Vail, Spencer price; hospital bonds hit on Tenet suit; Level 3, Global Crossing up on deal

By Paul Deckelman and Paul A. Harris

New York, April 11 - Vail Resorts, Inc. brought a quickly shopped $390 million offering of subordinated notes to market on Monday. The ski resort operator's bonds got a lift when they hit the aftermarket, gaining more than a point.

Spencer Gifts LLC priced an upsized six-year secured paper deal, finally completing a transaction the novelty and gag gift retailer had originally begun last November. It was postponed at that time due to not-so-fun market conditions.

Calumet Specialty Products Partners, LP, Chesapeake Midstream Partners, LP and Nortek, Inc. all began marketing deals, as did non-U.S. issuers, including Carmeuse Holdings SA, Elster Group SE and Southern Water.

Price talk emerged on pending deals from SugarHouse HSP Gaming and Taskeo Mines Ltd.

M&A activity, rather than new deals, drove the secondary market, with the bonds of telecom operators Level 3 Communications Inc. and Global Crossing Ltd. firming smartly on news Level 3 will acquire Global Crossing in a $3 billion deal.

But bonds of hospital operators Community Health Systems Inc. and Tenet Healthcare Corp. plunged sickeningly as Tenet, seeking to derail Community Health Systems' pending hostile takeover effort, filed a federal lawsuit alleging its would-be acquirer routinely does improper patient admissions and overbills Medicaid and other insurers.

Vail drives by

A pair of issuers raised a combined $565 million during the Monday session in the primary market.

Meanwhile the forward calendar saw a massive buildup, as the European primary market cranked out its most intense news volume in recent memory.

Vail Resorts did the session's biggest dollar-deal - a $390 million issue of eight-year senior subordinated notes (Ba3/BB) which priced at par to yield 6½%.

The yield printed at the tight end of price talk which had been set in the 6 5/8% area.

Merrill Lynch, J.P. Morgan Securities LLC and Deutsche Bank Securities Inc. were the joint bookrunners for the debt refinancing drive-by deal.

Spencer Gifts upsizes

Elsewhere, Spencer Gifts priced an upsized $175 million issue of six-year senior secured notes (B2/B) at par to yield 11%.

The yield printed at the wide end of the 10¾% to 11% price talk.

Wells Fargo Securities LLC and UBS Investment Bank were the joint bookrunners.

The Egg Harbor Township, N.J.-based specialty retailer plans to use the proceeds to repay debt and make a distribution to shareholders.

Wendell brings euro deal

In the European market, French investment firm Wendell priced a €300 million issue of 6¾% seven-year bonds (/BB-/) at 99.324 to yield 6 7/8%.

The yield printed on top of the price talk.

BNP Paribas, Natixis Bleichroeder and SG CIB were the bookrunners for the quick-to-market debt refinancing deal.

Talking the deals

Setting the stage for Tuesday, Sugarhouse Casino talked its $235 million offering of five-year senior secured second-lien notes with a yield in the 8¾% area.

Credit Suisse Securities and Goldman Sachs & Co. are the joint bookrunners.

Elsewhere Taseko Mines Ltd. talked its $200 million offering of eight-year senior notes (B3/B) with a 7¾% to 8% yield.

Barclays Capital is the bookrunner.

Lee plans $1.05 billion

Aside from Monday's completed transactions, the forward calendar saw a massive buildup.

Lee Enterprises, Inc. will run an investor roadshow during the present week for a $1.05 billion two-part offering of senior secured notes (Caa2//).

The Davenport, Iowa-based newspaper publisher plans to sell $675 million of six-year first-lien notes and $375 million seven-year second-lien notes.

Credit Suisse Securities and Deutsche Bank Securities Inc. are the joint bookrunners for the debt refinancing deal.

Calumet Specialty to price

Meanwhile Calumet Specialty Products Partners, LP, in conjunction with Calumet Finance Corp., plans to price a $375 million offering of eight-year senior notes during the present week.

Merrill Lynch and Goldman Sachs & Co. are the joint bookrunners for the debt refinancing.

Chesapeake Midstream to bring 10-year deal

Chesapeake Midstream Partners, LP, in conjunction with CHKM Finance Corp., plans to price a $350 million offering of 10-year senior notes during the present week.

Credit Suisse Securities, Wells Fargo Securities LLC, Goldman Sachs & Co. and RBS Securities Inc. are the joint bookrunners.

Proceeds will be used to repay the company's revolving credit facility and for general corporate purposes.

Carmeuse kicks off on Tuesday

The European high-yield market generated its biggest news volume in recent memory during the Monday session.

Aside from the pricing of the Wendell deal, Belgian limestone producer Carmeuse SA disclosed plans to start a roadshow on Tuesday in the United States for its $375 million offering of seven-year senior secured notes.

J.P. Morgan Securities LLC, BNP Paribas SA, Credit Agricole CIB and ING Group NV are the joint bookrunners for the debt refinancing.

Southern Water's sterling deal

Southern Water (Greensands) Financing plc plans to run a roadshow this week for a £250 million offering of eight-year notes (/BB-/).

