DPL, Platinum Energy deals price; Jeld-Wen on tap; Kodak clobbered on draw amid lower market

By Paul Deckelman and Paul A. Harris

New York, Sept. 26 - Apparently emboldened by last week's pricing of several new deals, even though the junk bond market turned more negative later in the week, primaryside players were back on Monday as nearly $1.3 billion of new paper priced. That was more than last week's entire output, although almost all of it came in one giant deal.

Dolphin Subsidiary II, Inc., a special financing vehicle connected with the acquisition of Ohio utility Dayton Power & Light Co. and its corporate parent, DPL Inc., by power-generating giant AES Corp., priced a two-part, $1.25 billion offering of five- and 10-year notes. The prospective deal had been on the forward calendar for a number of weeks, but was quickly brought to market on Monday in the wake of Friday's vote by DPL shareholders approving the acquisition.

That deal priced too late in the session, however, for any kind of aftermarket dealings.

Earlier, oilfield services operator Platinum Energy Services priced a $50 million non-fungible add-on to an existing tranche of bonds. The smallish deal was not seen trading around.

There was further news in the new deal arena from building products maker Jeld-Wen Escrow Corp., Inc., which was heard by syndicate sources to have downsized and restructured a prospective deal. The offering, like that of the AES deal, had been parked on the forward calendar since early August, as the issuer awaited the right moment to bring it to market. The sources said that right moment is likely to come during Tuesday's session.

Away from the new deals, traders saw a mostly dishwater-dull and uninspiring day, with Junkbondland failing to follow the example of stocks, which traded sharply higher on hopes that European officials can get a handle on the burgeoning debt crisis there.

Instead, traders said things seemed mostly lower, particularly the big, well-traded names like Caesars Entertainment Corp., seen off another 2 or 3 points, into the lower 60s.

But the disaster of the day in the junk world, they said, was Eastman Kodak Co., a portion of whose bonds were seen down more than 20 points, though on not a lot of trading, after the company drew $160 million - most of its availability - from its revolving credit facility as investors worried whether the photographic products and digital imaging technology company was burning through its available cash too quickly.

Statistical indicators of junk market performance remained in the rut they've been in over the past several sessions.

DPL $1.25 billion drive-by

Riding a tailwind generated by sharply rallying stock prices in the United States, the high-yield primary market persuasively regained its legs on Monday, with two issuers raising $1.3 billion in a combined three tranches.

Dolphin Sub II priced $1.25 billion of senior bullet notes (Ba1/BB+/BB+) in a two-part quick-to-market Monday transaction.

The deal included a $400 million tranche of five-year notes, which priced at par to yield 6½% on top of where the deal was launched. Price talk was 6½% to 6 5/8%.

In addition the Dayton, Ohio-based electrical utility priced an $800 million tranche of 10-year notes at par to yield 7¼%, again on top of where the deal was launched. Price talk was 7¼% to 7 3/8%.

Barclays Capital Inc., Bank of America Merrill Lynch, Morgan Stanley & Co. and J.P. Morgan Securities LLC were the active bookrunners.

Proceeds will be used to partially finance the acquisition of DPL, the parent of Dayton Power & Light Co., by AES Corp.

Platinum non-fungible tap

Platinum Energy Services priced a $50 million non-fungible add-on to its 14¼% senior secured notes due March 1, 2015 at 95 on Monday, resulting in a yield of 16.196%.

The reoffer price for the non-rated deal came at the cheap end of the 95 to 96 price talk.

J.P. Morgan Securities LLC was the bookrunner for the quick-to-market deal.

The Houston oilfield services company plans to use the proceeds to acquire additional core operating equipment, for working capital and for general corporate purposes.

The original $115 million issue priced at 97.764 to yield 15.17% on Aug. 31, 2011.

Stillwater sets price talk

Stillwater Mining Co. talked its $300 million offering of five-year senior notes (/B/) with a 10% coupon to price in the 98 area and yield in the 10½% area.

There were also covenant changes.

The order books were scheduled to close at 5 p.m. ET on Monday.

The deal is in the market via bookrunner Deutsche Bank Securities Inc.

Jeld-Wen returns

After seeing its deal stall during the August downturn, Jeld-Wen returned to the junk bond market on Monday with a downsized, restructured $450 million offering of six-year senior secured notes (B3/B-), according to a trader from a high-yield mutual fund.

