Agilent semiconductor buyers slate $1 billion deal; Chesapeake prices; Qwest climbs on tender news

By Paul Deckelman

New York, Nov. 2 - The buyout shops that are acquiring Agilent Technologies Inc.'s semiconductor unit were heard by high yield syndicate sources Wednesday to be planning a whopping $1 billion of new bond financing to help fund that deal. It will come to market as a three-tranche offering of fixed- and floating-rate notes.

Another sizable offering joining the forward calendar is Compton Petroleum Corp.'s $300 million eight-year issue, the proceeds of which will be used to take out existing bond and credit facility debt.

And late in the day - in the early evening, actually, well after the market had closed - Chesapeake Energy Corp. priced an upsized $500 million issue of 15-year bonds, as part of a three-legged funding effort connected with the Oklahoma City-based independent oil and gas exploration and production company's previously announced acquisition of Columbia Natural Resources LLC.

In the secondary market, Qwest Communications International Inc.'s paper was seen up at least two points across the board, replicating the gains that the Denver-based telecommunications company had notched on Tuesday. Traders said a variety of factors had Qwest ringing the bell, including the company's announcement Tuesday that it would tender for some of its bonds, favorable quarterly results and positive ratings agency action.

And even negative ratings agency action couldn't keep Tenet Healthcare Corp.'s bonds from bouncing off the lows they had hit Tuesday in response to bad quarterly figures.

"The whole market seemed up at least one-quarter to one-half point," a trader said, and some were up even more than that. "Volume is certainly down but I'd say it was certainly firmer."

And things were looking firmer in the primary arena as well. After a depressingly dull October - by Prospect News' calculations, just $3.1 billion of new junk bonds were sold in the month, making it the sleepiest month since May, when only $2.5 billion were sold, and at least half a dozen deals were spiked before they even made it to the starting gate, while many others were downsized - November looks like it's perking up nicely.

The big news Wednesday was the emergence of the market's first billion-dollar mega-deal in a while, as sources said Avago Technologies Finance Pte. Ltd. plans to issue $1 billion of bonds as part of the buyout of Agilent Technologies's semiconductor unit.

Singapore-based Avago is an affiliate of U.S. buyout shops Kohlberg Kravis Roberts & Co. and Silver Lake Partners, who are buying Agilent's Semiconductor Products Group for $2.66 billion.

As part of the funding package, which also includes a big bank debt financing, Avago will bring a three-part deal to market, consisting of $750 million of eight-year fixed-rate senior unsecured notes and 71/2-year floating-rate notes - the exact size of each tranche within that $750 million is to be determined - and $250 million of 10-year senior subordinated notes.

The 71/2-year notes will be non-callable for the first two years after issue, the eight-year notes will be non-callable for the first four years, and the 10-year notes will be non-callable for the first five years.

The Rule 144A offering will be brought to market via joint book-running managers Lehman Brothers, Citigroup and Credit Suisse First Boston.

It will be sold to potential investors via a three-continent roadshow process that begins in Europe next Monday, moves on to Asia on Nov. 10 and then on to the United States on Nov. 14, with pricing anticipated at the end of the Nov. 14 week.

Agilent announced the sale of semiconductor group to the buyout shops on Aug. 15 in the context of a broader effort by the Palo Alto, Calif.-based technology manufacturer to restructure by divesting non-core assets and refocusing itself as purely a high-tech measurements company servicing a $40 billion worldwide market.

Another big deal making its way onto the forward calendar is Compton Petroleum Corp. Finance Co.'s planned offering of $300 million of eight-year senior notes via a syndicate led by bookrunners CSFB and Morgan Stanley. They are slated to begin a roadshow Thursday, with pricing seen sometime next week.

The Calgary, Alta.-based oil and gas exploration and production company plans to use the proceeds from the offering to fund its previously announced tender offer for its $165 million of 9.90% series A senior notes due 2009, and to pay down its revolving credit debt.

Orchard to start marketing

California home improvement center retailer Orchard Supply Hardware Stores Corp. was also heard to be hitting the road Thursday to sell a planned $235 million issue of eight-year senior notes, which will be brought to market by underwriters Lehman, Citigroup and JP Morgan. That marketing campaign will run through Nov. 15.

Orchard, a wholly owned subsidiary of department store giant Sears Holdings Corp. will use the anticipated new-deal proceeds as part of a broad recapitalization of the company announced by Sears Holdings on Oct. 7. Under terms of that planned transaction, Ares Management LLC, a Los Angeles-based investment company, will pay $58.7 million in cash for a 19.9% stake in Orchard, and will also get a three-year option to purchase an additional 30.2% of the company for $126.8 million.

Orchard will sell the new bonds in support of that recap, and will pay a $450 million dividend to Sears, Roebuck and Co.

Shaw plans Canadian deal

And Shaw Communications Inc., a Calgary-based broadband, cable-TV, internet and telecommunications service provider, announced plans to offer C$300 million of seven-year notes via an underwriting syndicate led by TD Securities.

