Windstream, WCA Waste deals price; Berry, Graham up on acquisition deal

By Paul Deckelman and Paul A. Harris

New York, June 28 - Windstream Corp. blew in with a gigantic $2 billion-plus two-part mega-deal on Wednesday, junk market primary sources said Wednesday. Also pricing successfully was a considerably smaller deal for WCA Waste Corp.

U.S. Concrete, Inc. was meantime heard shopping around a quickly emerging add-on offering to its existing 8 3/8% notes due 2014, which is expected to price on Thursday. Price talk also surfaced on several other offerings on the forward calendar that could be priced as soon as Thursday - MarkWest Energy Partners LP, Stewart & Stevenson LLC and Citisteel USA Holdings.

In the secondary market, the new Windstream bonds, and WCA's, all traded up after being freed.

Back among the established issues, Berry Plastics Corp.'s bonds were better on the news that the Evansville, Ind.-based plastic packaging maker is going to be acquired by private equity players Apollo Management LP and Graham Partners. In a twist, the bonds of another name out of that same sector, Graham Packaging Co. Inc., were solidly better on that same news, apparently because the company that controls Graham Packaging - which is not Graham Partners, despite the similar names - will now not be acquiring Berry Plastics with hefty additions of new debt that might further subordinate Graham's bonds.

Overall a market source marked the broad high yield market unchanged on Wednesday.

In the primary market two issuers priced three tranches, and in doing so raised $2.653 billion of proceeds.

Windstream oversubscribed

Windstream priced $2.546 billion of senior notes (Ba3/BB-) in two parts on Wednesday.

The Little Rock, Ark.-based telecommunications company created by Valor Communications Group Inc.'s acquisition of Alltel Corp. Inc.'s landline telecom business priced $800 million of seven-year notes at par to yield 8 1/8%. The yield came at the wide end of the 8% to 8 1/8% price talk, which had been revised from 7¾% to 8%.

Merrill Lynch & Co. and JP Morgan Securities were joint bookrunners for both tranches. The seven-year tranche only had Banc of America Securities, Citigroup, Wachovia Securities and Barclays Capital as co-managers.

The company also priced $1.746 billion of 8 5/8% 10-year notes at 97.547 to yield 9%, the notes came on top of the price talk, which had been revised from earlier talk that had the notes pricing in a range of 8 1/8% to 8½% (3/8% to ½% wide of the original talk on the seven-year notes). The sale of the 10-year notes generated $1.703 billion of proceeds.

The overall two-part Rule 144A transaction generated $2.503 billion of proceeds.

The deal came with covenant changes.

Sources told Prospect News that both tranches of the deal were oversubscribed.

A buy-side source noted that the bonds had traded up in the secondary market.

WCA Waste tight to talk

Also pricing Wednesday was WCA Waste's $150 million issue of eight-year senior notes (B2/B-), which came at par to yield 9¼%, at the tight end of the 9¼% to 9½% price talk.

Credit Suisse ran the books for the recapitalization deal from the Houston-based waste disposal company.

Hedge funds pile into Nortel

Also on Wednesday, the stage was set for a big Thursday session during which most players expect the forward calendar to be cleared.

Sources said that syndicate desks will be very thinly staffed and trading floors even thinner as Friday wears on ahead of what for many market participants will be a four-day Fourth of July holiday weekend.

Nortel Networks Ltd. is expected to price its $2 billion three-tranche offering (B3/B-) on Thursday.

On Tuesday the company talked its tranche of seven-year non-callable fixed-rate notes at a yield of 10% to 10¼%, its 10-year non-call-five fixed-rate notes at 10½% to 10¾% and its five-year non-callable floating-rate notes at Libor plus 425 basis points.

Tranche sizes for the JP Morgan and Citigroup deal remain to be determined.

A buy-side source said that Nortel is going to go at the price talk very well, and added that there are reportedly $3 billion of orders in the book.

The source added that the books closed Wednesday afternoon "because the hedge funds got word that the thing was doing well and was oversubscribed, and all of the sudden they started piling in."

