Tenet plans $500 million deal; existing bonds little changed in dull dealings

By Paul Deckelman and Paul A. Harris

New York, June 14 - Tenet Healthcare Corp. announced plans Monday to sell $500 million of new 10-year notes, and to use the proceeds to repurchase outstanding senior notes with shorter maturities. High-yield syndicate sources heard the new deal likely to price as soon as Tuesday afternoon.

However, news of the new offering and the likely takeout of some of the Santa Barbara, Calif.-based hospital operator's existing bonds did little or nothing to spur those bonds higher, with some market sources even quoting them easier amid generally lackluster dealings.

Indeed, dull dealings were seen as the order of the day as junk marketeers returned to work following Friday's one-day closure in honor of the late Ronald Reagan.

No high yield issues priced during the opening primary market session of the June 14 week.

However the new issue pipeline was seen to build purposefully throughout the session.

"We have a slower pace this week," one sell-side official commented early Monday afternoon.

"The new issue calendar for this week is around $1.7 billion, which is not as busy as we have seen earlier in the year."

Tenet $500 million drive-by

However this source's color may have been overtaken by events, as Santa Barbara, Calif. acute care hospital company Tenet Healthcare Corp. showed up with the sirens on, announcing that it expects to price $500 million of 10-year senior notes (B3/B-) on Tuesday afternoon.

Price talk on the quick-to-market bullet deal, via Citigroup, is expected to emerge Tuesday morning.

Tenet will use the money to repay debt.

Pride to drill for $400 million

Meanwhile Houston-based drilling contractor Pride International, Inc. will start pumping the accounts on Tuesday as it commences a roadshow for a $400 million offering of 10-year senior notes, which is expected to price on Monday, June 21.

The company will also obtain an $800 million credit facility.

Citigroup, Banc of America Securities and Deutsche Bank Securities will run the books for the debt refinancing deal.

Medical Device plans $190 million

A Tuesday roadshow start is set for a $190 million offering of eight-year senior subordinated notes (B-) from Medical Device Manufacturing, Inc., via Credit Suisse First Boston.

The issuer is a subsidiary of closely held UTI Corp., a Collegeville, Pa. -based provider of metal and plastic components and assemblies for the healthcare industry. It will use the proceeds to fund the company's $230 million acquisition of medical device maker MedSource Technologies Inc., as well as to refinance debt and fund a minor dividend to one of UTI's two financial sponsors.

Pierre Foods dishes $125 million

On Wednesday Cincinnati-based Pierre Foods will begin roadshowing its $125 million of eight-year senior subordinated notes (B-), via Banc of America Securities and Wachovia Securities.

The company, which produces and markets fully cooked branded and private label protein, bakery products and microwaveable sandwiches for the domestic food service market, expects to price the acquisition deal late in the week of June 21.

Range Resources add-on

The roadshow also starts Wednesday for Range Resources Corp.'s $100 million add-on to its 7 3/8% senior subordinated notes due 2013 (B3/B).

The Fort Worth-based independent oil and gas company's acquisition-financing deal is expected to price on June 22 via JP Morgan.

The original $100 million priced July 16, 2003.

Talk on Huntsman, Adesa

Meanwhile price talk emerged on two offerings, which, along with the above-mentioned Tenet Healthcare deal, are expected to be priced on Tuesday.

Talk is 11¼%-11½% on Huntsman LLC's $400 million of eight-year senior notes (B3/CCC+) via Credit Suisse First Boston, JP Morgan, Citigroup, Deutsche Bank Securities and UBS Investment Bank.

Meanwhile the B1/B+ rated notes of Adesa, Inc. are expected to come at a significantly tighter spread to Treasuries.

Price talk is 7 5/8%-7 7/8% on the Carmel, Ind. auto salvage operator's $125 million of eight-year senior subordinated notes, expected to price either late Tuesday or early on Wednesday via UBS Investment Bank and Merrill Lynch & Co.

Finally, Bob Evans Farms announced Monday that it will offer $190 million in debt securities to fund its acquisition of Tustin, Calif.-based SWH Corp. (Mimi's Cafe) for $182 million in cash, including the assumption of approximately $78.7 million of outstanding debt.

The company told Prospect News that NatCity Investments would run the bond deal and would be the lead bank on the company's new credit facility.

Looking at data

The sell-side source, quoted above concerning the coming week's slower pace, said that a raft of financial numbers including the Consumer Price Index, the Producer Price Index and housing starts this week, and the gross domestic product numbers that are expected to be reported during the week of June 21, have incontestable implications for the high yield.

"If we hear really strong data I think people will expect a 50 basis points increase in interest rates from the Fed when it meets on June 30," the source said.

"If that happens things could get a little ugly because that is a sharp pick-up.

"By the end of the year we could be looking at 2%."

Secondary slow, including Tenet

Monday was "really slow," a secondary market trader said, "worse than last week - and last week was worse than Christmas."

