Five deals price in $1.4 billion day; Sterigenics, LBI, Hooters, Dresser trade up, Kodak off

By Paul Deckelman and Paul A. Harris

New York, Mar. 11 - After a sleepy start to the week, the high yield primary sphere went out in style on Friday, as five dollar-denominated deals worth about $1.4 billion came to market.

Even so, the week's new issuance only came in at a little more than half the more than $10 billion racked up the previous week, ended March 4.

Traders said the star of Friday's session was medical sterilization services provider Sterigenics International, Inc., whose $475 million offering of seven-year bonds - the big deal of the day, size-wise - shot up by several points on the break and stayed there.

Also making its mark was broadcaster LBI Media Inc.'s downsized $220 million offering of eight-year secured bonds, which was seen up by a pair of points when the deal hit the aftermarket.

Building supplies company Euramax International, Inc.'s $375 million offering of five-year secured bonds appeared late in the day, but was quoted offered at sharply higher levels, though with no bids seen.

The new $300 million Clayton Williams Energy, Inc. eight-year deal behaved more sedately in the aftermarket, hanging around the bonds' issue price.

Thursday's new deals from Hooters Restaurants and Dresser-Rand Group, Inc., were meantime seen continuing to firm on Friday, on top of the gains which they had notched in initial aftermarket dealings.

However, things looked pretty negative for Eastman Kodak Co.'s eight-year secured deal, trading further down from Thursday's already-discounted pricing level.

Secondary activity was seen largely confined to the new issues. Statistical indicators were mixed on the day, but lower for the week.

Sterigenics sells $475 million

A busy Friday session in the primary market saw five issuers, each one bringing a single tranche of bonds, raise $1.42 billion.

Sterigenics International priced a $475 million issue of seven-year senior secured second-lien notes (B2/B) at par to yield 8%.

The yield printed on top of the price talk.

J.P. Morgan Securities LLC, Bank of America Merrill Lynch, UBS Investment Bank and Morgan Stanley & Co. Inc. were the joint bookrunners for the acquisition financing.

Euramax prices wide of talk

Meanwhile Euramax International priced a $375 million issue of five-year senior secured notes (Caa1/B-) at par to yield 9½%.

The yield printed 37.5 basis point beyond the wide end of the 9% area price talk.

Deutsche Bank Securities Inc. ran the books for the debt refinancing deal.

Clayton Williams atop talk

Clayton Williams Energy priced a $300 million issue of eight-year senior notes (Caa1/B) at par to yield 7¾%, on top of the price talk.

RBS Securities Inc., J.P. Morgan Securities LLC, UBS Investment Bank and BNP Paribas were the joint bookrunners.

The company plans to use the proceeds to fund the tender offer for its 7¾% senior notes due 2013, as well as to repay revolver borrowings and for general corporate purposes.

LBI downsized, restructured

LBI Media priced a downsized, restructured $220 million issue of 9¼% eight-year first-lien senior secured notes (B2/B-) at 98.594 to yield 9½%.

The yield printed on top of the yield talk. The reoffer price came in line with discount talk of 1 to 2 points.

In a restructuring of the deal, a special call provision allowing the issuer to redeem 10% of notes annually at 103 during the non-call period was removed. The notes come with standard call features, with the first call at 104.625 on April 15, 2015.

The size was reduced from $240 million.

Credit Suisse Securities, Macquarie Capital and Wells Fargo Securities were joint bookrunners.

Proceeds will be used to repay bank debt.

Due to the downsizing, the company's 11% senior discount notes due 2013 will no longer be redeemed. The company states that it has $28.7 million of pro forma cash on balance sheet and a $50 million undrawn revolver that will be available to pay off 11% discount notes beginning in October 2012.

Hillman taps 10 7/8% notes

The Friday session saw one a.m.-to-p.m. drive-by deal.

Hillman Group, Inc. priced a $50 million add-on to its 10 7/8% senior notes due June 1, 2018 (B3/CCC+) at 109.25.

The reoffer price came at the rich end of the 109 to 109.25 price talk, and results in a 9.092% yield to worst.

Barclays Capital and Morgan Stanley & Co. were joint bookrunners.

Proceeds will be used to fund the company's acquisition of TagWorks, and to repay bank debt.

$6 billion week

With Friday's action into the tally, the March 7 week came to close having seen $6.05 billion of issuance in 17 junk-rated, dollar-denominated tranches.

That extends year-to-date issuance to $74.2 billion in 175 tranches.

MEG Energy sets talk

Looking to the week ahead, MEG Energy Corp. talked its $500 million offering of 10-year senior notes (expected ratings B3/BB) with a 6½% to 6¾% yield.

