Williams Partners prices $600 million deal; Movie Gallery bonds jump

By Paul Deckelman and Paul A. Harris

New York, Dec. 6 - Williams Partners LP was heard to have successfully priced its quick-to-market $600 million offering of 10-year notes on Wednesday. The oversubscribed issue that priced on the tight end of talk and was well received when it freed for secondary dealings. Also pricing was a euro-denominated add-on offering for Spanish issuer Cirsa.

Junk market syndicate sources also saw price talk emerging on deals for NewMarket Corp. and for OPTI Canada Inc., as well as on Regency Energy Partners LP's upcoming seven-year deal, which was also downsized.

In the secondary market, the big winner was Movie Gallery Inc., whose bonds were being quoted up around 3 to 4 points on the session, even as the Dothan, Ala.-based video rental chain operator's shares were jumping around 16%. No hard news was seen out on the company, although there was plenty of speculation that it might have an announcement of a major balance-sheet move soon.

Elsewhere, takeover speculation was seen fueling a rise in Stone Container Corp.'s bonds, which have firmed about 2 to 3 points over the last couple of sessions, a trader said.

Domtar Inc.'s bonds were seen up for a second consecutive session, given a boost by the Montreal-based forest products company's sale of its half-interest in containerboard maker Norampac Inc., whose bonds were also firmer.

A high yield syndicate official said that the broad market was up a little on Wednesday, and noted that bonds from the health care sector had done well during the session.

Williams Partners tight to talk

In the primary, Wednesday's sole dollar-denominated transaction came from Williams Partners.

The Tulsa-based natural gas company priced a $600 million issue of senior bullet notes due Feb. 1, 2017 (Ba3/BB-/BB) at par to yield 7¼%, at the tight end of the 7 3/8% area price talk.

Citigroup, Lehman Brothers and Merrill Lynch & Co. were joint bookrunners for the quick-to-market acquisition and general corporate purposes deal.

An informed source said that in the afternoon when the new Williams paper had freed, the new 7 3/8% notes due 2017 were trading in a 101.50 bid context.

The source added that a very strong book had been built for the deal which ended up being 2½ to 3 times oversubscribed. The source also said that it had seemed possible to actually price the deal inside of talk, but there was a sufficient amount of investor pushback so that it seemed prudent to price within the talk.

Talking the deals

Meanwhile news surfaced on three of the deals that are on the forward calendar as business expected to clear the market by Friday's close.

Opti Canada Inc. has talked its $1 billion offering of eight-year senior unsecured notes (B1/BB) at a yield of 8¼% to 8½%, according to a market source.

The Credit Suisse and RBC Capital Markets led deal is expected to price on Friday.

Elsewhere Regency Energy Partners LP downsized to $550 million from $650 million its offering of seven-year senior notes (B2/B), and talked those notes at 8¼% to 8 3/8%.

The deal, which is being led by UBS Investment Bank, Lehman Brothers and Wachovia Securities, is expected to price on Thursday.

And NewMarket Corp. talked its $150 million offering of 10-year senior notes (B1/BB+) at the 7¼% area.

The deal, via Credit Suisse, is also expected to price on Thursday.

December opportunities

Sell-siders continued to advise Prospect News during the Wednesday session that time is of the essence with regard to getting deals done by the end of the year.

There is a consensus that the third full week of December, which gets underway on the 18th, will be very light in terms of primary market activity.

One syndicate official commented that it might be possible for a well-known credit to still launch a full roadshow and get a deal done before the Christmas break. However, the source said, for lesser known names it may already be too late to get a deal done during the remainder of 2006.

A couple of sell-side sources also suggested that deals which are presently in the market may be undergoing some acceleration, with regard to roadshow timing.

One source said that accounts are likely to begin putting in orders so that they can get away for the holidays, which could prompt issuers to price ahead of originally announced schedules.

Georgia-Pacific rumors strengthen

And sources continue to view the early-to-mid-December primary market as one that is rife for "opportunistic" debt refinancing deals.

"Treasuries are at pretty good levels so there is a good likelihood that will happen," one syndicate official reasoned, well after the Wednesday close.

One name that continued to be bandied about on Wednesday was Georgia-Pacific Corp.

On Tuesday a buy-side source said that Georgia-Pacific is expected to do $1 billion of new bonds, and added that the deal is likely to be led by either Citigroup or Banc of America Securities.

Georgia-Pacific is presently in the market with $1.25 billion in add-on bank debt, a refinancing via Citigroup, Bank of America and Deutsche Bank.

On Wednesday morning a high yield syndicate official suggested that the Georgia-Pacific deal is not exactly the year's best kept secret, but added that it remained to be seen who would get the mandate to lead the bonds.

The source also professed the expectation that the deal would be done soon - certainly before the end of the year - and will come as a drive-by.

Williams Partners up in aftermarket

When the new Williams Partners 7 ¼% notes due 2016 were freed for secondary dealings, a trader saw those bonds "well received," hitting 100.875 bid, 101.375 offered on the break and then continuing to move up to 101.5 bid, 102 offered.

Another trader saw those bonds "move up good" to 101.625 bid, 102 offered, well up from their par issue price.

Among other recent pricings now ensconced in the secondary, a trader saw Nashville-based hospital operator HCA Inc.'s 9¼% senior secured second-lien notes due 2016 having eased to 105.75 bid, 106.25 offered from prior levels at 106.25 bid, 106.75 offered.

