Niska, Equinix lead $2.5 billion primary, new bonds rise; Visteon jumps on Q4 numbers

By Paul Deckelman and Paul A. Harris

New York, Feb. 26 - Like some great Olympic athlete going for the gold, the high-yield primary market came on strong at the end Friday, giving a big kick in the final lap of the race to come roaring across the finish line and snapping the tape in style, as five domestic deals totaling more than $2.5 billion priced. The pricing parade was led by big offerings from Niska Gas Storage, which came to market with $800 million of eight-year senior notes units, and Equinix, Inc., which upsized its eight-year issue to $750 million from $500 million originally.

Also pricing were a $500 million, two-part offering of seven- and 10-year notes from Oshkosh Corp., a $250 million eight-year issue from ArvinMeritor Inc., and $270 million of five-year senior secured notes from Reddy Ice Corp. - the latter deal downsized from the originally announced $300 million and pricing after some covenant changes.

There was also a sterling-denominated deal priced, from Ladbrokes Group Finance plc, which upsized its seven-year offering to £225 million from £200 million originally. All of the day's deals, apart from ArvinMeritor, priced at par. Traders saw Arvin, Oshkosh, Niska and Equinix all trading strongly in the aftermarket, particularly Oshkosh.

New offerings from Garda World Security Corp. and Zayo Group LLC joined the forward calendar.

In the secondary market, away from the newly priced issues, traders saw a surge in Visteon Corp.'s bonds, as the restructuring auto parts company reported fourth-quarter and 2009 full-year profits, versus year-ago losses.

Niska prices $800 million

The primary market churned out $2.57 billion and £225 million face amount of issuance on Friday.

Niska Gas Storage, issuing via U.S. and Canadian financing subsidiaries, priced $800 million notes units (B1/BB-) at par to yield 8 7/8%.

The yield printed in the middle of the 8¾% to 9% price talk.

Morgan Stanley, UBS Investment Bank, Goldman Sachs & Co., Credit Suisse and RBC Capital Markets were joint bookrunners.

Equinix upsizes by $250 million

Elsewhere, Equinix priced an upsized $750 million issue of eight-year notes (Ba2/B+) at par to yield 8 1/8%.

The yield printed at the wide end of the 8% area price talk. The amount was increased from $500 million.

Citigroup Global Markets Inc. and J.P. Morgan Securities Inc. were the joint bookrunners.

Proceeds will be used for general corporate purposes, which may include expansion capital expenditures and debt repayment, including debt expected to be assumed in connection with the company's planned acquisition of Switch and Data.

Oshkosh prices two-parter

Oshkosh Corp. priced $500 million of senior notes (B3/B-) in two tranches.

The Oshkosh, Wis.-based specialty access equipment maker priced a $250 million tranche of seven-year notes at par to yield 8¼%. The yield printed at the tight end of the 8¼% to 8½% price talk.

In addition, Oshkosh priced a $250 million tranche of 10-year notes at par to yield 8½%. The yield on the 10-year tranche also printed at the tight end of the 8½% to 8¾% price talk.

Bank of America Merrill Lynch, Goldman Sachs & Co. and J.P. Morgan Securities Inc. were joint bookrunners for the debt refinancing.

Reddy Ice downsizes

Also Reddy Ice Holdings priced a downsized $270 million issue of five-year first-lien notes (B1//) at par to yield 11¼%.

The yield priced at the wide end of the 11% to 11¼% price talk.

J.P. Morgan Securities Inc., Broadpoint Gleacher and Wells Fargo Securities were joint bookrunners for the debt refinancing deal.

ArvinMeritor brings $250 million

ArvinMeritor priced a $250 million issue of 10 5/8% eight-year senior notes (Caa2/CCC-) at 98.024 to yield 11%.

The yield printed at the wide end of the 10¾% to 11% price talk.

Bank of America Merrill Lynch, J.P. Morgan Securities Inc., Citigroup Global Markets Inc. and RBS Securities Inc. were joint bookrunners.

Proceeds from both the notes and a stock offering priced late Thursday will be used to purchase up to $175 million of the company's 8¾% notes due 2012, to pay down its revolver and its U.S. accounts receivable securitization program and for general corporate purposes.

Ladbrokes upsizes

In Europe, Ladbrokes Group Finance plc priced an upsized £225 million issue of seven-year guaranteed bullet notes (Ba2/BB/BB+) at par to yield 7 5/8%, on Friday.

The yield printed at the tight end of the 7 5/8% to 7 7/8% price talk. The amount was increased from £200 million.

Barclays Capital and RBS Securities ran the books for the Regulation S debt refinancing deal.

Garda starts roadshow Monday

Garda World Security Corp. will begin a roadshow on Monday for a seven-year senior notes deal that will come in tranches of $250 million and C$75 million.

The roadshow wraps up on Friday.

UBS Investment Bank is the left bookrunner for the Rule 144A and Regulation S for life offering. Macquarie Capital is the joint bookrunner.

Proceeds will be used to refinance debt and for general corporation purposes.

