Centennial, Block deals price, Cablevision megadeal ahead; new issues dominate secondary

By Paul Deckelman and Paul A. Harris

New York, Dec. 13 - The high-yield primary market churned into high gear Tuesday as issuers stepped up to get their financing done before the new-deal segment goes into its year-end holiday hibernation mode. Deals for Centennial Communications Corp., Block Communications Inc. and Pipe Acquisition Ltd./Pipe Acquisition Finance plc were heard to have successfully priced.

Meantime, CSC Holdings Inc., a unit of Cablevision Systems Corp., was seen getting ready to sell $1 billion of new bonds, perhaps as early as Wednesday or Thursday, while price talk emerged on already-calendared issues for SGS International Inc. and Comstock Homebuilding Companies Inc.

New issues also dominated the secondary market, as the Centennial deal, along with the Omnicare Inc. notes that priced Monday, firmed smartly in aftermarket activity. That action overshadowed the relatively range-bound established issues, traders said, and they also noted that as usual, there was little junk market response to the latest Federal Reserve news, even though the central bank is thought by many observers to be nearing the end of its year-and-a-half-long rate-hike campaign.

A high-yield syndicate official marked the broad market slightly firmer on the heels of a very quiet Tuesday session.

"Right now the focus is the forward calendar," the source commented, adding that at present the new issue calendar is the biggest seen so far in 2005.

As Prospect News tallies it, the forward calendar remains slightly above $8 billion in deals that are expected to price before the rapidly approaching 2005 terminus.

Meanwhile over $1 billion of bonds cleared Tuesday as five tranches from four issuers were priced.

Centennial drives through

Tuesday's biggest volume of issuance came from Wall, N.J.-based provider of wireless and integrated communications services Centennial Communications Corp.

The company priced $550 million in two tranches of seven-year senior notes (Caa2/CCC).

Centennial priced a $200 million tranche of fixed-rate notes at par to yield 10%, on top of the 10% area price talk, and a $350 million tranche of floating-rate notes at 99.00, which will pay interest at Libor plus 575 basis points. That floater came wide of the 550 basis points area price talk.

Credit Suisse First Boston ran the books for the dividend funding and debt refinancing deal.

Elsewhere Block Communications Inc., a Toledo Ohio diversified media company, priced a $150 million issue of 8¼% 10-year senior notes (B1/B-) at 99.169 to yield 8 3/8%, at the wide end of the 8¼% to 8 3/8% price talk.

Banc of America Securities and Deutsche Bank Securities were the bookrunners for the debt refinancing and general corporate purposes issue.

And Pipe Acquisition Ltd. in conjunction with Pipe Acquisition Finance plc - financing units of Scotland-based Murray International Metals Ltd. - priced a $130 million issue of five-year senior secured floating-rate notes (B3/CCC+) at 99.00. The notes will pay a coupon of six-month Libor plus 625 basis points, on top of price talk.

Jefferies & Co. ran the books for the acquisition deal.

Finally Thailand-based paper and pulp producer Advance Agro PCL sold $250 million of seven-year bonds at 98.81 to yield 11¼%. The notes priced at the tight end of revised 11¼% to 11½% price talk. Talk had been revised from 11½% to 11 5/8%. The initial guidance was set at the mid-11% range.

ABN Amro and Deutsche Bank ran the books for the notes that were marketed to high-yield accounts in addition to emerging markets names.

Cablevision brings a billion

In the wake of the Thanksgiving break, sources from both the sell-side and the buy-side forecasted that high yield would see drive-by business in the run-up to the year-end holidays.

On Tuesday CSC Holdings Inc. (Cablevision Systems Corp.) announced that it expects to price a $1 billion offering of 10-year senior unsecured notes (B2/B+) late Wednesday or early Thursday, without a full roadshow.

Merrill Lynch & Co., JP Morgan, Banc of America Securities, Bear Stearns & Co., Citigroup and Credit Suisse First Boston are joint bookrunners for the bullet notes, proceeds from which will be used to repay bank debt and help fund a special dividend to shareholders, if declared by the board.

Also set to drive through is Germany-based Gerresheimer Alpha GmbH, a financing subsidiary of Gerresheimer Glas AG.

Gerresheimer plans to price a €60 million add-on to its 7 7/8% senior notes due March 1, 2015 (Caa1/B-) on Thursday, via JP Morgan.

Proceeds will be used to help fund the acquisition of Superfos Pharma Pack, from Superfos Industries AS.

The original €150 million issue priced at par on Feb. 28, 2005.

More mega deals

Aside from Cablevision's above-described $1 billion deal, the forward calendar contains a veritable crowd of hefty offerings that are expected to price before the Friday close.

