VNU restructures mega-deal, talk out on Verso, Phibro; HCA bonds dive on buyout deal news

By Paul Deckelman and Paul A. Harris

New York, July 24 - VNU NV was heard by high yield syndicate sources Monday to have restructured its nearly $2 billion multi-tranche, dual-currency deal, which could price at any time now.

Primary market participants meantime heard price talk on several other prospective issues - Verso Paper Holdings/Verso Paper Inc.'s nearly $1 billion three-part offering, Phibro Animal Health Corp.'s seven-year senior notes deal, and German issuer Treofan Germany GmbH & Co. KG's seven-year euro-denominated deal. PNA Group Inc. was heard getting ready to hit the road Tuesday to market its 10-year note offering, while Petrohawk Energy Corp. - which recently sold an issue of 9 1/8% notes due 2013 - came back to refuel, pricing an add-on offering, which then firmed modestly in aftermarket trading.

In the secondary arena, HCA Corp.'s bonds - which last week had widened out on news reports that it was in talks with potential investors on a big leveraged buyout deal to take the Nashville-based hospital company private - were seen sharply lower Monday as the company announced that it had, indeed, now reached a deal, agreeing to be acquired for $21 billion, most of which will be debt-financed. Debt assumption or repayment brings the deal's total value to $33 billion, making the largest LBO transaction ever. The bonds of rival hospital operator Tenet Healthcare Corp. were lower in apparent sector sympathy.

Advanced Micro Devices Inc.'s bonds gyrated around wildly before closing essentially little changed on the session, traders said, after the Silicon Valley semiconductor company announced plans to acquire graphics chipmaker ATI Technologies for $5.4 billion, as AMD tries to bulk up to stay competitive with larger rival Intel Corp.

Overall, a high yield syndicate official said, the Monday market settled mixed.

Petrohawk's drive-by

Meanwhile in the primary market Petrohawk Energy drove through with an upsized $125 million tap of its 9 1/8% senior notes due July 15, 2013 which priced at 101.125, on top of the price talk.

The debt refinancing deal resulted in a yield to worst of 8.876% and a yield to maturity of 8.903%. It generated $126.4 million of proceeds.

The original $650 million priced at 98.735 to yield 9 3/8% on June 23, so Petrohawk realized substantial interest savings with Monday's transaction.

Credit Suisse, Lehman Brothers and BNP Paribas led the only deal to price during the session.

Talking the deals

Elsewhere in the primary market price talk emerged on offerings that are expected to price by the end of Wednesday's session.

Stamford, Conn.-based Verso Paper Holdings/Verso Paper Inc. issued price talk on $900 million of high-yield notes in three tranches.

The paper, packaging, forest products and chemical products company plans to sell $600 million of eight-year second lien senior secured notes (B1/B+) in a tranche of fixed-rate notes talked at the 9¼% area, and a tranche of floating-rate notes talked at the Libor plus 400 basis points area.

Verso Paper also plans to sell $300 million of 10-year senior subordinated notes (B3/B-), which are talked at the 11% area.

Credit Suisse and Lehman Brothers are joint bookrunners.

Meanwhile Phibro Animal Health talked its $240 million offering of seven-year senior notes (B3/B-) at a yield in the 10¾% area.

UBS Investment Bank is leading the deal.

And Treofan Germany talked its €170 million offering of seven-year notes (Caa1/CCC+) at 10¾% to 11%.

Citigroup and JP Morgan are joint physical bookrunners.

VNU restructures

The $1.67 billion equivalent multi-tranche high-yield bond deal backing the acquisition of VNU by Valcon Acquisition BV has been restructured, according to market sources.

The new structure includes a €200 million tranche of 10-year senior subordinated discount notes to be issued by VNU NV, the holding company, and a downsized $600 million equivalent tranche of 10-year senior subordinated discount notes (Caa1/CCC+) to be issued in dollar- and euro-denominated tranches by Nielsen Finance LLC.

The three tranches replace the proposed $835 million equivalent tranche of 10-year senior subordinated discount notes that were to have been issued by Nielsen Finance.

Meanwhile Nielsen Finance's $835 million equivalent offering of eight-year senior notes (B3/CCC+) remains unchanged. The eight-year senior notes are being offered in both dollar-denominated and euro-denominated tranches.

The notes are expected to price late this week or early next week.

Deutsche Bank Securities, JP Morgan, Citigroup, ABN Amro and ING are joint bookrunners for the acquisition financing.

PNA Group starts roadshow

PNA Group, Inc. will begin a roadshow Tuesday for a $250 million offering of 10-year senior notes.

Banc of America Securities and Citigroup are joint bookrunners for the debt refinancing and dividend-funding deal from the Atlanta, Ga., steel processing and distribution company.

Infor shifts $250 million to loan

Prospect News also learned on Monday that Infor Global Solutions increased the size of its seven-year term loan B to $2.25 billion from $2 billion and downsized its proposed bond offering by the equivalent $250 million amount.

A high yield syndicate official said that the market had been anticipating an offering of bonds in the vicinity of $1.4 billion from Infor Global.

Petrohawk edges up in trading

When the new Petrohawk Energy 9 1/8% add-on notes due 2013 were freed for secondary dealings, they were seen having firmed a little to 101.5 bid, 102 offered, up from their 101.125 issue price earlier in the session.

