VeraSun, Skilled Healthcare, Kimball deals price, Cablevision next; Six Flags gyrates as sale plans dropped

By Paul Deckelman and Paul A. Harris

New York, Dec. 14 - The pre-holiday new-deal parade continued to roll on Wednesday, with high yield syndicate sources reporting successful pricings for offerings by VeraSun Energy Corp., Skilled Healthcare Group Inc. and Kimball Hill Inc. And waiting in the wings, expected to price Thursday, was Cablevision Systems Corp.'s $1 billion issue, on which price talk was heard. Talk also came out on lesser deals, such as Stripes Acquisition/Susser Finance, EuroFresh Inc., Atlas Pipeline Partners LP, and Gerresheimer Glas AG.

In the secondary market VeraSun's new deal was well received, traders said, while Skilled Healthcare and Kimball Hill traded not too far from their respective issue prices.

Among the established issues, Six Flags Inc.'s bonds took investors on a roller-coaster ride, after the Oklahoma City-based theme park operator announced that it had ended its efforts to sell itself, in pieces or all at once, to outside bidders. The company's new management announced the official hiring of its chief executive officer and several high-profile additions to the company's board.

As has been the case throughout this week, sources pointed to a bulging pre-holiday forward calendar as the most formidable force in the high-yield market.

One sell-side official marked prices overall off slightly on the session.

In the primary market three issuers raised $609 million proceeds in three tranches. All three priced their deals at discounts to par. One came at the tight end of price talk while the other two priced at the wide end.

However the Wednesday primary market was a modest appetizer for what is expected to be an extremely busy Thursday session which could see nearly $5 billion price from just three issuers.

Those three, Hertz Corp., Paxson Communications Corp. and Cablevision Systems Corp., are expected to be joined by as many as seven additional issuers with deals ranging in size from $80 million to $400 million

A big finish for VeraSun

Wednesday's biggest issuer, by a nose, was Brookings, S.D.-based ethanol producer VeraSun Energy Corp., which was in the market to refinance debt and fund construction of a new facility.

The company priced a $210 million issue of 9 7/8% seven-year senior secured notes (B3/B-) at 99.386 to yield 10%.

VeraSun's bond sale generated $208.7 million of proceeds, and was the only one of Wednesday's three tranches that priced at the tight end of talk, in this case for a yield of 10% to 10¼%.

Lehman Brothers and Morgan Stanley ran the books.

An informed source said that the deal had been "rough going" until late Tuesday into early Wednesday, whereupon it became "a major pile-on."

The source estimated that the deal ended up being three to four times oversubscribed, and added that accounts may have been tentative until a few "staple orders" came in late Tuesday.

In the end, the source said, over 70 accounts took part.

Kimball Hill completes debt refinancing

Elsewhere homebuilder Kimball Hill Inc. priced a $203 million issue of 10½% seven-year senior subordinated notes (B3/B) at par to yield 10¾%, at the wide end of the 10½% to 10¾% price talk.

The JP Morgan and Harris Nesbitt-led bond sale generated $200.6 million of proceeds.

The Rolling Meadows, Ill., builder of single-family detached homes, townhouses and condominiums will use the proceeds to repay debt.

Skilled Healthcare finishes LBO deal

Finally, Skilled Healthcare Group Inc. priced a $200 million issue of 11% eight-year senior subordinated notes (Caa1/CCC+) at 99.333 to yield 11 1/8%, again at the wide end of price talk, this time the 11% area.

Credit Suisse First Boston and JP Morgan were joint bookrunners for the LBO financing from the Foothill, Calif.-based assisted living facilities operator.

A massive Thursday

No new roadshow starts were heard on Wednesday.

One sell-sider expressed doubts that any issuers will be inclined to hit the road with a deal as the year-end holidays are fast approaching.

Talk and timing were heard on several offerings.

CSC Holdings Inc. (Cablevision Systems Corp.) talked its $1 billion offering of 10-year senior unsecured notes at 8¼% to 8 3/8%.

