Downsized Windstream, upsized Griffon, MEG Energy price; market awaits CDW megadeal

By Paul Deckelman and Paul A. Harris

New York, Mar. 14 - Windstream Corp., fresh off a recent junk bond deal, came back to the market on Monday to price another offering with plans to use the combined proceeds from the two deals to help take out another existing series of bonds. The telecom company's downsized $450 million drive-by 10-year deal came to market too late for aftermarket activity.

Also pricing was an upsized $550 million forward-calendar deal from diversified industrial products manufacturer Griffon Corp., which also appeared too late in the session for any trading around.

Canadian oil sands operator MEG Energy Corp. meantime priced a solidly upsized 10-year Canadian dollar-denominated bond offering.

For a time, it looked like technology products distributor CDW Corp. might price a quickly shopped billion-dollar offering on Monday. Although price talk on the issue finally surfaced, syndicate sources were seeing the megadeal likely as Tuesday's business.

Talk also emerged on supply chain management company Park-Ohio Industries, Inc.'s $250 million subordinated calendar deal, which could also price following its books closing on Tuesday.

Defense contractor ADS Tactical, Inc. was heard to have enlisted with a $275 million offering slated to price later in the week.

And Japanese telecom operator eAccess Ltd. said that it would continue its previously announced benchmark-sized dollar- and euro-denominated deal, even amid the disruption to Japan's economy from last week's massive earthquake and tsunami.

Recent new deals, like Friday's Sterigenics International, Inc., LBI Media, Inc. and Clayton Williams Energy, Inc. transactions, stayed around their initial aftermarket levels.

Away from the new deals, activity was quiet, with statistical performance indicators mixed.

MEG Energy massively upsized

With a trio of issuers each bringing a single tranche to raise $1.75 billion, the March 14 week got off to a purposeful start in the primary market.

MEG Energy priced a massively upsized $750 million issue of 10-year senior notes (B3/BB) at par to yield 6½% on Monday, according to an informed source.

The yield printed at the tight end of the 6½% to 6¾% price talk.

Barclays, Credit Suisse, BMO and Morgan Stanley & Co. were the joint bookrunners for the deal, which was upsized from $500 million.

Timing was moved ahead on the deal, which was initially expected to price after the roadshow concluded on Wednesday.

However, the company, which is expected to eventually garner investment-grade credit ratings, will finish the roadshow despite having priced its deal on Monday due to this possibly being the last time to see the credit as a high-yield issuer for many accounts, the source said.

Despite that investment-grade potential, Monday's oversubscribed deal played mostly to high-yield accounts, the informed source commented.

The Calgary, Alta.-based oil sands development company plans to use the proceeds, along with proceeds from a concurrent $500 million revolver and a $1 billion term loan B, to refinance its existing term loans and for general corporate purposes. Proceeds from the $250 million upsizing will be used for general corporate purposes, including project financing.

Griffon at the tight end

Meanwhile, Griffon priced an upsized $550 million issue of seven-year senior notes (Ba3/BB-) at par to yield 7 1/8%, at the tight end of the 7¼% area price talk.

Deutsche Bank Securities Inc. ran the books for the issue, which was upsized from $500 million.

The company plans to use the proceeds to repay debt and for general corporate purposes.

Windstream returns, downsizes

Less than two weeks after tapping the high-yield bond market for $600 million, Windstream returned on Monday to price a downsized $450 million issue of 7¾% 10.5-year notes (Ba3/B+) at 99.116 to yield 7 7/8%.

The yield printed at the wide end of price talk, which had been set in the 7¾% area.

J.P. Morgan Securities LLC, Barclays Capital, Bank of America Merrill Lynch, Deutsche Bank Securities and Goldman Sachs were the joint bookrunners for the quick-to-market issue, which was downsized from $500 million.

Proceeds, together with proceeds from its previous $600 million issue of 7½% senior notes due 2023 and borrowings under its revolver or cash on hand, will be used to fund the tender for the total outstanding amount of 8 5/8% senior notes due 2016.

The above-mentioned 7½% notes were priced at par on March 2.

CDW price talk

CDW Escrow Corp. talked its $1.065 billion offering of eight-year senior notes (expected ratings Caa1/CCC+) with a yield in the 8½% area on Monday, according to a market source.

The deal is expected to price on Tuesday.

J.P. Morgan Securities LLC, Barclays Capital, Bank of America Merrill Lynch, Deutsche Bank Securities and Morgan Stanley are the joint bookrunners for the quick-to-market deal.

The company plans to use the proceeds to fund the tender offers for its 11% notes due 2015 and its 11½% PIK toggle notes due 2015.

eAccess going forward

In the face of the catastrophic earthquake and tsunami damage sustained by its country, Japan's eAccess intends to go forward with its planned sale of dollar-denominated and euro-denominated seven-year senior notes, an informed source said on Monday.

