Cablevision cancels mega-deal; Paxson prices downsized offering

By Paul Deckelman and Paul A. Harris

New York, Dec. 19 - Cablevision Systems Corp. stunned high-yield players Monday with its announcement that it was canceling last week's huge offering of 10-year notes, citing technical violations of some of its bank lending covenants. Despite the surprising news, however, reaction in the secondary market was relatively muted, with the Bethpage, N.Y.-based cable operator's bonds seen down perhaps half a point, but not much beyond that.

In the primary sphere, Paxson Communications Corp. was heard to have priced its two-part offering of senior secured floating-rate notes - although the West Palm Beach, Fla.-based television broadcasting company was forced to downsize its issue by almost 30%. The first-lien/second-lien two-part bond deal was reduced by $325 million to $805 million from $1.13 billion as the company the $325 million to a first-lien term loan with terms virtually identical to the first-lien bonds.

Elsewhere in the new-deal arena, tighter price talk emerged on Mirant North America LLC's planned eight-year offering, and talk was heard on Omega Healthcare Investors Inc.'s five-year note issue, which could come to market as soon as Tuesday.

And Italy's Wind Telecommunications showed up with a €250 million blended coupon deal which is expected to price Thursday.

Primary market sources in the U.S., meanwhile, said that further drive-by business between the Monday close and Friday's early pre-Christmas close is extremely unlikely. But never say "Never," those sources counseled.

Overall a high-yield syndicate official marked the broad market flat to down as much as an eighth of a point on Monday, as the holiday abbreviated week of Dec. 19 got underway.

Paxson downsizes

Monday's sole issue came from West Palm Beach, Fla., television broadcast company Paxson Communications Corp. which priced a downsized, restructured $805 million two-part senior secured floating-rate notes transaction.

The company priced a downsized $400 million tranche of six-year first-lien notes (B2/CCC+) at par to yield three-month Libor plus 325 basis points, on top of price talk. The tranche was downsized from $700 million.

Paxson also priced a downsized $405 million tranche of seven-year second-lien notes (B3/CCC-) at 98.00. The second-lien notes, which will pay interest at a rate that will float at three-month Libor plus 625 basis points, priced at a deeper discount than that at which they were talked; talk was Libor plus 625 basis points at 99.00.

The second-lien tranche was downsized from $430 million, and six months of call protection were added making the notes non-callable for two years, increased from 18 months.

Citigroup, Bear Stearns & Co., CIBC World Markets, Goldman Sachs & Co. and UBS Investment Bank were joint bookrunners for debt refinancing transaction.

The company shifted $325 million of proceeds to a first-lien term loan with terms that are virtually identical to the first-lien bonds, according to an informed source.

Cablevision cancels

Meanwhile on Monday the robust new issuance totals turned out last week lost a little air as Cablevision announced that it had canceled its $1 billion issue of 10-year senior notes

CSC Holdings Inc. priced a $1 billion issue of 10-year senior unsecured notes (B2/B+) at par last Thursday to yield 8 3/8%. It was due to settle on Wednesday.

Merrill Lynch & Co., JP Morgan, Banc of America Securities, Bear Stearns & Co., Citigroup and Credit Suisse First Boston were the bookrunners.

Proceeds were to be used to help fund a $3 billion special dividend to shareholders.

The company also canceled a $4.5 billion credit facility.

By pulling the deal, Cablevision trimmed last Thursday's issuance to $3.8 billion from $4.8 billion. Hence that session now comes up short of the July 27, 2005 session which saw $3.99 billion of bonds price including the massive SunGard Data Systems $3 billion transaction.

It also cut the week's issuance to $7.835 billion from $7.935 billion.

More from Wind

One prospective issuer appeared early Monday with a deal that is expected to price before Christmas break.

Art Five BV, Inc., a special purpose vehicle for Italy's Wind Telecommunications, plans to sell €250 million equivalent of nine-year blended-rate senior secured notes in dollar and euro tranches (implied ratings B1/B+) on Thursday.

The blended rate is anticipated to be three-month Euribor plus 300 basis points until 2013 and three-month Euribor plus 325 basis points until 2014.

ABN Amro and Deutsche Bank Securities are joint bookrunners.

Proceeds will be used to support the acquisition of Wind by Weather Investment.

Wind is a fixed-line and mobile telecommunications company based in Rome, Italy.

In November 2005 Wind Acquisition Finance SA priced approximately €1.25 billion of 10-year senior notes (B3/B-) in two tranches, a €825 million issue at par to yield 9¾% and $500 million at par to yield 10 ¾%.

Proceeds from that transaction were also used to support the acquisition.

Mirant tightens talk

As for deals that were already known to be in the market, Mirant North America LLC cut price talk on its $850 million offering of eight-year senior notes (B1/B-) to the 7 3/8% area from 7½% to 7¾% on Monday.

JP Morgan, Deutsche Bank Securities and Goldman Sachs & Co. are joint bookrunners for the deal, which is expected to price Tuesday.

Moody's Investors Service assigns its B1 rating to the notes. Standard & Poor's rates the notes at B-.

The prospective issuer is an independent power producer based in Atlanta.

And Omega Healthcare Investors Inc. talked its $175 million offering of 10-year senior notes (B1/BB-) at the 7 1/8% area on Monday.

Deutsche Bank Securities, Banc of America Securities and UBS Investment Bank are joint bookrunners for the deal, which is also expected to price on Tuesday.

