Ford Credit, upsized Kraton, add-ons pace busy primary; OPTI Canada carnage continues

By Paul Deckelman and Paul A. Harris

New York, Feb. 2 - In the popular movie "Groundhog Day," a surly TV weatherman inexplicably finds himself trapped in a time warp, seemingly doomed to repeat Feb. 2, day after day after day. But some junk marketeers might not mind repeating Wednesday - perhaps not endlessly like the film's anti-hero protagonist, but maybe at least once or twice.

An energetic primary market saw a quickly shopped - and well received - benchmark 10-year offering Wednesday from familiar Junkbondland name Ford Motor Credit Co. LLC. Traders said investors got their allocations of the new bonds, and the paper traded well in the aftermarket.

The traders also saw good aftermarket action in chemical manufacturer Kraton Performance Polymers Inc.'s offering of eight-year notes, which was upsized before pricing and which firmed by at least 2 points after the bonds came to market.

Taking advantage of the favorable new-issuance climate, there was also a pair of opportunistic add-ons to existing bonds, from casino operator Peninsula Gaming, LLC and from geothermal energy provider Ormat Technologies, Inc.

A pair of new deals popped up on the forward calendar - $300 million of five-year bonds from Yankee Candle Co. Inc. and a $1 billion secured offering from telecommunications technology producer Avaya Inc.

High yield syndicate sources meantime heard price talk on deals from another high-tech manufacturer, CPI International Acquisition, Inc., and from homebuilder Hovnanian Enterprises, Inc.

While all of that was going on in the primary, traders said the secondary market was generally firm, with recently priced new issues like MedImpact Holdings Inc. holding on to their initial trading gains, while most statistical performance measures recorded advances.

However, OPTI Canada Inc.'s beleaguered bondholders are probably feeling like Bill Murray's fictional TV weatherman right about now - trapped in their own time warp, as the Canadian energy company's bonds keep getting hammered down by multiple points, day after day, and once again during Wednesday's session.

Ford $1.25 billion yields 5¾%

Wintry weather in the Northeastern United States failed to stanch primary market activity on Wednesday. However the emphasis appeared to be on drive-by deals, a fact that market sources chalked up, in part, to the snow and ice which hit New England overnight Tuesday and into Wednesday.

The new issue market saw three junk-rated issuers raise $1.584 billion - all in quick-to-market deals.

Ford Motor Credit priced a $1.25 billion issue of 10-year senior notes (Ba2/BB-) at par to yield 5¾%.

The deal, which was priced on the investment-grade syndicate desks, launched with the final size at 5¾% earlier in the session.

Bank of America Merrill Lynch, Deutsche Bank Securities, J.P. Morgan Securities LLC and Morgan Stanley were the joint bookrunners.

Proceeds will be added to general funds for the purchase of receivables, to make loans and for debt retirement.

The deal played to an order book approaching $6 billion in size, according to a trader from a high-yield mutual fund.

Kraton upsizes

Meanwhile Kraton Polymers LLC and Kraton Polymers Capital Corp. priced an upsized $250 million issue of eight-year senior notes (B2/B+) at par to yield 6¾%, at the tight end of the 6 7/8% area price talk.

The amount was increased from $200 million.

Bank of America Merrill Lynch, Credit Suisse, Goldman Sachs & Co., Morgan Stanley and Macquarie Capital were the joint bookrunners for the quick-to-market issue.

Proceeds, together with fund from the company's $200 million term loan A and available cash, will be used to refinance debt.

Peninsula Gaming taps 8 3/8s

Bringing their second add-on deal in a week, Peninsula Gaming, LLC and Peninsula Gaming Corp. priced an $80 million tap of their 8 3/8% senior secured notes due Aug. 15, 2015 (Ba3/BB) at 105, resulting in a 6.755% yield to worst on Wednesday.

The reoffer price came on top of price talk and the yield came in line with the 6¾% yield talk.

Credit Suisse ran the books for the quick-to-market deal.

The deal came less than one week after Peninsula Gaming priced a $50 million add-on to its 10¾% senior notes due Aug. 15, 2017 (Caa1) at 108, resulting in an 8.888% yield to worst.

Proceeds from both add-ons will be used to fund the development of the Kansas Star Casino.

Both taps involved issues which priced in a $545 million two-part transaction in July 2009.

Talking the deals

Looking ahead to the Thursday session, CPI International Acquisition talked its $215 million offering of seven-year senior notes (B3/CCC+) with an 8¼% to 8½% yield.

UBS Investment Bank is the bookrunner.

And K. Hovnanian Enterprises, Inc. talked its $150 million offering of non-callable 4.75-year senior notes (Caa2//) with a 12¾% area yield, including 2 to 3 points of original issue discount.

