TXU, Air Medical, Tutor Perini deals price, Air Medical sizzles but TXU fizzles; Sabra slates

By Paul Deckelman

New York, Oct. 15 - After Thursday's relative breather, the barrage of new deal pricings resumed on Friday, as the week closed out with a total of nearly $1.2 billion of new paper having come to market during the session, bringing the week's tally to nearly $5 billion.

Texas Competitive Electric Holdings Co. LLC and TCEH Finance Inc.'s deal, which was a no-show on Thursday, finally priced on Friday morning, upsized to $350 million of 101/2-year senior secured notes. However, when those bonds went into the aftermarket, traders reported that they fell by several points from their par pricing level.

However, that was not the case for Air Medical Group Holdings, Inc./AMGH Merger Sub, Inc.'s $545 million offering of eight-year secured bonds. After the emergency air services provider's deal priced, traders reported that those bonds continued to lift off, firming by several points in the secondary.

Also pricing was California construction company Tutor Perini Corp., bringing a $300 million issue of eight-year notes. Those bonds came to market too late for any meaningful secondary activity.

Traders saw most of the bonds which priced earlier in the week continuing to do well in the aftermarket, although they came off a little from the highs hit in Thursday's initial dealings. But Clearwater Paper Corp., Manitowoc Co. Inc. and Regency Energy Partners LP/Regency Energy Finance Corp. continued to do well, and Sino-Forest Corp. was also on the upside. XM Satellite Radio Inc.'s new offering, however, finished out the week still pretty much anchored to its par issue price.

The junk forward calendar saw one definitive deal slate, for Sabra Health Care LP and Sabra Capital Corp., whose $225 million eight-year offering hits the road on Monday.

TXU deal appears, finally

Texas Competitive Electric Holdings Co. LLC and TCEH Finance, Inc. priced their upsized $350 million offering of 101/2-year senior secured second-lien notes (Caa2/CCC/B) at par on Friday to yield 15%, according to high yield syndicate sources. The issue came to market in line with previously circulated price talk.

The quickly-marketed deal had been announced and shopped around on Thursday, and there were some expectations then that it would price by the end of Thursday's session, but that was floated off until Friday morning.

The transaction was upsized from the $300 million issue which was originally announced on Thursday.

The bonds came to market via Citigroup Global Markets, Inc., the left bookrunner; other book runners were J.P. Morgan Securities LLC, Goldman Sachs & Co. and Credit Suisse Securities (USA) LLC.

Bank of America Merrill Lynch and Morgan Stanley & Co. Inc. were co-managers on the deal.

The issuers, which are both subsidiaries of Energy Future Holdings Corp., the Dallas-based power generation and electric utility company formerly known as TXU Corp, have said that they plan to use the deal proceeds to pay down some of the company's massive bank debt, and/or partially repay some of its outstanding bonds, specifically its 10¼% notes due 2015 and 10½%/11¼% senior toggle notes due 2016

The bonds are substantially similar, including indenture covenants, to the $335.905 million of 15% senior secured second-lien notes due April 1, 2021, which the company issued in connection with its below-par exchange offer, concluded earlier this month, that took out roughly $478 million of those 2015 and 2016 bonds.

New Texas Competitive takes a tumble

While the Texas Competitive Electric bonds may have priced at par, they did not stay there for very long. A trader said Friday morning that he was "already seeing 98 trades" in the new paper, and he later said that the bonds would probably go out at that level.

A second trader saw the new notes do even worse, pegging them around 97 bid, 98 offered late in the day.

Another trader, looking at the trading levels for the first time, summed up the bond's fall in one word: "Wow!

"That wasn't pretty," he opined. "Somebody obviously made a mistake."

At another desk, a market source suggested that "they overpriced the issue" at par "just to get them out the door."

Traders meantime continued to see brisk activity in the Texas Competitive Electric 2015 and 2016 notes, a small portion of which could be taken out with the bond-deal proceeds. That possibility had spurred active trading in them on Thursday, which slopped over into Friday.

One trader saw "lots and lots of trades all day" in those bonds, seeing the 10¼% notes due 2015 ending at 63 bid, 64 offered, which he said "doesn't sound a whole lot different" from where they had finished on Thursday, when the bonds traded up about 1½ points on news of the TXU bond deal.

But he said that "there was a lot of activity today, obviously because of the [new] deal."

He meantime saw the 10½% senior toggle notes due 2016 ending at 56 bid, 57½ offered.

He saw considerably more activity though in the new 15% secured notes due 2021, which ended around 97½ bid, 98½ offered.

Air Medical prices, heads skyward

Away from Texas Competitive, the success story of the day was Air Medical Group Holdings and AMGH Merger Sub's $545 million offering of eight-year senior secured notes (B2/B).

The bonds priced at par to yield 9¼%, at the tight end of price talk envisioning a yield in a 9¼% to 9½% range.

They came to market via joint bookrunners Barclays Capital Inc., Bank of America Merrill Lynch, Citigroup Global Markets, Inc. and Morgan Stanley & Co. Inc.

Proceeds are to be used to help finance the roughly $1 billion leveraged buyout of the West Plains, Mo.-based provider of emergency air medical services - it claims to be the largest independent provider in the world - by Bain Capital LLC. The transaction was announced in late August.

A Bain Capital affiliate will lead a recapitalization of the company in partnership with management and AMGH's current investors, the private equity firms Brockway Moran & Partners and MVP Capital Partners.

When the new bonds hit the secondary market, traders said they immediately began to gain altitude.

One saw those notes going home at 102¾ bid, 103 offered, well up from their par pricing.

A second saw them even better, at 103 bid, 103½ offered.

Most new bonds higher

Those Air Medical bonds were not alone in hovering at higher levels.

