MGM Mirage upsizes deal, OSI pulls its recent sale; Rite Aid unfazed by downgrade

By Paul Deckelman and Paul A. Harris

New York, May 8- MGM Mirage priced a quickly shopped, upsized offering of nine-year notes Tuesday, but when the new bonds were freed for secondary dealings they gained little - and in fact, the Las Vegas-based gaming giant's outstanding bonds were seen in retreat.

The primary also saw a small add-on deal for Broadview Networks price.

But far more interesting was the unusual step taken by OSI Restaurant Partners LLC - cancelling the company's offering of new eight-year notes, which had priced but not yet settled.

In the secondary market, apart from the disappointing aftermarket behavior of the new MGM Mirage notes, Movie Gallery Inc.'s bonds were higher, along with its shares, after its biggest investor once again said it would encourage the Dothan, Ala.-based Number-Two U.S. video-rental chain to raise cash and cut debt, possibly through a stock offering.

Rite Aid Corp.'s bonds were seen firmer - since a Standard & Poor's downgrade of its debt came too late in the session to have much impact.

A high yield syndicate official said that the broad market was softer on Tuesday.

The source said that junk was off by about an eighth of a point in the morning, and ended the day flat to slightly down.

Meanwhile, trailing an ultra-quiet Monday session the primary market got rolling on Tuesday as two issuers priced a tranche of dollar-denominated bonds apiece, generating slightly less than $850 million of proceeds.

The star of the show was MGM Mirage, which upsized its single tranche of nine-year bullet paper by 50% to $750 million, and priced that paper in a classic a.m.-to-p.m. drive-by.

MGM Mirage massively upsized

MGM Mirage, Tuesday's big issuer in terms of dollar-amount, priced an upsized $750 million issue of nine-year senior notes (Ba2/BB) at par to yield 7½%, at the wide end of the 7 3/8% to 7½% price talk.

The debt refinancing deal was led by joint bookrunners Citigroup, Banc of America Securities, Deutsche Bank, JP Morgan and RBS Greenwich Capital, and was upsized from $500 million.

An informed source said that the MGM Mirage bond sale went very well, and added that the order book was oversubscribed.

The source also said that the notes traded up in the aftermarket by about half a point, and were wrapped around 100.375 bid, 100.50 offered at the Tuesday close.

"The company was happy and the underwriters were happy," the source concluded. "It was a good deal all around."

Bifurcated market

With an eye on the new MGM Mirage notes, which came at the wide end of price talk, Prospect News suggested to the informed source that although high yield accounts are eager to put cash to work there is perhaps a little more price sensitivity a play presently relative to some of the hot market conditions that prevailed in the recent past.

The official responded by saying that it depends upon the credit.

"It's bifurcated between credits," the source explained.

"It's gotten a bit more sensitive to price and value, but for the right name you will get a massive book, and accounts will take less yield because they really want to own it.

"If it's the wrong name, or one that people aren't feeling as good about, the bid is probably not as deep."

Broadview prices mid-talk

Elsewhere Tuesday Broadview Networks Holdings, Inc. priced a $90 million add-on to its 11 3/8% senior secured notes due Sept. 1, 2012 (B3/B-) at 105.75, in the middle of the 105.50 to 106.00 price talk.

The issue premium resulted in a yield to worst call of 9.698%.

The notes sale generated $95.175 million of proceeds.

Jefferies & Co. was the bookrunner for the merger-funding and general corporate purposes deal.

The calendar builds

New deals were announced during the Tuesday session. However all of them are expected to clear the market before Friday's close.

Constellation Brands, Inc. will host an investor call at 10:30 a.m. ET on Wednesday in order to present its $700 million offering of 10-year senior bullet notes (expected Ba3/confirmed BB-).

Banc of America Securities is the left bookrunner for the debt refinancing. Citigroup is the joint bookrunner.

Constellation Brands is a Fairport, N.Y., producer and marketer of beverage alcohol brands.

Elsewhere VeraSun Energy Corp. commenced a brief roadshow for its $450 million two-part offering of senior notes (B3/B-).

The Brookings, S.D.-based producer of ethanol is offering tranches of seven-year notes and 10-year notes.

Lehman Brothers, Morgan Stanley and UBS Investment Bank are joint bookrunners for the project financing.