Credit Suisse Securities, Citigroup Global Markets Inc., Deutsche Bank Securities Inc. and J.P. Morgan Securities LLC are the joint bookrunners.

Avaya to bring $1.009 billion

Avaya will host an investor conference call at 10:30 a.m. ET on Thursday for a $1.009 billion offering of eight-year senior secured notes, expected to price during the week ahead.

Morgan Stanley, UBS Investment Bank, Citigroup, Goldman Sachs & Co. and J.P. Morgan Securities LLC are the joint bookrunners for the debt repayment deal.

Yankee Candle dividend deal

Meanwhile, Yankee Candle Co. will begin marketing a $300 million offering of five-year senior notes with a Thursday investor call.

An investor roadshow will also get underway with a Thursday lunch in New York. The roadshow moves to Boston on Friday, subject to weather conditions.

The notes, which are being issued via YCC Holdings LLC and Yankee Finance, Inc., are expected to be sold at an original issue discount of 2 to 3 points.

Barclays Capital and Bank of America Merrill Lynch are the joint bookrunners.

The South Deerfield, Mass.-based designer, manufacturer, wholesaler and retailer of premium scented candles plans to use the proceeds to fund a distribution to equity holders.

Axcan moves to loan market

Finally, Axcan Holdings Inc. eliminated plans for a $225 million secured notes offering on Thursday, increasing its six-year term loan to $450 million from $225 million.

Proceeds from the term loan, along with $145 million of equity and cash on hand, will be used to fund the acquisition of Eurand NV for $12 per share, or $586.5 million in total on a fully-diluted basis, to repay Eurand's debt and to repay Axcan's outstanding term loan.

Bank of America Merrill Lynch, Barclays Capital, RBC Capital Markets and HSBC were to be the joint bookrunners for the bond deal.

Ford firms after pricing

A trader said that there was "tons of activity" in the new Ford Motor Credit 10-year notes that unexpectedly priced on Wednesday.

He saw the paper at 100 3/8 bid, 100½ offered, up from the par level at which the automotive-loan financing arm of Dearborn, Mich.-based automotive giant Ford Motor Co. had priced its $1.25 billion transaction.

Referring to one of the carmaker's better-known models, he quipped that "it seemed like everyone's focus was on Ford."

A second trader declared that the Ford deal "is actually trading pretty well," seeing the bonds bid at 100 3/8. He predicted that "it will be stronger [Thursday] too, depending on how Treasuries trade."

He said the deal "came, and it was very well received. Guys got good allocations and they were very happy. We also had a couple of guys adding on here late in the day. We got very active in it.

"It's trading well."

At another desk, the new Ford bonds were seen at 100 3/8 bid, 100 5/8 offered.

Parent Ford's existing 7.45% bonds due 2031 were seen by a trader only up ¼ point on the session at 110 bid, 111 offered.

Ford Credit's existing 7¼% notes slated to come due in October gained ½ point on the session to end at 104 bid. However, the financing arm's other paper was mostly lower. A market source quoted its 8.7% notes due 2014 down ¾ point on the day at 115. Its 8% notes due 2016 did even worse, surrendering 2½ points to go home just above 114, while its 8 1/8% notes due 2020 retreated by ¾ point to 117 bid.

Kraton climbs in aftermarket

When Kraton Polymers' new eight-year bonds were freed for secondary dealings, a trader saw the upsized $250 million issue up by a deuce on the day from their par issue price, going home at 102 bid, 102½ offered.

No action in Peninsula, Ormat

Traders saw no aftermarket activity in the day's two "drive-by" add-on transactions - Peninsula Gaming's 8 3/8% senior secured notes due 2015 and Ormat Technologies' 7% notes due 2017, owing to both the relatively small size of each of those deals - both under $100 million. Ormat had limited placement and was Regulation S only.

Del Monte deal down a little

Traders saw the new Del Monte Foods Co. 7 5/8% notes due 2019 trading at slightly lower levels than the San Francisco-based canned fruit, vegetable and pet food producer's $1.3 billion deal had traded at following its par pricing on Tuesday.

One estimated the bonds softer by 1/8 to ¼ point, at 101½ bid, 102 offered, down from Tuesday's aftermarket levels around 102 bid, 102¼ offered.

A second trader saw the bonds going out at 101¾ bid, 102 offered.

MedImpact moves up

However, a trader saw MedImpact Holdings' new 10½% senior secured notes due 2018 having firmed to a 1021/2-103 context, "and we had buyers on the follow."

That was up from the 101½ bid, 102 offered levels seen on Tuesday after the San Diego-based pharmacy benefits manager had priced its $230 million offering at 98.799 to yield 10¾%.

