Triad debt sizzles but Lear fizzles on M&A news; Claymont Steel deal prices

By Paul Deckelman, Paul A. Harris and Stephanie N. Rotondo

New York, Feb. 5 - Mergermania was back on Wall Street with a vengeance Monday as a slew of merger, acquisition and buyout deals came clattering down the chute. Several piqued the interest of investors in the high-yield bond market, notably the news that Triad Hospitals Inc. had agreed to be taken private in a $6.4 billion deal, including debt assumption. That pushed the bonds of the Plano, Tex.-based hospital operator up by several points.

But the news that billionaire investor Carl Icahn wants to acquire Lear Corp. had the opposite effect on the Southfield, Mich.-based automotive components company, with bondholders bailing out on fears Icahn may go to the debt market to fund his takeover try.

Bonds of Werner Holding Co. Inc. were seen several points better, albeit in light trading, on the news that the bankrupt Greenville, Pa.-based metal ladder maker will be bought out by two private equity companies in a $258.8 million deal.

And market participants reported little in the way of price moves or much trading in the bonds of Hanover Compressor Co. and Universal Compression Holdings Inc., after the two Houston-based natural gas compression services companies announced an all-stock merger of equals.

In the primary market, Claymont Steel, Inc. was heard to have priced an issue of eight-year notes, which was moderately well received when the smallish $105 million offering was freed for secondary dealings.

AmeriPath Inc. was heard to have successfully brought an issue of seven-year payment-in-kind toggle notes to market. And pre-deal price talk emerged on Calfrac Holdings LP's eight-year bond offering, which is expected to price on Wednesday morning.

In all, Monday's primary market saw slightly less than $229 million of issuance.

AmeriPath prices $125 million

AmeriPath Intermediate Holdings, Inc. priced a $125 million issue of six-month Libor plus 525 basis points floating-rate PIK toggle notes due Feb. 5, 2014 (B-) at 99.00 on Monday, according to an informed source.

Wachovia Securities was the bookrunner for the debt refinancing and general corporate purposes deal from the Palm Beach Gardens, Fla., provider of advanced pathology testing and disease management services.

The toggle feature, which comes into effect if the issuer elects to make an in-kind (as opposed to an in-cash) coupon payment, steps up the coupon by 75 basis points to six-month Libor plus 600 basis points.

Claymont drives through

Elsewhere Claymont Steel, formerly CitiSteel, priced a $105 million issue of eight-year senior notes (B3/CCC+) at par to yield 8 7/8%.

Although the a.m.-to-p.m. drive-by came with no official price talk, pro forma on the red was 9½%, according to a source close to the deal.

Jefferies & Co. ran the books for the Claymont, Del., company's debt refinancing deal.

Talking the deals

Price talk was heard Monday on offerings that have been marketed via investor roadshows and are expected to price during the middle portion of this week.

Invacare Corp. talked its $175 million offering of eight-year senior notes (B2/B-) at 10% area.

And PNA Intermediate Holding Corp. talked its $150 million offering of six-year senior floating-rate PIK toggle notes (Caa1/B-) with a three-month Libor plus 700 basis points cash-pay coupon, at an issue price of 98.00 to 98.50.

Banc of America Securities the books for both Invacare and PNA.

Elsewhere Calfrac Holdings talked its $125 million offering of eight-year senior notes (B1/B) at a yield in the 8% area.

RBC Capital Markets and Morgan Stanley are joint bookrunners.

Claymont climbs

When the new Claymont Steel 8 7/8% notes due 2015 were freed for secondary market dealings, a trader quoted those bonds at 101 bid, 101.5 offered, up from their par issue price.

However, another trader said he had seen no sign of the deal, given its small size, and commented that "those Jefferies deals usually just don't show in secondary," but rather get quickly put away.

Triad triumphant

Back among the established issues, a trader said the junk market was firm on the buyout news that was bouncing around the market, particularly Triad, which he quoted as being up anywhere from 1¼ point to 1¾ point.

A trader at another desk saw the company's 7% notes due 2012 firm to 103.625 bid, 104.125 offered, up about 1¼ points on the session, while its 2013 7% notes were "up a lot," moving to 104.25 bid, 104.75 offered from Friday's bid levels about 101 7/8.

Yet another trader described Triad "up 3 to 4 points," with the '12s at 103.5 bid, 104.5 offered, and the '13s at 104.5 bid, 105.5 offered.

But while bondholders were pleased, the ratings agencies were wary - Standard & Poor's dropped Triad to BB, and warned it could downgrade it again, while Moody's Investors Service, which has Triad debt at Ba3, put Triad under review for a possible downgrade, as it evaluates the amount of debt used to complete the deal.

