Hynix Semiconductor, Rexham deals price; Sea Containers gain on lesser pension obligation

By Paul Deckelman and Paul A. Harris

New York, June 20 - Hynix Semiconductor was heard by participants in both the high yield and emerging markets sectors to have priced an eagerly-awaited offering of 10-year notes on Wednesday. But while there was very strong demand for those bonds on the part of potential investors seeking a part of the deal before it priced - a trader said it had been "massively" oversubscribed - secondary market activity did not come anywhere close to matching that appetite, and the bonds finished below their issue price.

Also in the primary market, Rexam plc, which is buying Owens Illinois Inc.'s plastics packaging division, priced an upsized offering of euro-denominated hybrid securities as part of the financing for that transaction. Deal terms emerged on United Airlines, Inc.'s approximately $200 million of junk-rated pass-through certificates, which moved modestly higher in the aftermarket.

Elsewhere, Thomson Learning was heard to have restructured its upcoming $2 billion-plus offering, while Servicemaster Co. hit the road to start marketing its own mega-deal of eight-year toggle notes. Pre-deal market price talk emerged on upcoming deals for AmeriCredit Corp. and for Swiss packaging firm SIG, while Metals USA slated an offering of floating-rate toggle notes.

In the secondary realm, besides the activity in the new Hynix bonds, market participants saw Sea Containers Ltd.'s bonds continuing to rise, helped by a smaller-than-anticipated hit the troubled company may take in connection with its pension plan.

Trading was active in MGM Mirage bonds, following the announcement by 56% owner Tracinda Corp. that it will not go forward with a recently announced plan to restructure the Las Vegas-based gaming giant and negotiate to purchase two of its prize properties. Out of that same sector, Trump Entertainment Resorts Inc.'s bonds were seen lower in busy trading.

A sell-side source told Prospect News that the broad high yield market was 1/8 to ¼ point weaker on Wednesday.

The primary market, meanwhile, saw two issuers, one from Europe, the other from Asia, price bonds.

And the phenomenal forward calendar continued to build.

Asian investors drive Hynix deal

Wednesday's sole dollar-denominated issue was Hynix Semiconductor's $500 million of 10-year senior unsecured notes (Ba3/BB-/BB) which priced at par to yield 7 7/8%, and which played to a big order book, according to an informed source.

The yield came at the tight end of the 7 7/8% to 8% price talk, which had been lowered from earlier talk of the 8 1/8% area.

Citigroup, Credit Suisse, Goldman Sachs & Co., Korea Development Bank and Merrill Lynch & Co. were joint bookrunners for the debt refinancing deal from the Korean semiconductor company.

The informed source said that there was strong demand from high yield investors as well as emerging markets investors, but added that it was Asian accounts that drove the deal.

Rexam sells hybrids

Elsewhere London-based beverage can manufacturer Rexam priced €750 million of 60-year subordinated hybrid securities (Ba2/BB+) at a 190 basis points spread to mid-swaps on Wednesday.

Price talk was the mid-swaps plus 200 basis points area.

The notes, which priced at an original issue discount of 99.54, have an initial coupon of 6¾% and a yield to maturity of 6.815%.

Barclays Capital and Citigroup were the underwriters for the deal backing the acquisition of OI Plastic Products FTS Inc.

Talking the deals

News surfaced Wednesday on three of the deals that are among those expected to clear before the end of the week.

Shingle Springs Tribal Gaming set price talk for its $450 million offering of eight-year senior notes (B) at 9¼% to 9½%.

Morgan Stanley is leading the deal, which is set to price Thursday.

Elsewhere AmeriCredit set price talk for its $200 million offering of eight-year senior notes (Ba3/B+) at 8¼% to 8½% for an offering that is also expected to price Thursday, via Deutsche Bank Securities and Lehman Brothers.

And Swiss beverage packaging firm SIG set price talk for its €770 million two-part offering of notes.

The company talked €450 million of nine-year senior notes at the 8% area, and its €320 million of 10-year senior subordinated notes at the 9½% area.

Credit Suisse is at the helm for the SIG deal, which is expected to price Friday.

Servicemaster roadshowing $1.15 billion

An already fat forward calendar took on even more heft during the mid-week session, closing the day with more than $14 billion of anticipated dollar-denominated issuance in the market.

Servicemaster started a roadshow for its $1.15 billion offering of eight-year senior toggle notes (Caa1/CCC+) via JP Morgan, Citigroup, Goldman Sachs & Co., Morgan Stanley and Banc of America Securities.

Proceeds will be used to help fund an LBO of the Downers Grove, Ill., provider of home maintenance services.

Elsewhere Houston-based Metals USA Holdings Corp. launched a $300 million offering of seven-year senior floating-rate toggle notes, in a deal being quarterbacked by UBS.

Proceeds will be used to redeem the 2006 holding company notes, pay a cash dividend to stockholders and make a special cash payment to stock option holders.

Hynix falls despite big demand

A trader saw the new Hynix Semiconductor bonds as having been "massively" oversubscribed - he estimated the order book "more than 10 times" oversubscribed at some $6 billion.