He said that "it was bid at [10]2½ all day - we never saw an offer."

"It's a small deal, kind of a one-off. People liked it" and they snapped it up.

GEO holds above par

The new GEO Group Inc. 6 5/8% notes due 2021 continued to trade a little bit above the par level where the Boca Raton, Fla.. private corrections and metal health facilities operator's upsized $300 million deal priced on Tuesday. Those bonds had moved up slightly to about 1001/4-100½ when they were freed to trade late Tuesday.

"We heard the allocations were skinny and it was going to be a tough trade," a trader said. He opined that "there were a lot of flippers right out of the chute - people were kind of hoping to collect some bonds around par."

He quoted the bonds Wednesday at 1001/2-1003/4, "a little bit firmer from [Tuesday], but not a lot of trading in it.

Secondary stays solid

Away from the new-deal arena, a trader saw the CDX North American Series 15 HY index unchanged on Wednesday to finish at 103¾ bid, 103 7/8 offered, after having been up by ¼ point on Tuesday.

The KDP High Yield Daily index meantime jumped by 13 basis points on Wednesday to close at 75.51, on top of the 7 bps gain seen on Tuesday. Its yield narrowed by 7 bps, to 6.87%, after having come in by 5 bps on Tuesday.

The Merrill Lynch High Yield Master II index was once again better on Wednesday, rising by 0.128%, on top of Tuesday's 0.095% gain.

That lifted the index's year-to-date return to 2.331% on Wednesday - yet another new peak level for the year so far. It had closed on Tuesday at 2.20%, the previous 2011 high point.

Advancing issues led decliners for a ninth straight session on Wednesday, although their advantage declined to about six to five from the four-to-three edge they held on Tuesday.

Overall activity, represented by dollar-volume levels, eased by about 4% on Wednesday, after having zoomed by 35% on Tuesday from the previous session's level.

A trader said that "the market feels firm, generally, despite the fact that a lot of people were working from home today," in view of the continued inclement weather conditions in metropolitan New York. That, he said, gave the market "definitely a weird tone to the day," with many people either not there or coming in late.

A second trader agreed that Wednesday - and the past several days "seemed to be starting out taking a while to rev things up. Maybe people were coming in and spending time digesting what they were seeing on their screens from the Middle East," where the political situation in Egypt was growing ever more chaotic, "so the mornings have been getting off to a slow start.

OPTI Canada slides again

Among specific issues, "the big story of the day," a trader said, was OPTI Canada, "again." He saw the troubled Calgary, Alta.-based oil-sands energy producer's 7 7/8% notes and 8¼% notes, both due 2014, "down a boatload of points" to around a 48-49 context, versus Tuesday's already depressed levels in the lower to mid 50s.

He said that just as had been the case on Tuesday, and indeed, over the past few sessions, "there was good size again." He saw "all kinds of activity" in them, estimating a loss of at least 6 points and probably more.

"OPTI was the big mover of the day," he declared. "It was on everybody's run, every page of offerings."

A second market participant agreed that OPTI "was the big trader today. "

He opined that "there are a lot of questions [among investors] about what's going on there. The bonds have been very active over the last two weeks," calling them down 15 to 20 points total in the last week or so, "on really no news. I think a lot of people are getting the sense that the company is in kind of dire straits."

He said that operations at the oil-sands joint-venture in Long Lake, Alta. that is 35% owned by OPTI and 65% controlled by senior partner Nexen Inc. "aren't working as advertised, and they're having to put more money into more steam production" to get the thick, gooey bitumen crude oil out of the ground so it can be processed into the much more commercially valuable and desirable light, sweet grade of crude.

He said that "there are some credit questions going on and people have been talking about restructuring. There was some talk earlier about a dealer blowing out of a position, and that put pressure on them. I think a lot of people are just starting to take a look at the story" - and as a result, he said, the bonds had gone from levels around 72 bid at the start of the year down to current levels in the upper 40s, getting as low as 451/2-46 during Wednesday's dealings.

He said OPTI's two senior secured first-lien issues, the 9% notes due 2012 and 9¾% notes due 2013 are still trading up in the 90s, around 97 bid on the 9s and a 94-ish level on the 93/4s.

Another trader saw the 7 7/8s down over 7 points on the session, pegging them around 48¾ bid, while the 81/4s lost 8¾ points, with a last trade at 47. He said that "north of $50 million of each of those issues were trading."

Relative to junk players in the United States, he quipped that "they're up in the far north - but the bonds are definitely heading south."

