Citizens Communications prices two-part quickie; Stratos jumps on acquisition news

By Paul Deckelman and Paul A. Harris

New York, March 19 - Citizens Communications Corp. priced a quickly offered $750 million two-part deal Monday, junk bond primary market sources said. When the new drive-by deal was freed for secondary trading, it was seen having firmed modestly.

Elsewhere in the primary, Sterling Chemicals was heard in the market with a $125 million secured notes deal while Pharmaceutical Technologies and Services was getting ready to hit the road at mid-week with a $865 million equivalent bond financing.

In the secondary, besides the aftermarket activity in the new Citizens Communications bonds, traders saw a jump in Stratos Global Corp.'s bonds on the announcement that the telecommunications company is to be acquired.

News that Triad Hospitals Corp. had accepted a higher acquisition offer didn't have too much impact on its bonds, traders said, since it is already expected that the debt will be assumed and ultimately probably taken out by whoever ends up buying the hospital operator, and that has already been priced in.

Bally Total Fitness Holding Corp.'s bonds were seen having firmed, once the dust from last week's wild gyrations had settled. However, the bonds remain well below where they had been before the company unleashed its negative news on the market last week.

One senior high yield syndicate official said that the market seemed firm on Monday, but commented that there did not seem to be much conviction on the part of investors.

Another sell-side source said that in contrast to a week or more of seeing junk gyrate by a point or more, both up and down, the Monday session ended with junk just a touch better.

Two bullets from Citizens

The primary market, meanwhile, saw terms materialize on a single - though sizable - junk deal as Citizens Communications sold $750 million of notes in an a.m.-to-p.m. drive-by.

The Stamford, Conn.-based company sold $750 million of senior bullet notes (Ba2/BB+/BB) in a quick-to-market transaction on Monday.

The full-service communications provider priced a $300 million tranche of eight-year notes at par to yield 6 5/8%, on the wide end of the 6½% area price talk.

In addition the company priced a $450 million tranche of 12-year notes at par to yield 7 1/8%, also on the wide end of the 7% area price talk.

Citigroup, Credit Suisse and JP Morgan were joint bookrunners.

Proceeds will be used to refinance the $200 million bridge loan incurred in connection with the company's acquisition of Commonwealth Telephone Enterprises, Inc. and to redeem $495.2 million of Citizens' 7 5/8% senior notes due 2008, with any remaining proceeds to pay integration costs and settle liabilities associated with the acquisition.

Pharmaceutical Technologies plans $865 million

As expected, Pharmaceutical Technologies & Services, which The Blackstone Group is acquiring from Cardinal Health, unveiled its sizable bond financing on Monday.

The Somerset, N.J.-based company will begin a roadshow in Europe on Wednesday for its $865 million equivalent two-part offering of high yield notes (B-).

A U.S. roadshow begins on March 26. Pricing is expected to take place during the week of April 2.

The contract manufacturing and service provider for the pharmaceutical industry is offering dollar-denominated eight-year senior PIK toggle notes and a euro-denominated tranche of 10-year senior subordinated notes.

Morgan Stanley, Goldman Sachs & Co., Banc of America Securities and Deutsche Bank Securities are joint bookrunners.

Advance Medical unveils deal

Also announcing a deal on Monday was Santa Ana, Calif.-based ophthalmic medical devices company, Advanced Medical Optics, Inc.

The looks to start a roadshow on Wednesday for its $200 million offering of 10-year senior subordinated notes (B3/B).

UBS Investment Bank is the left bookrunner for the acquisition financing.

Sterling Chemical starts $125 million

Also entering into Monday's mix of deals that will be marketed via investor roadshows was Houston-based petrochemical manufacturer, Sterling Chemicals, Inc.

The company started a roadshow for its $125 million offering of eight-year senior secured notes (B2).

Jefferies & Co. is the sole bookrunner for the debt refinancing and general corporate purposes transaction.

Citizens firms in secondary

When the new Citizens Communications bonds were freed for secondary dealings, market participants said that the issues moved up, with the company's 6 5/8% notes due 2015 at 100.5 bid, 100.75 offered, a trader said, while its 7 1/8% notes due 2019 advanced to 100.75 bid, 101.75 offered, both up from their par issue price earlier in the session.

Another trader meantime saw TRW Automotive Inc.'s new 7% notes due 2014 and 7¼% notes due 2017 both trading around in a 98.25 bid, 98.625 offered context. Both notes had priced at a discount to par on Wednesday, and have been languishing around 98 and change since then.

Stratos goes stratospheric

Back among the established issues, a trader saw Stratos Global's 9 7/8% notes due 2007 - normally not seen much in the market - as "the big gainer," pegging the bonds at 108 bid, 109 offered, well up from Friday's levels around 102 bid, 103 offered.

Those bonds jumped after the Bethesda, Md.-based provider of advanced mobile and fixed-site remote communications solutions for users operating beyond the reach of traditional networks announced that it has agreed to be acquired by CIP Canada Investment Inc., a wholly owned subsidiary of Communications Investment Partners Ltd., which invests in companies providing satellite services.

Total cost of the deal, including debt assumption, is $576 million.

Triad improves - a little

Also on the merger and acquisition front, Triad Hospital's were seen "probably a quarter-point or a half-point better," a trader said, helped by the news that the company is to be acquired by sector peer Community Health Systems Inc. for $5.1 billion - a higher bid than the $4.7 billion offer it had previously agreed to from a group of private-equity firms. Debt assumption of some $1.7 billion will bring the total price tag to $6.8 billion.

