GNC, TVN, Jostens price deals; Dana bonds better after takeover try falters

By Paul Deckelman and Paul A. Harris

New York, Nov. 25- High yield players got all pumped up Tuesday for fitness supplements maker General Nutrition Cos. Inc.'s offering of seven year notes, which was upsized and which was then heard to have moved higher in initial secondary dealings. TVN Finance Corp. plc also priced an offering of euro-denominated notes earlier in the session while Jostens Holding Corp. brought a zero-coupon dollar offering.

In the secondary arena, besides the new GNC bonds, Dana Corp. debt was heard to have advanced in the aftermath of the failure of ArvinMeritor Inc.'s hostile $2.67 billion bid for the rival auto components maker. Levi Strauss & Co. bonds were also quoted at firmer levels, although trading was quiet on the last full trading session of the week and of November.

Investment banks on either side of the Atlantic combined Tuesday to complete three high-yield transactions during a session that also saw a substantial buildup of new junk bond offerings coming down the pipe.

General Nutrition priced an upsized $215 million of seven-year senior subordinated notes (B3/B-) at par to yield 8½%. The Pittsburgh-based nutritional substitutes producer's deal, led by Lehman Brothers and JP Morgan, was increased from $190 million and came at the tight end of the 8½%-8¾% price talk.

A market source told Prospect News that when the notes were released for trading they were "up two or three points out of the gate."

Minneapolis-based scholastic awards, yearbook and class ring-maker Jostens Holding sold $150 million proceeds of zero-coupon 10-year senior discount notes (Caa2/B-) at 60.682 to yield 10¼%.

The deal, via Credit Suisse First Boston and Deutsche Bank Securities, came at the tight end of the 10¼%-10½% price talk.

A market source told Prospect News shortly before Jostens priced its zeros that demand for the paper was substantial.

"They were talking 10½%, but it's so oversubscribed that it will probably come tighter than that," the source accurately forecasted.

"I think it has gone from being oversubscribed to being just plain silly."

Meanwhile in Europe, Polish broadcaster TVN Finance sold €235 million of 10-year senior notes due (B3/B-) at par to yield 9½%.

JP Morgan ran the books on the deal which came at the wide end of the 9¼%-9½% price talk.

Meanwhile on Tuesday roadshow news of roadshow launches was heard on $1.22 billion of new business coming in four offerings, all expected to price before mid-December.

Ship Finance International Ltd., a subsidiary of Norwegian oil tanker company Frontline Ltd., is set to start the roadshow Monday for $580 million of 10-year senior notes (expected ratings B2/B). The Jefferies & Co.-led deal is expected to price on Dec. 12.

A source who had a look at the Oslo firm's new offering said that with a pro forma 8¼% yield and "at 3.2 times coverage it's not coming cheap," said the source.

A roadshow also starts Monday for Valeant Pharmaceuticals International's $275 million of eight-year senior notes (BB-), which are expected to price Friday Dec. 5 or Monday Dec. 8.

Bear Stearns & Co. is the bookrunner for the Costa Mesa, Calif. pharmaceutical firm's offer.

Monday also figures to see the roadshow start for Equinox Holdings' $150 million of six-year senior notes due 2009 (B3 expected/B-), expected to price on Dec. 9.

Merrill Lynch & Co. and UBS Investment Bank will run the books for the New York City-based fitness company's deal.

And the roadshow starts Tuesday for United Agri Products Inc.'s $215 million of eight-year senior notes (B2/expected B), expected to price on Dec. 10 or 11.

The deal will help support Apollo Management LP's $600 million acquisition of the company from ConAgra Foods Inc. in a management-led buyout is being led by UBS Investment Bank.

Andrew Feltus, an assistant portfolio manager with Pioneer Investment Management, told Prospect News Tuesday that for the foreseeable future the high yield asset class looks to be Saturday's child.

"It seems like these deals are going down pretty easily," Feltus commented of recent transactions.

"I don't see things slowing down," he added. "What else are you going to do with your money?

"One of two things is going to happen. Treasuries will sell off, which means that growth is here and the economy is strong, which is good for high yield. Or Treasuries will rally, which will at least put a floor underneath high yield.

"In either case it seems like a win-win for high yield."

Meanwhile, of business presently in the market, only one deal appears poised to price during the final session before the long Thanksgiving break.

Price talk of 9¾%-10% emerged Tuesday on Waterford Wedgwood plc's €165 million of seven-year subordinated mezzanine notes (B3/B-), expected to price on Wednesday, via Barclays Capital.

When the new GNC 8½% notes due 2010 were freed for secondary dealings, they strengthened to 102.125 bid, 102.625 offered from their par issue price earlier in the session, a trader said.

Generally, however, he saw the market as "pretty quiet. There wasn't a lot of activity going on," as participants wound things down ahead of the upcoming Thanksgiving holiday break. The Bond Market Association has recommended an early close at 2 p.m. ET on Wednesday, with U.S. financial markets shuttered on Thursday, and an early close again on Friday, when activity is expected to be minimal, at best.

Dana Corp. debt was better, apparently unfazed by the news that ArvinMeritor had abandoned its unsolicited effort to buy the company following the latest of several rebuffs by Dana management, which had asserted that the company's stockholders and debt investors would be better off with Dana remaining independent.

Dana's 9% notes due 2011 were quoted up two points on the session at 113.5, its 10 1/8% notes were at 114.5 bid, up half a point, and its 6½% notes due 2008 were nearly a point better at par. Its shares also rose, up 47 cents (3.09%) to $15.70 in New York Stock Exchange dealings.

