A Possible New Issue and a Secret That Wasn't
August 2, 1999
Charter Communications came out with its $3.45 billion initial public offering last week, which was probably the worst-kept secret the market has seen for a long time, joked one investor.
The company's outstanding bonds were little changed on the news, since word of the initial public offering had leaked out and was priced in for some time. But some buy-siders are expecting the issuer to tap the junk bond market yet again, after its mammoth $3 billion high yield issue made such a splash in March.
The company, controlled by Microsoft co-founder Paul Allen, is one of the front-runners in plans to use cable system to provide a litany of high speed services to the home over cable lines, including telephone, Internet access and video-on-demand services. And the company said it plans to spend about $5.9 billion between 2000 and 2002 to upgrade and expand its system, leading to the speculation of another high yield bond offering.
Activity Of The Week
The actual new issues market last week saw a few more pricings than in recent weeks, but the forward calendar continued to balloon.
Deals in the offing included McLeod, which is trying to raise $400 million in senior notes due in 2009 via Goldman Sachs and Salomon Smith Barney; Mueller Group, which is in the market with a $300 million deal structured as senior subordinated notes via Donaldson Lufkin & Jenrette; Corral Petroleum, which is said to be looking to do a $300 million issue in senior notes with Deutsche Banc Alex. Brown acting as the underwriter; Mattress Discounters, which is said to be looking for $125 million of senior discount notes with Chase as the manager; and Veridian Corp., which is putting the final touches on a $175 million issue underwritten by Credit Suisse First Boston.
Allied Waste Industries sold one of the biggest deals to come along in several months when it priced a $2 billion issue last Monday. The deal, rated B2 by Moody's Investors Service and single-B+ by Standard & Poor's, featured a 10% coupon and priced at 99.668 to yield 10.06%, or 425 basis points over Treasurys.
The proceeds will help pay down a portion of the $9.5 billion of bank debt the company incurred to buy its larger rival Browning Ferris Industries. That transaction will make Allied Waste the second-largest trash hauling company in the U.S.
The paper is first callable in 2004 at a price of 105. Then prices decline in subsequent years to 103.333, 101.666, and par.
Canandaigua Brands, which makes Inglehook and some wines and distributes Corona beer in the U.S., sold $200 million of 8.625%, seven-year notes. They priced at par to yield 281 basis points over Treasurys.
SCG Holdings Corp. sold $400 million worth of junk bonds that were rated B2 by Moody's Investors Service and single-B by Standard & Poor's. The notes, structured as senior subordinated notes, priced at par to yield 621 basis points over Treasurys.
SCG's notes are initially callable in 2004 at 106, then prices fall in following years to 104.25, 103, 101.5, and par.
United Pan Europe priced its $800 million deal that carried a rating of B2/single B-. The deal was structured as senior notes and priced at par to yield 504 basis points over comparable Treasurys. UPC is expected to become a benchmark name in the continental European cable sector.
First call is in 2004 at 105.438. Then prices fall in succeeding years to 103.625, 101.813 and par.