The roadshow will continue through Wednesday.

Barclays, Credit Suisse, BMO and Morgan Stanley & Co. have the books for the debt refinancing and general corporate purposes deal.

Boart Longyear plans deal

The March 14 week will begin with an active new deal calendar of $2.6 billion.

The Friday session saw one new deal put aboard that calendar.

Boart Longyear Management Pty Ltd. began marketing a $250 million offering of 10-year senior notes.

A roadshow gets underway on Tuesday in New York City, then moves to Boston on Wednesday, to Los Angeles on Thursday, and wraps up in San Francisco on Friday, March 18.

Goldman Sachs & Co. is the bookrunner.

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

Sterigenics is a star

When the new Sterigenics seven-year notes were freed for secondary market dealings, a trader saw them having jumped to 103 bid, 104 offered versus their par issue price earlier, commenting "Wow, is right."

A second trader said: "Once they got into the secondary, around noon-ish [ET]," the new bonds got as high as 103 bid, 103½ offered.

After that, he said, "they backed off a little bit and got a little wider," at 102¾ bid, 103¾ offered, "the last that we saw on those."

"It was almost without warning," yet another trader said, seeing pictures as high as 103 5/8-104, although he said there had only been "a couple of trades, not a lot of volume."

He quoted the new bonds having popped up to a going-home price of 103 3/8 bid, 103 7/8 offered.

"It was like the first market I saw had a 103 handle on it. It didn't really trade up, it just printed up right away.

The trader opined that the deal did so stunningly well in the secondary because it was too cheaply priced to begin with.

"Given the way the market was [on Thursday], guys kind of dropped their hands - so when something comes to market and you feel like you don't have a strong book, you price it cheap enough to blow out," he explained.

"I guess they did it on that one," he said, not so much in terms of a discounted price - it came to market at par - as the interest rate.

"It's a B2/B credit - why did it have to come with an 8% coupon? I don't know?

He theorized that "it's a biomedical [credit], maybe there could be a little volatility in the business" that might cause investors to be a little reluctant. "I don't know."

Market likes LBI

Another solid secondary performer was LBI Media's eight-year senior secured notes. A trader saw the issue move up to 100½ bid, 101½ offered, "a nice move" from the 98.594 level at which the downsized $220 million deal had priced.

A second trader also quoted the bonds at that higher level.

Euramax seen offered higher

Euramax International's offering of five-year senior secured notes was one of the later-pricing deals on the day, and thus did not see a lot of aftermarket action, although a trader did quote the issue offered at 1021/4, with no bids seen, after it had priced at par during the afternoon.

Clayton Williams near issue

While those deals were being quoted solidly higher, Clayton Williams Energy's offering of eight-year bonds was seen little changed from its par issue price, with one trader pegging the Midland, Tex.-based oil and gas company's notes at par bid, 100½ offered and a second seeing them at par bid, 100¾ offered.

Hooters continues to fly

Among Thursday's deals, the $180 million of new 11¼% senior secured notes due 2017 from HOA Restaurant Group, LLC/HOA Finance Corp. - the issuing entities for Atlanta-based Hooter's Restaurants - "grew wings," a trader said, making a pun on the new issue's WINGS ticker symbol, a tribute to its owl corporate mascot.

And like that legendary wise bird, the new bonds were flying for a second straight session after their Thursday pricing at par. The issue had been upsized from the originally planned $165 million.

In Thursday's aftermarket, they rose to 101¼ bid, 102¼ offered, and in Friday's dealings, continued to gain altitude, with one trader seeing them at 101½ bid, 102 offered, and a second seeing them even better, at 101¾ bid, 102¼ offered.

Dresser-Rand rises

Another Thursday deal seen having improved in Friday's trading was Houston-based industrial equipment manufacturer Dresser-Rand Group, whose $375 million of 6½% senior subordinated notes due 2021, after having priced at par, had been quoted as high as 101 bid, 101½ offered in early aftermarket dealings, although they later came off those peaks.

"When trading picked up again on Friday, they were seen at one shop having gotten as good as 101¾ bid, 102¾ offered, with another trader seeing them at a tighter 101¾ bid, 102 offered level.

Kodak gets clobbered

But Eastman Kodak's new 10 5/8% senior secured notes due 2019 continued to disappoint.

The Rochester, N.Y. -based digital photography, film and imaging products maker's $250 million drive-bay offering, upsized from an originally announced $200 million, had priced on Thursday at 98.686 to yield 10 7/8%, and had proceeded to trade in that day's aftermarket not far from their issue price, between 98 5/8 and 99.

