OSI, USI, Clarke American deals price; Ford jumps on lower loss; funds see $200K inflow

By Paul Deckelman and Paul A. Harris

New York, April 26 - OSI Restaurant Partners LLC and USI Holdings Corp. were heard to have priced downsized junk bond deals on Thursday. Also bringing a deal to fruition was Clarke American Corp., although the latter company's $615 million two-part offering came in at the originally envisioned size.

In total, the three issuers combined to price $1.565 billion of issuance in five dollar-denominated tranches.

Three of those five tranches priced richer than price talk. Another priced at the tight end of talk, while the remaining tranche came atop the price talk.

The strong performance prompted one syndicate official to observe that the primary market is presently "rockin'."

Meanwhile the junk market continued to witness the march of financing to the red hot bank loan market: two of Thursday's five tranches were downsized by a combined total of $175 million, with the issuers electing to raise the cash via their credit facilities.

As Thursday's business was clearing the market, Edison Mission Energy began a roadshow for a $2.7 billion three-part mega-deal that is expected to price before the middle of next week.

The new bonds issued by the three companies were seen by traders to have moved up solidly when freed for secondary dealings, with the standout name in that respect being OSI, the parent of the popular Australian-themed Outback Steakhouse eatery chain. Also seen trading up, at least a little, were the bonds of Mariner Energy Inc., which had priced late in the session on Wednesday.

In the secondary market, in addition to the upside movement of all of the newly issued bonds, Ford Motor Co. and its Ford Motor Credit Co. financing arm were solid upside performers, helped by the smaller-than-anticipated quarterly loss posted by the Number-Two domestic carmaker. The latest red ink was far less than Ford posted a year ago - evidence, the company says, that its turnaround plan is working.

On the downside, Wendy's International Inc.'s bonds fizzled - even as its stock sizzled like, well, one of its trademark hamburgers on a hot grill - in the wake of the Dublin, Ohio-based fast food operator's announcement that it would explore different options for boosting shareholder value, which in turn caused the major ratings agencies to regard the company warily, fearing some course of action that might boost leverage.

Also lower were the bonds of some paper and packaging companies, including Bowater Inc., no doubt hurt by that manufacturer's wider first-quarter loss.

Overall, sources gave various spots on the broad high yield market during the Thursday session.

One sell-sider said that it was flat, but felt pretty good.

A high yield syndicate source, who spoke well after the close, also said that the broad market felt good, and added that it seems "directionally better."

"We're still working our way back up from the sub-prime mess, but we're getting there," the syndicate source commented.

Funds see tiny inflow

As activity was trailing off for the day, market participants familiar with the weekly high yield mutual fund flow numbers compiled by AMG Data Services of Arcata, Calif., told Prospect News that in the week ended Wednesday, about $200,000 more came into those weekly-reporting funds than left them.

That followed the $32.5 million inflow seen in the previous week, ended April 18.

It was the second straight inflow - however small - and the fourth in the last five weeks, as the fund-flow numbers seem to be trying to regain the momentum they showed at the beginning of the year, when an aggregate total of some $862 million had come into the funds in the first two months, according to a Prospect News analysis of the AMG figures. That run was then interrupted by a choppy four-week period in March, characterized by alternating weeks of outflows and inflows, none larger than $25 million. Over the past five weeks, though, with four inflows seen, the funds have had a net total infusion during that period of $193.4 million, according to the Prospect News analysis.

On a year-to-date basis, inflows have now been seen in fully 13 weeks out of the 17 since the start of the year, and net inflows total $1.029 billion, according to the analysis, essentially unchanged from the previous week.

Those fund-flow figures exclude distributions.

The flow of money into and out of the junk bond funds is seen as a generally reliable market barometer of overall high yield market liquidity trends - although they only comprise 10% to 15% of the total monies floating around the high yield universe, far less than they used to - because there is no reporting mechanism to track the movements of other, larger sources of junk market cash, such as insurance companies, pension funds and, most recently, hedge funds.

Clarke American prices $615 million

Clarke American turned out Thursday's largest dollar amount of issuance as it priced a $615 million two-part offering of eight-year senior notes (Caa1/B-).

The company priced a $310 million tranche of fixed-rate notes at par to yield 9\½%, 12.5 basis points inside of the 9¾% area price talk.

In addition Clarke American priced a $305 million tranche of floating-rate notes at par to yield three-month Libor plus 475 basis points, on top of price talk.

Credit Suisse, Bear Stearns & Co., Citigroup and JP Morgan were joint bookrunners for the acquisition financing from the Texas-based provider of checks and related products and services.

