DynCorp sells tap of 2013 bonds; Spectrum falls as lenders nix pet unit sale; gaming stabilizes

By Paul Deckelman and Paul A. Harris

New York, July 14 - DynCorp International LLC successfully priced a $125 million add-on Monday to its existing issue of 9½% senior subordinated notes due 2013.

High yield syndicate sources also heard that the upcoming Ticketmaster offering of eight-year notes had been downsized, with part of that borrowing to now be done through a term loan.

In the secondary market Spectrum Brands Inc.'s bonds were seen lower after its senior lenders decided that the Atlanta-based consumer products company was barking up the wrong tree by trying to sell its pet products division and refused to give their consent, causing the deal to be scrubbed.

Another deal which could end up being scrubbed is Republic Services Inc.'s effort to acquire Allied Waste Industries Inc., with the two companies' larger rival, Waste Management Inc., suddenly stepping forward with an offer to acquire Republic. But there was not much activity seen in Allied Waste's bonds on the news.

And a deal which never even got off the ground proved to be a non-event for Service Corp. International's bonds, as the Houston-based deathcare giant revealed in a regulatory filing that it had made an acquisition offer to competitor Stewart Enterprises Inc., but the latter had flatly refused the overture. Service Corp.'s bonds were seen lower, though in light dealings, and Stewarts were seen not at all.

Outside of the M&A arena, bonds of gaming companies like Station Casinos Inc., MGM Mirage and Trump Entertainment Resorts Inc., which were getting crushed as last week ended, started the session on a firmer note, along with the high yield market generally, in line with an early stock market upturn. But as that early stock surge stalled - the equity indexes all eventually ended lower - that early upturn pretty much faded, although there were a couple of exceptions.

Well after the close a source from a high-yield syndicate desk said that the market felt heavy on Monday.

DynCorp does $125 million add-on

One issue priced during the Monday session. And as has been true of more than 40% of 2008's primary market business, it came quick-to-market.

DynCorp International LLC and DIV Capital Corp. priced a $125 million add-on to their 9½% senior subordinated notes due Feb. 15, 2013 (B2/B) at 99.001 to yield 9.772%.

There was no official price talk for the drive-by add-on, according to an informed source, who added that the deal went very well.

Wachovia Securities and Goldman Sachs were joint bookrunners for the debt refinancing.

In addition to tapping the 9½% notes due 2013, DynCorp downsized its term loan to $185 million from $200 million, and downsized its revolver to $200 million from $250 million. An accordion feature will accommodate up to an additional $150 million commitment to either the term loan or the revolver.

New issues holding in

A banker who tracks both the high-yield and leveraged loan markets was not surprised to hear that the DynCorp tap went well.

"The secondary market in junk and leveraged loans is trading poorly," the source said. "But a lot of the new 2008 deals have gone well in the primary market."

The source said that both the Fox Acquisition Sub LLC 13 3/8% eight-year senior notes (Caa1/CCC+) and the Libor plus 425 bps term loan B, which priced last week, continue to trade well.

Also, the banker said, much of the energy-related issuance seen during May and June, while off a little, has generally held in well.

This source attributes much of the secondary market's recent miserable performance to a pair of sectors, automotive related and gaming.

The banker also said that any deal structured according to the metrics which prevailed during the first half of 2007, in both the bond and bank loan markets, tends to be trading poorly, while those structured this year tend to be doing well.

Ticketmaster downsizes bonds

Ticketmaster, which is being spun off from IAC/InterActiveCorp, downsized to $300 million from $400 its offering of eight-year senior notes (Ba3).

The deal, via JP Morgan, Merrill Lynch and Banc of America Securities, is expected to price mid-week.

The company shifted $100 million of proceeds to its term loan B from the bond offering, and increased the pricing on the term loan to Libor plus 325 basis points from Libor plus 275 basis points. The term loan is being offered at an original issue discount of 98.50.

Ticketmaster is one of three are related to the spin offs of entities from Barry Diller's IAC/InterActiveCorp.

Interval Acquisition Corp. is shopping a $300 million offering of eight-year senior notes (B1/BB), via left bookrunner Morgan Stanley and joint bookrunners Barclays Capital and Wachovia Securities.

And HSN, Inc., formerly the Home Shopping Network, is in the market with a $250 million offering of eight-year senior notes via Banc of America Securities, JP Morgan and Morgan Stanley.

An informed source said that no changes to the latter two occurred on Monday.

The source also said that no price talk has surfaced on any of the three IAC spin-off deals.

