Boyd Gaming, CRC price deals; Lear better after numbers

By Paul Deckelman and Paul A. Harris

New York, Jan. 25 - Boyd Gaming Corp. and CRC Health Corp. successfully priced new deals on Wednesday, although CRC's came in a little smaller than originally anticipated. CRC's new notes firmed smartly when they were freed for secondary dealings, while the Boyd bonds traded a little bit above issue.

Primaryside players also heard that TIM Hellas, which tapped the market last year for an issue of floating-rate notes due 2012, paid a return visit, pricing an add-on to the original issue. Looking ahead, CMA CGM was heard shopping an issue of eight-year notes around, and price talk emerged on Exopack Holding Corp's upcoming eight-year deal.

In the secondary market, Southfield, Mich.-based Lear Corp.'s bonds were seen having firmed a point or so, after the company posted a narrower loss in the fourth quarter from a year earlier, and released some optimistic free-cash-flow projections.

Overall one sell-side source marked the high-yield market basically unchanged on Wednesday after trading up as much as a quarter of a point in the morning. The story, the source added, was a sell-off in Treasuries.

Another source, also a sell-sider, said that the market had a good tone throughout the day, but also made note of the sell-off in Treasuries. Late in the day, this source spotted the yield on the 10-year Treasury at 4.47%, seven basis points wider on the session, and commented that should such moves continue the high-yield will have a difficult time escaping the impact.

Nonetheless, this sell-side official added that higher-rated (and thus Treasury-sensitive) bonds, especially from the health care and energy sectors, hung in well in the face of Wednesday's sell-off in Treasuries. But, the source said, it will be interesting to see what these bonds do on Thursday if the Treasury sell-off continues.

Boyd Gaming drives through

In total three issues, amounting to $646.25 million of proceeds, priced in the primary market. Two of them were drive-bys.

Boyd Gaming Corp. priced a $250 million issue of 7 1/8% 10-year notes (B1/B+) at 99.50 to yield 7.196%, toward the wide end of the 7 1/8% to 7¼% price talk.

The Banc of America Securities and Deutsche Bank Securities-led sale generated $248.75 million of proceeds for the Las Vegas gaming company.

One source told Prospect News that the deal had gone well, and added that "allocations were tough."

The source spotted the notes trading in a tight bid-offer range: 99.875 bid, 100 offered in the secondary market late Wednesday.

Also coming quick-to-market was Greek telecom TIM Hellas Communications, which priced a €200 million add-on to its three-month Euribor plus 350 basis points senior secured floating-rate notes due Oct. 15, 2012 (existing ratings B1/B) at 100.25, inside of the par area price talk.

JP Morgan and Deutsche Bank Securities ran the books.

The original €925 million priced at par Sept. 30 2005. In the same September transaction the company priced a €355 million issue of senior subordinated notes due 2013.

CRC shifts $20 million to bank loan

Only one of Wednesday's three deals had traveled the investor roadshow circuit.

CRC Health Corp. priced a downsized $200 million issue of 10¾% 10-year senior subordinated notes (Caa1/CCC+) at 98.511 on Wednesday to yield 11%.

The yield came wide of the 10¾% area price talk. The sale generated $197 million of proceeds.

JP Morgan, Merrill Lynch & Co., Citigroup and Credit Suisse ran the books for the acquisition financing that was downsized from $220 million, with the Cupertino, Calif., addiction treatment company shifting $20 million to its term loan B. The term B is now $245 million, increased from $225 million, and pricing flexed down to Libor plus 225 basis points from 250.

NRG restructures mega-deal

Late Wednesday an informed source said that NRG Energy has dropped a planned tranche of floating-rate notes from its $3.6 billion offering of senior unsecured notes (B1/B-/B), without downsizing the deal.

The offering, now in two tranches, is expected to price on Thursday.

The source said that the $300 million of proceeds from the withdrawn floating-rate tranche will be split among the two remaining fixed-rate tranches, with approximately two-thirds shifted to the 10-year notes and one third to the eight-year notes.

