Calpine, American Tower, Encore deals price; UbiquiTel up on tender; Calpine off

By Paul Deckelman and Paul A. Harris

New York, Sept. 28 - Calpine Corp. its priced its nearly $800 million offering of 10-year notes Tuesday while smaller deals were completed by Encore Medical IHC Inc. and American Tower Corp., the latter deal an upsized drive-by offering.

In the secondary market, Calpine's existing bonds were heard mostly lower on the day as the company added its big chunk of new debt - secured and thus senior to the outstanding bonds in the capital structure. On the upside, the outstanding discount bonds of UbiquiTel Inc. - which also announced plans for a new bond issue - were quoted firmer on the news that the Sprint PCS affiliate will take those existing bonds out via a tender offer.

An even $1.25 billion priced in three tranches from three issuers on Tuesday, as Calpine completed a closely watched $785 million offering of 10-year notes at the wide end price talk.

In addition, sources began noting the presence of "triple-hook" deals - issues rated Caa1 or below by Moody's Investors Services and CCC+ or lower by Standard & Poor's - in the primary market. Two offerings rated at this level or from issuers with existing ratings that qualify priced on Tuesday, from American Tower Corp. and Encore Medical IHC Inc.

"We haven't seen the triple-hook deals popping like this for a while," a sell-side source said on Tuesday afternoon.

"It's a sign that people are testing the limits of the market, and it's liable to start making investors a little nervous," the source added.

Calpine prices deal, notes trade down

Soon after it was announced last Friday Calpine Corp.'s $785 million offering of 10-year first priority senior secured notes (B+) started generating considerable chatter in the high-yield market.

The Merrill Lynch-led deal priced on Tuesday, with Calpine selling the new 9 5/8% notes due 2014 at 99.212 to yield 9¾%. That was the wide end of the 9½%-9¾% price talk.

Late Tuesday a source had the bonds trading down three-quarters of a point.

"Ordinarily when bonds trade down like that you might infer that the demand was not heavy," said the source.

"However Calpine also priced a convert today, which could factor into the way the bonds trade."

On Monday a market source told Prospect News that investors had mounted some resistance to the deal at the 9½%-9¾% price talk on the San Jose, Calif. power producer's new paper, asserting that a 9¾%-10% context was more appropriate.

However a sell-side source who did not play a part in the deal told Prospect News on Tuesday, after the Calpine terms were heard, that there is currently a demand for junk coming from sources other than the traditional high-yield mutual funds, insurance funds and pension funds.

"The recent high-yield mutual fund inflow numbers are just not big enough to absorb the kind of supply we're seeing," the sell-sider said.

"Recently there have been some new CDOs and CBOs created. And they need to put money to work. And of course there are the hedge funds with money to put to work."

These forces, the source added, have combined to create an issuer's market in the current high yield primary.

American Tower upsized, tight end of talk

Also pricing on Tuesday was an upsized $300 million issue of eight-year senior notes (existing ratings Caa1/CCC) from Boston communications tower company American Tower Corp.

The notes priced at par on Tuesday to yield 7 1/8%, on the tight end of the 7 1/8%-7¼% price talk.

Credit Suisse First Boston ran the books for the debt refinancing issue, which was increased from a planned size of $250 million.

And Encore Medical IHC Inc. sold $165 million of 9¾% eight-year senior subordinated notes (Caa1/CCC+) at 99.314 on Tuesday to yield 9 7/8%, on the wide end of the 9 5/8% - 9 7/8% price talk.

Banc of America Securities ran the books for the acquisition financing from the Austin, Tex.-based diversified orthopedic device company.

Three deals talked for Wednesday

Price talk emerged Tuesday on what one market source described as a "well-subscribed" $625 million two-part deal from Graham Packaging Holdings Co.

Talk is 8½%-8¾% on $250 million of eight-year non-call-four senior notes (Caa1/CCC+). The issue was decreased from $350 million as $100 million was shifted to the company's term loan, which was a blowout, according to sources.

Meanwhile price talk on Graham Packaging's $375 million 10-year non-call-five senior subordinated notes has them pricing 150 basis points behind the senior notes.

Both tranches are expected to price Wednesday afternoon.

Citigroup, Deutsche Bank Securities and Goldman Sachs & Co. are joint bookrunners for the debt repayment and acquisition financing deal from the York, Pa. plastic container manufacturer.

Meanwhile price talk of 10% area emerged Tuesday on Denny's Holdings Inc./Denny's Corp. $175 million of eight-year senior notes (Caa1/CCC+), expected mid-day Wednesday via UBS Investment Bank, Goldman Sachs & Co. and Banc of America Securities.

And finally in drive-by action, price talk is the 103.5 area on Ubiquitel Operating Co.'s $135 million add-on to its 9 7/8% senior notes due March 1, 2011 (existing ratings Caa1/CCC).

The quick-to-market debt refinancing deal from the Conshohocken, Pa.-based Sprint affiliate, via Bear Stearns, is expected to price on Wednesday.

The original $270 million issue priced Feb. 13, 2004.

Calpine weak in trading

When the new Calpine Corp. 9 5/8% notes due 2014 were freed for secondary dealings, they were seen having eased to 98.5 bid, 98.75 offered from their 99.212 issue price - validating the prediction which a trader had made to Prospect News on Monday when he noted that Calpine had a track record of bringing big new issues to market, which would then almost always head lower in aftermarket dealings.