The deal, which is expected to price on Tuesday, is being shopped in the high 12% to low 13% range, the trader added.

There are also covenant changes.

Bank of America Merrill Lynch, Wells Fargo Securities LLC, Barclays Capital Inc. and KeyBanc Capital Markets Inc. are the joint bookrunners for the deal, which was downsized from $575 million. In addition to the covenant changes, the tenor of the notes was decreased to six years from seven years.

The issuing entity will be Jeld-Wen Escrow Corp., Inc., which will be merged with and into Jeld-Wen, Inc., a Klamath Falls, Ore.-based door and window manufacturer.

New deals a no-show

No secondary market activity was reported by traders in the day's new deals.

The Platinum Energy Services add-on to its 2015 senior secured notes was seen just too small to have spurred any aftermarket demand.

And while the two-part DPL was certainly big enough, it hit the tape way too late in the afternoon to trade.

Recent new deals steady

Among recently priced deals, a trader saw them mostly holding around, or slightly above, the levels at which they finished last week, although that was down from where they had traded earlier in the week, owing to the junk bond downturn at the end of last week.

For instance, he saw Sealed Air Corp.'s $1.5 billion two-part deal trading between 102 and 102½ on both tranches.

The Elmwood Park, N.J.-based plastics packaging maker had priced $750 million of 8 1/8% notes due 2019 and $750 million of 8 3/8% notes due 2021 on Sept. 16, with both parts of the offering pricing at par. The deal had been much anticipated in the market and was heard to have been well-oversubscribed.

After that successful debut, the two tranches each shot up to levels above 101-102 in initial aftermarket dealings that session, then firmed up to as high as 103 bid earlier last week, but came off those peak levels around mid-week amid the general market downturn.

The bonds had traded on Friday around 101½ bid, 102 offered.

The trader also saw Iron Mountain Inc.'s 7¾% senior subordinated notes due 2019 "still hanging out, right around par, plus or minus." He saw them in a range of 993/4-to1001/2.

The Boston-based document storage, processing and disposal company's $400 million drive-by deal - upsized from the originally announced $300 million - priced at par last Tuesday. The bonds moved up in aftermarket dealings to as high as a 101 level. By Friday, though, they had backed all the way down to around 99¾ bid, par offered.

There was no relief seen for Parsippany, N.J.-based vehicle-rental giant Avis Budget Car Rental LLC's $250 million offering of 9¾% notes due in March of 2020, a trader seeing them "still" at 97½ bid, 98½ offered.

The bonds had priced off the forward calendar at par last Wednesday, initially were quoted as high as 101 bid on the break, but then skidded into the breakdown lane after that, ending their initial trading down around 99 bid. As the week wore on, the bonds got as low as a 97-97½ bid context before coming back up to the 98 level, where they were seen on Friday.

The trader expressed some surprise "that the underwriters would let that thing just drift down like that."

Market negative on Kodak

Away from the new deal arena, Kodak was on everyone's lips, with market participants awed by the sheer magnitude of the fall in the Rochester, N.Y.-based photographic products and digital imaging technology company's bonds, even though there wasn't that much actual trading going on in them.

For instance, a trader saw Kodak's 7¼% notes due 2013 swoon to 62 bid versus last week's levels in the mid-80s, a plunge of some 23 points on the session. However, he pointed out that he saw just one trade of round-lot size, $1 million or over, one trade of about 700 bonds for $700,000 and the rest of the day's busy activity in the credit all considerably smaller trades.

"There was not a huge amount traded, but they made up for it with the size of the price loss," he declared.

Seeing only $1.6 billion or $1.7 billion of large trades, he theorized that "maybe some dealer was long Kodak and they sold bonds," spurred by the news that Kodak had drawn down most of the availability it had under its asset-based revolver.

"They drew down on the revolver, it had people concerned, obviously," a second trader said, seeing the 71/4s fall to around the 60 level and the company's 10 1/8% senior secured notes due 2019 trading in the mid-70s versus both issues' previous levels in the 80s, "so it was definitely much weaker on that one."

Yet another trader saw the 10 5/8s down 10 points on the session at 73 bid, 75 offered, while pegging the 71/4s down 20 points on the day at 62 bid, 63 offered.

"It was an ugly day in Eastman Kodak," he said, "the biggest downdraft in the market."

