Downsized Domino's leads trio of deals; Buhrmann up on asset sale

By Paul Deckelman and Paul A. Harris

New York, June 18 - Pizza giant Domino's Inc. served up a somewhat downsized offering of eight-year notes at a discount on Wednesday, although investors found the new deal palatable to take the bonds solidly higher when they were freed for secondary dealings. Two other deals also priced, one a drive-by offering from homebuilder D.R. Horton Inc.

In the secondary market, apart from the new Domino's notes, activity on a generally dull day included upside on another large pizza provider, Sbarro Inc., whose bonds were quoted as continuing a climb that's been seen all week. Charter Communications LLC was better after it announced that it had finally gotten its lenders' OK to a much-desired bank credit facility amendment. And Dutch office products wholesaler Buhrmann NV's bonds jumped on news of a big asset sale, with proceeds slated for debt paydown.

A "red hot market" that has "gone crazy" was the way one sell-side official described Wednesday's action in a high-yield primary market that heard the gavel fall on an even handful of new junk bond deals. Among the offerings was Domino's, which priced a $403 million slice of new eight-year debt at the inside of talk. The notes, which came at 99.278, were heard to have been bid at 103.5 and offered at 104 when released for trading.

Three new offerings either took to the road or crouched in the starting blocks during the mid-week session.

And talk was issued on $1 billion of new paper from Xerox, with one informed source reporting that it could upsize.

As to the day's five completed transactions in the new issuance market, the above-mentioned deal from Domino's - $403 million of 8¼% eight-year senior subordinated notes (B3/B-) - priced at 99.278 to yield 8 3/8%. The JP Morgan-run transaction came at the tight end of the 8½% area price talk.

The Ann Arbor, Mich. pizza firm had initially marketed an extra large ($450 million) before changing the order to large ($400 million) earlier in the week, shifting the $50 million slice to its bank deal, according to sources.

Latrobe, Pa. flavored water firm Le-Nature's, Inc. bottled up $150 million from high yield accounts on Wednesday, with its new 10-year notes that priced at par to yield 9%. Price talk was 9% area on the deal run by Wachovia Securities.

Also on Wednesday D.R. Horton joined the ranks of homebuilders pricing deals with "five-handles," as it sold $100 million of new 10-year paper on Wednesday.

The Arlington, Tex.-based homebuilder nailed a 5 7/8% yield to its new senior notes (Ba1/BB) which it priced at par. UBS Investment Bank and Credit Suisse First Boston were joint bookrunners.

D.R. Horton, which priced an upsized $200 million of 10-year notes (Ba1/BB) back in April to yield 6 7/8%, came away from Wednesday's transaction with an interest rate that is 100 basis points lower than that of the April transaction.

With regard to the "five-handle" yields, the Texas homebuilder joins fellow homebuilders NVR, Inc., which priced a $200 million seven-year deal to yield 5% on June 12, and Ryland Group, Inc., which sold $150 million of five year notes on May 29 to yield 5 3/8%.

From the far side of the Atlantic, Remy Cointreau SA sold an upsized €175 million of senior notes with an eight-year vintage (Ba2/BB) at par on Wednesday to yield 6½%. The offering was increased from €150 million. Price talk on the deal, run by Banc of America Securities and BNP Paribas, had tightened to the 6½% area from 6 5/8%-6 7/8%.

And Lucite International Finance plc put the polish on a €50 million offering of mirror notes (i.e. an add-on) to its 10¼% senior notes due May 15, 2010 (B3/B). The deal priced at 104.5 to yield 9.09%, spot on to the 104.5 area price talk. Merrill Lynch was the bookrunner.

Three new transactions appeared on the primary market radar, Wednesday.

Vought Aircraft Industries, Inc., of Dallas, radioed in its approach with $250 million of new eight-year senior notes (B). The roadshow starts Thursday, with pricing expected to price late in the week of June 23 via Lehman Brothers and Goldman Sachs.

DigitalNet, Inc. is also set to begin a roadshow Thursday for an offering of $125 million of seven-year senior notes (B2/B), with pricing also expected late in the week of June 23, via Banc of America Securities.

And Romanian telecom MobiFon Holdings BV phoned in with an offering of $233 million of six-year non-call-three senior notes (CCC+) that are expected to also price during the week of June 23, via bookrunner Goldman Sachs.

Price talk emerged Wednesday on Xerox's $1 billion two-tranche senior notes offering: 7¼% area on the seven-year bullets and 50 basis points behind the seven-years on the 10-year non-call-five notes.

