Charter floaters, Chesapeake, SBA new deals price; existing Charter bonds up, Calpine continues rise

By Paul Deckelman and Paul A. Harris

New York, Dec. 1 - The high-yield primary market headed into the homestretch for 2004 Wednesday, opening the last month of the year with a quickly shopped, upsized, oversubscribed issue of floating-rate notes from a Charter Communications Inc. subsidiary - on top of deals from Chesapeake Energy Corp. and SBA Communications Corp.

In a secondary market described by one trader as "sporadic," Calpine Corp. bonds continued to firm, getting additional lift from Monday's news of the company's pending collaboration on an innovative plant project with General Electric. Charter's existing bonds were higher, aided by the new-deal news.

The high yield primary market saw $1.4 billion price in three tranches price during the mid-week session, as Chesapeake Energy Corp. and Charter Communications completed drive-by deals for the lion's share of that amount.

Meanwhile the forward calendar continued to build, with news of two roadshow starts, as well as a pair of drive-by add-on deals that figure to price before Friday's close.

Plenty of cash

The steady build up of the calendar in the three completed post-Thanksgiving sessions prompted Prospect News to ask one investment banker, on Wednesday, whether the market can digest the all of this business - $6.4 billion of dollar-denominated deals - by the end of 2004.

"Absolutely," the sell-sider responded.

"I see somewhere between $4 billion and $5 billion on the calendar right now, and that's pretty big. It's not huge or overwhelming. And there is definitely more stuff coming.

"All of the big deals that I am aware of have already priced. But there are other situations out there that could result in big deals, too," the source added.

"But I know there are smaller deals out there.

"I don't think we are going to reach the 'trickle-point' until just a few days before Christmas, especially with Christmas on a Saturday: it's not going to be a completely wasted week. So unless there is a dramatic move in Treasury rates before then I think we'll go all the way up until the Tuesday or Wednesday before Christmas.

"And I do believe that the market can digest this stuff."

Chesapeake prices day's biggest

At $600 million, Chesapeake Energy Corp.'s new senior notes due June 2014 led the field on Wednesday.

The Oklahoma City-based independent natural gas producer sold its new 6 3/8% senior notes (Ba3/BB-/BB) at 99.056 to yield 6½%, at the tight end of the 6½% to 6 5/8% price talk.

Deutsche Bank Securities, Banc of America Securities, Credit Suisse First Boston, Lehman Brothers and UBS Investment Bank ran the books for the drive-by acquisition and debt refinancing deal.

Charter upsizes by $50 million

Also in the market with a drive-by deal on Wednesday was Charter Communications, the St. Louis-based cable TV and high-speed internet services provider.

Issuing entities CCO Holdings LLC and CCO Capital Corp. priced an upsized $550 million of six-year senior floating-rate notes (B3/CCC-/CCC+) at par to yield three-month Libor plus 412.5 basis points.

The Credit Suisse First Boston and Citigroup-led deal came in the middle of the Libor plus 400 to 425 basis points price talk and was increased from $500 million.

A market source told Prospect News that the debt refinancing and general corporate purposes deal was oversubscribed.

Finally, SBA Communications Corp. sold $250 million of eight-year senior notes (Caa2/CCC-) at par on Wednesday to yield 8½%, a the wide end of the 8¼% to 8½% price talk.

Lehman Brothers and Deutsche Bank Securities ran the books for the debt refinancing deal from the Boca Raton, Fla.-based operator of wireless communications infrastructure.

Universal City talk

Price talk emerged Wednesday on the $450 million two-part offering of 5.5-year notes due 2010 (B3) from Universal City Florida Holding Co. I and Universal City Florida Holding Co. II, which is expected to price on Thursday.

The prospective issuers, which are partnerships of Orlando, Fla. theme park owner operator Universal City Development Partners, Ltd., are offering $150 million of fixed-rate notes, talked at 8½% area, and $300 million of floating-rate notes, which are talked at three-month Libor plus 475 basis points area.

JP Morgan and Banc of America Securities have the books.

Stingy with talk

Market sources, both Tuesday and Wednesday, commented that although there is a substantial amount of business that is expected to price before the end of the present week, well after the close talk had only been heard on the above-mentioned Universal City deal.

That left an even half-dozen deals that are expected to price by Friday, none of which have official price talk, according to various sell-side sources.

Sources have conjectured that issuers and their underwriters are being careful about issuing talk prematurely, given the recent precipitous upward movement of the 10-year Treasury note.

"People are being stingy with talk," one sell-side official commented late Wednesday.

"It has something to do with the 10-year. But I also think that it has to do, in part, with the strength of the market.

"I don't think people are as concerned about judging sensitivity to price talk once it's out there.

"People are able to build large order books and price where they think the deal should come when the market is this hot.

"There's not a lot of haggling. You just tell people 'Hey, we've got an order book. We know where we're going to price it.'"

The calendar builds

Two roadshow starts were heard during the mid-week session.

Marketing starts Monday for Scientific Games Corp.'s $200 million offering of 10-year non-call-five senior subordinated notes via JP Morgan and Bear Stearns & Co.

