Rhodia unveils €1.1 billion floater, Peabody to mine $825 million; Harrah's bonds tumble on buyout news

By Paul A. Harris

St. Louis, Oct. 2 - A syndicate official said that the market traded flat on Monday as observance of Yom Kippur, the Jewish holiday of the Day of Atonement, significantly thinned the ranks in the high-yield market.

Thinned ranks notwithstanding, however, the market did produce news.

In the primary market, St. Louis-based Peabody Energy Corp. announced its intention to bore into junk investors' pockets with an $825 million two-parter. And in the euro domain, French specialty chemical firm Rhodia SA announced a quick-to-market €1.1 billion offering of seven-year senior floating-rate notes.

In the secondary market, meanwhile, existing issues of Harrah's Entertainment tumbled on news that Apollo Management and Texas Pacific Group are coming with the biggest-ever casino buyout deal.

And Delphi Corp. paper firmed on the heels of a Wall Street Journal story reporting that hedge fund Appaloosa Management is close to making a substantial investment in the company.

Peabody two-tranche transaction

Peabody Energy will kick off a brief roadshow on Tuesday in New York for its $825 million offering of senior notes (Ba1/BB) in two tranches, a 10-year tranche and a 20-year tranche.

The deal is expected to price on Thursday.

Morgan Stanley and Merrill Lynch & Co. are joint bookrunners for the acquisition financing.

News of the new deal had a negative impact on some of Peabody's existing paper, sources said.

Late in the afternoon a market source saw Peabody's 6 7/8% paper due 2013 trading at 98 bid, 98.75 offered, down ½ point.

Meanwhile the source spotted the Peabody 5 7/8% notes of 2016 at 91 bid, 91.75 offered, down 3/4.

After the close, a source gave prices on the 6 7/8% due 2013 at 98 bid, 99 offered, and marked the paper down half a point.

Rhodia's €1.1 billion floater

Elsewhere on Monday, Paris-based chemical company, Rhodia, talked its quick-to-market €1.1 billion offering of seven-year senior floating-rate notes (B2/B-) at a 275 basis points to 287.5 basis points spread to Euribor.

The books will close at noon London time on Tuesday, with pricing expected after that.

Credit Suisse has the books for the debt refinancing deal.

Of course Rhodia is by no means the only European-based issuer in the new issue market this week.

Netherlands-based NXP BV/NXP Funding LLC (formerly Philips Semiconductor) is expected to price a €4.5 billion equivalent multi-tranche transaction before the end of the week, via Morgan Stanley, Deutsche Bank Securities and Merrill Lynch.

No news was heard on that transaction during the Monday session, primary market sources said.

SemGroup talk expected Tuesday

Aside from Peabody and Rhodia the only other deal expected to be early-week business is SemGroup LP's $250 million add-on to its 8¾% senior notes due Nov. 15, 2015 (existing ratings B1//B+).

A source told Prospect News that price talk should surface on the Banc of America Securities-led acquisition deal on Tuesday, with terms to follow possibly before the end of the day.

Harrah's history-maker

The story that grabbed most of the attention during Monday's session in the secondary market was Harrah's Entertainment, which is the object of a buyout bid by Apollo Management and Texas Pacific Group.

The two private equity firms announced their intentions of acquiring all of the company's outstanding common stock for $81.00 per share in cash.

One trader, speaking toward the middle of the morning after the news had sufficiently filtered through the capital markets - and specifying that if consummated the deal would be the biggest casino buyout transaction in history - said that Harrah's stock was "up eight or nine bucks."

The bonds were another story, however, the source said, taking them down 8 points from last Friday's close.

"The buyout plan is expected to send leverage soaring," the trader commented,

This source said that the trading was no doubt predicated on the perfectly reasonable expectation that as a result of the buyout the existing bonds would become subordinated in Harrah's capital structure.

Toward the close, a market a source said that Harrah's 5 5/8% notes due 2015 were at 84.25 bid, 85.25 offered, down 7 to 8 points on the session.

Meanwhile the casino company's 6½% notes due 2016 were at 87.25 bid, 88.25 offered, down 8 to 9 points.

Shortly after the close, a trader had Harrah's 5¾% notes maturing in 2017 at 82 bid, 84 offered, down 9 points.

The trader also saw the company's 5 3/8% notes due 2013 at 85 bid, 87 offered, down eight points.

Oracles and horses

Elsewhere bankrupt auto parts maker Delphi Corp.'s paper got a lift trailing a Wall Street Journal story that hedge fund Appaloosa Management is close to making a substantial investment in the company.

The rumor, market sources said, saw several issues smartening up to the tune of 2 to 4 points.

For example, one market source said, Delphi's 6½% notes due 2009 were at 93.75 bid, 94.75 offered in the late afternoon, up 4 points on the session.

Meanwhile the same source said that Delphi's long paper had also improved, and spotted the 7 1/8% notes due 2029 at 87.50 bid, 88.50 offered, up 2 points on the day.

Trailing the Monday close, a trader also spotted the 2029 Delphi paper up 2 points at 87 bid, 88 offered.

Meanwhile this source saw the short-dated 6.55% notes due 2006 at 93.50 bid, 94.50 offered, up 4 points.

Elsewhere Delphi's 6½% bonds due 2013 closed at 88 bid, 89 offered, up 3 points, the source said, and the 7 1/8% notes due 2029 were at 87 bid, 88 offered, up 2 points on the session.

Ahold bonds mixed

In secondary trading of paper from European issuers the existing paper of Amsterdam-based supermarket operator Royal Ahold NV was mixed trailing a story in the Financial Times reporting that Blackstone Capital Partners LP may be interested in buying the company.

At the close, one market source saw Ahold's 6 7/8% notes due 2029 at 92.50 bid, 93.50 offered, down a point on the day.

Earlier in the session another source spotted that paper at 93 bid, 94 offered, unchanged.

That same source said that a shorter-dated Ahold issue, the 8 % notes due 2010, were trading at 106.50 bid, 107.50 offered, up ½ point from the Friday close.

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