Centerpulse trades up on Zimmer bid; Penn National stronger on rating outlook revision

By Sara Rosenberg

New York, May 20 -In what appeared to be a relatively active secondary market, Centerpulse Ltd.'s bank debt stood out from the crowd as it moved higher on news of a takeover bid by Zimmer Holdings Inc. Furthermore, Penn National Gaming Inc.'s bank debt strengthened slightly due to a change in rating outlook.

Overall, activity was seen in quite a few secondary names, such as Rite Aid Corp., Charter Communications Inc. and SpectraSite Inc., although most trades took place in the basic context of where the paper was previously quoted.

Centurpulse's term loan B traded higher and was quoted at par 1/8 bid, up from par bid, par ¼ offered previously, according to a trader.

Early Tuesday morning, Zimmer announced its intention to commence an offer to acquire Centerpulse for CHF120 cash and 3.68 Zimmer shares per Centerpulse registered share. Based on Zimmer's closing price as of May 19, the offer implies a value of CHF350 per Centerpulse share. In total the offer is worth CHF4.16 billion or approximately $3.22 billion. Zimmer also announced a related offer for InCentive Capital AG, which beneficially holds 18.9% of the outstanding shares of Centerpulse.

In a letter to Max Link, Centurpulse's chairman and chief executive officer, Ray Elliott, Zimmer's chairman and chief executive officer, compared his company's offer to that from Smith & Nephew plc, saying: "It will provide the opportunity for your shareholders to realize significantly greater value for their shares than that presented by the current, competing offer."

Zimmer's offer represents a 26% premium over the closing price of Centerpulse stock on March 19, the trading day before the Smith & Nephew transaction was announced, and a 19% premium over Smith & Nephew's offer based on the closing price of Smith & Nephew stock on May 19. He also said Zimmer's offer has a 63% greater cash component than Smith & Nephew's.

"We believe our offer is both financially and strategically superior to Smith & Nephew's offer, both immediately and over the long term. It will combine Centerpulse's leadership position in European orthopedics and platforms in spine and dental with Zimmer's leading positions in the U.S. and Japan in reconstructive products and Minimally Invasive Solutions," Elliott continued.

Centerpulse said it is evaluating Zimmer's proposal.

Centerpulse is a Switzerland-based developer, producer and distributor of medical implants and biological materials for cardiovascular and orthopedic markets.

Penn National Gaming's bank debt was quoted at par ¼ bid, par ¾ offered, up about a quarter following a revised outlook to positive from stable by Standard & Poor's, according to a trader.

"The outlook revision follows Penn National's continued steady operating results during the quarter ended March 31, 2003, and the expectation that this trend will continue in the near term," said Standard & Poor's credit analyst Michael Scerbo, in a news release.

Also, S&P noted that the Wyomissing, Pa. casino owner and operator successfully completed its acquisition of Hollywood Casino, which further diversifies its cash flow base and provides entry into several of the largest riverboat gaming markets in the U.S.

For the quarter ended March 31, EBITDA was $50.3 million, up by more than 50% compared with the same period last year. Same-store EBITDA grew by more than 20%. Based on current operating trends, consolidated EBITDA for fiscal 2003 is expected to exceed $240 million.

SpectraSite's bank debt was said to be active and slightly higher on Tuesday, with the term loan B quoted at 99¾ bid, par ¼ offered, according to a trader, who explained that the momentum is probably still a result of the company's successful recent bond deal, which is being used to repay bank debt.

On Friday, the Cary, N.C. communications tower operator priced an upsized $200 million of senior notes due May 15, 2010 at par to yield 8¼%. Originally, the bond offering was expected to be sized at $150 million.

Rite Aid Corp.'s new term loan B was quoted at par ½ bid, par 5/8 offered, pretty much in line with previous levels, according to a trader, who added: "I hear a lot of Rite Aid has been trading around today."

The company's $2 billion senior secured credit facility due April 2008 (B1/BB) is being led by Citigroup Global Markets Inc. and J.P. Morgan Securities Inc. and consists of a $700 million revolver at Libor plus 350 basis points and a $1.15 billion term loan at Libor plus 350 basis points.

Proceeds will be used by the Camp Hill, Pa. drugstore chain to repay the existing $1.37 billion senior secured credit facility due March 2005 and $107 million synthetic lease due March 2005 and to replace the existing $500 million revolver

Other active but essentially unchanged secondary names on Tuesday included Charter Communications Inc., Bresnan Communications LLC, Huntsman Corp. and Mediacom Communications Corp.

Charter's term loan B traded at 91½ in an auction, Bresnan traded around 981/2, Huntsman traded at 97¼ and Mediacom traded around par, according to a trader.

In follow-up news, Jafra Cosmetics International Inc. closed on a $90 million credit facility (B1/B+), consisting of a $40 million five-year revolver with an interest rate of Libor plus 400 basis points and a $50 million five-year term loan A with an interest rate of Libor plus 400 basis points.

Credit Suisse First Boston is the administration agent and Merrill Lynch is the syndication agent on the deal.

The Westlake Village, Calif. direct seller of personal care products obtained the loan as part of its recapitalization plan, which also included the sale of $200 million senior subordinated notes due 2011. Proceeds from the recapitalization will principally be used to repay outstanding amounts under the current credit facility of Jafra US and Jafra Cosmetics International, SA de CV, redeem the 11¾% senior subordinated notes due 2008 of Jafra US and Jafra Mexico, and make a distribution to CDRJ Investments (Lux) SA's equity holders.

© 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.