Pricing is expected on Thursday via joint bookrunners Merrill Lynch & Co., JP Morgan, Banc of America Securities, Bear Stearns & Co., Citigroup and Credit Suisse First Boston.

Elsewhere Atlas Pipeline Partners LP talked its $250 million offering of 10-year senior notes at 8% to 8¼%. The Wachovia Securities-led deal is expected to price Thursday afternoon.

Greenhouse tomato producer Eurofresh Inc. issued price talk on its $195 million two-part deal. The Willcox, Ariz., company is talking its $170 million tranche of eight-year senior notes (B3/B-) at a yield of 11¼% to 11½%.

Meanwhile its $25 million tranche of nine-year senior subordinated discount notes (Caa2/CCC+) is talked 300 basis points area behind the senior notes.

The Banc of America Securities-led deal is expected to price on Thursday or Friday.

And German glass maker Gerresheimer Alpha GmbH is talking the €60 million add-on to its 7 7/8% senior notes due March 1, 2015 (Caa1/B-) at 98.00 to 98.50. JP Morgan has the books for the deal, which is also expected to price on Thursday.

Competition in the primary?

With the above-mentioned potential Thursday deals parading alongside the massive offerings from Hertz and Paxson, Prospect News asked a sell-side official to what extent these issuers are competing with one another.

Commenting that conceivably there is competition, the sell-sider said that the smaller deals have the greatest disadvantage in the present market.

"Hertz [$2.80 billion] is obviously getting the most attention," the source said, and added that Mirant North America LLC's $850 million offering of eight-year senior notes (B1/B-) is getting a special kind of attention, but may not be the kind of deal that the broader market is looking at.

"Cablevision is probably a no-brainer for most people," the source added, "it's just a matter of price."

The source added that Paxson at $1.13 billion is probably garnering a lot of attention because of its size, and because it is a potential mergers and acquisitions play owing to the expectations that Paxson could be acquired in the next 12 to 18 months.

"It's probably the smaller deals that are suffering," the sell-sider asserted, explaining that the smaller deals are not receiving attention proportional to that being given to the behemoths.

However, the sell-sider added, there seems to be sufficient cash to get all of Thursday's potentially massive issuance done.

VeraSun up in trading

When the new VeraSun 9 7/8% senior secured notes due 2012 were freed for secondary dealings, traders saw the bonds firm smartly from their 99.386 issue price earlier in the session. One trader saw those bonds push up to 101.25 bid, 101.75 offered, while another saw them get as good as 101.5 bid, 102 offered.

That robust performance did not carry over into the day's other new-deal issues. A trader saw Skilled Healthcare's 11% senior subordinated notes due 2013 get no better than 99.5 bid, 100.5 offered from their 99.333 issue price, and remarked that the Foothill Ranch, Calif.-based nursing home operator's new issue "doesn't look very active."

The trader also saw Kimball Hill's new 10½% senior subordinated notes due 2012 "trade up out of the gate" after pricing at 98.796, and get as good as 99.75 bid, 100.25 offered. However, late in the day, those bonds fell back to 98.5 bid, 99.5 offered.

At another desk, a trader saw the Skilled Healthcare bonds going home at 99.75 bid, 100.25 offered, and saw that same price level for the Kimball bonds.

Centennial, Omnicare firm

He also said that the new Centennial Communications Corp. 10% senior notes due 2013 were trading at 101 bid, 100.5 offered - a little lower than the peak levels that the Wall, N.J.-based Caribbean wireless operator's bonds hit in Tuesday's aftermarket activity, but still well up from their par issue price. Ditto for its floating-rate senior notes due 2013, which had priced at 99 on Tuesday and traded up to levels a point behind the fixed-rate bonds. On Wednesday, they closed at par bid, 100.5 offered - slightly below the peak level but up from the issue price.

