Hooters jumps on acquisition agreement; Stone Container up on consolidation buzz

By Paul Deckelman and Paul A. Harris

New York, May 4 - Bonds of 155 East Tropicana LLC - better known to investors by the name it operates its casino under, Hooters - were seen flying high on Friday, propelled to near-par levels on the news that the Las Vegas-based casino resort operator had reached an agreement to sell essentially all of its assets for $95 million, with the buyer also assuming responsibility for the bonds.

Also on the upside, the various Stone Container issues were quoted higher, in line with the rise in the company's shares, spurred on by consolidation speculation involving the paper and containerboard industry, as forest products giant Weyerhaeuser Co. said it was contemplating a sale or link-up of its containerboard, packaging and recycling business.

Also on the upside were bonds of Charter Communications Inc. on the narrower quarterly loss that the St. Louis-based cable operator reported on Thursday.

Sell-side sources marked the broad high yield market flat and "directionless" during the Friday session.

In the primary arena, things were pretty quiet, at least on the domestic side of the calendar, as euro-denominated deals priced for a pair of European issuers - Europcar and Cognis GmbH. And Eurofins Scientific was heard preparing an offering of euro-denominated perpetual securities.

Hooters is hot

Traders saw the Hooters 8¾% notes due 2012 solidly higher on the news that the company has agreed to sell essentially all of its assets to Hedwigs Las Vegas Top Tier, LLC, an affiliate of the investment group led by NTH Advisory Group, LLC.

One trader pegged the bonds at 98 bid, par offered, which he called up 3½ points on the session. Another called the issue "up considerably," trading at par bid, 100.5 offered.

And yet another source saw the bonds get as good as 100.5 before going home at 99 bid - well up from recent levels in the lower 90s.

Under the terms of the agreement announced Friday, Hedwigs will purchase the assets for $95 million in cash, the payment of certain accrued royalties, and the assumption of certain outstanding liabilities. The buyer will also be responsible for the $130 million of 8¾% notes.

News of the deal was hardly unexpected, as Hooters had announced in January that it had signed a letter of intent to sell the property - a 696-room hotel and approximately 29,000 square-foot casino located on the famed Las Vegas Strip. However, nothing had been heard about the deal since then and the bonds had been stuck in the lower 90s.

"I think the fact that they got to the next step gives it a good chance of this going through," a market source said. "Obviously, somebody thinks something [is going on]."

The deal is expected to close by Oct. 31, although that could be extended to as late as June 30 of next year. Certain conditions must be met by this Monday for the deal to progress.

Stone up on consolidation talk

The news that Weyerhaeuser, the second-largest paper and container manufacturer in the United States, may sell or spin off its containerboard operations gave a lift to the bonds of Stone Container Corp. and its corporate parent, Smurfit Stone Container, spurred higher by the possibility of sector consolidation.

That pushed the Chicago-based company's bonds higher, with its Stone Container Finance 7 3/8% notes due 2014 up more than 2 points on the day to close at par. Parent Smurfit-Stone's 8% notes due 2017 moved up to 101 and Jefferson Smurfit Corp. U.S.' 7½% notes due 2013 rose to around 101 as well, both of the latter up 1½ points.

Another market source had the Jefferson Smurfit's 8¼% notes due 2012 up a point at 102.5.

Morgan Stanley analyst Edings Thibault wrote in a research note that "the potential sale or spin-off of the Weyerhaeuser containerboard business is another big step towards a period of significant containerboard consolidation," adding that shareholders of Smurfit-Stone and Packaging Corp. of America could be big winners under such a scenario.

"We believe that large-sale consolidation in the containerboard industry is a strategic imperative because such a move will improve the odds that producers can boost prices and margins on a sustainable basis," the analyst concluded.

Smurfit-Stone Container's Nasdaq-traded shares were up 72 cents (5.95%) on Friday, to $12.83, although the volume of about 8.8 million shares was only about one third of the usual daily handle.

Charter numbers buoy bonds

Charter Communications' bonds were among the most actively traded on the day, a market source indicated, and they ended mostly higher, continuing a trend seen Thursday after the company reported a narrower loss from a year ago and improved performance in many areas.

Charter's CCHI 11% holding company notes due 2015 were seen up nearly 1¾ points at 107.5, bouncing back from a 5/8 point loss notched on Thursday.

Its CCO Holdings 8¾% notes due 2013 were seen ½ point better at 105.

The debt had begun mostly firming on Thursday, when the company said that its first-quarter loss narrowed to $381 million ($1.04 per share) from $459 million ($1.45 per share) a year earlier. Revenue was $1.43 billion, up 8% from $1.32 billion, as revenue from high-speed internet services zoomed 21% year-over-year to $296 million and revenue from telephone services to tripled to $63 million.

During the quarter, Charter added 126,800 telephone subscribers - an almost 30% jump from the end of last year.

Primus pops on narrower loss

Improved quarterly numbers also helped Primus Telecommunications Group, a trader said, quoting the McLean, Va.-based telecom operator's 8% notes due 2014 up 3 points at 71 bid, 72 offered.

The company said it lost $3 million (2 cents per share) in the latest quarter - a sharply narrower deficit than its year-ago red ink of $16 million (15 cents per share).

Clear Channel climbs on rejected bid

The trader said that Clear Channel Communications Inc.'s bonds were a point better on the session, its 7¼% notes due 2027 rising to 91 bid, 92 offered after the company's board of directors rejected a sweetened $39 per share buyout offer from Bain Capital Partners and Thomas H. Lee Partners.

