Upsized Conexant, downsized Britannia price; Revlon gains despite wider loss

By Paul Deckelman and Paul A. Harris

New York, Nov. 7 - Conexant Systems, Inc. was heard by junk market primaryside players to have successfully priced an upsized offering of four-year senior secured floating-rate notes Tuesday. At the same time, Britannia Bulk plc came to market with a downsized issue of six-year secured notes.

But those deals are just the warm up for what's to come, with price talk emerging on HCA Inc.'s $5.7 billion behemoth of a mega-deal. Syndicate sources also heard price talk on NCO Group Inc.'s upcoming considerably smaller two-part offering, while Mosaic Co. was about to hit the road Wednesday to begin selling its $950 million two-tranche deal to potential investors.

In the secondary market, traders said that activity was dull, with nobody wanting to stick his or her neck out, one way or another, until the results of Tuesday's elections were known.

About the only issues seen doing anything were those with actual news out about them, mostly in terms of earnings.

Chief among these was Revlon Consumer Products Corp., which saw its notes firm smartly even as the New York-based cosmetics company reported a wider third-quarter loss than it had a year ago, although the increased red ink was mostly due to special factors, notably the company's recent decision to pull the plug on its underperforming Vital Radiance product line.

Another gainer off earnings was Tenet Healthcare Corp.

Among the downsiders was Technical Olympic USA Inc. Its bonds and shares plunged as bankruptcy fears circulated about the Hollywood, Fla.-based homebuilder, as one of the lenders to its troubled Transeastern joint venture said the company was obligated to step up and bail the venture out - something Technical Olympic says it is not obligated to do.

Overall a high yield syndicate official said that the broad market felt firm on Tuesday.

In the primary market three issuers, each bringing a single junk-rated tranche, raised a total of slightly less than $500 million of proceeds.

Conexant upsizes

Tuesday's largest deal by dollar amount came from Newport Beach, Calif., semiconductor company, Conexant Systems, which priced an upsized $275 million issue of four-year senior secured first-lien floating-rate notes (B1/B+) at par to yield three-month Libor plus 375 basis points.

The yield came at the tight end of the three-month Libor plus 375 to 400 basis points price talk.

JP Morgan and Credit Suisse were the bookrunners for the debt refinancing.

Britannia downsizes, restructures

Britannia Bulk priced a downsized, restructured $185 million issue of 11% five-year senior secured notes (B3/B-) at 93.622 to yield 12¾% on Tuesday.

Price talk was for a yield of 10¾% to 11%.

The structure of the notes was modified during marketing, with the maturity decreased from seven years to five, and call protection decreased to three years from four.

The sale, which was downsized from $215 million, generated $173.2 million of proceeds.

Jefferies & Co. and ABN Amro were joint bookrunners for the vessel acquisition and general corporate purposes deal from the London-based drybulk, tug and barge fleet operator.

JetBlue brings junk tranche

Finally, JetBlue Airways Corp. priced a $49.418 million issue of class B-1 floating-rate pass-through certificates (Ba3/B+) at par to yield three-month Libor plus 287.5 basis points.

Morgan Stanley and RBS Greenwich Capital were the underwriters.

In addition to the high-yield tranche, JetBlue also priced $74.28 million of class G-1 certificates (Aaa/AAA) at par to yield three-month Libor plus 23 basis points.

Talk on HCA

Talk surfaced on the biggest deal expected to price this week.

Hercules Holding II (HCA Inc.), talked its $5.70 billion three-part bond offering.

The deal is comprised of $4.2 billion of senior secured second-lien notes in two tranches: eight-year notes talked at 9¼% area, and 10-year notes talked at 9 3/8% to 9½%.

In addition, a $1.5 billion tranche of 10-year senior second-lien "toggle" notes is talked 25 to 50 basis points behind the 10-year secured notes, with a 75 basis points PIK coupon step-up.

The books close on Wednesday. Pricing is set for Thursday.

Citigroup, Bank of America Securities, JP Morgan, Merrill Lynch, Deutsche Bank Securities and Wachovia Securities are joint bookrunners for the LBO financing.

NCO talks two-parter

Talk also circulated on the NCO Group Inc. $365 million two-part notes offering.

The Horsham, Pa., provider of business process outsourcing services talked its $165 million tranche of seven-year floating rate notes (B3/B-) at Libor plus 475 basis points area.

Meanwhile NCO Group talked its $200 million offering of eight-year senior subordinated fixed-rate notes (Caa1) at 11½% area.

Pricing is expected on Wednesday.

Morgan Stanley, JP Morgan and Banc of America Securities are joint bookrunners for the LBO from NCO.

Mosaic launches $950 million

The Mosaic Co. will start a roadshow on Wednesday for its $950 million two-part offering of senior notes (B1/BB+).

The Plymouth, Minn.-based phosphate and potash crop nutrients producer will sell two tranches, each sized at $475 million, of eight-year and 10-year senior notes.

Pricing is expected to take place on Nov. 16.

