Upsized Comstock Resources prices; new Hovnanian easier; CIT remains active; Blockbuster adds

By Paul Deckelman and Paul A. Harris

New York, Oct. 6 - Comstock Resources, Inc. was heard by high yield syndicate sources to have successfully priced an upsized offering of eight-year notes on Monday. When the Frisco, Tex.-based independent energy exploration and production company's new issue was freed for secondary dealings, a trader saw them having risen modestly, although on little activity.

Elsewhere in the primary arena - which awaits expected pricings from, among others, GEO Group Inc., Solutia Inc. and Hercules Offshore Inc., the first on Wednesday and the latter two on Thursday - there was not much forward calendar activity, beyond MTR Gaming Group Inc. slating a smallish add-on tranche to the 12 5/8% senior secured notes which the Chester, W.Va.-based racino and pari-mutuel track operator priced back in July.

K. Hovnanian Enterprises Inc.'s newly priced senior secured notes due 2016, which came to market on Monday, initially traded up - but gave up those early gains and came back down, even from the small gains which they had notched in initial aftermarket dealings on Monday, although they remained above the notes' issue price.

United Airlines' split-rated issue of pass-through certificates, which actually priced on Monday, even though terms did not surface until the airline giant announced them early Tuesday, were seen having moved up a little from their issue price.

Among existing issues with no new-deal connections, traders saw another busy session in such names as CIT Group Inc. and Energy Future Holdings Corp., each of which are trying to cut overall debt and extend maturities with debt-exchange transactions. Another notable secondary credit was Blockbuster Inc.

The junk rally continued on Tuesday, a high-yield syndicate official said, but added that cash bonds were only up 1/8 to ¼ point on the day.

Meanwhile the new issue market turned out a comparatively modest amount of news, as two issuers - each bringing a single tranche of bonds - priced $300 million and €750 million.

But stay tuned, advised a banker on the syndicate desk of one of the big dealers.

In the next two weeks there is likely to be quite a meaningful step up of activity in the new issue market.

Comstock upsizes

Comstock Resources priced an upsized $300 million issue of 8 3/8% eight-year notes (B2/B) at 98.571 to yield 8 5/8% on Tuesday.

The yield printed at the tight end of the 8¾% area yield talk. The issue price came in line with talk for approximately 1½ points of original issue discount.

Bank of America Merrill Lynch, BMO Nesbitt Burns and J.P. Morgan Securities Inc. were joint bookrunners for the deal which was upsized from $200 million.

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

Evonik seven-times oversubscribed

Meanwhile in Europe, Evonik Industries AG priced a €750 million issue of 7% five-year fixed-rate notes at 99.489 to yield 7 1/8% on Tuesday, in a deal that was seven-times oversubscribed, according to the company.

The yield printed at the tight end of the 7¼% price talk.

The coupon steps up by 1¼% if two public ratings are not acquired by the first coupon date.

Deutsche Bank, HSBC, Royal Bank of Scotland and UniCredit Group were joint bookrunners.

The deal saw high demand from private and institutional investors, according to a company press release that disclosed some of the terms.

"The strong interest in this transaction underpins the capital market's trust in our group," commented Klaus Engel, chairman of the executive board.

The deal traveled a four-day pan-European roadshow that included London, Paris, Amsterdam, Frankfurt, Munich and Dusseldorf.

MTR plans $10 million tap

Finally on Tuesday, MTR Gaming Group, Inc. announced in an 8-K document that it filed with the SEC that it plans to do a $10 million add-on to its 12 5/8% senior secured notes due July 15, 2014 (existing ratings B2/B).

No further details about the bonds were disclosed.

The original $250 million issue priced at 95.248 to yield 14% on July 24, 2009, via bookrunner Goldman Sachs & Co.

The company also announced that it plans to amend its senior secured credit facility to allow for the add-on.

Comstock bonds seen better

When the new Comstock Resources 8 3/8% notes due 2017 were freed for secondary dealings, a trader quoted those bonds at 99 bid, par offered.

That was up from the 98.571 level at which the $300 million issue had priced earlier in the day.

However, another trader, failing to see any real markets in the issue, opined that Comstock was "probably one of those issues that just get put away - because it's not one of these $1 billion things that you're going to see trading all over the place."

United Airlines certificates gain altitude

A market source said United Airlines' new 10.40% pass-through certificates due 2016 had moved up to 101 bid, 102 offered in morning trading.

That was up from par, where the Chicago-based Number-Two U.S. air carrier's new issue had priced on Monday, although terms first circulated in the market after the company announced them on Tuesday morning.

New Hovnanian bonds back off

A trader saw K. Hovnanian Enterprises' new issue of 10 5/8% senior secured notes due 2016 at 98¼ bid, 98¾ offered, which he called "maybe a half point lower" on the day than the levels where those bonds had gone home after their initial aftermarket trading on Monday. He noted that the bonds had traded higher earlier Tuesday, getting as good as 99¼ bid, 99½ offered.

A second trader saw the $785 million issue trading at 98¾ bid, 99¼ offered, essentially little changed from the levels to which the Red Bank, N.J.-based homebuilder's bonds had risen on Monday after they had priced earlier at 98.208 to yield 11%.