Meanwhile from crossover-land, French maritime shipping firm CMA CGM will make presentations in London on Wednesday and in Paris on Thursday for its €370 million offering of five-year senior notes (/BB+/BBB-) via JP Morgan, Barclays Capital and BNP Paribas.

Talking the deals

Deluxe Corp. set price talk for its $200 million offering of eight-year senior notes (confirmed Ba2/existing BB-) at a yield in the 7½% area.

JP Morgan and Wachovia Securities are joint bookrunners for the deal, which is expected to price on Wednesday.

Noranda Aluminum Holding Corp. set talk for its $510 million offering of eight-year senior unsecured floating-rate toggle notes (B3/B-) at six-month Libor plus 400 to 425 basis points.

Merrill Lynch & Co. is leading the deal.

OSI cancels senior notes

Finally, OSI Restaurant Partners, LLC, cancelled its $550 million issue of 9 5/8% senior notes (Caa1/B-) one day before it was to settle because the company did not receive sufficient shareholder approval to proceed with the going-private transaction for which the notes were issued.

Hence all trades in the issue, which was priced on April 26, must be unwound.

Shareholder polling has been extended to May 15.

If approval is given to the LBO the company will return to the market with a bond deal, according to a market source.

Banc of America Securities LLC was the left bookrunner for the deal and Deutsche Bank Securities the joint bookrunner.

New MGM bonds fail to rise

When the new MGM Mirage 7½% notes due 2016 were freed for secondary dealings, they didn't get very far. A trader saw the new issue quoted at 100.125 bid, 100.375 offered, up just a touch from their par issue price.

Another trader saw the new bonds at 100.25 bid, 100.5 offered.

MGM Mirage's existing bonds, meantime, reacted badly to the sudden upsized infusion of new debt. Its 7 5/8% notes due 2017 were seen down 1¾ points to 101.5 bid in active dealings. In fact, a source indicated, the bonds were among the busiest traded issues of the day.

Also in that same busy category were Trump Entertainment Resorts Inc.'s 8½% notes due 2015, which were quoted up 5/8 point in the 99 bid area. The Atlantic City, N.J.-based gaming operator last week reported a narrowed first-quarter loss versus a year ago.

Pinnacle bonds climb

And out of that same gaming sector, Pinnacle Entertainment Inc.'s bonds were up, even though the Las Vegas-based casino company's first-quarter income fell from a year ago; on an adjusted basis, excluding one time items, it came in above analysts' expectations at 22 cents per share - down from 39 cents a year ago, but above the nickel a share Wall Street had been looking for.

That helped to push Pinnacle's 8¼% notes due 2012 up a point to 104.25.

Rite Aid hangs in

Rite Aid Corp. bonds were seen generally better - although that was before the late-session S&P downgrade on the Camp Hill, Pa.-based drugstore chain operator's ratings, which brought its senior unsecured bonds down a notch to CCC+ from B- previously.

That downgrade hit the screens well after 4 p.m. ET, too late to have any practical impact on Tuesday's results.

Before that happened, its 8 5/8% notes due 2015 were seen up ¼ to ½ point at 96.5 bid, while its 7½% notes due 2017 advanced to 99 bid, up nearly a point on the day.

S&P cited the company's upcoming $1.22 billion bond issue which will help finance the purchase of Jean Coutu Group's Eckerd drug stores, noting its "significant debt burden and thin cash flow protection."

Movie Gallery moves

Elsewhere, a potential rights offering proposed by a majority shareholder boosted Movie Gallery's bonds and equity during the trading day.

A market source said the movie rental chain's 11% notes due 2012 traded around 86 earlier in the day, up from the previous day's levels around 85. At another desk, a buysider said he saw a market of 86.25 bid, 87.25 offered.

On the equity side, the stock rose 33 cents, or 9.82%, to $3.69.

Shareholder Schultze Asset Management, a hedge fund that owns almost 15% of the companyıs stock, said in a regulatory filing that it wants to urge the company to improve its value. A rights offering would raise funds, which could then be used to pay off its debt.

However the proposal is not new - Schultze's filing Tuesday was a repeat of an earlier document which also included the rights offering proposal but now reporting a larger equity stake of 14.4% versus13.4% previously.

A trader called the news "interesting," though he was not sure the plan would fix the struggling company's financial plight.

Calls made to the hedge fund Monday were not returned.

In other Movie Gallery news, the company will post its first quarter earnings before a conference call schedule for Friday at 11 a.m. ET.

Stephanie N. Rotondo contributed to this report.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.