Intelsat prices three-part mega-deal; Seminis sprouts on Monsanto deal; Tower tumbles again

By Paul Deckelman and Paul A. Harris

New York, Jan. 24 - Intelsat Bermuda Ltd. was heard by high-yield syndicate sources Monday to have successfully priced a re-tooled three-part mega-deal totaling more than $2.5 billion - not only the biggest deal of the young year but easily the biggest the market has seen in quite a few months. Earlier, Invensys plc did a drive-by add-on euro-denominated deal.

In the secondary market, news that agricultural chemicals giant Monsanto Co. agreed to buy leading seed company Seminis Inc. for $1 billion, plus debt assumption, sent the latter's bonds up like Jack's magic beanstalk. RJ Tower Corp. bonds were meantime going the other way, down for a third straight session following the company's warning of coming liquidity constraints.

Heavy snowfall in the northeastern United States thinned the high-yield market's ranks during the opening session of the Jan. 24 week, according to sources.

Nevertheless investors bought $2.55 billion of bonds in three tranches from Intelsat - a deal which one informed source told Prospect News did reasonably well.

And in the wake of that issuance, the primary market's forward calendar continued to build.

Intelsat shifts $75 million

In a deal that left the launching pad shortly after Thanksgiving 2004, only to have its orbit extended twice on news of two major satellite malfunctions, Intelsat completed a restructured $2.55 billion three-tranche deal (B1/B+/B+) on Monday.

The Bermuda-based worldwide satellite telecommunications company sold $1 billion of floating-rate notes due Jan. 15, 2012 at par to yield six-month Libor plus 487.5 basis points, at the tight end of the six-month Libor plus 500 basis points area price talk.

Last Friday the company doubled the size of the floating-rate tranche to $1 billion from $500 million, shifting $500 million from its eight-year fixed-rate tranche.

On Monday Intelsat tweaked the deal further, shifting $75 million to the eight-year fixed-rate tranche from the 10-year fixed-rate tranche.

The company priced an upsized $875 million of eight-year fixed-rate notes at par to yield 8¼%, on top of the 8¼% area price talk. The notes were increased from $800 million.

Meanwhile Intelsat priced a downsized $675 million of 10-year fixed-rate notes at par to yield 8 5/8%, on the wide end of the 8½% area price talk. The tranche was cut from $750 million.

Deutsche Bank Securities, Credit Suisse First Boston and Lehman Brothers ran the books for the acquisition financing deal.

One sell-side source told Prospect News that the deal "obviously went reasonably well," since the company sold the entire $2.55 billion that it brought into the market.

"There was obviously more interest in the floating-rate and shorter maturity fixed-rate notes," the source added, identifying the two tranches that were upsized and that priced at the tight end of price talk.

Invensys taps 9 7/8% notes

The only other notes to price during the Monday session came in the form of an add-on from British engineering firm Invensys.

The company priced a €65 million add-on to the 9 7/8% senior notes due Feb. 15, 2011 (B3/existing B-) at 108.5, resulting in a 7.828% yield to worst.

That brought the Invensys print at the wide end of the 108.5-109 price talk.

Deutsche Bank Securities ran the books for the debt refinancing deal.

In a two-tranche issue that priced on Feb. 27, 2004 the company originally sold original $550 million and €475 million. Both tranches priced at 98.147 to yield 10¼%.

So even though Monday's transaction came at the wide end of price talk Invensys obviously saved considerable interest expense with the add-on.

Five roadshow starts

Meanwhile on Monday, as Intelsat walked away with $2.55 billion of high-yield investors' cash, a fistful of issuers stepped forward with offerings - three from U.S. firms and two from European ones - that will be marketed via investor roadshows.

American Real Estate Partners LP, a Mount Kisco, N.Y. real estate master limited partnership of which Carl Icahn is the chairman of the board of the general partner, expects to price $300 million of eight-year senior notes (Ba2/BB) during the week of Jan. 31.

Bear Stearns & Co. has the books for the acquisition financing.

Elsewhere, PQ Corp. started a roadshow Monday for $300 million of eight-year non-call-four senior subordinated notes (B-), via Credit Suisse First Boston, JP Morgan and UBS Investment Bank.

The Berwyn, Pa.-based chemicals and engineered glass materials company will use the proceeds to help fund a leveraged buyout.

Knowledge Learning Corp. also began a roadshow Monday for $260 million of 10-year non-call-five senior subordinated notes (B-).

Credit Suisse First Boston, UBS Investment Bank and BNP Paribas are joint bookrunners for the acquisition financing and debt repayment deal from the San Rafael, Calif.-based early childhood educational services provider, which expects to price the deal later this week.

And from Europe, a roadshow is expected to start Tuesday in London for Mauser Beteiligungs GmbH's €175 million of eight-year non-call-three senior notes, via Citigroup.

The Bruhl, Germany, packaging company will use the proceeds to refinance debt.

And finally Kabel BW Holdings GmbH began a roadshow on Monday for €170 million of 10-year senior floating-rate notes (Caa1/CCC+), which are expected to price late this week or early next, via Morgan Stanley.

The German cable and satellite TV services provider will use the proceeds to refinance debt.

Intelsat floaters up

When the new Intelsat bonds were freed for secondary dealings, a trader quoted the floating-rate senior notes due 2012 as opening at 101 bid, 102 offered, up from their par issue price earlier in the session, but said that the two fixed-rate tranches - the 8 ¼% notes due 2013 and the 8 5/8% notes due 2015 - were both at par bid, 101 offered, little changed from their respective par issue prices, "so, not a great break."

