Upsized Unisys prices, Videotron too; Albertson's slides on LBO buzz, junk supermarkets follow along

By Paul Deckelman and Paul A. Harris

New York, Sept. 9 - Unisys Corp. priced an upsized two-part drive-by offering on Friday, high-yield syndicate sources said; they also reported pricing on another quickly appearing deal, this one for Canadian cable operator Videotron Ltee. Apart from the issues actually pricing, road-show details emerged on several other upcoming issues, including NBTY Inc., Metallurg Group, and School Specialty Inc.

Traders said that new issues seemed to be the market's primary focus, overshadowing the secondary sphere.

Apart from trading in new or recently priced names, traders saw some movement in the soon-to-be junk bonds of nominally investment-grade supermarket operator Albertson's Inc. as private-equity companies reportedly expressed interest in the Boise, Idaho-based Number-Two U.S. grocery chain operator. While that gave the company's stock a healthy boost, the bonds slid badly on debtholder fears of a big leveraged buyout, just as they had a week earlier when the company said it might put itself up for sale. That, in turn, also pulled some high-yield supermarket names like Pathmark Stores Inc. and Stater Bros. Holdings Inc. lower.

An official from the sell-side marked the CDX index 15 basis points tighter on Friday.

Meanwhile, the primary market saw a total of $725 million of high-yield bonds priced in three tranches.

That brought the four-session post-Labor Day week to a close with issuance of $2.5 billion and change in nine dollar-denominated tranches. The previous week, in the run-up to Labor Day, had seen no issuance whatsoever.

At the week's close, year-to-date issuance stood at $69.4 billion in 271 dollar-denominated tranches, far behind 2004 on a year-over-year basis. By the Sept. 9, 2004 close the market had seen $96 billion in 384 tranches.

And of course the $2.5 billion that priced during the abbreviated week of Sept. 5 also represents September's month-to-date issuance. Market sources have been forecasting that September might be the first month of 2005 to see issuance topping the same month in 2004; thus far all eight months have lagged their 2004 counterparts.

September 2004 saw slightly less than $9 billion in 33 dollar-denominated tranches.

Unisys upsizes by $100 million

Two of Friday's three new tranches came from Blue Bell, Pa., information technology services company Unisys Corp., which priced an upsized $550 million two-part offering of senior notes (Ba3/BB-).

Unisys priced a $400 million issue of seven-year notes at par to yield 8%, at the tight end of the 8% to 8 1/8% price talk.

The company also priced a $150 million issue of 10-year notes at par to yield 8½%, at the wide end of talk which had the 10-year notes coming 3/8% behind the seven-year notes.

Banc of America Securities and Citigroup were joint bookrunners for the debt refinancing deal.

A market source told Prospect News that investors were keenly focused on the seven-year piece.

Videotron drives through with $175 million

The third of the session's three tranches came from Montreal-based cable operator Videotron Ltee.

Videotron priced a $175 million issue of 6 3/8% 10-year senior notes (Ba3/B+) at 99.50 on Friday to yield 6.444%, in the middle of the 6 3/8% to 6½% price talk.

Banc of America Securities and Citigroup were joint bookrunners for the debt refinancing and dividend funding deal.

A market source commented early in the session that investor interest in the drive-by deal had built notably.

Metallurg to start marketing

Although timing was heard on transactions that were known to be waiting in the wings, only one new name surfaced Friday.

Metallurg Holdings will begin a roadshow Monday for a two-part $160 million offering of secured notes due 2010.

The New York City-based specialty metals manufacturer and distributor plans to sell $100 million of class A notes and $60 million of class B notes.

Jefferies & Co. will run the books for the debt refinancing deal.

The week ahead

During the Sept. 5 week the junk market saw a phenomenal buildup from what had been a virtually vacant forward calendar heading into the Labor Day recess.

The week ahead could see in excess of $2.25 billion price, in addition to any unforeseen quick-to-market action.