Proceeds will be used to refinance debt.

Deutsche Bank, HSBC and UBS are the joint bookrunners.

Elster marketing seven-years

Germany's Elster Group will begin a roadshow on Tuesday for a €250 million offering of seven-year senior notes (expected ratings Ba2/BB-).

Merrill Lynch and J.P. Morgan Securities LLC are the joint physical bookrunners; Merrill Lynch will bill and deliver. Deutsche Bank and Goldman Sachs International are joint bookrunners.

Proceeds will be used to repay bank debt.

Alba roadshow for Tuesday

Meanwhile, Germany's ALBA Group plc & Co. KG plans to start a roadshow on Tuesday in Europe for a €200 million offering of seven-year senior notes.

Deutsche Bank, Commerzbank, IKB, UniCredit and WestLB are the joint bookrunners. Deutsche Bank will bill and deliver.

The waste management services company, which is headquartered in Berlin, plans to use the proceeds to refinance debt.

Geo Travel brings LBO deal

Geo Travel Finance SCA plans to start a roadshow on Tuesday for a €175 million offering of eight-year senior notes (expected ratings Caa1/B-).

Goldman Sachs International and Credit Suisse are the joint bookrunners.

Proceeds will be used to help fund the acquisition of Opodo by Permira Advisers LLP and AXA SA from Amadeus IT, and to refinance the eDreams and Go Voyages credit facilities.

New Vail bonds move up

When the Vail Resorts eight-year senior subordinated notes were freed for secondary dealings, a trader quoted that drive-by issue at 100 5/8 bid, 100¾ offered on the break, versus its par issue price earlier. He noted that the issue was not like the several new deals which priced on Friday and then quickly moved up by 2 or 3 points or so in the aftermarket, such as those from Pittsburgh Glass Works LLC, Masonite International Corp. and Production Resources Group Inc.

However, another trader queried later in the afternoon saw the new Vail bonds having moved up to 101 bid, 101½ offered.

Friday deals hold their own

Traders said that the deals that priced Friday and traded around "all held their gains," in the words of one. "There weren't a whole lot of new or different levels, Pittsburgh Glass Works and all of that stuff all kind of held on to where they were."

Another trader said that "new issue-wise, there wasn't much going on," seeing Pittsburgh Glass' $325 million of 8½% senior secured notes due 2016 having stabilized around 103½ bid, 104 offered - actually slightly above the 103¼ bid, 103¾ offered levels at which those bonds had traded on Friday after the automotive glass maker had priced that deal, upsized from the original $300 million, at par.

The trader likewise saw Production Resources Group's new 8 7/8% notes due 2019 at 103¼ bid, 104 offered. Here too, the level was slightly above the 102½ bid, 103½ offered context at which the bonds had traded Friday. The Armonk, N.Y.-based provider of equipment and services to the concert and live-event industry had earlier priced the $400 million bond issue at par.

However, the trader said that Masonite's 8¼% notes due 2021were trading on Monday around 101½ bid, 102 offered; that was down slightly from the 102 bid, 102½ levels seen on Friday after the Mississauga, Ont.-based maker of residential and commercial doors had priced its $275 million deal, upsized from $250 million, at par.

Sheridan put away

As was the case on Friday, the one deal from that session which priced but which was not seen in the aftermarket was Sheridan Group's $150 million issue of 12¼% senior secured notes due 2014.

The Hunt Valley, Md.-based printing and publishing company priced those bonds at 94 to yield 15.059%, and they were not seen subsequently.

One of the traders said Monday that "if you [as an investor] got it put to you, you're going to own it till the end."

Indicators turn mixed

Away from the new-issue realm, a trader saw the CDX North American Series 16 HY index down 3/16 point on Monday to end at 102 5/8 bid, 102 7/8 offered, after having been unchanged on Friday.

The KDP High Yield Daily Index meantime dropped by 13 basis points on Monday to finish at 75.89, after having gained 3 bps on Friday. Its yield rose by 5 bps to 6.57% after having narrowed by 1 bp on Friday

But the Merrill Lynch High Yield Master II Index rose by 0. 094% on Monday - its ninth consecutive session-over-session rise - on top of the 0.06% gain seen Friday. That lifted its year-to-date return to 4.718% - a new peak for 2011, up from Friday's 4.62% level, the previous high for the year.

Advancing issues fell behind decliners on Monday for the first time in nine sessions, trailing them by a margin of almost six to five, after having led them by a similar-sized margin on Friday.

Overall market activity, as measured by dollar-volume levels, slid by 27% on Monday, after having jumped by 64% on Friday from the prior session's levels.

M&A news dominates secondary

Monday saw most of the secondary activity centered around merger and acquisition activity - breaking the recent trend of the secondary market being dominated by dealings in new primaryside paper once those bonds were freed for trading.

"Either guys trying to do a deal - or guys trying to keep one from happening," a trader quipped, noting the dominant role that the Level 3-Global Crossing and the Community Health Systems-Tenet Healthcare situations, respectively, were playing in the market.

