D.R. Horton, Radio One quickies price; Revlon rise puzzles participants

By Paul Deckelman and Paul A. Harris

New York, Feb. 4 - D.R. Horton Inc. and Radio One Inc. were heard by high-yield syndicate sources to have successfully priced opportunistic, quickly appearing note offerings Friday, taking advantage of market receptivity, particularly for companies like homebuilder Horton and broadcaster Radio One that are known quantities. But the market is proving equally receptive of such less familiar names as K&F Parent Inc., which came in with a smallish offering 10-year payment-in-kind notes.

In the secondary sphere, several traders remarked on the recent rise in Revlon Inc.'s 8 5/8% notes due 2008 - to the exclusion of pretty much all the rest of the New York -based cosmetics company's issues. They wondered what was up - and what, if anything, Revlon's chairman, New York billionaire Ronald O. Perelman, might now be up to. Elsewhere, Hollywood Entertainment Corp.'s bonds continued to rise following Thursday's news of a sweetened hostile takeover bid from larger movie-rental chain rival Blockbuster Inc.

The high-yield primary saw purposeful activity on Friday - in the wake of Thursday's $2 billion-plus session - as an additional $555 million of junk bonds priced in three tranches from three issuers during the week's final session.

The biggest of the three was Texas-based homebuilder D.R. Horton, which drove through with a Ba1/BB+ rated $300 million, just four months after its most recent visit.

Friday's tally took the primary market total to $4.75 billion in 19 tranches for the week to Feb. 4 - well below the previous week, which saw just under $7 billion.

Still a demand for junk

Bear Stearns high yield analyst Mike Taylor told Prospect News late Friday morning that although the market has rallied over the past two weeks after a lackluster start to 2005, it is way too early to conclude that high yield has found its legs and is now off to the races.

"Despite outflows from the mutual funds there is still a great deal of demand," Taylor said. "That's going to mitigate any dramatic sell-off over the next few months because there are still buyers who are looking for yield.

"And issuers are going to take advantage of that, as we saw with Intelsat on Thursday, when they completed a quickly-marketed dividend deal, having previously priced bonds within the past 10 days.

"On the other hand," continued Taylor, "we have had a couple of postponed deals - the first in several months. I'm not certain they represent a turning point for the market because there has obviously been demand for paper. But not every deal is getting priced."

D.R. Horton drives by

Friday's biggest issue came in the form of a quick-to-market transaction from homebuilder D.R. Horton, which priced $300 million of 5¼% 10-year senior notes (Ba1/BB+) at 98.782 to yield 5.409%. Wachovia Securities ran the books.

An informed source told Prospect News that no price talk had been issued on the notes, proceeds from which will be used for general corporate purposes.

The Arlington, Texas company had visited the high-yield market as recently as last October, when it priced $200 million of 4 7/8% 5.25-year senior notes (also Ba1/BB+) at 99.30 to yield 5.03%, also in a drive-by.

That time Citigroup ran the books.

Restructured Radio One comes tight to talk

Elsewhere Friday Radio One, Inc. priced a restructured $200 million issue of eight-year non-call four senior subordinated notes (B2/B-) at par to yield 6 3/8%, according to a syndicate source.

Credit Suisse First Boston ran the books for the Washington, D.C. broadcasting company's debt refinancing deal, which came at the tight end of the 6½% area price talk.

The note was restructured earlier in the Jan. 31 week from a 10-year non-call-five structure.

Finally on Friday, K&F Parent, Inc. priced a $55 million issue of 10-year senior PIK for life notes (Caa2/B-) at par to yield 11½%, right on top of price talk.

Lehman Brothers ran the books for the deal, proceeds from which will be used to redeem a portion of the New York City-based aircraft parts manufacturer's senior preferred stock.

Three small deals

One investment banker observed after Friday's close that the new issue calendar presently contains a scattering of relatively smaller deals, the biggest being Worldspan LP's $350 million. And the source added that with Friday's close the forward calendar appears to stop dead one week hence; as of late Friday no issues were scheduled to price in the Feb. 14 week.

However the week ahead does promise some activity, in addition to Worldspan.

Two roadshow starts were heard Friday. Both deals will be led by UBS Investment Bank.

Holly Energy Partners LP will start a roadshow on Monday for its $150 million offering of 10-year non-call-five senior notes (expected B3/confirmed B+), which are expected to price on Friday.

The Dallas-based provider of refined petroleum product transportation and terminal services to the petroleum industry will use the proceeds to fund an acquisition.

And CPI Holdco Inc. will start a roadshow Monday for an $80 million offering of 10-year non-call-one senior floating-rate notes (Caa1/B-).

At the issuer's discretion the notes will either be cash pay or pay in kind.

The Palo Alto, Calif.-based defense electronics firm's dividend-funding deal is expected to price during the Feb. 7 week.

Finally Innophos Investment Holdings Inc. was heard Friday to be in the market with $120 million of 10-year senior floating-rate notes (Caa2).

Bear Stearns & Co. has the books.

Pricing is expected on Monday.

The Cranbury, N.J., chemical company's deal is expected to price on Monday.

Proceeds will be used to fund a special $114 million dividend to its current shareholder, Bain Capital.

According to a ratings release from Moody's Investor Services the dividend virtually eliminates the equity contributed by Bain Capital to fund the acquisition of Innophos from Rhodia in August 2004.

Revlon 8 5/8s higher

In secondary dealings, Revlon's 8 5/8% notes were being quoted around 93 bid, 94 offered range, a gain of about three points on the session, and the issue, a trader said, had been moving up over the past several sessions, this despite a lack of fresh market-moving news about the company.