Although the Tokyo-headquartered telecommunications company did sustain some damages, they were relatively light, the source added.

The deal is roadshowing on the East Coast of the United States during the early part of the present week, after which the roadshow moves to Europe.

The deal size and tranche sizes remain to be determined.

UBS Investment Bank is the lead left bookrunner for the Rule 144A and Regulation S for life deal. ING and Credit Agricole CIB are the joint bookrunners.

Proceeds, together with borrowings under the company's new senior secured credit facility, will be used to repay and terminate the company's old credit facilities.

The proceeds are to be escrowed pending funding under the new credit facility, which is expected on March 31.

ADS shops $275 million

The Monday session turned up news of one roadshow start.

ADS Tactical plans to price a $275 million offering of seven-year senior secured notes (B3/B) late in the present week, according to a market source.

J.P. Morgan Securities LLC is leading the offer.

The notes come with four years of call protection. However, a special call provision allows the issuer to redeem 10% of the notes annually at 103 during the non-call period.

The Virginia Beach-based provider of military equipment plans to use the proceeds to repay debt and fund a dividend.

Windstream, Griffon no-shows

The new offerings from Windstream and Griffon priced too late in the session for any kind of real secondary activity, market sources said.

However, Little Rock, Ark.-based Windstream's existing 7 7/8% notes due 2017 were seen having lost 7/8 point to end at 107½ bid. Volume in the issue was over $10 million, making it one of the busier issues in Junkbondland on Monday.

Sterigenics near Friday level

Among recently priced issues, Sterigenics International's 8% notes due 2018 were seen holding above the 103 level to which the Oak Brook, Ill.-based contract sterilization and ionization services provider's $475 million deal had moved on Friday after pricing at par. The notes were brought to market via its STHI Holding Corp. unit.

As was the case on Friday, traders opined that that they believed the reason the bonds had shot up so strongly right out of the gate is that they were likely priced too low to begin with.

One who quoted the bonds at 103¼ bid, 103 5/8 offered said that with the bonds trading up at a premium instantly, "for every $1 million of bonds, that's $35,000. Multiply that by 475. The company left $16.5 million on the table," a sum he said "isn't chump change."

He said that that might raise some questions among investors, such as, "Do I really want to be owning this company long term if the underwriters can price something 3½ points cheaper, and the company leaves that amount of money on the table? What other type of judgments are the management going to be making?

"They didn't just price it cheap - they gave it away," he added.

He suggested that instead of pricing to yield 8%, which at the current trading price works out to a 7¼% yield, "could they have gotten the deal done at 7¼% [in the first place]? Who knows? Or at 7.5%? Pretty sure."

Another trader, who said the bonds "held onto all their gains," trading in a 1031/4-103½ context, agreed with the emerging trader consensus, but took a more philosophical stance on it than the first trader.

"Yeah, it happens every now and again," he said. But the alternative, he said, was "if you try and get super cute" in terms of pricing the issue with a considerably lower yield, "you might not get the deal done, and then the company is really in a bad spot."

So the way things worked out, he said, "they probably needed to" give the deal a somewhat fatter coupon, but added, "I'm sure the company, a first-time issuer, is happy to get it done as well."

LBI Media holds most gains

Another Friday deal seen hanging onto the gains it had notched in the initial aftermarket was Burbank, Cal.-based Spanish-language broadcaster LBI Media. Its $220 million of 9¼% first-lien senior secured notes due 2019 - downsized from the original $240 million - had priced at 98.594 to yield 9½% and then went home on Friday around 100½ bid, 101½ offered.

On Monday, a trader said, the bonds were trading at 100 5/8 bid, 101¼ offered.

Another trader pegged them at 100¾ bid, 101¼ offered and, while calling that a decent move, said that "it was not 31/2" - a clear reference to the Sterigenics deal.

Clayton Williams holds

A trader saw the new 7¾% notes due 2019 priced on Friday by Midland, Tex.-based oil and gas exploration and production operator Clayton Williams Energy offered at 100¼ with "no left side" versus the $300 million deal's par issue price and its Friday aftermarket level around par bid, 100½ offered.

"So that one went nowhere - and is still going nowhere."

A second trader saw a two-sided market in the name, at 100 bid, 100¼ offered.

Hooters flies a little lower

A trader said that the 11¼% senior secured notes due 2017 priced last week by HOA Restaurant Group, LLC and HOA Finance Corp. - the issuing entities for parent Hooters Restaurants - "actually cheapened up a little today," quoting them at 101 bid, 101½ offered, calling that down ½ to ¾ of a point.

