Community Health sells upsized $1 billion, Concho, CMS bring deals; Bon-Ton pops post-earnings

By Paul A. Harris and Stephanie N. Rotondo

Portland, Ore., March 7 - Community Health Systems, Inc. led high-yield primary market activity with a substantially upsized $1 billion add-on sale of senior notes.

The deal was one of three in Wednesday's market, which also saw new paper from Concho Resources Inc. and CMS Energy Corp.

In trading, the junk market was mostly positive, though indicators were mixed by the end of business.

"It was a quiet day waiting for [new issues] to price, then it heated up in the last 20 minutes, as everyone is flipping," a trader said.

But away from the new deals, Bon-Ton Stores Inc.'s debt was "crankin'," according to a trader. The bonds were up as much as 5 points on the day after the company released its fourth-quarter results.

In other earnings news, Hovnanian Enterprises Inc. also reported Wednesday. Despite a narrower loss, the homebuilder's bonds were barely changed.

Hawker Beechcraft Acquisition Co. LLC paper was on the quiet side and unchanged during midweek trading but its bank debt was declining. A trader said the losses were due to news out Tuesday regarding the company's hiring of restructuring advisors.

Community Health massively upsizes

The primary market saw three issuers, each one bringing a single tranche of notes, raise a total of $1.92 billion on Wednesday.

Community Health Systems priced a massively upsized $1 billion add-on to its 8% senior notes due Nov. 15, 2019 (B3/B) at 102.5.

The reoffer price came at the cheap end of the 102.5 to 103 price talk, and rendered a 7.447% yield to worst. The amount was increased from $750 million.

Credit Suisse Securities (USA) LLC, Bank of America Merrill Lynch, Citigroup Global Markets Inc., Credit Agricole Securities (USA) Inc., J.P. Morgan Securities LLC, Morgan Stanley & Co. LLC, RBC Capital Markets, LLC, SunTrust Robinson Humphrey, Inc. and Wells Fargo Securities, LLC were the joint bookrunners for the quick-to-market transaction.

The Franklin, Tenn.-based publicly traded hospital company plans to use $750 million of the proceeds to fund a tender offer for its 8 7/8% senior notes due 2015.

The original $1 billion issue priced at par on Nov. 14, 2011.

Concho prices at the wide end

Concho Resources priced an upsized $600 million issue of 10.5-year senior notes (B1/BB+) at par to yield 5½%, at the wide end of the 5¼% to 5½% price talk. The amount was raised from the original $500 million.

J.P. Morgan Securities LLC, Bank of America Merrill Lynch and Wells Fargo Securities, LLC were the joint bookrunners for the quick-to-market issue.

The Midland, Texas-based oil and natural gas company plans to use the proceeds to repay bank debt.

CMS prices at the tight end

CMS Energy priced a $300 million issue of 5.05% 10-year notes (Ba1/BB+/BB+) at a 312.5 basis points spread to Treasuries.

The spread came at the tight end of the Treasuries plus 325 bps spread talk.

Barclays Capital Inc., BNP Paribas Securities Corp., J.P. Morgan Securities LLC, Bank of America Merrill Lynch, RBS Securities Inc. and UBS Securities LLC were the joint bookrunners for the quick-to-market issue.

The Jackson, Mich.-based energy company plans to use the proceeds to repay its outstanding convertible notes and for general corporate purposes.

Verso plans secured deal

There was one deal announcement on Wednesday.

Verso Paper Holdings LLC and Verso Paper Inc. plan to sell $345 million of seven-year senior secured notes.

Timing of the deal was not immediately available when the announcement was made on Wednesday.

Credit Suisse Securities (USA) LLC, Barclays Capital Inc., Goldman Sachs & Co. and Citigroup Global Markets are the joint bookrunners.

The Memphis, Tenn.-based producer of coated papers plans to use the proceeds to refinance its first priority senior secured notes due 2014 and for general corporate purposes.

Indicators mixed

Market indexes were mixed in midweek trading, according to sources.

The KDP High Yield Index was unchanged from Tuesday at 74.12, with a 6.6% yield. However, the CDX North American High Yield Index moved up slightly to 96½ bid, 96¾ offered.

Among benchmark bonds, Ford Motor Co.'s 7.45% notes due 2031 were up nearly a point to 127½ bid, 128½ offered.

