SkillSoft prices eight-years; First Data finally firms as junk rebounds from Thursday slide

By Paul Deckelman and Paul A. Harris

New York, May 21 - SkillSoft plc was heard by high yield syndicate sources to have priced a $310 million offering of eight-year bonds on Friday, through its SSI Investments II Ltd and SSI Co-Issuer LLC units. When the Irish business development and educational software provider's new deal moved into the secondary market, it was heard to have firmed a little from issue.

The SkillSoft deal was the day's only pricing, closing out a relatively lackluster week in the primary market that saw $1.7 billion of new paper - well down from the week before - including a pair of $400 million offerings from familiar issuers - a little-publicized stealth deal from Calpine Corp. and a drive-by transaction by J.C. Penney Corp.

Elsewhere in the primary arena, market participants heard that Spectrum Brands Inc. plans to sell $500 million of seven-year senior secured notes as part of the financing for the Atlanta-based consumer products company's pending merger with Russell Hobbs Inc.

In the secondary market, Junkbondland seemed to steady after Thursday's wildly ugly session, with some names which had been pushed around firming from their lows at the Thursday close.

Among them were First Data Corp.'s recently hard-hit bonds, which turned upward on Friday. Also enjoying a bit of a rebound were the bonds of automotive bellwethers Ford Motor Co. and General Motors Corp., which firmed from the lows at which they began the session.

Overall the high-yield market regained some recently lost ground on Friday, according to a portfolio manager from a mutual fund.

What's more, the junk bond market has held in pretty well, given recent volatility in the global financial markets, the buy-sider asserted.

"Higher quality high-yield is definitely outperforming equities," the investor said.

"However the same may not be true of lower quality bonds," the buy-sider added.

Mylan, Inc.'s 7 7/8% notes due July 15, 2020 were at 99¼ bid, 99¾ offered on Friday, well off their highs in the context of 102 bid, but nonetheless holding in comparatively well, the source said.

Mylan priced a $700 million tranche of the 7 7/8% notes at 99.97 to yield 7 7/8% on May 12.

WireCo Worldgroup, Inc.'s new 9½% senior notes due 2017 were also holding in reasonably well at 96½ bid, 97½ offered on Friday, the buy-sider said.

The company priced a $275 million issue of the notes at 97.529 to yield 10% on May 14.

However, Huntsman International LLC's 8 3/8% senior subordinated notes due 2020, which priced at par on March 12, are 5 points lower on the week, the portfolio manager said.

SkillSoft prices atop talk

Only one issue priced during Friday's session.

SSI Investments II Ltd. and SSI Co-issuer LLC, financing units of SkillSoft plc, priced a $310 million issue of 11 1/8% eight-year senior unsecured notes (Caa1/B-) at 99.347 to yield 11¼%,, according to an informed source.

The yield printed on top of the price talk.

Morgan Stanley, Barclays Capital and Deutsche Bank Securities were the joint bookrunners for the LBO financing.

$1.7 billion week

With SkillSoft added to the tally, the primary market generated $1.7 billion of proceeds in an even half dozen junk-rated, dollar-denominated tranches during the May 17 week.

That's the lowest weekly total since the week of Feb. 15, which saw just $1.4 billion in two tranches.

At the close of the May 17 week, year-to-date issuance stood at $110.2 billion in 263 tranches.

Primary should be open

The global capital markets are now reacting to a variety of negative news, including the European credit crisis, a mutual fund portfolio manager said on Friday.

Piled on top of the European news, however, are recent economic numbers which indicate that economic recovery in the United States may be losing steam, the investor added.

Also weighing upon the global capital markets is the recent news that China's economy may be slowing.

However bad financial headlines and capital markets volatility aside, the high-yield primary market could continue to operate, the investor asserted.

The specter of redemptions diminished somewhat on Thursday, the source said.

That's because the $374 million outflow from the high yield mutual funds, which was reported by AMG Data Services is much more modest than the previous week's $1.7 billion outflow.

"People were braced for another big outflow, this week, but it didn't materialize," the portfolio manager said.

Meanwhile, an official from a high-yield syndicate desk said that although the primary market will likely continue to operate, the pace may be slower than the one set during the mid-March through late-April time frame - at least for a while.

Characterizing the recent sell-off as a "correction," the banker said: "These things take some time to digest."

For example, the banker said, the pace of opportunistic debt refinancings is apt to be slower than it had been during the run-up to May.

Recent primary market activity would seem to bear out this source's color. Four of the May 17 week's six deals were LBO financings. Only one of the past week's deals, JC Penney Corp. Inc.'s $400 million of 5.65% senior notes due 2020, was a debt refinancing.

