iStar sells drive-by offering; calendar keeps growing; aaiPharma in partial rebound

By Paul Deckelman and Paul A. Harris

New York, March 2 - iStar Financial Inc. was heard by high yield syndicate sources to have brought a quickly shopped offering of new 10-year senior notes to market on Tuesday. Apart from that pricing, the market was getting ready for Wednesday's expected pricing of a deal from Airgas Partners LP. Omega Healthcare Investors Inc. and Interactive Health were heard getting ready to hit the road to market their respective deals, while price talk emerged on True Temper Sports Inc's and Herbalife's upcoming offerings.

In the secondary market, things were described as fairly quiet, although aaiPharma Inc.'s bonds, which had slid badly on Monday after the company announced "sales abnormalities" in key product lines, were heard to have recovered at least some of their losses.

One deal, iStar's four-B drive-by, priced during Tuesday's session in the new issue market, while the pipeline continued to build and issues on the calendar for the deal-crammed March 1 week continued to take shape.

One buy-side source told Prospect News on Tuesday that the build-up continues to be driven by market technicals. The investment banks, knowing that investors continue to crave new issues, are continuing to unveil hot market deals.

Low-rated deals

"For about a month, now, the deals have seemed to skew heavily toward triple-C, and at best single-B," the buy-sider said. "Deal quality hasn't been very exciting, and the market is getting pretty tired of it.

"Everybody in high yield knows that when you go through phases like this, with the worst companies coming to market because market conditions can support it, those are the ones that are likely to lead the default rate higher in two years.

"Still, you're squeezed by the technicals.

"The parade of names that I saw for this week tended to be in that ballpark, again."

More than 14% of the dollar amount of deals brought to market in February was rated Caa1 or Caa2 by Moody's Investors Service, according to Prospect News data. And an additional 33% was rated B3. Just 17.5% of issuance was rated Ba1, Ba2 or Ba3.

The way of Calpine

The source pointed to Calpine Generating Co., LLC's recently postponed $2.3 billion bond and bank financing that was pulled in late February and suggested that it is conceivable, given the current circumstances in the high-yield new issue market, that other companies could walk away empty handed.

"Although Calpine wasn't a watershed event because it has its own unique wrinkles, I think there are plenty of deals that can and eventually will get pulled," said the investor.

"That will be a good sign that the high-yield market is starting to come to its senses, a little bit."

Another encore for iStar

One company that is obviously finding high-yield market conditions to its liking is New York City-based real state finance company iStar Financial Inc.

iStar Financial, Inc. priced a quick-to-market $250 million issue of 5.7% 10-year senior notes (Ba1/BB+) at 99.656 to yield 5.746%.

The spread was 170 basis points, which brought the Lehman Brothers-led deal in right on top of the 170 basis points area basis points price talk.

In January iStar priced a massively upsized quick-to-market issue of $350 million of 4 7/8% senior notes due Jan. 15, 2009 (Ba1/BB+) at 99.892, to yield 4.9%, with Deutsche Bank Securities and Banc of America Securities running the books. The deal was increased from $200 million.

More recently, on Feb. 25 the company priced an upsized offering of $125 million of series I perpetual preferred shares at par, with a yield of 7½%.

Bear Stearns & Co. was the bookrunner for the preferred.

More offerings crowd onto calendar

Details were heard Tuesday on three high yield offerings.

Omega Healthcare Investors, Inc. will kick off a seven-day roadshow on Monday for $200 million of 10-year senior notes via Deutsche Bank Securities and UBS Investment Bank.

The Timonium, Md.-based real estate investment trust, which invests in the long-term care industry, will use the proceeds to refinance debt.

The session also got wind of a new deal from Radnor, Pa.-based medical and specialty gas company Airgas, Inc. The company pulled up to the pump with an offering of $150 million of 10-year senior subordinated notes with warrants (Ba2/B+), which it expects to price on Wednesday via Banc of America Securities and Goldman Sachs & Co.

And a roadshow is expected to get underway during the week of March 8 for Interactive Health Corp.'s $80 million of seven-year senior notes (B-).

Jefferies & Co. will run the books on the quick-to-market offering from the Long Beach, Calif.-based company robotic chair maker.

Talk heard on a fistful of deals

The market heard price talk Tuesday on five deals expected to price before Thursday's close.

Talk of 8 7/8%-9 1/8% was heard on Global Cash Access, LLC's $235 million of eight-year senior subordinated notes (Caa1/B-), expected to price late Wednesday or early Thursday, via Banc of America Securities.

Price talk of 8¼%-8½% emerged Tuesday on Friendly Ice Cream Corp.'s $175 million of eight-year senior unsecured notes (B2/B-), expected to price Wednesday afternoon, with Goldman Sachs & Co. running the books.

The talk is 8½%-8¾% on True Temper Sports Inc.'s upcoming $125 million of seven-year senior subordinated notes (B3/B-), also expected to price on Wednesday afternoon. Credit Suisse First Boston is the bookrunner.

