Hooters flies on deal news, Tembec on financing; Cooper, Yankee Candle slate deals

By Paul Deckelman, Paul A. Harris and Stephanie Rotondo

New York, Jan. 22 - Bonds of 155 East Tropicana LLC - the owner of the struggling Hooters casino resort in Las Vegas - were seen gyrating around at higher levels Monday, given a boost by Friday's closing-time news that an investor group had agreed to acquire the company and take responsibility for buying back its outstanding bonds as a result of the envisioned change of control.

That shot those bonds into the mid-90s, about a 10-point gain on the session from where they had been pre-news.

Elsewhere, Tembec Inc.'s bonds got a late-session boost on the announcement that the Canadian forest products company and its lenders had come to an agreement on an amended and restated C$250 million loan facility.

Apart from such names that had specific news attached to them, traders said not much was shaking, with many highly placed junk marketeers deserting chilly New York and other Northeastern business centers for the three-day JP Morgan high-yield bond conference in South Florida.

Overall, a sell-side source said that the market was off on Monday, but specified that names in the telecommunications sector held in reasonably well throughout the session.

On the new deal front, that was probably enough to keep anything from actually pricing, although several upcoming deals emerged from the shadows, including Yankee Candle Co.'s $525 million two-part offering, heard to be hitting the road for a marketing campaign starting Wednesday, Greif Inc.'s $300 million 10-year deal, which as also reportedly beginning a roadshow, and The Cooper Cos. Inc.'s $350 million eight-year deal. TransDigm Inc.'s $250 million add-on to its 2014 bonds was seen likely to come to market fairly soon and price talk emerged on deals for Snoqualmie Entertainment Authority and MasTec Inc.

Pilgrim deal an aftermarket turkey

Back in the secondary realm, Pilgrim's Pride Corp.'s new bonds were seen continuing to straddle the par issue price on both tranches, a trader said - its 7 5/8% senior notes due 2015 and its 8 3/8% senior subordinated notes due 2017.

"They opened pretty good," the trader said, describing initial dealings in the 100.25 area - but they had come back down to the par level later on.

A second trader was even blunter, terming the Pittsburg, Tex.-based poultry producer's issue "sort of a dud," as it settled in around 99.75 bid, 100.25 offered.

155 rise a real Hoot

Back among the more established issues, the 155 East Tropicana/Hooters 8¾% senior notes due 2012 were the day's major success story, jumping into the mid-90s on busy trading on the news that the casino company had signed a letter of intent to be acquired by an investment group led by NTH Advisory Group, LLC, a Santa Monica, Calif.-based casino and hotel development and advisory firm, for $95 million in cash and the payment of certain accrued royalties. The purchasers would also be responsible for any repurchases, and related costs, of the $130 million of outstanding 8¾% notes as a result of the proposed change of control.

The buyers have the exclusive purchase rights through March 13; the deal is expected to be completed by June 30, but under certain publicly unspecified conditions could be closed as late as April of next year.

The mid-90s context at which the bond were trading busily on Monday, mostly around 95, was actually off slightly from the levels seen very late in the day on Friday, when several large trades of those bonds took place around the 97 area just as the news of the planned deal moved across screens at mostly empty trading desks. That was up from pre-news levels around 85.

"Those levels were totally out of whack," a trader said. When trading opened Monday morning, the issue was moving around 96, and after some fluctuations eventually settled in a 94.5-95 context, below the late Friday level but still well up from where they had been before the deal was announced. The trader added that there seemed to only "a 50-50-chance that this will get done."

That assessment was shared by analyst Barbara Cappaert of KDP Investment Advisors Inc. in Montpelier, Vt., who wrote in a research note that "we are concerned about the viability of this offer." She pointed out that a change-of-control offer for the bonds would by no means be a done deal, since it remains unclear how NTH and its as-yet unidentified partner or partners would pay for a change of control.

