Intelsat brings megadeal, talk heard on Ticketmaster, HSN, Interval; Sprint gains on buyout report

By Paul Deckelman and Paul A. Harris

New York, July 15 - Intelsat Ltd. - whose various subsidiaries tapped the junk bond market last month for more than $8 billion dollars in two transactions totaling seven tranches - was back for over $1 billion more in yet another new deal that replaced leveraged buyout-related bridge debt, syndicate sources said Tuesday.

They also heard price talk emerging on the upcoming new deals for IAC/Interactive Corp. subsidiaries Ticketmaster, Interval Acquisition Corp. and HSN Inc., which are raising capital to facilitate their respective upcoming spin offs to IAC investors.

But a $275 million bond offering for Horsepower Holdings Inc. is now off the calendar after shareholders of Grey Wolf Inc. turned down a proposed merger with Basic Energy Services Inc. and that the two companies had terminated their merger agreement.

In the secondary market, Sprint Nextel Corp. - whose bonds have been boosted in recent weeks by investor anticipation of continued consolidation in the wireless sector - were seen having firmed late in the session as CNBC reported that South Korean communications operator SK Telecom is in talks to possibly acquire the third-biggest U.S. wireless company, likely with some help from private equity firms. However, other news reports said that the two companies were merely talking technology, not merger.

General Motors Corp.'s bonds were seen trading off as investors skeptically examined the ambitious turnaround plan that the struggling automotive giant unveiled - a strategy that includes internal cost-cutting, including big headcount reductions, borrowing, selling assets and, for the first time since 1922, suspending its common stock dividend.

Elsewhere, after seeming to have steadied on Monday, gaming issues resumed the slide that was triggered last week by poor revenue figures from the two major gaming jurisdictions, Nevada and New Jersey. Notable downsiders included Isle of Capri Casinos Inc., Trump Entertainment Resorts Inc., Station Casinos Inc., and MGM Mirage.

A trader from a high-yield mutual fund said that junk ended the Tuesday session lower, but added that the market had bounced off of its early morning lows.

Intelsat brings more bonds

The Tuesday session saw new issuance related to the LBO backlog.

Intelsat Corp. replaced the bridge loan related to the LBO of the company with approximately $1.239 billion of 9¼% senior notes.

The operating subsidiary of the Pembroke, Bermuda-based fixed satellite services provider issued $658.119 million of notes due Aug. 15, 2014 and $580.719 million notes due June 15, 2016.

The underwriters, Credit Suisse, Banc of America Securities and Morgan Stanley, will sell the notes at various prices pending market conditions.

The Intelsat LBO has generated considerable issuance activity in the summer 2008 primary market.

On June 24 Intelsat, Ltd. entities priced $7.08 billion of notes: Intelsat Subsidiary Holding Co., Ltd. priced $1.56 billion, Intelsat (Bermuda), Ltd. priced $5.036 billion, and Intelsat Intermediate Holding Co., Ltd. priced $481.020 million.

Then on June 30 Intelsat Jackson Holdings Ltd. priced $986.5 million.

IAC deals talked

Elsewhere on Tuesday price talk surfaced on three deals related to spin offs from IAC/InterActiveCorp.

Ticketmaster set price talk for its downsized offering of approximately $300 million eight-year senior notes (Ba3/BB at 10¼% to 10½%.

The company initially launched $400 million of the eight-year notes. Up to $100 million of the proceeds will be shifted to the term loan B, with the bond offer to be downsized by the same amount.

JP Morgan, Merrill Lynch & Co. and Banc of America Securities are joint bookrunners.

Elsewhere HSN, Inc. set price talk for its $250 million offering of eight-year senior notes (Ba1/BB) at 10¾% to 11%.

Banc of America Securities LLC, JP Morgan and Morgan Stanley are joint bookrunners for the HSN deal.

Both Ticketmaster and HSN are expected to price on Wednesday.

Meanwhile Interval Acquisition Corp. set price talk for its $300 million offering of eight-year senior notes (B1/BB) at 10¾% to 11%.

Morgan Stanley is the left bookrunner for that deal, which is also expected to price during the mid-week period.

Market indicators down again

Back among the established issues, a trader said that the widely followed CDX junk bond performance index was down ¼ point on Tuesday, quoting it at around 92¼ bid, 92½ offered. The KDP High Yield Daily Index fell by 28 bps to end at 70.78, while its yield widened by 9 bps to 10.61%.

In the broader market, advancing issues trailed decliners by a more-than two-to-one margin. Activity, represented by dollar volume, jumped nearly 38% from the still-anemic levels seen in Monday's session.

