Downsized Intelsat/PanAmSat deal prices; Northwest also; CSK up, builders volatile

By Paul Deckelman

New York, June 19 - It took several extra days - but after having been restructured, downsized and delayed, the gigantic multi-part bond deal that will help finance the merger of satellite communications operators PanAmSat Holding Corp. and Intelsat Ltd. finally priced on Monday morning, junk market syndicate sources said.

That mega-deal was the big news in the primary market, but it was by no means the only thing going on there. Northwest Pipeline Corp. - a subsidiary of well-known high-yield issuer The Williams Cos. Inc. - priced a new deal during the afternoon, just hours after the quickly-shopped "drive-by" offering had been formally announced.

Another rapidly emerging deal - for Cleveland-based aircraft components supplier TransDigm Inc. - could price as soon as Tuesday's session, the sources said, as could International Coal Group Inc.'s offering of eight-year notes - which was heard Monday to have been sharply downsized. Price talk also emerged on the issue

Out of Europe came word that French chemical manufacturer SNF SA is shopping around a euro-denominated bonds offering - but it is only being shown to prospective buyers on that side of the Atlantic, ahead of an expected pricing later in the week.

In the secondary market, traders said that developments pretty much took a back seat to what was going on in the bubbling new-deal arena.

However, they saw a jump in the bonds of CSK Auto Corp. in the wake of the announcement that the Phoenix-based auto parts retailer will tender for its outstanding bonds at par.

And there was volatility among some of the homebuilder names - particularly Meritage Homes Corp. - after a home building industry group released its monthly report showing a deterioration in builder sentiment about the industry's prospects.

Back in the primary market, the Intelsat/PanAmSat deal - originally slated to price Thursday, and then Friday - was the first order of business, and finally got done.

Bermuda-based Intelsat and Wilton, Conn.-based PanAmSat, which are merging in order to form what is expected to be the dominant satellite communications company, brought a four-tranche offering totaling $2.915 billion, down from the $3.515 billion originally envisioned, with the $600 million difference taking the form of a 10-year bridge loan.

PanAmSat Corp., the operating company subsidiary for PanAmSat Holding Corp., priced a $575 million tranche of senior notes maturing June 15, 2016. The notes priced at par to yield 9%, right in line with revised pre-deal market price talk envisioning a yield in the 9% area. The notes had previously been talked in a range of 8¾% to 9%, before the revised talk was issued on Thursday, as reluctant potential investors held out for more yield.

Also pricing were three tranches of notes from Intelsat's holding company subsidiary, Intelsat (Bermuda) Ltd. The first - $750 million of senior notes maturing June 15, 2016, and guaranteed by Intelsat's operating company subsidiary, Intelsat Subsidiary Holding Co. - priced at par to yield 9¼%, which was in line with the revised price talk, although wider than the 8¾% to 9% range at which the notes were originally expected to price.

The biggest portion of the deal - Intelsat (Bermuda)'s fixed- and floating-rate non-guaranteed notes - totaled $1.59 billion, downsized from the originally envisioned $2.19 billion. These consisted of $1.33 billion of fixed-rate senior notes due June 15, 2016 and $260 million of floating-rate seniors due June 15, 2013.

The 10-years priced at par to yield 11¼%, at the wide end of the revised price talk of 11% to 11¼%, which had widened out from the 10¾% to 11% anticipated yield initially talked about, while the

seven-year floaters priced at par and will initially pay interest of 600 basis points over the six-month Libor, at the wide end of price talk calling for a yield of between 575 and 600 basis points over Libor.

Deutsche Bank Securities, Citigroup, Credit Suisse, and Lehman Brothers served as joint book-running managers, with Goldman Sachs & Co., Bear Stearns, BNP Paribas, JP Morgan and Royal Bank of Scotland as co-managers. Merrill Lynch was a bookrunner for the PanAmSat part of the deal, but acted as a co-manager on the three Intelsat tranches.

Also pricing, though later in the day, was Williams Cos. subsidiary Northwest Pipeline. Its 7% coupon bonds came at a slight discount to par, pricing at 99.684 to yield 7.045%, or at a spread of 190 basis points over the comparable Treasury issue.

The bonds were brought to market via joint book-running managers JP Morgan and Calyon Securities.

The Tulsa-based company plans to use the new-deal proceeds for general corporate purposes, including capital expenditures.

It was the second time in less than a week that a Williams subsidiary tapped the junk market. Last Thursday, Williams Partners LP priced a $150 million issue of 7½% senior notes due 2011.

TransDigm, International Coal set to price

Junk market primary sources said that Tuesday could see some further pricings, including deals for TransDigm and International Coal Group.

