Aramark restructures, downsizes bond deal; AMD easier on earnings warning

By Paul Deckelman, Paul A. Harris and Ronda Fears

New York, Jan. 12 - Aramark Corp. was heard by junk bond primaryside players to have restructured and downsized its upcoming mega-deal Friday, slicing it down to $1.78 billion from an originally envisioned $2.27 billion by dropping a planned subordinated bond tranche and opting instead to borrow that $490 million via a term loan rather than by issuing bonds. Price talk meantime emerged on the bond deal's remaining two tranches.

New-dealers also saw Pilgrim's Pride Corp. getting ready to hit the road Tuesday to market its upcoming $450 million two-part offering to prospective investors.

In the secondary market, trading was described as extremely restrained - not surprising, given the half-session that was held ahead of Monday's Martin Luther King Day legal holiday, a closing for the U.S. debt market and financial exchanges on Monday.

Bonds of Advanced Micro Devices Inc. were seen unchanged to a little easier on the session after the Sunnyvale, Calif.-based computer chip maker warned that its fourth-quarter revenues will likely come in below the company's earlier estimates - the latest of several high-tech companies to put up the caution flag.

On the upside, a trader saw Owens Illinois Inc. paper a bit firmer on the possibility of an asset sale by the Toledo, Ohio-based packaging concern, which hired Goldman Sachs & Co. to help it explore that option.

In the distressed-bond markets, Adelphia Communications Corp. was seen up, though on no fresh news during the session; well after the official 2 p.m. ET wrap-up, however, came the news that the company will delay by a week the date on which its bankruptcy plan becomes effective to this coming Friday, Jan. 19.

The news that Northwest Airlines Corp. filed a plan of reorganization with the bankruptcy court overseeing its restructuring had little impact on the Eagan, Minn.-based Number-Five U.S. airline carrier's bonds, with investors seen hanging back and taking the long holiday weekend to evaluate this development, as well as another bankruptcy court event Friday, which saw Delphi Corp.'s bankruptcy judge issue a ruling in favor of the company's planned recapitalization by an investment syndicate of investors led by Appaloosa Capital Management rather than a competing bid from Highland Capital Management.

A source from the buy-side who spoke late in Friday's abbreviated session marked the broad market up ¼ to ½ point on the session.

"Things feel better but trading has been light," the buy-sider said, adding that it had been mostly "off the beaten path" names that had moved on Friday.

This source noted that the existing bonds of theme park company, Six Flags Inc., which is seeking to reduce its $2.2 billion of debt by selling seven of its parks for $312 million, had traded up during the session.

Grohe prices €800 million

The Friday primary market turned out terms on one deal.

Germany-based plumbing fixtures manufacturer Grohe Holding GmbH priced an €800 million issue of seven-year senior secured floating-rate notes (B2/B) at par to yield three-month Euribor plus 287.5 basis points.

The spread to Euribor came at the wide end of the 275 to 287.5 basis points price talk.

Credit Suisse and Deutsche Bank Securities were joint bookrunners.

Proceeds will be used to refinance the company's senior secured credit facilities.

An informed source said that the deal was 2.5 times covered, with a good mix across bank investors - via the credit facility that is being refinanced - as well as traditional high yield investors and hedge funds.

$1.5 billion week

With no dollar-denominated deals having priced Friday, the Jan. 8-12 week came to a close having seen slightly more than $1.5 billion of new issuance in four dollar-denominated tranches, including last Tuesday's Intelsat (Bermuda), Ltd. $600 million issue of senior unguaranteed floating-rate notes due 2015 (Caa1/B).

The week's biggest dollar-denominated deal, Intelsat priced at par to yield six-month Libor plus 350 basis points, tight to the 350-375 basis points price talk, via Deutsche Bank Securities, Lehman Brothers, Citigroup and Credit Suisse.

Comparing new issance in the young year of 2007 to that of the record-breaking past year, 2007 thus far lags 2006 in a year-over-year comparison.

At the Jan. 12, 2006 close, the market had seen slightly more than $1.94 billion price in seven tranches.

Aramark downsized but blowing out

Looking to the four day week that will commence after Monday's national holiday in the United States commemorating Dr. Martin Luther King, Jr., the year's first mega-deal is poised to price.

Aramark Corp. announced on Friday that it has downsized its offering of senior notes (B3/B-) to $1.78 billion from $2.27 billion, and has shifted $490 million to its term loan B.

The Philadelphia-based professional food, hospitality and facility management services company is now offering a $500 million tranche of eight-year floating-rate notes, with price talk of three-month Libor plus 350-375 basis points, and $1.280 billion of eight-year fixed-rate notes, with price talk of 8½% to 8¾%.

A planned $570 million tranche of senior subordinated notes tranche has been withdrawn.