A trader said that "it seemed like there was a little bit of a sigh of relief" in the junk market Tuesday, "even though the Dow [Jones Industrial Average] closed down 90-odd points. It seemed for a few minutes that things were better. When equities rebounded, there seemed to be a brief period" when junk seemed to catch a bid.

He said that it may have been short-covering, or perhaps bottom fishers," or some combination, "jumping in to try to take advantage of the depressed market levels that we've seen over the last few sessions."

However, the Dow, after hitting a peak at mid-afternoon, helped along by easier oil prices, gave it all back and ended the day down 92.65 points, or 0.84%, at 10,962.54. Broader indexes were mixed, with the Nasdaq up and the S&P 500 down. That helped to push the junk market back down, the early advance fizzling out.

Sprint gains on telecom takeover talk

However, one upsider seen amidst the generally down market was Sprint Nextel, whose bonds moved up after CNBC reported that South Korean telecommunications operator SK Telecom was in talks aimed at acquiring Sprint, the Number-Three U.S. wireless player behind the newly merged Verizon/Alltel combination at the top and AT&T/Cingular - displaced from its customary role as the top dog - at Number-Two.

A trader saw Sprint Nextel's most active issue, the 6% notes due 2016, get as good as 86.5, before coming off that peak to close at 85.25, unchanged on the day. "Close-to-close, they were unchanged, but they probably traded up when the news, or the rumor [of the acquisition talks] or whatever it was, came out."

However, he saw several other Sprint bonds, either those of the parent company or of its Sprint Capital Corp. financing subsidiary, moving up, and staying there - the 8 3/8% notes due 2012, which ended a point higher at par bid, and the 7 5/8% notes due 2011, which ended up ½ point at 98.5.

On the other hand, he said, the Sprint's issue of 6 3/8% notes due 2009 "was actually down" in a straight comparison of the most recent round-lot trade and the last one of a prior session - 99.75 on Tuesday, versus 100.125 last week.

And he saw the Sprint 8¾% bonds due 2032 push as high as 95.5 bid, before closing at 93.5, down from Monday's final round-lot transaction at 94. "They traded higher earlier in the day, though it closed ½ point below [Monday's] closing. Midday, probably right after the rumor/news was announced, they traded up."

A market source at another desk saw Sprint Capital's 6.90% notes due 2019 as being among the most actively traded bonds of the session, gaining 1½ points on the day to end at 87.5, while the parent company's 6s ended up nearly a point at 86 bid. The Sprint Capital 6 7/8% bonds due 2028 closed 1½ points higher at just under 82.

Sprint's New York Stock Exchange-traded shares finished solidly higher on the day, propelled by the buyout buzz. The shares gained 78 cents, or 9.44%, to close at $9.04. Volume of 84 million shares was about 2½ times the average daily turnover.

CNBC, attributing its information to unidentified "people familiar with the talks," said that SK Telecom was dickering with Overland Park, Kan.-based Sprint, although it cautioned that "a deal is not imminent and while the talks are ongoing, participants caution that any agreement would at best be weeks away." It said that since SK Telecom is smaller than Sprint, it would need to enlist private equity partners to help with the financing.

The business news channel reported that it had been informed that "any deal with SK Telecom would have to be friendly. The Koreans have no plans to pursue Sprint should it not wish to be acquired." It said that while the talks "have not reached a crucial phase, and specific negotiation on price has yet to take place . . . they have heated up in recent days."

But other news sources later in the day contradicted the CNBC report. The Wall Street Journal and Reuters each reported that the talks were not merger negotiations; instead, they said, the two companies - which use the same wireless technology, a system known as CDMA - were discussing technology collaboration, or perhaps an alliance, rather than merger. The Journal's website said that Seoul-based SK Telecom has talked to Sprint about possibly making a minority investment in the company.

That, a market source said, would certainly be helpful to the U.S. company. "Even if it's not a full acquisition ... they could invest equity in Sprint." He noted that Sprint "has a pretty bad balance sheet. One way to play it is to long the bonds and short the stock. Adding equity is going to help the balance sheet."

Should such an investment - or even an outright acquisition - come to pass, it would require regulatory approval, not the least reason being SK's status as a Korean company. However, foreign ownership of large U.S. telecom carrier is not without precedent; another Sprint Nextel rival, Number-Four T-Mobile, is owned by Deutsche Telekom.

GM spins its wheels

Elsewhere, General Motors' bonds were seen mostly lower, apparently gaining little traction from the Detroit-based top U.S. automotive producer's wide-ranging turnaround plan, aimed at allowing the money-losing company to ride out the current market downturn and eventually return to profitability.

A trader saw GM's 8 3/8% bonds due 2033 down 1 point at 53 bid, while GMAC LLC's 8% bonds due 2031 were ½ point lower at 68.5.

