Possible sale boosts United Rentals; United Surgical Partners, iPCS talk deals; Pfleiderer launches hybrid

By Paul A. Harris

St. Louis, April 10 - Sources marked the broad high yield market flat on Tuesday, with a hedge fund manager spotting the high yield-tracking CDX 100 index unchanged on the day at 99.50 bid.

Secondary market sources reported low trading volume, apart from a two or three names, the most conspicuous being United Rentals, Inc. Its bonds went on a "good news-bad news" roller coaster ride that left them approximately a point higher on the day.

Meanwhile no issues were priced in the primary market.

Information surfaced, however, on issues that are presently in the market.

United Rentals - the good news

During an otherwise quiet session traders and other market sources saw activity in the existing issues of United Rentals.

Sources saw the Greenwich, Conn., equipment rental company's bonds trade up by as much as 4 points early on Tuesday, only to fade throughout the remainder of the session.

It was good news and bad news for United Rentals.

The good news greeted the market as soon as the awning went up Tuesday morning:

In a press release the rental company announced that it will explore "a broad range of strategic alternatives to maximize shareholder value, including a possible sale of the company."

The company has retained UBS Investment Bank and Credit Suisse to act as financial advisors in this process.

United Rentals also announced that Wayland R. Hicks, 64, will retire as chief executive officer effective at the annual shareholders' meeting on June 4, and will continue to serve on the board as vice chairman. He will be succeeded by Michael J. Kneeland as interim chief executive officer. Kneeland is currently executive vice president and chief operating officer of United Rentals.

United Rentals - the bad news

United Rentals did not have long to bask in the glow of these seemingly positive disclosures.

Soon afterwards the ratings agencies weighed in.

Moody's Investors Service changed its outlook on United Rentals to negative from stable, and specified that the company's decision to explore strategic alternatives is a departure from the expectations incorporated into the B1 corporate family rating.

"After a period of disruption caused by investigations into accounting irregularities at the company, Moody's ratings had acknowledged the company's renewed focus on operating performance. With no specific transactions yet identified, the negative outlook reflects the potential for increased operating and financial risk at United Rental should initiatives to maximize shareholder value, including a sale of the company, be implemented," the agency said.

Meanwhile S&P placed the company's ratings on CreditWatch with developing implications.

S&P noted that an acquisition by a strategic buyer with a stronger credit profile may result in an upgrade. On the other hand an acquisition by a financial buyer, resulting in a material increase in leverage, could result in a downgrade.

Finally, Fitch placed the company's ratings on Rating Watch negative, professing the belief that "United Rental's overall size and market position may limit the board's option in achieving a higher valuation to a restructuring or sale that would negatively alter the current financial profile of the company, including significantly higher leverage, weaker capitalization and liquidity."

Up and then down

A sell-side source who spoke to Prospect News shortly after Tuesday trading had commenced in New York said that news of the possible sale of United Rentals sparked a rally.

The source said that the company's 7% notes due 2014 opened at 104.25 bid, "up 5 points from last week," when, the source added, those same 7% notes had traded at 98.75.

However before this official rang off, the bonds were already easing and had slipped to 103.50 bid and before the source could say "Goodbye," 103 bid.

By mid-afternoon a market source saw the URI 7% notes at 103 bid, 103.50 offered, and said that they were a point higher on the day.

Meanwhile, the source added, the 6½% senior notes due 2012 were at 101 bid, 101.50 offered, up from 100 bid, 100.50 offered on Monday

The source also spotted the company's 7¾% senior subordinated notes due 2013 at 104.125 bid, 104.625 offered, but was unable to quantify the change.

After the close a trader said that United Rentals's bonds had been up 3 to 3½ points early in the day, but ended the session just a point higher.

This source spotted the 7¾% notes due 2013 going out at 103.50, bid, 104.50 offered.

Talk on two deals

No issues were priced during the Tuesday primary market session.

Price talk surfaced on two deals that are in the market and poised to price before the end of the week.

United Surgical Partners Inc. set price talk for its $480 million two-part offering of 10-year senior subordinated notes (Caa1/CCC-).

The Dallas-based owner-operator of surgical facilities talked its $240 million tranche of cash-pay notes at 9% area.