JP Morgan and Merrill Lynch & Co are joint bookrunners for the debt refinancing deal.

Revlon rolls despite red ink

A secondary trader said that "the primary took center stage" Tuesday, with much of the secondary locked down until the election results - which would determine whether there would be a change of control in one or both houses of Congress - became clear.

Another trader estimated that in general the market was essentially unchanged or up perhaps one sixteenth.

But traders saw Revlon bonds sitting pretty, even though the cosmetics maker reported a third quarter net loss of $100.5 million (24 cents per diluted share), widening out from its year-earlier red ink of $65.4 million (17 cents per diluted share).

The wider loss was largely driven by costs associated with the discontinuance of Vital Radiance, a line of color cosmetics aimed at women in the 50-plus age category which never did meet company expectations and ended up losing money. There were also costs associated with the company's recent restructuring efforts, including severance costs connected with the purge of a number of senior executives.

But even with the increased losses, company executives were upbeat on their conference call about Revlon's prospects, now that it has pulled the plug on the money-losing Vital Essence and will focus instead on its established Revlon and Almay brands. Management also said it was continuing to evaluate potential refinancing scenarios for its $217 million of 8 5/8% notes due 2008 (see related story elsewhere in this issue).

A trader saw Revlon's 9½% notes due 2011 up about 2½ points on the day at 93 bid, 94 offered, although he saw the 8 5/8s essentially unchanged at 96.5 bid, 97.5 offered.

Another trader also saw the 91/2s two points better in that same 93 bid context.

The bonds were "up pretty nicely today," said yet another trader who saw the 91/2s at that same level.

Tenet firms on narrower loss

While Revlon's loss for the quarter was expanding - albeit due to special items - Tenet Healthcare's red ink was shrinking, which helped push the Dallas-based hospital operator's bonds up.

Tenet "showed some strength" on numbers that were "pretty decent," a trader said, seeing its 6 7/8% notes due 2031 a point better at 78.75 bid, 79.75 offered.

Another trader quoted its 9 7/8% notes due 2014 as having moved up to 99.125 bid, 99.625 offered from prior levels at 98.5 bid, 98.75 offered.

And yet another trader, pegging the company's bonds up about ½ point saw the 6½% notes due 2012 move up to 88.25 bid, 89.25 offered, while the 9¼% notes due 2015 ended at 96.25 bid, 96.75 offered. He saw the 9 7/8s at 99.25 bid, 99.75 offered.

Tenet lost $89 million (19 cents per share) in the quarter ended Sept. 30 - well down from its year-earlier loss of $401 million (85 cents per share), although it should be noted that the year-ago figures including restructuring charges for since-discontinued operations. Excluding those discontinued operations, Tenet said it would have lost $30 million (6 cents per share) in the latest quarter, beating Wall Street projections of a seven cents per share loss.

Primedia bonds retreat

Also on the earnings front, a trader saw Primedia Inc.'s 8 7/8% notes ease 99 bid, off from prior levels around 99.75.

The New York-based magazine publisher and website operator reported that net income fell to $53.8 million (20 cents per share) from $207.8 million (79 cents per share) a year earlier. However, much of the big year-ago gain was attributable to gains from the sale of certain operations.

Technical Olympic tumbles

Outside of the earnings area, a trader saw Technical Olympic's 10 3/8% notes due 2012 at 83.5 bid, 84.5 offered, down 6 points on the session.

Those bonds fell in line with a nosedive in the company's New York Stock Exchange-traded shares, which lost $3.79 (35.13%), ending at an even $7 per share. Volume of 13.1 million shares was nearly 20 times the usual turnover.

The slide was triggered by investor fears that the company might be forced to bail its floundering Florida joint venture and might even face bankruptcy - speculation which at this time is strictly unconfirmed and unofficial.

Technical Olympic tumbled after Deutsche Bank, the lead bank for a group of lenders to Technical Olympic's troubled Transeastern homebuilding venture, said that "TOUSA has an obligation to undertake funding initiatives to stabilize the borrower."

The shares and the bonds retreated even as Technical Olympic shot back that it is in talks with the lenders about the situation, but added it does not believe any obligations related to financing the venture have been triggered.

It blamed Transeastern's problems on heavy debt and a weak Florida housing market.

Friendly, Jean Coutu better

Elsewhere, a trader said that Friendly Ice Cream's 8 3/8% notes were up a point at 92.5 bid, 93.5 offered. He saw "no real news" out that might explain the rise in the bonds of the Wilbraham, Mass.-based ice cream manufacturer and restaurant operator.

He also saw Jean Coutu Group's 8½% notes due 2014 spike 1½ points to par bid, 100.5 offered. He cited market rumors - at this time still unconfirmed - that Rite-Aid Corp., which is buying the Eckerd drugstore chain off the Canadian retailer, will back off from its earlier intention of assuming, but not redeeming those bonds. Jean Coutu noteholders were dismayed by the original terms of the Eckerd deal, which called for Rite Aid, a weaker credit than Jean Coutu, to assume those bonds.

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