Primary busy but Intelsat delays $2.55 billion deal; MCI, Nextel, Levi gain; funds see $167 million outflow

By Paul Deckelman and Paul A. Harris

New York, Dec. 9 - A busy primary market bubbled merrily along Thursday, with high-yield syndicate sources seeing new deals pricing for such issuers as Carrols Corp., Alliance Imaging Inc., Scientific Games Corp. and Community Health Systems Inc. But late in the day, word reached the market that what had been expected to be the big deal of the week - even eclipsing Wednesday's Texas Genco LLC billion-dollar-plus behemoth - will be a no-show, as Intelsat said that it would postpone its $2.55 billion multi-part bond offering until early January.

In the secondary market, "there was a lotta stuff" going on, a trader said, with no small degree of understatement. MCI Inc., whose bonds firmed smartly Wednesday after Standard & Poor's assigned them a rating, continued to rise Thursday. Fellow telecommer Nextel Communications Inc.'s bonds were up - modestly - as speculation swirled about whether the Reston, Va.-based wireless operator is in merger talks with phone giant Sprint Corp. And Levi Strauss & Co.'s bonds just keep right on climbing.

After trading had finished for the session, participants familiar with the weekly high-yield mutual fund flow numbers compiled by AMG Data Services of Arcata, Calif. said that the junk funds had suffered their third consecutive weekly outflow, as $166.8 million more left the funds than came into them in the week ended Dec. 8.

That followed outflows of $186.4 million in the week ended Dec. 1 and about $5 million in the week ended Nov. 24, for a three-week outflow total of some $358.2 million, according to a Prospect News analysis of the weekly AMG figures.

Outflows have now been seen in 24 weeks out of the 49 since the beginning of the year, and inflows in 25, although that apparent balance is deceptive; the funds show a clearly negative preponderance for the year, with a net outflow over that time of $2.881 billion, according to the Prospect News analysis of the data. There were several weeks early in the year of unusually large outflows that tipped the scales, although the trend over the past four months had been solidly positive, outside of the last three weeks, according to the analysis of the figures.

The fund flow numbers include only those funds that report on a weekly basis and they exclude distributions.

Traditionally the figures have been seen as a reliable barometer of overall junk market liquidity trends, even though the funds make up only a relatively small percentage of the money available in the greater high yield universe.

But as has been the case throughout most of the second half of 2004, however, a sell-side source insisted on Thursday afternoon that the high-yield mutual funds flows numbers cannot be depended upon to reflect the present liquidity of the high-yield asset class.

There is cash out there to be put to work, this investment banker asserted, in the face of Thursday's funds flow news.

3 deals tight to talk

Trailing Wednesday's busy $2.43 billion day in the new issue market the Thursday session unfolded at a more moderate pace, with slightly over $800 million and £500 million of bonds being sold.

Among dollar-denominated issuers on Thursday, Community Health Systems Inc. led all others, pricing an upsized $300 million of eight-year senior subordinated notes (/B/B+) at par to yield 6½%.

The Brentwood, Tenn. acute care hospital operator's debt refinancing deal, via JP Morgan, came at the tight end of the 6½% to 6¾% price talk. It was increased from $250 million.

Also coming at the tight end of talk was Scientific Games Corp.'s $200 million of eight-year senior subordinated notes (B1/B+), which priced at par to yield 6¼%, tight to the 6¼% to 6½% price talk.

JP Morgan and Bear Stearns & Co. ran the books for the debt refinancing deal from the New York City-based provider of products and services to the lottery and pari-mutuel wagering industries.

And Carrols Corp., a Syracuse, N.Y. restaurant company which is the largest franchisee of Burger King restaurants, priced its downsized $180 million issue of eight-year senior subordinated notes (B3/B-) at par to yield 9%, tight to the 9% to 9¼% price talk.

JP Morgan and Banc of America Securities ran the books for the debt refinancing and dividend funding deal.

The issue was downsized by $20 million, which was shifted to the company's credit facility.

Alliance Imaging drives by

In quick-to-market action on Thursday Alliance Imaging Inc. sold $150 million of eight-year senior subordinated notes (B3/B-) at par to yield 7¼%, right on top of the 7¼% area price talk.

Deutsche Bank Securities and Citigroup were the bookrunners for the debt refinancing deal from the Anaheim, Calif.-based diagnostic imaging systems operator.

Also pricing Thursday was Phibro Animal Health Corp. and Philipp Brothers Netherlands III BV.

The issuers united to sell a $23.39 million add-on to their 13% senior secured notes due Dec. 1, 2007 (B2/B-).

The notes priced at 104.0, resulting in an 11.12% yield to worst and an 11.36% yield to maturity.

Jefferies & Co. ran the books for the debt refinancing deal.

