NTL, Penhall deals price, also Digicel add-on; Spectrum continues to ease

By Paul Deckelman and Paul A. Harris

New York, July 18 - NTL Cable plc successfully priced a restructured one-tranche offering of senior notes on Tuesday - and junk bond traders said that the new bonds of the New York-based operator of British communications networks were well-received when they broke into the secondary arena.

Also pricing was Pennhall International Corp.'s issue of eight-year second-lien notes, although that deal came a little wide of pre-deal market price talk envisioning a yield in the 11½% to 11¾% range. And Digicel Ltd. joined in with an add-on offering of its existing 2012 senior notes.

In the secondary market, Spectrum Brands Inc.'s bonds - which got solidly drubbed on Monday after the Atlanta-based consumer products company said that dull-year results would be well down from its earlier projections - were seen continuing to ease on Tuesday, although the erosion was minor compared with Monday's slide.

There was also some movement in the bonds of Sanmina-SCI Corp., whose shares tumbled Tuesday after the company cut its third-quarter outlook and several analysts published bearish comments on it.

A high yield syndicate official said that while the broad market definitely traded higher on Tuesday morning, it gave back most if not all of its early gains to end the session mixed.

Meanwhile three issuers, each bringing a single dollar-denominated tranche, raised approximately $879 million in the primary market.

Rejigged NTL tight to talk

The fact that the NTL Cable plc $550 million deal came as a single dollar-denominated tranche reflected a restructuring that came about after the deal had been on the road.

Initially the company had come to the market with a £300 million equivalent two-part dollar and euro deal. However one source said that the eventual abandonment of the sterling tranche reflected investor preference.

On Tuesday NTL priced its $550 million issue of 10-year senior notes (B2/B-/B) at par to yield 9 1/8%, at the tight end of the 9¼% area price talk.

JP Morgan, Deutsche Bank, Goldman Sachs and The Royal Bank of Scotland were joint bookrunners for the debt refinancing deal from the U.K.-based communications and content distribution company.

Europe's 'momentum-driven' hedge funds

An investor in Europe who spoke to Prospect News on Tuesday was not in the NTL deal.

However the source spotted the recently priced Avis Finance Co. plc (Avis Europe) three-month Euribor plus 262.5 basis points notes due in 2013, which priced at par in a €250 million issue last Friday, trading Tuesday morning just a touch above par.

The investor commented that the trading level was something of a surprise given that the deal was rumored to have been between seven- and 10-times oversubscribed, and had initially traded up to around 101.

Once it got there, the source added, it seemed like "a lot of sellers came out of the woodwork."

The investor, explaining that presently in Europe broker-dealers run very aggressive proprietary books and momentum-driven hedge funds move bonds around, reasoned that there may have been a number of hedge funds in the deal to make a quick profit by selling the bonds into the post-pricing rally.

The source commented that such action on the part of fast-money players has been known to create market volatility.

Digicel taps 9¼% notes

Also pricing during Tuesday's primary market session was Caribbean wireless operator Digicel's $150 million add-on to its 9¼% senior notes due Sept. 1, 2012 (B3//B).

The deal priced at 102.514 to yield 8 5/8%, on top of the 8 5/8% area price talk, generating slightly less than $154 million of proceeds.

Citigroup and JP Morgan were joint bookrunners for the capital expenditures financing from the Kingston, Jamaica-based company.

Penhall prices wide of talk

Elsewhere Penhall International priced a $175 million issue of eight-year senior secured second-lien notes (B3/CCC+) at par to yield 12%, 25 basis points beyond the wide end of the 11½% to 11¾% price talk.

Deutsche Bank Securities and CIBC World Markets ran the books for the acquisition deal from the Anaheim, Calif.-based construction equipment company.

Two for the road

Roadshow timing was heard for two new junk bond offerings on Tuesday.

TFS Acquisition Corp. (Textron Fastening Systems) will begin a roadshow on Wednesday for its $190 million offering of 10-year senior secured notes (Caa1/B-).

