Visteon, Friendly Ice Cream lead new-deal surge; Bally dives as investors await numbers

By Paul Deckelman and Paul A. Harris

New York, March 3 - The high-yield market is supposed to be humbled, chastened, and knocked down a few pegs from the exuberant mood seen in the first few weeks of the year - but if the junk market is in fact pulling in its horns and becoming more guarded in the wake of several recent mutual fund net outflows and a suddenly mediocre stock market, nobody bothered to tell the primary sector, where the new deals continue to roll out unabated, with well over $1 billion of new paper priced, counting all issuers.

Syndicate sources heard that Visteon Corp. sold $450 million of new 10-year notes, the big deal of the day (if you don't count HCA Inc.'s $500 million split-rated offering); other issuers coming to market included Friendly Ice Cream Corp., Airgas Inc., WH Holdings/WH Capital Corp. (i.e. Herbalife), True Temper Sports Inc. and Softbank Corp., the latter deal a euro-denominated offering.

In the secondary market, the bonds and shares of Bally Total Fitness Holding Corp. looked like a 98-pound weakling, getting smacked around by investors made nervous by the seeming slowness of the Chicago-based nationwide fitness center operator to release fourth-quarter results.

And Hollinger International paper was being quoted notably lower, in the wake of the apparent demise of ousted Hollinger chairman Conrad Black's agreement to sell his stake in the Chicago-based newspaper company's corporate parent to British press tycoons David and Frederick Barclay, who pulled their offer to buy Black's controlling stake in Hollinger.

Six deals price

Wednesday's session in the new issue market saw six deals price generating a total of $1.175 billion and €450 million for half a dozen different issuers.

And although the session saw one offer postponed, stricken from what all sources concur is an extremely busy new issue calendar, sources from both the buy-side and the sell-side expressed confidence in the junk deals that remain on the calendar as this week's business.

"There could be some indigestion, with all these little deals out there, but I think most of this stuff will get done," a sell-sider said not long after Wednesday's close.

Visteon upsizes

Visteon Corp. priced an upsized $450 million of 7% 10-year notes (Ba1/BB+/BBB-) at 99.957 to yield 7.006%.

The deal, increased from $400 million, came at a spread of 295 basis points, which brought it in at the tight end of the 300 basis points plus or minus five basis points price talk.

Citigroup ran the books for the Dearborn, Mich. supplier of automotive components.

Elsewhere WH Holdings Ltd. and WH Capital Corp., the parent of Century City, Calif.-based marketer of weight management and nutrition products Herbalife sold $275 million of seven-year senior notes (B3/B) at par to yield 9 ½%.

The UBS Investment Bank-led deal came at the tight end of the 9½%-9¾% price talk.

Friendly Ice Cream Corp. scooped out $175 million cash from investors with an issue of eight-year senior subordinated notes (B2/B-) that priced at par to yield 8 3/8%

With Goldman Sachs & Co. running the books the Wilbraham, Mass.-based restaurant operator's deal came in the middle of the 8¼%-8½% price talk.

Radnor, Pa.-based distributor of industrial, medical and specialty gases, Airgas, Inc. sold $150 million of 10-year senior subordinated notes (Ba2/B+) at par to yield 6¼%.

The deal came at the tight end of the 6¼%-6½% talk, with Banc of America Securities and Goldman Sachs & Co. running the pumps.

True Temper heard massively oversubscribed

Memphis, Tenn. golf club-maker True Temper Sports, Inc. landed on (or in) the green, Wednesday, as it priced $125 million of seven-year senior subordinated notes (B3/B-) at par to yield 8 3/8%.

Credit Suisse First Boston was the caddy, as the deal came in the middle of the 8½%-8¾% price talk.

A buy-side source told Prospect News that with the True Temper pricing there is evidence in that investors may at long last be getting a handle on things.

"An analyst here was telling me it's 15-times oversubscribed," the buy-sider said.

"What's happened in the last month, with brokers trying to cram deals down peoples' throats, is that the market has backed up and people have gotten smarter about it.

"Values seem to make a lot more sense right now. If you price the deal right you can probably get it done. But if you hold out for every last basis point it's going to be a lot tougher.

"It's easier to trade now. Things seem to be somewhat shaken out."

Finally, Tokyo internet company incubator Softbank Corp. priced an upsized €400 million of seven-year senior unsecured notes (B1/BB-) at par to yield 9 3/8%.

The Deutsche Bank Securities-led deal came at the tight end of the 9¼%-9½% price talk and was increased from €350 million - although Softbank's original announcement of the transaction had indicated a willingness to go bigger.

Team Health hits the track

Only one new roadshow start was heard Wednesday as Team Health, Inc. started marketing its $180 million of eight-year senior subordinated notes.

The Knoxville, Tenn.-based provider of outsourced physician services is expected to conclude its roadshow on March 11.

JP Morgan, Banc of America Securities and Merrill Lynch & Co. are joint bookrunners.

Talk on pending issues

Revised price talk of 8¾%-8 7/8%, in from 8 7/8%-9 1/8%, was heard Wednesday on Global Cash Access, LLC's upcoming $235 million of eight-year senior subordinated notes (Caa1/B-), which are expected to price on Thursday. Banc of America Securities is the bookrunner.

