Service Corp. International, Steel Dynamics price quickie deals; Beazer gyrates on investigation stories

By Paul Deckelman

New York, March 28 - Service Corp. International and Steel Dynamics Inc. priced quickly shopped deals during Wednesday's session, the latter an upsized offering.

The two new tranches of Service Corp. bonds were quoted modestly higher when they freed for secondary dealings.

Elsewhere on the new-deal scene, Altra Industrial Motion Inc. was heard to have begun a roadshow for its planned add-on offering to an existing tranche of notes.

And a syndicate source said that United Surgical Partners International Inc.'s planned $480 million two-part subordinated notes deal is likely to launch early next week.

In the secondary market, Beazer Homes USA Inc. was the nom du jour, gyrating around in response to news reports - denied by the company - that the FBI was investigating the Atlanta-based homebuilder.

Elsewhere in that same troubled sector, Technical Olympic USA Inc.'s bonds - which had been soundly drubbed over the past few sessions, due to the widely reported troubles of the Hollywood, Fla.-based builder's Transeastern Homes joint venture - seemed to stabilize Wednesday.

Steel Dynamics upsizes deal

Steel Dynamics' offering was the big deal of the day, as it priced an upsized offering of eight-year senior notes (Ba2/BB+). The new bonds priced at par to yield 6¾%, for a spread of 212 basis points over the comparable Treasury Issue.

The quickly shopped deal came to market late in the session, preventing any aftermarket activity in the new bonds, traders said.

The Fort Wayne, Ind.-based owner and operator of steel mills, which produces flat-rolled steel products for the auto, appliance and industrial machinery markets, had announced during the morning that it would sell $400 million of new notes, but the offering was upsized to $500 million to meet demand by potential investors. It was brought to market via underwriters Banc of America Securities, Goldman Sachs and Morgan Stanley.

The company plans to use the proceeds from the new deal to redeem its $300 million of 9½% senior notes, due 2009, to pay back outstanding loans from a senior secured revolving credit facility, to finance capital expenditures and for general corporate purposes.

Service Corp. prices two-part deal

Also pricing was Service Corp. International's $400 million two-part offering of eight- and 20-year bonds (B1/BB-).

This too was a quickly shopped deal, having only emerged on players' radar screens during Monday's session.

High-yield syndicate sources said the Houston-based deathcare company - the nation's largest funeral home operator - sold $200 million face amount of senior notes due April 1, 2015 in a private placement. Those notes, with a coupon of 6¾%, priced at 99.583, to yield 6.819%, a spread of 225 basis points over Treasuries. It also sold $200 million of 7½% senior notes due April 1, 2027 at par, for a spread of 268 bps over Treasuries.

The eight-year notes came to market via book-running managers Merrill Lynch & Co. and Banc of America Securities.

The same investment banks also brought in the other half of the deal, except that Banc of America Securities was the left-hand bookrunner leading the deal.

The company plans to use the deal's net proceeds, along with available cash, to retire its 6½% notes due 2008 and its 7.70% notes due 2009.

Altra begins selling add-on

Apart from the two pricings, Altra Industrial Motion was heard to have begun marketing its planned $105 million add-on to its 9% senior secured notes due 2011 (B1/CCC+).

High yield primary sources said that the Quincy, Mass.-based electromechanical power transmission products company began a roadshow to pitch the deal to prospective investors. That roadshow is slated to continue through this coming Monday. Then the bonds will price via bookrunner Jefferies & Co.

Altra Industrial Motion sold the original $165 million issue of the 9% notes in November 2004.

The new bonds will have the same indenture features as the existing bonds.

The company plans to use the proceeds from the add-on offering, plus a $10 million draw on its revolving credit facility and $10.9 million of cash on hand, to fund its $106.2 million acquisition of TB Woods Corp.

United Surgical seen launching next week

In another acquisition-related new deal, United Surgical Partners International was said by a high yield syndicate source as being likely to formally launch its $480 million offering of senior subordinated notes early next week, perhaps as soon as Monday or Tuesday.

The bond deal is expected to come in two parts - $240 million of cash-pay senior subordinated notes and $240 million of senior subordinated toggle notes, both due 2017. Citigroup, Lehman Brothers, SunTrust, UBS Investment Bank and Bear Stearns are expected to be the underwriters on the bond deal.

The the Addison, Tex.-based short-stay surgical facilities owner's bank lenders will meet Thursday for its proposed $590 million senior secured credit facility.

