Vanguard sells $700 million, Ainsworth $450 million; Calpine higher on preferred news; Charter down

By Paul A. Harris

St. Louis, Sept. 17 - During the final primary market session of the Sept. 13 week the high-yield market saw $1.150 billion price across four tranches from two issuers, as Vanguard Health Systems, Inc. got a $700 million proceeds cash infusion, And Ainsworth Lumber company logged out $450 million of investors' green.

Meanwhile in the secondary market Calpine Corp. bonds rose on news that the company was in the market with a new preferred deal, and Charter Communications paper dropped on news that the company's chief operating officer was exiting.

Kind of neutral

"There were just a few tidbits of news out there, and a couple of things traded here and there," one trader commented. "But things were just quoted lower or quoted higher.

"In general it was kind of neutral.

"Over the past couple of days it felt like the market gave up half a point. But there is still no new issuance. And there is still some cash - you heard the inflow number," the source added, commenting on the $258 million inflow to high-yield mutual funds for the week ending Sept. 15, the fourth consecutive inflow, all of which have come in above the $200 million mark.

"Everything is hanging in there," the trader added. "But there's nowhere else to go with the money."

Charter COO exit sends bond lower

News that Charter chief operating officer Margaret Bellville will leave the company effective Sept. 30 caused the company's existing bonds to trade lower, according to two sources on Friday.

One trader said Charter's paper was "a little weaker across the board," down a point to 1½ points.

The trader spotted the 8 5/8% due 2009, "the benchmark," at 79 bid, 80 offered.

Another trader had the 8 5/8s at 78.50 bid, 79.50 offered, "half a buck" better than Friday's lows, but down from Thursday's 79 bid, 81 offered.

Meanwhile another source spotted the Charter 8¼% notes due 2007 on Friday at 90, down from Thursday's 91 bid. Meanwhile the 9.92s due 2011 traded at 78 Friday, down from 79.25.

The zeroes due 2011 traded at 73 on Friday, down from the previous session's 74 bid and the zeroes due 2012 were 56.50 bid on Friday, down from 57.50 bid on Thursday.

"They were all basically down one point," said the source.

A buy-side capital markets source was taking the Friday news of Bellville's exodus in stride.

"The market is waiting and waiting to see what kind of debt reduction package they will come out with," the investor commented. "But there is no incredible short-term pressure on them to do that.

"People are willing to own the bonds, figuring they can get out before things get bad, and/or an equity offering comes to reduce debt, which would make everything good."

Calpine up on preferred deal

Meanwhile Calpine Corp.'s debt was better after the San Jose, Calif., power generator announced plans to issue $360 million of two-year redeemable preferred shares, subject to regulatory approval.

Proceeds will be initially loaned to Calpine's 1,200-megawatt Saltend cogeneration power plant located in Hull, Yorkshire, England, and the payments of principal and interest on the loan will fund payments on the redeemable preferred shares, the release added.

Sources in both the bond and bank loan secondary markets said that the news seemed to be impacting Calpine's existing debt favorably.

One trader spotted Calpine's 8¼% notes due 2005 at 98.75 bid, 99.75 offered, "three-quarters of a point higher" than the Thursday close.

Another trader spotted the 7 5/8s due 2006 at 92.75 bid, 93.75 offered and the 8½% due 2008 70 bid, 71 offered, about two points higher than Thursday.

Meanwhile Calpine's 8½% notes due 2008 at were at 71 bid on Friday, up from 69.75 bid.

Potential international sales ignite Salton

One trader told Prospect News that Friday's most traded issues came from Salton, Inc., the Lake Forest, Ill., appliance company that sells, among other things, former heavyweight boxer George Foreman's autographed grills.

"They've been a little better every day," said the trader.

"They had gotten kind of beat up because they had saturated the U.S. market with George Foreman Grills.

"But then about a week ago they released their 2004 results, and gave some upbeat guidance for 2005, saying they're trying to squeeze out some costs. And they think that internationally the world is ready for the George Foreman Grill.

"The seniors and the subs have gone up three or four points over the past few days."

The trader spotted the company's 12¼% notes due 2008 at 83 bid, 84 offered, while the 10¾% seniors due 2005 93 bid, 94 offered.

Tekni-Plex off on downgrade

The trader also said that the bonds of Somerville, NJ, packaging manufacturer Tekni-Plex slid after Standard & Poor's lowered the company's corporate credit rating to B- from B+, and placed the company on CreditWatch negative.

The trader said that the company's 12¾% senior subordinated notes due 2010 were at 85 bid, 86 offered, "down about a point," while the 8¾% senior secured notes due 2013 were at 92 bid, 93 offered, unchanged.

Similarly another source had the 83/4s of 2013 at 92 bid, basically unchanged.

Those levels were better than the lows reached earlier in the week but undid some of the subsequent rebound.

Tekni-Plex's debt started falling on early in the week and then late Wednesday it announced that it expects to report a net loss for the 12 months ending July 2, 2004. As a result, it is currently in default of its revolving credit agreement and senior secured term loan due 2008 and has breached the financial covenants.

2 deals for $1.15 billion

In the primary market on Friday, two issuers completed transactions on four tranches of bonds totaling $1.150 of proceeds.

Vanguard Health Systems, Inc. sold $700 million proceeds of high-yield bonds via subsidiaries on Friday.

Vanguard Health Holding Co. II LLC in conjunction with Vanguard Holding Co. II, Inc. priced an upsized $575 million of 10-year senior subordinated notes (Caa1/CCC+) at par to yield 9%, right on top of the 9% area price talk.

The issue was upsized from $560 million.

Meanwhile Vanguard Health Holding Co. I, LLC in conjunction with Vanguard Health Holding Co. I, Inc. priced a downsized $216 million of 11-year senior discount notes (Caa2/CCC+) at 57.713 to yield 11¼%, at the wide end of price talk of 200 to 225 basis points behind the senior subordinated notes.

The sale, which generated $124.7 million of proceeds, was decreased from $140 million proceeds.

Citigroup and Banc of America Securities ran the books for the debt refinancing deal from the Nashville, Tenn. owner/operator of healthcare delivery networks in urban markets. The transaction is part of a leveraged acquisition of the company by Blackstone.

Ainsworth sells $450 million

Meanwhile Vancouver, B.C., forest products company Ainsworth Lumber Co. Ltd. priced $450 million of bonds (B2/B+) in two tranches on Friday.

The company sold $275 million of eight-year senior fixed-rate notes at par to yield 7¼%, at the tight end of the 7¼%-7½% price talk.

The company also sold $175 million of six-year senior floating-rate notes at par to yield three-month Libor plus 375 basis points, at the wide end of the 350-375 basis points talk.

Deutsche Bank Securities and Goldman Sachs & Co. were joint bookrunners for the acquisition deal.

A trader told Prospect news that the new Ainsworth 7¼% notes due 2012 subsequently traded higher, finishing out the session at 101.375 bid, 101.50 offered.

Denny's awaits investors' orders

One new roadshow start was heard on Friday.

The roadshow starts Monday for Denny's Holdings Inc./Denny's Corp.'s $175 million of eight-year senior notes (Caa1/CCC+), which are expected to price on Wednesday Sept. 29.

UBS Investment Bank, Goldman Sachs & Co. and Banc of America Securities will run the books on the debt refinancing deal from the Spartanburg, S.C.-based family-style restaurant chain.

Finally price talk of 8¼% area emerged Friday on Culligan Finance Corp. BV's €185 million of 10-year senior subordinated notes (B3/B-), which are expected to price on Tuesday via Citigroup, Banc of America Securities and BNP Paribas.

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