OPTI Canada, Nevada Power/Sierra Pacific deals price; Dobson firms on sale possibility

By Paul Deckelman and Paul A. Harris

New York, June 25- OPTI Canada Inc. and Western power operators Nevada Power Co. and Sierra Pacific Power Co. successfully came to market with quickly-shopped new deals Monday, market sources said, to start what promises to be a busy week in the primary arena.

To that end, pre-deal market price talk was heard on upcoming issues from Community Health Systems Inc. - a $3.365 billion behemoth of a deal - Fresenius Medical Care AG & Co. KgaA, Magnum Coal Co. and Varietal Distribution Merger Sub Inc. (VWR International Inc.). Meantime InterGen Group was heard getting ready to hit the road early next week to market its nearly $2 billion multi-tranche mega-deal to prospective investors.

In the secondary market, the new OPTI Canada bonds were seen by traders little moved off their issue price when they were freed for aftermarket activity. And Thomson Learning's new bonds - which priced very late in the day on Friday - were driven solidly lower in Monday's initial secondary market dealings.

Back among the established issues, Dobson Communications Corp. bonds were firmer on the news reports that the Oklahoma City-based rural-oriented wireless service provider was looking into strategic alternatives, possibly including the sale of the company.

Sources marked the broad high yield market down half a point to a point on the day.

However one sell-side official noted seeing some stability toward the end of Monday's session.

Meanwhile three issuers drove through the primary market.

OPTI Canada prices $750 million

OPTI Canada priced a $750 million issue of seven-year senior secured second-lien notes (B1/BB+) at par to yield 7 7/8%, at the wide end of the 7¾% to 7 7/8% price talk.

Credit Suisse ran the books for the quick-to-market debt refinancing and project funding deal.

OPTI is a Calgary, Alta.-based company focused on developing the fourth and next major integrated oil sands project in Canada, the Long Lake Project, in a 50/50 joint venture with Nexen Inc.

Nevada Power, Sierra Pacific Power bring deals

Two wholly owned subsidiaries of Sierra Pacific Resources priced a combined $675 million of 6¾% 30-year general and refunding mortgage bonds (Ba1/BB+/BBB-) at a 155 basis points spread to Treasuries, on top of price talk.

Nevada Power Co. priced a $350 million issue of series R bonds via Credit Suisse with Merrill Lynch & Co. and UBS Investment Bank as joint bookrunners

Sierra Pacific Power Co. priced $325 million of series P bonds via Goldman Sachs with Deutsche Bank Securities and Lehman Brothers as joint bookrunners.

Proceeds will be used to repay debt.

Community Health talks $3.365 billion

The primary market continued to hear talk of restructured mega-deals on Monday.

Community Health Systems set price talk for its restructured $3.365 billion offering of eight-year senior notes (B3/B-) at 8¾% to 9%.

The Credit Suisse and Wachovia-led deal is expected to price on Wednesday.

The Nashville-based operator of acute care hospitals withdrew proposed tranches of eight-year floating-rate notes and 10-year fixed-rate notes.

VWR talks toggle notes

Elsewhere Varietal Distribution Merger Sub Inc. (VWR International Inc.) set price talk for its $675 million offering of eight-year senior PIK toggle notes (Caa1/CCC+) at 9¾% to 10%.

The deal is being led by Goldman Sachs & Co., Banc of America Securities, JP Morgan and Deutsche Bank Securities.

U.S. Foodservice downsized again

U.S. Foodservice Inc. set price talk for its downsized, restructured $650 million offering of eight-year cash-pay senior notes (Caa2/CCC) at 10¾% to 11% on Monday.

The offering, which is being led by Deutsche Bank Securities, Citigroup, Goldman Sachs & Co., JP Morgan, Morgan Stanley and RBS Greenwich Capital, was downsized from $1.55 billion, with $900 million of the LBO financing shifted to a bridge loan.

The deal initially came to market in multiple tranches, including toggle notes and PIK for life notes.

Market sources have said that the Columbia, Md., foodservice distributor's leverage, in the wake of the LBO, is expected to be 9.3 times.

One source said late Monday that high yield investors are demonstrating a diminishing appetite for highly leveraged credits.

Not a bad market

A sell-side official, parsing recent news about downsized and restructured deals, said that the high yield market is not necessarily in bad shape.

With "equity markets at all-time highs and high yield spreads within spitting distance of recent tights," this source insisted that there are deals getting done at attractive levels when the market likes them.

However, the source continued, issuers are seeing "pushback" from investors, especially on credits where the "leverage multiples just got out of control."

"The market is saying no to nine-times leverage and 10-times leverage," the source asserted, pointing to the above-mentioned U.S. Foodservice deal, and to last Friday's downsized, restructured deal from TL Acquisitions Inc./Thomson Learning.

"The market has also become more selective with about toggle bonds," the source added, specifying that it appears that the above-mentioned VWR toggle notes deal will get done.

The sell-sider also said that pricing appears to have swung in favor of the investor community.

Fresenius talks $500 million

Fresenius Medical Care AG & Co. KGaA set price talk for its $500 million offering of 10-year senior notes (Ba3/BB-) at 6 7/8 % to 7 1/8 % on Monday.

The Banc of America Securities-led deal is expected to price on Tuesday.

