Crown Holdings, Empire Today price upsized drive-by deals; post-holiday market largely quiet

By Paul Deckelman and Paul A. Harris

New York, Jan. 18 - Crown Holdings, Inc. and Empire Today, LLC came to market on Tuesday with upsized "drive-by" offerings - $700 million for packaging maker Crown and $150 million for floor-covering seller Empire. However, the two deals came to market too late in the session for any kind of trading.

High-yield syndicate sources meantime heard price talk on Florida East Coast Railway Corp.'s $450 million of six-year notes. Pricing of the Jacksonville, Fla.-based freight transportation company's deal is seen possible for late Wednesday after the order books close.

The sources also said that Great Lakes Dredge & Dock Corp., Packaging Dynamics Corp. and Europe-based issuers Swissport International Ltd. and Anglian Water Group were beginning roadshows for their respective deals.

Realogy Corp. also indicated plans to line up $700 million of secured debt financing in order to repay the company's term loans.

Away from the new-issue realm, traders reported a mostly quiet day as market participants continued to stagger back in to work after a three-day weekend.

They did see Catalyst Paper Corp.'s bonds continuing to come down from the peak levels seen a week ago on the company's announcement of an upcoming bond redemption.

There was little follow-through to Friday's gains in the bonds of Smithfield Foods Inc., which came after the Virginia-based hog producer announced plans for a modified Dutch Auction tender offer for a portion of its outstanding bonds - even though company executives had positive news on the debt front at the company's annual investor day presentation.

Crown upsizes drive-by

Two issuers, each pricing a single tranche of junk bonds, raised a combined $848 million in Tuesday's primary market.

Crown Holdings subsidiaries Crown Americas LLC and Crown Americas Capital Corp. III priced an upsized $700 million issue of 10-year senior notes (Ba3/BB-) at par to yield 6¼%.

The yield printed at the tight end of the 6 3/8% area price talk.

Deutsche Bank Securities Inc., Barclays Capital Inc., Bank of America Merrill Lynch, RBS Securities LLC and UBS Investment Bank were the joint bookrunners for the quick-to-market issue, which was upsized from $600 million.

The Philadelphia-based packaging company will use the proceeds to refinance its existing 7¾% notes due 2015 and for general corporate purposes.

Empire Today, at the tight end

Meanwhile, Empire Today and Empire Today Finance Corp. priced an upsized $150 million issue of six-year senior secured notes (expected ratings B3/B) at 98.941 to yield 11 5/8%, at the tight end of the 11¾% area price talk.

Jefferies & Co. ran the books for the quick-to-market debt-refinancing deal, which was upsized from $140 million.

Florida East Coast Railway

Setting the stage for Wednesday's session, Florida East Coast Railway talked its $450 million offering of six-year senior secured notes (Ba3/B+) with an 8¼% to 8½% yield.

Bank of America Merrill Lynch is the bookrunner.

Proceeds, along with a $165 million equity contribution, will be used to repay existing debt and for general corporate purposes.

Packaging Dynamics to price

Meanwhile, the new issue calendar grew with the announcements of deals denominated in dollars, pounds and Swiss francs.

Packaging Dynamics began marketing a $400 million offering of five-year senior secured notes on Tuesday.

Goldman Sachs & Co. is the left lead bookrunner. Deutsche Bank Securities is the joint bookrunner.

The Chicago-based flexible packaging company will use the proceeds to repay its notes maturing in 2016 and its credit facility and to pay a dividend.

Great Lakes Dredge hits road

Elsewhere, Great Lakes Dredge & Dock will begin a roadshow on Wednesday for a $250 million offering of eight-year senior notes.

Deutsche Bank Securities and Bank of America Merrill Lynch are the joint bookrunners.

Proceeds will be used to repay the company's 7¾% senior subordinated notes due in December 2013 and for general corporate purposes, which may include acquisitions.

Swissport's CHF 750 million

Apart from those dollar-denominated offerings, Zurich-based Swissport was heard to be marketing a CHF 750 million equivalent offering of seven-year notes (B2/B).

The deal, which will be comprised of dollar-denominated and Swiss franc-denominated bonds, is set to price during the week ahead.