Hence the Princeton, N.J.-based independent power producer now plans to price approximately $2.4 billion of 10-year fixed-rate notes, non-callable for five years, which it has talked at 7 3/8% to 7 5/8%. That piece was previously $2.2 billion.

The company also plans to price approximately $1.2 billion of eight-year fixed-rate notes, non-callable for four years, which are talked 12.5 basis points to 25 basis points inside of the 10-year notes. The tranche is up from $1.1 billion before.

Morgan Stanley and Citigroup are joint bookrunners for the acquisition deal.

On Tuesday a buy-side source told Prospect News that NRG was a "complete blowout," with the 10-year tranche generating the most interest.

Also expected to price Thursday is Charter Communications, Inc.'s $400 million two-part offering (expected ratings Caa1/CCC-) to be issued via subsidiary CCH II, LLC. Bookrunners are JP Morgan, Credit Suisse and Deutsche Bank.

The company plans to offer seven-year senior notes with a coupon that will be cash-pay or pay-in-kind at the company's discretion. The new senior notes will come with five years of call protection.

The St. Louis cable TV and high-speed internet services provider also plans to do a tap of its 10¼% senior notes due 2010. The present outstanding amount of that issue is $1.6 billion.

A market source said late Wednesday that no official price talk had been heard on the latest Charter deal.

Finally, Exopack Holding Corp. talked its $235 million offering of eight-year senior notes (B2/B-) at 10 7/8% to 11 1/8% on Wednesday.

The Goldman Sachs-led deal is also expected to price Thursday.

CRC up in trading

When the new CRC Health 10 ¾% senior notes due 2016 were freed for secondary dealings, "they had a nice big move, said a trader who saw the new bonds having moved up to 100 bid, 101 offered from their issue price at 98.511. Several other traders saw the new notes trading as much as two points better, around the 100.5 bid area.

Boyd's new 7 1/8% notes due 2016 were a bit more restrained in their aftermarket activity, pushing up slightly to the par bid, 101 offered level from their 99.5 issue price. A trader characterized the bonds' movement as "nothing too exciting."

"A lot of these deals that came last week - the [R.H.] Donnelleys and the DISH [EchoStar] bonds, some of the more Treasury-sensitive issues, struggled a little bit today [Wednesday]," another trader opined, "off a quarter of a point with the Treasury market off a point on the back end."

Lear rises

Back among the established issues, traders saw Lear Corp. bonds a bit better, following the release of the company's numbers.

"Lear was up a little, maybe a point or two," a trader said, quoting the company's 8.11% notes due 2009 at 91 bid, 92 offered, while another trader saw its 5¾% notes due 2014 at 79.5 bid, 80 offered, up a point.

He noted that late in the session, Standard & Poor's put the automotive seatmaker's ratings on CreditWatch for a possible downgrade, warning that "Lear has suffered from depressed operating performance caused by severe industry pressures in 2005, which caused credit protection measures to weaken dramatically."

However, the trader said, the announcement from S&P came down at 4:35 p.m. ET, too late to affect Wednesday's trading.

The bonds had firmed before that announcement after Lear said that it lost $596 million ($8.88 per share) in the fourth quarter, versus a year-earlier profit of $123 million ($1.70 per share). Company vice chairman Jim Vandenberghe told analysts on a conference call following the release of the results that 2005 had been "a challenging year," with Lear's performance hurt by such factors beyond its control as lower orders from carmakers - particularly from Detroit's Big Three, who account for more than half of its orders - and from sharply rising materials costs.

Vandenberghe and other Lear executives on the call, while acknowledging these problems, said that the company had undertaken a major restructuring last year, and was diversifying its customer base to include European and Asia-based original equipment manufacturers as well as its traditional customers, General Motors Corp., Ford Motor Corp. and the Chrysler division of DaimlerChrysler. In 2005, North American customers accounted for 54% of sales, European OEMs had 38% and customers in the rest of the world - chiefly Japan and Korea - had 8%.

The Lear executive noted that "from an operating standpoint, pre-tax income was in the range of our expectations that we outlined on our last call [three months earlier], despite the fact that we did see additional production cuts [by customers] and higher commodity pricing in the quarter." Net sales were actually up year-on year, to $4.4 billion from $4.3 billion a year earlier.

