Service Corp. $500 million 2-part bonds talked at 7 3/8%, 7¾%

By Paul Deckelman

New York, Sept. 26 - Pre-deal market price talk emerged Tuesday on Service Corp. International's upcoming two-part $500 million bond issue, high yield syndicate sources said.

A $250 million tranche of eight-year senior notes is expected to yield around 7 3/8%, while a $250 million tranche of 12-year seniors is seen likely to yield around 7¾%.

The Rule 144A notes are non-callable, except for a make-whole call at 50 basis points over Treasuries for each tranche. They have been rated B1 with a stable outlook by Moody's Investors Service and BB- with a negative outlook by Standard & Poor's.

The issue is expected to price at around midday Wednesday via a syndicate led by joint bookrunners managers JP Morgan Securities and Merrill Lynch & Co. Co-managers are Banc of America Securities, Lehman Brothers, Raymond James and Morgan Keegan.

Houston-based Service Corp. - the world's largest funeral home and cemetery operator, with over 1,000 of the former and 350 of the latter in the United States and seven other countries - plans to use proceeds from the bond issue together with available cash and other financings to complete its previously announced acquisition of its largest competitor, Alderwoods Group Inc., and to refinance debt.

Service Corp. and Alderwoods announced in early April that Service Corp. would acquire its Cincinnati-based rival for $856 million in cash, or $20 per share, and would also assume $374 million of outstanding Alderwoods debt.

Following the closing of the deal, the combined company's domestic operations will consist of 1,712 funeral homes and 490 cemeteries in 48 states. Excluding one-time costs, Service Corp. projects that the acquisition will produce pretax savings of between $60 million and $70 million within 12 to 18 months of the closing, which is expected to take place before the end of the year.

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