The New York City-based provider of products and services to the lottery and pari-mutuel wagering industries will use the proceeds to refinance debt.

And a roadshow starts Friday for Douglas Dynamics LLC/Finance Co.'s $150 million offering of seven-year non-call-four senior notes via Credit Suisse First Boston.

The Milwaukee, Wis.-based manufacturer of snow and ice removal equipment will use the proceeds to refinance debt and fund a dividend.

A pair of add-ons

Elsewhere two issuers appeared Wednesday with intentions of tapping existing issues.

Fairfax Financial Holdings plans to price a $150 million add-on to its 7¾% senior bullet notes due April 26, 2012 (expected ratings Ba3/BB) on Friday via Banc of America Securities.

The Toronto-based financial services holding company plans to use the proceeds to fund a tender and for general corporate purposes.

And Haights Cross Operating Co. plans to price a $20 million add-on to its 11¾% senior notes due Aug. 15, 2011 on Thursday, via Bear Stearns & Co.

The White Plains, N.Y.-based educational and library publisher will use the proceeds to fund an acquisition and for general corporate purposes.

Chesapeake gains in trading

When the new Chesapeake 6 3/8% notes due 2014 were freed for secondary dealings, they were heard to have firmed to 100.5 bid from their 99.056 issue price, "so that's up pretty good," a trader said. The Charter floaters and the new SBA notes were not seen having broken into the aftermarket.

Charter old bonds rise

Charter's existing bonds were seen having done well in advance of the new deal, with a market source quoting the St. Louis-based cable operator's 8¼% notes due 2007 a quarter point better at 97.25, its 10% notes due 2009 half a point better at 87.25 bid, its zero-coupon notes due 2011 up a full point at 78.5, and its 11 1/8% notes due 2011 1½ points better at 87.5.

At another desk, a trader said that from where he sat, "Calpine, Charter and Continental [Airlines] definitely showed some strength."

He saw Charter's benchmark 8 5/8% notes due 2009 up perhaps a quarter of a point to 83.75 bid, 84.75 offered.

Another trader agreed that the Charters were "slightly better," pegging the 81/4s at 97.5, up a point, while the 11 1/8s were two points up at 87.75, as were Charter's zero-coupon notes due 2012, at 63 bid. He also saw Charter's zeroes of 2011 jump all the way to 69.625 from prior levels at 67, while the company's 9.92% notes due 2011 were up 1½ points at 83.5.

Calpine continues upward

Calpine bonds, meanwhile, which had risen anywhere from two to three points on Tuesday, were continuing to appreciate on Wednesday. A trader said that the San Jose, Calif.-based independent power producer's bonds were up on "more fallout from the news they'll build a plant with GE."

He quoted Calpine's flagship 8½% notes due 2011 at 69.5 bid, 70.5 offered, exclaiming "holy mackerel!" as he noted the four-point gain in the notes from the mid-60s.

The trader also saw the 8½% notes due 2008 firm handsomely to 73.5 bid, 74.5 offered from prior levels at 70 bid, 71 offered. However, he said that Calpine's "short stuff didn't move much," with its 8¼% notes due 2005 at par, up a quarter of a point, while its 10½% notes due 2006 were up half a point to 99.25.

Calpine and General Electric Corp.'s GE Energy unit announced Tuesday that they had agreed to build an advanced combined-cycle natural gas-fired power plant in North America.

The power plant, which will be just the second in the world of its type, will be based on two GE 107H combined-cycle systems, which will provide a total plant output of more than 775 megawatts - enough power for nearly 800,000 U.S. homes.

Combined-cycle systems use exhaust heat from a gas turbine to generate steam used to power a steam turbine, producing additional power without an increase in fuel consumption, saving up to an estimated $8 million a year on fuel costs.

Levi gains

Elsewhere, traders noted that Levi Strauss & Co. bonds were firming for a second consecutive session.

"I haven't figured it out" why the bonds of the San Francisco-based apparel company were up, one trader said, quoting the 7% notes due 2006 as having jumped to 102 bid, 102.5 offered from 100.5 bid, 101.5 offered. However, he saw Levi's 12¼% notes due 2012 firm more modestly to 106 bid from 105.5 bid, 106.5 offered, and estimated the 11 5/8% notes due 2008 unchanged at 104.25 bid, 105 offered.

Bombardier down again

Bombardier Inc.'s bonds - which fell about two points across the board Tuesday as Standard & Poor's dropped the Canadian aircraft and transportation equipment manufacturer's ratings to junk-bond status (Moody's Investors Service already had them there) - were seen continuing to ease Wednesday, a trader seeing them "if anything, about a buck [one point] lower" from Tuesday's closing level of 90 for the 6.30% notes due 2014, and 94.5 bid for the 6¾% notes due 2012.

However, some traders had seen closing levels Tuesday below those levels.

The news that Blockbuster Inc. said that it is willing to raise its $1 billion bid to acquire rival Hollywood Entertainment Corp. was seen having little effect on Portland, Ore.-based video rental operator Hollywood's bonds, its 9 5/8% notes due 2011 up perhaps 1/8 point at 107.875.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.