Blount, U.S. Oncology, Borden deals price; Charter gyrates on equity infusion buzz, CFO exit

By Paul Deckelman and Paul A. Harris

New York, Aug. 4 - New York, Aug. 4 - Blount Inc., U.S., Oncology Inc. and Borden U.S. Finance Corp,/Borden Nova Scotia priced new deals Wednesday, with the U.S. Oncology and the Borden offerings two-parters.

In secondary dealings, Charter Communications Inc.'s bonds were seen churning furiously, as the St. Louis-based cable operator's notes first rose on market rumors the company was going to get a major equity infusion - only to come back down later on as the equity infusion talk went nowhere and the chief financial officer announced his plans to leave the company.

"All the action seemed to be in the primary market today," one investment banker told Prospect News well after the mid-week session came to a close.

"Things were comparatively quiet in the secondary. And of course we saw well over a billion get done."

Indeed, the high-yield market turned out $1.225 billion of business Wednesday as five tranches were completed by three issuing companies.

"This is uncharacteristic for the first part of the third quarter in the high yield," said another sell-sider.

"You have to say there is 'significant' new issuance out there," the source added.

Now is better than later

The sell-side official added that the investment banks' old axiom, "Now is better than later" - the customary counsel given to issuers - is at present especially true.

"It's enhanced by the fact that issuers recognize that during the last week of August and the first two or three weeks in September, everything stops, including due diligence.

"So people who aren't out there now, or very soon, won't be pricing things until late September.

"And in the current interest rate environment people understand that that means taking on a month and a half of interest rate risk.

"So now is not just better than next week. It's better than six weeks down the road, which, realistically, is the next opportunity, if they don't go now.

"And we believe that interest rates could move substantially between now and the middle of September."

Three companies, five issues

Wednesday's largest issuance came from Houston-based cancer treatment services company U.S. Oncology Inc., which sold $575 million of high-yield bonds in a restructured two-tranche deal.

The company sold an upsized $300 million of eight-year senior notes (B2/B-) at par to yield 9% - right on top of the 9% area price talk. It was increased from $200 million.

U.S. Oncology also priced a downsized $275 million issue of 10-year senior subordinated notes (B3/B-) at par to yield 10¾% - well wide of the 10¼% area talk. It was reduced from $375 million.

Citigroup, JP Morgan and Wachovia Securities ran the books for the company's acquisition financing deal.

A buy-side source, noting that U.S. Oncology's upsized eight-year issue came on top of talk but the downsized 10-year deal came wide, said that the pricings reflect a definite preference among investors at present for shorter maturities in accordance with the expectation that interest rates will continue to rise for the foreseeable future.

Borden Chemical fixed and floating

Elsewhere in the primary market, Borden U.S. Finance Corp. and Borden Nova Scotia, both subsidiaries of Columbus, Ohio-based Borden Chemical, Inc., priced $475 million of high-yield bonds (B3/B-) on Wednesday.

Credit Suisse First Boston and JP Morgan ran the books for the acquisition deal.

The company sold $325 million of 10-year second priority senior secured notes at par to yield 9%, at the tight end of the 9%-9¼% price talk.

The company also sold $150 million of six-year second priority senior secured floating-rate notes at par to yield three-month Libor plus 475 basis points, again tight to talk, in this case of three-month Libor plus 475-500 basis points.

The same buy-side source quoted above, regarding the preference for shorter maturities, also said that on a swap basis floating-rate tranches, which seem to be coming to high yield in ever greater abundance, are perceived as "cheap" for investors.

"That's the sales pitch," said the investor. "It's really more geared to arbitrageurs rather than outright accounts, because arbitrageurs are really not buying it for the floating-rate feature. A retail investor might buy a floating rate note because of concern about rising rates, which is addressed by a floating coupon.

"Arbitrage people are really buying it, however, to take out the spread. They're not long-term investors. It's all about financial engineering."

Meanwhile a source from the syndicate desk of a major investment bank had much the same color on the floating tranches.

"We hear that people are capturing the upside and shifting it off of their books," the source said.

"You see the floating-rate tranches on the larger, more difficult deals because you tend to be tapping into a slightly different set of investors, which are the hedge funds, and the guys that played that bank debt, and were properly hedged on the interest rate side.

"And with rates going up, floating-rate debt is a good thing to have in your portfolio."

Blount prices

Finally on Wednesday, Portland, Ore.-based outdoor products company Blount International, Inc. sold $175 million of eight-year senior subordinated notes (Caa1/B-) at par to yield 8 7/8%, at the wide end of the 8¾%-8 7/8% price talk.

Lehman Brothers ran the books for the debt refinancing deal.

Drive-bys planned by Xerox, La Quinta

As if to type an exclamation point behind an above-quoted investment banker's color on the relative rush to get to market before Labor Day, two drive-by deals appeared on the screen Wednesday.

Xerox Corp. is expected to sell $400 million of seven-year senior notes on Thursday.

Citigroup and JP Morgan are the underwriters for the Stamford, Conn.-based document management company.

And La Quinta Properties, Inc. will hold an investor conference call Thursday morning for its offering of $200 million of eight-year senior notes, which is expected to price Thursday afternoon.

Lehman Brothers and Banc of America Securities are joint bookrunners for the acquisition deal from the Dallas-based REIT.

Blockbuster hitting the road

One roadshow start was heard during the mid-week session.

The roadshow starts Thursday for Blockbuster Inc.'s $300 million offering of eight-year senior subordinated notes, with pricing expected on Thursday Aug. 12

JP Morgan, Credit Suisse First Boston and Citigroup will run the books for the deal from the Dallas provider of in-home movies and games.