The week ahead

The week ahead is a different story, however.

Of the six dollar-denominated deals totaling $3.2 billion on the calendar and expected to price by Friday's close, five have debt refinancing as at least a partial use of proceeds.

The biggest of those five is Citgo Petroleum Corp.'s $1.5 billion two-part offering of first-lien senior secured notes (Ba2/BB+/BB+) in seven- and 10-year tranches.

RBS, UBS, BNP Paribas and Credit Agricole are the joint bookrunners for the debt refinancing and general corporate purposes deal.

Only one of the coming week's expected dollar-denominated deals is an acquisition financing.

Willbros Group, Inc. is marketing $250 million of six-year senior secured second-lien notes (B3/B+) via left bookrunner UBS, and joint bookrunners Credit Agricole and Credit Suisse.

Proceeds will be used to partially fund the acquisition of InfrastruX Group, Inc.

SkillSoft moves softly upward

When the new SkillSoft 11 1/8% notes due 2018 were freed for secondary dealings, a trader quoted the bonds as having firmed to 100¼ bid, 100¾ offered, versus the 99.347 level at which the deal had priced.

Dave & Buster's hangs around issue

A trader saw the new Games Merger Corp. - i.e. Dave & Buster's Inc. - 11% notes due 2018 at par bid, 100¼ offered, not much removed from the par bid level at which the Dallas-based restaurant/amusement arcade chain had priced its $200 million offering on Wednesday.

Another trader quoted the bonds as having firmed a little to 100½ bid, 101 offered.

American Tire goes flat

A trader saw the new American Tire Distributors, Inc. 9¾% second-lien senior secured notes due 2017 having firmed a little on the session to 98¾ bid, 99¼ offered. That would be around the 98.76 level at which the Charlotte, N.C.-based tire and auto supplies wholesaler priced its $225 million deal on Wednesday, and well up from the 97 level to which those bonds initially fell after the pricing.

However, at another desk a little later in Friday's session, a trader said that he saw the bonds again down at 97 bid, 98 offered on Friday, opining that "it was not too good of a deal."

Market indicators pushed lower

Among bonds not connected with the new-deal market, a trader saw the CDX Series 14 index down 1/8 point on Friday to end at 93 bid, 93½ offered, after having tumbled by a whopping 1 5/8 points on Thursday. The index thus finished out the week well down from the 96½ bid, 97 offered levelr at which it had gone home on the previous Friday, May 14.

The KDP High Yield Daily Index, meanwhile, eased by 10 basis points Friday to 69.62, after having plunged by 78 bps on Thursday, thus ending the week well down from its 71.36 close the week before. The index's yield widened by 4 bps to 8.99%, after having gapped out by 24 bps Thursday. The yield thus ended the week having ballooned out from 8.37% the previous Friday.

Another widely followed junk market measure, the Merrill Lynch High Yield Master II Index, closed the week showing a year-to-date gain of 3.115% - well down from 5.22% the previous Friday, and down further still from its mid-April peak level of 7.18%.

Advancing issues were again behind decliners, for a sixth straight session, on Friday, by around a better than six-to-five ratio.

Overall market activity, represented by dollar-volume levels, plunged by 40% on Friday from the previous day's pace.

A trader, noting how junk tried to follow the lead of stocks, which rebounded on Friday after having taken a bad beating over the previous several sessions on investor worries about the debt situation in Europe in general and in Greece in particular, as well as fears of tighter regulations from Washington, said that the market had gone "on a wild ride."

First Data finally firmer

One of the most volatile names of late has been First Data Corp. - whose bonds got whacked down by anywhere from 3 to 5 points a week ago when the Greenwood Village, Colo.-based electronic transaction processor released disappointing first-quarter numbers, and then continued to lose ground over the following several sessions.

That paper finally showed a little rebound on Friday, on what one trader called "good volume on all of it," referring to the company's three series of bonds.

He saw its 9 7/8% notes due 2015 finishing the session at 81 bid, which he said was up by ½ point to a full point. The paper had earlier gotten as good as 82.

He also saw a lot of volume in First Data's 10.55% notes due 2015, with the bonds finishing in a 75 to 75½ context, up a point.

First Data's 11¼% notes due 2016 were unchanged in a 66 to 66½ range.

At another desk, a market source called the 10.55s nearly 2 point gainers on the session, seeing them at 751/2.

Another market participant also saw those 10.55s at 751/2, although calling that a 1 point advance, with the 9 7/8s meanwhile up some 2 points-plus on the day at 82¾ bid. More than $19 million of each of the 2015 bonds had changed hands by mid-afternoon - a figure which continued to swell heading for the close - making First Data one of the most actively traded credits on the day.

