Interactive Data jumps up, Calpine prices; Energy Future improves; Clear Channel heads higher

By Stephanie N. Rotondo

Portland, Ore., July 20 - The secondary high yield market held its ground Tuesday and with Interactive Data Corp.'s new deal, one of two new offerings to price Tuesday, bolstering trading.

The new bonds were priced at par but quickly - and instantly - headed higher upon entering the market. One source speculated that there wasn't enough of the paper to go around, resulting in investors scampering for paper on the open market.

Pricing later in the day was Calpine Corp., which was able to upsize its deal to $1.1 billion from the original $750 million.

Away from new issues, Energy Future Holdings Corp. bonds continued to improve as the market evaluates a proposed tender offer. The debt initially traded down upon hearing about the exchange last week, but has since been moving up.

Clear Channel Communications Inc. saw modest gains over the course of the trading day. However, there was no news out to explain the increase.

On the other hand, there was news out to explain why rarely traded Ames True Temper Inc. debt actually did change hands. Late Monday, the company announced it was being sold by its private equity owners. Traders said the bonds did trade, even posting slight gains.

Calpine plays to familiar crowd

The dollar-denominated primary market saw two issuers raise a combined total of $1.79 billion, each one bringing a single tranche.

In an a.m.-to-p.m. drive-by deal, Calpine priced a substantially upsized $1.1 billion issue of 7 7/8% 10-year first-lien senior secured notes (B1/B+) at 99.146 to yield 8%.

The yield printed on top of the price talk. The size was increased from $750 million.

Morgan Stanley, Citigroup, Credit Suisse, Deutsche Bank Securities and Goldman Sachs & Co. were joint bookrunners for the bank debt refinancing deal.

The market buzz held that Calpine allocations were "severe."

However, when asked to confirm this color, a high-yield mutual fund manager said "No, they were horrible."

The deal played to a lot of accounts that like the name and want to increase their exposure to it, according to a syndicate source, who added that the Calpine order book came to about $4 billion.

The deal came out of the gate sized at $750 million, with talk running at 8%, the source added.

That's exactly where the upsized $1.1 billion deal priced, the banker remarked, and commented that high yield is rallying now and the primary market window is open, at least to familiar names such as Calpine.

Interactive Data sees $5 billion demand

Another "familiar name" which the banker included was Interactive Data Corp., which priced a $700 million issue of eight-year senior notes (Caa1/B-) at par to yield 10¼%.

The yield printed at the tight end of the 10 3/8% area price talk.

Barclays Capital Inc., Bank of America Merrill Lynch, Credit Suisse and UBS Investment Bank were the joint bookrunners for the LBO deal, which priced following a roadshow.

The $700 million issue played to $5 billion of demand, syndicate sources said.

"People in the deal included a Who's Who of high-yield accounts," one remarked.

Cegedim euro deal oversubscribed

Meanwhile from Europe, French health care technology company Cegedim SA moved up timing and priced a €300 million issue of 7% five-year senior unsecured notes (/BB+/) at 98.967 to yield 7¼%.

Earlier in the European day, yield talk in the 7¼% area circulated, with pricing set for Wednesday morning.

However, timing subsequently was moved up.

The issue played to a book that contained €400 million of orders, a source close to the deal said.

Investor meetings for the deal were held during the May 17 week, the source added.

However the execution awaited improving market conditions. The dealers reactivated the offering last week with a few telephone calls and meetings.

Credit Agricole CIB and SG CIB were joint bookrunners.

The Paris-based company will use the proceeds to refinance bank debt and for general corporate purposes.

Air Canada starts roadshow

Boarding the forward calendar on Tuesday was Air Canada, which began a roadshow for its $900 million equivalent offering of five-year senior secured first-lien notes (B2/B+).

The deal features dollar-denominated notes and Canadian dollar-denominated notes, with tranche sizes to be determined.

The roadshow wraps up on June 27.

JP Morgan has the books for the Rule 144A for life dollar-denominated tranche.

TD Securities is running the books for the Canadian dollar-denominated notes, which are to be privately distributed.