At another desk, though, a trader said late in the day that while he had not seen the fixed-rate tranches, since the FRNs were the first notes to be freed for the aftermarket, "the paper was oversubscribed, so it'll probably trade very well." He also saw the floaters at 101 bid, 101.5 offered.

Seminis soars

Back among the established issues, Seminis' 10¼% notes due 2013 were quoted by one market source as having jumped eight points on the session on the Monsanto news, to 120 bid, while a trader at another shop quoted them at 121 bid, 124 offered, but said that "those bonds don't trade very much." Yet another trader echoed that assessment, saying he was unaware of the issue.

Seminis, an Oxnard, Calif.-producer of fruit and vegetable seeds - the world's largest such producer, in fact - agreed to be bought by Monsanto for $1 billion in cash and the assumption by Monsanto of its more than $400 million of debt, including the $330 million of notes. Monsanto also agreed to pay a $125 million performance-based payment by the end of in fiscal 2007.

Tower down again

Elsewhere, RJ Tower's 12% notes due 2013 - which fell from around 79-80 bid to the 67 area on Thursday, after Novi, Mich.-based parent Tower Automotive Inc. issued its liquidity warning, and then fell further Friday, to bid levels around 60-62, continued to run off the road Monday, with levels seen as low as 54, before the bonds came slightly off those lows to end quoted around 56 bid, 57 offered. One trader attributed some of the fall to market buzz - strictly unconfirmed - that the company "may file [Chapter 11]."

Moody's Investors Service on Monday chopped the rating on those bonds down to Ca from B3 previously, following the lead of Standard & Poor's, which on Friday had cut Tower's corporate credit to CCC from B.

Tower, which makes automotive assemblies for the Big Three and other carmakers, on Thursday had warned that its ongoing initiatives to improve liquidity "were adversely impacted by the length of customer shutdowns over the holiday season," in that the shutdowns were longer than expected. Cumulatively it said, those shutdowns will adversely impact the company's liquidity by as much as $40 million during the current 2005 first quarter.

Tower said it continues to face "significant challenges in meeting its ongoing liquidity requirements" - especially in the wake of the elimination of early payment programs from the company's customers. For January, it said, those changes in payment terms will adversely impact liquidity by some $17 million.

Tower said it was continuing to work with its customers and suppliers to address its liquidity issues, and was also continuing to pursue a European factoring facility, the possible sale of certain equipment and other liquidity initiatives.

However, while the company's bonds were continued to skid lower, Tower's New York Stock Exchange-traded shares, which had fallen 27.12% on Thursday in response to its guidance release Thursday morning and then remained in absolute freefall on Friday, when they lost another 56.40%, bounced Monday, rising 19 cents (25.33%) to end at 94 cents, on volume of 10.3 million, more than five times the usual turnover.

Other auto names avoid Tower trouble

Although Tower bonds continued to get pummeled, market watchers did not see its troubles dragging down other automotive-sector bonds, although one trader did see Collins & Aikman Products Corp.'s 10¾% notes due 2011 and 12 7/8% notes due 2012 down about a point apiece at 99.5 bid, 100.5 offered for the former and 83.5 bid, 84.5 offered for the latter.

A source at another desk, in fact, called the 103/4s only half a point lower and the 12 7/8s actually up a quarter point from where he had seen them going out on Friday. He did see Dura Operating's 9% notes due 2009 down half a point at 94 bid, while its 8 5/8% notes due 2012 were a quarter point down at 101.75 bid.

At another desk, automotive supplier Visteon Corp.'s 7% notes due 2014 were seen a point better at 92.75, although TRW Automotive's 9 3/8% notes due 2013 were down nearly a point at 113 bid.

Station higher

Outside of the auto sphere, Station Casino's bonds were seen up half a point to a point, after the Las Vegas-based gaming operator - which eschews the high-rollers on the glitzy Strip to concentrate on the local trade with several downtown casinos there - reported fourth quarter net income of $38 million (55 cents a share), a turnaround from a year-earlier loss of $8.6 million (14 cents). Excluding special items, earnings were 58 cents a share, up from 48 cents a year ago and better than the 51 cents a share Wall Street was expecting.

Station's 6½% notes due 2014 and 8 3/8% notes due 2008 were each up a point to 102.75 bid and 103 bid respectively, while its 9 7/8% notes due 2010 closed at 109.5 bid, its 6% notes due 2012 at 102.25 bid and its 6 7/8% notes due 2016 at 103.5 bid, all up half a point.

Pilgrim's Pride rises

Pilgrim's Pride Corp.'s 9¼% notes due 2013 gained a quarter point to 112.25, after the Pittsburg, Tex.-based poultry producer posted sharply improved fiscal first-quarter earnings of $48.5 million (73 cents a share), up from $10.3 million (20 cents a share) a year earlier.

Those two companies are just the vanguard of what a trader expects to be a whole slew of earnings that will come out over the next couple of days. Caution ahead of those earnings, plus other factors, he said, led to "a really quiet day."

On top of earnings, he said, "you've got the Iraqi election, and there was a lot of commentary in the papers over the weekend about January and the 'January effect',"- which in most years tends to send financial markets higher at the start of most years, once investment managers who dumped under-performers before the end of the year so as not to show them on the books, decide to go back into those areas. "Here we are in the last week in January, and what does that mean - is it a negative month?

"So it seemed very quiet - plus the weather,' following the weekend nor'easter that dumped large quantities of snow on New York and other Northeastern business centers, along with near-zero temperatures.

"A small percentage of people didn't make it in to work [in New York] and some people who had to go north of where we are" - blizzard-blasted Boston, for instance - "didn't make it in. So we had a minimal turnout and a pretty high level of apathy today [Monday]. Hopefully, we'll pick it up tomorrow."

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