The Fort Lee, N.J. manufacturer/marketer of animal health products (formerly Philipp Brothers Chemicals, Inc.) originally sold $105 million which priced at par on Oct. 10, 2003, and realized a substantial interest savings with Thursday's add-on.

Waste Recycling re-jigs £500 million deal

Meanwhile on Thursday the European market produced terms on a slightly reworked £500 million of issuance from Waste Recycling Group Ltd., which had been anticipated to come in two tranches split 50-50.

Instead, WRG Finance plc (the newly formed parent of WRG Acquisitions plc) priced a downsized £200 million of 10-year senior fixed rate notes (B3/B+) at par to yield 9%, on the wide end of the 8¾%-9% price talk. The piece was cut from £250 million.

And WRG Acquisitions plc, the parent of Waste Recycling Group Ltd., sold an upsized £300 million of 10-year second-lien floating-rate notes at par to yield Libor plus 350 basis points, right on top of the Libor plus 350 basis points price talk. It was raised from £250 million.

Deutsche Bank Securities led the debt refinancing and dividend funding deal from the Doncaster, United Kingdom-based company that handles household, commercial and industrial waste.

Friday session shaped up

Details were heard Thursday on deals that are set to price during the final session of the busy Dec. 6 week.

Price talk is 8% area on Douglas Dynamics LLC/Finance Co.'s $150 million offering of seven-year non-call-four senior notes (B-), expected Friday afternoon via Credit Suisse First Boston.

Diane Keefe, portfolio manager of the Pax World High Yield Fund, told Prospect News that she would be involved in the debt refinancing and dividend payment deal from the Milwaukee-based manufacturer of snow and ice removal equipment.

"We are in this deal," Keefe disclosed.

"Leverage is 3.9-times, which is not too high. It's a recession-resistant business with stable cash flows.

"We like it because it's an essential business."

Keefe also indicated that the 8% area yield, given the present "hot market" conditions in high yield, was not all that bad.

"Name another deal like this and I would buy that too," she asserted.

Elsewhere Thursday price talk of a yield in the 9½% area emerged on HudBay Mining & Smelting, Inc.'s $200 million of seven-year non-call-four senior notes (B3/B), also expected on Friday via Credit Suisse First Boston.

Price talk is three-month Libor plus 587.5 basis points to 612.5 basis points on Aventine Renewable Energy Inc.'s $160 million of seven-year senior secured floating-rate notes (B3/CCC+), coming Friday via Morgan Stanley and JP Morgan.

CasaBlanca Resorts issued price talk Thursday on its $160 million proceeds two-part bond offering which is expected to price Friday via Jefferies & Co.

The company is in the market with $120 million of seven-year non-call-four senior secured second-lien notes (B), price talk 9% to 9¼%, and $40 million proceeds of eight-year non-call-four senior subordinated discount notes (CCC+), price talk 12¾% plus or minus 25 basis points.

Pricing is expected Friday.

Intelsat delays

Those who only one day ago had anticipated that the 2004 high-yield market would top the 2003 issuance volume may need to recharge their calculator, as Intelsat Ltd. disclosed that its $2.55 billion of junk bonds is not going to happen prior to the choruses of "Auld Lang Syne."

Intelsat Ltd. has postponed the deal until early January, according to a market source.

The source said that private equity group Zeus Holdings Ltd., formed by private equity firms Apax Partners, Permira, Apollo Management and Madison Dearborn Partners, was re-evaluating its takeover of Intelsat in light of the satellite telecommunications company's recently reported electrical difficulties with its Americas-7 satellite.

The junk bonds are being sold to back the proposed $5 billion acquisition.

In a Dec. 3 press release the company announced that it had regained control of the satellite in question.

Deutsche Bank Securities, Credit Suisse First Boston and Lehman Brothers are leading the deal.

However this year's total could still top last year. With $133.8 billion priced so far this year, the $5.5 billion still on the calendar would surpass 2003's $138.5 billion, currently the second busiest year ever.

And one for the road

With the 2004 calendar pages continuing to dwindle down one more prospective issuer announced a roadshow start during the Thursday session.

Inergy, LP plans to start a roadshow Friday for its $400 million offering of 10-year senior notes.

The Lehman Brothers and JP Morgan acquisition deal from the Kansas City, Mo.-based propane supplier, which is acquiring Star Gas Partners, is expected to wind up that roadshow on Friday, Dec. 17.

New deals mixed in trading

Aftermarket trading in the new issues was "kind of mixed," said a trader, who noted that while the new Stone Energy Corp. 6¾% notes due 2014 "started out strong," moving up to 101.25 bid, 101.5 offered, well up from their late-Wednesday issue price at par, by the end of the day, the Lafayette, La.-based independent oil and gas company's new bonds had come in substantially from that peak and finished at 100.25 bid, 100.5 offered.

