Paxson bonds up on tender offer, plans billion-dollar deal; TUI, Plastipak offerings price

By Paul Deckelman and Paul A. Harris

New York, Dec. 2 - Bonds of Paxson Communications Corp. were better Friday, after the West Palm Beach, Fla.-based television network operator announced plans to tender for its three outstanding issues. Paxson concurrently unveiled plans for a two-part senior secured note mega-deal, for as much as $1.13 billion, with the proceeds slated to fund the take out of the existing bonds.

Elsewhere in the primary market, TUI AG was heard to have priced over €1 billion of floating- and fixed-rate senior notes and perpetual bonds. Plastipak Packaging Inc. priced a considerably smaller dollar-denominated offering of 10-year bonds, which was well received when it broke for aftermarket trading later in the day.

A sell-side official marked the broad market a quarter-point to half a point higher on Friday, and added that the market was likely a point higher on the week and 20 basis points tighter on an average yield-to-worst basis.

Meanwhile a primary market that generally snoozed through most of the post-Thanksgiving week took a wake-up call on Friday, as €1.3 billion and $415 million of bonds were sold.

And the forward calendar of deals expected to price before year end continued to build.

The sell-side official remarked that this December is not as busy as December 2004 was, but added that the present forward calendar in not insignificant and that the secondary market has been pretty good.

TUI upsizes

Friday's big deal came from German tourism company, TUI AG, which priced an upsized €1 billion of senior notes, as well as €300 million of hybrid perpetual notes.

The company priced €450 million of 5 1/8% seven-year fixed-rate notes (Ba2/BB) at 99.947 to yield 5.2%. The notes came at a spread of 187.5 basis points to mid-swaps, at the tight end of the mid-swaps plus 187.5 to 200 basis points price talk.

TUI also priced €550 million of five-year floating-rate notes (Ba2/BB) at 99.909. The notes will pay a coupon that will float at three-month Euribor plus 155 basis points, inside of the Euribor plus 160 to 170 basis points price talk.

The combined senior notes sale was upsized from €700 million.

TUI also issued €300 million of 8 5/8% hybrid capital perpetual notes (B1/B+) at par. The notes, which are non-callable for seven years and contain a 200 basis points step-up after seven years, priced at the tight end of the 8¾% area price talk.

Citigroup, Deutsche Bank Securities, HVB and The Royal Bank of Scotland were joint bookrunners for the acquisition and debt refinancing deal.

A syndicate source commented that demand for the TUI notes was strong and the books were heavily oversubscribed, and added that all three tranches were trading above par late Friday morning, New York time.

Of the Regulation S hybrid capital tranche, the syndicate source claimed that it is the first-ever hybrid capital deal done in the market.

The source explained that hybrid capital, a form of non-dilutive quasi-equity capital, has now been established in Europe as a financing tool available to junk companies looking for a rating defense or for a layer of subordinated capital between senior debt and equity, particularly when making an acquisition.

Plastipak, OrCal do dollar deals

Also pricing bonds on Friday were U.S. issuers Plastipak Holdings, Inc. and OrCal Geothermal Inc.

Plastipak priced a $250 million issue of 10-year senior notes (B2/B) at par on Friday to yield 8½%, on top of the 8½% area price talk.

Banc of America Securities, JP Morgan and Goldman Sachs & Co. were joint bookrunners for the debt refinancing deal from the Plymouth, Mich., blow-molded plastic packaging company.

And OrCal Geothermal priced a $165 million issue of amortizing senior secured notes due Dec. 30, 2020 (Ba1//BBB-) at par to yield 6.21%, with Lehman Brothers running the books.

The issuer, a subsidiary of Sparks, Nev.-based Ormat Technologies, Inc., will use the proceeds to repay debt.

Issuance $37 billion behind 2004

That brought the post-Thanksgiving week to a close having seen just over $860 million of issuance in four dollar-denominated tranches, far less than the abbreviated three-session Thanksgiving week's approximately $3.3 billion in 11 tranches.

Including Friday's business, year-to-date dollar-denominated issuance stands at just under $92.8 billion in 357 tranches, trailing on a year-over-year basis by nearly $37 billion. At the Dec. 2, 2004 close the market had seen approximately $129.6 billion in 518 tranches.

Paxson plans $1.13 billion

News of two new roadshow starts circulated on Friday.

Paxson Communications Corp. will market $1.130 billion of notes in two tranches from Wednesday through Friday. The deal is expected to price on Dec. 14 or Dec. 15.

