Avis heard to be readying bond deal; Sealed Air may hit road; Fresenius firms in mixed market

By Paul Deckelman and Paul A. Harris

New York, Sept. 13 - The high-yield secondary market waffled through another generally theme-less, indecisive session on Tuesday, with traders seeing many junk names trading within a point or two of where they were on Monday.

Among names seen on the upside were such familiar junk denizens as hospital operator Community Health Systems Inc. and homebuilder Hovnanian Enterprises Inc.

Downsiders included electronic payments processor First Data Corp. and real estate services firm Realogy Corp.

Market performance indicators were meanwhile mixed.

No deals priced in the primary arena; however, sources there heard that car rental giant Avis Budget Group Inc. may soon be coming to market with a $250 million junk bond deal.

And they heard that Sealed Air Corp. might soon begin what's described as a non-deal roadshow to talk to investors, as the packaging systems maker continues to plan an eventual $1.5 billion equivalent junk bond borrowing.

Avis possible for this week

Market conditions were slightly improved from the beginning of the week, and cash flows to the high-yield asset class were positive on Monday, a debt capital markets banker said.

As a result, dealers are working behind the scenes prepping deals that could come in short order.

Avis Budget Group is expected to bring a $250 million offering of high-yield bonds to market in the near future, sources said. The deal could come before the end of the week.

The bonds are part of the debt financing for Avis Budget's purchase of Avis Europe plc, which also includes a $420 million seven-year term loan B.

Morgan Stanley & Co. LLC, Citigroup Global Markets Inc., Credit Agricole Securities (USA) Inc., Scotia Capital (USA) Inc. and RBS Securities Inc. are leading the debt financing.

Avis Budget is buying Avis Europe for £3.15 in cash per share. The transaction is valued at £635 million, or about $1 billion.

Sealed Air non-deal roadshow

Also behind the scenes, the syndicate of banks leading Sealed Air's expected $1.5 billion equivalent offering of senior notes plans to conduct a non-deal roadshow, according to a buyside source.

The plan is to get accounts up to speed and then bring the deal as a quick-to-market transaction, as conditions permit, the investor added.

Citigroup, Bank of America Merrill Lynch, BNP Paribas Securities Corp. and RBS Securities Inc. are the leads.

Timing remains to be determined, but the bond deal is expected to be completed before the end of the month.

A bank meeting for Sealed Air's $1.2 billion seven-year term loan B took place on Tuesday.

The bond transaction initially set a $1 billion tranche and a €500 million tranche. However, it remains to be seen whether there is sufficient demand to go forward with the euro-denominated tranche, sources said.

The bridge loan backing the bonds is fully syndicated, according to market sources who add that most of the accounts that played the bridge are expected to roll into bonds, owing in part to the far greater liquidity of the bonds.

Proceeds, along with a total of $3 billion of bank debt, will be used to fund the acquisition of Diversey Holdings Inc. from the Johnson family and Clayton, Dubilier & Rice LLC for $2.1 billion in cash and a total of 31.7 million shares of Sealed Air common stock. The transaction is valued at $4.3 billion.

Fresenius firms again

Fresenius Medical Group AG's new 6½% dollar-denominated notes due 2018 were seen by a trader "up slightly on the day" at 101 bid, 101½ offered.

It was the fourth consecutive session that the Bad Homburg, Germany-based kidney dialysis products and services provider's new issue has risen since its pricing on Thursday.

A second trader on Tuesday saw those bonds at 100¾ bid, 101¼ offered, saying that "it was more of a story that they held in on Monday and Tuesday, when the overall market was off, than that they firmed a little today."

Yet another trader also saw those bonds at 100¾ bid, 101¼ offered, which he called up by ¼ of a point.

Fresenius priced the bonds Thursday via its Fresenius Medical U.S. Finance unit. The $400 million issue - upsized from the originally announced $300 million - came to market at 98.623 to yield 6¾%, at the tight end of pre-deal price talk envisioning a yield of between 6¾% and 7%.

They were seen having moved up to around a 99 7/8 bid, 100 1/8 offered level when they were freed to trade late in the day on Thursday and had moved up to 100½ bid, 100¾ offered in Friday's dealings. On Monday, a trader saw them at 100½ bid, 101 offered.

The bonds priced as part of a two-part deal that also included €400 million of euro-denominated bonds having the same coupon and maturity, which priced at the same 98.623 price and yield level.

On Tuesday, a trader said that the euro tranche was "doing even better" than the dollar bonds, pegging them at 102 bid.

Those bonds, which had been issued by Fresenius Finance VIII SA, initially traded at 99 3/8 bid, 99 5/8 and then moved up to 100 5/8 bid, 101 offered on Friday.

The euro portion of the deal was upsized to €400 million from the originally announced €300 million after a third tranche that was part of the original deal, for €100 million of three-year floating-rate notes, was abandoned.

Calumet little moved

A trader meantime saw the new Calumet Specialty Products Partners LP 9 3/8% notes due 2019 trading on Tuesday at 93¼ bid, 94 offered, versus Monday's late level at 93¼ bid, 93¾ offered.

Those levels were both down slightly from the 93½ bid, 94 offered level at which those $200 million of bonds had traded on Friday, but they were still up from their issue price at 93, which was in line with their price talk.

Calumet, an Indianapolis-based chemical manufacturer, and its Calumet Finance Corp. unit came to market with those bonds on Thursday afternoon, a day after their announcement that they would do such a deal. The bonds were priced to yield 10.739% but came too late in the session Thursday for any real aftermarket at that time.

