Advanced Micro Devices bonds lower on revenue warning; iPCS, Energy Partners launch deals

By Paul A. Harris

St. Louis, April 9 - The broad high-yield market was variously marked "unchanged to slightly higher" and "unchanged to slightly weaker" by sources on Monday.

A consensus held that the new deal calendar has been slow to build, although a couple of sources specified that it is expected to begin doing so in short order.

Meanwhile two prospective issuers, iPCS, Inc. and Energy Partners Ltd., launched deals.

In the secondary market the bonds of Advanced Micro Devices, Inc. moved lower after the company warned that its year-over-year revenues were dramatically lower.

AMD off on sales drop

A revenue warning from Sunnyvale, Calif.-based AMD caused the chip-maker's bonds to trade down on Monday, according to sources.

The company announced on Monday that its revenues declined sharply quarter-over-quarter for its computing solutions segment, primarily due to lower overall average selling prices and significantly lower unit sales, especially in the resale channel.

In its press release AMD stated that it plans to restructure its business model to increase operational efficiencies and lower its operating cost structure. AMD will reduce 2007 capital expenditures by approximately $500 million, which the company believes will not materially impact capacity plans for the year. AMD will also significantly reduce discretionary expenses and limit hiring to critical positions.

One trader marked AMD down a point, spotting the company's 7¾% notes maturing in 2012 going out on the day at 100 bid, 101 offered, having ended last week at 100.75 bid, 101.75 offered.

Another trader marked the same AMD 7¾% notes at 100.50 bid, and said that they were down ½ to ¾ on the day.

Yet another trader said that the AMD 7¾% notes due 2012 closed the session at 100 bid, 101 offered, down a point.

This source added that Monday had been a very quiet day.

Realogy holding in

Turning to the realm of recent issues, debt-side sources remained obsessed with bonds priced last week by New Jersey-based Realogy Corp. in a downsized, restructured $3.125 billion LBO megadeal.

The Parsippany, N.J., real estate franchisor priced $1.7 billion of 10½% fixed-rate notes due 2014 (Caa1/B-) at 98.786 to yield 10¾%.

Realogy also priced $550 million of 11% toggle notes due 2014 (Caa1/B-) at 98.805 to yield 11¼%.

In addition to the senior notes, Realogy priced a downsized $875 million tranche of 12 3/8% senior subordinated notes due 2015 (Caa2/B-) at 98.146 to yield 12¾%.

Monday morning a buy-side source who focuses on both bonds and bank loans said that the new Realogy 10½% notes due 2014, which priced Thursday at 98.786, were trading at 99.625 bid, 100.50 offered.

Meanwhile the 11% senior notes due 2014, which priced at 98.805, were seen at 99.50 bid, 100 offered.

The biggest premium to the pricing level, however, was recorded by the subordinated notes, the 12 3/8% bonds due 2015, which priced at 98.146. They were quoted Monday at 100.25 bid, 100.75 offered.

Meanwhile this source spotted Realogy's Libor plus 300 basis points term loan, which priced at par late last week, trading Monday morning at 100.375 bid, 100.625 offered.

Equity versus jawboning

"It was clearly a tough deal," the buy-sider said of the Realogy bond transaction.

"There were two ways to get it done. One was for Apollo to put in more equity to demonstrate that it was willing to bear the risk that the real estate market is as weak as some people fear.

"The other way was to put in less equity and jawbone, tell people 'It's not going to be that bad.'

"That's pretty much the way they did it."

The source said that the company and its sponsor adopted the PIK toggle structure in order to cushion the downside.

"Realistically it probably would cushion the downside, in the sense of not filing for bankruptcy," the source said.

"But once you start PIK toggling you are adding leverage and making your credit worse.

"In a bad cycle that could make the other things in the structure trade badly."

This buy-sider also said that the noted covenant changes - two rounds of them as the deal wound its way through the market, according to some sources - were focused pretty much on one scenario of which the buy-side was wary.

"People were worried that if the real estate market regained strength Apollo would just whip out a dividend deal, and they didn't like that thought."

Realogy 'off the day's highs'

Spotting Realogy bond prices turned out to be something of an "occupation du jour" on Monday, as nearly all sources on both the buy-side and the sell-side had trading levels at hand.

Late Monday one trader - noting that the bonds priced late Thursday, and there was virtually no trading during Friday's abbreviated pre-Easter session - said that the Realogy paper opened the week unchanged, and added that most of the day's activity was in the subordinated tranche.

The source said the 12 3/8% bonds due 2015 traded at par on the Monday open, got as high as 100.50 bid and went out at 100.25 bid, 100.75 offered, approximately 2 points above the issue price of 98.146 but off the day's highs.

Meanwhile the 101/2s due 2014 were at 99.75 bid, 100 offered for most of the day.

