Aramark mega-deal prices, rises; Cablevision climbs as board nixes buyout; Tembec up again

By Paul Deckelman, Paul A. Harris and Ronda Fears

New York, Jan. 17 - Aramark Corp. successfully priced its downsized and restructured two-part bond offering Wednesday, high yield syndicate sources said, and traders saw the solidly oversold issue's new bonds firm smartly once they were freed for secondary dealings.

In the secondary market, aside from the jump in the new Aramark bonds, Cablevision Systems Corp. bonds were better as a special committee of the Bethpage, N.Y.-based cable television operator's board rejected a buyout bid from members of the controlling Dolan family, who want to take the company private.

In that same cable-TV sphere, Adelphia Communications Corp.'s bonds were better, several traders said, with those debtholders looking forward to the planned conversion of the bonds into new Time Warner Cable stock as part of Adelphia's long-awaited emergence from Chapter 11.

Another distressed name continuing to make news in junk bond land is Tembec Inc., whose bonds rose several additional points for yet another day, continuing a recent firming trend sparked by a weakening of Canada's dollar.

One name on the downside Wednesday is very new to junk marketeers - as it was only downgraded to below investment-grade status on Wednesday, after Health Management Associates Inc. announced a big borrowing program to fund a special dividend for its shareholders.

A senior high yield syndicate official who spoke to Prospect News late Wednesday afternoon said that the broad market was generally up on the day.

And based upon the session's sole new issue, Aramark Corp.'s $1.78 billion two-tranche deal, which saw both pieces coming on the tight end of price talk and was said to have been heavily oversubscribed, the official proclaimed that the primary market is wide open.

The forward calendar will build, the source said, but added that thus far in 2007 issuers have not been coming to the high-yield market in droves.

Aramark prices $1.78 billion

According to sources on both the buy-side and the sell-side, Aramark's two-part eight-year senior notes transaction (B3/B-) was already a blowout last week when the company decided to downsize the deal to $1.78 billion from $2.27 billion, and shift $490 million of the LBO financing to its term loan B, which was also said to be a blowout.

Hence on Tuesday an investor who was looking at the deal said that demand for the Aramark paper was heard to be in excess of $12 billion, and correctly forecast that both tranches would price on the tight end of price talk.

On Wednesday the Philadelphia-based professional food, hospitality and facility management services company priced a $1.28 billion tranche of fixed-rate notes at par to yield 8½%, on the tight end of the 8½% to 8¾% price talk.

In addition Aramark priced a $500 million tranche of floating-rate notes at par to yield three-month Libor plus 350 basis points, also on the tight end of the three month Libor plus 350 to 375 basis points price talk.

JP Morgan and Goldman Sachs & Co. were joint bookrunners.

A planned $570 million tranche of senior subordinated notes was withdrawn.

After the terms were circulated, Prospect News asked a source close to the deal to confirm or deny that the Aramark book had indeed contained $12 billion of orders.

However the source declined to give a number, merely characterizing it as a well-subscribed transaction which was very well received by everyone involved.

The source added that it is presently a great time for issuers to be accessing the market.

A quiet Wednesday

Apart from the Aramark transaction, however, the primary market's news flow was extremely light.

With Aramark having cleared there are at present no billion dollar-plus megadeals on the forward calendar of offerings that are thought to be in the market.

The biggest pending transaction in the wake of Aramark is Baldor Electric Co.'s $550 million offering of 10-year senior notes (B3/B), an acquisition financing that is expected to price next week via BNP Paribas and Lehman Brothers.

However sources roundabout the primary market do expect megadeals to begin to appear.

Names recently heard include Kinder Morgan Inc., Univision Communications Inc. and Cablevision Systems Corp.

The rest of the week

No price talk or timing updates were heard on the four deals from U.S. issuers that are expected to price before Friday's close.

Thursday's business is expected to include Open Solutions Inc.'s $325 million offering of eight-year senior subordinated notes (Caa1/CCC+), which was talked Tuesday at 9 7/8% area.

Wachovia Securities, JP Morgan and Merrill Lynch & Co. are leading the deal.

Also expected to price Thursday is Tube City IMS Corp.'s $250 million offering of eight-year senior subordinated notes (B3/B-), via Credit Suisse. It was talked Tuesday at 10% to 10¼%.

Price talk is expected to surface Thursday on the remaining two deals slated as the present week's business: Pilgrim's Pride's $450 million two-part offering via Lehman Brothers and Credit Suisse, and Stallion Oilfield Services' $300 million offering of eight-year senior unsecured notes, led by UBS Investment Bank.

New Aramark notes trade up

When the new Aramark bonds were freed for secondary dealings, a trader said, both the 8½% notes due 2015 and the floating-rate notes due 2015 proved to be as popular in the aftermarket as they had been among the new-dealers. Each tranche was seen 2 points better on the session, versus their respective par issue prices earlier.

