American Real Estate, DynCorp deals price; MCI continues ascent

By Paul Deckelman and Paul A. Harris

New York, Feb. 1 - American Real Estate Partners LP was heard by high-yield syndicate sources to have priced a dramatically upsized offering of eight-year bonds Wednesday. Also in the primary sphere, DynCorp successfully priced a quickly shopped eight-year offering.

In the secondary market, MCI Inc.'s bonds continued to firm on telecommunications industry takeover speculation in the wake of the SBC Communications Inc.-AT&T merger deal. But the major movers were in the segment of the market that would normally be termed "distressed" - Adelphia Communications Corp.'s bonds bouncing back from Monday's losses, apparently on the strength of a better-than expected asset auction, and RJ Tower Corp., whose bonds were also quoted higher Tuesday - but heard trading flat, or without accrued interest.

In a high-yield market that was slightly firmer Tuesday, two new issues were priced

Carl Icahn's American Real Estate Partners LP upsized its issue of eight-year notes (Ba2/BB) to $480 million from $300 million, and priced the notes in the middle of talk.

Meanwhile DynCorp International LLC priced its $320 million eight-year notes wide of price talk, making DynCorp. one of five issuers to price wide of talk over the past five sessions going back to the beginning of the Tuesday, Jan. 25 session.

And Las Vegas Sand Corp. showed up on Tuesday with $250 million of 10-year notes that it expects to price in drive-by action on Wednesday or Thursday.

American Real Estate massively upsizes

In what one source characterized as an active session in which spreads tightened across most sectors and prices were seen to inch higher, the biggest success story in Tuesday's primary market was the four-B issue from Carl Icahn's American Real Estate Partners.

Launching early last week as a $300 million offering of eight-year senior notes (Ba2/BB), an investor told Prospect News on Tuesday morning that the deal had been upsized to $400 million and was heard to be doing well.

Ultimately American Real Estate Partners priced a massively upsized $480 million of the notes at par to yield 7 1/8%, in the middle of the 7% to 7¼% price talk.

Bear Stearns & Co. ran the books for the investments- and acquisitions-funding deal from the Mount Kisco, N.Y.-based company.

DynCorp comes 25 bps wide of talk

Elsewhere in the primary market, DI Finance in conjunction with DynCorp International LLC priced $320 million of eight-year senior subordinated notes (Caa1/B-) at par to yield 9½%, 25 basis points wide of the 9% to 9¼% price talk.

Goldman Sachs & Co. and Bear Stearns & Co. were joint bookrunners for the acquisition financing offering from the Fort Worth, Texas-based provider of mission critical support to its customers, primarily the U.S. government.

One source close to the deal told Prospect News that DynCorp went reasonably well.

"There were a lot of good orders but the deal came a little wide of where the company thought it would come," the source specified.

"There is a lot of liquidity out there," the source added. "People are still buying these deals. It's just a matter of getting the price right."

Five of 13 wide of talk in six sessions

Starting with the Tuesday, Jan. 25 session and ending with the Tuesday, Feb. 1 session, five of 13 high yield transactions, counting DynCorp, have come wide of price talk, according to data compiled by Prospect News.

The widest pricing, relative to talk, came during that period from Eye Care Centers of America, which sold $152 million of 10¾% 10-year senior subordinated notes (Caa1/CCC+) at 98.495 on Friday, Jan. 28, to yield 11%, 75 basis points wide of the 10% to 10¼% talk.

Like Tuesday's DynCorp deal, AMR Holdco Inc./EmCare Holdco Inc. brought its deal 25 basis points wide of talk, pricing $250 million of 10-year senior subordinated notes (Caa1/B-) at par on Thursday, Jan. 27, to yield 10%, relative to the 9½% to 9¾% price talk.

The remaining two of this quintet of wide-of-talk issues priced 12.5 basis points wide of the price talk.

Uno Restaurant Holdings Corp. sold $142 million of 10% six-year senior secured second-lien notes (B3/B-) at 98.878 on Monday, Jan. 31, to yield 10¼%, 12.5 points wide of the 10% area revised talk. Earlier the notes had been talked at 9¾% area.

Finally, in the biggest deal to price during the period, Montreal aluminum and packaging producer Novelis Inc. priced $1.4 billion of 10-year senior notes (B1/B) at par on Friday, Jan. 28, to yield 7¼%, 12.5 basis points wide of the 7% area price talk.

Las Vegas Sands with a drive-by

Only one new offering came into the market during the Tuesday session.

Las Vegas Sands Corp. expects to price a drive-by $250 million of 10-year non-call-five senior notes (B2/B) on Wednesday or Thursday via Goldman Sachs & Co.

Price talk will be announced Wednesday morning.

Las Vegas Sands intends to use the net proceeds and $400 million of additional term loan borrowings under its amended credit facility, to retire the outstanding 11% mortgage notes due 2010 of Las Vegas Sands, Inc. and Venetian Casino Resort, LLC.

Shifting fortunes of triple-C names

Although triple-C bonds were outperforming the market as 2004 was winding down, a decidedly new scenario has begun to unfold in the month-old year of 2005.

One investor told Prospect News on Tuesday that during the month of January it was double-B bonds, up 0.5% during the month according to the Bear Stearns High Yield Index, that outperformed both single-Bs, which were down 0.2%, and triple-Cs, down 1.2%.

Evidence of the toll this shift is taking is evident in the primary market, sources say, notably in Atlantis Plastics Inc. $125 million seven-year non-call four senior subordinated notes (Caa1/CCC+).

The Bear Stearns-led deal, proceeds from which will be used to repay bank debt and fund a dividend, is lately heard to have been restructured and downsized, according to market sources.

