Kodak, Dresser-Rand, Hooters lead $1 billion session; new Hooters flies; funds up $574 million

By Paul Deckelman and Paul A. Harris

New York, March 10 - Eastman Kodak Co.'s eagerly awaited drive-by offering of eight-year secured notes came to market on Thursday, high-yield syndicate sources said. The photographic products giant's upsized new $250 million deal stayed around its discounted pricing level when it moved into the aftermarket.

However, traders there did see a continued rise in the company's existing 2013 bonds, which have firmed solidly over the past several sessions, helped by the new-deal news.

Also pricing a quickly shopped deal just a day after it was first announced was Dresser-Rand Group, Inc., although like Kodak's offering, the industrial equipment manufacturer's $375 million tranche - the big deal of the day, size-wise - really didn't go anywhere in the aftermarket.

The same held true for medical products provider Rotech Healthcare, Inc., which priced $290 million of seven-year secured paper.

But Hooters Restaurants' upsized $180 million secured bond offering was quite another story. The eatery operator's new notes were seen by traders winging their way higher in the aftermarket.

Britain's MOTO Finance plc meantime priced a sterling-denominated secured notes deal.

Pretium Packaging LLC and EV Energy Partners, LP were heard by sources to have hit the road to begin marketing their respective deals, expected to price next week, while price talk emerged on offerings from Clayton Williams Energy, Inc., Sterigenics International, Inc. and Euramax International, Inc. Pricing for each is expected on Friday.

Away from the new deals, secondary activity was dull and statistical measures lower. But high-yield mutual funds - considered a key indicator of overall junk market liquidity trends - continued to attract new investor money in the latest week.

Junk funds gain $574 million

After the session's activity had wound down, participants familiar with the weekly AMG high-yield mutual fund flow statistics generated by Lipper/FMI said that in the week ended Wednesday, $574 million more came into those funds than left them.

According to a Prospect News analysis of the figures, it was the 14th consecutive cash injection and came on top of the $131 million inflow seen the week ended March 2. During that stretch, dating back to Dec. 8, $8.29 billion of net inflows have come into the junk market, according to the analysis.

On a year-to-date basis, 2011 net inflows have now totaled $6.24 billion, according to the analysis, with cash infusions seen in each of the year's 10 weeks so far, against no outflows yet.

That extends the strong inflow trend seen in 2010, when $10.67 billion more came into the funds than left them, and inflows were seen in 37 weeks, against just 15 weeks experiencing outflows.

EPFR sees $1.25 billion inflow

Another fund-tracking service, Cambridge, Mass.-based EPFR Global, whose methodology differs somewhat from AMG, meantime reported a $1.25 billion inflow in the latest week, which followed the previous week's $335 million gain.

It was also the 14th consecutive weekly inflow by EPFR's calculation and the first to top $1 billion since the record $1.44 billion cash injection seen in the week ended Feb. 9.

Reflecting the difference between the ways AMG and EPFR calculate their respective fund-flow totals, although the two services' numbers generally point toward the same trends, EPFR includes results from certain non-U.S. domiciled funds as well as the domestic funds. Its year-to-date net inflow total now stands at $15.1 billion.

Cumulative fund-flow estimates, whether from Lipper/FMI or EPFR, may be revised upward or downward or be rounded off and could include unannounced revisions and adjustments to figures from prior weeks.

Analysts say the continued flow of fresh cash into junk - and the mutual funds represent but a small, though quantifiable, percentage of the total amount of money coming in - fueled the record new deal borrowing binges seen in both 2009 and then in 2010 as well as the robust secondary market seen both years. Both of those trends have been continuing on in 2011 as well.

Primary/secondary disconnect

The primary market saw four issuers - each one bringing a single dollar-denominated tranche - raise $1.08 billion on Thursday.

The executions appeared tight, with all of the yields printing in the middle of price talk or at the tight end of talk.

There is something of a disconnect between the primary market, where deals are tending to play to strong demand and are seeing tight executions, and the secondary market, where prices have softened against a backdrop of sagging equities, sources said.