ArvinMeritor investors were also relieved that the takeover try fell through, since some in the investment community had expressed concern that ArvinMeritor would have to take on so much debt in addition to its existing $1.5 billion in order to be able to swing a buyout of Dana - which has about $2.4 billion of debt - that it might be a financial basket case.

ArvinMeritor's 12% notes were seen up a point at 108 bid, 109 offered, while its shares gained 46 cents (2.40%) to close at $19.61.

Also on the merger-and-acquisition front, news that Oakwood Homes had agreed to sell virtually all of its assets to Clayton Homes pushed Oakwood's 7 7/8% notes due 2004 and 8 1/8% notes due 2009 as high as 50.5 bid, 51 offered from prior levels in the mid-40s, a trader said. However, at that point, he continued, "sellers came in, looking to take advantage [of the rise] and the bonds fell back from their peaks" to end offered around 47.

Apart from takeover-related activity, not much else was happening.

Levi Strauss & Co. bonds - which had gyrated around at higher levels on Monday before coming off their 4 and 5 point peaks to end up around a point or two - were slightly firmer on Tuesday. The San Francisco-based blue jeans maker's 11 5/8% notes due 2008, which had gone home at around 74 bid on Monday, pushed up to 75.5 bid early on, then came off that peak to trade about two points lower before regaining some of the lost ground and closing at 74.5 bid, 75.5 offered, up about half a point net-to-net.

A trader saw Levis' 12¼% notes due 2012 at 71.5 bid, 73 offered and its 7% notes due 2006 at 69.5 bid, 70 offered, both up a point on the session, despite a lack of any fresh news on the credit.

There was news out on Nextel Communications Inc., with Moody's Investors Service affirming the Reston, Va.-based wireless telecommunications company's current ratings, including the B2 on its senior unsecured debt, and revising its outlook to positive from stable.

"The new rating outlook is based upon the company's significant balance sheet improvement since the rating was upgraded in July 2003, and its continuing operating success in the marketplace," Moody's said.

It also predicted that "should the company maintain superior operating performance in the face of expected turbulence in the marketplace caused by number portability and push-to-talk competition, Nextel's ratings could move upward."

However, despite that good news, the company's bonds "were up maybe a little," a trader said. "It was more a case of better sellers at these levels."

They "just kinda sat there," another trader said, quoting its benchmark 9 3/8% issue in the same 108.5-109 bid context it's recently held. "There's just not a lot of room to move there."

He saw the same situation with Xerox Corp., despite the Stamford Conn.-based copier and office machines giant's bullish prediction that earnings would grow by 35% in both 2004 and 2005, driven by sales of color printers and related services and supplies.

While Xerox stock rose 82 cents (7.72%) to $11.44 on the NYSE, the trader saw the bonds essentially unmoved. "They're already trading so tight. There was not a lot of movement at all."

Xerox's 7 1/8% notes due 2010 were quoted a half point better at 103 bid, while a market observer quoted the company's other issues up perhaps a quarter point across the board.

"There were some slightly better bids" on Xerox, another trader said, "but no offers, and nothing trading."

Tenet Healthcare Corp. bonds were quoted at easier levels after Moody's Investors Service cut the Santa Barbara, Calif.-based hospital operator's ratings, including its senior unsecured rating, lowered to B1 from Ba3 and its subordinated rating, cut to B3 from B2. Moody's said the downgrade was prompted by "further deterioration in operating cash flow and the potential for material calls on cash over the near to intermediate term."

It warned that "new operating issues and recently disclosed potential claims on cash result in a higher level of uncertainty regarding Tenet's ability to fully fund its cash needs with current sources of liquidity."

The ratings service further cautioned that "newly disclosed operating challenges - some of which are sector-wide in nature - include higher bad debt expense, more restrictive nurse staffing ratios in California, and tougher stances taken by health benefits payors as remaining contracts are negotiated. In addition, several recent developments, including an appellate court's ruling on an employee contract case and an IRS tax deficiency report, may require sizable near-term cash outlays."

Moody's said it believes that "these potential cash needs, even prior to considering pending government investigations, may materially reduce current cash resources, which are expected to total approximately $650 million by year end."

A market source said Tenet debt was "down a little," with its 8 1/8% notes due 2008 off a quarter point at 93.75 bid. Its 6 3/8% notes due 2011 were at 92 bid, down a point and a half, while its 6 7/8% bonds due 2031 were down more than a point, at 86 bid.

Back on the upside, Collins & Aikman Products Co. bonds "felt a little better," said a trader, quoting the Troy, Mich.-based automotive component supplier's 10¾% senior notes due 2011 up a point at 90 bid, 91 offered and its 11½% subordinated notes due 2006 at 83.25 bid, 84.25 offered, also up a point.

Overall, though, a trader said in commenting on the low activity level, "the year-end is getting pretty close. Maybe things will pick up after November."

On the emerging markets front, Tuesday, Privatbanck, a Ukrainian bank, was heard to be about to price $150 million of three year notes (B-), possibly before the end of the present week, via Credit Suisse First Boston.

As to rumors recently circulating the emerging markets, one source said that Costa Rica figures to be the first sovereign out of the gate, coming in the first quarter of 2004.

And Brazilian energy giant Petrobras is heard to be coming even sooner with $500 million via Credit Suisse First Boston and Lehman Brothers, perhaps sometime in December.

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