He saw little or no dealings in Tenet Healthcare's bonds, even with the company's announcement of the new bond issue and its intent on taking out some existing debt, as well as news reports that had Tenet in negotiations to settle outstanding government investigations and lawsuits stemming from allegations that doctors at its Redding, Calif. hospital had performed unnecessary heart surgeries.

The Los Angeles Times had reported on Friday - when the market was closed - that nation's second-largest for-profit hospital chain is in preliminary discussions with government officials and lawyers representing more than 750 patients who are suing Tenet. The paper said that the company might wind up paying more than $1 billion to settle all of the various claims, it said.

For its part, Tenet sought to downplay the story, noting that it has been in talks with the Justice Department and other regulators for well over a year, looking to settle the tangled legal problems which have dogged the company and have reduced the value of its bonds and shares.

A Tenet spokesman said that any speculation about the size or shape of a settlement - such as the L.A. Times' $1 billion figure - was "very premature."

The news - either that of the upcoming bond deal and debt reduction or that of Tenet's efforts to settle its legal problems - were a non-story, as far as the secondary market was concerned.

One market source quoted Tenet's 6 3/8% notes due 2011 as having actually dipped to 86.5 bid from prior levels around 87, and said he saw other Tenet issues all "down half a point, across the board."

A trader saw the company's New York Stock Exchange-traded 5 3/8% notes due 2006 likewise down three-quarters of a point at 95 bid on the board, but saw no over-the-counter dealings in the bonds.

He said that other Tenet issues, such as its 5% notes due 2007, holding steady at 92 bid, "didn't look too exciting. There was nothing really going on in the name" Monday, despite all of the news.

MGM, Mandalay slip

Elsewhere, news that MGM Mirage had made a better offer to Mandalay Resort Group - which nixed Mirage's initial unsolicited $68 per share takeover offer last week - had a mixed impact on the bonds of the two Las Vegas-based gaming operators, market participants said.

A market source saw the bonds of both companies lower all around, with MGM Mirage's 9¾% notes due 2007 dipping to 110 bid from 110.25, while its 8 3/8% notes due 2011 were seen at 103.25 bid, down two points from last week's levels.

He also saw Mandalay's 10¼% notes due 2007 ease to 110.75 bid, from 112, while its 7 3/8% notes due 2013 were a quarter point down at 100.25 bid, off from 100.5.

At another desk, a trader characterized Mandalay's as "bid without, no offer seen," its 6 3/8% notes and 6½% notes both at par. He said the MGM Mirage issues were "a little weaker and quoted wider," with the 8 3/8s at 103.5 bid, 104.5 offered and the 93/4s at 109 bid, 110 offered.

He also saw the company's 6¾% notes due 2007 at 102 bid, its 6% notes due 2009 at 97 bid, its 8½% notes due 2010 at 107.75 bid, 108.5 offered, and its 6 7/8% notes due 2008 at 106.75 bid,

After the financial markets were closed for the day, MGM Mirage announced that Mandalay's management has tentatively decided to support the revised offer.

MGM Mirage sweetened its offer to $71 per share from the previous $68, for a total of $4.8 billion in cash; it would also pay another $600 million to acquire convertible debt, which would convert to shares at the higher offer price, and would assume another $2.5 billion in Mandalay's debt.

That is considered an improvement, from a Mandalay debtholder's point of view, from the original proposal of $4.65 billion in cash plus assumption of $2.8 billion of Mandalay debt, including the $600 million of convertible notes.

MGM Mirage also dropped a controversial loophole provision that was in the rejected original deal; that provision had provided for an escape hatch which would let MGM Mirage exit the deal scott-free in 15 months if it ran into regulatory problems - which Mandalay shareholders and management said unfairly left them holding the bag and bearing all the risk that the deal might not go through.

For its part, Mandalay, while saying the revised bid would "offer significantly greater assurances of closing for Mandalay's shareholders" than the previous offer did, said it had not actually agreed to the revised proposal, pending a board meeting Tuesday.

Should the merger go through, it would create a gaming industry powerhouse that - unless forced to divest properties by regulators - would own fully one-third of the hotels and about half of the total number of rooms along the Las Vegas Strip.

Prime Medical unchanged

News that Prime Medical Services Inc. has agreed to merge with Healthtronics Surgical Services Inc. in an all-stock deal that will leave Prime Shareholders in control of 62% of the stock of the merged company had little impact on Prime Medical's 8¾% notes due 2008, which were unchanged at 99.

And NeighborCare Inc.'s rejection of rival Omnicare Inc.'s $1.35 billion hostile takeover bid left Neighborcare's 6 7/8% notes due 2013 unchanged at 106 bid and Omnicare's 6 1/8% notes due 2013 lkiewise unchanged, at 95.

L-3 Communications announced it had been awarded contracts by the Navy that could potentially be worth as much as several billion dollars to the New York-based defense electronics firm over the 15-year life of the contract.

L-3's 6 1/8% notes due 2014 moved up to 94.875 bid from 93.75 - but its 7 5/8% notes due 2012 were seen having eased almost a point to 104.

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