$1.5 billion of issuance clears calendar; GM's long bond trades off; AMG reports $79.2 million inflow

By Paul A. Harris

St. Louis, May 24 - The broad high yield market was flat to as much as ¼ point lower at the Thursday close, sources said, noting a sell-off in both stocks - with the Dow Jones Industrial Average closing down nearly 85 points - and Treasuries.

One source, spotting 10-year government paper yielding 4.84%, 20 basis points higher over the past two weeks, said that the Treasury move was causing concern, and also remarked that investors might have been positioning for the pending three-day Memorial Day holiday weekend.

A hedge fund manager told Prospect News late Thursday afternoon that the high yield-tracking CDX index was trading at par 9/16 bid, par 11/16 offered, down 1/8 on the day.

Meanwhile the freewheeling primary market cranked out $1.5 billion of issuance in four tranches from four issuers.

And AMG Data Services reported late Thursday that high yield mutual funds saw inflows totaling $79.2 million for the week to Wednesday

That extends the year-to-date positive flows among fund reporting to AMG on a weekly basis to $1.403 billion.

Meanwhile the accounts which report on a monthly basis have thus far seen $3.761 billion of net inflows year to date.

Hence year-to-date aggregate flows, which tally both the weekly and the monthly reporting funds, ended the most recent period at $5.164 billion.

Fontainebleau completes deal

Fontainebleau Las Vegas Holdings, LLC and Fontainebleau Las Vegas Capital Corp. priced Thursday's biggest deal, a $675 million issue of eight-year second mortgage notes (Caa1/CCC+) which it sold at par to yield 10¼%.

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

Banc of America Securities LLC was the left bookrunner for the project financing deal. Barclays Capital, Deutsche Bank Securities and Merrill Lynch & Co. were joint bookrunners.

Proceeds will fund the design, development, construction and opening of the Fontainebleau Las Vegas.

A source close to the deal said that the deal had a little bit of a premium built into it, and added that the par-pricing bonds went out in a 102 3/8 bid, 102 5/8 offered context.

A little earlier a trader had the new Fontainebleau 10¼% notes due 2015 trading at 102 5/8 bid, 102 7/8 offered.

Earlier still, a market source spotted the new Fontainebleaus at 102.50 bid, 102.75 offered.

The source close to the deal said that the Fontainebleau book had in excess of $3 billion of orders.

Biggest since Wynn

The source close to the Fontainebleau deal said that it was the biggest "on-the-Strip" project financing since Wynn Las Vegas LLC priced $1.3 billion of first-mortgage notes due 2014 at par to yield 6 5/8% in November 2004.

The sell-sider conceded that project financing deals are a special case of high yield transaction, and noted that it requires considerable due diligence on the part of accounts in order for them to get comfortable with the project and the disbursement agreements, as well as with management.

Prospect News asked this official whether the project financing brought a different crowd of accounts to the table.

"High yield grew up financing gaming projects, going back to Golden Nugget and Mirage," the official contended, adding that most "blue chip high yield firms" have high quality gaming analysts.

Rural Cellular massively upsized

Rural Cellular Corp. priced a massively upsized $425 million issue of six-year floating-rate senior subordinated notes (Caa2/CCC) at par to yield three-month Libor plus 300 basis points on Thursday.

The deal was increased nearly three times from the originally planned $115 million amount.

The spread to Libor came at the wide end of the Libor plus 275 to 300 basis points.

Bear Stearns & Co. was the bookrunner for the debt refinancing from the Alexandria, Minn.-based wireless provider.

Psychiatric Solutions upsizes

Psychiatric Solutions Inc. priced an upsized $250 million add-on to its 7¾% senior subordinated notes due July 15, 2015 (B3/B-) at 102.75 on Thursday, resulting in a 7.184% yield to worst.

The issue price came on top of the price talk.

Citigroup and Merrill Lynch were joint bookrunners for the acquisition-funding and debt-refinancing deal. The sale was increased from $200 million.

The original $220 million issue priced at par on June 30, 2005.

A source close to the Psychiatric Solutions tap said that the deal went fine, and added that it was oversubscribed approximately two times relative to the upsized amount.

The official also commented that when the Franklin, Tenn.-based company first decided to return to the junk market it was mulling the pluses and minuses of doing a tap versus a new issue.

"In the end they chose to keep the same covenant package, selling at a premium," the official commented, observing that the new notes began trading at 103 bid, 103.25 offered.

Slightly later a trader saw them at 103 bid, 103.50 offered.

Compucom oversubscribed

Elsewhere Thursday CHR Intermediate Holding Corp., the holding company for Compucom Systems, Inc., priced a $150 million issue of three-month Libor plus 725 basis points six-year senior floating-rate toggle notes (Caa1/B-) at 98.50, on the cheap end of the Libor plus 700 to 725 basis points at 98.50 price talk.

Banc of America Securities LLC was the left bookrunner for the dividend deal from the Dallas-based information technology services provider. Citigroup was the joint bookrunner.

A source close to the transaction said that it went very well and added that the order book was 2.5 times oversubscribed.

A market source saw the Compucom notes trading at 99.50 bid, par offered.

Energy XXI upsized

In addition to the above, Energy XXI Gulf Coast, Inc. priced an upsized $750 million issue of six-year senior notes (Caa2/CCC) at par to yield 10% in a Regulation D private-private, on Thursday.

The yield was printed on the tight end of the 10% to 10¼% price talk.

The deal, led by joint placement agents Jefferies & Co., BNP Paribas and RBS Greenwich Capital, was upsized from $700 million.

A trader spotted the Energy XXI 10% senior notes due 2013 trading at par bid, par 1/8 offered at the Thursday close, and added that it appeared there had "not a lot of flipping," meaning that few of the notes actually changed hands.

GM lower trailing converts deal

A hedge fund manager told Prospect News that a convertible securities deal from General Motors Corp. sparked selling in the company's 8 3/8% notes due 2033.

GM priced an upsized $1.305 billion of two-year convertible senior debentures on Thursday to yield 1.5% with an initial conversion premium of 20%. The convertibles were offered at par. The deal was raised from the originally announced $1.1 billion.

The hedge fund source saw GM's 2033 paper going out at 92.75 bid, and added that they opened the day at 93 1/8 bid.

Dura gains further

Elsewhere, a trader who commented that the market was firm on Thursday, said that the Dura Operating Corp.'s deeply distressed 8 5/8% notes due 2012 continued to firm, and were going out at 49.75 bid after having started the session around 46.50 bid.

This source also noted strength in Movie Gallery Inc.'s 11% senior notes due 2012, which traded as high as 87.50, after starting the day 84.25 bid, 85.25 offered. The source added that the Movie Gallery 11% notes were "very active."

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.