Cablevision unit sells bonds; Hawker Beechcraft plunges to earth; Clear Channel off on loan drawdown

By Paul Deckelman and Paul A. Harris

New York, Feb. 9 - CSC Holdings Inc. - which sold the first new junk bond deal of 2009 - reached another milestone on Monday, as it became the first issuer this year to come back for a second helping of market money; the unit of Cablevision Systems Corp. brought a quickly shopped "drive-by" offering of 10-year bonds, priced at a discount to par to boost its yield. When the new bonds were freed for aftermarket dealings, they moved up solidly.

Back among the established issues, Wichita, Kan.-based general aviation manufacturer Hawker Beechcraft Inc.'s bonds went into a sickening tailspin down to the mid-teens, losing about half of their remaining value on investor angst about the industry's poor prospects in a recession-wracked economy in which the kind of business jet the company makes has become a favored target of politicians and pundits seeking to attack what they denounce as corporate greed and irresponsibility.

Elsewhere, radio giant Clear Channel Communications Inc. got some static from bondholders on the news that the San Antonio, Tex.-based company had drawn down the remaining $1.6 billion of a $2 billion credit line.

Satellite broadcaster Sirius XM Satellite Radio Inc.'s bonds rose - even as its shares retreated -- as The Wall Street Journal reported that Sirius last year turned down an unsolicited offer from satellite TV tycoon Charlie Ergen to take control of the struggling company. The Journal disclosed last week that Ergen has been busily buying up a big chunk of Sirius' soon-maturing debt.

A looming debt maturity and an immediate need to raise a lot of money seem not to be troubling investors in NOVA Chemicals Corp. too much; the Canadian chemical company's bonds rose by several points and its shares gained over 10%, on no fresh positive news; an analyst suggested that players in NOVA are heartened by the prospect of higher prices for one of its key products.

Cablevision returns

The shutters lifted on the primary market, which saw the pricing of the first 10-year notes to clear the market in nearly three-fourths of a year.

In Monday drive-by action, CSC Holdings, Inc., a subsidiary of Cablevision Systems Corp., raised $500 million with an issue of 8 5/8% 10-year senior notes (B1/BB) which priced at 95.196 to yield 9 3/8%.

The yield came in the middle 9¼% to 9½% yield talk while the issue price came toward the cheap end of original issue discount talk of four to five points.

The deal was well oversubscribed, according to an informed source who added that 140 accounts played.

JPMorgan, Banc of America Securities, Citigroup, Credit Suisse, Deutsche Bank Securities and Goldman Sachs & Co. were joint bookrunners for the debt refinancing deal.

Monday's deal came slightly more than a month after Cablevision, via the same subsidiary, priced an upsized $844 million issue of 8½% five-year senior notes (B1/BB) at 88.885 to yield 11 3/8%.

Further along the curve

With the Cablevision deal, the primary market saw the first new 10-year bond to price since B/E Aerospace, Inc. sold $600 million 8½% senior notes due July 1, 2018 (Ba3/BB+) at par on June 26, 2008.

This is significant, according to market sources,.

"Investors and issuers have been hesitant to go too far out on the [maturity] curve," a high-yield syndicate official commented late Monday, noting that as the market began to thaw last December the first deals to come were five-year bullet deals: Kansas City Southern Railway Co.'s 13% senior unsecured notes due December 2013 (callable, but with the first call at par plus the full coupon), and El Paso Corp.'s 12% non-callable senior unsecured notes due December 2013.

Precision Drilling launches

Meanwhile during Monday's primary market session Precision Drilling Trust launched a $250 million offering of 6.5-year senior notes.

The roadshow starts Tuesday and is scheduled to conclude on Friday morning, with pricing expected after that.

Credit ratings remain to be determined.

Deutsche Bank Securities and RBC Capital Markets are joint bookrunners.

Proceeds will be used to reduce debt under the company's $400 million bridge facility used to fund the acquisition of Grey Wolf, Inc, which closed on Dec. 23, 2008.