155 East Tropicana - an offshoot of the popular Atlanta-based Hooters restaurant chain famed for its spicy chicken wings and saucy waitress uniforms - acquired the former San Remo casino in Las Vegas in 2005 in an effort to leverage its well-known brand name, but the operation has not lived up to expectations. In the first nine months of the fiscal year, the company lost $16 million. 155 sold the $130 million of bonds in 2005 to finance the transformation from San Remo to Hooters - but the push into the 90s late Friday and on Monday was the first time those notes have been back in that trading range since last summer.

Bonds of other gaming companies were mixed on Monday. While Trump Entertainment Resorts Inc.'s 8½% notes due 2015 were seen up 2 points on the session to just under par, and Station Casinos Inc.'s 6% notes due 2012 were up a more modest ½ point at 96, Harrah's Operating Co. Inc.'s 7½% notes due 2009 were down ½ point to 102.75, and Isle of Capri Casinos' 7% notes due 2014 finished at par, down ½ point.

Tembec up on financing news

Elsewhere, the news that Tembec and its bank lenders had agreed to the amended and restated working capital facility, announced late in the session, pushed the Montreal-based forest products company's bonds up a point or two across the board, traders said.

One quoted its 8 5/8% notes due 2009 as being up a point at 82 bid, 84 offered, while another saw Tembec's bonds up 2 points, with its 8½% notes due 2011 at 76 bid, 77 offered.

Tembec said that it had amended and restated the working capital loan facility with CIT Business Credit Canada Inc. The restated and amended loan facility is a three-year committed facility of C$250 million, available to both Tembec Industries Inc. and its wholly-owned subsidiary, Tembec Enterprises Inc. The amended and restated facility effectively replaces a C$150 million revolving working capital facility with CIT and a C$136 million non-revolving working capital facility with a syndicate of banks that would have matured in June 2008.

Tembec further said that the new facility will ensure that the company has sufficient revolving credit to efficiently manage its operations.

Movie Gallery climbs despite wider loss

Also in the distressed-bond sphere, Movie Gallery Inc.'s late-Friday announcement of its delayed third-quarter results - and a warning that it is in danger of defaulting on its credit facility covenants - had little impact on the Dothan, Ala.-based movie rental chain's 11% notes due 2012. If anything, the bonds rose despite the bad news, with one trader seeing them up 1½ points to 78.5 bid, 79.5 offered, while another pegged them up 2 points at 78 bid, 79 offered.

Movie Gallery posted a loss of $36.1 million ($1.13 a share), for the fiscal quarter that ended Oct. 1, compared with year-earlier red ink of $12.5 million (39 cents a share).

Much of the loss could be attributed to charges for store closings, the company's restructuring and other items.

The bigger loss, and even the warning of possible credit facility covenant defaults had been expected by the market, and thus had little impact, some observers said.

Also helping prop the bonds up in the face of the bad news was the company's statement that it would have sufficient liquidity to meet its working capital needs.

A trader said that much of the rise was due to short covering.

Hospital operator has healthy rise

And a trader pegged the 9¼% notes due 2013 of LifeCare Holdings solidly better at 76 bid, 77 offered, well up from 72 bid, 73 offered on Friday.

He attributed the gains in the Plano, Tex.-based long-term care hospital operator to potentially favorable healthcare legislation being introduced in Washington.

He saw upside also in the bonds of another Texas-based hospital concern, Tenet Healthcare Corp., whose 6½% notes due 2012 closed a point higher at 91.5 bid, 92.5 offered.

Cooper launches $350 million

Monday's primary market session, meanwhile, came and went with no issues pricing. However the forward calendar grew.

Most of the announced deals will be marketed by means of brief roadshows, and are expected to be priced before Friday's close.

The Cooper Cos. Inc. will start a roadshow on Tuesday for a $350 million offering of eight-year senior notes (Ba3/BB-).

The roadshow will conclude on Thursday with pricing expected on Friday.

