Harrah's prices upsized drive-by deal; ATP, Cleave-Brooks slate; new Cablevision, Rosetta up

By Paul Deckelman and Paul A. Harris

New York, April 13 - Harrah's Operating Escrow LLC and Harrah's Escrow Corp. - both subsidiaries of Harrah's Operating Co. Inc. - priced an upsized $750 million offering of eight-year secured notes on Tuesday, high yield syndicate sources said. The opportunistically timed drive-by deal priced at a discount to par and then was seen by traders to have moved up solidly, although they finished off their initial peak level.

The existing Harrah's bonds scheduled to be redeemed using the proceeds from the new deal were little-traded on the day. However, several other outstanding issues from the Las Vegas-based casino giant not slated for redemption moved up solidly in anticipation of the company's improved balance sheet.

Elsewhere on the new-deal scene, Houston-based ATP Oil & Gas Corp. announced plans to sell $1.5 billion of five-year second-lien notes, with the syndicate sources hearing that the company had begun a roadshow for its offering, running through the end of the week.

They also heard that Cleaver-Brooks, Inc., a Milwaukee-based manufacturer of burners and boilers, had begun a roadshow, slated to go into the early part of next week, for a $200 million issue of six-year senior secured notes.

Cablevision Systems Corp.'s new bonds, which priced too late on Monday for any aftermarket, were seen up by several points after being freed for secondary dealings. The cable system operator's existing bond issue that is to be bought back via a tender offer using the new-deal proceeds was up handsomely.

The new Rosetta Resources Inc. bonds, which also priced on Monday, moved up in the aftermarket as well.

Harrah's a blowout

The Tuesday primary market session saw a single new issue clear the market.

In a drive-by, Harrah's Operating Co. priced a massively upsized $750 million issue of 12¾% eight-year second-lien senior secured notes (Ca/CCC) at 98.778 to yield 13%.

The yield printed on top of yield talk. The issue price came in line with the 98.00 to 99.00 price talk range.

It was a multiple-times oversubscribed blowout, sources said.

The deal benefited from the perception that the gaming sector is due to catch a tailwind from a recovering economy, according to a mutual fund manager who also pointed out that a JP Morgan stock analyst upped target prices for shares of Las Vegas Sands, MGM Mirage and Wynn Resorts on Tuesday.

The deal also benefited from the fact that Harrah's is an ultra-familiar name to high-yield investors who jumped at the chance to own Harrah's secured paper coming with a 13% yield, a syndicate banker said.

Citigroup, Bank of America Merrill Lynch, Credit Suisse, Deutsche Bank Securities and JP Morgan were joint bookrunners for the quick-to-market deal which was upsized from $500 million.

Proceeds will be used to redeem the Las Vegas-based casino entertainment company's outstanding 5½% senior notes due 2010, its 8% senior notes due 2011 and its 8 1/8% senior subordinated notes due 2011, as well as for other general corporate purposes, including repaying revolving loans outstanding under its senior secured credit facilities.

ATP begins brief roadshow

Meanwhile, the forward calendar continued to build.

ATP Oil & Gas Corp. began a brief roadshow on Tuesday for its $1.5 billion offering of five-year senior secured second-lien notes (/B/).

The roadshow wraps up on Friday.

JP Morgan is the left book bookrunner for the offering which is being marketed via Rule 144A and Regulation S, with registration rights. Credit Suisse is the joint bookrunner.

Proceeds will be used to repay the Houston-based offshore oil and gas development and production company's first-lien term loans and its revolver, and for general corporate purposes.

The deal should come in the range of 10½% to 11%, according to a buy-side source who covers the sector.

Although ATP buys proven assets, it must put up enormous amounts of capital to develop them, rendering the company exceptionally vulnerable to downswings in crude oil prices, the source explained.

However, there is likely to be a big "roll factor," added the buy-sider, who looks for holders of ATP's existing bond and bank debt to roll into the new paper.

Hence the deal should get done, the buy-sider said.

Cleaver-Brooks starts roadshow

Elsewhere, Cleaver-Brooks, Inc. began a roadshow on Tuesday for its $200 million offering of six-year senior secured notes (expected ratings B2/B).

JP Morgan and UBS Investment Bank are joint bookrunners.

The roadshow wraps up on Monday.

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

Proceeds will be used to repay debt and fund a dividend.

Cleaver-Brooks is a Milwaukee, Wis.-based manufacturer of packaged and engineered boilers.

GMAC sells euro benchmark

Meanwhile, GMAC International Finance BV is expected to price a benchmark-sized offering of euro-denominated bonds on Wednesday.

BNP Paribas, Deutsche Bank Securities and RBS Securities are bookrunners for the Regulation S deal.

The issuer is a Rotterdam, the Netherlands-based provider funding to affiliated General Motors Acceptance Corp. operations that conduct automobile financing operations.

New Harrah bonds higher

When the new Harrah's 12¾% second-priority senior secured notes due 2018 were freed for secondary dealings, traders saw the new bonds trade as high as 101 bid. However, after that initial flurry, the bonds came off those highs, with traders seeing them around a par-100½ context - still up from the 98.778 level at which the issue had priced earlier in the session.