A trader also saw Mobile Services U.S./Mobile Storage Group Inc.'s new 9¾% senior notes due 2014 trading at 100.875 bid, 101.375 offered. The Burbank, Calif.-based storage units company's issue priced on Thursday at par.

HCA plunges

Back among the established issues, HCA's bonds dropped like a stone as the worst fears of its bondholders came true - the company, the largest hospital operator in the United States, announced that its board had accepted a buyout offer that values the company at $21.3 billion, and which also includes the assumption or repayment of $11.7 billion of outstanding debt, for a $33 billion package.

The company's bonds are usually quoted on a spread-versus Treasuries basis like investment-grade instruments despite their junk ratings, although these are at the at the high end of the high yield ratings spectrum. Traders estimated that the bonds had already widened out about 100 basis points over several sessions last week to bid levels around 350 bps over after The Wall Street Journal reported that the company was in talks with prospective purchasers including Bain Capital, Kohlberg Kravis Roberts & Co. and Merrill Lynch Private Equity, as well as members of senior management and relatives of Senate majority leader Bill Frist - a heart surgeon by training whose father, the late Thomas Frist, and brother, Thomas Frist Jr., founded HCA back in the 1960s. The bonds ended the week wider, even though news reports said that those talks had collapsed.

The negotiations apparently took a turn for the better over the weekend, leading to the early Monday announcement of a deal - and that caused HCA's spreads to shoot up like never before. A trader quoted its widely traded 6½% notes due 2016 at a bid spread of 471 basis points over Treasuries, and an offered spread of 456 bps over - far wider than 352/342 at the close Friday. He also saw the company's 6¼% notes due 2013 at 479 bps over on the bid side, 462 bps over, again a substantial widening out from 355/345 on Friday.

"I guess that there was a fear in the market that they [HCA] will be taking on a lot more debt to fund this LBO," he observed.

Moody's Investors Service put the company's debt, including its Ba2 corporate family rating, under review for a possible downgrade Monday, citing the news of the buyout transaction. "A transaction that results in a significant amount of incremental financial leverage could result in a multiple notch downgrade of Moody's ratings," said Dean Diaz, a vice president and senior analyst for the agency, in announcing the downgrade watch.

Standard & Poor's likewise placed HCA's BB+ corporate credit and senior unsecured debt ratings on CreditWatch with negative implications.

"We expect that the transaction will include the issuance of a significant amount of new debt, including debt that will be senior to the unsecured notes that remain outstanding," S&P credit analyst David Peknay wrote in announcing the review.

"We believe that the corporate credit rating will likely be lowered by more than one notch because HCA's financial profile will weaken substantially. The rating on the unsecured notes will likely be lowered by even more notches than the corporate credit rating because this debt will likely become subordinated to the new senior debt and, therefore, be materially disadvantaged to senior lenders."

"HCA, obviously" was the big news of the day, another trader said, describing the behavior of its bonds as "pitiful."

He saw the 6½% notes down about 4 points on the session to a close around 80 bid, 81 offered - well down from the levels in the high 80s which those bonds held before news of the buyout talks hit the media last week.

A market source saw HCA's 5¾% notes due 2014 at 80, which he termed down more than 5 points on the session.

HCA drags Tenet down

Tenet Healthcare's bonds "were down in sympathy," the second trader said, seeing the Dallas-based hospital operator's 6 7/8% notes due 2031 at 77 bid, 78 offered, which he estimated was 2½ points lower.

While news that a major company in a given industry - or even a minor one - was being acquired might normally be expected to raise bond investor hopes of sector consolidation, sending the bonds up, rather than down, in this case, "the LBO [for HCA] is going to add so much additional leverage that [Tenet bondholders] fear that they may be next," he said, in explaining the drop.

"There was no consolidation bounce, that's for sure," he added.

Another trader saw Tenet's 9¼% notes due 2015 at 95 bid, 95.75 offered, down 2½ points on the session, while its 7 3/8% notes due 2013 dropped to 88.5 bid, 89.5 offered, a 1½ point loss.

A market source at another desk saw the 6 7/8s down 1 3/8 points at 76.875, while its 9 7/8% notes due 2014 were off 2½ points at 96.5 bid, but he saw the company's other issues, including the 91/4s and the 7 3/8s, only marginally lower.

Also lower in apparent sympathy were the bonds of the considerably smaller Franklin, Tenn.-based hospital operator Iasis Healthcare LLC, whose 8¾% notes due 2014 were seen down more than a point at 98.

AMD sinks, rebounds

The other significant mover on the session was AMD, after the Sunnyvale, Calif.-based microprocessor company unveiled plans to buy ATI - a transaction which analysts say makes it much more competitive with industry giant Intel. It lets AMD become a seller of chips in four new categories, eroding one of Intel's key advantages, its broader product portfolio relative to AMD.

A trader said that trading in AMD was "volatile," with its 7¾% notes due 2012 down about 3 points, around 97.5 bid, 98.5 offered in the early going.

After that, however, he said, investors "read through the prospectus of the original deal, and saw that it said that these bonds will now have to be secured like the bank debt, so the bonds came right back and finished the day basically unchanged," at bid levels around par to 100.5.

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