Citigroup and Credit Suisse are joint bookrunners for the debt refinancing deal from Lake Forest, Calif., manufacturer and marketer of medical diagnostic products and instruments.

Greif starts $300 million

Greif, Inc., an Ohio-based industrial packaging company, began a roadshow on Monday for its $300 million offering of 10-year senior notes (confirmed Ba2/expected BB-).

Like the Cooper roadshow, the Greif marketing is set to conclude on Thursday, with the deal pricing afterwards.

Deutsche Bank Securities is the bookrunner for the debt refinancing.

TransDigm to tap 7¾% notes

Also announcing Monday was TransDigm Inc.

The subsidiary of TransDigm Group Inc., a Cleveland-based aircraft components company, plans to price a $250 million add-on to its 7¾% senior subordinated notes due July 15, 2014 (B-) on Thursday, trailing a Tuesday investor conference call.

Credit Suisse and Lehman Brothers are leading the acquisition deal.

The original $275 million issue priced at par on June 20, 2006.

Full roadshow for Yankee Candle

The Yankee Candle Co. Inc. will start a roadshow on Wednesday for its $525 million two-part offering of notes (B3/CCC+).

The South Deerfield, Mass., scented candle company is offering a $300 million tranche of eight-year senior unsecured notes and a $225 million tranche of 10-year senior subordinated notes.

Lehman Brothers and Merrill Lynch & Co. are joint bookrunners for the LBO financing.

Talking the deals

As the forward calendar fattened, two deals that have been traveling the high yield investor roadshow circuit were talked on Monday.

Snoqualmie Entertainment Authority circulated price talk on its $320 million two-part offering of senior notes (B3/B).

The tribal gaming company, which is based in western Washington state, talked a $120 million tranche of seven-year floating-rate notes at Libor plus 375-400 basis points, and its $200 million tranche of eight-year fixed-rate notes at the 9¼% area.

Bear Stearns & Co. has the books. Guggenheim Capital Markets is the co-manager.

Elsewhere MasTec, Inc. has talked its $150 million offering of 10-year senior notes (B1/B+) at a yield of 7½% to 7¾%.

The Morgan Stanley-led deal is expected to price late Tuesday or early Wednesday.

Affinion talks term loan

Finally, in a deal that one source alluded to as a probable harbinger of things to come, Affinion Group Holdings Inc. is having its $300 million five-year senior unsecured term loan run off a high yield syndicate desk.

On Monday Affinion set price talk on the syndicated loan at Libor plus 625 basis points at an issue price of 99.00.

Deutsche Bank and Bank of America are joint lead arrangers and bookrunners.

The loan will be non-callable for six months, callable at par for months seven through 18, and then callable at 102, 101, par in subsequent years, the source said.

There will be step ups in pricing by 50 basis points at 18 months and 36 months.

One sell-sider who focuses on both the high yield market and the leveraged loan market referred to the deal as a "toggle-type" of loan, similar to the spate of junk bond tranches that were priced in late 2006, the most conspicuous being tranches of the HCA, Inc. $5.70 billion three-part deal, and the Freescale Semiconductor $5.95 billion four-part transaction, which were priced in early November.

On Monday the sell-side source said that the deals are apt to be run off of high yield syndicate desks because the loans have "high yield-type structures," and are marketed via one-week roadshows, as opposed to being launched at a single bank meeting.

The source recalled that last week Italy's Prysmian Cables & Systems priced an €800 million PIK loan in euros and dollars via Goldman Sachs and Deutsche Bank.

That deal, according to the source, priced at Libor or Euribor plus 675 bps at an issue price of 99.50 on Jan. 18.

The deal sports coupon steps up of 100 basis points in 12 months, and another 100 basis points in 24 months.

There is also a covenant setting forth a 150 basis points step up if net leverage exceeds 4.5 times.

The source said that loan deals such as Affinion and Prysmian, run off high yield desks, are apt to become more commonplace.

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