iPayment prices downsized deal; Sea Containers bonds higher as stock jumps

By Paul Deckelman and Paul A. Harris

New York, May 2 - iPayment Inc. was heard by high-yield syndicate sources to have successfully completed its downsized $205 million transaction at the tight end of price talk.

However a pair of quick-to-market deal announcements rendered Wednesday the day of the whopper, as Allied Waste North America announced a $600 million offering it intends to price on Thursday while Fiat SpA said it plans to price €1 billion on Friday.

In the secondary market, Sea Containers Ltd.'s bonds - which saw some volatile dealings on Monday - were seen up solidly on Wednesday, in line with a sharp rise in the Hamilton, Bermuda-based railroad and maritime container company amid a slew of news items - the hiring of an investment bank to shop its ferry unit as part of a campaign to unload non-core assets, the long-awaited ruling in an arbitration case, which could have been a lot worse, and news that an investor has taken a big position in the company's shares.

Elsewhere, Sinclair Broadcast Group Inc.'s bonds were better on first-quarter earnings. However, several other companies reporting earnings Wednesday saw little real bond market movement in response - even though some of them, such as Qwest Communications International Inc. - had quite positive quarterly results.

Downsized iPayment tight to talk

Only one issue priced during Wednesday's primary market session as iPayment, Inc.

Wednesday's sole new issue came from iPayment which priced a downsized $205 million issue of 9¾% eight-year notes (Caa1/CCC+) at 98.64 to yield 10%.

The Banc of America Securities-led acquisition deal came at the tight end of the 10% to 10¼% price talk, generating $202.212 million of proceeds.

The Nashville-based provider of credit and debit card-based payment processing services downsized the issue to $205 million from $280 million on Tuesday, shifting $65 million to its term loan and decreasing the amount of proceeds by $10 million.

Allied Waste to price $600 million

The iPayment deal was the last offering marketed via an investor roadshow that was expected to come to market before the Friday close.

However two sizable drive-bys surfaced during the Wednesday session - both of which are expected to price before the end of the week.

Allied Waste North America plans to price a $600 million offering of 10-year senior secured notes on Thursday via Citigroup, JP Morgan and UBS Investment Bank.

The issuer, a wholly owned subsidiary of Scottsdale, Ariz.-based Allied Waste Industries, Inc., will used the proceeds to refinance debt.

Fiat €1 billion for Friday

Elsewhere Fiat Finance & Trade Ltd. SA, a financing unit of Turin, Italy-based automobile manufacturer Fiat SpA will hold an investor lunch presentation on Thursday in London for its €1 billion offering of five-year senior notes (Ba3/BB-), which are expected to price on Friday.

Credit Suisse and Goldman Sachs & Co. have the physical books for the bullet notes, proceeds from which will be used for general corporate purposes.

Euro primary continues to sizzle

The Fiat €1 billion deal finds the euro forward calendar bulling its way toward the €2.5 billion mark as it joins a trio of other offerings, each of which is expected to price next week.

The biggest of those is Lottomatica SpA's €750 million offering of 60-year non-call-10 hybrid capital securities (Ba3/BB) via Credit Suisse.

Proceeds from the deal will be used by the Rome-based lottery game operator to help fund its acquisition of Gtech Holdings, a West Greenwich, R.I., gaming technology and services provider.

A source in Europe said that the Lottomatica roadshow commenced on Wednesday and got off to a great start with a packed meeting in Milan attended by over 30 investors.

The source also noted that Lottomatica's acquisition of Gtech will create the number one lottery company in the world with an 80% share of the U.S. market and a 60% share of the international market.

Also in the euro market with a deal expected to price next week is Europcar AMAG Services AG, with €500 million two-part transaction.

The car rental arm of Volkswagen AG plans to sell seven-year senior subordinated secured floating-rate notes and eight-year senior subordinated unsecured fixed-rate notes.

Deutsche Bank Securities has the books for the acquisition financing.

Also roadshowing is Mechachrome International Inc., which is in the market with a €175 million offering of eight-year senior subordinated notes (Caa1) via Merrill Lynch.

The Montreal-based designer, manufacturer and assembler of precision-engineered industrial components for the automotive and aerospace industries will use the proceeds to repay debt.