The company reduced by $150 million the original $400 million of debt securities it planned to sell in order to refinance the bridge, and instead is doing a concurrent offering of trust units which is expected to generate gross proceeds of about $150 million.

During the company's quarterly earnings conference call on Monday, Precision Drilling announced it is taking steps to add greater certainty to its debt and capital structure in response to lower financial operating performance in early 2009.

The company said it would indefinitely suspend cash distributions effective immediately in order to increase debt repayment capability and balance sheet strength.

"A key issue for Precision Drilling is to deleverage our balance sheet and structure our debt to ensure we are well-positioned for when the oil-service market rebounds, as we know it will," Kevin Neveu, chief executive officer of Precision Drilling, said during the call.

New Cablevision bonds move up

When the new CSC Holdings 8 5/8% notes due 2019 were freed for secondary-market dealings, they broke at 96 bid, 96.5 offered, a trader said, versus 95.196 at the pricing. He saw the bonds subsequently move up further to 96.5 bid, 97 offered.

A second trader saw those bonds get as good as 96.75 bid, 97.75 offered.

Another trader said the deal "got done, though they priced at a deep discount." He said that "this kind of paper seems to be coming about with reverse inquiries. The richer end of the credit curve is staying rich, and the cheaper end is getting cheaper."

He said there was some "small trading going on, and on the shorter end too," for existing Cablevision bonds. Both issues coming due this year were trading around 101-plus." Other Cablevision bonds traded on "no really big size."

New El Pasos stay strong

A trader saw El Paso Corp.'s new 8¼% notes due 2016 in a 98.25-99 context, well up from the 95,.535 level at which the Houston-based natural gas operator priced its $500 million of the bonds last week. "They're bid for, but they're not trading a lot. I really haven't seen them."

Market indicators turn mixed

The widely followed CDX High Yield 11 index of junk bond performance, which rose by ¾ point on Friday, continued its winning ways Monday, with a trader quoting the market measure up another ½ point at 74¼ bid, 74¾ offered.

However, the KDP High Yield Daily Index was meanwhile down 10 bps on the day at 54.60, while its yield widened by 1 bp to 13.14%.

In the broader market, advancing issues continued to lead decliners, by a not quite nine-to-seven margin.

Overall market activity, measured by dollar-volume totals, fell nearly 35% from the levels seen in Friday's session.

A trader said that "everybody's waiting for tomorrow," i.e. Tuesday, anticipating a trifecta of political developments that may give a clearer picture of where the economy will be headed over the next few months or even years. There will be a speech by Treasury secretary Timothy Geithner outlining the Obama administration's plan to overhaul the government's $700 billion financial bailout package, as well as Federal Reserve chairman Ben Bernanke's testimony before a House panel on the central bank's efforts to revive lending during the financial crisis.

Meanwhile, the Senate is expected to narrowly pass an $827 billion stimulus bill on Tuesday, although this will have to be reconciled with the $819 billion plan that passed the House last week on a party-line vote; besides their overall size, the two plans differ in some details, which must be brought into agreement for the final bill that will emerge for another Capitol Hill vote.

With all of that going on, he said, people were sitting on their hands Monday. "It did affect what's going on today, I think - it's been pretty quiet."

Another trader said that "it was kind of a dull day." He said that "when you look at it on a credit basis, the top half of the market seems to be flying - while the bottom half seems to be sinking."

Better-quality bonds, he continued "have gotten tighter, and it's a little harder to get buyers and sellers to agree upon a price now. Plus, it's harder to get size," or any kind of quantity, in bonds being traded.

As a result, he said, "every now and then, something pops up that you haven't seen trade for a while, and it's trading at a price that's a lot higher."

For instance, he said, Coventry Healthcare Inc.'s 5.95% notes due 2017 were trading at 68.5. The company's bonds "were pretty much beat up at the end of [2008] and traded on an odd-lot basis in the 50s in January, then 63 at the end of January." He said they had moved up to 68 on Monday "without any real trading [recently] going on. So I think that as people are able to find these blocks of these things that haven't traded for a while, they're trading at a higher price."