The rest of Thursday's field

Also expected to price Thursday are:

• Markwest Energy Partners' $200 million offering of 10-year notes via RBC Capital Markets, JP Morgan and Wachovia Securities, talked Wednesday at 8½% to 8¾%;

• Stewart & Stevenson LLC's $150 million offering of eight-year senior notes (B3/B-) via JP Morgan, talked at 9¾% to 10%; and

• CitiSteel USA Holdings' $60 million of 4.5-year senior secured PIK notes, via Jefferies & Co., talked at 15%.

Also showing up Wednesday with a drive-by deal was U.S. Concrete.

The Houston ready-mixed concrete company talked a $75 million add-on to its 8 3/8% senior subordinated notes due April 1, 2014 (existing ratings B3/B-) at a dollar price of 99 to 99.50, and expects to price the deal on Thursday via Citigroup

The original $200 million issue priced at par on March 26, 2004.

Because they have to

A sell-side source said Wednesday morning that the high yield primary remains a buyer's market, and added that across the board investors are pushing out prices.

Later in the day a buy-sider said that issuers are only selling bonds at the present because they have to.

The source added, however, that once Nortel and the rest of Thursday's anticipated burst of issuance clears the market, junk may rally somewhat because the new issue supply will be out of the way.

That's not to say that the post-Fourth of July market looks to be a sleepy one, the buy-sider added, saying that there are issuers expected to do deals during the remainder of the summer.

One of those deals, the buy-sider said, is expected to come from Univision Communications Inc.

The Los Angeles-based Spanish-language media company is expected to bring $2 billion of high-yield bonds via Credit Suisse and also expected to obtain a new $8.25 billion credit facility to support its leveraged buyout by Madison Dearborn Partners, Providence Equity Partners, Texas Pacific Group, Thomas H. Lee Partners and Saban Capital Group, transaction is valued at about $13.7 billion.

Windstream jumps in trading

When the new Windstream 8 1/8% notes due 2013 were freed for secondary dealings, they were seen firming smartly to around 100.75 bid, 101.25 offered from their par issue price earlier in the day. The company's 8 5/8% notes due 2016 were seen having moved up to par bid, 100.5 offered, a sizable gain from their 97.547 issue price, a trader said.

Another trader saw the seven-years even better, at 101 bid, 101.5 offered, although he saw a little less appreciation on the 10-years, to 99.75 bid, 100.25 offered.

The second trader also saw WCA Waste's new 9¼% notes due 2014 at 101 bid, 101.5 offered, well up from their par issue price.

A trader saw Chesapeake Energy Corp.'s new 7 5/8% notes due 2013 trading at 99.5 bid, par offered, up from their issue price late Monday of 98.266.

Market quiet, many names steady

Back among the established issues, there wasn't all that much going one, a trader said - not with the primary market booming along and monopolizing the attention of many junk players, and with the Federal Reserve's policy-setting Federal Open Market Committee slated to wrap up its two-day meeting Thursday. The central bank is expected to probably announce yet another quarter-point rise in interest rates, its 17th in the past two years, and may possibly offer rhetorical clues in its accompanying statement that could indicate whether those rates will keep on rising.

With all of that going on, they said, there wasn't much price movement among the usual suspects. General Motors Corp.'s bellwether 8 3/8% notes due 2033 were seen trading around 75, up perhaps a ¼ to ½ point on the session, while its General Motors Acceptance Corp. financial arm's 8% notes due 2031 were up ¼ point at 93.25 bid, 95.75 offered. GM arch-rival Ford Motor Co.'s flagship 7.45% notes due 2031 were up ¼ point at 70.25 bid, 70.75 offered, while its Ford Motor Credit Co. finance unit's 7% notes due 2013 were unchanged at 85 bid, 85.25 offered.

Berry higher

One rarely seen name where there was some movement was Berry Plastics, with a trader seeing its 10 ¾% notes due 2012 up ¾ point at 108.5 bid, 109 offered.