And the trader had the Realogy 11% toggle notes going out at 99.125 bid, 99.625 offered, but said that he had seen no trades in the issue.

Another trader, specifying that Realogy had been trading quite a bit, had the 10½% notes due 2014 going out Monday at 99.625 bid, 100 offered, and added that they had traded in that context all day.

The 11% notes due 2014 were at 99 bid, 99.50 offered, and had been better earlier in the day, the trader said.

And the 12 3/8% subordinated notes were at 100.125 bid, 100.75 offered at the close.

This trader added that Realogy's old Ba3/BB+ rated senior notes, the 6½% bonds due 2016 and the 6.15% bonds due in 2011, closed Monday at 101 bid, 101.25 offered, unchanged from last week.

Six Flags up on sale completion

News that Six Flags, Inc. completed its previously announced sale of three of its water parks and four of its theme parks for $275 million in cash and a $37 million note sent the amusement park company's existing bonds higher.

A trader told Prospect News that although the company apparently does not intend to use the proceeds to take out debt, the news that the sale had been completed was nonetheless welcome.

"The paper started clawing its way up last week," the trader recounted.

"Last Tuesday and Wednesday it was a little weaker due to illiquidity, but then it caught a nice bid on Thursday."

This source marked the Six Flags 9 5/8% notes due 2014 at 94.25 bid, 94.75 offered on Monday, up from 93.50 bid, 94 offered in the middle of last week.

Meanwhile the trader saw Six Flags' 8 7/8% notes due 2010 trade "a couple of times" at 101.125 on Monday, and added that they were at 100.50 bid, 100.75 offered last week.

"Across the board Six Flags paper was up ½ point over the past couple of days," the trader said.

'Fair demand'

A trader who focuses on retail names said the existing issues of Linens 'n' Things, Inc. were up a point on Monday, and speculated that the reason may be "short covering."

The trader said that the company's senior secured floating-rate notes due 2014 went home Monday at 94 bid, 94.50 offered and noted that at their lows, during the middle part of last week, they touched 92.75 bid, 93.75 offered, before starting to trade up late on Thursday.

The source marked the broad market "unchanged to up a touch," and noted that at present there is really no new issue calendar, although people are anticipating that there is going to be one.

Demand for existing issues, in the absence of a strong forward calendar, is holding steady, the source said, adding that last week there had been a couple of portfolio restructurings, with big portfolios being liquidated.

"We saw multiple bids for everything on the list, so there is fair demand," the trader said.

iPCS, Energy Partners roll out deals

With regard to the new issue calendar, wireless services provider iPCS, Inc., launched a $475 million two-part offering of senior secured floating-rate notes on Monday.

The Schaumburg, Ill.-based Sprint PCS Affiliate of Sprint Nextel is in the market with a $300 million tranche of first-lien notes (B1/B-) and a $175 million tranche of second-lien toggle notes (Caa1/CCC), with a 75 basis points coupon step-up should the issuer elect to make an in-kind, as opposed to cash, payment.

The deal is expected to be priced on Wednesday or Thursday.

Banc of America Securities is the left lead. UBS Investment Bank is the joint bookrunner.

Proceeds, together with available cash, will be used to repurchase iPCS' existing $165 million 11½% senior notes due 2012 and $125 million 11 3/8% senior notes due 2012, and pay a special cash dividend of $186 million, representing $11.00 per share.

Elsewhere Energy Partners Ltd. will begin a roadshow on Wednesday for a $450 million two-part offering of senior unsecured notes via bookrunner Banc of America Securities.

The New Orleans-based independent oil and natural gas exploration and production company is offering a tranche of six-year floating-rate notes, and a tranche of eight-year fixed-rate notes.

Proceeds will be used to refinance debt.

Only two deals were carried over from the pre-Easter week calendar as business expected to clear before this coming Friday's close.

KAR Holdings, Inc. expects to price its $1.1 billion three-part notes offer.

The Westchester, Ill., automotive specialty salvage services provider plans to issue $600 million in tranches of eight-year senior fixed-rate and floating-rate notes (B3/CCC), and $500 million of 10-year senior subordinated notes (Caa1/CCC).

Bear Stearns, UBS, Goldman Sachs and Deutsche Bank Securities are joint bookrunners for the LBO deal.

And United Surgical Partners International, Inc. expects to complete its $480 million two-part notes offering.

The company is offering $240 million of 10-year senior subordinated notes and $240 million of 10-year senior subordinated toggle notes.

Citigroup, Lehman Brothers, UBS Investment Bank and Bear Stearns are joint bookrunners for that LBO transaction.

An informed source told Prospect News on Friday that the United Surgical Partners deal is pro-formaed at 8¾% to 9%, and is going well.

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