On the other hand, he said, that even as better-rated credits were showing strength, "bankrupt or near-bankrupt" bonds are "either orphaned in the sense that they've gotten so cheap that companies that you think would be hoarding cash are out their buying their debt, or they're just sinking lower."

An example of the latter, he said is Aleris International Inc.'s 10% notes due 2016, formerly bid around 16 just a couple of weeks ago, are now trading in a 2-4 context, going as low as 1.5.

He said that "right now, there's a fair amount of cash coming into the market." He said that investors are saying that "'if my principal is safe and I get some income,' there's going to be a bid for the bonds and they'll continue to move up. That's the kind of stuff everybody's looking for."

However, "every now and again, some of this off-the-run low dollar price will trade, but it's work to put it together."

Plane maker Hawker's bonds hit turbulence

Among specific issues, Hawker Beechcraft's debt was clearly the day's big loser, falling at least 10 points on the day.

A trader quoted the 8½% notes due 2015 at 16 bid, 17 offered, compared to 26 bid, 27 offered last week. Another trader pegged the notes at 15 bid, 16 offered.

"They haven't been trading much recently," the second trader said of the paper. "But that definitely looks a good bit lower from where it had been in the higher 20s."

Another source deemed the bonds as much as 16½ points weaker at 15.5 bid.

There was no fresh news out Monday on the manufacturer of general aviation aircraft - the smaller jets frequently bought by businesses and private owners. However, last week, Moody's Investors Service downgraded the company to B3 from B2, citing concerns over diminished revenue prospects and cash flows.

Also last week, Hawker said it would cut 2,300 jobs before the end of the year. That is in addition to about 500 workers that were laid off before the end of 2008. Pink slips went out to some employees on Friday.

"This is an extremely painful step for the HBC family and community, but one that is absolutely necessary," the company's chairman and chief executive officer, Jim Schuster, said in a letter to the employees last Tuesday. "While I wish I could commit to you that this will be our final action, I cannot do so at this time given the extreme volatility in the marketplace."

Schuster said that the government's stimulus package "has failed to sufficiently loosen credit markets, which are absolutely vital to the success of HBC and our industry." He also pointed out that "the media and some politicians have cast general aviation as a wasteful extravagance instead of a critical business tool and the source of millions of American jobs."

Schuster was apparently referring to the uproar surrounding the heads of the three ailing Detroit automakers, on the news that they had come to Washington in their corporate jets - just before they met with lawmakers asking for federal bailout funds. There was further corporate jet-bashing just recently, when Citigroup - the recipient of billions of dollars in federal aid - hurriedly backed away from plans to buy a $50 million luxury jet from a Hawker Beechcraft competitor, French jet manufacturer Dassault.

As of October 2008, Hawker had about $2.4 billion in debt and an expected $190 million in interest payments to make in 2009.

Clear Channel chokes on credit drawdown

Another big loser on the day was Clear Channel Communications; a trader saw its 4.25% notes slated to come due on May 15 "take a hit" on the news that the company had drawn the final $1.6 billion available under its revolving credit agreement.

He said the bonds slid "about 4 or 5 points" into the high 80s, from prior levels in the lower 90s.

The company's 6¼% notes due 2011 were meantime seen having cascaded down to the 25 level, from prior levels about 10 points higher than that.

Clear Channel disclosed the latest borrowing in a morning filing with the Securities and Exchange Commission.

Clear Channel said that it borrowed the money to improve its cash flow amid continuing uncertainty in credit markets and economic conditions.

Sirius strengthens again

Also among the broadcasters, Sirius XM Satellite Radio's 9 5/8% notes due 2013 were "maybe up a point" at 37 bid, 39 offered, a trader said, while another quoted the bonds bouncing around in a 34-38 range, which he called "up a couple," while the company's XM 13% notes due 2013 had moved up to quoted levels at 42 bid, versus 39 bid, 40 offered on Friday.

