HCA prices $1.25 billion behemoth; Charter, Six Flags up after convertible financings

By Paul Deckelman and Paul A. Harris

New York, Nov. 16 - HCA Inc. priced a massive $1.25 billion mega-deal Tuesday helping push junk bond to new issuance up to $2.8 billion so far this week with just two sessions completed. Smaller deals heard to have successfully priced Tuesday included Mayne Group's $200 million tranche of seven-year bonds, and Trailer Bridge Inc.'s $80 million worth of seven years.

In secondary market activity, Charter Communications Inc.'s bonds, and those of Six Flags Inc. were seen having firmed smartly after each company unveiled a sizable convertible financing - even as the stock of both nosedived Tuesday on shareholder dilution fears, and even after both Standard & Poor's and Moody's Investors' Service recently clobbered Six Flags, ratingswise.

The high-yield primary market saw another $1.5 billion and change price in four transactions during the course of Tuesday's session, led by hospital operator HCA's $1.25 billion in two parts.

Thus far the still-young week of Nov. 15 has seen $2.8 billion of junk bonds sold in 11 tranches.

With just over $4.2 billion of business expected to price before Friday, the Nov. 15 week appears poised to top the $7 billion mark.

In all, between Wednesday, Nov. 17 and Wednesday, Nov. 24 - the day before Thanksgiving - the market anticipates seeing nearly $5.5 billion of bonds sold before the cranberry sauce starts to chill.

And that's barring surprises.

Prospect News asked one sell-side source on Tuesday whether demand for paper among high-yield investors remains sufficiently robust to see that volume of business completed.

"We're continuing to see strong demand for this paper, for the deals that are coming out of this shop," said the source.

"And from the way other deals are pricing relative to price talk, and the fact that some of these deals have been getting upsized, tells you that there plenty of buyers for those bonds.

"We're still looking for well over $5 billion to price before Thanksgiving," the source added. "Whether or not the market can clear that much paper, you can't really tell.

"But you get the sense that people are really focused now on the pre-Thanksgiving time window. No one seems to be parking deals in the after-Thanksgiving calendar right now."

HCA's $1.25 billion in two parts

Tuesday's biggest deal came from the Nashville, Tenn.-based hospital operator HCA.

The company priced a $1.25 billion off-the-shelf issue of high-yield bonds (Ba2/BB+) in two parts.

The company sold $500 million of 5½% five-year senior notes at 99.707 to yield 5.567%. The notes priced at a spread of 200 basis points, right on top of the 200 basis points area price talk, via Merrill Lynch & Co. and JP Morgan.

HCA also sold $750 million of 6 3/8% senior notes due Jan. 15, 2015 (10-year) at 99.671 to yield 6.421%. The notes priced at a spread of 220 basis points, at the tight end of the 225 basis points area price talk, this time with the bookrunners switching places: JP Morgan on the left and Merrill Lynch & Co. on the right.

Proceeds will be used to repay a bridge loan incurred to help fund a stock buy-back.

Elsewhere Tuesday Melbourne, Australia, integrated pharmaceutical manufacturer and healthcare services provider Mayne Group Ltd. sold $200 million of 5 7/8% seven-year senior notes (Ba1/BB) at 99.324 on Tuesday to yield 5.994%.

The issue priced at a spread of mid-swaps plus 170 basis points, which was the tight end of the mid-swaps plus 170 to 175 basis points price talk.

An informed source said that the deal was marketed with mid-swaps price talk because Asian investors are accustomed to seeing it, and the deal was intensively shopped in Asia.

Morgan Stanley ran the books for the debt refinancing deal.

Finally, Trailer Bridge, Inc., a Jacksonville, Fla.-based shipping company, priced a slightly upsized $85 million of seven-year senior notes (B3/B-) at par on to yield 9¼%, tight to the 9¼% to 9 3/8% price talk, via Jefferies & Co. The deal was increased from $80 million.

Three more drive-bys announced

The pre-Thanksgiving calendar continued to build on Tuesday with a trio of issuers announcing their intentions of pricing deals during the Nov. 15 week.

Gaylord Entertainment Co. will present its $200 million offering of 10-year non-call-five senior notes (existing ratings B3/B-) during a 10 a.m. ET conference call on Wednesday, with pricing expected to follow on Wednesday afternoon.

Deutsche Bank Securities and Bank of America Securities are joint bookrunners for the debt refinancing deal from the Nashville-based lodging and entertainment company.

Elsewhere Stena AB, the Gothenburg, Sweden-based shipping company, is scheduled to hold a conference call on Wednesday morning for $200 million of 12-year non-call-five senior notes (Ba3/BB-), which are expected to price on Thursday via JP Morgan and Citigroup.

And Pinnacle Entertainment, Inc. is expected to price a $100 million add-on to its 8¼% senior subordinated notes due March 15, 2012 on Thursday, via Lehman Brothers and Bear Stearns.

The Las Vegas gaming company priced the original $200 million issue priced at par on Feb. 27, 2004.

Price talk on Hornbeck, Neenah Paper

Finally on Tuesday, price talk of 6¼% to 6½% emerged on Hornbeck Offshore Services Inc.'s $225 million of 10-year non-call-five senior notes (Ba3/BB-), expected on Wednesday via Goldman Sachs & Co.

And price talk is 7½% to 7¾% on Neenah Paper Inc.'s $200 million offering of 10-year non-call-five senior notes (B1/B+), also expected to price on Wednesday via Citigroup, Goldman Sachs & Co. and JP Morgan.