He said that the rejection lessens the chance that the San Antonio-based radio and billboards giant might be acquired by the two private-equity shops in a leveraged buyout offer, "meaning they'll be less likely to take on more debt - so the bonds went up."

The deal could still be approved by shareholders - but most analysts see them as unlikely to support any deal that does not value Clear Channel at $41 per share at a minimum.

Dura up as it shops RV unit

Traders saw Dura Automotive Systems Inc.'s bonds better on news that the bankrupt Rochester Hills, Mich.-based automotive components maker is shopping its Atwood Mobile Products division around to potential buyers, with the assistance of the Miller Buckfire restructuring firm. The unit, based in Elkhart, Ind., makes components for recreational vehicles such as windows and doors, specialty glass, hardware appliances and electronics.

A trader saw Dura's 8 5/8% senior notes due 2012 push up to 35.5 bid, 36.5 offered, versus 32.5 bid, 34.5 offered. That came on top of a 2 point rise in the bonds on Thursday.

He saw Dura's 9% subordinated notes due 2009 move up to 7 bid, 8 offered from prior levels at 6.25 bid, 7.25 offered.

At another desk, a trader saw those junior bonds at 6.5 bid, 7.5 offered, which he called up ½ point on the day, and pegged the seniors up 2 points at 35.5 bid, 36.5 offered.

Road King prices $350 million

The primary market saw $643 million and €876 million of issuance on Friday.

The biggest chunk of dollar-denominated issuance came from Hong Kong's Road King Infrastructure Ltd.

The company priced $350 million in two-tranches.

A $200 million tranche of seven-year senior fixed rate notes priced at par to yield 7 5/8%, in the middle of the 7½% to 7¾% price talk.

Road King also priced a $150 million of five-year floating-rate notes which priced at par to yield three-month Libor plus 225 basis points, on top of price talk.

JP Morgan ran the books.

Cognis brings notes and loans

Cognis GmbH priced €1.65 billion equivalent of dollar- and euro-denominated six-year senior secured floating-rate notes and loans (B1/B) on Friday.

The four-part deal was transacted in tranches of €610 million and $293 million of notes, and €610 million and $293 million loans.

All tranches were priced at par to yield 200 basis points spreads to Euribor and Libor, respectively.

The deal priced on top of price guidance.

Goldman Sachs & Co. and JP Morgan were the underwriters for the debt refinancing deal from the Dusseldorf, Germany-based specialty chemical company;

Europcar taps two issues

Elsewhere Europcar Group raised slightly less than €266 million by tapping two existing issues on Friday.

The company priced a €130 million add-on to its three-month Euribor plus 350 bps senior subordinated secured floating-rate notes due May 15, 2013 (B1/B+) at 102.25, on the tight end of the 102.0 to 102.25 price talk.

The sale generated €132.925 million of proceeds.

The original €300 million issue priced at par on May 9, 2006.

Europcar also prices a €125 million add-on to 8 1/8% senior subordinated unsecured fixed-rate notes due May 15, 2014 (B2/B) at 106.375 to yield 6.61%. The fixed-rate notes also priced at the tight end of the 106.125 to 106.375 price talk.

The sale of the fixed-rate notes generated €132.969 million of proceeds.

The €250 million issue priced at par on May 9, 2006.

The overall face amount of Friday's two-part add-on was €255 million.

Deutsche Bank ran the books for the debt refinancing deal from the Paris-based car rental arm of Volkswagen.

Week tops $5 billion

Tallying the two dollar-denominated tranches that priced Friday, the week saw $5.88 billion of issuance in 15 tranches, the first week in nearly two months to top the $5.0 billion mark.

The most recent bigger week was the period from March 12 to March 16 which saw nearly $10 billion of issuance in 15 tranches - the biggest week thus far in 2007.

At Friday's close year-to-date dollar denominated issuance stood at $64.75 billion, as 2007 issuance is now running more than 39% ahead of that of the record-setting year of 2006, in terms of dollar-amount: at the May 4, 2006 close the market had seen slightly less than $46.53 billion of issuance.

In terms of deal volume 2007 also leads 2006 dramatically, in terms of year over year volume.

At Friday's close 177 dollar-denominated tranches had been priced, more than 29% higher than 2006 volume of 136 tranches by the May 4 close.

The week ahead

The week beginning May 7 gets underway with a light calendar, although sell-side sources advise Prospect News that the situation is bound to change.

Of the known deals that are expected to price by Friday's close, Deluxe Corp. is roadshowing a $200 million offering of eight-year senior notes (existing Ba2/confirmed BB-) via JP Morgan and Wachovia Securities.

Tennessee-based Noranda Aluminum Holdings Corp. is on the road through Wednesday with its $510 million offering of eight-year senior unsecured floating-rate toggle notes (B3/B-) - a Merrill Lynch deal.

The remainder of expected business is euro-denominated.

New World Resources BV will start a roadshow on Monday for its €300 million offering of eight-year senior notes (B3/B), via Morgan Stanley, Barclays Capital and Citigroup.

SGL Carbon AG will also start roadshowing a €200 million offering of senior floating-rate corporate bonds, via Morgan Stanley and Deutsche Bank, early in the week.

And Eurofins Scientific is in the market with a €68 million offering of perpetual securities which are expected to price before Friday's close.

Dresdner Kleinwort and HSBC are leading the deal.

However, sell-side sources who spoke to Prospect News on Friday said that the week beginning May 7 figures to see considerable drive-by business.

One high yield syndicate official added that at least one issuer is apt to materialize with a sizable offering. However the source could not be persuaded to volunteer names or sectors.

Stephanie N. Rotondo contributed to this report.

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