Harrah's a trader said "were higher, but then people started selling them back to the managers." He quoted the new bonds going home at par bid, 100¼ offered.

The trader said that he saw little activity in the three issues of existing Harrah's bonds that are to be redeemed using the new-deal proceeds - its approximately $255 million of 5½% notes coming due on July 1 of this year, its roughly $31 million remaining (out of an original $500 million) of 8% notes due 2011, and its nearly $183 million of 8 1/8% senior subordinated notes also due in 2011.

He said that the 51/2s, last seen trading around the par level, "are not going to move because they're so short."

He predicted that the 8% notes, which "didn't really trade that much, are really going to kick in [Wednesday]. They'll move up, and trade like a yield-to-call piece of paper." Those bonds also were last seen around par.

He also projected that the 8 1/8s, which were last seen around 102, "are gonna gap up."

"People," he said, "wanted to digest if this deal was going to get done" before doing anything on the soon-to-be redeemed issues.

While there was little movement in those three pieces of paper, market-watchers saw brisk activity in a couple of other Harrah's credits not being taken out. Over $12 million of the company's 5 5/8% notes due 2015 were seen by a market source having moved up 2½ points on the day to the 70 level, while an equal amount of its 10¾% notes due 2016 changed hands, moving up ½ point to 88 bid. Harrah's 10% senior secured notes due 2015 gained 1½ points to close at 93, with nearly $10 million traded.

New Cablevision notes climb

Traders saw Cablevision's new $1.25 billion two-part issue of notes having climbed from the par level at which both halves of that mega-deal, upsized from the originally announced $1 billion, priced at on Monday afternoon, too late for any aftermarket then.

The Bethpage, N.Y.-based cable system operator and professional sports team owner's two tranches -- $750 million of 7¾% notes due 2018 and $500 million 8% notes due 2020 - were seen trading at identical levels, with one trader calling them at 101 bid, 102 offered and another at 101½ bid, 102 offered.

At another desk, a trader said the new paper "did pretty well. They were off their highs," which he estimated at 101¾ bid, "but they still did well," with the eight-years ending at 101 1/8 bid, 101½ offered, while the 10s stabilized at 101 3/8 bid, 101½ offered.

He meantime saw Cablevision's 8% notes due 2012, which are scheduled to be taken out via a tender offer funded by the new-deal proceeds, as having "definitely shot up, They're trading with a 110-handle," well up from levels before Monday's announcement of around 106-107.

Rosetta Resources on a roll

A trader said that Monday's new deal from Rosetta Resources went out trading at 101½ bid, 102 offered - up from the par level at which the Houston-based energy exploration and production operator had priced its $200 million issue .

Market indicators improve again

Among bonds not connected with the new-deal market, a trader saw the CDX Series 14 index up by ¼ point on the session Tuesday, pegging it at 100¼ bid, 100½ offered, after having also gained ¼ in both Friday's dealings and Monday's.

The KDP High Yield Daily Index meantime rose by 16 basis points on Tuesday to end at 72.44, after having gained 7 bps on Monday, while its yield narrowed by 4 bps to 7.70%, after having tightened by 3 bps on Monday.

Advancing issues outpaced decliners again on Tuesday, holding onto their better than seven-to-six advantage.

Overall market activity, represented by dollar-volume levels, jumped 31% on Tuesday from levels seen the previous session.

Traders said that as has been the case in many sessions recently, interest in the new-deal market generally overshadowed regular secondary dealings, although here and there was some activity.

Paper names pop up

A trader said that NewPage Corp.'s bonds, and those of sector peer Verso Paper Corp. were "very firm," in line with a surge in Verso's shares after Credit Suisse upgraded the Memphis-based coated-paper company's stock to "outperform" from "neutral" previously.

He said that there were "better buyers all over the place" for the bonds of the two paper manufacturers. "They keep getting pushed up."

He saw NewPage's 10% senior secured second-lien notes due 2012 at 74½ bid, 75½ offered, while the Miamisburg, Ohio-based company's 11 3/8% senior secured notes due 2014 at 101½ bid, 102 offered.

Verso's 11 3/8% senior subordinated notes due 2016 were at 94 bid, 95 offered, its 9 1/8% second-priority senior secured notes due 2014 firmed to 101-102, while its 11½ senior secureds due 2014 ended at 1101/2- 1111/2, which he called "all up a point."

Verso's New York Stock Exchange-traded shares meantime jumped 83 cents, or 21.78%, to $4.64, on volume of 979,000, more than six times the norm, following the Credit Suisse upgrade.

In raising its opinion on Verso's shares and establishing a $6 price target, Credit Suisse said that adverse industry conditions Verso had been facing seemed to have subsided, predicting also that there would be multiple upcoming catalysts to the stock.

Mirant, RRI hold Monday gains

A trader saw Mirant Corp.'s bonds and those of prospective merger partner RRI Energy Inc. as having "kind of settled in" around the same levels to which they had risen on Monday following their announcement that

Atlanta-based Mirant and its Houston-based competitor RRI have entered into a definitive agreement to create GenOn Energy, which will be one of the largest independent power producers in the United States, gave a boost to both companies' bonds.