Biggest, of course, is Hertz Corp.'s $2.80 billion via Deutsche Bank Securities, Lehman Brothers, JP Morgan, Goldman Sachs and Merrill Lynch.

The car rental company's $1.950 billion offering of senior notes is talked at a yield in the 9% area, while its €225 million of senior notes is talked at the 8% area - the difference relating to the difference between the interest rates on the 10-year Bund and the 10-year Treasury.

Hertz also plans to sell $600 million of 10-year senior subordinated notes which it has talked at the 10¾% area.

On Tuesday a buy-side source told Prospect News that the euro-denominated tranche of senior notes is "a blowout," and added that the dollar-denominated seniors and subordinated notes are also doing well.

Next in line comes Paxson Communications Corp. with $1.130 billion of first- and second-priority floating-rate notes via Citigroup, Bear Stearns, CIBC and Goldman Sachs.

The buy-sider said that Paxson will likely pay up for attempting to issue the Rule 144A notes without registration rights.

And dropping below the billion dollar threshold, Mirant North America plans to sell $850 million of eight-year senior notes via JP Morgan, Deutsche Bank Securities and Goldman Sachs to help fund its exit from bankruptcy.

The buy-sider said that unofficial guidance on Mirant's notes is 8%.

Talking the deals

Meanwhile official price talk was heard on three other deals that are expected to price before Friday's close.

Spansion Inc. is talking its $400 million offering of 10-year senior unsecured notes at 11% area. Pricing is set for Thursday on the deal being run by Citigroup and Credit Suisse First Boston.

SGS International has talked its $200 million offering of eight-year senior subordinated notes at 11¼% to 11½%. The UBS and Lehman-led deal is also expected to price Thursday.

Finally, Comstock Homebuilding Cos., Inc. is talking its $150 million offering of five-year senior subordinated notes at 11% to 11 ¼%.

That offering, via Friedman Billings Ramsey, is expected to price on Thursday, as well.

Centennial up in trading

When the new Centennial Communications notes were freed for secondary dealings, "they traded up nicely," a trader said, quoting the company's new 10% senior notes due 2013 as having moved up to 101.5 bid, 102 offered from their par issue price, while the Wall, N.J.-based Caribbean wireless provider's senior floating-rate notes due 2013 had firmed to 100.5 bid, 101 offered from their issue price at 99.

Another trader saw the 10s at 101.25 bid, 101.75 offered, but saw the FRNs up less than a point at 99.75 bid, 100.25 offered.

Yet another trader saw the floaters at that same price, while the fixed-rate notes were at 101.125 bid, 101.625 offered.

The first trader also saw the new Omnicare bonds "trade up to decent levels," with both tranches of the Covington, Ky.-based nursing home pharmaceuticals supplier's new deal at 101.25 bid, 101.75 offered, up from their Monday issue price at par.

Another trader characterized the new 6¾% notes due 2013 and 6 7/8% notes due 2015 as "well received," pegging the former at 101 bid, 101.5 offered, and the latter at 101.25 bid, 101.75 offered.

But while those new issues were sizzling, all the traders agreed that Block Communications' new 8 ¼% notes due 2015 were fizzling, little moved from their 99.169 issue price.

The Block bonds "looked like a pig," one said, quoting them at 99.25 bid, 99.5 offered, "up an 1/8, nothing. It didn't do too well in the Street, but the other two [had] nice little pops."

Block "was kinda small," another trader said - $150 million, compared to $550 million total for Centennial and $750 million total for Ominicare - "and didn't attract the attention, I think, of a lot of the hedge funds, like these other deals did, and so it's holding right about at new issue, but that's about it." He saw the Block bonds at 99.25 bid, 99.75 offered.

The new Pipe Acquisition senior secured floating-rate notes due 2010, which priced at 99, came too late in the day for any aftermarket dealings.

Focused on new deals

The trader said that there was little real activity in established secondary market names, with only the new-deal bonds "very active.

"It's all going to be about new issues for the next 10 days before Christmas," he declared. The established secondary market, he continued "was quiet. We had several bid [wanted] lists. It was sort of typical, with a lot of people sitting around waiting for the Fed, a lot of people deciding 'I'll buy those depending on how the Fed goes,' but I think that was sort of as expected," with the central bank bumping the closely watched federal funds target rate up another ¼ point to 4¼% - its highest level in 4½ years, but wording its message in such a way that economists parsing its language speculating that there might only be one or two more rate boosts left.

"The Dow got a nice boost" from that, he said - the widely followed stock market barometer moved up 55.95 points (0.52%) to 10,823.72, with most of the gain concentrated in the last two hours of trading, following the release of the Fed message - "but our market seemed to go nowhere. It was unchanged, or maybe a little bit firmer."

