Universal City sells two-parter; Pathmark firms on chance of sale; funds see $186 million outflow

By Paul Deckelman and Paul A. Harris

New York, Dec. 2 - Thursday's session in the high-yield primary market came short of half a billion of business, with Orlando theme park company Universal City Development Partners, Ltd. bringing two tranches totaling $450 million.

However with the Yuletide rising, companies continued to hang their high-yield stockings by the fire, hoping the accounts will fill them with cash, at what the sell-side continues to insist are agreeable interest rates.

In the secondary sphere, news that Pathmark Stores Inc. had hired investment bank Dresdner Kleinwort Wasserstein to explore various "strategic alternatives" - possibly including the sale of the underperforming Carteret, N.J.-based supermarket operator - sent its bonds and shares higher in Thursday's dealings. ON Semiconductor Corp.'s notes were higher, a day after the Phoenix-based semiconductor maker said that it would buy back some of its bond debt via a tender offer.

After the market close, participants familiar with the weekly high yield mutual fund flow numbers compiled by AMG Data Services of Arcata, Calif. said that in the week ended Wednesday $186.4 million more left the funds than came into them. It was the second consecutive week of outflows, following the essentially negligible $5 million outflow in the previous week.

Outflows have been seen in 23 weeks out of the 48 since the beginning of the year, although the funds show a clearly negative balance for the year, with a net outflow over that time of $2.714 billion, according to a Prospect News analysis of the AMG figures. However, following a mixed bag of weekly results early in the year - which included several weeks of unusually large outflows - the trend over the past three months has been solidly positive, according to the analysis of the figures.

Market sources continue to say that there is cash aplenty on the buy-side - enough to clear the building pipeline of deals that are poised to price before 2004 comes to what will apparently be a busy end.

The cash, those sources add, is coming from investors such as pension funds, insurance funds and hedge funds, and is therefore not reflected in the weekly high-yield mutual funds flow data.

Universal City is day's sole issuer

Using the increasingly familiar structure of fixed-rate and floating-rate notes, Universal City completed Thursday's only transaction.

Universal City Florida Holding Cos. I and II sold $450 million of notes due May 1, 2010 (B3/B-) at par.

The company sold $150 million of senior fixed-rate notes to yield 8 3/8%, at the tight end of the 8½% area price talk.

The company also sold $300 million of senior floating-rate notes to yield three-month Libor plus 475 basis points, which was right on top of the price talk.

JP Morgan and Banc of America Securities ran the books for the dividend funding deal.

Busy end to post-Thanksgiving week

Shortly after the Thursday session came to a close, one investment banker told Prospect News that Friday's session will likely see terms emerge on offerings from at least six issuers and possibly as many as eight.

Among the offerings that appear to be headed for Friday pricings, Huntsman International LLC issued price talk Thursday on its $350 million offering of 10-year non-call-five senior subordinated notes via Deutsche Bank Securities and Credit Suisse First Boston.

Talk is 7¼% area on the dollar-denominated notes and 7¼% to 7½% on the euro-denominated notes, with tranche sizes remaining to be determined.

Elsewhere price talk is 99.50 area on Fairfax Financial Holding Ltd.'s $150 million add-on to its 7¾% senior bullet notes due April 26, 2012 (expected ratings Ba3/BB), expected on Friday via bookrunner Banc of America Securities.

A big Friday in Europe

Meanwhile, Friday could see healthy issuance turned out by the high-yield syndicate desks in Europe.

Kabel Deutschland Holding GmbH & Co.'s €400 million of 10-year senior floating-rate PIK notes (B-) saw talk emerge Thursday of a coupon of six-month Euribor plus 850 basis points coming at a discount price of 99.00. Pricing is expected on Friday via Goldman Sachs & Co. and Deutsche Bank Securities.

The notes will be callable at par after one year, which will provide the Bonn, Germany-based cable TV and internet services provider a window in which it can call the bonds if an IPO is completed. After the second year the call premium increases to 102, whereupon it declines annually to 101 and to par.

Price talk also emerged on Peri-Werk Artur GmbH's €225 million of bonds that will be offered in two bullet tranches (Ba3/BB),

The Weisenhorn, Germany-based construction company is selling seven-year senior fixed-rate notes which are talked at 5 5/8% to 5 7/8%, and five-year senior floating-rate notes talked at Euribor plus 175-200 basis points.

Deutsche Bank Securities and Goldman Sachs & Co. have the books.

And price talk is 7 1/8% area on Chesapeake Corp.'s €100 million of 10-year senior subordinated notes (B2/B+), expected to price Friday via Citigroup and Banc of America Securities.

Add to those the approximately £500 million equivalent of issuance that some observers are expecting Friday from Waste Recycling Group Ltd.

The company's deal is split evenly between two issuing entities: WRG Acquisitions plc, the parent of Waste Recycling Group Ltd., is selling £250 million second lien floating-rate notes due 2011 (B+). WRG Finance plc, the newly formed parent of WRG Acquisitions plc, has £250 million fixed-rate senior notes due 2014 (B) in the market.

