 basis points price talk.

Meanwhile the company priced a $450 million tranche of seven-year senior fixed-rate notes (B3/CCC) at par to yield 8¾%, at the tight end of the 8¾% to 9% price talk.

In addition KAR Holdings priced a downsized $425 million tranche of eight-year senior subordinated notes (Caa1/CCC) at par to yield 10%, on top of price talk which had the subordinated notes pricing 125 basis points behind the senior fixed-rate notes. The subordinated notes offering was downsized from $500 million, with $75 million of the financing shifted to the company's bank loan.

Goldman Sachs & Co., Bear Stearns & Co., UBS Investment Bank and Deutsche Bank Securities were joint bookrunners for the LBO transaction.

KAR was very well oversubscribed, an informed source said.

The source added that the floating-rate piece was initially weaker than the fixed-rate tranches, but got a warmer reception from the accounts when the coupon was moved to the wide end of the price talk.

Two billion week

With KAR, the week's biggest transaction, added to the total the April 9 to April 13 week saw slightly more than $2.0 billion of issuance in eight dollar-denominated tranches.

A sell-side source who spoke on Friday morning remarked that it is a conspicuously low amount, given the reportedly high degree of liquidity in the asset class.

Friday's KAR transaction extends year-to-date high yield issuance to $53.2 billion in 144 dollar-denominated tranches.

In a year-over-year comparison, 2007 issuance now leads that of the record-breaking year of 2006 by an astonishing 37%. At the April 13, 2006 close, the history-making year past had seen $38.8 billion of issuance in 109 tranches.

Iasis prices PIK loan

Friday's business also included Iasis Healthcare Corp.'s $300 million Libor plus 525 basis points holdco senior PIK loan due June 15, 2014 (Caa1/CCC+) which came at 98.50, in a transaction that the high-yield market had been watching.

The coupon came at the wide end of the Libor plus 500 to 525 basis points at 98.50 price talk.

A source in the bank loan market told Prospect News that the loan broke for trading at 99 bid, 99.50 offered.

Banc of America Securities was the lead bookrunner for the dividend funding deal from the Franklin, Tenn., owner and operator of medium-sized acute care hospitals. Citigroup was the joint bookrunner.

Calendar builds

Two substantial transactions were added to the new deal calendar on Friday

Swiss petroleum refiner and market, Petroplus Finance Ltd., will begin a roadshow Monday in Europe for its $1.20 billion two-part offering of senior notes.

The deal is comprised of a tranche of eight-year notes and a tranche of 10-year notes.

Morgan Stanley is the lead bookrunner for the acquisition financing and debt refinancing deal, with Credit Suisse, UBS Investment Bank and Barclays Capital as joint bookrunners.

Elsewhere OSI Restaurant Partners, LLC, will begin a roadshow on Tuesday for its $700 million offering of eight-year senior notes, via Banc of America Securities and Deutsche Bank Securities.

Proceeds will be used to fund the LBO of the Tampa, Fla., restaurant company.

The week ahead

The week beginning April 16 gets underway with what one sell-side source characterized as a paltry amount of new issue business.

Energy Partners Ltd. is in the market with a $450 million two-part offering of senior unsecured notes (Caa1/B-) via bookrunner Banc of America Securities.

The roadshow wraps up on Tuesday.

Cimarex Energy Co. is marketing a $300 million offering of 10-year senior notes (B1/BB-) via JP Morgan and Lehman Brothers.

Pricing is expected on Thursday.

Also, German timber products company Pfleiderer Finance BV is marketing its €200 million to €250 million offering of perpetual subordinated hybrid bonds (B1//BB-) via ABN AMRO and Barclays Capital.

New KAR drives higher

When the new KAR Holdings bonds were freed for secondary dealings, a trader saw "a good move on all three" of the deal's tranches.

The floating-rate senior notes due 2014 had moved up to 100.75 bid, 101.25 offered, with the 8¾% seniors due 2014 seen at 101.875 bid, 102.375 offered, both up from their respective par issue prices earlier in the session.

KAR's 10% senior subordinated notes due 2015 did even better, pushing up to 102.5 bid, 103 offered from par, apparently aided by investor enthusiasm for the sub issue's fat coupon.

A quiet Friday

Traders said that generally not too much was going on, with some market players heading for home even well before trading officially wrapped up for the session.

A trader said that the widely-followed CDX junk bond pricing index was up perhaps 3/16 point at 99 13/16.

Clear Channel issue takes a dive

Arguably the biggest mover on the session was Clear Channel Communications' 5½% notes due 2014. Those bonds were seen having collapsed by 5 3/8 points to around an 86 context, from about the 91 area on Thursday. The issue was among the most actively traded during the session, with a number of large transactions seen.

The bonds fell even as speculation rose that Thomas H. Lee Partners LP and Bain Capital Partners LLC were considering possibly raising the price they are willing to pay to take Clear Channel private in a buyout transaction that also involves members of the company's founding Mays family.

The prospective buyers have offered to acquire the radio and outdoor advertising giant for $27 billion, or $37.60 per share, an offer they unveiled in November. That's not good enough, said the company's two biggest shareholders, Fidelity Investments and Highfields Capital Management, who between them hold about 15% of the company's outstanding float. By some estimates, the company could be worth as much as $41 per share and change, the dissidents say.

Shareholders are scheduled to vote on the deal on Thursday. Although Thomas H. Lee and Bain have not indicated whether they will raise the offer in order to get the recalcitrant shareholders on board, there has been some speculation in the media that such a course is possible. If it happens, it will negatively impact Clear Channel's split-rated (Baa3/BB+/BB-) bonds.

High yield syndicate sources have heard that Clear Channel plans to tap the junk market for $4.1 billion and the bank debt market for a whopping $17.375 billion to help finance the deal under the existing offer; any significant increase in the price the two buyout shops and the Mays family would offer shareholders is likely to require additional borrowing, further increasing the company's leverage and adding an even bigger cushion of debt to the capital structure above the existing bonds on the food chain.

Lear gains as vote date set

Also on the buyout front, Southfield Mich.-based automotive components maker Lear Corp.'s bonds were seen better, its 5¾% notes due 2014 up ¾ point at 85.75.

Lear announced late Wednesday that shareholders would vote on billionaire investor Carl Icahn's $5 billion-plus buyout proposal at the company's annual meeting on June 27.

As is the case with Clear Channel, some of the larger existing shareholders have expressed reluctance to go along with the buyout, holding out for a better price.

Calpine climb continues

There seems to be no such reluctance on the part of Calpine Corp.'s bondholders, who have taken the company's paper higher over the past few sessions against a backdrop of media stories indicating that major private-equity shops have been asked to submit bids for the company, which has been languishing in bankruptcy since the end of 2005.

Also seen pushing the bonds higher still on Friday, was the news that the company had signed a new agreement with Southern California Edison.

A trader called the 8½% notes due 2008 up ½ point at 115.75, adding that the notes had gained as much as 5 points on Thursday.

Under the new deal, Southern California Edison will purchase 225 megawatts of geothermal energy from Calpine's Geysers plant north of San Francisco, supplying about 130,000 homes.

Financial terms were not disclosed. The deal still needs to be approved by the California Public Utilities Commission and the court overseeing Calpine's bankruptcy case.

Stephanie N. Rotondo contributed to this report.

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