All are expected to price mid-week.

Market indicators a bit lower

Back among the established issues, a trader said that the widely followed CDX junk bond performance index was essentially unchanged on Monday, still quoting it at around 92½ bid, 92¾ offered. The KDP High Yield Daily Index eased by 2 bps to end at 71.06, while its yield was steady at 10.52%.

In the broader market, advancing issues lagged behind decliners by a not quite five-to-four margin. Activity, represented by dollar volume, rose by 14% from the anemic levels seen in Friday's session.

A trader said that Monday's market was "very name-specific," but he said things generally were "pretty much unchanged. Equities opened higher, and everyone jacked their offerings [up] and the bids did not follow. Then equities moved lower, and everyone dropped their bids - and the offers did not follow."

He said that while sectors like retailing and gaming remained under pressure, they were "definitely better offered." All eyes, he said "were kind of on the tape and were watching equities - Lehman and National City and all the other names that were dancing around in high grade land. But we didn't see a whole lot of activity in high yield land."

A second trader said that market volume "was definitely light," and activity "quiet," with "a lot of the accounts on the sidelines debating when to jump in - it seems like there were a few other opportunities that looked like we hit the bottom, but then we went lower.

"With the slew of economic releases over the next few days, I think accounts are waiting to see how it all pans out." Tuesday morning will bring June producer prices and retail sales as well as May business inventories; on Wednesday, Washington reports June consumer prices, earnings and industrial production, while June housing starts and the weekly initial jobless claims numbers are on tap for Thursday.

He added that "the little bit of trading that actually went on today was more of the dealer and hedge fund community."

Another trader said that with "blood all over" and many junk denizens again mostly watching what was going on in the beleaguered equity sphere, "we didn't see very much trading."

He saw, for example, the big auto industry benchmark issues - General Motors Corp.'s 8 3/8% bonds due 2033 and GM domestic arch rival Ford Motor Co.'s 7.45% bonds due 2031 - essentially unchanged from Friday's levels at 54 bid, 55 offered and 54.25 bid, 55.25 offered, respectively. Yet another trader saw the GM benchmarks down 1 point at 54 bid. GM's 49%-owned auto and mortgage financing unit GMAC LLC's 8% bonds due 2031 were up ½ point on relatively busy dealings to just over 58.

Spectrum falls as asset sale fails

A trader said that Spectrum Brands' 11% notes due 2013 were trading in a 78-79 range, down some 3½ to 4 points from Friday's 82.5 closing level, while the company's 7 5/8% notes due 2015 were likewise down 3 or 4 points in a 58-59 context, down from 62 on Friday. He saw "pretty decent volume considering it was a very quiet day."

Spectrum's sale of its pet products business to Salton Inc. was officially called off Sunday. Spectrum attributed the deal's dissolution to its senior lenders' refusal to consent to the sale. Late last month, Spectrum said it was unable to secure support from those lenders, but that the definitive purchase agreement was still in effect. The company also said it intended to comply with its obligations under the agreement in order to complete the sale process.

Just last week, traders had reported that Spectrum's bonds had inexplicably began to trade up, leaving some to opine that perhaps the sale would get done after all.

Spectrum planned to use proceeds from the sale of the business to repay a portion of the borrowings outstanding under its ABL credit facility along with other senior bank debt.

Salton was going to buy the pet business for $692.5 million in cash, plus $98 million of Spectrum Brand's variable-rate toggle senior subordinated notes due 2013 and $124.5 million of Spectrum Brand's senior subordinated notes due Feb. 1, 2015, in each case taking into account the principal amount and any accrued interest.

Allied Waste off as buyout gets complicated

Allied Waste's bonds were being quoted lower - although in quite light trading - as larger rival Waste Management Inc.'s out-of the-blue $6.19 billion bid to buy Republic Services Group could potentially endanger Republic's own pending acquisition of Phoenix-based Allied. Republic and Allied agreed on a $6 billion transaction some weeks ago.

A trader saw Allied Waste North America's 6½% notes due 2010 trading at par, down a little from 100.25 last Thursday. He saw the 6 3/8% notes due 2011 trading at 99, down from 100.25 on Thursday, while the 7 1/8% notes due 2016 dipped to 98.25 from 99.75 on Friday. Noting the greater drop in this bond, he said "that's typical of the longer maturity - more volatility."

The trader also saw the 7 3/8% notes due 2014 trading at 100.25, versus last week's levels around 101, so "they definitely were weaker."