OSI sells downsized deal

Elsewhere OSI Restaurant Partners priced a downsized $550 million issue of eight-year senior notes (Caa1/B-) at par to yield 9 5/8%, at the tight end of the 9 5/8% to 9 7/8% price talk.

Banc of America Securities LLC was the left bookrunner for the LBO deal from the Tampa-based casual dining restaurants company. Deutsche Bank Securities was joint bookrunner.

The bond issue was downsized from $700 million, with $150 million of the financing shifted to the company's term loan.

USI highly oversubscribed

Meanwhile USI Holdings priced a downsized $400 million high-yield notes transaction.

The Briarcliff Manor, N.Y., insurance company priced a $225 million tranche of 7.5-year senior floating-rate notes (B3/CCC) at par to yield three-month Libor plus 387.5 bps, 12.5 basis points below the Libor plus 400 to 425 basis points price talk.

In addition USI priced a downsized $175 million tranche of eight-year senior subordinated notes (Caa1/CCC) at par to yield 9¾%, 25 basis points better than the 10% to 10 ¼% price talk.

The subordinated notes tranche was downsized from $200 million.

The overall transaction was downsized to $400 million from $425 million, with $25 million of the financing shifted to the company's bank loan.

Goldman Sachs & Co. and JP Morgan were joint bookrunners for the LBO deal.

A source close to the deal said that USI was highly oversubscribed and went very well.

Edison Mission launches $2.7 billion

Edison Mission Energy started a roadshow on Thursday for a $2.7 billion three-part offering of senior notes (expected ratings B1/BB-).

The roadshow is expected to wrap up on Monday, with pricing to follow on Tuesday.

The company plans to sell tranches of notes maturing in 2017 and 2027. The final maturity of the third tranche remains to be determined, according to the source, who added that all three tranches will be non-callable.

Citigroup, Credit Suisse, Deutsche Bank Securities, Goldman Sachs & Co., JP Morgan, Lehman Brothers and Merrill Lynch & Co. are joint bookrunners.

Proceeds will be used to fund the tender for $600 million of the company's 7.73% senior notes due June 15, 2009, as well as to fund dividend to its immediate parent, Mission Energy Holding Co., and fund the tender for Holding Co.'s $799.957 million 13½% senior secured notes due 2008.

In addition proceeds will be used to fund a capital contribution to subsidiary, Midwest Generation, LLC and help fund Midwest Generation's tender for $1.0 billion of its 8¾% second priority senior secured notes due 2034 and repay Midwest Generation's secured term loan.

The Rosemead, Calif.-based electric power generator and distributor is a wholly owned subsidiary of Edison Mission Group.

Countrywide, China Properties tweak talk

Two junk-rated deals are on tap for Friday.

Countrywide plc (Castle Holdco 4, Ltd.) tweaked the price talk on its £640 million three-part notes offer on Thursday, according to an informed source.

The London-based estate agent set talk for its £370 million tranche of seven-year senior secured cash-pay notes (B2/B) at three-month sterling Libor plus 287.5 basis points, in the middle of the previously announced 275 to 300 basis points range.

Meanwhile Countrywide revised talk on its £100 million tranche of seven-year senior secured toggle notes (B2/B) to three-month sterling Libor plus 325 basis points. The toggle notes had previously been talked to price 25 to 50 basis points behind the cash-pay notes, which would have seen them pricing to yield sterling Libor plus 300 to 350 basis points.

The company also lowered talk on its £170 million tranche of eight-year senior unsecured notes (Caa1/CCC+) to 9 7/8% from the 10% area.

Pricing, which had previously been expected to take place on Thursday, was rescheduled to Friday due to the mergers and acquisitions timetable, according to an informed source.

Credit Suisse, Deutsche Bank Securities and Goldman Sachs & Co. are joint bookrunners for the acquisition financing.

Elsewhere China Properties Group lowered price talk on its $300 million offering of seven-year senior notes (B1/B+) to 9 1/8% to 9¼% from previous talk of 9 ¼% to 9 ½%.

The Shanghai-based developer's deal, which is being led by Merrill Lynch & Co., is also expected to price on Friday.

Outback bonds lead new-deal surge

When the new OSI Restaurant Partners 9 5/8% notes due 2015 were freed for secondary dealings, traders saw the bonds take a kangaroo-like jump to 102.875 bid, 103.125 offered from their par issue price, and they were still hanging in and "holding pretty well" around those levels at day's end, one market source said.

USI Holdings' two-tranche issue also sprang upward, with the company's floating-rate senior notes due 2014 getting up to 101.875 bid, 102.125 offered, and its 9¾% senior subordinated notes due 2015 doing even better, at 102.375 bid, 102.625 offered, both up from a par issue price. At another desk, a trader saw the latter issue at a somewhat wider 102.25 bid, 103.25 offered.