And he saw Omnicare Inc.'s new 6¾% senior subordinated notes due 2013, which had priced Monday at par, now at 101.25 bid, 101.5 offered, while its 6 7/8% senior subs - which had also priced at par on Monday - at 101.375 bid, 101.75 offered.

Six Flags slides

Back among the established issues, a trader saw Six Flags' 9 5/8% notes due 2014 open at 97.5 bid, firm to 98, then drop as low as 93, before coming out of that trough to end at 97 bid, 98 offered, down half a point on the day, after the company "took itself off the auction block."

The company's other issues of bonds, the trader said, "all trade around each other, maybe half a point or so," and thus also presumably went on the scary up-and-down thrill ride before ending within half a point of their opening.

At another desk, a market source saw Six Flags' 8 7/8% notes due 2010 ending down half a point at 97 bid, while the 9¼% notes due 2013 were ¾ point lower at 98.25.

Six Flags - recently taken over by Washington Redskins owner Daniel Snyder's Red Zone LLC in a proxy fight - announced that it had ended its efforts to sell itself after a deadline for bid submissions passed with not a single would-be buyer having entered a bid.

Instead, said Snyder, who ousted chairman and chief executive officer Kieran Burke in the proxy fight and assumed the chairmanship of the company himself, Six Flags will now work on internal strategies for improving shareholder value, and will also work to bring its debt load down to "a more appropriate level."

As part of the sweeping changes that Snyder is implementing, in hopes of boosting the stock price - now in the $7 area - he named former ESPN executive Mark Shapiro as CEO in Burke's place. He had most recently been the CEO at Red Zone, Snyder's investment vehicle.

Six Flags also named several new directors, including Hollywood heavyweight Harvey Weinstein, and former football star, congressman, Cabinet member and vice presidential candidate Jack Kemp.

Bally rises

With the fight over Six Flags now over, observers looking for fisticuffs between entrenched company management and a big shareholder are turning their attentions to Bally Total Fitness Holding Corp., which is at loggerheads with its largest shareholder, Pardus Capital Management, over the latter's effort to expand the Chicago-based fitness center chain's board by four members, which would give those designees and their sponsor - presumably Pardus and other dissident holders - a virtual veto over any strategic alternatives that emerge from the company's current effort to sell assets, or perhaps even the whole company, if the price is right.

In a Securities and Exchange Commission filing Tuesday, Bally called Pardus' suggestion "irresponsible" and denounced the fund's recent criticism of chairman/CEO Paul Toback's sale of some of his Bally stock and other company actions as "absurd and inappropriate".

A market source saw Bally's 9 7/8% notes due 2007 up ¾ point at 95.75 bid. At another desk those bonds were seen up a full point at 97.5 bid.

Cablevision dip, bounce on upcoming deal

Elsewhere, Cablevision's bonds were "lower out of the gate," a trader said, in response to Tuesday's announcement that the Bethpage, N.Y.-based cable-TV operator will sell $1 billion of new bonds and use some of the proceeds to fund a special dividend to the shareholders.

The trader saw the company's CSC Holdings bonds, as well as its longer issues company-wide, down about 1½ points at the outset, while the shorter issues were off half a point. But then the bonds bounced back, to end little changed on the session, with the CSC 8 1/8% notes due 2009 ending at 101.5 bid, 102.5 offered.

Ford, GM slips

A trader reported that activity in Ford Motor Co.'s bonds was "very quiet," apparently not much moved by the news that the United Auto Workers union and the second-largest domestic carmaker have agreed on a plan to cut Ford's healthcare costs, much the same way as the union recently agreed to such cuts in a similar plan it negotiated with Ford's arch-rival, General Motors Corp. Under terms of the plan, Ford hourly workers and retirees, whose healthcare costs have heretofore been fully company-covered, will now have to chip in a portion of those costs.

Ford's flagship 7.45% notes due 2031 were seen off slightly at 71.25 bid, 72.25 offered. GM's benchmark 8 3/8% notes due 2033 were half a point down at 70.5 bid.

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