But on Friday, a trader said, the new bonds had fallen to 97½ bid, 98 offered. "They were doing nothing," he said, ascribing investors' apparent dislike for the name to market conditions.

Kodak's outstanding 7¼% notes due 2013 - which had been on a tear all week apparently buoyed by the new-deal news, rising to a 99-par context by Thursday after having started the week in the low 90s - were seen staying around the 99 level on Friday.

Secondary signs mixed on day, down on week

Away from the new-deal world, a market source saw the CDX North American Series 15 HY index up by ¼ point on Friday to end at 103 1/8 bid, 103 3/8 offered.

For the week, though, the index was down from 103¾ bid, 104 offered at the close of trading the previous week, ended Friday, March 4.

The KDP High Yield Daily index meantime rose by 1 basis point on Friday to close at 75.85, after having dropped by 8 bps on Thursday. Its yield was unchanged on the day at 6.66%, after having risen by 4 bps on Thursday.

The index closed the week down from the previous Friday's close at 76.01, while its yield widened from the 6.60% seen the previous Friday.

The Merrill Lynch High Yield Master II index lost 0.082% on Friday, on top of its 0.157% retreat seen on Thursday. That left its year-to-date return at 3.482%, down from Thursday's 3.566% and down as well from the 2011 peak level of 3.73%, set on Wednesday.

The index fell by 0.165% on the week, in contrast to the previous week's 0.354% gain - the second week in the past three in which the index has declined, following a long string of advances dating from early December all the way up to late February. The year-to-date return figure was thus down from 3.673% at the close the previous Friday.

Advancing issues trailed decliners Friday for a second straight session, although the margin of difference narrowed to a couple dozen issues out of the more than 1,200 traded, versus the better than seven-to-five edge which the losers held over the winners on Thursday.

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

A trader said that "other than those few new issues that came about today, it was painfully quiet.

"That seemed to be everything that was going on."

A second trader said that "volume was pretty light today overall," and said that even among the new issues, "it was not as active as you might think."

While the Japanese tsunami was bearing down on the West Coast, in New York and other parts of the Northeast, it was quite a different story - shirt-sleeve weather prevailed, and combined with the irresistible lure of the ongoing Big East college basketball tournament going on at Madison Square Garden, and, of course, being a Friday, that no doubt prompted a considerable number of early exits among Wall Streeters. By mid-afternoon, many traders and other market participants were reported gone for the day. A trader, calling the session "one of those crazy, frustrating Fridays," said that among the institutional clients whom he dealt with, many were nowhere to be found. "I had a lot of yellow lights flashing, right around noon."

New Page is busy

Among specific non-new-deal secondary names, a trader said that New Page Co.'s 10% notes due 2012 "was the volume leader today," seeing the Miamisburg, Ohio-based paper company's bonds trading down ¾ point to 1 point, to 66¾ bid.

Dynegy shrugs off bankruptcy buzz

A trader said that Houston-based power generation company Dynegy Holdings, Inc.'s bonds "seemed to be up a few points today."

He saw its 8 3/8% notes due 2016 at 79¼ bid, up from the 76 area the day before. He saw no fresh news out about the company, which earlier in the week warned investors that it might have to seek bankruptcy protection if it is unable to amend or replace its existing loan facility.

At another desk, a market source called the rise to the 79 level a 4 point jump, although a second source said the gain was only around 1¾ points.

Dynegy's 7¾% notes due 2019 were meanwhile being quoted up a little more than 2 points at just under the 72 bid level.

Also in the power-generation space, Edison Mission Group's bonds "popped up a bit after they traded off earlier in the week."

He saw its 7¾% notes due 2016 racking u; "pretty decent volume for today," trading at the 82-83 level, well up from the round-lot level around 79½ at which those bonds - issued by the unregulated power-generating subsidiary of Rosemead, Calif.-based utility operator Edison International - traded on Thursday. He said that besides the 82-83 trades, there were "a whole lot of odd lots bracketing that."

He saw no fresh news out about the company.

Automotive bonds trade off

A trader said that the 8 3/8% benchmark bonds due 2033 of Motors Liquidation Co. - the former General Motors Corp. following its 2009 bankruptcy reorganization - were unchanged at 30 bid, 31 offered.

He saw no news out on the company, which, following the reorganization, was left responsible for the "old GM's" outstanding bonds and other liabilities and unprofitable, unwanted assess while its profitable carmaking operations were split off and formed into an unrelated "new GM."

A trader meantime saw GM domestic arch-rival Ford Motor Co.'s 7.45% bonds due 2031 down ½ point at 107½ bid, 108½ offered.

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