Service Corp off on failed bid for rival

A market source quipped that trading in Service Corp. International's bonds - in the wake of the Houston-based funeral home and cemetery operator's failed effort to get rival Stewart Enterprises interested in being acquired - "was pretty dead."

A trader said he saw Service Corp.'s 6¾% notes due 2016 trading at 94.25, down from a 96 bid level on Thursday, when the issue last previously traded. He saw no activity in Stewart's 6¼% notes due 2013, which last traded last week around the 93.5 level. "Given the kind of lackluster volume we had today," he said, "it doesn't surprise me."

A market source at another desk, seeing the Service Corp. 6¾% bonds at that same 94ish level, down from 96 previously, observed that the activity all seemed to come from one large trade.

There were meanwhile only a handful of very small trades at lower levels in Service Corp.'s other issues - its 7 3/8% notes due 2014, which closed at 98, down from 101 last week, and its 7% notes due 2017 which sank to below 94, down from about 96.5 last week, again on a handful of small trades.

Service Corp. disclosed in a Securities and Exchange Commission filing that it had made an offer last month to buy out its smaller rival for $9.50 per share, or $881.7 million. However, Stewart's board of directors last week rejected the offer as inadequate. Service Corp. said in its filing that while it still thinks there are compelling reasons for such a merger transaction it will proceed no further with its effort without the consent of Stewart's board.

Gaming takes a breather

Apart from developments related to M&A-type situations, traders saw gaming-sector issues mostly getting a little bit of a respite, after having been hard hit last week, particularly after Thursday's release of poor revenue numbers from the two biggest jurisdictions, Nevada and New Jersey.

Gaming "stabilized a touch," a trader said, but on lighter volume, "it was softer." He saw Trump Entertainment Resorts' 8½% notes due 2015 going out at 53 bid, 54 offered, "a smidge lower than where they had been."

He saw the Wynn Las Vegas LLC 6 5/8% notes due 2014 at 88 bid, 88.5 offered, which he called "a touch" lower than last week, around ½ point to 1 point. The MGM Mirage 7½% notes due 2016 "may have bounced off their lows" to end at 79.25 bid, 80.25 offered.

"Supposedly, there was a touch of a rebound this morning, with equities opening stronger," a second trader said, "but as the equity market sizzled, I believe the rebound was wiped out."

He saw the Trump bonds open at 55.5 bid but go home at 53.25, only up marginally from a 53 finish on Friday. "From Friday to today, they were [pretty much] unchanged, but they had rebounded earlier, with several million [dollars worth of bonds] that had traded between 55 and 55.5, but then those gains were wiped away" as they traded back down to 53, "nil for the day."

He saw Station Casinos Inc.'s 6 7/8% notes due 2016 trading in a range Monday between 45 and 46.5, finishing at 45.5, unchanged from Friday but well down from 51 bid that the bonds traded at on Thursday.

As one of the few exceptions to the rule - early gains followed by later pullback - he said Stations' 6% notes due 2012 finished at 78.25 bid, actually up solidly from 77 at the close Friday, though on light volume.

Another rare upsider was Isle of Capri Inc., which "got hit last week, on lots of volume" and was closing at 68 Monday - up 3/8 point on the day but still well down from 71.75 bid on Thursday and 72.5 last Wednesday.

He also saw Wynn Las Vegas' 6 5/8% notes ending at 87.75 bid, down from 88 at the end of last week and from 90 a week ago.

"The whole sector has been decimated," he said, "there's no question about it," with the main culprit being last week's reports that Nevada gaming revenues slid badly in May from year-ago levels, while the same thing happened in June in Atlantic City.

"It doesn't take much to get the hedge funds and the dealers to sell. What's tougher is to have people jump in and buy in this environment. It's a very itchy trigger to sell."

That was perhaps nowhere more evident than in the 9 5/8% notes due 2104 of Tropicana Entertainment LLC. The trader called them "really active," although they were unchanged from Friday at 36 bid - but well before Thursday's closing level at 44 and last Wednesday's at 46.

At another desk, a market source saw MGM's 6 5/8% notes due 2015 up 1½ points at 79 bid, while its 7 5/8% notes due 2017 gained nearly a point to end at 82.5. Station Casinos' 6s were seen up nearly 2 points at 78.25, and Wynn Las Vegas' 6 5/8s were seen up as much as 3 points on the day in active dealings to 88.5. But Tropicana Entertainment's 9 5/8% notes due 2014 were down 1 point at 37. Another source put them at 56, down ½ point.

Stephanie N. Rotondo contributed to this report

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