Aramark's existing 5% notes due 2012 were meantime a point better at 88.25 bid, 89.25 offered.

Cablevision climbs as Dolan deal dismissed

Among other existing names, Cablevision's bonds, "particularly in the longer end," a trader said, were higher on the news that a special committee that had been appointed by the cable company's board to evaluate a buyout offer from the family of chairman Charles Dolan had turned thumbs down on the idea, dismissing the $30 per share offer as "inadequate."

Long-dated debt like the 7 7/8% notes due 2018 were seen up about 2½ points at 102 bid, 103 offered.

The trader saw middle-dated issues, like its 8% notes due 2012, up a point at par bid, 101 offered, while shorter-dated paper, like the 7¼% notes due 2008 showed "nothing, maybe up 1/8" at 100.25 bid, 100.75 offered.

Cablevision's New York Stock Exchange-traded shares were likewise up 76 cents (2.7%) to $29.25 on the news.

In the special committee's letter to the Dolans rejecting their offer, panel members Thomas Reifenheiser and John Ryan wrote "the revised offer does not represent fair value for the company's public shareholders nor does it contemplate a transaction that is in their best interest."

The proposed transaction that was turned down was actually an improvement over the family's original $27 per share offer announced in October. Charles Dolan and his son James, Cablevision's chief executive officer, said last week that the $30 offer would be their final one.

Analysts opined that given the company's strong earnings growth and good market position in the New York metropolitan area - the nation's top TV market - and the possibility that competitor Time Warner Cable could decide to solidify its own position by launching an acquisition bid for Cablevision at levels well above $30, the Dolan's offer was, in fact, inadequate.

Adelphia gains despite delay

In that same cable television sphere, Adelphia Communications bonds were seen up solidly, a trader said, characterizing them as "way up for cash settlement," adding "this was about the last day to settle," while a second trader at that same shop agreed that the bankrupt Greenwood Village, Colo.-based company's paper was trading better.

He said "higher-claim" paper such as the 10¼% notes due 2011 and 9 3/8% notes due 2009 were up at 104.5, while the "lower-claim" paper like the 101/4s of 2006s were around 101 bid, 101.5 offered.

He explained that the company's reorganization plan "is supposed to go into effect [Friday], where you lose the bonds and get the new Time Warner [Cable] stock," part of the proceeds from Adelphia's sale last year of virtually all of its operations to Time Warner and Comcast Corp. for $17 billion.

Very late Tuesday, Adelphia said that said the U.S. Bankruptcy Court for the Southern District of New York, which has been overseeing its restructuring, temporarily extended the 10-day stay of the Jan. 5 order confirming the company's plan of reorganization to early in next week, to give the district court

enough time to rule on a pending motion filed by some disgruntled creditors seeking a stay of the confirmation order pending their appeal. Those creditors feel the proposed division of the Time Warner shares is unfair to them.

But the delay of another week, the trader said, was "really not a big deal," and said that junk players on the whole "are still net-net buyers [of the bonds]. If you have bonds, they're to be turned into the new Time Warner stock - which everybody wants."

While he saw the Adelphia bonds up perhaps a point, another trader also called them higher, but "just ½ point," with the 2011s at 104-105. Its 9 5/8% notes due later this year were at 101.5 bid, up 1½ points, a market source at yet another shop said.

Tembec still on a tear

Elsewhere in the distressed precincts, Tembec's bonds were once again seen on the upside, pushed higher by the continued weakness in the Canadian dollar, which is seen as likely to spur Canada's exports of such products as lumber and newsprint, both key Tembec products.

A trader saw the Montreal-based forest products company's 8 5/8% notes due 2009 at 82 bid, 84 offered, up 4 points on the session, while its 7¾% notes due 2012 were also up 4 points at 73 bid, 74 offered, and its 8½% notes due 2011 were 3½ points better at 74.5 bid, 75.5 offered.

Another trader saw that latter bond at 75 bid, 76 offered, although he said that was only a 2 point rise.

Tembec's paper "is up big time on the year," a market-watcher at another shop observed, adding that it was not all that long ago that the paper was "down in the 40s."

Indeed, the 8 5/8s were languishing at such levels last March, but have been successively climbing since then. By mid-year, the bonds stood just over 50; they were in the mid-50s by the end of the third quarter, but had advanced another 10 points to the mid-60s by the end of last year, helped by a sizable liquidity boost the company got when it received back several hundred million Canadian dollars of tariffs it had paid on certain wood exports to the United States over the previous five years after the United States and Canada came to an agreement on their long-simmering dispute over those tariffs.