GM, Ford steady

Among the usual names, General Motors Corp. and rival Ford Motor Co., and their respective financing arms, General Motors Acceptance Corp. and Ford Motor Credit Corp., "were really range bound," said another trader, who saw GM's benchmark 8 3/8% notes due 2033 in a 70-72 context, "but no real volatility, like you had yesterday [Monday], when they were back and forth three or four points," pushed around by Standard & Poor's downgrade of GM's credit ratings deeper into junkbondland and its warning that bankruptcy for the once-mighty Detroit-based auto giant was not out of the question.

The trader also saw GMAC's widely watched 8% notes due 2031 hanging in around 97.5 bid, 98.5 offered.

Another trader, however, did see some volatility in the latter name, pegging the GMAC 8s up half a point at 97.5 bid, 98.5 offered - after first seeing those bonds drop as low as 96 and then bounce as high as 99, versus their opening levels at 97 bid, 99 offered.

He also saw GMAC's 6¾% notes due 2014 go from an opening level of 90 bid, 92 offered, up to 92 bid, 93 offered intraday, and then finish at 91 bid, 92 offered, a one-point gain. He saw a similar advance for GMAC's 6 7/8% notes due 2011 which firmed to 92 bid, 93 offered.

Yet another trader saw the GMAC 8s half a point better at 97 bid, 97.5 offered, while the GM 8 3/8s were a quarter-point higher at 71 bid, 72 offered. He saw Ford's flagship 7.45% notes due 2031 down ¾ point at 71.5 bid, 72.5 offered, while Ford Motor Credit's 7% notes due 2013 were unchanged at 88.5 bid, 89.5 offered.

There seemed to be no real market response to the news that the United Auto Workers union has been in talks with GM, aimed at averting a strike at GM's former subsidiary and still largest single components supplier, Troy, Mich.-based Delphi Corp. But a union official said that while those talks had been going on, it was still unclear how GM - which has enough of its own problems - might be able to help its erstwhile problem child, which filed for bankruptcy protection in October. Delphi and the union have not really been talking since then, except for Delphi's submission to the labor group of two wage-cut proposals that would sharply slash the hourly pay and benefits now enjoyed by Delphi's unionized workers; the UAW rejected both out of hand. A union official said Tuesday a strike against Delphi, at this juncture, is "still more likely than not," although he would not give a timetable for such a possible work stoppage. A strike would seriously disrupt GM's production, and would also impact Ford and other automakers who use Delphi's electronic components, although none of them are as dependent on Delphi as GM - Delphi's single largest customer - is.

The UAW also said Tuesday that leaders of the national union would meet with representatives of its Ford locals on Wednesday to discuss a proposed agreement with the Dearborn, Mich.-based Number-Two U.S. carmaker that would cut the company's healthcare costs. Such an agreement would be similar to one recently reached with GM, which makes hourly workers and retirees pay more for their health care, previously fully paid for by the company.

Toys 'R' Us gains

Outside of the automotive area, a trader said that Toys 'R' Us Inc. "was a little stronger, for whatever reason, even after bad numbers last week."

He said that he had seen some buyers of the company's 7 5/8% notes due 2011 lift those bonds a point to 82 bid, 83 offered, while its 7 3/8% notes due 2018 were also a point better, at 71.5 bid, 73.5 offered.

The Wayne, N.J. based toy and children's products retailer - which was taken private earlier this year in a big leveraged buyout transaction by a Kohlberg Kravis Roberts & Co.-led syndicate - reported last week that in the fiscal third quarter ended Oct. 29 it had a net loss of $126 million, up sharply from its year-earlier $21 million deficit.

HealthSouth rises on earnings

He also saw HealthSouth Corp. bonds up on "good numbers today [Tuesday], better than anticipated, about 10% or 15% better than what they [market watchers] thought," with the company's bonds up two or three points across the board.

He saw the Birmingham, Ala.-based outpatient diagnostic, surgery and rehabilitation services clinic operator's 10¾% notes due 2008 two points better at 96.5 bid, 97.5 offered, while its 7 5/8% notes due 2012 were also up a deuce at 95 bid, 96 offered. HealthSouth's 7% notes due 2008 were at 99 bid, par offered and 8½% notes due 2008 were at 98 bid, 99 offered, both up a point.

HealthSouth reported third-quarter operating earnings of $123.7 million and net revenue of $828.8 million. It did not provide comparable quarterly figures from 2004.

It also mapped out a three-phase strategy for the next four years, which the company said would lead to improved operations and more financial flexibility to let it pay down debt.

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