Tranche sized remain to be determined, according to one informed source who added that Xerox appears to "have room" to upsized the deal.

Deutsche Bank Securities, Citigroup, Goldman Sachs, JP Morgan, Merrill Lynch and UBS Investment Bank are joint bookrunners.

Finally on Wednesday Psychiatric Solutions, Inc. of Franklin, Tenn. issued 10¾% area price talk on $150 million of 10-year non-call-five senior subordinated notes (B3/B-). The deal, via Lehman Brothers and Merrill Lynch, is expected to price late Thursday or early Friday.

In trading, Le Nature's new 9% senior subordinated notes due 2013, which had come at par, traded up more than three points to about the 103.25 bid level.

By way of contrast, a trader said that the new D.R. Horton 5 7/8% senior notes due 2013 "didn't really do much," perhaps firming slightly to 100.5 bid, 101 offered. He noted the small size of the deal (just a very illiquid $100 million) and the fact that the yield was a very un-junk-like 5.875% - fascinating, perhaps for high-grade players looking to pick up a little yield by taking a walk on the wild side (not that much on the wild side, though, at Ba1/BB) - but of little interest to junk market denizens.

Indeed, traders say the whole housing sector of late has been like a ghost town despite continued strong housing starts numbers from the government (starts jumped to a 1.732-million unit annual pace in May from 1.632 million in April) and bullish estimates from the homebuilders themselves as to their likely order flows and backlogs.

There hasn't been much in the way of dealings going on, since the bonds of companies like Horton and sector peers like Ryland, KB Homes, Beazer and Hovnanian are for the most part already at or over par - sometimes well above par - trading "too rich" for many high-yield investors who want to boost their yield by buying credits which still have some upside to them.

Horton's existing 9% notes due 2008, which are to be redeemed using the proceeds of the new bond issue (see Tenders and Redemptions elsewhere in this issue for details), were quoted unchanged Wednesday at 104.5 bid.

Meantime, Advanced Medical Optics Inc.'s 9¼% notes due 2010 were quoted at 106 bid, actually down a quarter point, while Fairchild Semiconductor International Inc.'s 10 3/8% notes due 2007 were unchanged at 105.375 bid; Advanced Medical Optics plans to buy back a portion of its $200 million of outstanding 9¼% bonds via a modified Dutch auction tender offer, while Fairchild intends to call the 10 3/8s for redemption next month (see Tenders and Redemptions for further details).

A trader said that the secondary market was "extra quiet" Wednesday, adding that "it may be one of the slowest days we've had."

Still, there was movement here and there. He quoted Italian fast-food restaurateur Sbarro's 11% notes due 2009 as having moved up to 90 bid "and looking" [for offerings] from prior levels around 87 bid.

At another desk, a trader noted that the notes had begun Monday down around 82.5 bid and had moved up to around 86-87 by Tuesday and to the 89-90 area on Wednesday. There was no news seen out on the privately held Melville, N.Y.-based company that would explain the rise, although one trader recently opined that investors had been showing some interest in restaurant issues including Sbarro and such sector peers as Carroll's, CKR and Denny's perhaps because of the presence of the Domino's deal, and another upcoming new issue, New World Restaurant Group Inc.'s planned $160 million five-year notes, on the high yield market menu.

Elsewhere, Charter Communications' 8 5/8% notes due 2009 also gained around two points, to 77 bid, after the St. Louis-based cable operator said that it had received the OK from its lenders to amend its $5.2 billion senior secured credit facilities agreement, allowing principal owner Paul Allen to make a $300 million investment in the company which will allow it to remain in compliance with its debt covenants as it begins trying to straighten out its troubled finances. The move was reported by the Wall Street Journal during the session and confirmed by the company late in the day.

Buhrmann's 12¼% notes due 2009 were quoted as high as 106.5 bid, well up from recent levels in the mid-90s, after the Amsterdam-based office products wholesaler announced that it had agreed to sell its paper merchanting arm to Australia's Paperlinx for €746 million. Buhrmann said it would put the net proceeds toward debt reduction, and is expected to slash its total debt load of approximately €1.6 billion by at least €650 million.

Buhrmann's normally little-traded New York Stock Exchange-listed shares jumped $1.50 (26.55%) to $7.15 on volume of 81,000 shares, almost eight times the usual turnover.

Sealy Mattress Co.'s 9 7/8% notes due 2007 were two points better on the session, at 100.5 bid.

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