However, despite that robust demand for those 7 5/8% bonds due 2017, aftermarket appetite left something to be desired - the trader noted that the new issue "closed a little weaker against a backdrop of weaker Treasuries," which pushed emerging market bonds in general lower.

After the bonds priced at par and actually moved up to 100.5 bid in initial secondary trading, they dropped back from those peaks, he said, to finish at 99.625 bid, 99.75 offered.

A second trader saw those bonds - which traded off both emerging market desks and at conventional high yield shops - as having moved up to offered levels around 100.75 "right out of the box". But while they "tried to come higher, it didn't work out," and the bonds began to fall back - first to bid levels at 100.25, and then, to around 99.25 bid, par offered. The trader saw the bonds trade into a 99.5 bid and said they were left at 99.25 bid, 99.625 offered.

The first trader said that "a combination of factors" undermined the bonds once they began trading around, particularly the "weak tone" in Treasuries. "We did see some selling pressure on the backdrop of Treasuries and [lower] equities."

New UAL certificates slightly higher

United Airlines' new junk-rated pass-through certificates were trying to move upward following their pricing, and meeting with mixed success.

A trader saw the Chicago-based Number-Two U.S. air carrier's B1/B floating-rate certificates due 2014 at one point get as good as 100.5 bid, 100.75 offered, before coming off that peak level to end little changed from their par issue price at par bid, 100.375 offered.

But the company's 7.336% Ba2/BB certificates due 2019 at one point moved up to 101.25 bid, 101.75 offered from the par issue price. But they ended the day down from those peak levels, going home at 100.75 bid, 101.75 offered.

Sea Containers up on lesser pension bite

Back among the established issues, traders saw the suddenly revived bonds of Sea Containers continuing to cruise higher Wednesday, despite a ruling earlier in the week from British pension regulators ordering the bankrupt Bermuda-based maritime and railroad transportation operator to pay about £100 million to cover shortfalls in two pension plans covering the employees of its U.K. subsidiary, Sea Containers Services.

A trader said that even though that is a hefty chunk of cash, the pension liability is actually considerably less than originally feared - about $175 million versus the $240 million worst-case scenario that was being projected.

With that less onerous than it could have been ruling out of the way, the bonds have been going up, and rose again Wednesday. The trader saw Sea Containers' 10¾% notes that were to have come due last year up 3 points on the day at 98 bid, 99 offered.

Another trader saw those bonds at 98.5 bid, 99.5 offered, which he called up 1½ points, and said that the company's other two issues had firmed by about that same amount - the 7 7/8% notes due 2008 to 94 bid, 95 offered and the 10½% notes due 2012 at 97 bid, 98 offered.

MGM bounces around on Tracinda news

The news that billionaire investor Kirk Kerkorian will not be proceeding with previously announced plans to restructure MGM Mirage, including negotiating to buy its crown jewel, Las Vegas' glitzy Bellagio resort, was seen by a source as having pushed the company's 7 5/8% notes due 2017 down nearly 3 points to just above 97, in very busy trading.

However, at another desk, a source saw MGM Mirage's 6 5/8% notes due 2015 up ½ point at 94 bid. Another trader saw the company's 7½% notes due 2016 move up about a point to 96.5 bid, 97 offered, while still another saw its 8 3.8% notes due 2011 a point ahead at 104 bid, 105 offered.

The tycoon's Tracinda holding company, which currently owns 56% of MGM Mirage, was also going to negotiate for another property, its City Center project, a $7.4 billion casino complex going up on the famed Las Vegas Strip.

MGM Mirage separately announced plans Wednesday to build yet another multi-billion dollar resort on the Strip, teaming up with global casino operator Kerzner International for the project.

Out of that same sector, Trump Entertainment Resorts' 8½% notes due 2011 were seen down a point at 101.5 offered. Those bonds have come down about 2 points from recent peak levels reached on renewed buyout buzz about the Atlantic City, N.J. based gaming operator.

Realogy, Claire's paper languishing

Realogy Corp.'s recent new issue - a 12 3/8% notes due 2015 with $875 million in principal - is already trading down at 91.75 bid, 92.75 offered, a trader said of the two-month old issue.

"People are wondering if this is a sign of more stressful times," he said, commenting on how several new issues of late have dipped well below par.

Among the poor performers is Claire's Stores Inc., which released earnings Tuesday, an event that may have accounted for at least part of the dip in its new issues.

A trader said the 9 5/8% toggle notes due 2015 have fallen to 94.5 since being issued less than a month ago. Other issues have also dropped, including the 10½% notes due 2017, which are trading at 92 bid, 92.5 offered.

"Nice," he said dryly.

The costume jewelry and accessories chain posted a 3% decline in profit for the first quarter at $28.8 million, compared to $29.7 million for the same quarter the previous year. Sales, however, increased 9.2% to $340.6 million, with consolidated comparable store sales gaining 1.3%.

The trader, however, was not impressed with the figures.

"1.3%? Big deal!" he said.

Stephanie N. Rotondo contributed to this report

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