Late Thursday no price talk had been heard on the U.K. recycling company's notes.

Calendar continues to build

Meanwhile Thursday prospective issuers continued to appear, as has been the case throughout the post-Thanksgiving week.

Bathroom fixtures manufacturer Maax Holdings, Inc. plans to price $110 million proceeds of eight-year non-call-four senior discount notes on Friday afternoon, following a Friday morning investor conference call.

Merrill Lynch & Co. has the books for the deal from the Quebec company, which will use proceeds to repurchase shares.

Elsewhere the roadshow starts Friday for InterDent Service Corp.'s $80 million offering of seven-year non-call-four senior secured second-lien notes (B3/B), which are expected to sell on Friday, Dec. 10.

Jefferies & Co. has the books for the equity-buyback deal from the El Segundo, Calif.-based dental management services provider.

Finally, Independent Wireless One Corp. plans to sell $225 million proceeds of bonds to be issued by IWO Escrow Corp., according to a company source.

The source, who declined to disclose any other details, said that the Lake Charles, La.-based Sprint PCS affiliate hopes to complete the deal before the end of 2004.

According to a market source, Bear Stearns & Co., Lehman Brothers and Merrill Lynch & Co. are joint bookrunners for the deal which will be structured in two tranches: $150 million of eight-year non-call-two senior secured floating-rate notes and $75 million proceeds of 10-year senior discount notes, which will come with a five-year zero coupon.

Proceeds will be used to help fund the company's restructuring under Chapter 11.

SBA new notes higher in trading

The new Universal City 8 3/8% notes due 2011 and floating-rate notes due 2010 arrived too late in the session for aftermarket trading.

Among recently priced bonds, SBA Communications' 8½% notes due 2012 were seen by a trader as hovering at 101.5 bid, 102 offered, well up from the par issue price for the Sarasota, Fla.-based communications antenna operator's new notes.

However, Charter Communications Inc.'s new floating rate notes "basically straddled their issue price," at 99.75 bid, 100.25 offered.

Pathmark gains

Among the existing issues, Pathmark's 8¾% notes due 2012 got as good as 97.5 bid, 98.5 offered, a trader said, well up from prior levels at 96.

At another desk, an observer clocked the bonds at 97.5 bid, up a point on the day.

Pathmark's Nasdaq-traded shares were up 40 cents (7.19%) on the session to $5.96. Volume of nearly 1.6 million shares was better than five times the usual turnover.

The bonds and shares seemed to have gotten a boost from the news that the company has hired Dresdner Kleinwort Wasserstein to help management evaluate possible strategic maneuvers - a broad term which, Pathmark said in a statement, could even include the possible sale of the whole 142-store supermarket chain.

Pathmark officials declined to comment any further beyond the official statement, parrying analysts' questions along those lines during the company's Thursday afternoon third-quarter earnings conference call (see related story elsewhere in this issue).

Pathmark - which restructured via a voluntary Chapter 11 filing in 2000 - reported a third-quarter net loss of $3.6 million (12 cents per share), versus a year-ago net loss of $200,000 (one cent per share).

ON Semiconductor up, Level 3 steady

Elsewhere, ON Semiconductor Corp.'s 13% notes due 2008 were quoted at 118.75, up more than four points on the session. The rise followed the news that the company will tender for its 12% notes due 2008 and 2010, in an offer scheduled to conclude on Dec. 29.

News that Level 3 Communications Inc. had successfully concluded its $1.105 billion tender offer for its 2008 bonds was seen having little immediate impact.

The Broomfield, Colo.-based telecommunications company's benchmark 9 1/8% notes due 2008 were seen down half a point at 88.25, while its 10½% notes due 2008 and 11% notes due 2008 were each seen off half a point at 89.5 bid and 91 bid, respectively.

Level 3 - which had originally wanted to buy back just $450 million of the 2008 notes - had raised the amount it would buy to $1.105 billion after the offer was well oversubscribed (see Tenders and Redemptions for full tender offer details).

Level 3 said that it had reduced the total principal amount of its outstanding debt maturing in 2008 to about $1.3 billion, a reduction of some 46%, based on current euro exchange rates. The company estimated that it cut its annual cash interest expense by $28 million, reduced its total outstanding debt by about $30 million (after taking into account the new bank and convertible debt sold to fund the tender offer) and said that it had about $20 million in cash proceeds remaining from those capital raising transactions, after payments under the debt tender offers and the related transaction expenses.

HealthSouth higher

Among other names, HealthSouth Corp. "Is a story that continues to turn around," a trader said, quoting the company's 7 5/8% notes due 2012 up a point at 98.5 bid, 99 offered.

The company's recently appointed chief executive officer, Jay Grinney - who took over from disgraced former CEO Richard Scrushy, now being tried for alleged fraud - said at a presentation for investors that fully turning the Birmingham-based diagnostic services provider around after the billion-dollar-plus accounting scandal that brought Scrushy and other company execs down could take as long as four years.

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