A strong technical bid for new issues is prominent among the reasons for that disconnect, a debt capital markets banker said late Thursday.

For evidence, this sellsider pointed to the strong positive cash inflow into the high-yield mutual funds for the week ended Wednesday, as reported by Lipper-AMG.

So while the secondary - including some of the recently priced deals - has drooped, the new deals continue to attract the institutional buyers who have cash to put to work.

Dresser-Rand, atop talk

Dresser-Rand priced a $375 million issue of 10-year senior subordinated notes (B1/B+) at par to yield 6½%, on top of the price talk.

UBS Investment Bank was the left lead bookrunner for the quick-to-market issue. Goldman Sachs & Co. was the joint bookrunner.

Proceeds, together with cash on hand, will be used to fund the tender offer for the company's 2014 notes and to redeem the notes that are not purchased in the tender.

Rotech, in the middle of talk

Elsewhere, Rotech Healthcare priced a $290 million issue of 10½% seven-year second-priority senior secured notes (B3/B) at 98.197 to yield 10 7/8%.

The yield printed in the middle of the 10¾% to 11% yield talk. The reoffer price came in line with discount talk of 1 to 2 points.

Credit Suisse Securities and Jefferies & Co. were the joint bookrunners for the debt-refinancing deal.

Kodak upsizes

Eastman Kodak priced an upsized $250 million issue of 10 5/8% eight-year senior secured second-lien notes (B1/CCC) at 98.686 to yield 10 7/8%, on top of the price talk.

Citigroup Global Markets Inc. was the left bookrunner for the quick-to-market deal, which was upsized from $200 million.

Bank of America Merrill Lynch and Morgan Stanley & Co. Inc. were the joint bookrunners.

Kodak will use the proceeds for general corporate purposes, including the repurchase of debt.

Hooters, at the tight end

Hooters Restaurants priced an upsized $180 million issue of six-year senior secured notes (B3/B) at par to yield 11¼%, at the tight end of the 11¼% to 11½% price talk.

Jefferies ran the books for the issue, which was upsized from $165 million.

The Atlanta-based owner, operator and franchisor of casual dining restaurants will use the proceeds to repay its existing term loan and to redeem sponsor mezzanine debt. The additional $15 million of proceeds will be used to fund a dividend.

The Canadian primary

The Thursday session saw a couple of Canadian dollar-denominated high-yield deals price.

Precision Drilling Corp. announced well after the close that it had sold C$200 million of 6½% eight-year senior notes (Ba2/BB+/).

RBC Capital Markets Corp., Credit Suisse and TD Securities Inc. were the lead managers.

Additional pricing details were not immediately available.

The proceeds and available cash will be used to repay outstanding debt under the company's senior secured revolving credit facilities.

Meanwhile, Perpetual Energy Inc. price a C$150 million issue of seven-year senior notes (B3/B-/) at par to yield 8¾%.

BMO Capital Markets Corp. was the lead manager. Co-managers were CIBC World Markets Inc., Scotia Capital Inc., TD Securities Inc., National Bank Financial Inc. and Peters & Co. Ltd.

Proceeds will be used to repay existing debt under the company's existing credit facility and provide flexibility with the maturity of its 6½% convertible debentures due June 2012.

Standard & Poor's had said in its ratings notice that if the deal is upsized, it would lower the rating to CCC+.

MOTO prices £176 million

Elsewhere, England's MOTO Finance priced a £176 million issue of 10¼% six-year second-lien notes at 96.773 to yield 11%.

Deutsche Bank, Credit Agricole CIB, HSBC and ING were the joint bookrunners for the debt-refinancing deal.

Talking the deals

Looking ahead to what promises to be a busy Friday session, STHI Holding Corp., the indirect parent of Sterigenics International, talked its $475 million offering of senior secured second-lien notes (B3/B-) with a yield in the 8% area on Thursday.

The deal is expected to price on Friday via J.P. Morgan Securities LLC, Bank of America Merrill Lynch, UBS Investment Bank and Morgan Stanley.

Meanwhile, Euramax International talked its $375 million offering of five-year senior secured notes (Caa1/B-) with a yield in the 9% area.