The Montreal-based airline will use the proceeds to repay its term loan, and for general corporate purposes.

Meanwhile, Tembec Inc. was around to see accounts, with Bank of America Merrill Lynch pushing the doors, according to a mutual fund manager.

"It's a tough deal, so I don't know if they will get it done," the buy-sider commented.

However a Tembec deal is taking shape, although it probably is not a near-term trade, a sell-side source familiar with the matter told Prospect News on Tuesday evening.

And Chemtura Corp. plans to use the proceeds from $1.3 billion of debt issuance to help fund its exit from Chapter 11 bankruptcy, according to a market source.

The debt will come in the form of $800 million of new senior secured notes and $500 million of reinstated 6 7/8% senior notes due 2016.

No syndicate names or timing were available as Prospect News went to press on Tuesday.

The Middlebury, Conn.-based specialty chemical company filed for bankruptcy on March 18, 2009.

Also heard along the grapevine, Tuesday: JP Morgan has a large and building pipeline that is expected September business.

Vantage Drilling whispered at 13½%

Vantage Drilling Co.'s $960 million offering of five-year senior secured first-lien notes, which kicked off a full roadshow on Monday, is being warmly received, according to a high-yield mutual fund manager.

The BP plc debacle in the Gulf of Mexico does not figure into the Vantage deal, at all, the manager said.

"They pre-marketed [Vantage] pretty heavily, and the reaction has been pretty good," the buy-sider said, adding that initial talk has the deal coming at around 13½%, with "pretty tight covenants."

In part, the proceeds will be used to acquire the remaining interest in Mandarin Drilling Corp., the owner of the construction contract for the Platinum Explorer, an ultra-deepwater drillship, and to fund the remaining construction payments for the Platinum Explorer.

"That drillship will be delivered to the Indian Ocean, to the Indian National Oil company," the buy-sider said.

"It is basically done," the investor added, noting that the ship is contracted to the Indian enterprise for five years at $585,000 per day.

"There are some things that could still go wrong, but it's looking pretty good," said the buy-sider, who keeps a close eye on the energy sectors.

BP doesn't figure in, at all, because the Platinum Explorer is going operate in the Indian Ocean for five years, the buy-sider explained.

"Their insurance rates may be up a little.

"But the only way that the BP events impacts these guys is in freeing up some Gulf of Mexico rigs to go elsewhere in the world.

"That could affect the dailies, but this contract lasts for five years."

The Vantage Drilling roadshow wraps up on July 26.

Jefferies & Co. and Deutsche Bank Securities are joint bookrunners.

Low single-B credit ratings are expected to be assigned to the notes.

Market indexes firm

Bonds in the secondary market "held in there" while equities were trading leaner on Tuesday, a trader said.

But then, "the market picked up a lot of steam in the last few hours" as stocks closed the day in the black.

The CDX High Yield Index improved nearly half a point to 96¼ bid, 96¾ offered, according to one market source. The KDP High Yield Index was also better at 71.67, with an 8.33% yield. That compared to Monday's reading of 71.64, to yield 8.34%.

As the market closed on a positive note, a trader speculated that Wednesday would bring "another strong day."

Interactive Data jumps, Calpine prices

New issues might have also helped the secondary universe gain ground, as the market eagerly awaited Interactive Data's new $700 million of notes.

One trader said the new bonds were "pretty busy," with $40 million to $50 million worth of paper being traded at his place of employment alone. Priced at par, the notes quickly jumped to 102½ bid, 103 offered.

Several other traders echoed that market.

Another trader noted that allocations of the bonds had been "severe," as accounts couldn't get their hands on as many of the bonds as they would have liked. He saw the debt hitting the market at 101¾ bid, 102¾ offered, versus its par issue price.

Calpine priced too late in the day for secondary trading, sources said.

Energy Future improves

Energy Future Holdings' debt remained strong throughout Tuesday's session and volume in the name was "a little busier," a trader said, as investors were "still trying to feel out what's really happening and how this tender will shake out."

