Hertz drive-by, Dana two-parter lead nearly $2 billion primary; new deals move up; OPTI busy

By Paul Deckelman and Paul A. Harris

New York, Jan. 25 - Car rental giant Hertz Corp. drove by the junk market Tuesday, going away with a trunk load full of fresh cash after pricing an upsized $500 million eight-year deal.

Auto systems maker Dana Holding Corp. also stropped by, pricing an upsized $750 million two-part offering just a day after that transaction was announced.

Both of those quickly shopped deals were seen by traders to have firmed when they hit the secondary, Dana more so than Hertz.

Also seen pricing and then doing well in the aftermarket - each up more than 2 points from issue - were scheduled forward calendar deals from Packaging Dynamics Corp. ($425 million) and from Great Lakes Dredge & Dock Corp. ($250 million). The latter was the day's only pricing that was not upsized from its original amount.

High-yield syndicate sources meantime saw the calendar swell with new-deal announcements from Axcan Intermediate Holdings Inc., Krayton Polymers, Inc., SM Energy Co. and Westmoreland Coal Co.

Away from the new-deal sphere, traders did not see very much going on, although one recently familiar name continued to trade busily, and at lower levels - OPTI Canada, Inc.

Paper names meantime continued to firm a day after the news of a big merger between cardboard packaging and container makers Rock-Tenn Co. and Smurfit-Stone Container Corp.

Traders said junk followed the bearish lead of equities initially before firming later on in the session, pushing most statistical measures higher.

Dana prices two tranches

The Tuesday primary market session saw four issuers raise a combined $1.925 billion by pricing five tranches of dollar-denominated high-yield notes.

Once again, executions appeared tight.

Dana Holding priced an upsized $750 million of senior notes (B3/BB-) in two tranches.

The Toledo, Ohio-based automotive components and systems company priced a $400 million tranche of notes at par to yield 6½%. The yield printed at the tight end of the 6 5/8% area price talk.

Dana also priced a $350 million tranche of 10-year notes at par to yield 6¾%. The yield on the 10-year notes also came at the tight end of the 6 7/8% area price talk.

Citigroup Global Markets Inc., Wells Fargo Securities LLC, Bank of America Merrill Lynch, Barclays Capital Inc., ING Financial Markets LLC, Deutsche Bank Securities Inc. and UBS Securities LLC were the joint bookrunners for the quick-to-market issue, which was upsized from $700 million.

The company plans to use the proceeds to repay its term loan facility.

Cash on the balance sheet was also to be applied to the bank debt repayment. With Tuesday's $50 million upsizing of the bonds, the company will apply less of that cash to the refinancing, according to an informed source who added that the bond deal went very well.

Hertz sees big upsizing

Meanwhile Hertz priced an upsized $500 million issue of 8.25-year senior notes (B2/B-) at par to yield 6¾%.

The yield printed on top of the price talk.

Barclays Capital, Bank of America Merrill Lynch, Citigroup, Credit Agricole CIB, Deutsche Bank Securities Inc., J.P. Morgan Securities LLC and Wells Fargo Securities were the joint bookrunners for the quick-to-market issue, which was upsized from $300 million.

Proceeds, including the additional proceeds from the upsizing, will be used to redeem a portion of the company's 8 7/8% senior notes due 2014.

The deal went very well, playing to an order book that was 3.5-times oversubscribed, an informed source said.

Hertz's new 6¾% notes due April 2019 represent the tightest yield printed by a B2/B- issuer in almost five years, the source asserted, pointing to Radio One Inc.'s $200 million issue of eight-year senior subordinated notes (B2/B-), which priced at par to yield 6 3/8% in February 2005.

Packaging Dynamics - Fighting for bonds

Elsewhere, Packaging Dynamics priced an upsized $425 million issue of five-year senior secured notes (B3/B) at par to yield 8¾%.

The deal priced on top of downwardly revised price talk; initial talk was 9% area.