On Monday, Mirant's 8½% notes due 2021 issued by its Mirant Americas Generation unit were seen to have jumped more than 6 points on the day to 97½ bid on heavy volume, while its Mirant North America 7 3/8% notes due 2013 gained more than 2 points to end at 102.

RRI's 7 5/8% notes due 2014 gained nearly 2 points to just over 99 bid, while its 7 7/8% notes due 2017 were 4 point winners, ending at just over 96.

At another desk, Mirant's 7 3/8s were pegged up more than a half point on the session to end at 102¾ bid.

The first trader said that two other companies in that same power generation sector, Edison International and Dynegy Holdings Inc. "tried to rally [Monday], but they came back to unchanged levels," having not gotten any kind of sector-consolidation boost from the Mirant/RRI news either Monday or Tuesday, he said.

Another market source saw Houston-based Dynegy's 7 ¾% notes due 2019 up 2 points at 81 bid, although its 7½% notes due 2015 lost nearly 3 points to end just above 87.

ResCap yield raises questions

A trader said Residential Capital LLC's 8½% notes slated to come due on May 15 were being offered at par, thus yielding 8½%, which he called "pretty cheap for 30-day paper," which he said "would usually trade with around a 3½% yield."

He noted the fact that the ResCap paper had been trading down in the 60s prior to the company's Jan. 5 statement that parent GMAC Inc. had considered bankruptcy as an option for the mortgage unit, but had rejected it, instead opting to accept a nearly $4 billion cash infusion from the federal government and use some $2.7 billion of that for ResCap. That caused the bonds to move up after that to their current levels in the high 90s, especially with GMAC subsequently continuing to do new bond deals to shore up its own liquidity.

"From what we're seeing, nobody knows for sure - nobody has been able to confirm that the company is going to pay these bonds off," he asserted - although GMAC, now under majority control by the government, which would not wish to see a new market setback, would be unlikely to let its problem child default on the $743 million of outstanding bonds next month.

He said there had not been any real scuttlebutt that ResCap was not going to pay off on the bonds - but added that "in trying to get people involved in this, the quote we heard in a couple of spots was 'any idea why this paper is trading so cheap? When [people] hear the name ResCap, they think of a bankrupt company'."

He acknowledged that ResCap and its parent "could have all intentions of paying it off - we haven't heard one way or another - but it makes me raise an eyebrow when I see 30-day ResCap paper trading at an 8½% yield. The market sounds like it has some second thoughts.

"Any other name, that paper offered at 8½% would be bought like THAT. It's something to keep an eye on."

ResCap meanwhile announced that that it has agreed to sell its European mortgage operations to asset manager Fortress Investment Group for undisclosed terms. The Minneapolis-based lender said the deal represents about 10% of its total assets as of Dec. 31.

CIT Group gains

A trader said that CIT Group Inc.'s bonds were "feeling better, in good trading" with the New York-based commercial lender's collection of 7% notes due from 2013 to 2017 up by a point on the short end and ½ point on the long end. The 7% notes due 2013 were ending at 98½ bid, 99 offered, and around 94 bid on the 7% notes due 2017.

Also among the financials, a trader said that Ambac Financial Group Inc.'s paper was mostly in a 37-to-39 context, for issues such as the 5.95% notes due 2037 , which he said was "right around 40, trading probably up a point or two."

The 6.15% hybrid paper due 2087 was ending around 101/2-111/2. With the last trade around 11, he called the bonds up a point from Monday, but "on good volume."

"All of those monoliners [bond insurers] have had a lot of activity. The stocks have been awesome, whipping around."

New York-based Ambac last week reported a fourth-quarter profit of $558.1 million, or $1.93 per share, versus a year-earlier loss of $2.34 billion, or $8.14 per share. However, Ambac warned investors that it has "insufficient capital" to continue operating past the second quarter of 2011, cautioning that it therefore might need to eventually file for bankruptcy.

Auto names hang in

A trader said that General Motors Corp.'s bonds were holding around the 37 area to which they had risen on Monday, with "decent trading" in the Detroit-based top U.S. automaker's 8 3/8% benchmark bonds due 2033.

He also saw GM domestic arch-rival Ford Motor Co.'s 7.45% bonds due 2031 trading in a 93-94 range, after finishing at 93 on Monday. "The market is 93-94, but there were more trades at [9]4 than [9]3," he said, in pegging the bonds up ½ point on the day.

Another trader meantime called the GM benchmarks up a point on the day at 36½ bid, 37½ offered, while the Ford long bonds were ½ point better at 93¼ bid, 94¼ offered.

Tronox trades triumphantly

Tronox Worldwide LLC's 9% notes due 2012 have moved up solidly over the last several days, despite a lack of fresh new news out from the bankrupt Oklahoma City-based manufacturer of chemical pigments.

The bonds were seen going home at 119½ bid, up about 6 points from Monday and some 9 points above where they were trading in the middle of last week.

Tuesday's round-lot volume was around $4 million, a market source said.

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