On the other hand, American Tower's new 7 1/8% notes due 2012, after pricing at par, were seen by one trader having firmed slightly to 100.25 bid, 100.75 offered, although another trader declared that the new deal "was very well received" and traded as high as 101 bid.

Encore, PanAmSat lower

Encore Medical's new 9¾% senior subordinated notes due 2012, meantime, were heard to have eased in secondary dealings to 98.625 bid, 99 offered, from their 99.314 issue price.

And PanAmSat Corp.'s new zero-coupon notes due 2014, which priced Monday at 59.46 were seen Tuesday morning at 59 bid, 59.5 offered, and had dipped to a wider 58.5 bid, 59.5 offered reading by day's end.

Ubiquitel gains

Back among the existing bonds, the zero-coupon notes due 2010 of UbiquiTel were seen having firmed nicely in response to the news that the Conshohocken, Pa.-based telecommunications operator will take out those notes via a tender offer, using the proceeds of its upcoming new bond issue plus other available funds (see "Tenders and Redemptions" elsewhere in this issue for full details).

A trader saw the zeros due April 15, 2010 having advanced to 105.5 bid, the anticipated takeout level, from 102, while the zeros due May 15, 2010 improved to 105.25 bid, from 103.

Calpine old bonds lower

Calpine's existing debt was quoted mostly easier- although one trader did see the San Jose, Calif.-based power generating company's 8¼% senior notes due 2005 as having firmed to 99 bid from prior levels at 98.5 bid, 99 offered, which it had hit earlier "when people wondered whether the deal would get done."

Calpine, he said, "Priced their deal, and the '05s hung in there because they're short, but everything else was off."

He quoted the company's 8½% notes due 2011 at 65 bid, 66 offered, about half a point weaker, while even its 10½% notes due 2006 were "no higher" than 97 bid, 98 offered.

A market source called Calpine "kind of a mixed bag," with its 8½% notes due 2010 up half a point at 77.5 and the 8½% notes due 2011 dipping to 65.75 from prior levels at 66.5. Calpine's 8¾% notes due 2007 were a point better at 82.

Another trader saw "a lot of trades in Calpine," all lower, with its 8¾% notes due 2013 down two points at 77.25 and the 8½% notes due 2010 off three quarter of a point at 78. He saw Calpine Canada's 8½% notes due 2008 three points lower at 70 bid.

Levi steadies

After two straight sessions in which Levi Strauss Inc. bonds had firmed solidly, amid news reports - still unconfirmed by the company - that the San Francisco-based blue jeans maker has agreed to sell its Dockers casual clothing unit to Vestar Capital Partners and clothing industry veteran Eric Rosenfield for $800 million (see related story elsewhere in this issue), those bonds appeared for the moment to have plateaued at the higher levels they reached on the news.

"There's not much more room for them to move," said a trader, who quoted the company's 7% notes due 2006 at par bid, its 11 5/8% notes due 2008 at 103.5 bid and its 12¼% notes due 2012 at 106 bid.

Hilton higher

Hilton Hotels Corp.'s bonds were seen up more than a point on the session, after Moody's Investors Service raised the Beverly Hills, Calif.-based lodging company's debt ratings to investment grade, with its senior unsecured bonds going to Baa3 from Ba1 previously.

Moody's cited the improving conditions in the lodging industry.

Hilton's 7 5/8% notes due 2012 were quoted up 1½ points at 117.5 bid.

Another name in the gaming and lodging sector - Las Vegas-based casino operator/hotelier MGM Mirage - was also up on the session, its 8½% notes due 2010 two points better at 114.375.

aaiPharma rises

Another name on the upside was aaiPharma Inc., coinciding with the troubled Wilmington, N.C.-based pharmaceutical company's announcement of a shakeup in its top management ranks - the second in less than a year.

A trader in distressed bonds quoted aaiPharma's 11½% notes due 2010 as having pushed up to 60 bid, 62 offered Tuesday. He said those bonds had most recently been languishing in the 52 bid, 54 offered area, although another trader said the bonds had lately stayed around 55.5.

At another desk, the bonds were seen having gained four points on the day to that same 60 bid level.

aaiPharma's Nasdaq-traded shares meantime jumped 42 cents (31.11%) to $1.77 on volume of 1.6 million, more than triple the norm.

The company - which has been wrestling for most of the year with the growing fallout from its March 1 announcement of "sales abnormalities" in key product lines and the resulting need to delay earnings as it recalculates data for several recent quarters - said Tuesday that Ludo Reynders, who most recently held executive posts at Quintiles Transnational, a medical research services unit of Durham, N.C.-based Pharma Services, would immediately take over as president and chief executive officer, replacing the company's founder, Frederick D. Sancilio, who had stepped into those jobs on an interim basis back in February, replacing Philip Tabbiner. Sancilio also immediately relinquishes his chairman's position to board member and former North Carolina governor James G. Martin, who will serve as non-executive chairman. Sancilio will remain a member of the company's board.

The shuffle at the top is the latest personnel change at the company, which has also replaced its chief operating officer, chief financial officer and several other top executives so far this year as it attempts to restore investor confidence.

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