Another trader saw the GM benchmark bonds fall more than 2 points to end at 51.5. He said that the bonds were down even further from their intraday highs at 54.5.

At another desk, a market source saw the 8 3/8s fall to 52 bid - down more than 2 points on the day, in active dealings, and down more than 3 points from their earlier highs.

Among the shorter bonds, a market source saw GM's 7 1/8% notes due 2013 off slightly to 58, and its 7.20% notes due 2011 drop nearly 4 points to just below the 67 level. Meanwhile, while GMAC's 7¾% notes due 2010 were down nearly a deuce at 78.

A trader agreed with the suggestion that junk marketeers did not seem terribly impressed with the turnaround plan outlined by GM's chief executive officer, Rick Wagoner, on a mid-morning conference call with investors and the media.

Besides that, "we've got a lot of other issues going on right now" in the bond markets, grabbing most of the attention, between the problems of Fannie Mae and Freddie Mac, as well as problems with the financial sector generally. "There's lots of stuff going on right now, so I can see where people would be paying less attention [to anything GM says or does] because that's an old story. Now we have a new story - who's going to bail out Fannie Mae and Freddie, and what financials are going to make it - and which ones aren't?"

GM's plan

Wagoner outlined an extensive program of turnaround steps, including improving its capital position by $15 billion this year and next - $10 billion to be generated from internal cost savings, and $5 billion by selling as-yet unidentified assets and borrowing. He estimated that borrowing would total about $2 billion to $3 billion.

To reach the $10 billion cost-cutting goals, GM plans to suspend its equity dividend, the first time it has done that since 1922. It plans to reduce headcount among its 40,000-person North American salaried workforce - ideally through attrition and the use of buyouts, something it hasn't done for several years, but if need be, it will use layoffs to get the level of salaried employees down to where it wants.

The company also plans to cut health care benefits for salaried retirees over age 65, who would instead get a pension increase from GM's overfunded pension fund to help compensate for Medicare and supplemental insurance.

Wagoner and GM's chief financial officer, Fritz Henderson, further said that GM - looking to balance its production levels with current sales trends, which include a consumer move away from the kinds of sport-utility vehicles, pickup truck and other light trucks that were such profitable big sellers for GM before spiraling gas prices made them obsolete - plans to cut its truck production capacity by 300,000 units, some 150,000 more than it announced at its annual meeting just last month.

It will speed up previously announced closures of four truck and SUV assembly plants, as well as making thousands of job cuts at other truck assembly and parts factories - facilities which will remain open, for now.

GM sector peer Ford Motor Co.'s 7.45% bonds due 2031 were "down ¾ to a point" at 53.5 bid. A trader said, adding that the bonds were "definitely not as active as GM's." Ford Motor Credit Co.'s 7 3/8% notes due 2011 dipped by more than 2 points, to under the 78 level. Its 7 ¼% notes due 2011 finished ½ point lower at 75.5.

Among the parts suppliers, big GM supplier American Axle & Manufacturing Holdings' 7 7/8% notes due 2017 fell by 2 points to the 66 level.

Gaming resumes slide

The respite which the hard-hit gaming sector saw on Monday - when the big slide seen last Thursday and Friday appeared to bottom out, leaving many sector names little changed on the session - appears to have been very short-lived, since those casino names for the most part started heading south once again on Tuesday.

A trader saw Station Casinos' 6% notes due 2012 drop nearly 2 points to 76.5, while the company's 7¾% notes due 2016 were down 1 point at 74.25. He saw Isle of Capri's 7% notes due 2014 "very active - wow," trading as high as 67 - down a point from Monday's close at 68 - before coming off that relative peak to end at 65 bid, down 3 points on the day, "so there was no rebound for this sector."

He also saw Trump Entertainment Resorts' 8½% notes due 2015 trade as high as 53 bid before coming down from there to end down 2 points on the day at 51.25. Another market source saw the Trump bonds go as low as just above 49, which he called down more than 3 points on the day.

At another desk, a market source saw Isle of Capri's 7% paper down 2½ points at around the 65 level, while Station Casinos' 6% notes due 2012 were down nearly 2 points at 76.5, MGM Mirage's 6 5/8% notes due 2015 were 2 points lower at 77, and Harrah's Entertainment Inc.'s 5¾% notes due 2017 were off 1 point at 45.5.

Yet another market source called Isle of Capri's bonds a major loser, down some 3½ points to the 65 level, in active trading. The source also saw Wynn Las Vegas LLC's 6 7/8% notes due 2014 down slightly, to about the mid-88 level, while Tropicana Entertainment's 9 5/8% notes due 2014 were marginally lower at just under 36.

© 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.