Yet another trader said the bonds "kind of bounced around a little bit today," opening at 99 bid, 99½ offered, but then they "slowly kind of came in a little bit towards the end of the day," before going home at 981/2, "a little bit above issue."

Among existing Hovnanian bonds, one of the traders said the new deal "is why you're getting activity in that name.

"The new issue seemed to bring out the other paper."

He saw the company's existing 6¼% notes due 2016 up a point around 77, although noting that "it was only one trade, it doesn't mean a whole lot."

He added that "they're quoted higher - call them a point higher - but there's not much trading away from the new issue."

Another trader meantime saw the Hovnanian 6 3/8% notes due 2014 gain more than a point on the day to above the 80 level.

Cincinnati Bell bonds firmer

A market source saw Cincinnati Bell Inc.'s recently priced 8¼% notes due 2017 at bid levels slightly above 99. That was up from the 98.562 level at which the Ohio telecommunications provider's $500 million issue had priced last Wednesday to yield 8½%.

The source saw the new bonds busily traded, with over $12 million having changed hands by mid-afternoon.

Another trader said that was "a good-sized amount to be moving around."

Market indicators hold steady

Back among the existing bonds not connected with the new-deal market, a trader saw the CDX Series 13 index unchanged on the session Tuesday at 92½ bid, 93 offered, after having risen 1½ points on Monday

The KDP High Yield Daily Index gained 20 basis points on Tuesday to finish at 68.90, after having risen by 19 bps on Monday, while its yield tightened by 8 bps to 8.42%, on top of having narrowed by 8 bps the session before.

In the broader market, advancing issues led decliners for a third consecutive session on Tuesday, and expanded their advantage to better than four to three, after having led Monday by only a relative handful of issues out of nearly 1,400 tracked.

Overall market activity, as measured by dollar-volume levels, rose by 51% on Tuesday from Monday's pace.

A trader said that at his shop, "a lot of offerings were getting lifted. There was a lot of appetite out there just to put money to work. If it was a decent offering on any decent size, at least from our perspective, it seemed that it was getting lifted."

He saw that happening in CIT Group's beleaguered bonds, as well as in "more on-the-run names," such as GMAC LLC, which "seemed a little active today," and Chesapeake Energy Corp.

CIT saga continues

As had been the case on Monday, a trader said that "kind of the most active thing we saw today" was CIT Group, whose bonds have been on the slide in active trading since Friday's announcement by the New York-based commercial lender launching exchange transactions for many of its bonds, and soliciting noteholder consents to a pre-packaged Chapter 11 filing the company plans on should the voluntary debt exchanges fail to cut debt and extend maturities enough.

Another saw "a lot of activity" in CIT's bonds, which he said had "been all over" during the day. He saw the company's shorter dated paper, like the 6 7/8% notes coming due on Nov. 1, still in a 72-73 context, "about where they've been."

He said he didn't think he saw very much going on in the longer end, quoting the 7 5/8% notes due 2012 around a 64-65 level, which he called "sort of unchanged."

"There was a lot of volume in the short end. I didn't see a lot of trading in the long end - some trading in the 2012s, but not huge volume. So it seems like it's slowing down a little."

Another trader saw CIT's 6 7/8% '09 bonds and its 4 1/8% notes due Nov.3 as each down 1½ points at 70 bid, 72 offered.

He also saw its notes maturing between 2010 and 2017 down a point, in a 64-67 range.

TXU bonds again busy

A trader saw the former TXU Corp.'s bonds "always active, in huge markets" dominated by large block trades from the larger firms.

He saw its Texas Competitive Electric Holdings Co. 10¼% notes due 2015 a point lower at 66½ bid, 67½ offered, on "huge volume all day long, just pages and pages of quotes."

He also saw the company's Energy Future Holdings Corp.'s 10 7/8% notes due 2017 unchanged at 69-70, its 6½% notes due 2024 and 6.55% notes due 2034 at 46-48, "about where they were [Monday]." Its 5.55% notes due 2014 were at 70-72.

Blockbuster is better

A trader saw Blockbuster Inc.'s 9% notes due 2012 around a 60-63 context, "and there was a lot of trading in that one." He called the bonds up "a point and change" on the day, with most of the volume taking place at bid levels between 60 and 62.

Another trader saw the Dallas-based DVD, Blu-Ray and videogame rental company's bonds were trading "anywhere inside" a 60-61 market.

"The best bid we saw [Monday] was at 59 bid, but then it kind of bumped up to the 60 level and bounced around" between 60 and 61.

A market source at another desk estimated that over $16 million of the bonds had traded as of mid-afternoon, making it one of the busiest junk movers of the day. The source saw those bonds slightly firmer, at 61¼ bid.

Blockbuster's recently priced 11¾% senior secured notes due 2014 were quoted Tuesday at around 94¼ bid, "slightly above issue price," a trader said. The company had priced $675 million of the notes - massively upsized from $340 million originally -- on Sept.17 at 94 to yield 15.21%. The new bonds had immediately shot as high as around the par level when they were freed - but then began to come back down later that same day, and have continued to come in since, amid investor concern about the long-range viability of Blockbuster's business model.

The company has been seeking to reinvent itself, moving away from its dependence on increasingly unprofitable brick-and-mortar rental stores, and trying to expand into the internet and mail model for delivering DVDs to customer - a field pioneered by Blockbuster's more financially successful rival, Netflix Inc.

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