He saw Irish drugmaker Elan Corp. plc's 8 7/8% notes due 2013 firm to 101.25 bid from 100.875 bid, 100.25 offered, while Neilsen Finance LLC's 10% notes due 2014 dipped to 106.5 bid, 107.5 offered from 107 bid, 108 offered on Tuesday, but the trader called that retreat "not a big move."

Movie Gallery strong

Back among the established issues, a trader said, "there was a little bit of a pause" in the market, which "had been on a tear over the last week or so." He saw most issues pretty much unchanged and "stuff kind of offered at higher levels."

One significant exception to the generally rangebound trading levels in most names was Movie Gallery, which got two thumbs up from bondholders and from shareholders as well. There was no hard news seen out about the company - but a lot of speculation that an announcement of a significant move to improve its balance sheet might be forthcoming soon.

A trader saw the company's 11% notes due 2012 move up to 75.5 bid, 77.5 offered from 70 bid, 72 offered, though he saw no news. He may have been playing catch up, however, as others saw those bonds move up to about the 77-77.5 bid level from about a 74.5 context previously. One trader pegged them at 76.5-78.5, up 4 points.

Movie Gallery's Nasdaq-traded shares pushed up 56 cents (15.95%) on volume of 8.1 million shares, about eight times the usual turnover.

Among the factors said to be pushing the bonds and shares up were such things as short covering and merger and acquisition speculation, most of it centered around the possibility of a combination with larger movie rental chain rival Blockbuster Inc. or upstart internet rival renter Netflix.

There was also the possibility that the company could soon announce moves to shore up its balance sheet. Back in March, its lenders agreed to ease their enforcement of the financial covenants in Movie Gallery's credit facilities for the remainder of this year - which now can be counted only in days, rather than months. The covenants would go back to their tighter levels at the beginning of 2007, which could put Movie Gallery back in the same straits in which it found itself during the first part of this year.

According to one news report, Movie Gallery has hired Goldman Sachs to help it restructure. There is talk that the company could do a debt-for-equity swap, which would be great for bondholders, but not so good for stockholders who would see their equity diluted. Another possibility being mentioned is a second-lien loan, which would be used to take out some of the existing first-lien debt.

A bond trader, noting the paper's suddenly elevated levels, opined that "the last time the bonds were at this price, the stock was $6. There was no news on the wires but someone knows something. There was some big buys in the bonds and huge accumulation in the stock today."

While acknowledging that "there is always merger potential," he thought it unlikely that the company would hook up with either Blockbuster or Netflix.

Far more likely, he said was the possibility of some kind of effort to refinance the bonds, or at least the bank debt.

"If they did second-lien debt replacing first-lien debt, OK, they merely shuffle the paper and have the same total debt, presumably at a higher interest rate due to second lien status - this might provide short-term covenant relief.

"If they did a debt-for-equity swap, which a lot of people think is the most sensible thing to do, the total debt is reduced not merely reshuffled. This would put a lot of pressure on the stock - but the bondholders would be in control and if a merger offer came along, they could push it through. "

Stone Container seen rocking

Elsewhere, a trader said that he had heard rumors that "Stone Container is in play," with the most likely possible acquirer being investment-graded packaging power Temple Inland Inc.

He saw the company's bonds up 2 to 3 points over the last session or so, with its Smurfit-Stone Container Corp. 8¼% notes due 2012 at 96.25 bid, 97,25 offered and its 7½% notes due 2013 at 94.5 bid, 95 offered. The company's Stone Container Finance Co. of Canada 7 3/8% notes due 2014 finished at 93.5 bid, 94 offered.

He called their 2 to 3 point gain "pretty substantial."

However, another market source saw some of Stone's bonds little changed, its 9¾% notes due 2011 steady at 103.25 bid, its 8 3/8% notes due 2012 up perhaps ¾ point at 99.25, and the 7 3/8s off ½ point at 93.

Domtar better on asset sale

A trader saw Domtar's 7 1/8% notes due 2015 at 98.5 bid, 99 offered, up another point, after a solid move up on Tuesday.

At another desk, a market source called the bonds three-point winners, at 99.

Those bonds have gotten a boost from the news that Domtar was selling its half-interest in Norampac to Cascades Inc. for C$560 million (about $488 million) as Domtar tries to clean up its balance sheet ahead of its pending merger with a unit of Weyerhaeuser Co., North America's largest lumber producer.

Norampac's own 7¾% notes due 2014 moved up a point on Tuesday, the day the news was announced, to 98 bid, 99 offered. The company's bonds continued to rise Wednesday, its 6¾% notes due 2013 half a point better at 98.5 bid, 99 .5 offered.

Portfolio liquidation ahead?

A trader said that he had heard rumors Wednesday of a "big" portfolio liquidation, which could perhaps take place on Thursday. He did not know the name of the rumored liquidator, but did say that about half a billion dollars of bonds would be liquidated, more or less evenly split between high-grade and high yield.

The bonds will likely get a pretty good reception, he theorized, noting that with high yield far outperforming other fixed-asset income classes so far this year "there's real value in high yield," and much cash waiting to be put to work there, apparently undented by the approximately $30 billion of new bonds which have been sold over the past month.

"There will be plenty of demand" for the bonds being sold, he concluded.

Ronda Fears contributed to this report

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