The LBO deal, which is being led by JP Morgan and Goldman Sachs, is set to price Wednesday morning.

A sell-side source close to the Aramark deal said that it is "blowing out" - color that was later verified by a buy-side source.

As to why Aramark chose to downsize a bond transaction that figures to be a blowout, sources say it comes down to the cheaper cost of capital in the bank loan market.

The bank deal is also blowing out, one source said.

Pilgrim's Pride starts Tuesday

Also expected to priced next week is a $450 million two-part offer from poultry prodcuer Pilgrim's Pride.

In a merger-funding deal that is being led by Lehman Brothers and Credit Suisse, the company is offering a $250 million tranche of eight-year senior notes and a $200 million tranche of 10-year senior subordinated notes.

The roadshow starts Tuesday and the transaction is expected to be priced before the end of the week.

Also in the market for the week ahead are these previously announced transactions:

• Open Solutions Inc. with a $325 million offering of eight-year senior subordinated notes (Caa1/CCC+) via Wachovia Securities, JP Morgan and Merrill Lynch;

• Stallion Oilfield Services with a $300 million offering of eight-year senior unsecured notes (B3/B-) via UBS; and

• Tube City IMS Corp. with a $250 million offering of eight-year senior subordinated notes (B3/B-) that is being led by bookrunner Credit Suisse.

Cablevision eyes $2.575 billion issuance

Also coming into visibility on Friday was a massive debt financing backing Cablevision Systems Corp.'s buyout bid by Charles F. and James L. Dolan, on behalf of the Dolan family.

The financing commitment calls for $2.575 billion in new bond debt and $10 billion in new credit facilities.

Merrill Lynch and Bear Stearns are the lead banks on the debt financing.

The buyout offer will expire at the close of business on Jan. 17.

AMD easier on revenue warning

Back in the secondary realm, traders generally said that "nothing went on," with skeleton crews manning the desks at many shops, and a lot of people going through the motions of actually doing anything before making an early exit well before the official abbreviated close.

A trader said that AMD's 7¾% notes due 2012 were down about ½ point at 102.5 bid, 103.5 offered, citing the impact on the revenue warning on a normally not much traded issue on a thinly-traded day.

A second trader also saw the bonds at that slightly weaker level, noting that "it's not a name that trades a whole lot."

However, yet another trader pegged those bonds as about unchanged at 102.75 bid, 103.75 offered, noting that AMD'S movement's "may be more of a bottom-line thing" than being dependent on a top-line item such as revenues. He added that investors probably realize that "they're a better credit than they were five to 10 years ago."

AMD said revenue in the fourth quarter of the year will be up a mere 3% from the third quarter's $1.33 billion in sales, considerably lower than the 6% to 13% sequential growth that management had previously indicated was typical seasonal growth in the fourth quarter, and well down from the 8% rise Wall Street has been predicting.

The company - which formally reports its results on Jan. 23 - said that fourth-quarter operating income, excluding ATI-related segments and acquisition-related charges, is expected to be "positive but substantially lower than in the third quarter."

It said that fourth quarter gross margin and operating income "were impacted by significantly lower microprocessor average selling prices, which largely offset a significant increase in unit sales."

Owens up on Goldman hire, possible sale

On the upside, a trader saw Owens-Illinois bonds up a little after the company said that it was looking into a possible sale of its plastics packaging business, and has hired Goldman Sachs to explore strategic options.

He quoted its 7.80% notes due 2018 at 100.5 bid, 101.5 offered, up from 99.75 bid, 100.75 offered previously.

The plastics packaging business makes up a relatively small part of Owens' total operations, accounting for about $770 million in revenue for the 12 months ended Sept. 30 versus some $5.6 billion for the company overall.

Plastics packaging has assumed a much smaller role in the overall scheme of things at O-I than it once did, with the company having divested much of it in a sale to Graham Packaging Co. for about $1.2 billion in 2004. It now derives most of its revenues and earnings from its glass containers business.

Six Flags seen steady

Another well-known junk name making news this past week in the asset-sale arena was Six Flags Inc., which said on Thursday that it would sell seven theme and water parks for $312 million and use the proceeds to reduce its $2.1 billion of total debt.

The New York-based amusement park concern held a conference call on Friday during which it further discussed the asset sale, as well as the company's prospects for 2007, the first full year in which the current management team, installed last year after a heated proxy fight, will lead the company.

While Six Flags said that it will post a net loss for 2006, first indications for this year are promising, with group sales and season-pass sales running above their year-ago levels.

A trader said that the conference call "went well," although he did not see any movement Friday in the company's bonds beyond the gains racked up Thursday on the asset-sale news. He saw its 8 7/8% notes due 2010 at 99.5 bid, 100.5 offered, about 2 points stronger on the week, and its 9¾% notes due 2013 at 96 bid, 97 offered, up 3 points on the week.