L-3 calls several issues

A market source saw L-3 Communications Corp's 5 7/8% notes due 2015 having risen 1¾ points on the day to the 101 level.

That coincided with the New York-based defense contractor's announcement that it plans to redeem its $800 million of 6 1/8% notes due 2013 and 2014 on June 21.

The 5 7/8s were probably the most active issue in the capital structure, firming in busy trading on the prospect that by taking out the bond early, using the proceeds from a recent $800 million offering of 4¾% notes due 2020, L-3 thus cleans up its balance sheet by extending its maturities while lowering its coupon costs.

However, the two 6 1/8% issues were seen little moved, both already trading around the 101 level, having risen earlier in the week when the company brought the bond deal.

The new bonds were meantime quoted by a market source as having firmed slightly to just over par, from prior levels a skosh under par. The issue - carrying a Baa3/BBB-/BBB- investment-grade rating, unlike the company's other bonds, all solid BB rated junk - was seen trading at a spread versus a comparable Treasury issue of 151 bps, narrower than 154 bps on Thursday, although still out from the 138 bps where those bonds priced this past Tuesday.

Ford, GM come off early lows

A trader said that Ford Motor's 7.45% bonds due 2031 started the session at 84 bid, 86 offered, and finished up at 86 bid, 87 offered, which he called up a point or two.

He also saw General Motors' benchmark 8 3/8% bonds due 2033 trading in a 30-32 context most of the day before ending at 32, which he called unchanged, "so they got down to 30, and they're ending at 32."

He said there was "really good volume on GM, it was an active name today."

Another trader said that the GM benchmarks closed down ¼ point on the day at 32 bid, 33 offered, while seeing the Ford long bonds unchanged on the day at 86 bid, 88 offered.

However, a market source at another shop pegged the GM benchmark issue down by more than full point Friday at a shade over 31, while seeing the Ford '31s going out just under 86, calling that up around a point on the day.

CIT moves up

A trader said that CIT Group Inc.'s bonds had recently been on "a wild ride," that extended into "today as well." He said prices on the New York-based commercial lender's bonds were moving around, although "they were not very active today" volume-wise.

He saw the company's 7% notes due 2014 up a point on the day at 92 bid, with its shortest issue, the 7% notes due 2013, about a point better than that, and its longest issue, the 7% notes due 2017 up by ½ point at 89.

He said there was "not a lot of trading in the '13s, there was more trading in the long ones."

Also among the financials, there was a fair amount of activity in Lehman Brothers Holdings' bonds, such as its 5 5/8% notes due 2013, which closed the session 21¼ bid, down slightly on the day.

Bon-Ton steady, Rite Aid retreats

A trader said that Bon-Ton Department Stores Inc.'s 10¼% senior notes due 2014 were steady at around a 97-97 3/8 context, about the level to which the York, Pa.-based retailer 's bonds had fallen on Thursday, when they lost 2 to 2½ points, despite having registered decent fiscal first-quarter results..

"Yesterday [Thursday] everything was down," he opined, "so it didn't matter."

"There were not a lot of trades," he said, adding that "97 was where they hung out most of the day."

On Thursday., Bon-Ton announced that its fiscal first-quarter loss had narrowed on a mix of higher sales and lower costs and it raised its guidance for the year.

It lost $23.5 million, or $1.33 per share, for the period ended May 1, which compared with a loss of $45.4 million, or $2.67 per share, a year earlier. Revenue, mostly from sales, rose 2% to $675.2 million from $662.9 million.

Same-store sales rose 3% in the quarter, while cost of sales fell 1% to $414.3 million and selling, general and administrative expenses fell 4% to $227.9 million.

The retailer guided that it now expects full-year net income between 80 cents and $1.60 per share, up from prior guidance of 30 cents to $1.10 per share. Analysts expect net income of $1.40 per share.

Elsewhere in retail, a trader saw Rite Aid Corp.'s several series of bonds mostly lower, with the Camp Hill, Pa.-based Number-Three U.S. drugstore chain operator's 6 7/8% notes due 2013 at 88 bid and its 6 7/8% bonds due 2028 at 55, both down a point on the day.

The company's 7½% notes due 2017 were down 1¼ points on the day at 89 bid, while its 7.70% paper due 2027 ended down 2½ points on the day at 58½ bid. Rite Aid's 8 5/8% notes due 2015 bucked the trend, rising ½ point to 80 bid.

-Rebecca Melvin contributed to this report

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