Citigroup, Bear Stearns & Co., CIBC World Markets, Goldman Sachs & Co. and UBS Investment Bank are joint bookrunners for the debt refinancing deal.

The West Palm Beach, Fla., broadcasting company plans to sell $700 million of five-year floating-rate first-priority senior secured notes and $430 million of six-year floating-rate second-priority senior secured notes.

Also SGS International, Inc., a financing subsidiary of Southern Graphics Systems Inc., will begin a roadshow Tuesday for a $200 million offering of eight-year senior subordinated notes (Caa1/B-).

UBS Investment Bank and Lehman Brothers are bookrunners for the LBO deal from the Louisville, Ky., digital imaging and communications company.

The week ahead

Although the appearance of the Paxson deal, nestled onto the calendar next to Hertz Corp.'s $2.80 billion transaction - both expected to price during the Dec. 12 week - joined the car rental firm in hogging the primary market spotlight, investors have plenty to chew on during the week ahead.

Although sources said late Friday that no official price talk or precise timing has been heard on the week's business, the following are expected to price by Friday's close:

• Clarke American Corp.'s $175 million eight-year senior notes (B2/B) via Bear Stearns and JP Morgan;

• Edgen Acquisition Corp.'s $30 million add-on to its 9 7/8% senior secured notes due Feb. 1, 2011 (B3/CCC+), via Jefferies;

• Cleveland Unlimited Inc.'s $150 million five-year FRN (Caa1/CCC+), also via Jefferies;

• Massey Energy Co.'s $725 million eight-year senior notes (BB-), led by UBS; and

• National Coal Corp's $80 million seven-year senior secured notes, again via Jefferies.

The market also expects to hear terms on deals from three Asian issuers that are said to be playing, to varying degrees, to high-yield audiences. Those are:

• Advance Agro PCL, a Thailand pulp and paper producer, with $250 million of intermediate maturity bonds (B3), via ABN Amro and Deutsche Bank;

• Galaxy Entertainment Finance Co. Ltd. (Macau's Galaxy Casino) with $500 million in two parts (B+), via Merrill Lynch and Morgan Stanley; and

• True Corp. PCL, a Thai telecom, with $225 million of seven-year senior notes (B2/B+), via JP Morgan.

Plastipak up in trading

When the new Plastipak 8½% notes due 2015 were freed for secondary dealings, "they looked great," a trader said, seeing the new bonds firm to 101.5 bid, 102 offered from their par issue price earlier in the session. Several other traders also saw those bonds at that level, one remarking that "they performed well" and another commenting that they had traded "fairly busily."

"The market is bracing itself for a huge calendar," the first trader said, "with $8 billion coming over the next couple of weeks" as 2005 moves into the home stretch.

Paxson old notes rise

Back among the established issues, a trader saw Paxson's 10¾% senior subordinated notes due 2008 push as high as 105 bid, 105.5 offered from prior levels around 102.75 bid, 103.25 offered previously, on the news that the $200 million of those bonds, and the company's $496.3 million (face value at maturity) of zero-coupon/12¼% senior subordinated discount notes due 2009 and its $365 million of senior secured floating-rate notes due 2010, are to be taken out in a tender offer, which will be funded by the new billion dollar-plus deal the company concurrently announced.

He also saw the zero/121/4s firm to 104.875 bid, 105.375 offered from 103 bid, 103.75 offered pre-news. He saw no quotes on the floaters.

Another trader pegged the bonds "up three or four points, right to the tender price" - 100.25 for the floating-rate notes, 105.95 for the 0%/123/4s, and 105.625 for the 103/4s.

Granite steady after coupon

Also in that same television station ownership sector, Granite Broadcasting Corp.'s 9¾% senior secured notes due 2010 were "pretty much unchanged" at 94 bid, a trader said. The New York-based TV station group operator told Prospect News that it had made the scheduled $19.74 million Dec. 1 interest payment on the $405 million of outstanding notes.

Calpine active

Elsewhere, Calpine Corp. bonds bounced around crazily, in a tug-of-war between shortcovering pushing them up, and the pressure of negative news pushing them down. A trader said he saw Calpine's bonds "take off like a bat out of hell. Then some negative news came back. They were up about two or three points in the morning, and then they settled in to be up maybe a half [point] to three-quarters" at the end of the session.

The troubled San Jose, Calif.-based power generating company appeared in the Delaware Court of Chancery - which last week ordered Calpine to pay back $313 million of improperly spent asset-sale proceeds - to plead for 90 days within which to pay back the money rather than paying it back now, as disgruntled bondholders had demanded. Court vice chancellor Leo Strine imposed a Solomonic compromise, giving the company until Jan. 22 to make the restitution - a longer period than the bondholders and the trustee for their notes, Bank of New York, were willing to grant Calpine, but considerably less than the three months the company wanted.