Meanwhile a $240 million tranche of toggle notes is talked to price 37.5 basis points behind the cash-pay notes.

The merger-funding deal, via Citigroup, Lehman Brothers, UBS Investment Bank and Bear Stearns, is expected to price on Wednesday.

Meanwhile wireless services provider iPCS, Inc. set price talk for its $475 million two-part offering of senior secured floating-rate notes.

The Schaumburg, Ill.-based Sprint PCS Affiliate of Sprint Nextel talked a $300 million tranche of first-lien notes (B1/B-) at the Libor plus 225 basis points area.

The company also talked its $175 million tranche of second-lien toggle notes (Caa1/CCC) at Libor plus 325 basis points area.

The order book for the debt refinancing and dividend funding deal via Banc of America Securities will close late Wednesday afternoon.

KAR going well

Meanwhile no talk was heard on KAR Holdings, Inc.'s $1.1 billion three-part notes deal to help back the acquisition of Adesa, Inc. by Kelso, GS Capital, ValueAct Capital and Parthenon Capital.

However a buy-side source said that the deal appears to be going well, and is expected to price on Friday.

The Westchester, Ill., automotive specialty salvage services provider plans to issue $600 million in tranches of eight-year senior fixed- and floating-rate notes (B3/CCC) and $500 million of 10-year senior subordinated notes (Caa1/CCC).

Bear Stearns, UBS, Goldman Sachs and Deutsche Bank Securities are joint bookrunners.

The buy-sider said that the whisper on the KAR senior fixed-rate notes is 9% while the whisper on the subordinated notes is 10¼%.

The source added that these tranches were "pro forma-ed at 9¼% and 10½%, respectively.

Hence, as the deal has wound its way through the market the issuer has been tightening the coupon.

A hybrid from Pfleiderer

From Germany, Pfleiderer Finance BV, the holding company for German timber products-maker, Pfleiderer AG, announced that it will start a pan-European roadshow on Monday for its €200 million to €250 million offering of perpetual subordinated hybrid bonds (B1//BB-).

ABN AMRO and Barclays Capital have the books.

The notes, which come with seven years of call protection, will bear interest at a fixed rate until the call date. After that they will bear interest at a floating-rate, with a coupon step up.

Proceeds will be used to repay the bridge loan drawn to finance Pfleiderer's recent acquisition of Pergo AB.

Finlay paper lower

Back in the secondary market, one of the few names remarked upon Tuesday during discussions with traders was Finlay Fine Jewelry Corp.

One trader said that the company's 8 3/8% notes maturing in 2012 continued to be under pressure since the company reported disappointing numbers two weeks ago.

The trader said that the notes were headed out on Tuesday at 89 bid, 90 offered after having traded in a 91 bid, 92 offered context on Monday - all in all, down a point on the session.

Also lower, the trader said, were Denny's Corp.'s 10% senior notes due 2012 on news that same-store sales had fallen by 1.8% during the first quarter.

The trader spotted the 10% notes at 105.75 bid, 106.75 offered, ½ to ¾ point lower on the session.

"The market was flat on the day," the trader remarked.

"Everything seemed range-bound."

This trader also covers the health care sector.

Hence, armed with information from a bank loan trader that HCA, Inc.'s term loans had traded up on the session, Prospect News inquired as to whether the unsecured reaches of the Tennessee hospital company's capital structure had followed in the slipstream.

"Nyet," the source responded, adding that the middle of the HCA curve, which the trader identified as HCA's 6¾% notes due 2013, went out Tuesday at 92 bid, 92.50 offered, unchanged, while at the long end the 7½% notes due 2033 closed 85 bid, 86 offered, also unchanged.

Very quiet

Trying unsuccessfully to suppress a yawn, one market source reported that it had been a very quiet market on Tuesday.

Specifying that very little had traded, the source spotted General Motor's Corp.'s 8 3/8% notes due 2033 closing at 90 bid, 90.50 offered, up ¼ point on the session, and the Ford Motor Co. 7.45% notes at 77.875 bid, up 1/8.

Elsewhere sources reported seeing very little movement in recent issues.

One trader said that Realogy Corp.'s 12 3/8% senior subordinated notes due 2015, which priced at 98.146, were as much as a point lower on Tuesday, closing at 99.50 bid, 100 offered.

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