Community Health volume soars

Easily the most actively traded issue of the day in Junkbondland was Community Health Systems' 8 7/8% notes due 2015; one trader estimated that a breathtaking $200 million of the Franklin, Tenn.-based hospital company's paper changed hands on Monday.

He said that the Community Health bonds were going home down 4½ points, at 101 1/8 bid.

"You couldn't help but see [trading in Community Health bonds], it was coming across your screen all day whether you liked it or not."

He cited one particular market participant who by himself "put out about 92 e-mails about markets in that name."

The $200 million figure was "crazy," he opined, adding "and that's only what you see. It's probably even bigger than that."

Yet another trader acknowledged that "CYH traded a ton today." He saw the bonds open at 105½ bid, then drop as low as 99 bid, 99½ offered, before finally going home around a par-101 context.

The controversy also hammered Tenet's bonds down; he saw its 8% notes due 2020 off 1 to 2 points to finish at 102½ bid, 103½ offered.

Its 8 7/8% notes due 2019 likewise dropped more than 2 points to end at 112½ bid.

` The trader said that hospital bonds in general, even from other issuers not involved in the matter such as HCA, were softer on the news as well.

Community Health's New York Stock Exchange-traded shares plunged nearly 45% at one point in the day before finishing down $14.41, or 35.76%, at $25.89. Volume of 44.7 million shares was 22 times the norm.

Tenet's NYSE-traded stock meantime dropped as much as 20% on the news before ending down $1.11, or 14.70% at $6.44. Volume of 85.8 million shares was almost 10 times the usual turnover.

The bonds and shares were gyrating around on the news that Community Health's prospective acquisition target, Tenet Healthcare, had leveled serious charges of improper admissions and Medicare billings against its would-be suitor in a lawsuit filed with the federal court in Dallas, where Tenet is based. Community Health Systems said the charges are without merit, unfounded and irresponsible.

Monday's legal hand grenade comes against the backdrop of a nasty hostile takeover attempt that the 120 hospital Community Health Systems has been making since late last year against the smaller Tenet, which operates 49 facilities. In December, Tenet rejected Community Health's $3.3 billion takeover offer, which breaks out to $5 per share in cash and $1 per share in Community Health stock for each Tenet share, claiming it undervalued Tenet.

Community Health management dismissed Tenet's lawsuit as a ploy to "distract" its shareholders from seeing the value of its offer for Tenet.

Telecom bonds climb on deal

The other big M&A news of the day related to Broomfield, Colo.-based fiber-optic network operator Level 3 Communications' agreement to acquire Bermuda-based international communications carrier Global Crossing in a deal worth $3 billion, including the assumption of $1.1 billion of Global Crossing debt.

"That did really well for both of those bonds," a trader said, seeing Level 3's 11 7/8% notes due 2019 zooming by around 11 points on the day to 107½ bid, 108½ offered versus their pre-news levels around 96½ bid, 97½ offered.

He saw Global Crossing's 12% notes due 2015 jump to 117 bid from prior levels at 114.

A second trader pronounced the Global Crossing bonds as "pretty busy, seeing the 12% paper at 117 1/8 bid, 117 3/8 offered, with over $30 million traded.

'The bonds traded up to their next call price," he said, on the assumption that after it buys the company, Level 3 will redeem that debt.

He meantime saw Level 3's 8¾% notes due 2017 up 3½ points at 104 bid, while its 10% notes due 2018 were 4 points better at 106¾ bid.

Unlike some acquisition deals which involve the acquirer assuming a sizable amount of the company being acquired's debt, causing its own bondholders to balk, in this case, "two positives equal an even bigger positive."

Shareholders of the two companies thought so as well; Level 3's Nasdaq-traded shares were up over 27% at one point during the session, finishing up 26 cents, or 18.06%, at $1.70. Volume of 444.9 million was 16 times the usual daily handle.

Global Crossing's Nasdaq shares soared by 79% intraday before finishing at up $10.17, or 68.72%, at $24.97. Volume of 17.1 million shares was 117 times the amount normally traded.

Endo lower on acquisition

In yet another M&A-related situation, which got nowhere near the attention of either Tenet-Community Health or Level 3-Global Crossing, a trader said that Endo Pharmaceuticals Holdings, Inc.'s bonds "were off a couple of points today," pegging the Chadds Ford, Pa.-based drug company's 7% notes due 2020 down about a deuce to 101½ bid, 102½ offered.

He said that nobody saw too much of Endo because it's a 144A deal that doesn't Trace.

He cited the news that Endo plans to acquire American Medical Systems Holdings Inc. for about $2.6 billion, and will assume and repay some $312 million of the Minnetonka, Minn.-based urology-products company's debt.

While the bondholders were underwhelmed, Endo shareholders liked the deal, boosting its Nasdaq-traded stock at one point by as much as 9%, although the shares finished well off those highs at $41.06, up 21 cents, or 0.51% on the day. Volume of 7 million shares was almost six times the usual.

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