Goldman Sachs & Co. was the left lead bookrunner for the issue, which was upsized from $400 million. Deutsche Bank Securities was the joint bookrunner.

The Chicago-based flexible packaging company will use the proceeds to repay its notes maturing in 2016 and its credit facility and to pay a dividend.

"They could have doubled that size of that deal and still filled the order book," a high-yield mutual fund manager contended, adding that when talk went down to 8¾% from 9% area, people were hoping to see the crowd thin out a little, which never really happened.

Great Lakes, through talk

Finally, Great Lakes Dredge & Dock priced a $250 million issue of eight-year senior notes (B3/B) at par to yield 7 3/8%.

The yield printed 12.5 basis points through the 7 5/8% area price talk.

Deutsche Bank Securities and Bank of America Merrill Lynch were the joint bookrunners.

Proceeds will be used to repay the company's 7¾% senior subordinated notes due in December 2013 and for general corporate purposes, which may include acquisitions.

The par-pricing deal was seen trading at 101¾ bid, according to a buy-side source.

Athens-based Excel Maritime Carriers Ltd. was also expected to price its $250 million offering of eight-year senior notes (Caa1/B-/) on Tuesday. However no terms were available at press time.

The deal was talked with a 9½% yield on Monday, market sources said.

That news may have been overtaken by events, however, sources said Tuesday night, adding that the deal is expected to be downsized and price talk has widened by as much as 100 bps.

SM Energy starts roadshow

The calendar of deals on the road continued to build on Tuesday.

SM Energy began marketing a $250 million offering of eight-year senior notes (/BB/).

The deal is set to price early in the week ahead.

Bank of America Merrill Lynch and Wells Fargo Securities are the joint bookrunners.

Proceeds will be used to repay bank debt, to fund capital expenditures and for general corporate purposes.

Axcan's $225 million

Meanwhile Axcan began a roadshow for a $225 million offering of seven-year senior secured notes (/BB/), which are expected to price late in the week ahead.

Bank of America Merrill Lynch, Barclays Capital, RBC Capital Markets and HSBC are the joint bookrunners.

Proceeds, together with cash on hand, as well as proceeds from an equity contribution and a term loan, will be used to finance the acquisition of Eurand NV and to pay off some debt of Axcan and Eurand.

Westmoreland's seven-year deal

Finally, an investor roadshow is underway for Westmoreland Coal's $150 million offering of seven-year senior secured notes (Caa2/CCC) via bookrunner Gleacher & Co.

The Colorado Springs-based coal producer expects to use the proceeds to pay all accrued and unpaid dividends on its series A preferred stock, to repay some debt, to retire about $2.7 million of the outstanding principal owed on its senior secured convertible notes (with the remaining principal balance to be converted to common stock at closing) and for general corporate purposes.

New Hertz bonds head higher

When they were freed for secondary dealings, Hertz's new eight-year bonds moved up a little after a slowish kind of a start.

A trader said that "all the news seems to be Hertz," trading between 100¼ and 1001/2, although he later saw the bonds having risen to 100 5/8 versus the bonds' par issue price.

He said that the Park Ridge, N.J.-based vehicle-rental company, a well-known junk market name, was probably the most active of the day's new deals.

A second trader saw the quickly marketed bonds trade up to 100½ bid, leaving them in a 100 3/8-to-100¾ context.

At another desk, a trader pointed out that the Hertz deal had been upsized by 40% from its original size - $300 million becoming $500 million - so "people got a little bit more of their allocations than they expected, so it's going pretty well." He saw the bonds initially trade between par and 1003/4, although he saw that retreat to 100¼ to 100½ "on some size."

Later on in the afternoon, yet another trader estimated the Hertz bonds at 100½ bid, 101 offered.

Packaging Dynamics pops

A trader saw Packaging Dynamics' upsized issue of five-year senior secured notes get as good as 103 bid, well up from their par issue price, although he said that the Chicago-based flexible packaging materials company's new deal "traded down a little bit" after that peak and were left at 102½ bid, 103 offered.