Zayo call for Tuesday

Meanwhile, Zayo Group LLC and Zayo Capital, Inc. will host an 11 a.m. ET investor conference call on Tuesday for a $225 million offering of seven-year first-lien senior secured notes.

The deal is set to price later in the week ahead.

Morgan Stanley and RBC Capital Markets are joint bookrunners. Barclays Capital, Oppenheimer & Co. and Suntrust Robinson Humphrey are co-managers.

Proceeds will be used to pay down bank debt and interest rate swaps, and for general corporate purposes.

The coming week

In addition to Garda and Zayo, Express, LLC is expected to price a $200 million offering of eight-year senior notes via Bank of America Merrill Lynch, Goldman Sachs & Co. and Morgan Stanley during the week ahead.

Also on the calendar for the first week of March is Learning Care Group (US) No. 2 Inc., with a $265 million offering of five-year senior secured notes (confirmed B2/expected CCC+).

Barclays Capital Inc., Wells Fargo Securities and Morgan Stanley are joint bookrunners for the deal which is expected to price during the middle of the week.

And Pioneer Drilling Co. is in the market with a $250 million offering of eight-year senior unsecured notes (B3//) via Bank of America Merrill Lynch, Goldman Sachs & Co. and Wells Fargo Securities.

The roadshow is expected to wrap up on Wednesday.

New deals dominate secondary sphere

A trader in the secondary market who was asked what was going one said that from where he sat, Friday was "a new-issue day, that's about it," with the bulk of activity in the newly priced paper.

"Everything has moved up pretty good," he added.

A second trader agreed that the new-issue market was "on fire," consuming most of the secondary side in Junkbondland on Friday.

He suggested that "the underwriters didn't want to get stuck with the new issues, so they priced them rather generously relative to where they would have come two weeks ago," before the market slid into its short, but intense, deep freeze.

The sudden drying up of new-deal activity and the secondary market's mid-month retreat - even briefly dipping into the red according to the widely followed Merrill Lynch High Yield Master II index - "scared the hell out of everybody, so it became a buyers' market again, at least for the last week or so."

He suggested that the issuers and their underwriters "almost had it pre-circled and accounts were telling them where they wanted [the new deals] to price."

Oshkosh opens strongly

The star of the day in the aftermarket seemed to be Oshkosh Corp.'s $500 million two-part bond issue, both parts of which had priced at par and then had proceeded to move up.

A trader saw both the seven-year and the 10-year bonds having moved up to 102¾ bid, 103 offered from those par issue prices, a second had them at 102½ bid, 103½ offered, while a third saw a 103 bid level.

Niska does nicely

A trader said that he had traded "a bunch" of the new Niska Gas Storage 8 7/8% senior note units due 2018 at 101½ bid - well up from the par level at which they had priced the Calgary, Alta.-based natural gas storage company had priced them.

Arvin bonds are up

Several traders quoted ArvinMeritor's 10 5/8% notes due 2018 at 101 bid - up almost 3 points from the 98.024 level at which the Troy, Mich.-based automotive components company had priced its $250 million offering earlier in the day to yield 11%.

ArvinMeritor's existing 8¾% notes due 2012 - most of which are to be taken out via a previously announced tender offer for those bonds financed with the proceeds from the new bond deal - were meantime steady at levels above 1061/2, the total consideration which the company's tender offer announcement on Wednesday said that it would pay for those bonds tendered before the March 8 early tender deadline and accepted for payment. Well after trading had wound down for the session, ArvinMeritor announced that it was upping the amount it will offer for those bonds, with tender offer consideration raised to $1,067.50 per $1,000 principal amount from the original $1,035 price and total consideration likewise increased to $1,097.50 from $1,065. Total consideration includes a $30 per $1,000 principal amount early tender fee for those who tender bonds by March 8. Arvin Meritor is still only tendering for $175 million of the outstanding $276 million of bonds, and will accept notes for purchase on a pro-rata basis, should the tender offer be oversubscribed.

Equinix deal gains

A trader said that Equinix's $750 million of 8 1/8% notes due 2018 were trading at 101½ bid, 102 offered, while a second saw the bonds at 101 7/8 bid, 102 1/8 offered. That was well up from the par level at which the Foster City, Calif.-based data infrastructure services company priced the offering earlier in the session.

Reddy Ice makes late appearance

The one domestic deal which saw no aftermarket action on Friday was Reddy Ice Holdings' 11¼% first lien senior secured notes due 2015, which priced at par too late in the session for any kind of meaningful secondary dealings.

A trader suggested that the issue was late in pricing because of the thinness of the market "on a Friday with a lot of snow, so it's kind of painful."

Another trader, speaking before the pricing, opined that deal - which had been downsized to $270 million from the originally announced $300 million size, with certain covenants in the issue's indenture also changed to presumably reflect investor concerns - was "struggling" to come to market, although it finally did price.

Central Garden moves up

Among recently priced issues, a trader saw Central Garden & Pet Co.'s 8¼% senior subordinated notes due 2018 trading around 101¼ bid, 101½ offered - up from the par level at which the Walnut Creek, Calif.-based lawn, garden and pet care supply company's $400 million deal, upsized from $300 million, had priced on Thursday to yield 8¼%. After that, he said, the bonds had gone down to 100 5/8-1003/4, before closing at 101 bid.