But the real movement has come since the start of this year, which has seen Tembec and such other sector names as Abitibi-Consolidated Inc, and Bowater Inc. better, as the fall in the Canadian dollar, sparked by a sharp decline in the world price for oil, a key Canadian export, was seen boosting the wood and paper exports, assuming the loonie remains around or below current levels versus the U.S. dollar and the euro.

From the mid-60s, the 8 5/8s moved up to around the 70 mark in the opening days of 2007, and then had pushed up to the 80s by this week.

Northwest navigates higher, but Delta dithers

The recent drop in oil has also been good for airline bonds, since many observers see the slide in crude oil prices over the past few weeks to be a harbinger of potentially lower jet fuel prices down the road.

And even though crude prices were up a little Wednesday from the 19-month lows they had hit on Tuesday, buoyed by Saudi Arabia's insistence that the crude slide lately was no big deal, Northwest Airlines Corp.'s bonds continued to gain altitude.

A trader saw the bankrupt Eagan, Minn.-based Number-Five U.S. airline carrier parent's 9 7/8% notes scheduled to come due this year up 2 points at 107 bid, 109 offered, while its 10% notes due 2009 were also up a deuce at 106 bid, 108 offered, and its 7 7/8% notes due 2008 were a point higher at 103 bid, 105 offered.

Another market source saw the 7 7/8s up 3 points on the day at 104.

However, the first trader said, the bonds of bankrupt Atlanta-based Number-Three carrier parent Delta Air Lines Inc.'s bonds down a point "across the board," with the 8.30% notes due 2029 easing to 70 bid, 71 offered.

Another trader meantime saw AMR Corp.'s 9% notes due 2012 half a point better at 106 bid, 107 offered after the Fort Worth, Tex.-based parent of top carrier American Airlines surprised Wall Street and posted a $17 million fourth-quarter profit - quite an improvement from the $600 million loss seen a year earlier, and better than the loss the analysts had been looking for in the latest quarter. The trader noted that it was "their first profit since 2000."

Visteon vigorous on new takeover talk

Among the automotive names, a trader saw Visteon Corp.'s bonds up 1½ points, with its 8¼% notes due 2010 at 100.25 bid, 101.25 offered.

The trader saw the bonds move on talk that "a hedge fund was buying a stake in [French auto parts maker] Valeo SA - and it already owns a stake in Visteon. There's continued takeover speculation there."

Rumors have circulated in the market for some months that Valeo might be interested in acquiring the former Ford Motor Co. unit.

Another trader saw Van Buren Township, Mich.-based parts supplier's notes at par bid, 101 offered, up 3 points on the bid side, 2 on the offered side, while its 7% 2014 notes were up 2 points at 89 bid, 90 offered.

Health Management falls

Health Management Associates' announcement that it plans to borrow over $3 billion on the bank debt market and return $2.4 billion of that to its stockholders in the form of a $10 per share special dividend was greeted with approval by the equity market, which saw the Naples, Fla.-based hospital operator's shares rise - but it was entirely another story on the fixed-income side.

There, Standard & Poor's dropped the company's ratings to junk, citing concerns about its sharp leverage increase, and bondholders took its paper about 2 points lower in heavy trading.

The company's 6 1/8% notes due 2016 fell from Tuesday's pre-news levels around 96 bid to lows around 93 and change and session highs around 95, before finally ending the day at 94, down 2 points, even though management claimed that the recapitalization transaction would "reduce HMA's overall cost of capital, enabling the company to achieve a more optimal capital structure intended to enhance its enterprise value."

The company said that the $400 million of 6 1/8% notes will remain outstanding, but will be secured pari passu with the new senior credit facility. Its $588 million of outstanding convertible subordinated notes will also remain outstanding.

Standard & Poor's slashed the company's corporate credit and senior unsecured bond ratings to B+ from BBB previously, citing the "dramatic increase in Health Management's debt, the consequent weakening of the company's credit profile and a more aggressive financial policy."

Blowing most of the borrowed money on a payout to the shareholders "comes at a time when the company's operations will continue to feel the pressure of higher bad debt [a nagging problem for all hospital operators], relatively flat patient volume and increasing operating expenses relative to reimbursement increases."

The ratings agency said that Health Management's profitability and cash flow protection measures "have been declining over the past few years due to lackluster same-store patient volume, increasing bad debt and rising expenses," and warned that it will "continue to face operating challenges and potentially greater third-party reimbursement risk over the next couple of years, which could further erode its operating results and cash generation."

Fitch Ratings also downgraded the company, while Moody's Investors Service, which did not rate much of its debt, assigned its upcoming borrowings a junk rating.

The company's NYSE-traded shares rose 54 cents (2.52%), to $21.17, on volume of 20.7 million, about 12 times the norm. Its 4 3/8% convertible notes due 2023 were seen up 2 points at 102.75.

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