A second trader saw the bonds at 102½ bid, 103½ offered.

Great break for Great Lakes

A trader saw Great Lakes Dredge & Dock's new eight-year bonds at 101¾ bid, 102¼ offered, versus their par issue price earlier in the day. Later on, he saw the Oak Brook, Ill.-based dredging and demolition services provider's tranche having firmed to bid levels between 102 and 1021/4.

A second trader had them at 101¾ bid, 102¼ offered.

Swissport sizzles

Among the bonds that were priced on Monday, a trader said that Swissport International Ltd.'s new dollar-denominated 7 7/8% senior secured notes due 2018 got as good as 102¼ bid, 103¼ offered in morning trading.

That was up from the 101¼ bid, 102¼ offered level to which that $425 million of bonds - issued by the Zurich-based aviation ground services provider's Aquila 3 SA unit - had risen to after pricing earlier Monday at par, along with a mirror tranche of Swiss franc-denominated notes.

DirectBuy fizzles

But the trader said that Monday's other deal - DirectBuy's $335 million offering of 12% senior secured second-lien notes due 2017 - "was struggling a little bit."

The Merrillville, Ind.-based members-only showroom and home design center had priced those bonds - upsized from the originally shopped $325 million - on Monday at 97 to yield 12.721%, and they had been seen in Monday's aftermarket dealings anchored around their issue price.

But on Tuesday, the trader said he had heard from others in the market that the new bonds "might be as low" as a 95-to-95¾ context, but he stressed that he himself had not seen that.

Two other traders, meantime, said on Tuesday that they had not seen any dealings in the new DirectBuy issue.

Recent Grifols grinds higher

Going back a little farther, a trader saw Grifols SA's 8¼% notes due 2018 "trading well" at 103 7/8 bid, 104 offered.

The bonds had gradually edged their way up to that level since the Spanish health-care company priced its $1.1 billion offering at par on Jan. 12.

That deal finally got done after having been on primaryside players' radar screens for many months, ever since the mid-year announcement that Grifols would acquire U.S. biopharmaceutical company Talecris Biotherapeutics Holdings Corp.

Secondary indicators firm

Apart from the new-deal universe, a trader saw the CDX North American Series 15 HY index unchanged on Tuesday, ending at 103 7/8 bid, 104 1/8 offered after having gained 3/16 point on Monday.

The KDP High Yield Daily index meantime rose by 8 basis points Tuesday to finish at 75.15 after having gained 10 bps on Monday. Its yield tightened by 11 bps to 7.04% after having risen by 5 bps on Monday.

The Merrill Lynch High Yield Master II index continued to push higher on Tuesday, gaining 0.147%, versus the 0.158% advance on Monday.

As of Tuesday's close, that left the index's year-to-date return at 1.831% - the latest new peak level for 2011, up from Monday's year-to-date return of 1.681%, the index's previous zenith.

Advancing issues led decliners for a third consecutive session on Tuesday, widening their advantage to seven to six from the mere couple of dozen issues out of the more than 1,400 traded that had separated the two groups on Monday.

Overall activity, represented by dollar-volume levels, rose by 27% on Tuesday after having fallen by 20% on Monday from the previous session's level.

A trader said that the primary market was the major impetus on the secondary side, with most traders tied up with the new deals.

He said that overall, junk "followed equities a little bit. It was kind of mushy early in the day. Then as equities did better later on," - the bellwether Dow Jones Industrial Average recovered from a big early slide to end the day only nominally lower - "junk got a little firmer tone to it."

OPTI Canada actively lower

Among specific names, a trader said that OPTI Canada's bonds were among the most active junk issues trading on Tuesday, seeing the Calgary, Alta.-based oil-sands company's paper down at least a point or more from the levels seen on Monday.

He saw its 7 7/8% notes due 2014 trading at 63¾ bid, and its 8¼% notes due 2014 at 64 bid, down from the levels in the 65-to-66 area at which those bonds had traded on Monday.