And finally on Wednesday price talk of 7¾% area emerged on Alderwoods Group, Inc.'s $200 million of eight-year senior notes, expected to price Thursday afternoon via Banc of America Securities and Morgan Stanley.

Blount firms in trading

When the new Blount 8 7/8% senior subordinated notes due 2012 were freed for secondary dealings, "they did OK," a trader said, pegging the bonds at 101.25 bid. 102 offered, up from their par issue price.

He saw most of the new-deal paper likewise at least holding its own, quoting Borden Chemical's new 9% notes due 2014 at 101 bid, 101.5 offered, up from their par issue price; U.S. Oncology's 9% senior notes due 2012 firmed to 101.25 bid, 101.5 offered and its 10 ¼% subordinated notes due 2014 were at 100.25 bid, 100.75 offered.

Only United Refining Co.'s new bonds turned in what he called a "painful showing," as the 10½% senior notes due 2014, which priced Tuesday at 98.671, well wide of price talk in the 10%-10¼% range, dropped to 96.5 bid, 97.5 offered Wednesday, making them "clearly the dog of the new issues group," the trader opined.

Primus, Revlon recover partly

Back among the secondary issues, some of the bonds which had gotten slapped around over the previous several sessions in response to their earnings numbers seemed to regain their footing. Primus Telecommunications Group's 8% notes due 2014 were seen better than two points higher, around the 78 range, after having fallen to the low 70s Friday after the telecom operator had swung to a loss from a year-ago profit.

And Revlon Consumer Products Corp.'s 8 5/8% notes due 2008, which had fallen to around an 83-84 bid context after the New York-based cosmetics company reported weaker sales and earnings for the quarter - despite a much better balance sheet - were seen Wednesday to have recovered a bit to around 85 bid.

Tenet down again

However, Tenet Healthcare Corp., whose bonds had slid Tuesday after the Santa Barbara, Calif.-based hospital operator posted disappointing results that included a doubling of its provisions for doubtful accounts - i.e., patients not likely to pay their bills - remained on the sick list on Wednesday.

A market source saw Tenet's 6 3/8% notes due 2011 having lost over a point to 87.125 bid and its 5 3/8% notes due 2006 down about the same amount to par bid. Its 6 7/8% bonds due 2031 were down a point at 76.5, as were its 7 5/8% notes due 2013, at 90.5 bid.

Titan steady despite earnings

Titan Corp. was out with second-quarter numbers, posting a loss, mostly due to the effects of an ongoing federal probe of whether the San Diego-based provider of information technology services to the defense community made payments to officials in some foreign countries to win business, and to the company's cancelled merger with Lockheed Martin Corp., which the latter company walked away from in late June due to Titan's ongoing legal problems (See related story elsewhere in this issue). However, the company's bonds were little changed on the day, its 8% senior subordinated notes due 2011 anchored to the 100.5 level.

Charter rises on equity rumors, then dips

Elsewhere, "there was apparently a rumor in the morning that Charter was getting an equity infusion," a trader said "and the bonds went up on that." He saw the company's 10¼% notes due 2009 jump to 82 bid, 83 offered from prior levels at 80.5 bids, 81.5 offered.

In fact, a subscription-based investment advisory service, Street Insight, carried a squib by reporter Jay Somany - widely spammed around investment-oriented internet bulletin boards - to the effect that he was "hearing chatter that a bunch of bigwigs like Paul Allen, Cuban et al might be putting in a bunch of money into CHTR. Chatter about $1.5 billion infusion. Passing it on."

Billionaire investor Allen, of course, is Charter's principal shareholder, and has long been the subject of rumors - mostly groundless - that he was going to come riding to the struggling Charter's rescue, checkbook in hand.

Some of the talk Wednesday included mention that Allen - as co-founder and presumably still a major shareholder of Microsoft - stands to get a big payday when the special dividend recently announced by Bill Gates comes through, not that Allen, with an estimated worth of at least $6 billion, needs to watch his pennies.

The other name attached to the rumor is that of Mark Cuban, billionaire investor in high-definition television and other cutting-edge technologies, as well as the flamboyant, media-savvy owner of the Dallas Mavericks NBA franchise.

As the rumor circulated, other parties chimed in with the names of other large equity investment players, such as the buyout firm Texas Pacific, as possible participants in the Charter rescue.

With everyone keyed up and looking for news of an Allen-Cuban investment in the company, news finally hit the tape - but not the news they had been expecting. Charter said that CFO Michael P. Huseby was resigning effective Aug. 20 - to take the same position with rival cabler Cablevision Systems Corp.

While not widely expected, the resignation is not abrupt - he will be in the job for another two weeks to ease the transition - nor is there any indication that Huseby was leaving for any negative reason, other than to take a job at a more financially stable company in the same industry. But his impending departure is still one more sign of uncertainty for the company, which just last week settled a long running Securities and Exchange Commission probe into its accounting. Concerns over accounting had led to the ouster of a predecessor of Huseby, then-CFO Kent D. Kalkwarf and then-chief operating officer David Barford, in December 2002.

Once the equity infusion rumors seemed to have run their course, "then the news seemed to really be that the CFO resigned, with no confirmation or additional information about the equity infusion - and the bonds went right back down," the trader said, to finish at 80 bid, 81 offered.

"On the day, Charter paper was unchanged," he said.

Charter's Nasdaq-traded stock also sizzled and then later fizzled, the shares jumping as high as $3.46 during early afternoon trading on the Allen-Cuban scuttlebutt, before coming back to reality and back down to close at $3.08, off three cents on the day, on volume of 10 million shares, two and a half times the norm.

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