A trader said that Sino-Forest's 6¼% notes due 2017 were being offered at 1011/2, although he said he did not see any trading.

A second trader quoted the bonds late in the day at 101 bid, 102 offered - up from the par level at which the Chinese forest products company's upsized $600 million offering had priced on Thursday.

Among Wednesday's deals, Clearwater Paper's upsized $375 million of 7 1/8% notes due 2018 continued to hold around 103¼ bid, 104 offered - down a little from its immediate post-pricing highs above 104, but still well up from their par issue price.

A trader Friday saw Manitowoc Co.'s 8½% notes due 2020 trading around 101¼ bid, 101 3/8 offered.

The Wisconsin-based industrial equipment maker's upsized $600 million deal moved up to its current levels after pricing at 99.165 on Wednesday.

A trader saw Regency Energy's 6 7/8% notes due 2018 at 102¼ bid, 102½ offered. That remained well up from the par level at which the Dallas-based natural gas company's $600 million offering had priced Wednesday.

Still lagging, however, was XM Satellite Radio.

The New York-based satellite broadcaster's upsized $700 million of 7 5/8% notes due 2018 were seen Friday at about the same par to 101 context they had previously held, after pricing at par on Wednesday.

However, a trader cautioned that when talking about how the week's new deals did, it would be misleading to lump XM in with Texas Competitive Electric, since "XM is not TXU. They're still up [above par] - they just didn't rally a couple of points like the other guys did."

Tutor Perini comes to market

Tutor Perini priced a $300 million issue of eight-year senior notes (Ba3/BB-) later in the session on Friday.

High yield syndicate sources said that its 7 5/8% notes priced at 99.258 to yield 7¾%, in line with market price talk, but did not go into the aftermarket because of the lateness of the day.

The bonds came to market via bookrunner Deutsche Bank Securities, Inc. following a road show which began on Monday.

The Sylmar, Calif.-based civil and building construction company plans to use the new-deal net proceeds for general corporate purposes, which could include acquisitions and stock repurchases.

Sabra deal to hit the road

On the forward-calendar front, Sabra Healthcare LP and Sabra Capital Corp. were heard by syndicate sources as beginning to shop an offering of eight-year senior notes.

Sabra will begin a roadshow on Monday to showcase the bond issue to potential investors. That marketing push will continue through Oct. 22, with pricing of the bonds expected after that.

The bond deal will be brought to market by joint bookrunners Bank of America Merrill Lynch, Citigroup Global Markets, Inc., J.P. Morgan Securities LLC and Wells Fargo Securities LLC.

RBC Capital Markets Corp. will serve as a co-manager.

The bonds are being issued in connection with the pending spinoff of Sabra, a healthcare real estate investment trust, from Irving Tex.-based Sun Healthcare Group Inc., which together with its subsidiaries, provides nursing, rehabilitative, and related specialty healthcare services to nursing home patients in the United States.

Under the terms of the company restructuring announced in August, the Sun will split into two publicly traded companies - Sun Healthcare, which will be an operating company, and Sabra, which will hold all of Sun's current properties and real estate and operate as a REIT.

Market indicators seen easier

Away from the new-deal world, a trader saw the CDX North American Series 15 HY index down ¼ point on Friday at 99 3/8 bid, 99 5/8 offered, after having retreated by ½ point on Thursday. The index thus ends pretty much unchanged compared with the level at which it closed out the previous week on Friday, Oct. 8.

The KDP High Yield Daily index meantime eased by 2 basis points on Friday to close at 74.22, after having risen by 6 bps on Thursday. Its yield tightened by 1 bp for a second straight session to end at 7.29%. The index showed improvement on the week from the previous Friday's 73.97 reading and 7.37% yield.

The Merrill Lynch High Yield Master II index fell by 0.014% on Friday, following its 0.04% backtracking on Thursday. That left its year-to-date return at 13.511%, off from Thursday's 13.527%, which in turn was down from the 2010 peak level of 13.572%, set on Wednesday. However, on the week, the index gained 0.386%, to finish above the previous Friday's 13.075% level.

Advancing issues fell behind decliners on Friday for the first time after 14 consecutive sessions on the upside, dating back to mid-September. However, the margin of difference - as had been the case on Thursday - was just a relative handful of issues - maybe a couple dozen out of the nearly 1,500 traded.

Paper names continue to pop

Among specific non-new-deal names, a trader said that NewPage Corp.'s bonds were "incredibly active," seeing the Miamisburg, Ohio-based coated-paper manufacturer's bonds rise by 3 to 5 points during the session, "and then they faded and gave it all back."

He saw "a lot of activity" in the company's 10% notes due 2012, seeing them jump as high as 62 bid intra-day, before falling off that peak to go back out around 581/2, the same level seen on Thursday.

"Paper seemed popular, again" said another trader, noting the firmness in the sector over the last few sessions.

Autos in reverse on ratings news

A trader saw General Motors Corp.'s benchmark 8 3/8% bonds due 2033 weaken a little during the day, but end the session at 34 bid, 35 offered, which he called unchanged on the day. "There was some volume," he said, "but not much."

Another trader saw the GM benchmarks ending down ¼ point at 34 5/8 bid, 35 5/8 offered.

He saw GM domestic arch-rival Ford Motor Co.'s 7.45% bonds due 2031 down ¾ point at 109½ bid, 110½ offered, after having traded as high as 111¾ bid, 112¾ offered around mid-week.

The trader said the bonds likely fell on Friday on indications that its ratings would remain in speculative-grade territory for the next 12 months. Moody's Investors Service - which just last Friday raised Ford's corporate family rating to Ba2, the fifth such Ford upgrade by the ratings agency in the past 13 months - said on Thursday that it is likely to maintain Ford's Ba2 and GM's Ba2 ratings for the next 12 months.

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