Another trader saw Calpine "down about a point or 11/2. They were volatile. They tried to rally them a little - if you could say that about a 25 cent [on the dollar] bond - but then when it came back that they had to pay back the $313 [million] by Jan. 22, they lost all of their steam."

He saw the 8½% notes due 2011 down a point at 24.5 bid, 25.5 offered, and also pegged the 10½% notes due 2006 at 36 bid, 37 offered, which he saw down a point on the day, and well off their peak levels early in the day around 40.

At another shop, a trader called Calpine's bonds unchanged to down half a point, with the 8½% notes due 2008 at 28.5 bid, 29.5 offered, its 9 7/8% secured notes due 2011 at 79 bid, 80 offered, and its 9 5/8% notes due 2014 - which the company has offered to buy back - at 102 bid, 103 offered, all off half a point.

Yet another trader did see some upside to Calpine, with "short covering on the short maturities" boosting the 101/2s and the 7 5/8% notes due 2006 to 37 bid, 38 offered from recent lows around 33 bid, 35 offered. But he saw Calpine's 7¾% notes due 2009 at 32 bid, 24 offered and the 8½% 2008 notes at 29 bid, 30 offered, each unchanged, although "a lot of paper traded around."

Steel firm on takeover hope

Apart from Calpine, a trader said "steels continued strong," with AK Steel Corp.'s 7 7/8% notes due 2009 rising to 95.5 bid, 96.5 offered from 94.25 bid, 95 offered, on "takeover rumors - foreign companies buying."

The bonds have been steadily creeping up on that international consolidation scenario. He said he had heard news that "Chinese companies are making a run at U.S. [industrial] companies," like Middletown, Ohio-based specialty steel producer AK. Other news reports suggest that the interest may be coming from Europe, with AK, its larger rival U.S. Steel Corp. and aluminum giant Alcoa Inc. all recently mentioned as possible targets for a takeover by the loser in the current bidding for Canadian steelmaker Dofasco Inc. between Luxembourg-based Arcelor SA and Germany's ThyssenKrupp AG.

At another desk, a trader saw the AK 7 7/8s at 95.75 bid, 96.75 offered and its 7¾% notes due 2012 at 91 bid, 92 offered.

Bally up again

He also saw Bally Total Fitness Holding Corp.'s bonds firmer for a second straight day, with the Chicago-based fitness club chain operator's 9 7/8% notes due 2007 up a point at 97 bid, 98 offered and its 10½% notes due 2011 up about ¾ point at 102.75 bid, 103.75 offered.

Amkor lower on rating cut

A trader saw Amkor Technology Inc. "selling off a little, after the S&P downgrade," with the Chandler, Ariz.-based semiconductor industry packaging and testing services provider's 9¼% notes due 2008 starting the session at 96.75 bid, 97.25 offered, but then retreating to 95.75 bid, 96.25 offered.

Standard & Poor's on Friday announced that it had lowered its bank loan rating on Amkor's $300 million senior secured second-lien term loan due 2010 to B- from B and revised the recovery rating on the loan to 2 from 1 previously, meaning the ratings agency feels that the loan holders can expect a recovery of between 80% and 100% of principal in the event of a payment default, rather than the 100% expectation previously in effect. S&P also cut the ratings on the company's senior unsecured bond debt was lowered to CCC+ from B-, while its B- corporate credit rating and CCC subordinated debt rating were affirmed. The rating outlook remains negative.

S&P said the ratings change reflects the company's completion of recently announced financing initiatives. "Two of the new financings, totaling $154 million in senior credit facilities, represent incremental secured debt that have priority over the company's existing senior indebtedness," S&P said, while also noting its overall "high operating and financial leverage, cyclical and competitive industry conditions, and strained liquidity."

In the automotive sphere, a trader saw Lear Corp.'s 8.11% notes due 2009 fall to 92 bid, 93 offered from 94 bid, 95 offered Thursday, after a Michigan judge issued a temporary restraining order directing the Southfield, Mich.-based automotive seats and interior components maker to continue supplying parts to DaimlerChrysler AG. The German-American automotive giant sued to keep the flow of parts coming after Lear - reeling from continued higher raw materials and energy costs - allegedly said it would pass on such price increases to DaimlerChrysler and would stop shipping some parts. The judge set a Dec. 14 hearing to determine whether the order should be extended.

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