Meanwhile price talk of 9½%-9 5/8% emerged on American Rock Salt Co. LLC's $100 million of 10-year senior secured notes (B3/B-), expected to price on Friday, via Jefferies & Co.

Price talk of 10½% area was heard for Gold Kist Inc.'s planned $200 million of 10-year senior notes (B2), which are expected to price on Thursday, via Credit Suisse First Boston.

And the price talk is 8¾%-9% on J.B. Poindexter & Co.'s $125 million of 10-year senior notes (B1/B-), which are expected to price on Thursday. JP Morgan is the bookrunner.

Knology pulls Caa2/CCC- deal

Among the March 1 week's crowded field of prospective issuers, one was winnowed on Wednesday.

Knology, Inc. postponed its $280 million 10-year senior notes deal (Caa2/CCC-), citing market conditions.

"We had believed that market conditions would enable us to complete an opportunistic refinancing of our existing long-term debt to realize significant cost savings," said Rodger Johnson, president and chief executive officer of Knology, in a press release. "Unfortunately, proceeding with the proposed offering in the current market environment would not have provided Knology with the interest expense savings we had expected."

New deals trade up

When the new Herbalife 9½% senior notes due 2011 were freed for secondary dealings, the nutrition products company's new bonds certain seemed full of vim and vigor, firming to 102.25 bid, 102.75 offered from their par issue price earlier in the session. Likewise, Friendly Ice Cream's 8 3/8% senior notes due 2012 also pushed up to the 102 bid level from their par issue price.

A trader saw Airgas' 6¼% senior subordinated notes due 2014 advance to 101.625 bid, 101.875 offered, from par, while True Temper Sports' 8 3/8% senior subordinated notes due 2011 rose to 101.25 bid, 102 offered, also from par.

The trader also saw Visteon's 7% notes due 2014, which were being quoted on a spread-over-Treasuries basis as having priced at 295 bps over, but then having narrowed to closing levels of 288 bps over bid, 283 bps over offered.

At another desk, HCA's split-rated (Ba1/BBB-) offering was seen having tightened 12 points to levels around 161 bps over bid, 158 bps over offered.

Bally continues slide

Back among the established issues, Bally Total Fitness Holding's bonds - which were heard to have declined by about three points in Tuesday's dealings - continued to slide, losing another five or six points.

Its 10½% notes due 2011 were quoted by one market source as having declined to 86 bid from 91.75 on Tuesday, while its 9 7/8% notes due 2007 were seen having fallen to as low as 70 bid from the upper 70s previously.

At another desk, the 101/2s were seen as low as 83 bid, down six points on the session.

The Bally notes "have traded off quite a bit," a trader said, noting that the company "has still not released its financials" for the 2003 fourth quarter and full year. In years past, the company was usually able to put out its fourth quarter results by about mid-February.

Bally has not formally announced any delay in the results, nor has it asked for any kind of extension. One possible explanation for the lack of figures to date could be the disruption caused by New York Attorney General Elliot Spitzer's probe of Bally's advertising and sales practices; company critics had alleged that the gym operator used deceptive advertising and high-pressure sales tactics. Bally last month announced that it had reached agreement with Spitzer's office on settling the case.

As part of the accord, Bally must implement substantial sales, training, and advertising reforms "far greater than the law requires." It also must improve its cancellation policies and better monitor its compliance with those policies, Spitzer's office said.

Whatever reason for the non-appearance of the results, the fact that the company has not yet reported has spooked investors, who speculate that there's bad news ahead and that management is trying to delay the inevitable.

"The rumor is that cash flow is going to be lower than anticipated," the trader said.

That scuttlebutt was enough to push the bonds solidly lower, while the company's New York Stock Exchange-traded shares fell 42 cents (7.08%) to $5.51. Volume was 1.1 million shares, nearly three times the norm.

Hollinger International down

Elsewhere, a market source saw Hollinger International's 11 7/8% notes due 2011 having fallen to 116.25 bid from prior levels up around 123; the bonds declined after the Barclay Brothers withdrew their offer to buy fellow Fleet Street press lord Conrad Black's controlling stake in Hollinger Inc. The controversial proposed sale has drawn the ire of some of the company's other shareholders, who characterized the arrangement as an unfair sweetheart deal; they also contend that Black behaved improperly when he led the company - which publishes papers such as the British-based Daily and Sunday Telegraph and the Chicago Sun-Times.

On the earnings front, Majestic Star Casino LLC's 9½% notes due 2010 were seen having pushed up to 106.5 bid from 105.25 previously after the casino operator released fourth quarter results, which included EBITDA for the quarter of $10.7 million. The company cited higher taxes in jurisdictions where it operates, as well as construction costs, but these negatives apparently did not discourage investors.

Another company out with results was Saks Inc., which reported earnings for the fiscal fourth quarter ended Jan. 31 of $81.8 million (57 cents a share), up from the previous year's $68.1 million, (47 cents a share), though down from analysts' consensus estimate of 68 cents a share.

But the Birmingham, Ala.-based retailer's were little changed; a trader quoted the Saks 8¼% notes steady at 110.5 bid, 111.5 offered.

He noted that with that much of a premium over par, no one cares "unless the numbers are either really good or really bad, this one doesn't move."

Overall, a trader said that the market was "very quiet until about 4 p.m. ET - when all the new issues came. Including the secondary market, he characterized things in general as pretty quiet, on thin volume.

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