Triad's 7% notes due 2012 and its 7% notes due 2013 were already trading north of the 104 level, and the latest news was only a mild influence.

"This was already a takeout story - it's just that they now got a better bid," the trader said.

He said that combining Triad with Community Health Systems - which by some estimates will produce the biggest operator in the industry, displacing current kingpin HCA Corp. - "works out better for everyone," the trader said, noting that Community is actually in the healthcare business, which makes them "a better fit than some [financially-oriented] strategic partners."

A market source at another desk actually quoted Triad a little lower, its 2013 7s at 104.75.

Late in the day, another source saw the bonds actually lower still, as low as 102.5, down nearly 2 points.

At another desk, Community Health's 6½% notes due 2012 were seen up as much as 3 points to the 102.5 area, after having earlier gyrated as lower as 95, investors apparently deciding later in the day that the deal makes sense after all.

HCA's 7.19% notes due 2016 were meanwhile up a point at 88.5

Visteon powers upward - for a while

A trader saw Visteon Corp.'s bonds "run up" in the early going on the news that the Van Buren Township, Mich.-based automotive parts manufacturer would amend its $1 billion term loan to add a new tranche of up to $500 million.

He said the 8¼% notes due 2010 had been "subject to speculation that maybe they were going to take those bonds out via a tender," and on this news, they traded up to 104, up 1½ in the early going.

"But as the day waned, they gave most of it back," he said, and the bonds ended at 102.25 bid, 102.75 offered, up perhaps ½ point. "It was up big this morning."

Bally firms after wild last week

Bally's Total Fitness firmed up and quieted down after Thursday and Friday's wild gyrations. A trader saw its 10½% notes due 2011 up 2½ points at 93.5 bid, 94.5 offered, while the Chicago-based fitness club operator's 9 7/8% bonds slated to come due Oct. 15 were at 73 bid, 74 offered, up two to three points from Friday's finish.

Both issues, however, remain well below where they had been before Bally's announced last Thursday, among other news, that it would have to restructure its debt to stay solvent and that absent such a restructuring, could be forced into bankruptcy.

The senior bonds had fallen from par all the way down into the mid-80s Thursday, before closing that day at 89-90 and then pushing up to around 91 on Friday.

The 9 7/8s initially ignored the news, investors perhaps still believing that the bonds would be money-good on their maturity this fall. However, on Friday, the bottom dropped out and those bonds fell about 25 points, from the mid-90s, to around the 70 level.

Technical Olympic mixed on numbers

Technical Olympic USA Inc. released its fourth quarter and annual results, prompting mixed results in its bonds.

A trader surmised that the homebuilder could have to take on extra borrowings as it continues talks with the mezzanine lenders of its Transeastern JV. One settlement possibility mentioned was the issuance of new debt or equity.

Technical Olympic's subordinated notes fell off about 2½ points, according to one trader familiar with the name, as the Hollywood, Fla.-based company released its quarterly results.

The trader placed the 10 3/8% subordinated notes due 2012 at 82 bid, 82.5 offered. He said the 9% senior notes due 2010, however, were unchanged at 94 bid, 94.5 offered.

"It looks like they have more debt ahead of them," he said of the earnings report. "But it was coming."

Another trader estimated the 10 3/8s to be down 2½ points around the 81 bid, 83 offered level.

Yet another saw its 9% notes at 93 bid, 94.5 offered, its 7½% notes due 2015 at 74 bid, 75.5 offered and its 8½% notes at 90 bid, 92 offered, all a little easier on the day following the results.

For the fourth quarter of 2006, the homebuilder posted a net loss of $243.8 million, including $97.9 million of non-cash, pre-tax, impairment related charges and a $275 million pre-tax loss contingency relating to the proposed settlement for the potential restructuring of its Transeastern joint venture.

Technical Olympic also posted a 6% increase in homebuilding revenue at $688.4 million, despite a 34% decrease in consolidated net sales orders, at 1,110.

For the fiscal 2006 year, the company reported a net loss of $201.2 million, compared to net income of $218.3 million for the previous year.

"Despite our fourth quarter revenue growth over the record levels of 2005, the effects of the rapidly deteriorating housing market negatively impacted our net income," said Antonio B. Mon, president and chief executive officer, in the company's earnings announcement.

"Our margins declined due to our reducing prices and increasing incentives in order to maintain sales velocity in light of the larger issues of adverse market conditions, which include increased cancellations, decreased demand, too much supply, and low affordability."

The company also said it continues to discuss settlement options with lenders of its money-burning Transeastern joint venture. The release stated that a settlement could results in the issuance of new equity or debt by Technical Olympic or its subsidiaries. The company is also looking to terminate the joint venture's rights under option contracts and any other obligations.

However, it warned in its statement, "There is no assurance that TOUSA will be able to reach satisfactory settlements in these negotiations. Any settlements are likely to involve the company having to incur more indebtedness which could, among other things, increase its debt servicing obligations and reduce its ability to incur indebtedness in the future."

For the fiscal year ending November 30, 2006, Transeastern - a Florida home-building joint venture that Technical Olympic entered into in the summer of 2005, just as the local housing market there was peaking - reported a net loss of $468.0 million. A significant portion of the loss can be attributed to $279.8 million in inventory impairments and write-off of land deposits and abandonment costs.

Technical Olympic's bonds and shares have been under pressure from investors since the company disclosed the precarious state of Transeastern's finances in a big closed-door meeting with its own lenders.

Stephanie N. Rotondo contributed to this report.

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