The Atlanta-based restaurant chain operator's $180 million deal, upsized from the originally shopped $165 million, had priced last Thursday at par, proceeded to very quickly move up to 101¼ bid, 102¼ and then firmed further on Friday to around 101¾ bid, 102 offered.

Kodak stays below issue

A trader said the new Eastman Kodak Co. deal "hasn't traded that well," seeing it "straddling" 98 versus the 98.686 price at which the Rochester, N.Y.-based photographic and imaging products giant had priced its upsized $250 million of 10 5/8% senior secured notes due 2019 on Thursday to yield 10 7/8%.

The bonds struggled from the get-go, reaching levels down into the 97ish area on Friday, and on Monday, the trader said, "Its traded off a little."

Secondary signs still mixed

Away from the new deal world, a market source saw the CDX North American Series 15 HY index off by ¼ of a point on Monday to end at 102 15/16 bid, 103 1/16 offered, after having gained that same ¼ of a point on Friday.

The KDP High Yield Daily index meantime plunged by 17 basis points on Monday to a close of 75.68, after having risen by 1 bp on Friday. Its yield was 6 bps higher, at 6.72%, after having been unchanged on Friday.

But the Merrill Lynch High Yield Master II index rose by 0.024% on Monday, after having fallen for a second session in a row on Friday by 0.082%. That lifted its year-to-date return to 3.507% on Monday, up from Friday's 3.482%, although it was still down from the 2011 peak level of 3.73% set last Wednesday.

Advancing issues trailed decliners Monday for a third straight session, with the margin of difference widening to about seven to five from the couple dozen issues out of the more than 1,200 traded, which had separated the losers from the winners on Friday.

Overall market activity, as measured by dollar-volume levels, fell by 23% on Monday on top of the 31% slide seen on Friday from the previous session's activity level.

A trader said there was "not a whole heck of a lot of excitement today."

"It seemed like it was a very slow start this morning - there was almost no volume on Trace through three cups of coffee. It was like nothing was really hitting the screen. I don't know if people were just trying to digest what's going on in Japan," where the death toll, now in the thousands, and the damage estimates, now in the billions, continued to mount following last week's huge earthquake and tsunami disaster.

Later on in the day, he said that volume did pick up in the second half, "but it's not any one or two huge movers - it's just kind of spread across the board, with thin trading everywhere.

"You could say instead of 'March Madness' " - a reference to the ongoing college basketball championships that remain a major distraction to the financial markets - "it's March sadness."

A second characterized the market as "a tiny bit softer and clearly not the volume leader for 2011, that's for sure."

He added that there was "not a ton" of things trading.

Sprint strengthens again

Among specific issues, he did see Sprint Nextel Corp.'s paper continuing to firm, apparently still riding the momentum from last week's rise, which had been purred by news reports that the Overland Park, Kan.-based No. 3 wireless carrier had been holding discussions with Deutsche Telecom, the parent of No. 4 U.S. cellular operator T-Mobile, on a possible combination of the two second-tier wireless companies aimed at creating a more formidable combined competitor for the industry's two biggest players, AT& T Corp. and Verizon Wireless.

He said that Sprint's bonds, which had firmed about 4 or 5 points initially last week on speculation of such a deal, were up about ½ of a point or so. He quoted Sprint's 8¾% notes due 2032 at 111 bid, up ¾ of a point on the day.

At another desk, a market source saw those bonds at 111 1/8, calling them up 7/8 point on the session.

And another source saw the Sprint volume leader - its 8 3/8% notes due 2017 - gain a point to end at 116 bid on volume of $8 million. Sprint Capital Corp.'s 6.9% notes due 2019 also traded around $8 million, up 1½ points on a round-lot basis to 106 bid, while the parent's 6% notes due 2016 were a half-point better at 104, with $4 million traded in round lots and "page upon page" of smallish odd-lot deals recorded on the Trace system.

Autos trade off

A trader said that the 8 3/8% benchmark bonds due 2033 of Motors Liquidation Co. - the former General Motors Corp. following its 2009 bankruptcy reorganization - fell below the 30 bid level for the first time in nearly a month, slipping to 29 7/8 bid, 30 5/8 offered, off 1/8 of a point. The bonds have gradually come down in recent days from their prior levels in the middle-30s.

A second trader pegged the bonds at 29 bid, down 1 point on the day.

There was no fresh news out on either the company, which is responsible for the pre-bankruptcy GM's bonds and other liabilities and winding down its unwanted assets, or on the "new GM."

The first trader also saw GM domestic arch-rival Ford Motor Co.'s 7.45% bonds due 2031 down ¼ of a point at 107½ bid, 108¼ offered.

Stephanie N. Rotondo contributed to this report

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