Deutsche Bank Securities Inc. has the books for the deal, which is set to price Friday afternoon.

And Clayton Williams Energy talked its $300 million offering of eight-year senior notes (Caa1/B/) with a yield in the 7¾% area.

RBS Securities Inc., JPMorgan, UBS Investment Bank and BNP Paribas are the joint bookrunners for the deal, which is also expected to price on Friday.

EV Energy roadshow

EV Energy Partners and EV Energy Finance Corp. will begin a roadshow on Friday for their $250 million offering of eight-year senior notes, which are expected to price late in the week ahead.

RBC Capital Markets is the left bookrunner. JPMorgan, Wells Fargo Securities and BNP Paribas are joint bookrunners.

Proceeds, along with proceeds from the partnership's equity offering, will be used to repay borrowings under its revolver, which were drawn to finance its Barnett Shale acquisition.

Pretium plans $150 million

Pretium Packaging began a roadshow on Thursday for its $150 million offering of five-year senior secured notes (expected ratings B3/B).

Jefferies has the books for the deal, which will be used to refinance debt and fund a dividend.

Hooters heads higher

When the new Hooters six-year senior secured notes were freed for secondary dealings, a trader quipped that the risqué restaurateur's issue "really busted out," quoting them at 101½ bid, 102½ offered, well up from their par issue price.

Another trader said that he last saw the Hooters issue at 101¼ bid, 102¼ offered.

"They did OK, despite the equity market getting slammed," the trader said.

Dresser-Rand rise doesn't last

A trader saw Dresser-Rand Group's new 10-year senior subordinated notes having gotten as good as 101 bid, 101½ offered, well up from their par issue price.

But another trader queried later said that he saw "nothing" in the industrial equipment manufacturer's deal, quoting it at a wide par bid, 102 offered - "not much" going on there.

Not exactly A Kodak Moment

When Eastman Kodak's new eight-year senior secured bonds moved into the secondary, a trader saw those bonds going home at 98¼ bid, 98¾ offered, bracketing the 98.686 level at which the upsized $250 million deal had priced.

Another trader saw the bonds trade into a 98 5/8 bid, which left them at 98 5/8 to 99.

However, the company's existing 7¼% notes due 2013 continued to rise for a third consecutive session, presumably bid up by investors encouraged by the notion that the new deal means the sometimes troubled Kodak is trying to get its financial house in order.

A market source saw the '13s up 1¾ points at par, while a second pegged the notes 1 5/8 higher on the day at 99 ¾ bid.

Those bonds had begun the week trading in the lower 90s, firmed modestly on Tuesday, although no one knew definitively at the time what was developing, and then jumped anywhere from 4 to 6 points on Wednesday after the new deal was formally announced.

Rotech remains near issue

The day's other new deal, medical equipment and services provider Rotech's seven-year second-lien notes, were seen trading only a little higher than their 98.197 issue price.

A trader said that the bonds were last trading at 98¾ bid, 99 3/8 offered.

A second trader saw the bonds at 98¾ bid, 99¼ offered.

Deluxe deal down

A trader said that "across the board, the new deals came pretty well" - but he saw Deluxe Corp.'s 7% notes due 2019 trading as low as 99 bid, 99¼ offered, and then back up to 100¼ bid, before going out wrapped around 99 bid, 99½ offered, "so for once, I started seeing a little bit of weakness."

A second trader said that the St. Paul, Minn.-based check and deposit slip printer's new bonds "kinda died" around 99 bid, 99½ offered.

The $200 million offering - which was restructured into an eight-year deal from the originally announced 10-year offering, with appropriately reduced call protection - had priced at par on Wednesday but then was not seen in the aftermarket that day.

American hovers just below par

A trader saw Wednesday's $1 billion offering of 7½% senior secured first-lien notes due 2016 from American Airlines, Inc. trading into a 99 7/8 bid, off a little from their par issue price, adding that the early-morning trade "believe it or not, was the last I saw of them."

A second trader saw the bonds at 99 bid, 99½ offered.

