Dex, William Lyons, Freeport price deals; Tenet tumbles on sale plan, downgrade

By Paul Deckelman and Paul A. Harris

New York, Jan. 28 - Dex Media Inc., William Lyon Homes Inc. and Freeport McMoRan Copper & Gold Inc. brought some three-quarter of a billion dollars of new bonds to market Wednesday in opportunistically timed quickie deals, while Town Sports International Holding Inc. added to that with a scheduled calendar offering.

In the secondary arena, Tenet Healthcare Corp. bonds tumbled after the Santa Barbara, Calif.-based hospital operator announced that it would sell 27 hospitals and take a $1.4 billion asset impairment charge. The company also warned that earnings for 2004 would be no better than breakeven, prompting Standard & Poor's to downgrade Tenet's ratings.

Sources were loathe to use the term "pushback," during Wednesday's primary market session. However two sell-siders who spoke to Prospect News said that the market in general has been softer since the beginning of the week.

And they added that Wednesday was certainly no exception.

Five deals priced during the session, generating nearly $1.05 billion of proceeds for the issuers (including one offering late Tuesday on which information emerged Wednesday). However two of the deals came wide of their price talk and another came at the wide end of talk, while the remaining two priced at price talk.

One sell sider, speaking after the session's close, attributed the softness in the junk bond market, as well as the 1.33% plunge in the Dow Jones Industrial Average (which fell 141.55 points to close at 10468.37) to what is being perceived on Wall Street as a shift in the Federal Reserve's bias regarding interest rates.

On Wednesday the Federal Open Market Committee issued the following statement: "The committee perceives that the upside and downside risks to the attainment of sustainable growth for the next few quarters are roughly equal."

Both sell-side officials who spoke to Prospect News Wednesday afternoon said that the between-the-lines interpretation that made the Wall Street rounds was that rates are now likely to rise sooner than later.

"People were definitely talking about the Fed comment," said one official who works on a high yield syndicate desk.

"The thinking is that the Fed removed the language that indicated that interest rates would not go up for a long while. And with rates as low as they are it is easy to believe that they will go up."

The other sell-sider expressed much the same sentiments.

"The Fed was hedging itself," the source said. "They seemed to indicate that a move was likely to take place sooner than later."

However both of these officials added that remarks by the Federal Reserve might not have been the only force at work Wednesday in the primary market.

Two dividend deals go wide of talk

One source noted that the two deals which priced wide of their price talk, Dex Media, Inc. and Town Sports International Holdings Inc., had both earmarked at least part of their proceeds (in the case of Dex, all the proceeds) to make dividend payments to stock holders.

Dex Media, the Englewood, Colo.-based parent of both the Dex Media East and the Dex Media West phone directories companies, priced a $361 million add-on to its senior discount notes due Nov. 15, 2013 (Caa2/B) at 69.384 to yield 8¼%, wide of the 7¾%-8% price talk. JP Morgan ran the books.

Proceeds will be used to fund a dividend to sponsors Welsh, Carson, Anderson & Stowe and The Carlyle Group.

Town Sports sold $213 million of 10-year senior discount notes (Caa2/CCC+) at 58.595 to yield 11%, wide of the 10 3/8%-10 5/8% price talk. The bookrunner was Deutsche Bank Securities.

Of the proceeds, $70 million was earmarked to pay a special dividend to shareholders.

"Issuers have been pushing hard over the past few weeks and investors may be starting to feel as though things might be getting too tight," one of the sell-side sources commented.

"You are seeing a lot of triple-C stuff in the market right now, mostly because people are issuing at the holding company-level and are issuing discount notes and so forth.

"And," the official added, "we've seen five dividend deals since the beginning of the year, which is quite a few."

However the other sell-sider was a little more blunt with regard to dividend-payment transactions.

"These deals (Dex and Town Sports) are triple-C, long-dated, dividend payment, bull market deals and you may be seeing some resistance starting to materialize," said the official.

"I don't think that those deals are a reflection on the market as a whole," added the source. "Look at Freeport McMoRan. It breezed through."

Freeport, William Lyon, Haights Cross within talk

The source was referring to a $350 million issue of 10-year senior notes (B2/B-) from New Orleans-based miner Freeport McMoRan Copper & Gold Inc. The bonds priced at par to yield 6 7/8%, in the middle of the 6¾%-7% price talk, with JP Morgan running the books.

Also pricing Wednesday was a drive-by from William Lyon Homes, which sold $150 million of 10-year senior notes (B3/B-) at par to yield 7½%.

UBS Investment Bank ran the books for the deal from the Newport Beach, Calif. homebuilder, which came at the wide end of the 7¼%-7½% price talk.

Finally, Haights Cross Communications, Inc. sold $135 million of senior discount notes due Aug. 15, 2011 (Caa2/CCC+) at 54.558 Tuesday night to yield 12½%, via Bear Stearns & Co.

The acquisition-financing deal came spot on the 12½% area price talk.

Talk heard on three deals

Meanwhile the price talk is 7 3/8%-7 5/8% on Carmike Cinemas, Inc.'s $150 million of 10-year senior subordinated notes (Caa1), expected to price on Thursday via Goldman Sachs & Co.

Price talk of 9% area was heard Wednesday on Thermadyne Holdings Corp.'s planned $165 million of 10-year senior subordinated notes (Caa1/B-), expected to price on Thursday via Credit Suisse First Boston.

And price talk of 9%-9¼% emerged on Petro Stopping Centers LP's $215 million of eight-year senior secured notes (B3), expected to price on Friday, via Banc of America Securities.

Unibanco ups 18-month deal to $100 million

In emerging markets corporates action Wednesday, Sao Paulo, Brazil-based Unibanco priced $100 million of 3% bonds due Aug. 10, 2005 (Ba2/BB+) at 99.927. The deal was increased from $75 million.