Citigroup is the left lead bookrunner. Barclays Capital, BNP Paribas and RBC Capital Markets are joint bookrunners for the leveraged buyout financing.

Anglian Water's £200 million

And in another LBO financing, Anglian Water (Osprey) Financing plc is expected to begin marketing its £200 million offering of five-year senior secured notes (Ba3//) during the present week.

Barclays Capital, BNP Paribas, HSBC, Lloyds TSB, Morgan Stanley and Royal Bank of Scotland are leading the deal.

New deals not much seen

The new Crown Holdings and Empire Today deals priced too late in the session for any kind of aftermarket activity, market sources said.

Meanwhile, new deals priced last week were not really seen around much either.

A trader said that Petrohawk Energy Corp.'s new 7¼% notes due 2018 "just weren't moving, really." He said that the bonds stayed "basically" around a 1021/4- 102½ bid context "all day long."

That was around the level where the Houston-based oil and natural gas exploration and production operator's upsized $400 million of the bonds moved up to on Friday after having priced as an add-on to its existing issue earlier that session at 101 7/8 to yield 6.837%.

However, at another desk, a market source said that the issue had gotten as good as 104 bid during the day, although after those outlier trades, the final round-lot transactions of the day left the bonds around 102¾ bid.

Secondary indicators stay firm

Away from the new-deal world, a trader saw the CDX North American Series 15 HY index up by 1/8 point on Tuesday to 103¾ bid, 104 offered after having gained ¼ point on Friday, the final session before the three-day holiday just past.

The KDP High Yield Daily index meantime rose by 5 basis points on Tuesday to end at 75.02 after having gained 4 bps on Friday. Its yield was unchanged at 7.08% after coming in by 2 bps on Friday.

The Merrill Lynch High Yield Master II index gained 0.054% on Tuesday after having risen 0.068% on Friday. Its year-to-date return increased to 1.454%, a new peak level for 2011 so far, eclipsing the previous high-water mark of 1.333% set on Friday.

Advancing names topped decliners for a 15th straight session on Tuesday, although their advantage dwindled to just a few dozen issues out of the more than 1,500 that traded from the not-quite seven-to-five edge the gainers held on Friday.

Overall activity, represented by dollar-volume levels, rose by 6% on Tuesday after having declined on Friday ahead of the three-day holiday break.

A trader said that as is frequently the case in a session after a three-day holiday weekend, trading was spotty and disjointed as market participants straggled back to their offices with their heads still in a holiday mode and tried to get back into a mood to do some work.

"It was a pretty light Trace volume day, and quiet over all," another trader said.

Several noted the impact that continued foul weather in New York and the Northeast was having in terms of limiting market attendance and undermining participants' focus.

Yet another trader said that "it was kind of quiet and seemed like folks were just looking at the new-issue calendar" rather than doing very much in the way of moving existing paper around.

Catalyst retreat continues

A trader said that overall, "paper seemed a little lower," and specifically mentioned that he had seen Catalyst's 7 3/8% notes due 2014 fall.

He said that the Richmond, B.C.-based paper manufacturer's bonds had begun the day at 83 bid, then dropped down to 80 and finally ended the day around 81½ bid, 82 offered.

"Down 2 points, up a point, down a point on the day," he summarized, noting that "those were the ones that moved," and on "decent volume," versus the 11% notes senior secured notes due 2016, which have recently been trading above par. He saw the latter bonds - recently as good as around 102-103 - fall to 101 bid but said that the 7 3/8s "were the big movers."

"I don't know how much activity there was in those [i.e., the 11s] - the 7 3/8s seemed to be more active."

A second trader called the latter bonds "kind of active," seeing them easing to 81½ bid.

Those bonds had risen as high as 86 bid, 86½ offered around the middle of last week - a gain of at least 4 or 5 points from their prior levels - after Catalyst announced plans a week ago for an early redemption on its 8 5/8% notes scheduled to come due on June 15; instead, the company called the bonds for redemption at par on Feb. 11. Market sources suggested that the call announcement was a sign of Catalyst's resolve to improve its balance sheet, thus pushing its other bonds not involved in the redemption higher.

However, after hitting those peak levels last Wednesday, the Catalyst bonds began to come in, with the 7 3/8s declining to around 84 bid on Thursday and easing another point to 83 on Friday and continuing to erode on Tuesday.