Another market source saw the latter bond get as good as 43 bid, up nearly 4 points on the session - even though the company shares slid badly amid the news that the troubled satellite radio broadcaster had last year spurned an acquisition offer from satellite TV industry pioneer Charlie Ergen, who reportedly has expressed interest in combining the struggling Sirius with either his EchoStar Corp. or his DISH Network Corp.

The Wall Street Journal reported last week that Ergen has purchased most of the $175 million in Sirius convertible debt that will mature in one week from now, and owns more than half of a $400 million tranche coming due in December.

The debt buys are seen in some quarters as a ploy by Ergen to give him leverage to grab control of New York-based Sirius, either by forcing a bankruptcy filing or outside the courts.

No news, but NOVA gains

NOVA Chemicals' bonds and shares rose, despite a seeming lack of positive news about them.

A trader said that its 7.40% notes coming due on April 1 were "up a little" at 68. He said there was "a good amount trading," at that level. "It seems like the big number of the day, with pretty good size in 68-type buyers," estimating the bonds "up 1 or 2 [points], or at least 1, anyway."

He also saw the company's 6½% notes due 2012 also up a point or two" at 37 bid, 39 offered, on "some trading."

Another trader saw the latter bonds up 2 or 3 points on the session, also at 37 bid, 39 offered.

At another desk, a market source said the 7.40% bonds had moved up to closing levels above 71, versus Friday's finish at 66, though on a round-lot basis, early gains that pushed the bonds above 68 bid faded, leaving the bonds only slightly higher on the day. Those bonds were one of the more actively traded issues on a generally dull day, with a relatively busy $12 million plus having changed hands by mid-afternoon.

That source said that the 61/2s had firmed about 2 points on the day to 37.5 bid. In round-lot dealings, the bonds had ended up perhaps a little more than a point, in that same 37ish context.

NOVA's New York Stock Exchange-traded shares meantime surged as much as 15% in intra-day dealings before closing at $1.80, up 17 cents, or 10.43% on the day, on volume of 3.8 million shares, more than twice the norm.

Paper pops on product pricing

The bonds and shares rose despite the lack of any kind of fresh news about the company. An analyst who follows NOVA on the equity side, Bill Selesky of Argus Research Group, suggested that investors may have taken a more positive view of NOVA "over the last week or so" - even in the face of the Calgary, Alta-based chemical company's setback last week in obtaining $100 million of necessary funding, possibly from the provincial government - because of stronger recent sales of one of its major products, ethylene-polyethylene.

"The company came out with an announcement indicating that they were seeing some slight positive developments with respect to demand, and also pricing, which are both positive."

He told Prospect News that "the industry group thought that January contract prices were up a couple of cents [per pound] and they also thought that trend was likely to continue." He noted that NOVA raised its prices for ethylene-polyethylene by a nickel per pound as of Feb. 1, and indicated that their prices would go up another 6 cents per pound on Mar. 1.

"That's good thing, because prior to this, pricing had been weak because the big chemical customers, which are primarily now in Asia, had stayed out of the market because of the whole global economic slowdown, and they believed prices were going to continue to trend lower. So this is kind of an inflection point, where instead of [prices] going lower, they've stopped and they've started to go higher. So you had a sea change here, so I think that's what has people more positive than negative now."

Given the lack of any other kind of positive news, Selesky said that the prospect of a recovery in chemical prices was about the only thing that he could point to as an explanation as to why both the shares and the bonds were higher, other than the recent decline in raw material and energy costs - but the latter, he said, "is a symptom of the recession."

There has not been much positive news lately, either for NOVA specifically or in the chemical industry generally, which has seen bankruptcy filings from companies such as junkers Lyondell Chemical Co. and Tronox Inc., sliding profits at such high-grade names as Dow Chemical Co. and 3M Co., and red ink from industry behemoth EI DuPont de Nemours & Co. NOVA has meantime had no shortage of negative news, including ratings downgrades from the major agencies and a fourth-quarter slide into the red on both an operating and an overall net basis, versus profits in both the third quarter and the year-earlier fourth period, as sales declined drastically.