Bondholders ignore sweetened Cablevision bid

Cablevision Systems Corp.'s bonds were seen unchanged on the session in the face of news that the founding Dolan family had raised its offer to take the Bethpage, N.Y. based cable television and sports team operator private to $8.9 billion, or $30 a share, an 11% increase over the $27 that the family - whose members occupy the key senior management posts at the company, including chairman and chief executive officer - had previously made.

A trader pronounced its 7 7/8% notes due 2018 steady at 99.5 bid, 100.5 offered. Another said he had seen no trading at all in Cablevision.

The Dolans own about 20% of Cablevision's stock, but have 70% of its voting power via the company's complicated ownership structure.

News reports said that it wasn't clear if the new offer would pass muster with a special committee of independent directors on Cablevision's board appointed to evaluate that bid.

Adelphia up before delay news

In that same cable TV arena, Adelphia Communications' recently resurgent paper was seen tacking on another point across the board, a trader said, with its 10¼% notes due 2011 at 102 bid, 103 offered and its 2006 101/4s rising to 98 bid, 99 offered.

At another desk, a market source saw Adelphia's 9 7/8% notes due 2007 at par bid, up 2 points on the session.

The Greenwood, Colo.-based company's bonds have been rising of late on expectations of its imminent emergence from Chapter 11 after more than four years spent in a messy, complicated reorganization that has often featured contentious disputes over the spoils between various creditor classes.

Adelphia, once the fifth-largest cable operator in the U.S., sold virtually all of its assets to TimeWarner Cable and Comcast Corp. for $17 billion last year, and has been attempting to divide that asset pie to the satisfaction of all of its creditors. The plan was approved by the court on Jan. 5.

However, that emergence will have to wait at least a week longer, with the company announcing late Friday, after the market close that it had been informed by its official committee of unsecured creditors that the parties had extended the deadline for the effective date of its plan from Jan. 12 to Jan. 19.

Northwest unchanged despite plan

Elsewhere in the distressed sector, Northwest Airlines' bonds were unchanged, with a trader quoting the 8 7/8% notes due 2006 at par bid, 101 offered and its 10% notes due 2009 at 102 bid, 103 offered, following the company's filing of its reorganization plan with the U.S. Bankruptcy Court in Manhattan.

It was widely concluded that Northwest Airlines filed its reorganization plan ahead of the deadline next week to preempt a takeover bid, but also widely speculated that a rival plan could still emerge.

"There will be a plan with a higher valuation coming out," said one distressed bond trader.

Northwest Airlines did not identify any major supporter in its plan nor many details but it did suggest its plan would include a rights offering possibly backed by private equity firms and that, as unsecured claims would not be paid in full, the reorganization would include new debt and equity.

Because unsecured claims would not be paid in full, current stockholders would not get a distribution.

Owl Creek Asset Management LP, Northwest's second-largest shareholder, is expected to protest the plan or possibly come up with a rival plan, several onlookers said. Owl Creek has asked the bankruptcy court to establish an official equity committee in the case, saying in court documents that it believes Northwest's reorganization could include enough money to pay off all creditor claims plus shareholders.

Owl Creek did not comment on the situation Friday.

Delphi bonds seen waffling

Bonds of another company currently in reorganization at that New York bankruptcy court, Delphi Corp., were said to be waffling amid very light trading action Friday, even after a major ruling by the court.

Its 6.55% issue was seen at 110.75 versus 112 on Thursday while the 6½% bonds due 2013 moved up about a point to 110.75.

Another trader said overall, he saw little real movement in the bankrupt Troy, Mich.-based auto parts maker's paper.

In what was described as a watershed event, Delphi got bankruptcy court approval Friday to pursue its $3.4 billion reorganization plan backed by Appaloosa, Cerberus Capital Management and Harbinger Capital Partners and investment banks Merrill Lynch and UBS Securities, rather than a $4.7 billion plan offered by Highland Capital Management.

Delphi still has to seal deals with former parent General Motors Corp. and its major union by the third quarter but the bankruptcy judge gave the company to July 31 to work that out without interference.

Highland, the second top Delphi stockholder, had wanted more access to Delphi's books to finalize its offer. The Delphi-supported plan also had been contested by the U.S. Trustee in the case and the equity committee, as Highland's plan would distribute a bigger chunk of reorganized Delphi to current stockholders.

Under Delphi's plan Appaloosa, Cerberus, Harbinger, Merrill and UBS have pledged $1.4 billion to $3.4 billion for 30% to 70% of reorganized Troy, Mich.-based Delphi. It includes a rights offering at $45 per share and an option for those investors to participate at $35. GM also would hold a big stake in a restructured Delphi.

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