AES plans $500 million drive-by deal; Tenet lower on breakup talk

By Paul Deckelman

New York, Feb. 9 - AES Corp. unveiled plans to sell $500 million of new 10-year senior notes Monday, with the quickly-shopped deal expected to price later Tuesday following a conference call with would-be investors.

The power company's issue was one of several which made their way onto the forward calendar during the session, although no deals were heard to have priced by the time trading wound down.

However, two other deals were said to have run afoul of suddenly worsening market conditions - Bluegreen Corp. spiked its 10-year note offering, while Time Warner Telecom Inc. was reported to have halved the size of its planned seven-year deal.

In the secondary market, trading was generally described as quiet, with many portfolio managers and other decision makers reported off at a bond conference in Colorado.

Tenet Healthcare Corp. bonds were being quoted lower, after one of the healthcare company's dissident stockholders was quoted saying that Tenet would likely have to break itself up into as many as four parts to survive.

Arlington, Va.-based AES said that it would sell $500 million of 10-year senior unsecured notes, using the deal proceeds to repay a portion of its term loan debt. Citigroup and Deutsche Banc Securities were heard by market sources to be the joint book-running managers for the deal, which will be a public drawdown from the company's shelf filing with the Securities & Exchange Commission rather than the more customary Rule 144A private placement deal.

The Pantry Inc. announced plans to sell $ 225 million of senior subordinated notes due 2014; it will use the deal proceeds to redeem its outstanding 10¼% senior subordinated notes due 2007 and to repay some bank debt. Credit Swiss First Boston is the sole bookrunner on the Sanford, N.C.-based convenience store chain's Rule 144A offering, which hit the road Monday, although no details on when the deal would actually price were given out.

Some details emerged on Phillips-Van Heusen Corp.'s planned $150 million note offering, the proceeds of which will fund the previously announced tender offer for the New York-based apparel company's outstanding 9 ½% senior subordinated notes due 2008.

Market participants heard that the Rule 144A offering will price toward the end of the week after a short roadshow. It will be brought to market by joint book-running managers CSFB, JPMorgan Chase and Lehman Bros.

Fedders Corp., in announcing plans to tender for its outstanding 9 3/8% senior subordinated notes due 2007, said that it would fund that tender offering from the proceeds of the sale of $160 million new senior subordinated notes.

However there was no word on the timing of such a deal or its tenor. Underwriters have apparently not yet been selected, although it should be noted that CSFB is likely to be involved since it is the dealer manager and solicitation agent for the tender offer.

Details have also yet to emerge about Riverside Forest Products Ltd.'s planned $150 million offering of senior unsecured notes due 2010, which received ratings on Monday from the Moody's Investors Service and from Standard & Poor's.

Two new-deal casualties

Two casualties of the recently worsened market conditions were heard to have appeared.

Bluegreen Corp. a Boca Raton, Fla.-based owner of vacation and timeshare resorts, announced that it has decided to postpone its previously proposed offering of up to $150 million of senior notes due 2014.

And news reports said that Time Warner Telecom had cut in half what had originally been planned as an $800 million two-tranche offering, consisting of floating-rate notes due 2011 and fixed-rate notes due 2014. While the overall size of the Littleton, Colo.-based network solutions company's deal was throttled back in deference to investor unease with market conditions, the two-tranche structure was retained.

Market conditions also appear to be playing havoc with new deal activity in the emerging markets sphere; for instance, a market source reported that Brasil Telecom SA's planned offering of $200 million of new 10-year notes "is not doing well." He noted that price talk on the issue had widened out to 9.40% from 9¼% previously, and opined that the coupon "is probably going to have to be a little more than that even" in order to get investors sufficiently committed to the deal.

When asked when the deal was supposed to have priced, he deadpanned "two weeks ago." Clearly, he said of the Brasilia, Brazil-based telecom operator's offering, "it's still in trouble."

Some secondary players on the side

Back among U.S. secondary market players, angst about suddenly more bearish market conditions may be keeping some on the sidelines. They've seen two consecutive weeks in which the junk markets, as measured by the performance of various indexes put out by the major brokerage houses, has been in retreat.

And in the past week, a dazzling 13-week string of inflows to high yield mutual funds - a key measure of market liquidity trends - came to an abrupt end, as over $1.5 billion more left the funds than came into them, as measured by AMG Data Services.

However, it should be noted that the junk market seemed to finish last week on a brighter note, following the release of not-so-scary job creation numbers.

And traders pointed out that things were pretty lackluster because many portfolio managers and other decision makers were in Boulder, Colo., for Salomon Brothers' high yield conference - the second consecutive week in which a major junk bond conference took the attention of players away from the market itself - JPMorgan Chase had held such a conference the previous week in New Orleans.

With not too much trading going on, a trader said, "it was like playing liar's poker. Things were being quoted, but not much real trading was getting done."

Many issues were within a half a point of where they had gone out on Friday, with no discernable trend - up or down - seen.

Tenet lower

However, one issue which was seen moving around a bit was Tenet Healthcare, whose bonds were being quoted one to two points lower across the board. Its 7 3/8% notes due 2013 dipped to 93.5 bid, 94.5 offered from 95.5 bid, 96.5 offered Friday, while its 6½% notes due 2012 and 6 3/8% notes due 2011 dropped to 89 bid, 90 offered from 91 bid, 93, after dissident shareholder M. Lee Pearce said that the Santa Barbara, Calif.-based hospital operator - which recently announced plans to unload nearly one third of its properties - might have to break into as many as four pieces in order to survive.

Pearce's group, the self-styled Tenet Shareholder Committee, questioned whether Tenet would have enough money to pay for potential settlements and penalties resulting from several investigations and lawsuits into its operations - he estimated those costs as $3 billion - unless it undertook even more sweeping asset sales.

Tenet did not immediately comment news reports of Pearce's statements.

Boyd slips on purchase

Elsewhere, Boyd Gaming Corp. paper was seen to have come in slightly on the news that Boyd will buy fellow Las Vegas-based gaming operator Coast Casinos Inc. for $1.3 billion, including the assumption of about $460 million of Coast Casinos debt.

Boyd's 7¾% notes dipped to 106.5 bid, 107.5 offered from 108 bid last week. Its 8¾% notes were likewise a point lower at 110.

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