Allied Waste little changed in trading

Back in the secondary market, the announcement that Allied Waste plans to sell new bonds to finance the takeout of existing paper was seen having little impact on the existing bonds. Its 6 3/8% notes due 2008 were half a point better at par bid, and its 9¼% notes due 2021 were down a quarter point at 101.5.

Sea Containers strong

The big mover on the secondary scene, traders said, was Sea Containers. Its bonds had gyrated around at lower levels Monday before ending mostly unchanged, as the company's New York Stock Exchange-traded shares nosedived after it warned that its auditors were likely to include a "going concern" advisory in their evaluation of its results.

But it was quite a different story on Wednesday, with traders seeing its several series of bonds firming smartly, in line with a sharp rise in the shares.

A market source saw Sea Containers' mercurial 10½% notes due 2012 zooming to 91.75 bid from prior levels at 86.75, while its 7 7/8% notes due 2008 were two points better at 89 bid, and its 10¾% notes slated to come due this Oct. 15 up slightly more than three points at 97.75.

That solid rise came in tandem with its shares soaring as high as $6.65 during the session - a $1.73 jump from Tuesday's closing price of $4.92 - before coming off that high to close with still substantial gains. The stock ended up $1.28 (26.02%) to $6.20, on volume of 1.45 million, nearly six times the usual turnover.

Sea Containers announced Wednesday that an arbitrator judging a dispute between the company and General Electric Corp.'s financing unit, GE Capital, had ruled in favor of GE on four counts of a 15-count allegation claiming that Sea Containers had breached an agreement under which it provides certain services to GE SeaCo, a container-leasing joint venture it entered into with GE Capital, and thus owed damages to the GE unit.

However, the arbitrator also ruled that Sea Containers had committed two other breaches of the service agreement but these did not result in any damages, and additionally declined to assess damages on the other nine counts of the allegation, and rejected claims by GE Capital that GE SeaCo was entitled to recover the fees paid to Sea Containers since the inception of the joint venture.

The breaches of the services agreement concerned Sea Containers' management of GE SeaCo's leased containers, office rent charged to GE SeaCo, costs related to containers bought by the joint venture, and the allocation of consulting fees.

While the arbitration award directs the two parties to attempt to agree upon the amount that Sea Containers must reimburse GE SeaCo as a result of the four breaches, Sea Containers indicated that its liability was limited. It said that based on assertions made by GE Capital during the arbitration, and taking into account the amounts Sea Containers has already repaid to GE SeaCo to cure any alleged breaches, it expects the additional amount that it will be required to pay will be no more than $13 million - although GE Capital recently said it believes the additional amount will be more than $15 million. If the parties are unable to agree on the amount of damages, the arbitrator will decide the issue after receiving further submissions from each.

Sea Containers additionally said that the economic impact of its payment of additional damages to GE SeaCo will be partially offset, because a large portion of that payment will in effect come back to Sea Containers anyway as a result of its joint-venture ownership interest in GE SeaCo.

Sea Containers' services agreement with GE SeaCo will be terminated on May 28 under the terms of the settlement.

Some Sea Container investors breathed a sigh of relief at the news that most of GE's claims against Sea Containers were quashed, and the amount of money the company is on the hook for isn't all that much. "$15 mil is nothing compared to what it could have been," wrote one poster on an investor-oriented internet message board, reacting to the announcement of the verdict. "The market was expecting much worse."

However, a bond trader at another shop - who saw both the 101/2s and the 7 7/8s up "significantly, at least two points," at 91.5 bid, 92.5 offered, while the 103/4s rose a point to 97.5 - flatly declared that "Sea Containers did not go up because of the GE ruling - everyone knew they were going to settle it, somehow." He instead pointed to media statements late Tuesday by Robert MacKenzie - who took over in January as chief executive officer from the company's founder and long-time leader, James B. Sherwood - confirming that the previously announced plans to sell the company's non-core Silja Oy AB ferries business in the Baltic Sea, should be completed "soon." Britain's Telegraph newspaper was reporting Wednesday that Sea Containers has hired investment bank Société Générale to sell off the ferry businesses to try to clear some of its debts.