Community Health Systems' 6½% notes due 2012 were seen late in the session at 100.75 bid, 101.5 offered, up from their par issue price earlier Thursday.

Also notching but a small gain were Scientific Games' new 6¼% notes due 2012, which moved up slightly to 100.25 bid, 100.625 offered from their par issue price.

However, the trader noted, Carrols Corp.'s new 9% notes due 2012 "took a big jump" upward to 103 bid, 103.5 offered, from their par issue price. And Texas Genco's new 6 5/8% notes due 2014 - which had priced at par Wednesday, traded up to 103 bid, 103.5 offered on the break and then finished Wednesday at 102.375 bid, 102.875 offered - were headed back upward Thursday, ending at 103.625 bid, 103.875 offered.

MCI up again

Among the existing issues, MCI Corp. - whose notes had appreciated handsomely on Wednesday after Standard & Poor's rated them B+, signaling a complete comeback from the depths of bankruptcy for the former WorldCom Inc. - just continued to climb on Thursday.

A market source saw the Ashburn, Va.-based long-distance giant's 5.908% notes due 2007 finish the day at 103.25 bid, up ¾ of a point, while its 6.688% notes due 2009 were a point better at 104.25 bid, and its 7.735% notes due 2014% two points better on the day at 108.25.

Nextel up on merger talk

MCI rival Sprint Corp. was the catalyst behind a rise in Nextel's bonds, as Wall Street buzzed with speculation of a possible merger between the two. Thursday's editions of The Wall Street Journal reported on the prospect of a merger, and then the newspaper reported on its web site later in the day that negotiations were underway. Both Sprint and Nextel declined comment.

Nextel, the number-5 U.S. wireless company, is the only national cellular operator that is an independent entity.

A trader saw Nextel's 5.95% notes due 2014 up half a point at 103.5 bid, 104 offered.

Another trader said that Nextel's bonds "did improve over the course of the day." He quoted the 5.95s at 104.125 bid, 104.625 offered, up from prior levels at 102.875 bid, 103.375 offered, while the company's 7 3/8% notes due 2015 were "quite a bit better," at 111 bid, 111.5 offered, up from 110.25 bid, 110.625 offered.

At another desk, a source pegged the Nextel bonds up ¾ of a point across the board, estimating the 5.9s at 103.625, the 7 3/8s at 110.75, the Nextel 6 7/8% notes due 2013 at 108.5 bid, and its 9½% notes due 2011 at 113.75. However, he saw the Nextel 13% notes due 2009 unchanged at 100.25.

Levi Strauss rises further

Outside of the telecom sphere, traders saw Levi Strauss' notes "still climbing," in the words of one, who added that "something was up" with the San Francisco-based apparel company, beyond just the news earlier in the week that it had repaid the remaining $57 million balance outstanding on its 1999 credit facility. Traders have mentioned speculation that Levi might tender for one of its bond issues, or might look to sell assets, perhaps even reviving the planned sale of its Dockers' casual clothing unit, which had seemed good to go earlier in the year but which fell through when Levi said it would prefer to hang onto the business.

The trader saw Levi's 7% notes due 2006, which had risen to around the 103 level on Wednesday, climb to 104 bid, 105 offered Thursday. Its 11 5/8% notes due 2008, which had hovered around 105.5 bid, 106.5 offered Wednesday, were about unchanged at those levels, but its 12¼% notes due 2012, after having risen nearly two points Wednesday to around 109.75, pushed up to 111.5 bid, 112.5 offered Thursday.

Bally builds on gains

Bally Total Fitness Holding Corp. "was up big" for a second consecutive session, a trader said, citing the news that Standard & Poor's had raised the Chicago-based fitness club operator's ratings to B-. S&P said the actions were based on the company having obtained a limited waiver from a majority of noteholders to avoid a possible default, and said that the outlook is now developing.

He saw Bally's 9 7/8% notes due 2007 pushing up to 84.5 bid, 85.5 offered from prior levels of 82.5 bid, 83 offered, and its 10½% notes due 2011 rising to 97.5 bid, 98.5 offered from 95.5 bid, 96.5 offered, "definitely up today."

The Bally bonds had also been up Wednesday - about two points for the 9 7/8s and perhaps half a point for the 101/2s - after Bally obtained a limited waiver relating to the two series of notes.

The company - which had failed to file with its financial statements for the quarter ended June 30 with the SEC and to deliver the financial statements to the bond trustee, potentially putting it in violation of its indenture covenants - now has until next July 31 to file updated financial statements with the SEC and to furnish them to bondholders and the bond trustee.

The trader also saw Calpine Corp. bonds as "a mover today," quoting the San Jose, Calif.-based independent power producer's 8½% notes due 2011 at 71 bid, 72 offered, up from 69 bid, 70 offered Wednesday.

"I don't know why they were up," he said, "but they certainly were."

© 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.