The Atlanta company is now marketing $105 million of senior secured notes and hoping that the upward move on its capital structure will get the notes into the single-B sector. Atlantis Plastics is also expected to decrease the size of the dividend.

And whispered guidance on the deal has been heard to have moved out to the 9½% area from an earlier pro forma of 9 1/8%.

A buy-side source, speaking on background, said Tuesday that the climate for triple-C deals is presently shifting.

"It probably is getting to be a tougher market for those deals - at least it has been this month," the investor said.

"January was the first month that that particular rating category actually trailed the others in more than six months.

"So there has been a little more caution for the lower-quality names.

"It was really a 'fourth quarter'-show for triple-Cs."

American Real Estate up in trading

When the new American Real Estate 7 1/8% senior notes due 2013 were freed for secondary dealings, they were quoted by one trader as being "mildly better," at 100.5 bid, 100.75 offered, versus their par issue price earlier in the session.

Another trader saw the Mount Kisco, N.Y.-based real estate development company's new bonds doing a little better than that at 100.75 bid, 101.25 offered. He saw no activity in the new DynCorp 9½% notes due 2013.

One other name was moving around in new-deal related activity - Las Vegas Sands Corp., which is bringing a new bond issue to market with the objective of taking out the existing 11% notes due 2010 issued by its Venetian Casino subsidiary. A market source the Venetian notes moving up on the prospect of being redeemed to 114.625 bid from prior levels at 113.75.

Among other companies which plan to redeem existing bonds using new debt, Hexcel Corp.'s outstanding 9 7/8% notes due 2008, which were already trading around the level at which they will be taken out, firmed perhaps a quarter of a point to 1111/4. Its new 6¾% notes due 2015, which priced last Thursday at par and then eased to levels slightly under par, came back up in morning trading, to par bid, 100.375 offered.

MCI's run continues

Among established notes for which there is no new-deal connection, MCI bonds were gaining for a fourth straight session, especially its longer-dated issue, the 8.735% notes due 2014, which were seen having broken the 110 barrier to end at 110.5 bid, up from 109.25 on Monday.

Those bonds had been trading around 104 prior to Thursday, when the market began buzzing with the speculation - which later turned out to be true - that SBC Communications and its former corporate parent, AT&T, were in merger talks. While that takeover talk did give a boost to Ma Bell's bonds - nominally junk at Ba1/BB+ but in reality little removed in the view of the marketplace from the high-grade securities they used to be - it helped MCI's notes even more, with investors speculating that one of SBC's regional Bell operating company rivals like BellSouth Corp. or Verizon Communications Inc. might look to link up with the nation's second-largest long-distance carrier to offset SBC's combination with AT&T, which, if antitrust regulators allow it to go through without doing too much surgery on the combined company, would be the largest single player in the U.S. telecom market.

While the 2014 notes were seen firming handsomely, Ashburn, Va.-based MCI's other bonds were seen up only slightly - its 7.688% notes due 2009 were a quarter point better Tuesday at 105, while its 6.908% notes due 2007 were 1/8 point higher at 102.625.

Adelphia undoes losses

But it was another communications name that was the big mover of the day - Adelphia, whose gains Tuesday essentially erased the three-point-plus losses its bonds saw Monday on apparently incorrect speculation that demand in its bankruptcy-court asset auction was lower-than-expected.

Adelphia's 10 7/8% notes due 2010 were seen having firmed to 89 bid, from 86.5 previously, while its 10¼% notes due 2006 improved to 86.5 bid from 84 and its 10¼% notes due 2011 rose to 92.5 bid from 91. Adelphia, said one market source, "just reversed Monday's fall." He saw the bankrupt Greenwood Village, Colo.-based cable operator's 9 7/87% notes due 2007 at 87 bid, up from 83.5 previously.

Charter better

Fellow cable operator Charter Communications Inc. was also "up a little too," he said, quoting the St. Louis-based cable operator's flagship 8 5/8% notes due 2009 a point better at 82, while its 10% notes due 2011 firmed two points to 81 bid, and its 9.92% notes due 2011 finished at 80.75 bid, up from 79.5.

Analysts have said that the conclusion of Adelphia's asset-sale process - however it works out, whether Adelphia agrees to accept one or more of the bids for its cable systems or, alternatively, spurns them all - can only help Charter, which is looking to sell some assets of its own in hopes of using the proceeds to pare down its nearly $20 billion of debt, but has been stymied by market reluctance to do any kind of deals until it is conclusively determined what impact the Adelphia assets will have on the various operators.

Tower up but trading flat

Elsewhere, Tower Automotive's 12% notes due 2013 were seen having improved, price-wise, from the levels they had fallen to over the past few sessions - but that nominal price gain masks an offsetting loss of the accrued income on the bonds, according to several traders, who saw the Novi, Mich.-based auto components maker's bonds trading flat, or without its accrued interest, on market worries over whether Tower was able to meet a Feb. 1 deadline for making a coupon interest payment on a euro-denominated bond issue.

Those worries had Tower "all over the map," according to a trader who quoted the bonds having nominally risen in price to 57.5 bid, 59.5 offered, trading flat, from the prior evening's close at 53.75 bid, 54.75 offered, but still trading with accrued interest.

Apart from such special cases, overall trading was termed quiet, with many market participants in Miami for the annual J.P. Morgan high yield conference there.

Georgia-Pacific edges higher

Georgia-Pacific Corp.'s bonds firmed slightly after the Atlanta-based paper and forest products company said that its fourth-quarter earnings beat Wall Street's estimates, even through those quarterly numbers were below year-ago levels. The company also said that it had managed to cut debt by nearly $2 billion in 2004.

Georgia-Pacific's 7.70% notes due 2015 and 8 7/8% notes due 2010 were each half a point better at 115 and 116, respectively.

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