CKE largely a no-show

Several traders said they had not seen any trace of CKE Holdings, Inc.'s upsized $200 million of 10½%/11¼% senior PIK toggle notes due 2016, which priced at 98.115 to yield 11% on a cash-pay basis, 11.759% if paid in kind.

They surmised that the Carpinteria, Calif.-based restaurant operator's smallish deal - originally announced as a $175 million offering - had been put away.

One trader proclaimed the deal was "not doing too well," quoting it as offered at 971/2.

Secondary turns south

Away from the new-deal universe, a trader saw the CDX North American Series 15 HY index fall by ½ point on Thursday to finish at 103 bid, 103¼ offered after having eased by 1/8 point on Wednesday.

The KDP High Yield Daily index meantime retreated by 8 basis points on Thursday to end at 75.84, on top of the 1-bp easing seen on Wednesday. Its yield rose by 4 bps Thursday, to 6.66%, after having held steady for the three previous sessions at 6.62%.

The Merrill Lynch High Yield Master II index lost 0.157% on Thursday, in contrast with Wednesday's 0.224% gain. The latest loss left its year-to-date return at 3.566%, down from Wednesday's 3.73%, the peak level for the year so far.

Advancing issues fell behind decliners by a seven-to-five ratio on Thursday after having led them over the previous two sessions. Wednesday's winning margin had been a mere several dozen issues out of the nearly 1,400 traded that day.

Overall market activity, as measured by dollar-volume levels, was virtually unchanged for a second straight session on Thursday.

Once again, the college basketball championships held the market enthralled; one trader said he was "ducking out to go see the Big East tournament" taking place at Madison Square Garden. "I think about 75% of the high-yield market was there today," he joked, with much of the other 25% there in spirit as they watched the televised games rather than doing much bond trading.

The trader said that "things across the board were not really even that weaker, although the [equity] market was taking it on the chin," with the bellwether Dow Jones Industrial Average plunging by 228.48 points, or 1.87%, to end at 11,984.61. Other, broader indexes were down around the same percentage, hurt by unfavorable economic news and renewed concerns about the role Middle East violence might have on oil prices.

A second trader said, "It's been a weird day. Other than a flurry in the new deals, it's been kind of quiet."

Solo seen mixed

Among specific non-new deal names, a trader said that Solo Cup Co.'s 10½% senior secured notes due 2013 "are hanging in there" around the 103¼ to 103½ area, with "a fair amount" of the bonds changing hands.

However, he saw the company's 8½% senior subordinated notes due 2014 trading down around the mid-80s from recently higher levels, although he said that the downturn was "not all in one day."

In Thursday's dealings, he saw the bonds trading down around an 84¼ to 84½ context, versus 85 to 85¼ on Wednesday.

There was no fresh news out on the Lake Forest, Ill.-based manufacturer of paper and plastic cups, plates, bowls and utensils.

Autos skid lower

In the autosphere, a trader said that Motors Liquidation Co.'s benchmark 8 3/8% bonds due 2033 were down 1½ points at 30 bid, 31. The bonds had been issued by the "old" General Motors Corp. before its bankruptcy reorganization, which saw the company re-named Motors Liquidation, liable for the bonds and other unwanted assets, while GM's four profitable car-making lines were separated out into a "new" GM not responsible for the outstanding debt.

GM domestic arch-rival Ford Motor Co.'s 7.45% bonds due 2031, meantime fell ¾ point to 108 bid, 109 offered.

OPTI off as Nexen nixes buyout

A market source said that OPTI Canada Inc.'s 8¼% notes due 2014 were down a deuce on Thursday to finish at 53 bid.

A Canadian newspaper meantime quoted the president and chief executive officer of OPTI Canada's partner in its pilot Long Lake, Alta., oil sands project, Nexen Inc., as having said that his company sees no need to buy out OPTI Canada's 35% stake in that project. The troubled Calgary, Alta.-based OPTI has recently been exploring the possibility of selling assets, or even the whole company, but has so far not found any potential buyers.

The Edmonton Journal quoted Nexen boss Marvin F. Romanow as having declared during an interview that "there's no driving necessity for us to own all of it," adding that his company has a "healthy working interest at 65%."

© 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.