HCA better in trading

When the new HCA bonds were freed for secondary dealings, a trader quoted the 5½% notes due 2009 - which he said were being quoted on a spread versus Treasuries basis, as though the Nashville-based hospital operator were still an investment-grade rated company rather than carrying a Ba2 from Moody;s and a BB+ from S&P - as having firmed slightly to a bid level equivalent to 193 basis points off the comparable Treasury issue, and an offered level 188 bps over, versus its pricing level at 200 bps off.

Elsewhere on the new-deal front, the trader saw Hovnanian Enterprises Inc.'s new 6% notes due 2010 at 100.625 bid, 101.125 offered and its new 6¼% notes due 2015 at 99.75 bid, 100.75 offered, versus the par issue price for both tranches late yesterday.

Charter gains on convertibles news

Back among already established bonds, a trader called Charter paper "definitely better" on news of the convertibles deal, which saw the St. Louis-based cable operator announce plans to sell $750 million of new notes, planning to use most of the deal proceeds to refinance existing convertible debt.

He quoted the company's 8 7/8% notes due 2009 as having gotten as good as 82.25 bid, 83.25 offered during the session, up from Monday's close at 79 bid, 80 offered, although he said the bonds later came down a little bit from their peak level, through they still finished with a handsome gain on the day, at 81.75 bid, 82.25 offered, up nearly three points.

At another shop, a market observer saw Charter's bonds "all up a little bit," with the 8 5/8s at 82 bid, up three points, the zero-coupon notes due 2012 better by 2¼ points at 60.25, the zero-coupon notes due 2011 at 66.5 bid, up three points on the day, and the 8¼% notes due 2007 up nearly three points at 97 bid. He said it appeared that all of Charter's other issues were up 2½ points to three points as well.

The Charter bonds shot up despite a big fall in the company's Nasdaq-traded share on the part of holders fearful of the dilutive effects of putting out a big new block of convertibles, which might cause the company to issue additional shares. Charter's stock swooned 55 cents (20.30%) to $2.16 on volume of 91.6 million shares - a whopping 23 times the normal turnover of just under four million.

Another high-yield name following that same path Tuesday was Six Flags, in the wake of the New York-based theme park operator's issuance of $260 million in convertible senior notes due 2015. Six Flags said that it plans to use the deal proceeds to repurchase or redeem a portion of the company's existing 9½% senior notes due 2009 and 8 7/8% seniors due 2010.

That prospect helped shoot those two bond issues up, with the 91/2s seen up 2¾ points at 103 bid and the 8 7/8s 2 3/8 points ahead at 98.375.

A market source also saw the company's other bond issues rising as well, with Six Flags' 9¾% notes due 2013 a point up at 98.75 and its 9 5/8% notes due 2014 nearly three points better at 98 bid.

A trader at another desk saw the 9 5/8s rise to 97.25 bid, 98.25 offered from 96.5 bid, 97.5 offered on Monday, while the 9¾% bonds were also higher, at 98.5 bid, 99.5 offered.

But the convertibles deal did not go over at all well with dilution-fearing equity investors, who dropped the company's New York Stock Exchange-traded shares 51 cents (9.64%) to $4.78 on volume of 6.1 million shares, about six times the norm.

For junk investors, news of the convertibles deal - and the use of the proceeds for junk bond redemption - apparently outweighed recent negative developments for Six Flags, including disappointing third-quarter numbers released last week, which the company attributed to higher costs and the effects of weather disturbances on attendance and revenue.

In the wake of those lackluster results, S&P on Friday revised its outlook on Six Flags' credit to negative from stable, while cutting its corporate credit rating to B- from B previously; S&P cited a poor profit outlook and the company's high debt leverage. Its action followed by a day a similar downgrade from Moody's, which cut the rating on Six Flags' bonds to Caa1 from B3, and said its outlook remained negative. Moody's cited its heavy debt burden and weak free cash flow.

Tekni-Plex gains

Another upsider Tuesday was Tekni-Plex Inc., which reported better-than-expected quarterly results. That boosted the Somerville, N.J.-based packaging company's 12¾% notes due 2010 to 86.5 bid from 77.5 previously, while its 8¾% notes due 2013 firmed to 100.5 bid, up from 96.5 on Monday.

Mohegan rises

Mohegan Tribal Gaming Authority reported what the Uncasville, Conn.-based Native American gaming operator called "record" fourth quarter and fiscal 2004 results; its 8% notes due 2012 were up a quarter point at 111, while its 8 3/8% notes due 2011 were also a quarter-point better, at 114.25.

Bally drops

On the downside, Bally Total Fitness Holding Corp.'s announcement that it was asking the holders of its 10½% notes due 2011 and 9 7/8% notes due 2007 for waivers of defaults related to its inability to file financial results in a timely manner (see "Tenders and Redemptions" elsewhere in this issue for full details) did not help the Chicago-based fitness club chain operator's bonds; the 9 7/8s were seen down three points at 80 bid, while the 101/2s were off more than three points at 94 bid.

A trader who saw the 101/2s dip to 93 bid, 95 offered from 96 bid, 97 offered previously, said that for the problem plagued company, this was getting to be "like a quarterly occurrence for them - more regular than filing a 10-Q."

Bally's NYSE shares were down 18 cents (5.31%) to $3.21. Volume of 877,000 was more than three times the usual trading level.

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