The trader saw about $30 million to $40 million of the 10 7/8% senior notes due 2017 changing hands, going out around 75 1/8.

"So that's back up," he said, adding that another $30 million to $40 million of the company's other bond issues traded, but those ended essentially flat.

Another trader said the 10 7/8% notes were "rally active," also at 75 1/8. He deemed that level up 1½ points from the previous day.

Another source placed the bonds at 713/4.

Late last week, the former TXU Corp. announced a debt-for-debt-and-cash swap in which the Houston-based company is offering to exchange $2.7 billion of the 11¼%/12% senior toggle notes due 2017 and $1.78 billion of the 10 7/8% notes for new debt and cash. The new debt consists of $2.18 billion of 10% senior secured notes due 2020 and the company is also paying up to $500 million in cash.

For each $1,000 principal amount of notes tendered by the early deadline date, holders will receive $720 for the toggle notes or $785 for the 10 7/8% notes. If tendered after the early deadline, holders will get $670 for the toggle notes and $735 for the 10 7/8% notes.

The breakdown of new debt and cash per each $1,000 tendered will be dependent on how much is tendered by the early deadline. If all bonds are accepted by the early deadline, then holders of the toggle notes would get $134.33 in cash and $585.67 in new notes, while the 10 7/8% noteholders would receive $146.46 in cash and $638.54 in new notes.

However, no cash will be paid out to those tendering after the early deadline.

The early tender deadline is 5 p.m. ET on July 29. The offer expires midnight ET on Aug. 12.

On Monday, Fitch Ratings said it had placed TXU's ratings on review. The rating agency said that while a successful exchange would result in the removal of about $3.6 billion in old notes, the overall reduction in debt would likely not be enough to substantially improve credit metrics.

And, Moody's Investors Service took action against the ratings come Tuesday. Moody's dropped TXU's probability of default rating to Ca from Caa2 and said the outlook remained negative.

Moody's considers the offer a distressed exchange.

Clear Channel heads higher

San Antonio-based multimedia company Clear Channel Communications saw its bonds trading on the active side Tuesday, but there was no news out that would have caused the activity.

A trader said the 10¾% notes due 2016 improved by ½ point, ending the day at 741/2.

Another trader agreed with that level, adding that about $10 million to $15 million of the paper traded.

And, yet another source pegged the issue at 743/4.

Ames trading on sale news

There was "some trading in Ames [True Temper]," a trader said, following news out late Monday regarding the sale of the company to Griffon Corp.

The trader placed the 10% notes due 2012 around par.

"It rarely trades," he noted.

Another trader also saw the bonds around par, which he called better by "maybe a quarter."

Late Monday, the Camp Hill, Pa.-based company announced that Castle Harlan Inc., its private equity owners, had agreed to sell the manufacturer of lawn and garden tools to Griffon for $542 million.

Under the terms of the definitive agreement, Griffon will launch a tender offering for the senior floating rate notes due 2012 and for the 10% notes.

The deal is expected to close by the end of the quarter.

Also, Ames True Temper released estimated third-quarter earnings.

For the 13 weeks ending July 3, the company expects to report net sales of $123 million, a 5% decline from the year before. Net income is estimated to fall 2.7% to 5.8% from year-ago levels.

Broad market inches up

In the rest of the market, Harrah's Entertainment Inc.'s 10¾% notes due 2016 closed over a point higher around 81, according to a trader.

Lyondell Chemical Co.'s bonds continued to be active, another trader reported. He said the 8% notes due 2014 was the most active issue under the Lyondell umbrella, seeing it at 104 bid, 104¼ offered. The 11% notes due 2018 were meantime "very tight" at 107 bid, 107¼ offered.

In the autosphere, General Motors Corp.'s benchmark 8 3/8% notes due 2033 inched up a tad to 32 3/8 bid, 33 3/8 offered. But another trader said the notes were "up half a point late in the day," closing around 323/4.

Ford Motor Co.'s 7.45% notes due 2031 meantime closed a bit better at 94¾ bid, 95¾ offered.

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