Community Health up on add-on

Meanwhile Community Health's new deal was seen higher when it began changing hands in the secondary.

Several traders pegged the add-on at 103¼ bid, 103½ offered, while another source quoted the notes at 103 3/8 bid, 103 7/8 offered. All were improved from the 102½ issue price.

Proceeds from the new deal will be used to tender for the 8 7/8% senior notes due 2015, the company said. That issue was therefore creeping up as well.

One trader placed the 8 7/8% notes around 104, while another market source deemed the issue up slightly at 104¼ bid.

A third source saw the paper even higher at 104½ bid, 105 offered.

Brentwood, Tenn.-based Community Health is an operator of acute care hospitals in non-urban markets located throughout the United States.

Bon-Ton climbs up

Bon-Ton Stores' 10¼% notes due 2014 were "crankin'," a trader said, seeing the bonds up 5 points on the day.

He placed the notes around the 72 mark.

Another trader said the debt was "very active," also seeing it end around the 72 level.

A third source called the debt up 4 to 5 points around 73.

The York, Pa.-based retailer said in its earnings release Wednesday that fourth-quarter profit dropped 8.1% due to weaker same-store sales and margins. For the quarter ending Jan. 28, profit was $78.2 million, or $4.00 per share. That compared to $85 million, or $4.41 per share, the year before.

Same-store sales fell 2.6% in the quarter and gross margin declined to 34.6% from 37% previously.

Total sales were $983 million, a 2.7% decrease from the year before.

Bon-Ton also provided 2012 guidance, forecasting earnings of 15 cents to 75 cents per share, with same-store sales gaining 1% to 2%.

On the positive side, the company did buy back $46 million of its bonds and ended February with $453 million of excess borrowing capacity.

Hovnanian steady with numbers

A trader said Hovnanian Enterprises' 10 5/8% notes due 2016 were "probably sideways" following the Red Bank, N.J.-based homebuilder's earnings release.

He quoted the issue at 88 bid, 88½ offered.

Another trader said the notes were up slightly at 89.

For its first fiscal quarter, Hovnanian reported a narrower loss of $18.3 million, or 17 cents per share. That compared to a loss of $64.1 million, or 82 cents per share, the year before.

The improved loss came as net contracts improved 27% year over year.

Also, revenues were $269.6 million, up 6.7%. Gross margin, however, slid to 16.5% from 16.9%.

Analysts had been expecting a loss of 47 cents per share on revenue of $288 million, according to a poll taken by Thomson Reuters.

Hovnanian ended the quarter with $201.7 million in cash and equivalents, including $35.7 million of restricted cash.

Hawker worries

Hawker Beechcraft's bonds were little moved but its strip of bank debt dropped on Wednesday to 72 bid, 74 offered from 73 bid, 75 offered with concerns that the company may be heading towards a restructuring, according to sources.

"Story out yesterday that the company has hired Alvarez & Marsal to assist with restructuring. Also, bonds began trading flat yesterday. All news points towards a restructuring in the near future," a buy-side source remarked.

The company's 8½% and 8 7/8% bonds were quoted at 12 bid, 15 offered, and its 9¾% bonds were quoted at 2 bid, 5 offered during the session, a trader added.

In the bonds, a trader saw the 8 7/8% and 8½% notes due 2015 trading flat around 13 and the 9¾% notes due 2017 around "6 or so," also flat.

Another trader said the senior notes were "still in the low-teens," while the subs were around 5.

Hawker Beechcraft is a Wichita, Kan., maker of business, general aviation, training and special mission aircraft.

Broad market heads higher

Among other goings-on in the market, a trader said ATP Oil & Gas Corp.'s 11 7/8% notes due 2015 were a point higher at 681/2. He also saw Chesapeake Energy Corp.'s 6 5/8% notes due 2020 rising to 1021/2.

Also in the energy space, Edison International Inc.'s paper "bounced back" after getting beat down on Tuesday, the trader said. He saw the 7½% notes due 2013 gain a deuce, finishing around 791/4, while the 7¾% notes due 2016 moved up a point to 641/4.

The 7% notes due 2017 were also a point better around 60.

At another desk, a trader said Nortel Networks Inc.'s 10 1/8% notes due 2013 were ½ point firmer at 1123/4.

"I think it's just people looking for places to park money," he said.

Sara Rosenberg contributed to this article

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