He saw over $30 million of the 7 7/8s changing hands and some $25 million of the 81/4s, putting both right near the top of Junkbondland's most-actives list.

Another market source quoted the 81/4s at 64 1/8, down 1 3/16 from Monday's levels, while the 7 7/8s lost 1 3/8 point to end at 63¾ bid.

There was no fresh news out about the company, which is 35% owner (Nexen Inc. has the other 65%) of a so-far problem-plagued oil-shale bitumen extraction and conversion facility at Long Lake, Alta.

A trader floated the theory that investors were "posturing" ahead of earnings season for the oil-sands producers, which begins Thursday with results from OPTI rival Canadian Oil Sands Ltd.

Kodak gets clocked

A market source saw Eastman Kodak Co.'s bonds get pushed down, along with the Rochester, N.Y.-based photography products company's New York Stock Exchange-traded shares, after a federal trade body issued a negative preliminary ruling on Kodak's patent-infringement suit against several smartphone makers.

He saw Kodak's 7% notes due 2017 drop to under 97 bid from Monday's closing level north of 104 bid, although the bonds did come a little off their lows to end at 97½ bid on round-lot trading of more than $8 million.

He meantime saw the company's 7¼% notes due 2013 drop to 97½ bid, down more than a point on the session, although only about $2 million of the bonds traded in size.

A second source quoted the latter bonds down over 2 points on the day at 963/4.

Kodak's shares meantime plunged 70 cents, or 13.41%, to end at $4.52 on volume of 32 million shares, more than five times the norm.

The bonds and shares fell in the wake of Kodak's announcement late Monday that the U.S. International Trade Commission had issued a preliminary ruling in Kodak's suit against Apple Inc. and Research In Motion Ltd. denying the validity of the camera company's claim that Apple's iPhone and Research In Motion's Blackberry had violated Kodak's patent for previewing images "in a digital camera-enabled device."

The ruling by the ITC's administrative law judge is not final because the full ITC must rule upon the action - a ruling that won't come for several months.

In the meantime, Kodak noted that it was able to previously prevail in similar suits brought against smartphone makers Samsung and LG Electronics.

First Data firms up

First Data Corp.'s bonds were seen having traded up despite a lack of fresh specific news about the Atlanta-based credit-card transaction processor.

A trader pegged its 11¼% notes due 2016 as high as 92¾ bid - up solidly from Monday's levels around 90 bid, 90¾ offered and well up from last week's levels in the high 80s, "so they've moved up quite a bit," although he didn't know why.

Another market source quoted the bonds up a deuce on the day at 92¾ bid.

Paper pops again

A market source saw Catalyst Paper Corp.'s 7 3/8% notes due 2014 at 86 bid, up 2¼ points on the session.

The Richmond, B.C.-based paper manufacturing company's bonds, and those of other sector peers such as NewPage Corp., pushed up solidly for a second straight session, helped by Monday's news that Rock-Tenn Co. will acquire Smurfit-Stone Container Corp. in a $5 billion deal, including debt and pension assumption, that will create a paper packaging industry powerhouse.

Miamisburg, Ohio-based NewPage's 10% notes due 2012 improved by 1½ points to around 65.

Auto bonds in the fast lane

A trader saw Ford Motor Co.'s 7.45% bonds due 2031 up by 1 point on Tuesday, trading at 108¼ bid, 109¼ offered, presumably cruising higher for a second consecutive session on the Dearborn, Mich.-based carmaker's reported $1.14 billion sale of auto loan-backed debt.

Coming along for the upside ride were Motors Liquidation Co.'s benchmark 8 3/8% bonds due 2033 - issued when the company was still called General Motors Corp., before its 2009 bankruptcy reorganization - with a trader seeing those "old GM" bonds up ¾ point at 36¼ bid, 36¾ offered.

Stephanie N. Rotondo contributed to this report

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