Shareholders were meantime as enthused as the bondholders, taking the company's New York Stock Exchange-traded shares up $6.36 (14.74%) to $49.65 on volume of 18 million, about 12 times the norm.

CMP Capital Advisors and GS Capital Partners offered Triad a buyout at $50.25 per share, or $4.7 billion total. The deal would also see the assumption of $1.7 billion of Triad debt, bringing the total price tag to $6.4 billion.

But that offer might be only "a starting point," some market participants said, noting that New York-based hedge fund TPG-Axon Capital Management LP - Triad's biggest shareholder, with 8.9% - has been pressuring the company to look at selling out for months now.

One equity trader opined that "I believe Triad will receive another offer and I think it could go over $55."

That market source continued "This situation looks very much like HCA" - the top U.S. hospital operator, also Nashville-based, from which Triad was spun off in 1999. HCA itself went private this past November in a $33 billion buyout by Bain Capital LLC, Kohlberg Kravis Roberts & Co., Merrill Lynch & Co. and HCA co-founder Thomas Frist Jr. - the largest LBO to date at that time, although others are pending in the market currently that would surpass that mark.

"The premium [over the pre-deal stock price] is a mere 16% and there is a 'go shop' provision wherein the [$40 million] termination fee falls to just $20 million if a better offer comes in during that time. The Street is already rumbling that the price is light," the equity trader said.

TPG-Axon said last week in a Securities and Exchange Commission filing that it would nominate its own slate for the board and was evaluating a range of potential actions for Triad. It noted in the filing that it had raised its stake in the hospital company to 8.87% from 7.4% in December and 6.2% in November. The $5.8 billion hedge fund, managed by former Goldman Sachs star trader Dinakar Singh, told the company that it expects to nominate a slate of five board directors for election at its 2007 annual shareholders' meeting.

Vanguard next on the agenda?

The first bond trader also saw the Triad news giving a boost to Vanguard Heath Systems Inc.'s bonds on the assumption that the Nashville, Tenn.-based hospital operator might be the next acquisition target in a consolidation wave.

He saw its Vanguard Health Holdings Co. II Inc. 9% notes due 2014 up about 1½ points to 103.5 bid, 104.5 offered, while its zero-coupon notes due 2015 were up 3 points up 82.5 bid.

At another desk, the 9s were seen up ¾ point at 103.75, while the zeroes were up 1½ points better on size trades at 82.75.

Market leery of Lear deal

But while Triad's bondholders - if not the ratings agencies - were not too perturbed by the notion that a buyout of the company might be funded by a lot of debt - it was another story with Lear Corp., after the Carl Icahn-controlled American Real Estate Partners LP offered to buy the approximately 82% of Lear that the billionaire doesn't already own for $36 a share, or about $2.5 billion - a premium of 4% over the stock's Friday closing price of $34.67.

While Lear's NYSE-traded shares rose $3.97 (11.5%) to close at $38.64, a trader saw its bonds down about half a point to a point on the session, with its 5¾% notes due 2014 at 87.5 bid, 88 offered.

Another trader called those bonds unchanged to down ½ point at 88 bid, 89 offered, while its 8½% notes due 2013 were at 98.75, which he called down from prior levels around 99.

The traders said investors seemed worry about the prospect of Icahn "piling on a lot of debt" to fund the buyout of Lear, which makes automotive interior components, seating systems and electronics.

However, at another desk, Lear's 5¾% notes were seen a point higher at 88 bid.

Remy dips, Delphi, Dana steady

In the automotive sphere apart from Lear, a trader saw Remy International Inc. "down a couple" of points, with its 8 5/8% notes due 2007 a point down at 87 bid, 89 offered and its 11% notes due 2009 2 points down at 38 bid, 40 offered.

Elsewhere among the auto supplier names, he saw Delphi Corp. and Dana Corp. bonds unchanged - but Federal-Mogul Corp.'s bonds were about 2 points higher across the board after a federal judge set May 8 as the date for the company's final hearing before it emerges from Chapter 11 - where it has been since October,2001.

MetalDyne's 10% notes due 2013 were up ½ point to 100.5 bid, 101.5 offered, about the level at which the bonds are expected to be taken out via a tender offer announced by the company. Its 11% notes due 2012, which are not being tendered for, were a point better at 95 bid, 96 offered.

Not much activity seen in compressor names

Traders said they normally don't see much activity in the bonds of Universal Compression and Hanover Compressor - and Monday was no exception, even though the two companies had agreed to a merger of equals.

One trader pegged Universal's 7¼% notes due 2010 up ½ a point around the 101 mark, while Hanover's debt was unchanged, like its 7½% notes due 2013 at 101.5

Ronda Fears contributed to this report.

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