Price talk on Magnum Coal

Finally, Magnum Coal Co. set price talk for its $350 million offering of seven-year senior secured second-lien notes (B3/B-) at 10¾% to 11%.

The Lehman Brothers deal is expected to price Wednesday.

InterGen brings $1.975 billion

InterGen Group will start U.S. and European roadshows on Monday for its $1.975 billion equivalent offering of senior secured first-lien notes (Ba3/BB-) to be sold in dollar-denominated and sterling denominated tranches, with the possible addition of euro-denominated bonds.

Merrill Lynch & Co. is the bookrunner for the debt refinancing, working capital and dividend-funding deal.

OPTI steady, Thomson tumbles

When the new OPTI Canada 7 7/8% notes were freed for secondary dealings, several traders saw the new bonds continuing to cling to their par issue price, quoting the notes at par bid, 100.5 offered.

Nobody had any quotes on the new Sierra Pacific Power or Nevada Power bonds.

Traders said the Thomson Learning bonds meantime struggled once they were freed for aftermarket activity.

A trader saw the company's 10½% senior notes due 2015 at 97 bid, 97.75 offered - well down from Friday's issue price at 98.724.

And he saw the company's new zero-coupon senior subordinated discount notes due 2015 "not doing too spiffy either," quoting the bonds at 74.75 bid, 75.75 offered - well off their 77.093 issue price.

Another trader said the new bonds "really hit the old skids," noting that when the 101/2s were freed to trade "they started at par - but then they immediately first went down from that level to 98-98.25, then to 97.5-98, and finally to around 97 bid, 97.25 offered."

One newly priced issue which continued to hold its own was Blaze Recycling & Metals Inc., whose 10 7/8% senior secured notes due 2012 priced Friday at par, and then moved up smartly to the 102.5 bid, 103 offered level. A trader saw those bonds continuing to hold those gains in Monday's dealings.

Dobson rings up gains

Among the established bonds, a Wall Street Journal story indicating that Dobson Communications has hired Morgan Stanley to help it explore alternatives, possibly including the sale of the company, gave those bonds a boost.

Although a trader said that "there was not a lot of action" in it, he saw Dobson's 8 7/8% notes gain from offered levels around 103.5 on Friday to about 104.5 offered Monday.

Another trader quoted those bonds at 104.75 bid, 105.25 offered, which he called up ½ point on the day.

Another source saw those bonds up a point on the day at 105 bid.

Claire's stores firm off lows

A trader saw Claire's Stores Inc.'s bonds head lower, but then rallied towards the end of the day.

"They became weaker, but then came back at later in the day, " although he did not see any fresh news out about the Pembroke Pines, Fla.-based specialty retailer.

He quoted its 9¼% notes due 2015 hitting a low at 95 bid, 99 offered, while its 9 5/8% notes due 2015 were at 92 bid, 93 offered and its 10½% notes were at 90.75 bid, 91.75 offered, all down about 1½ points from Friday's levels. However, by day's end, he said, the bonds had bounced off their lows and ended a point higher than those lows.

Another trader said Claire's was quoted a lot more frequently on Monday.

The source pegged the 10½% notes due 2017 at 92.5 bid, 93.5 offered.

A further trader said the situation with Claire's - where a new issue moves well under par in just months - is indicative of the recent trend of companies using LBO financing.

"They are starting to show the cracks," he said. "If [Claire's] is cracking after three months, my gosh!"

Delphi bonds hold onto gains

A trader said that Delphi Corp.'s bonds were "still up around the 120s" to which they had moved Friday on the news that the troubled Troy, Mich.-based automotive parts company had reached a labor-cost-cutting accord with the United Auto Workers union. Delphi had been in talks with the union and former corporate parent General Motors on such a pact for nearly a year.

Movie Gallery a bit better

A trader said that he saw Movie Gallery Inc.'s 11% notes due 2012 "quoted a little higher" at 78 bid, 79 offered, which he called ½ point better, but he said that the movement in the Dothan, Ala.-based Number-Two U.S. video rental chain operator's bonds was "no big deal."

Another source, however, said the bonds were easier than their levels around 80 bid at the tail end of last week, but on no news.

Bally slightly off highs

And he saw Bally Total Fitness Holding Corp.'s 9 7/8% notes slated to come due later this year at par bid, 101 offered and its 10½% notes due 2011 at 106 bid, 108 offered. The latter bonds were in a little from their levels late last week, when they were seen around a 107 bid, 108 offered context, after having firmed even higher earlier in the week.

Those bonds had reached their highs last week in the wake of the news that the Chicago-based Number-One U.S. fitness club operator's bondholders had agreed to the concept of its restructuring proposal, which would give the holders of its subordinated bonds full ownership of the company, while senior debtholders will get new secured notes. The plan will be implemented via a pre-packaged Chapter 11 filing. No further news was seen out on the company on Monday, although its Pink Sheets-traded penny stock shares were up six cents (14.61%) to 51 cents Monday on volume of 748,000, somewhat below the average daily turnover.

Overall, though, it was "a very slow day - and I mean s-l-o-w-w-w-w," a trader said. "It was a snoozer, to say the least."

Another trader saw the widely followed CDX index measuring junk market performance ending down 3/8 point at 981/4-98 5/16.

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