Upsized Boart deal finishes slow primary week, moves up; Solo Cup strong on favorable numbers

By Paul Deckelman and Paul A. Harris

New York, Mar. 18 - Boart Longyear Management Pty Ltd. priced an upsized $300 million offering of 10-year notes on Friday, bringing to a close one of the slowest primary weeks so far this year.

The Salt Lake City-based contract drilling company's offering lifted the week's new issuance total to $3 billion.

When the new issue was freed for secondary dealings, traders saw the bonds firm by more than a point.

Thursday's new issues, such as EV Energy Partners, LP and Pretium Packaging LLC, were seen to have firmed a little from the aftermarket levels they had reached immediately after their respective pricings.

Elsewhere on the new-issue front, British mobile telephone retailer Phones4U was heard by syndicate sources to be shopping a £430 million offering of seven-year senior secured notes, with pricing expected late in the upcoming week.

Away from the new deals, Solo Cup Co.'s bonds firmed smartly in response to relatively favorable fourth-quarter and full-year results. While the company's net loss widened in each of those periods from a year before, sales in each period were better.

General Maritime Corp.'s bonds continued to rebound from the lows they hit earlier in the week after the troubled oil-tanker company said that it would have to delay filing its year-end report with the Securities and Exchange Commission and that it was in talks with lenders and investors on possibly refinancing or restructuring its burdensome debt load.

With junk continuing to follow the lead of equities, traders saw a better overall tone Friday, while statistical performance measures were better on the session, though down for the week.

Boart Longyear upsizes

The Friday session saw a single deal completed.

Boart Longyear priced an upsized $300 million issue of 10-year senior notes (Ba2/BB-) at par to yield 7%.

The yield printed at the tight end of the 7% to 7¼% price talk. The amount was increased from the original $250 million.

Goldman Sachs & Co. ran the books.

Proceeds will be used to repay debt and for general corporate purposes.

The deal went very well considering the circumstances under which it had been marketed, said a syndicate source.

That sell-sider was referring to volatility that rocked the global capital markets throughout the March 14 week, trailing the catastrophic events which continue to unfold following the massive earthquake and tsunami which struck Japan a week ago.

Against that backdrop, market watchers learned that high-yield mutual funds saw $471 million of outflows for the week to Wednesday, as reported by Lipper-AMG - evidence that the massive three-month tide of cash moving into high yield has been stemmed, at least temporarily.

$3 billion week

With Boart into the total, the March 14 week saw $3.023 billion of issuance in eight junk-rated dollar-denominated tranches.

That's the slowest week since the one beginning Feb. 21, which saw $1.05 billion in four tranches.

The past week was the second slowest thus far in 2011.

Year-to-date issuance at Friday's close stood at $77.3 billion in 184 tranches.

Phones4U launches

Looking to the week ahead, England's Phones4U plans to price a £430 million offering of seven-year senior secured notes late in the week.

Goldman Sachs & Co., Deutsche Bank and ING are the joint bookrunners.

Proceeds will be used to help fund the acquisition of the company by BC Partners from Providence Equity Partners.

One other deal is on the road.

American Gaming Systems Inc. plans to market its $150 million offering of five-year senior secured second-lien notes (Caa1/B) through the middle of the week.

Imperial Capital has the books.

Also on the calendar as possible business for the week ahead are deals including Park-Ohio Industries, Inc.'s $200 million, ADS Tactical Inc.'s $270 million, and a dollar- and euro-denominated deal from eAccess Ltd., the size of which has not yet been specified.

Heading into the past week all three were seen as transactions that would possibly clear by Friday's close, but were subsequently overtaken by market conditions.

Interestingly, the deal from Tokyo-based telecom eAccess, featuring dollar-denominated and euro-denominated seven-year notes via left bookrunner UBS Investment Bank, and joint bookrunners ING and Credit Agricole, is heard to be well received among investors, despite reports that the company was at least slightly impacted by the recent catastrophic events in Japan.

Beyond those deals, and pending market conditions, the primary could be quite busy indeed during the week ahead, according to one syndicate banker who has visibility on a possible $9 billion, including three very big deals.

Again, that's pending market conditions.

Boart bonds get better

When Boart Longyear's new 10-year notes were freed for secondary dealings, a trader saw the upsized $300 million issue as having risen to 101½ bid from its par issue price, "so presumably they're improved," although he did not see an offer level.

Another trader queried later on did see the new bonds trading at 101½ bid, 102½ offered

Thursday issues improve

Among the bonds which were priced on Thursday, a trader said "everything held their gains."

