Atrium prices deal; Cablevision zooms as it looks to dump VOOM

By Paul Deckelman and Paul A. Harris

New York, Dec. 21 - Atrium Cos. Inc.'s parent company successfully priced a $125 million proceeds offering of eight-year senior discount notes - the only new deal seen pricing during the session. Elsewhere in the primary sphere, PanAmSat Corp. said that it plans to sell an as yet undetermined amount of high-yield bonds in conjunction with the $1.12 billion initial public offering the company disclosed Monday in a Securities and Exchange Commission filing.

In the secondary market, Cablevision Systems Corp. bonds were seen higher after the Bethpage, N.Y.-based cable operator revealed in an SEC filing that it will suspend its previously announced efforts to spin-off its Rainbow Media Enterprises subsidiary - and more importantly, it will instead "pursue strategic alternatives" - i.e., try to sell - its money-losing Rainbow DBS business, including its underperforming VOOM high-definition TV operation.

Atrium wide of talk

The only new issue to price during the Tuesday session came from ACIH Inc., the holding company for Atrium.

The company sold $174 million of eight-year senior discount notes (B3/CCC+) at 71.791 to yield 11½%, wide of the 11% to 11¼% price talk.

The sell generated approximately $125 million of proceeds.

UBS Investment Bank and Citigroup ran the books for the debt refinancing deal.

Market to regain stride in January

With primary market news a scarce commodity on Tuesday, market sources generally were reflecting on the past and contemplating the future.

One source added a voice to the growing chorus of sell-side officials who believe that January 2005 will likely pick up where the first two weeks of December 2004 left off.

"I hear that January will be a pretty heavy month," one syndicate official said.

"Prior to this week we had two huge weeks in a row," the source added. "And the market just soaked those deals right up.

"With spreads where they are and plenty of liquidity, the first couple of months of 2005 should continue on the present track.

"Beyond that, who really knows? But I don't think the market is going to fall out of bed anytime soon."

Another market source said that although the opening two weeks in December did indeed see heavy volume, the Nov. 15 week still leads holds the number one spot for weekly issuance in 2004: $6.78 billion, the source said, adding that the Rogers Cable and Rogers Wireless deals combined during the five-day period for $2.245 billion of that total.

Levi weak in trading

Traders said that they had not seen the new Atrium zero-coupon/11½% notes due 2012 trade in the aftermarket.

Among recently priced issues, a trader said that he had seen the new Levi Strauss & Co. 9¾% senior notes due 2015 "not doing so hot." The San Francisco-based apparel company priced the upsized $450 million issue of bonds at par on Thursday, but they had come down a bit to 99.25 bid, 99.75 offered by the start of Tuesday's session. He saw the bonds retreat further still to a closing level at 98.25 bid, 99 offered.

Cablevision gains

Back among the existing issues, Cablevision's shares and bonds were both seen higher, after the suburban New York cable company released a terse SEC statement, indicating that it will not proceed with its efforts to spin off Rainbow Media - but will, most likely, put the money-losing Rainbow DBS business, which primarily consists of its VOOM satellite television business, on the block.

A trader saw Cablevision's bonds up between half a point and a point on the session, depending on the maturity, with the company's 6¾% notes due 2012 at 102.75 bid, 103.75 offered; the 8 1/8% notes due 2009 at 109 bid, 110 offered; and the 7 5/8% notes due 2018 at 105.75 bid, 106.75 offered.

Another trader also saw Cablevision's bonds offered at better levels, with the 8 1/8s at 109.75 and its 7 7/8% notes due 2007 at 107.25. He saw the 63/4s bid at 102, the company's 7 5/8% notes due 2011 bid at 107 and its 8% notes due 2012 bid at 105.5.

A market source saw Rainbow National Services LLC's 8¾% notes due 2012 as the really big mover in the Cablevision constellation, up 2¼ points to 108.5. Among other Cablevision bonds, he saw the 8s unchanged at 106.25, while its 6.669% notes due 2009 were a quarter point better at 106.375.

At another desk, Rainbow National Services' 10 3/8% notes due 2014 were seen up better than three points at 111.5 bid, although the parent Cablevision 8s were seen up about a point at 106.5.

The company's New York Stock Exchange-traded shares jumped $2.95 (13.34%) to $25.06, on volume of 13 million, nearly nine times the usual turnover.

According to observers, the investor reaction was not prompted so much by the news that Cablevision will hang onto Rainbow Media, which includes several networks Cablevision owns like American Movie Classics, the Independent Film Channel and WE: Women's Entertainment, as it was by the news that the company will try to unload Rainbow DBS, including VOOM, which has lost $200 million since its inception. The service tried to differentiate itself from its satellite rivals and other cable channels by offering its programming in high-definition format, but that proved to not be enough of a differentiator, as better-established cable and satellite operators alike began offering some programming in an HDTV format.

UBS Investment Bank analyst Aryeh Bourkoff said that "despite uncertainty, given the sparse details the company released, and the risks to Cablevision associated with the lack of a Rainbow Media spin-off, we view this positively, as Cablevision appears to be pursuing options outside of the status quo for VOOM, which we view as value-destructive."

Bourkoff, a managing director in charge of fixed income research in the satellite and cable sector, said that Cablevision's willingness to consider alternatives could potentially lead to a sale of VOOM, "given its attractive high definition asset."

Analysts have considered VOOM to be an albatross around Cablevision's neck and Bourkoff says such a sale would produce a swing in Rainbow National Services' value from negative to positive.

The analyst said that right now, he doesn't see an imminent sale. But he said that "there exist potential buyers for the high-definition assets," possibly including the much larger satellite TV broadcaster EchoStar DBS, given the Englewood, Colo.-based company's need for high-definition capacity. "We would view a sale at any price positively, given the swing in RNS' valuation from negative to positive," he declared.

Bourkoff explained that assuming Rainbow National has cash on hand left over from its bond deal earlier this year of about $500 million, and estimating VOOM as a $300 million drag on the company's value, a VOOM sale could produce an $800 million swing in valuation.

Tenet rises

Elsewhere, Tenet Healthcare Corp. bonds were seen higher, after the Santa Barbara, Calif.-based hospital operator announced that it will pay $395 million to settle litigation with patients who claimed they were subjected to unnecessary heart surgeries at a hospital Tenet formerly owned in Redding, Calif., one of the 27 hospitals the company is in the process of selling off.

Tenet's 6 3/8% notes due 2011 were seen up half a point at 94 bid, while its 6½% notes due 2012 were also up a half at 93.5. Tenet's 9 7/8% notes due 2014 were a quarter point better at 109.

Tenet said it will set up a $395 million fund to be distributed among at least 750 patients who were treated at Redding. It said that the fund will cause Tenet to breach certain covenants of its bank line of credit, and will cause Tenet to terminate that credit line - which is currently undrawn anyway - before the end of the year.

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