Clarke American's two tranches of new eight-year bonds, which also priced at par, were likewise seen having done well, with its 9½% notes at 101.375 bid, 101.625 offered and its floaters up somewhat more modestly, at 100.25 bid, 100.375 offered. Another trader saw the 91/2s at that same 101.375-101.625 context, while the floaters were at 100.125 bid, 100.5 offered.

Among the issues which had priced on Wednesday, Mariner Energy's 8% notes due 2017, which had priced at par, too late in that session for any meaningful aftermarket activity, moved up slightly in Thursday's dealings to 100.5 bid, 101.5 offered.

And Petroplus Finance Ltd.'s new 6¾% notes due 2014, which had priced Wednesday at par and then had moved as high as 101 bid, 101.5 offered before settling in slightly below that, at 100.75 bid, 101.25 offered, were seen having retreated further still, to 100.25 bid, 100.75 offered. However, the Switzerland-based oil refiner's 7% notes due 2017, which had also priced at par, hung in Thursday at the same 101 bid, 101.5 offered level at which they had ended Wednesday's trading.

Ford motors upward on less red ink

Back among the established issues, Ford looked like the big winner of the day, as its bonds, and those of its Ford Motor Credit subsidiary, were cruising in the fast lane on the strength of the company's relatively not-so-bad quarterly performance.

While Dearborn, Mich.-based Ford lost $282 million (15 cents per share) in the first quarter, that was far less red ink than the year-earlier plunge of $1.42 billion (76 cents per share). While sales decreased, and losses increased, as expected, in Ford's core North American market, Ford turned in stellar numbers in Europe, which helped hold losses well below the estimates of up to $1 billion that some analysts were anticipating. Excluding one-time special expenses, Ford's quarterly loss was $171 million (9 cents per share) - well under the approximately 60 cent per share of ex-items losses Wall Street was looking for.

A trader saw Ford's benchmark 7.45% notes due 2031 up 1½ points at 79.5 bid, 80.5 offered, while another saw those bonds up 1 3/8 points at 79.75 bid, 80.25 offered. Another source said that those Ford bonds were probably the most actively traded issue on the day in junk bond land, and pegged them up 1 3/8 points at 80 bid.

A source at another desk meantime saw Ford's 7½% notes due 2026 up 1¼ points at 78 bid, and its Ford Motor Credit 7% notes due 2013 up ½ point on the session at 95.5.

Ford arch-rival General Motors Corp.'s flagship 8 3/8% notes due 2033 got a lift from its competitor's strength, rising 5/8 point to 91 bid, 91.5 offered.

Wendy's gyrates at lower levels

Elsewhere, Wendy's bonds were seen bouncing around at mostly lower levels, after the company said it would look into ways of boosting its value to its shareholders - a phrase which bondholders often interpret to mean setting up some kind of a debt-funded special dividend or stock buyback, although it could also include a sale of all or part of the company.

A trader saw its 7% notes due 2025 ping-ponging around inside a 5 point range of 87 to 92, before ending about in the middle, at 89 bid, 91 offered. However, that source said that the "4B" rated bonds usual were not much seen at many junk desks before the most recent news. "Nobody had a big interest in them until just recently," he said.

But another source pegged those same bonds considerably higher, although the same pattern - a sharply lower opening, eventually followed by a modestly lower close - was in effect. That source said that the 7s had opened around 94, well under Wednesday's close at 99, dropped as low as 91 during the day, and then went home around 95.

At that same desk, its 6¼% notes due 2011 were seen opening down nearly 2 points at around 99, and edging back up to 99.5

Both Moody's Investors Service and Standard & Poor's put Wendy's bonds under scrutiny for a possible downgrade from their current levels (Ba2/BB+), citing the company's plans to review its alternatives.

Paper names crumpled up

Paper and forest products names were seen mostly lower after a key member of the group, Bowater, said its quarterly loss grew to $35.4 million (62 cents per share) from a loss of $18.8 million (33 cents per share) during the same period last year. Excluding special items, including a gain on a big asset sale, it posted a loss of $48.6 million (85 cents per share).

Also weighing on the sector, which is largely Canadian-based, is the strength of Canada's dollar, which hovers just below 90 U.S. cents. The strong loonie is a drag on Canadian paper companies' export sales.

Bowater's 9 3/8% notes due 2021 were down ½ point at 98.5. Abitibi-Consolidated Inc.'s 8½% notes due 2029 were a point lower at 87; Bowater is in the process of acquiring Abitibi. Competitor Catalyst Paper - the former Norske Skog Canada's 7 3/8% notes due 2014 were ½ point down at 95.5 bid.

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