Sale of Helsinki-based Silja, which runs eight vessels on three routes linking various points in the Baltic, is expected to generate around €500 million, or more than $600 million.

"The bonds went up because they're going to sell their ferry business," the trader said, "and it looks like roughly around $630 million. I think they got a pretty good price for it.

"It looks like the assets obviously are more than their debt. There's $1.3 billion [of debt] outstanding, this is $630 million. That brings it down to about $500 million. With their other [businesses - including ferries elsewhere, including New York and in the Adriatic Sea, ship management and naval architectural subsidiaries, as well as their core British railroads business and marine container leasing operations] it think they have more than ample assets," he continued. "At least that's the conjecture. Anyway, the paper was very firm."

Yet another trader, quoting Sea Containers' bonds up four points, with the 7 7/8s at 90.5 bid, 91.5 offered, said it was simply a case of the paper "getting back some of the losses they've had over the past few days.

"They've just been down so much the past couple of days that they bounced back up."

Sea Containers fans also noted reports of a Tuesday afternoon filing with the Securities and Exchange Commission by Appaloosa Holdings, which disclosing that the Chatham, N.J.-based investment firm had taken a large stake - totaling 11.3% - in the container company for an undisclosed sum. That would make Appaloosa one of Sea Containers' single largest shareholders. The Appaloosa news was seen as another factor behind the stock's sharp rise.

Earnings help Sinclair

Elsewhere, earnings were reported by a number of companies, although most seemed to have little impact on the movements of their bonds.

One exception, however, was Sinclair Broadcast Group, whose 8% notes due 2012 were seen up 1½ points on the numbers, a trader said, at 102.5 bid, 103.5 offered.

The Hunt Valley, Md.-based television station group owner reported that its first-quarter earnings grew to $11.2 million (13 cents per share), up 27% from $8.8 million (10 cents per share) a year earlier, even though revenue edged down 0.2% to $163.5 million from $163.9 million. Revenues were hurt by a fall-off in automotive advertising, which normally accounts for more than 20% of its ad revenues.

Qwest steady after results

While Sinclair's bonds were up, other issuers reporting numbers saw their bonds mostly little changed. Qwest Communications' bonds, for instance, were mostly range-bound, trading up or down about a quarter point, a market source said, as he quoted its Qwest Communications Corp. 6% notes due 2007 down ¼ point at 97.5, its Qwest Capital Corp. 7 5/8% notes due 2021 up 1/8 point at 99.125, and the parent company's 7 7/8% notes due 2011 up ¼ point at 105.

The scant rise in the bonds came even as Qwest reported what executives of the Denver-based regional telecommunications company called "breakthrough" numbers in the first quarter. Earnings rose 54% to $88 million (five cents per share) from $57 million (three cents per share) a year earlier, beating Wall Street expectations that Qwest would do no better than break even for the quarter. The year-over-year improvement was even more pronounced if one remembers that the 2005 first-quarter results included a one-time gain of $257 million (14 cents per share) from Qwest's sale of its wireless assets to Verizon Communications Inc. Minus that gain, year-earlier performance would have been in the red.

Qwest's revenues were up 0.8% in the quarter from a year ago, to $3.5 billion, while operating expenses declined 4% to $3.1 billion on improvements in productivity and operating efficiencies, optimization initiatives in facility costs and lower depreciation, the company said.

At the same time, customer connections rose, and the company enjoyed a gain in average revenue per user, a key telephone industry economic performance metric.

Qwest ended the quarter with total debt of $15.4 billion down $1.9 billion from its year-earlier debt load. First-quarter interest expense totaled $296 million for the first quarter, down from $381 million in the year-ago quarter. As a result of successfully tendering for and retiring high coupon legacy debt in the fourth quarter of last year, interest expense is expected to be reduced by approximately $300 million in 2006. Quarter-end cash and short-term investments were $740 million.

Metaldyne rises on rumors

Apart from earnings, a trader saw Metaldyne Corp.'s 11% notes due 2012 firmer on "some sort of speculation" that a company that the Plymouth, Mich.-based automotive metal stamping company holds a stake in may soon file for an initial public offering, "which will help Metaldyne's liquidity, since it owns a piece of the company." The bonds ended up one point at 87 bid, 88 offered.

© 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.