In explaining why the 71/4s fell much more than the 10 5/8s, he said: "The ones that are down the most would be the shorter ones because some people thought the world was going to end, and they're gonna file [Chapter 11]. The 7 1/4s would be the one down the most."

But while seeing the bond levels quoted much lower, he said "there was virtually no volume."

Kodak's New York Stock Exchange-traded shares meantime collapsed down to $1.74 apiece, a loss of 64 cents, or 26.89% on the day. Volume of 43 million shares was more than triple the norm.

The bonds and shares were decimated on the news that Kodak had drawn $160 million from its credit line. While the credit facility has a nominal size of $400 million, Kodak is subject to borrowing-base limitations based on designated percentages of eligible accounts receivable, inventory, machinery and equipment, subject to applicable reserves, and further reduced by outstanding letters of credit and collateral used to secure other banking arrangements.

According to Kodak's most recent 10-Q report to the Securities and Exchange Commission filed in July, as of the end of the second quarter on June 30, based on this borrowing base calculation and after deducting the face amount of letters of credit outstanding of $97 million and $68 million of collateral, the company had $235 million available.

Kodak said in that document that it might routinely draw on its revolver "to compensate for unplanned timing differences between required expenditures and available cash for unforeseen shortfalls in cash flows." Although Kodak also had $957 million of cash and equivalents on its balance sheet at the end of the second quarter, investors wondered whether the big revolver draw indicated that Kodak was burning through its cash stockpile faster than expected.

Kodak has struggled in recent years to stay relevant as its traditional bread-and-butter film products and the related cameras, which formerly dominated photography, were rendered obsolete by the new digital technology where Kodak has lagged.

Although Kodak's bonds and shares had firmed smartly last month on market speculation that the company had billions of dollars of valuable imaging technology patents it could sell if it had to in order to raise money, a trader on Monday suggested that "maybe the patents aren't all they're cracked up to be." The trader also noted that at the turn of the 20th Century, many now defunct automobile manufacturers "probably had patents as assets," but this didn't ultimately save them from riding off into historical oblivion.

Harrah's still a losing hand

Elsewhere, a trader said that even though he thought the junk bond market was "up slightly, at least the indexes [...] the names that have a seemed to lot of volume, were down slightly."

Chief among these, he said, was Caesars Entertainment's recently hard-hit 10% notes due 2018. He saw $30 million of the bonds issued by the Las Vegas-based gaming giant, the former Harrah's Entertainment, down "another" 1½ points, last trading at 63.

A second trader, who also saw the Caesars bonds continuing to come in, pegged them down "another 2 or 3 points," in the 62-63 area.

Junk indicators mostly lower

Junk market statistical performance indicators, which ended Friday on a mostly negative note pretty much replicated that performance on Monday.

A trader said the CDX North American Series 16 HY Index rose by 1 point on Monday to 92½ bid, 92¾ offered, after having gained¼ point on Friday.

But the KDP High Yield Daily Index was off by 9 basis points on Monday to finish at 70.90, although that was a considerably smaller loss than the 60-bps plunge seen on Thursday, followed by Friday's 45-bps swoon.

Its yield was steady Monday at 8.18%, after having ballooned out by 13 bps on Friday.

The Merrill Lynch U.S. High Yield Master II Index fell by 0.213% on Monday, its fourth consecutive loss, following Friday's 0.553% retreat.

The latest downturn pushed the index's year-to-date return into negative territory - a 0.17% loss versus Friday's meager, but still slightly positive, 0.043% gain. It was the first time the index has been in the red on a year-to-date basis in all of 2011 - and indeed, for the first time since Feb. 16, 2010. The cumulative loss stood in stark contrast to the peak level for the year of 6.362% set on July 26.

Market activity levels, measured by dollar volume, were unchanged on Monday after having fallen about 21% on Friday versus the session before.

A trader said that junk names "continued to get hit, despite the fact that stocks had a real strong day."

Wall Street, which had broken out of a deep two-session nosedive and managed to edge higher on Friday - moved strongly higher on Monday on renewed hopes that European officials will be able to stem the burgeoning debt crisis there. The Dow jumped by 272.38 points, or 2.53% to end at 11,043.26, while the Standard & Poor's 500 index gained 2.39% and the broader Nasdaq Composite was up by 1.35%.

Nonetheless, the junk trader said, "high yield really didn't go with equities. High yield was basically unchanged despite the rally in equities. There definitely was a lot more stuff for sale."

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