The calendar for the week of Sept. 12 includes:

* E*Trade Financial Corp.'s $450 million via JP Morgan and Morgan Stanley;

* Ashton Woods USA LLC/Ashton Woods Finance Co.'s $125 million via UBS Investment Bank and Wachovia Securities;

* San Pasqual Casino Development Group's $180 million via Merrill Lynch;

* Euramax International's $315 million via Goldman Sachs and Credit Suisse First Boston;

* Perkins Family Restaurant's $190 million via Wachovia;

* Panolam Industries Inc.'s $150 million via Credit Suisse First Boston and Jefferies;

* Ikon Office Solutions' $225 million via Wachovia and Lehman Brothers;

* InSight Health Services Corp.'s $250 million via Banc of America Securities;

* NBTY Inc.'s $150 million via JP Morgan; and

* Select Medical Holdings' $250 million via JP Morgan and Merrill Lynch.

The latter deal was expected by some observers to price late in the week just completed. However one source said that the structure was being reconsidered on the 10-year floating-rate note, proceeds from which are pegged to fund a dividend.

Secondary firm but focused on new deals

Back in the secondary arena, "nothing really moved all day," a trader lamented. "The market tried to better - then all of a sudden, it kind of gave it up. It really died in the afternoon."

"The market in general opened up firm," a second trader said, "but it seems [to have gotten] pretty quiet. A lot of the focus has been on new issues."

When the new Videotron 6 3/8% senior notes due 2015 were freed for secondary dealings, a trader saw the bonds move up to 100.375 bid, 100.875 offered from their 99.5 issue price earlier in the session.

"It was tight when they came," another trader observed, "but there seemed to be decent demand." He said that while the bonds had been priced to yield 6.45%, "they traded right up to around 6.20%, and it's trading around 100.5 [bid], 101 [offered], good two-sided [flow] there."

A third trader also saw the bonds move up to 100.5, up a point from issue, even though at $175 million, it was "a smallish deal."

The Unisys offering hit the market later in the session, and not much aftermarket activity was seen, with one trader estimating that both tranches had freed around 100.25 bid after having priced at par.

Among other recently priced issues, AmerisourceBergen Corp.'s new 5.71% notes due 2012 and 5.94% notes due 2015 were seen "trading around par," after pricing Thursday at 99.5 for the pair of them. "Both hung in there," a trader said, "so no big deal there."

Meanwhile, Dobson Communications Corp.'s new floating-rate notes due 2012, which had priced Wednesday at par, were being quoted at 99.75 bid, par offered.

Albertson's down on LBO fears

With traders seeing not too much going on among established high yield names, people were looking elsewhere for ideas - and one situation that junk marketeers are starting to take notice of is Albertson's. The underperforming supermarket company's bonds had fallen sharply a week earlier, on Sept. 2, after management said it would evaluate strategic alternatives, including its possible sale - albeit in relatively thin trading during an abbreviated session ahead of the Labor Day holiday weekend. That had left Albertson's 8% notes due 2031 around 103 bid, well down from 118.5 before the announcement, and its 7½% notes due 2011 at 105.75 bid, down from 111.5. In terms of spread over Treasuries, the bonds widened out by 125 basis points that session, with the '31s left at 345 bps over and the '11s at 250 bps over.

In response to the notion that Albertson's might sell itself - and that the buyout might be largely debt-financed - Standard & Poor's and Fitch Ratings, which each rate the company's bonds just one precarious notch above junk, both said they might downgrade the bonds to below investment grade. Moody's Investors Service, which rates Albertson's two notches above junk, also said a downgrade was a possibility.

On Friday, a published report indicated that such well-known leveraged buyout players like Kohlberg Kravis Roberts & Co. or Bain Capital might be interested in Albertson's, which could fetch a price of as much as $10 billion, not including another $6.5 billion of debt that would be assumed in such a takeover. Other potentially interested buyers might include The Carlyle Group, Thomas H. Lee Partners and Apollo Management.