Cablevision mixed

In the secondary arena, Cablevision's decision to scrap its $1 billion offering of 8 3/8% notes due 2015, which priced on Thursday at par did not exactly throw the market into a tizzy, traders said.

One saw the company's existing notes "down about half a point, maybe down a point at the max," with its 7 5/8% notes due 2011 retreating to 99.25 bid, 100.25 offered from prior levels at 99.75 bid, 100.75 offered. There was "not much, really" happening in the name, he said.

Another trader called the company's CSC Holdings Inc. 8 1/8% notes due 2009 "pretty much unchanged," at 101 bid, 101.5 offered, and actually saw its 7 7/8% notes due 2018 "up a point and change" at 97 bid, 98 offered, versus Friday levels at 95.75 bid, 96.75 offered.

Yet another trader also saw those 7 7/8s up more than a point, in a 97.25 bid, 98 context, versus 95.5 last week, and trading "pretty actively" at the higher levels. He saw the company's 7 5/8% notes, also due 2018, push up to 96 bid, up from 94.5 on Friday, while its 8% notes due 2012 up half a point to three-quarters at 94.5 bid, 95 offered.

However, a source at another shop saw the CSC 8 1/8% 2009s half a point down on the day at 101.5, while its 6¾% notes due 2012 were, paradoxically, up a point at 95.75.

Pathmark lower on S&P cut

Elsewhere, a trader saw Pathmark Stores Corp.'s 8¾% notes due 2012 retreat to 92.5 bid, 93.5 offered from prior levels around 94.25 bid, 95.25 offered, after Standard & Poor's downgraded the Carteret, N.J.-based Northeast regional supermarket operator's corporate credit rating to B- from B, and its subordinated debt rating to CCC from CCC+, all with negative outlooks.

Another trader, however, saw the bonds unchanged around 94.

S&P credit analyst Stella Kapur, in downgrading the ratings, wrote that the action "reflects Pathmark's weakening credit metrics, limited cash flow generation, and our view that it will be very challenging for the company to significantly improve its market share and profitability levels given the competitive supermarket environment in which it operates."

S&P also cautioned that it anticipates that "credit metrics will continue to be very weak for current ratings over the intermediate term. Furthermore, given increased capital expenditure levels, free operating cash flow was negative $34 million in the first nine months of 2005. Capital expenditures are anticipated to remain elevated given store remodeling and investment needs."

Ford down

Ford Motor Co. was downgraded to junk bond status by Fitch Ratings, removing the Dearborn, Mich.-based automotive giant's last vestige of investment-grade respectability, since S&P and Moody's Investors Service had each cut the Number-Two domestic automaker to junk some months ago.

A trader saw Ford's benchmark 7.45% notes due 2031 a point lower at 70.5 bid, 71.5 offered, while a second saw those bonds half a point lower at 71 bid, 71.75 offered. He saw the company's Ford Motor Credit financing arm's 7% notes due 2013 likewise half a point lower at 88 bid, 88.75 offered.

In lowering Ford's corporate credit to BB+ from BBB- previously, Fitch warned that "the deterioration in Ford's core SUV products has had a disproportionate impact on consolidated profitability, with higher gas prices and shifts in consumer preferences providing uncertainty as to the extent of the decline going into 2006."

The ratings agency also cautioned that intense and unrelenting competition will likely blunt Ford's efforts to regain lost U.S. market share. Ford's share of the U.S. auto market has fallen from around the 25% mark some years ago to 18.4% in the first 11 months of 2004, and has continued to erode, to 17.4% in that period this year, or roughly 150,000 fewer vehicles sold.

GM weak

Also in the automotive sector, General Motors Corp.'s benchmark 8 3/8% notes due 2033 were being quoted half a point lower at 69.5 bid, 70 offered, a trader said, and he saw no significant change in General Motors Acceptance Corp.'s 8% notes due 2031, which remained at 97.75 bid, 98.75 offered.

Several traders had seen the GMAC bonds easier on Friday, on news reports that Citigroup - rumored to be one of the potential buyers for a controlling stake in the GM financial arm - indicated that it would play no role in any such deal.

The banking giant's chief executive officer, Charles Price, indicated to an investor conference Friday that taking a big slice of GMAC didn't fit with the company's strategy, saying it would be "hard to see" his company getting involved "as an extend-the-franchise kind of transaction."

Citi thus joins Bank of America and Wells Fargo & Co. in having officially taken itself out of the GMAC sweepstakes. There has still been no word one way or another from the other major financial player widely rumored to be a potential GMAC-stake buyer, GE Consumer Finance, a unit of General Electric Corp.

GM announced some weeks ago that it planned to sell a controlling stake in its lucrative financing business - about the only part of GM's North American operations that's making any money these days - in order to bring GMAC's debt ratings back up to investment grade from their current junky levels, thus lowering the unit's financing costs. Such a transaction would also mean a windfall of between $10 billion and $15 billion for GM, which has racked up some $4 billion of losses so far this year.

Outside of the auto sector, a trader saw AK Steel Corp.'s 7 ¾% notes due 2012 half a point lower, at 90.25 bid, 90.75 offered, though on "no news" about the Middletown, Ohio-based maker of specialty steels for the automotive industry and other customers.

And he saw Reliant Energy Inc.'s bonds "basically where they had been," unmoved by the news that the Houston-based energy operator had amended its credit facilities. Reliant's 6¾% subordinated notes due 2014 were at 87 bid, 88 offered, while its 9½% senior notes due 2013 were at par bid, 101 offered.

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