Another trader said that Houston-based EV Energy Partners, LP/EV Energy Finance Corp.'s 8% notes due 2019 "moved up a little from the close [Thursday]."

He saw the bonds get up to 100¾ bid, 101¼ offered, up from the par price at which the oil and natural gas acquisition and production company priced its $300 million issue, increased from the originally announced $250 million. The bonds were seen trading in Thursday's aftermarket at 100¼ bid, 101¼ offered.

Another trader saw the bonds Friday at 100 7/8 bid, 101 3/8 offered.

Pretium Packaging LLC's 11½% senior secured notes due 2016 were seen having improved slightly to par bid, 100¾ offered, versus the 99 7/8 bid, par offered level at which the St. Louis-based plastic packaging products maker's $150 million deal had traded on Thursday after pricing at par.

Another trader saw the new Pretium paper at 100¼ bid, but did not see an offer side.

Traders said they had not seen any activity Friday in Dutch hydraulic cylinder manufacturer Hyva Global NV's new 8 5/8% senior secured notes due 2016. The $375 million issue had priced at par on Thursday, and then was seen having moved up to 102 bid, 102½ offered.

Secondary indicators up on day, down on week

Away from the new-deal world, a trader saw the CDX North American Series 15 HY index rise by 7/8 point on Friday to close at 102 7/8 bid, 103 1/8 offered, on top of the 5/8 point gain seen on Thursday. While the index clearly had improved from the week's low point of 101 5/8 bid, 101¾ offered, seen on Wednesday, it still finished somewhat below the 103 1/8 bid, 103 3/8 offered level seen at the close of trading the previous week, on Friday, March 11.

The story was similar with the other market measures - they were up on the day and well up from the depths seen around mid-week, when junk was taking its lumps, but ended below their week-earlier levels.

The KDP High Yield Daily index continued its rebound, gaining 6 basis points on Friday to end at 75.59, on top of the 12 bps jump seen on Thursday, while its yield narrowed by 6 bps Friday to finish at 6.75%, after having come in by 1 bp on Thursday. While the index was improved from its mid-week level of a 75.36 reading and a 6.85% yield, it still lagged behind its week-earlier close at 75.85, with a yield of 6.66%.

The Merrill Lynch High Yield Master II index rose for a third consecutive session on Friday, by 0.182%, on top of Thursday's gain of 0.056%. That lifted its year-to-date return to 3.408% from Thursday's 3.219% and from its low for the week of 3.053%, seen on Tuesday. However that cumulative return remained behind the 2011 peak level of 3.73%, set on Mar. 9.

Advancing issues led decliners for a second consecutive session on Friday, after having trailed them for the previous five sessions. The gainers held a nearly seven-to-five edge over the losers, wider than Thursday's margin of difference - just a relative handful of issues out of the more than 1,300 that traded that day.

Overall market activity, as measured by dollar-volume levels, slid by 31% on Friday, after having risen by 1% on Thursday from the previous session's activity level.

While traders saw a continued improvement in the market tone from the black cloud that seemed to hang above everyone's heads during the early part of the week on Japanese, geopolitical and macroeconomic factors, they said that Junkbondland was considerably more subdued on Friday.

On trader said that "basketball still dominates," with the televised NCAA championships in full swing and monopolizing the attentions of many on a dull Friday afternoon. Activity levels were further lessened by a second straight Friday of sunny shirt-sleeve weather in New York and other Northeastern business centers - it was actually the last Friday of the winter season, even though it didn't feel like it - intensifying the usual tendency of market participants to make an early break for the exits.

Solo not low anymore

Among specific names, a trader said that Solo Cup Co.'s 8½% notes due 2014 were up in active trading following the release Thursday of quarterly numbers that were not as bad as feared.

He said that the bonds had already "been doing better the last week or so, recounting how several weeks ago, the bonds were trading around 90 bid, and then fell to an 83-84 context - perhaps in reaction to rising oil prices, which would translate into higher raw material costs for the Lake Forest, Ill.-based disposable cup and plate company's extensive line of plastic products, including its famous red 16-ounce party cups much-beloved by frat boys everywhere.

Since then, the bonds have crept back up, and on Friday, were trading as high as 89 bid, 89¼ offered early in the day. He said "a lot" of bonds were changing hands in an 88- 88½ context, adding that in fact, they were the most busily traded junk issue.

Solo, a second trader, "was better by a couple of points" on the numbers.

Another trader, seeing them go out at 88¾ bid, which he called up 3¾ points on the day, noted that over $40 million had changed hands, topping the most actives list.

Solo reported that for the fiscal fourth-quarter ended Dec. 26, net sales increased to $409.2 million from $387 million the year before, even though the company's net loss widened to $17.2 million from $4.5 million.

