Primary Sees a Handful of Deals
January 17, 2000
The new issues market last week was somewhat better than the secondary, but still not as robust as the forward calendar had made it appear in previous weeks.
There were, however, a few deals that actually priced last week and true to from, they came mostly from the telecommunications and cable sectors.
Focal Communications Corp. broke through last week's sluggish market by completing its $275 million deal via Rule 144A. The transaction, which was increased from its original $200 million size, was led by Salomon Smith Barney with Donaldson, Lufkin & Jenrette, Morgan Stanley Dean Witter, TD Securities and Banc of America Securities all acting as co-agents.
The senior notes were structured with a 10-year final maturity and carried a coupon of 11.875%. They were rated B3 by Moody's Investors Service and single B by Standard & Poor's Ratings Service.
The pricing was slightly tighter than the issuer's 1998 foray into the private arena in which it placed $270 million of senior discount notes at 12.125%.
"We were a very young company when we issued the [previous bonds]," explained a company spokeswoman. "The market is now starting to understand us better and recognize that we've got a great story."
The issuer is a Chicago-based competitive local-exchange carrier that provides its services to corporations, Internet-service providers and assorted value-added resellers in 12 domestic metropolitan markets.
Elsewhere, St. Louis-based Charter Communications, a bellwether in the high yield market, closed on a $1.5 billion high yield deal that was increased from an originally planned $900 million. The deal was broken out into three tranches.
The first piece, worth $675 million, had a 10% coupon and priced at par to yield 344 basis points over Treasurys. It carried a rating of B2 from Moody's and single B-plus from S & P.
The second tranche, worth $325 million, carried a coupon of 10.25% and it also priced at par to yield 369 basis points over Treasurys. It carried the same rating: B2 from Moody's and single B-plus from S&P. That tranche is initially callable in 2005 at 105.125, and then prices decline to 103.417, 101.708 and par in each subsequent year.
The final piece was for $532 million, and it priced at 56.44 to yield 519 basis points over Treasurys. It also carried a B2/B-plus rating and it is first callable in 2005 at 105.875. And in succeeding years, prices fall to 103.917, 101.958 and par.
Ski resort operator Intrawest Corp., for its part, was able to complete a $135 million deal in the 144A market despite suffering through yet another natural snowfall shortage on most of its properties. Goldman Sachs & Co. was the lead underwriter.
The senior unsecured notes have a 10-year maturity and carry a 10.5% coupon. Moody's rated the notes B1 while the issuer itself has an existing senior unsecured credit mark of single-B-plus from S & P.
The paper is initially callable in 2005 at a price of 105.25, and in following years, prices fall to 103.5, 101.75 and par in each year thereafter.
Todd Gray, a senior analyst at Moody's, said, "Even though most of the company's resorts haven't had much snow this year or last, [Intrawest] has done a good job filling its beds through advance reservations, and that's led to strong revenues in their restaurants and retail shops."
Intrawest was last in the private debt market in 1998 when it issued $75 million of similarly structured securities as part of a $200 million refinancing package.
The company also planned to issue an additional $150 million of senior unsecured notes last May but shelved the plan due to concerns over heady market spreads.
Proceeds from the current offering will be used to reduce bank indebtedness.
According to a company spokesman, the securities will be sold to U.S. buyers and institutional investors in the Canadian provinces of Ontario, Quebec and British Columbia.