Price talk of 9½%-9¾% emerged Tuesday on WH Holdings/WH Capital Corp. (Herbalife)'s $275 million of seven-year senior notes (B3/B), expected to price on Wednesday via UBS Investment Bank.

And talk is 9¼%-9½% on Softbank Corp.'s €350 million or more of senior notes due March 15, 2011 (B1/BB-), expected to price on Wednesday via Deutsche Bank AG London.

aaiPharma recoups some losses

In the secondary market, aaiPharma's 11% notes due 2010 - which had slid as much as eight points on Monday after the Wilmington, N.C. based specialty pharmaceuticals manufacturer announced "sales abnormalities" in two of its products and began an investigation - were seen having recovered some of their lost ground.

A market source saw them having advanced to 101.25 bid from Monday's close at par bid. The bonds had slid to par Monday from quoted levels as high as 108 bid (although another desk had them declining to 99 bid from around 105), after the company said that it had found the "abnormalities" in its Brethine and Darvocet product lines during the second half of 2003. It did not specify what kind of "abnormalities" it had uncovered, but said that it has appointed an independent committee of directors to conduct an inquiry into these matters.

Pending resolution of the investigation, aaiPharma said it was withdrawing its guidance for the first quarter and full year of 2004, believing that these matters would materially affect its previously announced projections. Both Standard & Poor's and Moody's Investors Service were eying the company's ratings for possible downgrades.

Cablevision steady despite loss

Elsewhere, Cablevision Systems Corp. posted a much-larger-than expected fourth-quarter net loss, hurt by costs to launch its satellite television service. Even though revenue grew by 12%, the Bethpage, N.Y.- based cable-TV operator reported a quarterly net loss of $197.4 million (69 cents a share), versus a year-ago net profit of $529.7 million ($1.66 a share), although it should be noted that the year-ago period included a $663.4 million gain from the sale of the company's Bravo channel to NBC. Analysts had only been looking for a loss of around 43 cents a share.

Due to the higher costs associated with the launch of its VOOM service, as well as lower margins at its Rainbow Media and Madison Square Garden units, EBITDA was off 19% to $250 million, below analysts' expectations.

Even so, market participants said, Cablevision's bonds were steady. A trader quoted its 7 5/8% notes due 2011 at 108.5 bid, 109.5 offered, while its 7¼% notes due 2008 were at 107.5 bid, 108 offered. Its 7 7/8% notes due 2007 were at 108.25 bid, 109.25 offered.

"I don't think there was much difference" between those levels and its day-earlier performance, he said.

A market source saw Cablevision's 8 1/8% notes due 2009 at 109.25 bid, up a quarter, but opined that the rest of its issues were essentially unchanged.

And there was little activity in the bonds of EchoStar DBS, despite the announcement that the Littleton, Colo.-based cable-TV operator had ended its four-year long patent dispute with Gemstar-TV Guide. Under terms of the settlement, Gemstar will license its interactive program guide technology to EchoStar, for a one-time payment of $190 million.

EchoStar's 10 3/8% notes due 2007 were unchanged, at 109.5 bid, and its 9 1/8% notes due 2009 remained at 113.

Also in the television world, Paxson Communications Corp.'s 10¾% notes due 2008 were seen up a point at 106 bid, although at another desk, the notes were quoted up some two points to get to that level, although there was no fresh news seen out on the West Palm Beach, Fla.-based television broadcaster.

Continental slips

Continental Airlines Inc.'s 8% notes due 2005 were quoted half a point lower at 97.5 bid, while the Houston-based air carrier's shares lost $1.12 (7.24%) to close at $14.35, on New York Stock Exchange volume of 3.7 million, slightly more than double the norm.

Continental reported its February operations results Tuesday, and airline industry-watchers noted that while its load factor (i.e. the percentage of seats on all of its flights filled with paying passengers) rose to 70.2% from 68.9% a year ago, revenue per average seat mile (RASM), a key airline industry financial performance gauge, fell between 2.5% and 3.5% during February, largely due to extensive fare discounting which the airlines traditional indulge in to boost traffic in the usually weak post-holiday period. Continental also noted that year-ago figures against which the latest month's statistics were compared had been notably strong.

The February decline snapped a nine-month streak of RASM growth for Continental, and its magnitude surprised some analysts who were expecting the figure to be flat or down only marginally. The decline was especially pronounced - 25% to 30% - in the very competitive transcontinental markets, Continental's statement said. Due to changes in the airline's schedule over the past year, those particular markets are now more important to Continental, accounting for 12.3% of domestic capacity, versus 9.8% in February 2003.

Uruguay bringing add-on

Meanwhile in emerging markets, Prospect News learned that Uruguay is looking to price a three-year Uruguayan peso-denominated, U.S. dollar-settled $100 million equivalent deal (B3/B-/B-).

With Citigroup leading, the South American republic will either bring an add-on to its 10.5% inflation-linked bonds due October 2006, or will seek to issue new bonds that are anticipated to come due in June 2007.

Pricing is expected on Wednesday or Thursday.

(Reshmi Basu contributed to this report)

© 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.