The bonds were structured as a mirror tranche, having identical terms to the $400 million of notes that the company sold back in April, although they are not fungible.

Market indicators turn mixed

Away from the new-deal arena, statistical measures of market performance, which had been down on both Friday and Monday, turned mixed on Tuesday.

A market source saw the CDX North American Series 16 High Yield index jump by 1 1/8 points on Tuesday, closing at 92 1/8 bid, 92 3/8 offered, more than offsetting the 5/16 of a point fall seen on Monday.

However, other market gauges remained in the red on Tuesday.

The KDP High Yield Daily index retreated by 19 basis points to end at 71.74 on top of the 31-bps plunge seen on Monday. Its yield widened by 6 bps to 7.94% after having risen by 10 bps on Monday.

The Merrill Lynch U.S. High Yield Master II index retreated by 0.105% on Tuesday, its third loss in a row. That followed Monday's 0.592% decline.

The latest slippage left its year-to-date return at 1.244%, down from 1.35% on Monday and well below the peak level for the year of 6.362%, which was set on July 26.

No theme seen

A trader said that "stuff was moving around," though in no discernable pattern.

For instance, he saw First Data, the Atlanta-based electronic payments processor, as one of the big losers, on heavy volume, although there was no fresh news out about the company.

Its 11¼% notes due 2016 were down by five-eights of a point at 81 bid, on busy volume of $17 million, the highest in high yield on Tuesday.

Another market source saw those bonds going home at 82 bid but said they were off by 1¼ points.

Its 9 7/8% notes due 2015 were likewise lower, at 90 bid, though its volume of between $8 million and $9 million was only half that of the 11¼% notes.

The first trader said that "what we're seeing going around is just one-off names, trading, things you don't see that often."

He said there was "not a lot of enthusiasm."

"Someone will ask about a name, and then everybody is going to hit that bid if a buyer comes up with a certain name," he said. "We saw that in one or two instances today - someone would throw out a bid to buy something at, say, 103, and everyone would call him back to tell him 'we'll sell it to you.'"

He was uncertain as to whether that was specific to those several issues he saw "or more of a general tone of dealers not wanting to be long stuff in this environment."

A second trader said the day was characterized by "some up, some down - most names were within a half [point] from [Monday]."

He mentioned that First Data was down by about a point, "but then, other stuff, like HCA [Inc.] paper and Harrah's [Operating Co. Inc.] and MGM [Resorts International] were up about the same amount. It was pretty much issue-dependent. All were clearly within one [point], but most were within a half-point of where they were [Monday]."

He said there was "not a great theme to the market at this time," instead seeing proceedings dominated by "repositioning in smaller ways - nothing dramatic, just repositioning in smaller ways."

Benchmark names seen better

A trader saw some of the well-known market benchmark issues modestly higher.

Community Health Systems Inc.'s 8 7/8% notes due 2015 were trading up by a half-point on Tuesday, with the trader seeing the Franklin, Tenn.-based hospital operator's $3 billion issue firming to par bid, 100½ offered.

He also saw No. 2 domestic carmaker Ford Motor Co.'s 7.45% bonds due 2031 up by a half-point at 108¼ bid, 109¼ offered.

Hovnanian heads higher

Another credit seen moving up was Hovnanian Enterprises' 10 5/8% notes due 2016. A trader quoted the Red Bank, N.J.-based homebuilder's bonds a half-point improved at 86½ bid, although a second market source, who also pegged the bonds above the 86 mark, said they were up by 1 5/8 points on the session.

More than $8 million of those bonds traded, putting them fairly high up on the Junkbondland most-actives list for the day.

There was no fresh news on the company, which has been among the hardest-hit names in the homebuilding sector of late amid more gloomy numbers coming out of Washington and such industry trade groups as the National Association of Realtors, which tracks home sales trends.

A Hovnanian sector peer - Irvine, Calif.-based builder Standard Pacific Corp. - was also higher, its 8 3/8% notes due 2021 gaining 1½ points to close at 85½ bid.

But some homebuilder and real estate names were moving in the other direction, such as Los Angeles builder KB Home, whose 6¼% notes due 2015 were seen down a deuce at 85 bid.

Parsippany, N.J.-based Realogy, which provides real estate and relocation services, was also a loser. Its 11½% notes due 2017 fell nearly 1½ points on Tuesday to 74½ bid, on active volume of more than $11.5 million.

A second market source saw the bonds at that same level but called them down 1 5/8 points.

Kodak coming back?

A trader said that one bond "that people are asking more and more about and you're getting a lot of press on is [Eastman] Kodak [Co.]," especially the 7¼% notes due 2013.

He noted that "a couple of months ago, they got hit from a high of 98 all the way down to 85 or even 84," when the company wasn't doing well, "and there was a lawsuit and other [negative] stuff."

Fast forward a few months.

Now, he said, "there seems to be some buying in the 87-88 range."

There was no fresh news out on the Rochester, N.Y.-based photographic products company, whose traditionally strong sales of film and the cameras that use it have withered in the Digital Age, but whose portfolio of technology patents is seen as a major asset, as it licenses its decades of scientific discoveries to makers of personal computers, smart phones and other devices.

The trader pointed out that "people are starting to say that with those patents they have, the company may be worth more dead than alive, with what the patents are worth, and that these bonds are going to be paid off."

Fueled by such optimism, he said, "they've been holding up in that range now," despite the recent sell-off.

A second trader mentioned Kodak on Tuesday, noting there had indeed been some buzz about the money the company could make with its patents - but said he had seen no activity in Tuesday's dealings.

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