Another positive Vandenberghe and chief financial officer Dave Wajsgras touted was the achievement during the quarter of positive free cash flow, at $46 million. For the full 2005 year, free cash flow was negative $419 million. While the company declined to issue formal guidance, it did say that it expected positive free cash flow for 2006.

There was no discussion of debt or liquidity issues during the company's presentation.

Other auto names quiet

Aside from Lear, traders said, automotive names seemed quiet, although Ford and GM did quote a little higher, with Ford's benchmark 7.45% notes due 2031 at 72.5 bid, 73.5 offered and GM's 8 3/8% notes due 2033 at that same level, both up ¾ points on the session. GM's financing arm, General Motors Acceptance Corp., was meanwhile down a bit, a trader said, its 8% notes due 2031 half a point lower at 100.75 bid, 101.25 offered. Ford's financial unit, Ford Motor Credit Co., saw its 7% notes due 2013 up ¼ point at 89 bid, 90 offered.

Xerox unchanged on earnings

Besides Lear, Xerox Corp. reported earnings, and while the Stamford, Conn.-based copier and office machines giant had a great quarter - fourth-quarter profits jumped 18% versus a year ago on strong demand for color copier supplies and service - those gains had been largely expected and were in line with forecasts. Xerox's 7.20% notes were at 106 bid, 107 offered and its 7 5/8% notes at 106 bid, 106.5 offered, both unchanged, a trader said.

He also saw Nova Chemicals' 7.40% notes due 2009 at 102 bid, 103 offered, and its 6½% notes due 2012 at 96 bid, 96.5 offered, both unchanged on the session, as the company fell into the red in the fourth quarter, with a net loss of $68 million (82 cents per share), versus a year-earlier profit of $162 million ($1.78 per share). But the fourth quarter was an improvement on the third quarter, when Nova lost $105 million ($1.28 per share).

Granite drops on network changes

Apart from the earnings calendar, a trader saw Granite Broadcasting Inc.'s bonds get "slaughtered," with the New York-based television station ownership group's 9 ¾% notes down about two or three points on the session to around the 86 level.

He noted that several Granite stations are affiliates of TimeWarner Corp.'s ill-fated WB network, which is slated to cease operations this fall, along with the equally underperforming CBS-owned UPN network. The two media giants plan to join forces in a 50-50 joint venture, to be called the CW network (for CBS and Warner Bros.), but success is by no means assured for the new entity, which still must somehow fight its way into the select group comprised of the traditional Big Three "alphabet networks" (ABC, NBC and CBS) plus Fox ,which has established itself as the nation's fourth network and seems to be here to stay in a way that neither the WB nor UPN could ever match. Still up in the air is the question of what will happen to existing affiliates of the two failed networks, particularly in markets where there is both a UPN station and a WB station, with only one of them being able to represent the new CW network.

"It remains to see how that's going to work out for Granite," the trader said, since among the 13 stations that Granite owns or provides programming and sales services to are WB affiliates in Detroit, San Francisco/Oakland/San Jose, Fort Wayne, Ind. and Duluth, Minn., and UPN affiliates, also in Duluth and in Peoria/Bloomington, Ill.

He recalled that there recently "was some question as to whether they were going to make their coupon payment on the last go-around [they did], and they did some asset sales - but the asset sales should really be going to pay down debt, and they're using it for acquisitions. So it looks like they're trying to grow their way out of their problems - but they may run out of time in six or none months.

"They're going to have trouble paying operating expenses," he continued, "and this whole WB thing really spells out their big issues. So that one bears watching."

Other TV names down

In that same industry, other broadcast names seen lower at another desk include Young Broadcasting Corp., LIN Television Corp., and Emmis Communications Corp. - each of which has some UPN and/or WB exposure.

Their bonds were all seen down about a point, with Young's 10% notes due 2011 quoted at 91 bid, LIN's 6½% notes due 2013 around 92 and Emmis' 6 7/8% notes due 2012 at 98.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.