For the full fiscal year, while the net loss grew to $104.2 million from $35.7 million in 2009, sales also improved to $1.58 billion from $1.5 billion the previous year.

Dex One drops

A trader said that Dex One Corp.'s 12% notes due 2017 "got hit pretty good today," seeing the Cary, N.C.-based telephone directory publisher's bonds down 4 to 5 points on the session, to the mid-to-low 60s.

He was unaware of any news developments that might account for the decline, beyond noting that "the space has been heavy for a while," and now it's just down even more.

A market source at another desk saw the bonds tumble to a closing level of about 61 bid from previous levels around 663/4, with about $4 million traded in round-lot transactions on Friday.

With no news seen out, Dex's New York Stock Exchange-traded shares meantime zoomed by 86 cents, at 19.68% in Friday dealings - one of the biggest percentage moves of the day on the Big Board - to end at $5.23. Volume of 1.5 million shares was more than three times the norm.

General Maritime gyrates more

A trader said that General Maritime Corp.'s 12% notes due 2017 were again actively traded, seeing the New York-based oil tanker operator's paper trading at bid levels between 86¼ and 87 "all day," with the last trades at 86¾ bid. He said that was up a little from the 85 area at which the bonds traded on Thursday, which in turn was up from levels around 83 at the close Wednesday.

The bonds had fallen to that level late Wednesday from levels earlier in the day in the low 90s, following the company's surprise announcement after the close of equity trading that session that it would not be able to file its 10-K yearly report with the Securities and Exchange Commission at the scheduled time, instead delaying that until the end of the month, and that it is in ongoing negotiations with potential lenders and investors in hopes of boosting its liquidity via a refinancing or restructuring of its current credit facility debt, or by a potential new issue of debt or equity.

"So they're off the bottom a little bit more, probably just with the market," he said.

"They bounced another point to two," a second trader said, seeing the bonds sailing home wrapped around 87 bid - "off their lows but still well below where they were" pre-news.

At another desk, a trader said over $20 million of the bonds were traded, making them one of the day's busiest junk names, behind volume leader Solo Cup. He saw the bonds "continuing to bounce back," ending at 86¾ bid.

NewPage pops on sale news

NewPage Corp.'s 10% notes due 2012 "continue to be active," a traders said, seeing the Miamisburg, Ohio-based coated-paper manufacturer's bonds trading at bid levels between 66¾ and 673/4.

"The low trade was the last trade of the day," he said.

On Thursday, the bonds were trading in "a wide range" between 66 on the low end and 67+ on the high end, amid the news that NewPage's wholly owned, Maine-based Rumford Paper Co. subsidiary will sell its cogeneration energy assets to a unit of ReEnergy Holdings LLC for $61 million.

Before that, he said, they were trading around 65 bid, 'so that thing keeps moving up".

Earlier in the month, he saw the bonds trade as high as 70 bid, "then they backed off and now they've come back again. He noted that back in January, the bonds were languishing in the high 50s, "so maybe it's connected with the gyrations in the market."

Power names again tower

Traders saw bonds of power generating companies such as Edison Mission Energy and Energy Future Holdings Corp. continuing to trade up, presumably helped by investor realization that new power plant emission standard proposals announced by the Environmental Protection Agency, in the words of one, "could have been worse."

One trader saw Rosemead, Calif.-based Edison Mission's 7¾ notes due 2016 trading around the 84 level on Friday, up from around 83 on Thursday and from an 82 handle on Wednesday.

"They're up a good 4 or 5 points," he said, helped by perceptions of the EPA rules - which seek to restrict emissions of mercury, arsenic and other such toxins by power plants.

Another trader said that Dallas-based Energy Future Holdings' paper, a legacy from its former incarnation as TXU Corp., "continued to rally," trading up around 45½ bid from prior levels earlier in the week in the lower 40s.

He said that while the EPA wants to restrict the emissions of mercury and other pollutants and will require plants to put systems in place to do so, "it allows some of these guys to utilize scrubbers they already had on their plants, and the cost is nowhere near as what it could have been. It does require them to put out some capex up front in the next year or so, but it could have been a lot worse."

Auto names on upside ride

A trader saw the old General Motors Corp.'s 8 3/8% bonds due 2033 at 30½ bid, 31 offered, calling that paper - now officially dubbed Motors Liquidation Co. - up ¾ on the day.

He saw GM domestic arch-rival Ford Motor Co.'s 7.45% bonds due 2031 likewise up ¾ point, at 107¾ bid, 108¾ offered.

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