"They bounced up too much [last week] on that news," the second trader said, estimating a fall of at least 3 points over the last two or three sessions.

Traders trying to explain the slippage said that the redemption news was not that big a deal. "I didn't understand it," the second trader said. "Those bonds went up by 5 points - I thought it was ridiculous."

He and other traders noted that only $26 million is being taken out by the call - the amount that remains currently outstanding of the $400 million originally sold early in the last decade by Catalyst's corporate ancestor, Norske Skog Canada Ltd., which issued $250 million in 2001 and an additional $150 million in 2003. Partial redemptions over the intervening years have whittled the outstanding amount down to present levels.

They also pointed out that the Feb. 11 early redemption only shaves slightly less than four months off the life of those bonds.

While Catalyst was backtracking, a trader said that its Miamisburg, Ohio-based sector peer, NewPage, stayed "right around" the 97 bid, 98 offered level at which he had seen that company's 8 3/8% senior secured notes due 2014 finishing up last week.

Smithfield slacks off

Traders saw Smithfield Foods Inc.'s bonds meandering around at slightly lower levels than they had traded at on Friday, when the Smithfield, Va.-based pork processor and hog producer's paper had firmed smartly on its mid-week announcement of a partial tender offer for its bonds.

Its 7¾% notes due 2013 were seen trading in a 108-109 context all day - little changed from their levels Friday, when the bonds had jumped about 3 points on the news that it would seek to take out some of the 7¾% paper via a modified Dutch Auction tender process.

On a round-lot basis, the bonds ended at 109 bid - actually down by a half-point from Friday's last large-block trade.

Smithfield's 7¾% notes due 2017 meanwhile got as good as 107¼ bid, a market source said, but ended down more than a point around the 105 level.

The Smithfield bonds turned in a lackluster performance even as executives told participants in the company's annual investor day presentation that it is close to having just $200 million of debt reduction to go on its previously stated goal of lowering debt by $1 billion by the end of fiscal 2012 (see related story elsewhere in this issue).

OPTI Canada a little lower

A trader said OPTI Canada Inc.'s bonds were "a little lower" on the day, quoting the Calgary, Alta.-based oil-sands energy company's 7 7/8% senior secured second-lien notes due 2014 at 69 bid, 70 offered, which he estimated was down a point.

However, he emphasized that these were quotation levels, as opposed to actual trades, in keeping with the overall quiet market seen on Tuesday.

He called activity in OPTI Canada "very thin - virtually no activity."

He quoted the company's 8¼% notes also due in 2014 at that same 69-70 level, down 1 point on the day, on "not much activity."

OPTI Canada's bonds had drifted down to around the 70 area at the end of last week from levels around 72 bid they briefly touched earlier in the week after the problem-plagued company had some rare good news for investors. At that time, it reported an 11% increase in daily production of bitumen crude oil in December at the Long Lake, Alta., oil-sands facility that 35%-owner OPTI runs in a joint-venture with partner Nexen Inc., which owns the other 65%.

Bondholders, as well as shareholders of the two companies, have worried that the facility has been slower than anticipated in ramping up to its projected target levels for the extraction of bitumen, a thick and heavy grade of crude oil that the plant owners hope to convert into the more desirable and profitable light sweet crude oil using a proprietary technology.

But while daily average production increased from 26,200 barrels in November to 29,100 barrels in December, that is still less than the 38,000-to-45,000 daily average that Nexen recently estimated for this year - and that in turn is still well below the 72,000 barrels per day figure that the three-year-old plant is theoretically capable of producing.

GM stays parked

A trader saw "not much activity" in Motors Liquidation Co.'s benchmark 8 3/8% bonds due 2033 issued by the "old" General Motors Corp. before its 2009 bankruptcy reorganization. He pegged the carmaker's bonds at 36¾ bid, 37 offered, which he called unchanged "on very low volume."

A second trader though said the benchmark bonds were down 1 point on the day at 36 bid, 37 offered, though on only light trading.

He meantime saw GM domestic arch-rival Ford Motor Co.'s 7.45% bonds due 2031 down 1¼ points at 107¾ bid, 108¾ offered.

Jennifer Lanning Drey contributed to this report

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