"What are you hearing on Revlon?" was the first question out of his mouth - a query echoed by other market participants who noted the sharp gain in the bonds from their recent levels in the 80s and who noted that the company's other issues didn't seem to be doing much of anything.

The stock, he said, has "been okay" of late, hanging in around a $2.40-$2.45 context, but showing no great moves to either side. "I'm trying to figure out what's going on on that."

The bonds "have definitely been feeling better," he said, speculating whether Perelman - who controls the company through his MacAndrews & Forbes Holdings Inc. investment vehicle - might have some new tricks up his sleeves.

"He definitely has long sleeves and tons of tricks up them," he said of the colorful billionaire socialite, who has had a long and, some would say, quite contentious history with his bondholders. Among those tricks are his maneuver a year ago in beginning an exchange offer for the company's REV Holdings 12% notes due Feb. 1, 2004, warning holders that Revlon did not have the cash available to pay the maturing principal amount of the bonds in order to get most of them to exchange those bonds for new 13% notes due 2007 - and then paying the relatively few remaining outstanding 12s off in cash, in full, leaving holders who had yielded in the face of the default threat grumbling.

In this case, "maybe he's buying back the subs [subordinated bonds], who knows?" the trader theorized.

The issue is not Revlon's closest maturity - that would be the 8 1/8% notes and the 9% notes due next year - nor is it by any means the most expensive piece of outstanding near-term debt interest-wise - that would be the 13% notes issued in exchange for the 12s last year. Even though the latter issue might seem to be the logical piece of debt for the company to take out - if in fact, anything is being bought back - but "that's like, crazy holding company paper - and he always forces those people to play a game of chicken when they get close to maturity," as happened with the 12s last year, "I don't know why this would be any different, who knows?"

Another trader, quoting the 8 5/8s at 93.5 bid, 94.5 offered, saw "better buyers going out the door," lifting the bonds from 90 bid, 91 on Thursday. "Most of the action was in those subs."

He added that "a lot of people are wondering" what's up with the bonds, "there's a lot of questions out there. There was no news, and the stock was relatively unchanged - but obviously, somebody knows something."

A market source at another shop meanwhile agreed that the 8 5/8s "just seemed like the only one that was moving," quoting them as having advanced to 92.5 bid from 89.5 on Thursday. By way of contrast, for instance, the 9s of '06, hanging around at par, "weren't really moving."

Hollywood Entertainment up again

Elsewhere, the Hollywood Entertainment 9 5/8% notes due 2011 - which on Thursday had risen some three points to a 111-112 context after Blockbuster, the nation's biggest video rental chain, increased its hostile bid for Hollywood - were up again on Friday, pushing up to bid levels around 112.25-112.5 from the mid-111s.

Blockbuster's improved offer for Wilsonville, Ore.-based Hollywood, the second-largest U.S. video rental company, appears - at least for now - to have trumped a smaller offer for Hollywood made by Movie Gallery Inc., the Number-Three movie rental chain.

Blockbuster improved its original bid of $11.50 per share in cash, which Hollywood had ignored, to $11.50 in cash plus $3 in Blockbuster stock per Hollywood share, or $14.50, for a total bid of $985 million. Hollywood had already agreed to Movie Gallery's offer of $13.25 per share in cash, or $900 million total. Movie Gallery, reacting to the Blockbuster move, said that it remained confident that its merger deal with Hollywood would go through, and proclaimed that its all-cash offer was more attractive to Hollywood shareholders than Blockbuster's mixed cash and stock bid, which has a smaller cash component than the Movie Gallery offer.

Both suitors have also said they would assume the $350 million of outstanding Hollywood bonds.

MCI up yet again

Elsewhere on the M&A front, MCI Inc.'s 8.735% notes due 2014 - easily the most active and volatile of the Ashburn, Va.-based long-distance telecommunications operator's three series of bonds - were seen again "trading higher," a trader said. He quoted them at 111.25 bid, 111.75 offered, up from levels around 111 at which those bonds finished Thursday after a wild roller-coaster day which saw them open around 111, fall as low as 108 on the news, then bounce back up to that 111 level on Thursday's close.

The bonds had retreated on the news that Qwest Communications International Inc. - the financially weakest of the four regional Bell operating companies (RBOCs) that provide most local telephone service in the United States - rather than one of the other, stronger, RBOCs, had made a $6.3 billion bid for MCI, which has been seen as a takeover target ever since another RBOC, SBC Communications Inc., entered into talks with MCI's larger rival, AT&T Corp., which led to a merger agreement between SBC and "Ma Bell," the former corporate parent of all of the RBOCs.

Beverly steady

But there was little movement seen in the bonds of Beverly Enterprises Inc., even after the Fort Smith, Ark.-based nursing home operator rejected an unsolicited $11.50 per share takeover bid from Formation Capital, which owns 8.1% of the company. That rejection prompted the Georgia-based investment group to name six nominees for positions on the nursing home company's board of directors, including turnaround specialists and crisis management experts, in hopes of pushing through its $1.5 billion deal. However, Beverly's 7 7/8% notes due 2014 stayed "pretty much where they were," a market source said, at 112.375.

Ahold higher

International supermarket operator Koninklijke Ahold NV said Friday that it will cancel a three-year bank credit facility it had obtained in December 2003 to shore up its finances after an accounting scandal, citing a need to cut costs, and that sent the bonds of the Dutch-based parent of U.S. food store chains Stop & Shop and Giant up about three to four points, particularly on the long end of the curve, a trader said; he saw its 2029 bonds rise to 104.5 bid, 105.5 offered.

Moody's Investors Service also approved, upgrading the company's debt ratings, including that of its senior unsecured bonds, which rose to Ba2 from Ba3 previously.

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