At another desk, those bonds were quoted having gotten as good as 101½ bid, 102½ offered.

RDS trades robustly

The trader saw RDS Ultra-Deepwater, Ltd.'s 11 7/8% senior secured notes due 2017 trading at 99¾ bid, 100¼ offered, while another saw a 99¾ bid, 100½ offered level - well up from the 97.131 at which the offshore energy drilling company's $270 million offering, slightly upsized from $260 million, had priced on Wednesday to yield 12½%.

However, one of the traders said that after some early trades at that level, the credit "sort of disappeared."

Market indicators turn northward

Among bonds not connected with the new-deal market, a trader saw the CDX Series 13 index up ¼ point on Friday to end at 97 bid, 97½ offered, after having eased by 1/8 point in Thursday's dealings. The index thus ends the slightly off from the 97 3/8 bid, 97 5/8 offered level to which it had risen by the close of trading on the previous Friday, Feb. 19, although Friday's level was up from lows in the mid-96 area seen around mid-week.

The KDP High Yield Daily Index meanwhile rose by 12 basis points on Friday to finish at 70.51, after having fallen by 7 bps on Thursday. Its yield tightened by 5 bps Friday to 8.38%, after having widened by 2 bps on Thursday. The index thus finishes the week slightly improved from the 70.45 close seen the previous Friday, while its yield was unchanged versus a week ago.

Another widely followed junk market measure, the Merrill Lynch High Yield Master II index, closed on Friday showing a year-to-date gain of 1.580%, continuing the trend seen last week, which closed out with the index having risen solidly to a 1.137% gain from a loss the week before that. While momentum is now once again trending in the right direction, the index's cumulative return still remains below its 2010 peak level of 2.292% seen at the close on Thursday, Jan. 14.

As of the Friday close, the index's yield to worst had narrowed to 8.935% from the previous week's 9.027%, while its spread to worst has paradoxically widened to 674 bps from 662 bps, in line with a more pronounced reduction in underlying Treasury yields.

Advancing issues - which on Thursday had fallen behind decliners for the first time in eight sessions, trailing by a relatively small margin of about a dozen issues out of the more than 1,400 tracked - moved back on top on Friday, holding a better than six-to-five advantage.

Traders noted the impact of the second major Northeast snowstorm this month on junk market activity levels, with reduced staff in at many places. Despite the intense pace in the new deal arena, the traders said that volume was light on the secondary side. Overall market activity, as measured by dollar-volume levels, slid by some 28% from Thursday's pace.

A trader said that the activity on the last trading day of the month was "all about the primary, and besides that, it was pretty quiet."

A second said that 'even though there was very light trading because a lot of people weren't in, the market was pretty firm today."

Junk jump seen ahead

One of the traders noted that during the week, the junk market got a hefty vote of confidence from the operator of the world's biggest bond fund, with Pacific Investment Management Co. saying in a mid-week report posted on its website that high-yield bonds could possibly show percentage returns this year as good as the low double digits - stronger performance than most market participants were predicting when the year began two months ago.

Pimco high yield portfolio manager Andrew Jessop opined that given current conditions in the financial markets, including continued slower economic growth, which is a negative for stocks, "many investors believe equities could continue to underperform high-yield," making the latter a more attractive investment.

Jessop added that with yields still attractive and a diminished risk of another financial system meltdown, "we believe investors can capture attractive yields and excess spread in the high-yield market with relatively low default risk."

Pimco's more positive assessment of junk's prospects two months into the year echoes other recent assertions that high yield may do better than the mid single-digit returns which may experts had earlier predicted; for instance, veteran high yield guru Martin Fridson was quoted in news reports earlier in the month as suggesting that the junk market "is now offering good value," with a return potential over the next 12 months "comfortably in the low teens."

Today, the trader said, "things felt good," although other than the new-deal names, "it was pretty quiet."

However, Visteon Corp.'s bonds were one of the few names making noise in a generally sleepy secondary, with a trader saying that Visteon was the story of the day. "That was what's going on," he declared, quoting its 8¼% notes due 2010 up a breathtaking 25 points on the session to 76 bid on "huge volume."

He meantime saw the bankrupt Van Buren Township, Mich.-based auto components supplier's 7% notes due 2014 trading between 65½ and 701/2, with most of the trading around 70, which he called a 17 to 18 point gain, with "[good] volume on both."

He said "I guess the market just likes those numbers."

Visteon reported fourth-quarter sales of $2.03 billion, up from $1.65 billion the year before. Net income came to $276 million, or $2.12 per share - an improvement over the net loss of $346 million, or $2.67 per share, for the fourth quarter of 2008.

For the year, Visteon - spun off from Ford Motor Co. a decade ago - reported its first ever yearly profit, with net income coming to $128 million, or 98 cents per share, on sales of $6.68 billion. In 2008, the company reported a full-year loss of $681 million, or $5.26 per share, on sales of $9.54 billion.

-Stephanie N. Rotondo contributed to this report

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