Proceeds of the bond deal and the bank financing will be used to help fund the planned $1.8 billion leveraged buyout of the company by Welsh, Carson, Anderson & Stowe, along with an $852 million equity contribution to the deal. That acquisition is scheduled to close in the second quarter.

New Service Corp. bonds up slightly

When the new Service Corp. International bonds were freed for secondary dealings, a trader saw the company's 6¾% notes due 2015 at 100.125 bid, 100.625 offered, up a bit from their 99.583 issue price earlier in the session.

He saw its 7½% notes due 2027 at 100.25 bid, 100.625 offered, up from their par issue price.

Another trader saw the 63/4s at 100.25 bid, 100.5 offered, and the 71/2s at 100.5 bid, 100.75 offered.

The new Steel Dynamics 6¾% notes due 2015 priced too late in the session for meaningful aftermarket activity.

Beazer goes on wild ride

Back among the established issues, Beazer Homes bonds were bouncing crazily around as investors reacted first to Tuesday's late news reports quoting the FBI as saying it was investigating allegations of mortgage fraud at the company, and later company denials that any such probe was under way or planned. Beazer said that the FBI official's statement to a North Carolina newspaper was unauthorized, and said it is cooperating fully with federal investigators.

While one trader saw the company's bonds finish about 2 points lower on the session, that source noted that "the bonds were down as much as 8 points earlier, but only ended down 2." The 8 1/8% notes due 2016 were pegged at 94 bid, 95 offered.

Another trader also saw the bonds drop - but said that by the day's end there were "up pretty good," with the 8 1/8s having moved up to 93.5 bid, 94.5 offered from prior levels at 89 bid, 91 offered, while its 6 7/8% notes due 2015 were about 1½ points higher at 89.5 bid, 90.5 offered.

He also noted that the company's stock was higher Wednesday at $28.77 versus $27.50 earlier - but cautioned that there was still "quite a gap from recent levels at $31.50, before news of the alleged federal probe came out."

Another source saw the company's 8 3/8% notes due 2012 up ¾ point at 96.75, in very busy trading.

Technical Olympic stops the bleeding

In that same homebuilding sector, Technical Olympic continued to be a name bandied about on Wednesday. Over the last few weeks, the company's bonds have lost weight faster than a binge dieter, but traders are seeing the notes firm up a bit.

A market player quoted the more active 10 3/8% notes due 2012 at 66 bid, 67 offered, essentially unchanged from Tuesday's close. He said the bonds were "bouncing around a little bit," trading up to 72 bid at midday.

"They are swinging all over the place," he said.

Another trader called the 10 3/8% notes up 1.5 points on the day, closing at 67.5 bid, 69.5 offered. He said he saw the notes as good as 5 points better at one point during the day, but the bonds gave up some of those gains.

The notes had fallen prey to subprime mortgage concerns, followed by a poorer earnings report - not to mention an even poorer outlook for 2007.

Investor concern that the company may be saddled with the bank debt of Transeastern, its joint venture with Falcone Group, took the notes on a roller coaster, as the notes lost as much as 10 points during the trading day, only to make up most of the losses.

A source saw its 10 3/8s up a point on the day at 70 bid - but also saw its 7½% notes due 2015 down 2½ points around 65.

Jean Coutu jumps on tender

The news that Jean Coutu Group will tender for its 8½% notes due 2014 caused those bonds to push solidly higher to 108 bid, 108.5 offered, a trader said, "even above the tender price."

Another market source saw the bonds even better than that at 108.625, up more than 2 points on the day.

The Canadian-based drugstore chain operator's bonds got their boost from the news that Jean Coutu will take them out, rather than transfer them over to Rite Aid Corp., the original game plan when it was announced last year that the U.S. drugstore giant will acquire Jean Coutu's Eckerd drugstore operation, as well as its Brooks chain.

While the indenture on the company's senior notes clearly called for the notes to be bought back in the event of such an event, there was no such explicit language in the indentures of the 81/2s. Bondholders said they did not want their debt to be transferred over to Rite Aid, considered less financially stable than Jean Coutu due to its heavy leverage position.

Court ruling last week cleared the way for Jean Coutu to tender for the bonds, causing the bonds to shoot up solidly last week, before posting their further gains on Tuesday.

Stephanie N. Rotondo contributed to this report.

© 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.