On top of that, the company has to raise $100 million by the end of February to stay in compliance with recently agreed upon revised terms of its credit agreement. While there was an upside flurry last week after a Canadian newspaper, The Globe and Mail, reported that NOVA was close to lining up the financing from either a bank or an investment fund owned by the Alberta provincial government, that optimism receded after province officials, including Alberta's premier, said that they would provide no such capital infusion to NOVA.

However, with a little more than two weeks to go before the deadline, the analyst believes that "they will" in all probability be able to come up with the needed funds. "I think they have good relationships with lots of banks."

He said that even if "their financing takes a different turn and they have to do something different, I think they'll be able to manage through this." He said that one possibility is an equity offering, although he allowed that "the stock is so low, less than $2, that it kind of makes it difficult. But I think there are enough believers out there that understand that these guys have a distinct competitive advantage and that they need to remain in business, and I think that somehow, I do think that they are going to be a survivor."

Selesky also took note of the coming change in NOVA's front office, which will see veteran chief executive officer Jeffrey M. Lipton replaced this spring by Christopher D. Pappas, currently the president and chief operating officer of the company. "I think the transition should be pretty smooth. Chris Pappas has been with the company for a long, long time. He's always been involved with a lot of investor meetings, and he's extremely knowledgeable. I don't think there's going to be any drop-off."

He said that likely, "the company will be run the same way as before - it will all depend on current market conditions, and the good thing is they seem to be getting slightly better."

Idearc slips

A trader saw Dallas-based telephone directory publisher Idearc Inc.'s 8% notes due 2016 down ½ point at 1.5 bid, 3.5 offered. Another said the bonds recently had been largely trading around 3 bid, 5 offered, and trading flat, or without their accrued interest. On Monday, he saw the bonds at 2.75 bid, 3.25 offered, opining that "so there's just a lot more trading on that bid side. "

That trading came against a backdrop of Moody's Investors Service's downgrade of both Idearc and sector peer R.H. Donnelley Corp., which has likewise been hurt by the sharp drop in phone directory advertising, and the ratings agency's declaration the two companies would each be likely to either reorganize through a pre-packaged Chapter 11 filing or else pursue a distressed debt exchange. A trader saw Donnelley's 8% notes and 9% notes due 2013 trading around 9.5 bid, 11.5 offered "pretty much all day and a little lower than Friday."

Elsewhere, a trader said that despite bad news coming out about AbitibiBowater Inc., including the company's announcement its finances were "severely constrained" and it might be unable to repay or refinance its debt, "I haven't seen much trading in it." He quoted the Montreal-based paper company's 9 3/8% notes due 2021 around 21. Noting the announcement of an exchange offer for $1.8 billion of its bonds, he said that "people are trying to sort out where the new paper [to be given out in exchange for the existing bonds] is going to trade. They're still digesting" the news.

Another trader said that Abitibi "has been barely breathing anyway," and the latest news did not produce "much of a difference in their quotes."

He said "maybe it moved up a bit" on the exchange offer news, but added that "it was more quoted than traded. There was no real activity in the name." He saw the company's 8.85% bonds due 2030 quoted at 14 bid, 18 offered and its 8.55% notes due 2010 at 16 bid, 18 offered, "so between them, 14-18 covers all of their issues, from the long to the short."

The trader also saw Nortel Networks Ltd.'s bonds quoted 1½ points lower, around 14 bid, 15.5 offered pretty much across the board. He noted that Tuesday was the scheduled date of the International Swaps and Derivatives Association's auction to set the settlement levels for contracts linked to the bankrupt Canadian telecommunications equipment manufacturer's bonds.

"That's where people are thinking it's going to clear at. Stay tuned - something to talk about tomorrow."

Stephanie N. Rotondo contributed to this report.

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