TransDigm could price a $275 million issue of eight-year senior subordinated notes as soon as Tuesday afternoon, junk bond market syndicate sources said Monday. They said that the quickly-shopped deal is likely to price around the end of the session, after a whirlwind one-day roadshow, including a 7:30 a.m. ET breakfast presentation in Boston, a lunchtime presentation in New York, and a 12:30 p.m. ET investor call.

The deal is being marketed by joint book-running managers Banc of America Securities and Credit Suisse. The company plans to use the proceeds for debt repayment.

Although coming to market as a drive-by, a bond offering in some form has been expected from TransDigm since late May.

Meantime, it could have some company Tuesday, in the form of International Coal Group's planned offering of eight-year senior notes. That deal was heard by high-yield syndicate sources Monday to have been sharply downsized to $175 million, well down from original expectations of $250 million.

The sources also said that pre-deal market price talk anticipating a yield between 9 ¾% and 10% emerged Monday. The notes are expected to price early Tuesday afternoon, after the books close at 11 a.m. ET.

The deal is being brought to market via joint book-running managers UBS, JP Morgan and Goldman Sachs. The Ashland, Ky.-based coal producer will use the proceeds for debt repayment and general corporate purposes.

WCA announced, SNF roadshows

Joining the forward calendar on Monday was a deal for WCA Waste Corp., the Houston-based waste disposal company. It announced that it plans to offer $150 million of eight year senior notes in a Rule 144A/Regulation S deal. Timing of the offering and other details have yet to emerge.

And out of Europe came the word that French chemical maker SNF will be selling €140 million of seven-year notes, with pricing expected later this week. The deal is being marketed via roadshow making stops at various European capitals - Paris on Monday, London Tuesday and Wednesday, Amsterdam and Frankfurt on Thursday. Calyon Securities is running the books, with Banc of America Securities as joint lead manager.

Intelsat/PanAmSat mostly up in trading

When the new Intelsat and PanAmSat 10-year bonds were freed for secondary dealings after pricing at par, a trader said that market interest was "very active." But while the new PanAmSat 9% notes and the guaranteed Intelsat 9¼% managed to hold their own, going out at 100.375 bid and 100.625 bid, respectively, the latter company's non-guaranteed 11¼% notes "was the only one down," the trader said, "the only one that took a hit." He pegged those bonds at 98.5 bid, 99.5 offered, while another trader saw them at 98.75 bid.

However, yet another trader quoted the 111/4s at par bid, 100.5 offered, and saw the 9¼% notes getting as good as 101 bid, 101.25 offered. He saw Intelsat's new floating-rate notes due 2013 at 100.75 bid, 101.25 offered, after the bonds had priced at par.

The new Northwest Pipeline bonds traded at par bid, 100.5 offered, after having priced slightly south of par, a trader said.

Pokagon still strong

Among other recently issued paper, the trader saw Pokagon Gaming Authority's new 10 3/8% senior notes due 2014 more than holding their own after having priced at par on Thursday. Those bonds were initially up two points, and pushed as high as the 103 area on Friday. In Monday's dealings, he said, the bonds were at 103.625 bid, 104.125 offered, "pretty much the same" where they were last week. But he added that "they're doing well."

CSK jumps on tender

Back among the established issues, CSK Auto's 7% notes due 2014 were certainly doing well, having firmed to par - their anticipated takeout level - from prior levels around 96.5.

The bonds jumped after the company announced plans to tender for them, and several other series of notes, at par.

Meritage weak

Elsewhere, a negative report on sentiment from the National Association of Home Builders, a trade industry group, caused some volatility in that sector.

A market source saw particular impact in the bonds of Scottsdale, Ariz.-based builder Meritage, quoting its 6¼% notes due 2015 as having fallen to 84.5 bid from 88.375 previously, while its 7% notes due 2014 ended at 89.5 bid, down from 91.375. However, the erosion in the company's 9¾% notes due 2011 was more restrained, to 102.75 from 103.125 previously.

But while that May report from the NAHB pegged sentiment within the industry at its lowest level in 10 years, soured by continued rising rates and the likelihood of order cancellations, the retreat in bonds was by no means universal. A trader estimated Hovnanian Enterprises Inc.'s 6½% notes due 2012 actually up half a point, at 89 bid, 90 offered.

Another trader saw the bonds of both Hovnanian and sector peer KB Home "tightening about five basis points."

"We're not seeing any change in anything," yet another trader opined in looking at the market in general.

"Everything was going on in the new issues. But for the secondary, Monday seems like a wash."

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