Credit Suisse has the books for the acquisition financing deal from the Troy, Mich.-based provider of fastening systems.

And polypropylene film manufacturer, Treofan Germany GmbH, will also begin a roadshow on Wednesday for its €170 million offering of seven-year second-lien notes (Caa1/CCC+).

Citigroup and JP Morgan are joint physical bookrunners for the debt refinancing deal from the Raunheim, Germany-based company.

NTL up in trading

When the new NTL Cable 9 1/8% senior notes due 2016 were freed for secondary dealings, a trader saw the bonds jump to 101.25 bid, 101.375 offered on the break.

Later in the session, several traders pegged the bonds at 101 bid, 101.5 offered, up from its par issue price earlier in the session.

Spectrum loses again

Back among the established issues, Spectrum Brands bonds seemed to pick up Tuesday right where they had left off on Monday, moving to the downside - but the downturn seemed to run out of gas, leaving the bonds only modestly lower than they had been at the close of trading Monday, when the bonds were seen having lost anywhere from 2½ to 4½ points, depending on who you spoke to.

On Tuesday, a trader said he had seen the company's 8½% notes due 2013, which had ended Monday bid around 80, offered on Tuesday around 79.5, though he saw no bid level.

A second trader pegged those bonds at 79 bid, 79.5 offered, which he called down ¾ point on the session, while its 7 3/8% notes due 2015, after having been beaten down Monday to about the 76 level, were at 75.375 bid, 75.875 offered, which he also saw down ¾ point. Yet another trader who viewed the bonds around those same levels called them "maybe off half a point. There was not much change."

Over on the equity side of the ledger, the company's New York Stock Exchange-traded shares - which on Monday had nosedived more than 33% on 12-times normal volume - lost another 82 cents (11.47%) to $6.33 on volume of 5.9 million, more than six times the average daily turnover. SunTrust Robinson Humphrey and Bear Stearns downgraded the shares on Tuesday.

The shares and bonds began their two-day pullback after the company - which makes such well-known consumer staples as Rayovac batteries, Remington shavers and Cutter insect repellent, as well as pet products and supplies, insect control products and lawn and garden products - said that it expects that full-year 2006 results will be "substantially lower" than the guidance it issued back in May, for net sales of approximately $2.6 billion, as well as pro forma fully diluted earnings per share of between 90 cents and a dollar. It cited lower-than-expected sales volume. The company will report third-quarter results on Aug. 3.

Even though it expects disappointing third quarter results, Spectrum said it anticipates being in compliance with its senior credit facility debt covenants for the fiscal third quarter, based on its preliminary estimates.

The company also announced that it is has hired Goldman Sachs and Co. as its financial advisor to assist in evaluating potential selective asset sales.

Sanmina drops on outlook cut

Elsewhere, Sanmina-SCI Corp. cut its third-quarter outlook, causing its shares to slide and its bonds to also be quoted mostly lower.

A trader said that the San Jose, Calif.-based electronic manufacturing services provider's 8 1/8% notes due 2016 lost a point on the session to finish at 95 bid, 95.5 offered, while its 6¾% notes due 2013 were down ¼ point at 91.5 bid, 92 offered.

However, another trader saw both bond issues unchanged on the session, the 8 1/8s at 95 bid, 96 offered, and the 63/4s at 91 bid, 92 offered.

And another market source called the 63/4s off ½ point on the day at 91.5 bid, but said that while the 8 1/8% notes fell as much as 1 1/8 points to intraday lows around 95.25, several moderate sized trades very late in the day actually took place around the 99.5-99.75 level. The source had no ready explanation for that strange development.

Sanmina-SCI's Nasdaq-traded shares retreated 49 cents (11.48%) to end at $3.78, on volume of 24.2 million, more than triple the norm.