The prospect that one of the buyout shops - or maybe several, acting in concert - might put in a bid for the company, which in all likelihood would be financed with a big helping of new debt - pushed the 8% notes well down, a trader said. He quoted the bid side of the bonds on spread at 445 bps over, about 50 bps wider than Thursday's closing level, 100 bps over where they began the week, and over 200 bps wider than they had been before the initial announcement about the strategic alternatives. Such a move, he declared, "was huge."

In dollar-price terms, the latest level translates to about 94.5 bid, 96.5 offered - almost eight points off from Thursday's close, almost 10 points below where they started the week, and well over 20 points down from where they had started out a week earlier.

Supermarket sector falls

Albertson's slippage was seen by some observers to have helped cause high-yield supermarket names to likewise head lower.

A market source saw Stater Bros.' 8 1/8% notes due 2012 down a point at 101 bid in apparent sector sympathy. Another source saw the bonds in the par bid, 101 offered area, after having been as high as 102 bid, 103 offered "for the longest time."

And Pathmark Stores - whose 8¾% bonds due 2012 had eased on Thursday after the Carteret, N.J.-based operator of 142 supermarkets in metro New York and the mid-Atlantic region reported a wider quarterly loss ($5.1 million, or 12 cents per share in the latest period, versus $1.6 million, or a nickel per share a year ago), remained weaker at about 98.5 bid, 99.5 offered, down from recent levels at 100 bid, 101 offered.

Signs of weakness

Apart from the Albertson's situation and the fallout it had on the junk supermarket names, "the secondary was kind of quiet today," a trader said, "with not a whole heck of a lot going on."

Everything, he continued "seems to be a little bit weaker, even though we had an inflow [Thursday], a real small one, actually." Market participants familiar with the weekly junk bond mutual fund flow numbers compiled by AMG Data Services of Arcata, Calif. told Prospect News that some $84.5 million more came into the funds than left them in the week ended Wednesday - a reversal of the previous week, which saw a net outflow of $101.5 million in the week ended Aug. 31.

He said that the gaming names that he saw, such as MGM Mirage, "seemed to be hanging in there. They were a little active in a couple of the issues," but no real continuation of the trend seen about a week earlier when some of the sector names went down in response to the damage wreaked on the Mississippi Gulf Coast by Hurricane Katrina. Even though "Biloxi [Miss.] and that whole area got killed, for most operators, it was such a small part of their revenues and their bottom line, and a lot of that stuff was insured, so it's not a death blow to the MGMs and companies like that."

Other sectors he was watching "were rangebound."

While Tenet Healthcare Corp. "took a little dip earlier in the week, it's kind of been hanging in there," with the Dallas-based hospital operator's 7 3/8% notes due 2013, "which seems to be the one everyone's interested in," closing at 96.5 bid, 97.5 offered, "down a couple of points from last week - but it hasn't fallen much further."

Movie theaters soft

He also saw movie theater names "a little under pressure," as the cinema operators try to recoup their fortunes after a summer movie season that was, by most estimates, a disappointment.

AMC Entertainment Corp. paper "looks to be pretty well offered out there," he said, quoting the Kansas City, Mo.-based theater chain operator's 9½% notes due 2011 and 9 7/8% notes due 2012 "about a point softer from the beginning of the week till now," with the 9 7/8s at 99.5 bid, 100.5 offered.

He quoted Chiquita Brands International's 7½% notes due 2014 as having been bid up to 97 bid, 98 offered a week earlier, but down two points over the week to 95 bid, 96 offered.

Another patch of weakness he saw included automotive retailers such as United Auto Group, whose 9 5/8% notes due 2012 were moving in reverse, down to 106 bid, 107 offered from prior levels at 107 bid, 108 offered. "But it's gradual. It's not like it all dropped [in one session]."

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