A trader at another desk said of Berry that "we never see 'em," but at yet another shop, the 103/4s were pegged having moved up to 108.25 bid from 107.125. Its even more seldom-seen 11% notes due 2007 firmed 1/8 point to 101.

The Berry bonds got a boost from the news that Apollo Management and Graham Partners have agreed to acquire the privately held company in a transaction having an aggregate enterprise value of $2.25 billion. That deal is expected to close in the third quarter.

The company announcement left unsaid what will happen with Berry Plastics' $1.145 billion of debt, which includes the $335 million of outstanding 10¾% bonds, as well as $789.038 million of term loan debt as of the end of the company's fiscal first quarter on April 30. According to its filing at that time with the Securities and Exchange Commission, the bond indentures include a provision for a change-of-control put in the event ownership changes hands - but at a price of 101, plus accrued interest, well below where those bonds have been trading for some months, it is highly unlikely that any bondholders would take advantage of such and offer. Calls to the company Wednesday were not returned.

A source close to the deal also said that there was no information available at this time on the possible financing of the acquisition, although market observers believe that like most such buyout deals it will be largely financed through new debt issuance.

Graham gains on Berry sale

That latter prospect may have been what was worrying the bank debt investors and bondholders of Graham Packaging, as long as that company's controlling shareholder, The Blackstone Group, appeared to be in the running as a possible buyer for Berry.

A bank debt market source said that there had been rumors that Blackstone was considering buying Berry Plastics and then combining the two portfolio plastic packaging manufacturers, which in turn caused Graham Packaging loan investors to fear that they might be facing a paydown or refinancing on possibly less favorable terms for the combined company, which would be considerably more levered than Graham Packaging alone is currently. That had caused the Graham paper to trade right around a par bid context - but Wednesday's announcement that Berry will be bought by Apollo Management and Graham Partners, and not by Blackstone, caused the bank debt to strengthen a bit to 100.25 bid, 100.5 offered, as repayment fears have diminished, the bank debt market source added.

Graham Packaging's bonds did even better, traders in the junk market said, with one quoting its 9 7/8% notes due 2014 at 98.75, up a full four points on the session.

A source at another desk saw those bonds up two points on the session at 97.625 bid, while its 8½% notes due 2012 were half a point better at 97 and its 8¾% notes due 2008 were unchanged at 100.125.

Another trader saw both the 9 7/8s and the 81/2s ending at 97 bid, 98 offered, which he called up 1½ point and up ¾ point, respectively.

Plains gains

The news that Plains Explorations and Production Co. plans to sell some Western oil and gas properties, primarily in California and Texas, helped the Houston-based independent energy company's bonds to firm, a market source said, quoting its 8¾% notes due 2012 up half a point at 104.25, while its 7 1/8% notes due 2014 were estimated a full point higher at 97.25 bid.

The company said it intends to realize more than $1 billion from a combination of the sale proceeds and free cash flow for the remainder of the year, with the proceeds to be used to reduce debt and for share repurchases.

Penn National unchanged

Penn National Gaming Inc.'s bonds failed to go anywhere, even as the Wyomissing, Pa.-based gaming operator's Nasdaq-traded shares shot up in apparent reaction to favorable action by the Pennsylvania state legislature. Its 6¾% notes due 2015 were unchanged at 93.5 bid, while its 6 7/8% notes due 2011 were likewise steady at 96.625.

The company's shares, in contrast, jumped $2.78 (7.90%) to $37.99. Volume of 2.4 million was almost three times the norm.

Those shares were hot - even though the bonds were not - on the news that the Pennsylvania state senate had on Tuesday night passed and sent to the state House a bill that would eliminate a requirement that gaming companies operating in-state exclusively buy their slot machines from Pennsylvania-based producers. That action is seen removing a key obstacle to the eventual final legislative approval for an expansion of slot-machine gambling throughout the state. Pennsylvania gaming regulators followed that up with a similar vote Wednesday on procedural matters relating to slot machine gaming.

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