Sanmina-SCI said on Monday after the close that it expects third-quarter earnings, excluding certain expenses, in a range of from 6 cents to 7 cents per share, down from its previous guidance of 8 cents to 10 cents per share.

It blamed the expected downturn on a less profitable mix in sales.

Analysts for Jefferies & Co. and Merrill Lynch & Co. issued negative commentary on the company in published research notes, with Jefferies analyst Brian White, who rates the stock as a hold, warning that Sanmina-SCI faces "market share shifts, a slowing economic environment and disappointing operating leverage."

Meanwhile, Merrill Lynch's Steven Fox, who rates the stock neutral, cut his full-year per-share earnings target to 26 cents from 31 cents previously, and declared that "the details around the [anticipated earnings] miss are emblematic of why we have resisted the Sanmina 'leverage story' in the past couple of years, as real leverage proves elusive for a variety of familiar reasons (restructuring, components, and sales and operating execution)."

Granite steady

News that Granite Broadcasting Corp. has cancelled a deal to sell its Detroit- and San Francisco-area television stations was seen having not too much impact on its bonds. A trader quoted the New York-based TV station ownership group's 9¾% notes due 2010 unchanged at 92 bid, 93 offered, while another trader said that he had not seen quotes on the bonds.

A market source at another shop did see Granite's 93/4s down a point at 92.5 bid, while its 8 7/8% notes due 2008 were ½ point lower, also at 92.5.

Granite said that it has decided to hang onto its Detroit station, WMYD-TV - which in turn means that it will not go through with its previously announced deal to sell that station and its KBWB-TV station in San Francisco to affiliates of DS Audible LLC. However, while it wants to keep the Channel 20 Detroit outlet, which in September will become an affiliate of the new My Network TV network, it will continue its efforts to market the San Francisco station - also Channel 20 - to interested parties, possibly including DS Audible.

Granite had been talking about the asset sale for some months as a way of boosting its liquidity - but in the absence of a firm deal now, it has taken other steps, including arranging a new senior credit facility it entered into earlier this month. Granite used some of the proceeds to make an overdue interest payment to holders of the 9¾% bonds. It also said that it will use the credit facility to pay for its pending acquisition of WBNG-TV, Channel 12 in upstate New York.

Pep Boys unchanged

A trader saw Pep Boys - Manny, Moe and Jack's bonds little moved by the news that the chief executive officer of the Philadelphia-based auto parts retailer and service center chain, Larry Stevenson, had abruptly resigned. The company did not offer a reason for Stevenson's sudden departure - although news reports said that hedge funds, which have been aggressive buyers of the company's shares, were unhappy with him and forced his ouster.

He said the 7½% notes due 2014 stayed in their recent 85.5 bid-87.5 context, where "they've been kind of quiet lately." He noted that the company's shares rose slightly, and said that shareholders like the hedge funds "have been wanting to get this guy out - so they're viewing it as a positive."

Tenet holds

The trader also saw little or nothing happening in the bonds of Dallas-based hospital operator Tenet Healthcare Corp., quoting its 9 7/8% notes due 2014 steady at 99.75 bid, 100.75 offered . The company announced that it would sell three New Orleans-area hospitals - including one that has been the focus of a legal investigation into the treatment of its patients before, during and after Hurricane Katrina.

The sale, the trader said "was pretty much expected," and the bonds were "status quo." Although no price was announced Tuesday, because certain aspects of the sales transaction were confidential, he estimated it around $200 million. "They haven't said what they're going to do with it. I don't know if they're going to pay down the [bond] debt due 2011, which is the closest subordinated-type debt that I see outstanding."

A market source saw those 6 3/8% notes due 2011 up ¼ point at 89 bid.

Late Monday, a doctor and two nurses were arrested in connection with patient deaths at the now-closed Memorial Medical Center, one of the three hospitals Tenet is selling. Authorities were looking into 34 deaths at Memorial following Katrina, which knocked out electricity and water to the facility for several days.

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