It said that proceeds from the deal will be used to repay existing bank debt, redeem U.S. dollar-denominated Canadian Originated Preferred Securities and for general corporate purposes.

Chesapeake upsizes

On the pricing front, Chesapeake Energy Corp. sold $500 million of senior notes due 2020 - upsized from the originally planned $400 million - as part of its financing package for the Columbia Natural Resources transaction.

Those bonds, which came to market via a broad underwriting syndicate consisting of Bear Stearns, Banc of America Securities, CSFB, Lehman and Wachovia Securities, carried a 6 7/8% coupon, and priced at 98.847 to yield 7%.

After having been announced only on Tuesday afternoon, the quickly emerging drive-by deal was rapidly shopped around to investors via a conference call that preceded the pricing. The pricing process was not concluded until the early evening hours, well after the market had wrapped up for the day.

In addition to the bond sale, Chesapeake also priced separate offerings of cumulative convertible preferred securities and contingent convertible senior notes.

From out of the Far East came word that Hopson Development Holdings Ltd., which develops and manages residential real estate properties in Beijing, Shanghai and other Chinese cities, priced a $300 million offering of seven-year senior notes. Those bonds came to market via bookrunner CSFB, along with Morgan Stanley, and priced at par with to yield 8 1/8%, in line with pre-deal market price talk.

Qwest jumps

Back in the secondary sphere, Qwest Communications bonds shot up by about two points across the board Wednesday, pretty much matching the gains they had recorded on Tuesday.

A trader - who saw the bonds up on the combination of the announced tender offer, a smaller quarterly loss versus a year ago and favorable ratings activity by Moody's Investors Service and Fitch Ratings - pegged the bonds up two points, quoting the 6 7/8% notes due 2033 at 92.5 bid, 93.5 offered.

At another desk, a trader saw Qwest's 6 7/8s of 2028 having moved up to 89.25 bid, 90.25 offered, from Tuesday's close at 85.5 bid, 87.5 offered.

Qwest's 8 7/8% notes due 2031 were seen around the 106 level, after having pushed up on Tuesday to 104 bid, 105 offered from 102.5 bid, 103.5 offered.

Helping give those bonds a boost was Qwest's announcement Tuesday that it will tender for up to $3 billion face amount of its various notes. Also helping out was Moody's move in raising Qwest's corporate family rating to B1 and affirming its senior unsecured rating at Ba3. Fitch Ratings on Wednesday said that it might raise Qwest's ratings.

All of that follows Qwest's announcement on Tuesday that its third-quarter loss was $144 million (eight cents per share), well improved from the year-earlier loss of $569 million (31 cents per share). It also had improved revenue. And Qwest also reached agreement to settle protracted shareholder lawsuits against the company for about $400 million, cauterizing a festering open wound.

Tenet defies negatives

While Qwest was up on good news, Tenet was up despite the lack of same - even up despite bad news.

A day after the Dallas-based hospital operator reported a third-quarter loss of $408 million (87 cents per share), sharply wider than a loss of $70 million (15 cents per share) a year ago and Moody's cut Tenet's corporate family rating to B3 from B2, Tenet's bonds "were actually up," a trader said, quoting its 7 3/8% notes due 2013 a point better at 89.5 bid, 90.5 offered, "even though it got downgraded."

The ratings downgrade "doesn't really matter," another trader said, calling the company's notes "Teflon bonds. Every time it tries to trade down, it trades back up."

He saw the 7 3/8s at 90.25 bid, and its 9 7/8% notes at 98.5 bid, 99.5 offered.

Yet another trader saw Tenet's 9¼% notes due 2015 move up to 97.75 bid, 98.75 offered, better from 95.5 bid, 96.5 offered at the market's opening, and up still further from 95 bid, 96 offered late Tuesday. He also saw the 6 7/8% notes due 2031 up three points on the day, at 80 bid, 82 offered.

"Gee, this was actually up," he said, "by 2¾ points - which makes absolutely no sense, unless someone was covering some shorts."

Level 3 steady after gains

Elsewhere, the same trader saw Level 3 Communications Inc.'s bonds - which had firmed smartly over the previous two sessions on the news that Broomfield, Colo.-based Level 3 will buy rival fiber-optic operator WilTel Communications Group's valuable, cash-flow generating operations but will not have to assume its debt and other liabilities - as little changed, the spurt apparently over.

The company's benchmark 9 1/8% notes due 2011 were up ¼ point at 85.25 bid, 86.25 offered.

"I don't see," he declared, "any big move in that one."

GM rebounds a little

General Motors Corp., whose bonds had trended lower Tuesday after Moody's downgraded them, warning about the weak sales and earnings outlook for the huge carmaker, were seen recovering Wednesday.

Its benchmark 8 3/8% notes due 2033 were a quarter point better at 73.5 bid, 74.5 offered, and General Motors Acceptance Corp.'s 8% notes due 2031 firmed ¾ of a point to 104.75 bid, 105.25 offered.

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