OPTI's bonds - which had been weakening steadily over the previous few sessions on no real news - took a tumble on Tuesday, down into the mid-50s from the lower 60s before that, on the news that OPTI has hired Lazard Freres & Co LLC as a financial advisor to join in its search for strategic options, which could include an investment in OPTI, an asset sale or even finding a buyer for the whole company. OPTI has already had Scotia Waterous Inc. and TD Securities Inc. trying to find a buyer or strategic investor since 2009, so far unsuccessfully. Those two companies will continue their efforts, joined by Lazard - but analysts were quoted warning that the Lazard hiring, far from a positive for OPTI, sends a message to investors that no deal is currently in the offing and one is not expected any time soon.

Claire's climb continues

On the upside, a trader saw Claire's Stores Inc.'s bonds up for a second consecutive session, pegging the Hoffman Estates, Ill.-based specialty retailer's 9 5/8% notes due 2015 at 102 3/8, up nearly 2 points on the day.

Those bonds, as well as the company's 9¼% notes due 2015 and its 10½% notes due 2017, had all risen on Tuesday after the company reported strong fourth-quarter sales.

Claire's reported net sales of $422 million for the fiscal 2010 fourth quarter ended Jan. 29, an increase of $11 million, or 2.7% versus the fiscal 2009 fourth quarter. Consolidated same-store sales increased by 3.2% in the 2010 fourth quarter - up 4.7% in North America and 0.6% in Europe. Excluding the impact of foreign currency rate changes, sales would have increased by 4.5%.

For the full fiscal year ended Jan. 29, Claire's reported net sales of $1.426 billion, an increase of $84 million, or 6.3%, versus the 2009 fiscal year. Consolidated same-store sales increased 6.5% in fiscal 2010 - up 7.8% in North America and 4.3% in Europe. Excluding forex factors, sales would have increased by 7.4%.

Nortel better as auction nears

A trader saw Nortel Networks Corp.'s 10¾% notes due 2016 up between 2 and 2½ points on the day at 91 bid, 92 offered, on "good volume," particularly at the end of the day.

The company's 10 1/8% notes due 2013 rose by 1½ points to close at 90 bid.

The Wall Street Journal reported on Wednesday that the Toronto-based telecommunications systems manufacturer - which filed for bankruptcy in 2009, and has been liquidating its far-flung assets one by one since then through court-supervised sales, choosing to wind down the company rather than attempt a reorganization - expects to select an initial stalking-horse bidder for a massive portfolio of some 4,000 patents, probably within three weeks. The Journal quoted unidentified sources said to be familiar with the situation that among the pool of at least five potential buyers are such high-tech heavyweights as Apple Inc. and Google Inc.

The patents are expected to go for at least $1 billion, with the proceeds to be distributed among Nortel's various creditors.

Massey still busy on buyout

A trader saw Massey Energy Co.'s 6 7/8% notes due 2013 trading at 102½ bid, on brisk volume of between $25 million and $30 million.

Despite that solid investor interest, the bonds were largely unchanged from the levels to which they had risen on Monday and held on Tuesday, driven higher by the news that Richmond, Va.-based coal producer Massey is to be acquired by Alpha Natural Resources for $7.1 billion in stock and cash - a transaction having an $8.5 billion value including debt refinancing.

GM holds steady

A trader called the 8 3/8% benchmark bonds due 2033 of Motors Liquidation Co. - which had been issued by the "old" General Motors Corp. before its 2009 bankruptcy reorganization and name change to Motors Liquidation - unchanged on the day at 36 bid, 36½ offered, on "decent volume."

Another trader saw the GM bonds down ¾ point at 35 bid, 35½ offered.

Kodak called mixed

A trader said that Eastman Kodak Co.'s 7¼% notes due 2013 were quoted in a 94 to 96 range on Wednesday, perhaps a little above where they had been on Tuesday, although there was no fresh news on the Rochester, N.Y.-based photographic products company. "There was some volume in that name today," he said, seeing them last trading in a context of 941/4-943/4.

But another market source, while seeing the bonds go home 941/4, called that a loss of ¾ point on the day.

The first trader also saw the 9¾% notes due 2018 around 101 bid.

Sallie Mae seen active

A trader saw SLM Corp.'s bonds "very active, and I think it's going to continue to be one of the major players,"

When all was said and done, the trader saw "a couple hundred million" of the Reston, Va.-based education financing company's 6 ¼% notes due 2016 turn over at 101½ bid, 101 5/8 offered - much of the activity probably coming from high-grade players, although the split-rated name (Ba2/BBB-/BBB-) also attracts some interest from junk accounts.

The trader saw between $25 million and $30 million of Sallie Mae's 8% notes due 2020 at 1053/4, which was "up fractionally."

A market source at another desk saw the 61/4s up ½ point at 101 5/8 bid, while its 8.45% notes due 2018 lost 1¼ points to end at 108 bid.

Stephanie N. Rotondo contributed to this report

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