The deal, led by Dresdner Kleinwort Wasserstein and Unibanco Securities, came in the middle of the 2 7/8%-3 1/8% price talk.

Lyons steady, Freeport up

When the new William Lyons 7½% senior notes due 2014 were freed for secondary dealings, they were initially quoted at 100.25 bid, 100.75 offered, although by the end of the session, they were sandwiched around their par issue price at 99.75 bid, 100.25 offered.

The new Freeport McMoRan 6 7/8% notes due 2014 were being quoted at 100.5 bid, 101 offered, up from their par issue price.

A trader said that the new Dex Media zero-coupon/9% senior discount notes due 2013 "were pretty much a disaster from the start," with price talk on the issue having moved up from the 7¾%-8% area, first to 8¼%, "and then they ended up pricing at 69.384, which is 8.35%. The bonds didn't go anywhere. There were sellers on the break of decent size." He quoted the bonds closing at 68.5 bid, 69.5 offered.

As for Dex's outstanding bonds, and those of its Dex Media East and Dex Media West subsidiaries, "the rest of the [Dex] issues were down, several points on the day."

He acknowledged that "they seemed to be better offered - there were a couple of guys trying to buy stuff kind of late in the afternoon - but generally most of the Dex bonds went out softer."

However a second trader was quoting the new issue as having firmed from its issue price, to 69.75 bid, 70.25 offered.

And at another desk, the existing Dex paper - which had all backed up on Tuesday when news of the impending new offer began percolating around the market - was quoted higher, with parent Dex Media Inc.'s 8% notes due 2013 seen up half a point, at 105.5 bid; Dex Media East's 9 7/8% notes due 2009 were half a point better at 114; and Dex Media West's 8½% notes due 2010 were likewise half a point better at 111.

Tenet is day's disaster

Apart from new-deal related activity, Tenet Healthcare was clearly the name du jour as well as the disaster of the day. Its bonds - which had eased about a point or two on Tuesday in response to a Wall Street Journal article predicting that it was preparing to sell as many as 30 of its nearly 100 hospitals, and quoting an analyst as saying that this was a sign that the company's efforts to stabilize itself are far from over - fell an average of another four to five points across the board when the company confirmed the earlier reports that it would divest itself of more than a quarter of its hospitals, accounting for some 20% of its annual revenues, including 19 in its core market area of California.

Tenet's bank debt seemed little affected by news of the massive divestiture - and the company's other bearish guidance and the S&P downgrade to B+ from BB- . The paper was quoted at 93 bid, 96 offered by one trader, while a second trader placed the paper closer to 94.5 bid, 95.5 offered levels.

"It's probably unchanged for the most part," the second trader added.

Tenet's bonds were quite another story, with a trader exclaiming that "they were all over the place" on the news.

He saw Tenet's 6 7/8% bonds due 2031 five points lower at 84 bid, 86 offered; its 7 3/8% notes due 2013 were 6½ points down at 95.5 bid, 97 offered; its 6½% notes due 2012 and 6 3/8% notes due 2011 were each five points lower, at 91.5 bid, 93 offered and 92 bid, 93.5 offered, respectively; its 5% notes due 2007 dropped 4½ points to 92 bid, 94 offered; and its 5 3/8% notes due 2006 had the smallest loss, off nearly three points to 66.25 bid, 97.5 offered.

Tenet, another trader said, "was clearly the big news of the day."

He said that the S&P downgrade "was expected."

"Wait and See"

"It's kind of a wait-and-see situation," he continued. "If you buy into the management [version of the company's prospects] and you buy into the 'they'll be smaller and better able to manage the facilities' kind of thing, it's probably a decent story. But it's probably two or three years from now that it pays off - and you've got the '06 maturity coming up, of course."

The trader opined that "it remains to be seen what's going to happen. There are a lot of questions about Tenet right now. They're going to be divesting themselves of 27 of their no-margin or low-margin hospitals, including 19 in California, which kind of calls into question management and their ability to run any of their hospitals profitably.

"A lot of people looked at this and saw it clearly as an attempt by Tenet to say 'look, we're in significant financial difficulty and if we're not able to divest ourselves of this property - it's going to be an issue.'"

That having been said, however, he said that the bonds actually ended up a little better than the levels seen immediately after the S&P downgrade.

"My sense is there's a buyer out there - but how long it lasts, I don't know."

He said that some high-grade accounts that have dabbled in Tenet as a yield play would be likely to stick with it, "as long as you don't get the 'going concern' notice, what do you really care? You have a two, three, five, seven, 10 year horizon and you don't really care" about whatever short-term difficulties the company may face, so long as things get better in the long run.

"Most insurance companies are not likely to sell. Now, high yield mutual funds - that's a different story. Guys who've recently bought into this in the high 90s, or above par, have got to be kicking themselves."

Collins & Aikman drops

Elsewhere, Collins & Aikman Products Co. bonds fell as much as four points early in the session on the news that the Troy, Mich.-based automotive components maker is launching syndication of a $100 million credit facility - on top of its existing debt - to enhance its financial flexibility.

However, by the end of the session, the bonds had firmed a bit off their lows and were seen down about two points on the day, its 10 ¾% senior notes due 2011 at 99.75 bid, 100.75 offered and its 11½% senior subordinated notes due 2006 at 96.75 bid, 97.75 offered.

Owens Illinois Inc. bonds retreated, after the Toledo, Ohio-based packaging maker posted a fourth-quarter loss of $1.071 billion ($7.33 per share), versus a year-earlier profit of $50.3 million (30 cents per share). Owens-Illinois cited higher natural gas prices and interest expenses, and pricing pressures on its plastics business.

Its 8.10% notes due 2007 were quoted down four points at 103.

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