Essar Steel, Quintiles price, new Quintiles firms; calendar builds further; American Axle up

By Paul Deckelman

New York, Dec. 4 - Essar Steel Algoma, Inc. and Quintiles Transnational Holdings Inc. each priced upsized junk bond offerings on Friday, high yield syndicate sources said. When the new Quintiles bonds were freed for secondary dealings, they were heard to have firmed to the par level, up from their discounted price.

The junk forward calendar meantime continued to build, setting the stage, market participants said, for a last-minute borrowing binge before junk players call it a year and head for home, around the end of the month.

New deals were seen from Bumble Bee Foods LLC/Connors Bros. Cloverleaf Seafood Co. and Bumble Bee Capital Corp.; from Novasep Holding SAS; and from United Maritime Group, LLC. That trio of deals joins an already busy calendar that includes names such as JDA Software Group, Inc., price talk for which circulated around on Friday ahead of an expected pricing on Monday. Bumble Bee and United Maritime were heard to have begun roadshows Friday for their respective deals, with Novasep scheduled to hit the road on Monday to market its offering to would-be investors.

Among recently priced issues, Hanesbrands Inc.'s $500 million Thursday deal was seen continuing to shine in the aftermarket on Friday.

Away from the new-issue realm, traders saw solid gains in American Axle & Manufacturing Holdings Inc.'s bonds, although none had seen any especially positive news about the Detroit-based automotive drivetrain components manufacturer that might explain that rise.

Overall, traders saw the secondary maintaining a firm tone - even after an early equity surge that had strengthened junk faded away to just a small blip.

Quintiles prices, trades up

The big deal of the day came from Quintiles Transnational Holdings, which priced a $525 million issue of 9½% senior unsecured notes due 2014 (B3/B) at 98 to yield 10.012% - essentially in line with price talk envisioning an all-in yield in the 10% area, with an original issue discount of 2 points.

The Rule 144A/Regulation S offering, sold without registration rights, was brought to market via joint bookrunners Morgan Stanley & Co. Inc. and Citigroup Global Markets Inc.

The offering was upsized from the $400 million originally planned. The Research Triangle Park, N.C.-provider of services to the pharmaceutical industry plans to use the proceeds to fund a $275 million dividend, as well as related payments to certain option holders of $8 million. Some $97 million of cash will be used to support PharmaBio's future operations and to cash out its fractional shareholders.

A trader saw the new bonds break at 98½ bid, just over their issue price, but with no offer initially seen. However, he said shortly afterward that the bonds had firmed nicely to around a par bid, 100½ offer.

Essar Steel upsizes

Also pricing on Friday was Essar Steel Algoma's $400 million issue of five-year first-lien senior secured notes (B3/B+). The 9 3/8% bonds due 2015 priced at 98.51376 to yield 9¾%, at the tight end of pre-deal price talk which had circulated in the market earlier Friday, envisioning a yield between 9¾% and 10%.

The Rule 144A/Regulation S offering was brought to market via bookrunner UBS Securities LLC.

The deal was upsized from the originally announced size of $325 million.

The Sault Ste. Marie, Ont.-based steelmaker - part of the Mumbai, India-based Essar Group industrial conglomerate - plans to use the proceeds to repay all amounts outstanding under its existing senior secured term loan facility and its existing senior secured revolving credit facility. The remainder will go to general corporate purposes.

The bonds priced too late in the session for any kind of aftermarket activity.

Hanesbrands continues to look good

A Thursday deal which priced and did well in the aftermarket was Hanesbrands' $500 million issue of 8% senior unsecured notes due 2016 that priced at 98.686 to yield 8¼%, at the tight end of pre-deal price talk which had circulated in the market Wednesday, envisioning a yield between 8¼% and 8½%.

The Winston-Salem, N.C.-based apparel manufacturer's new bonds were heard to have jumped to a par bid "right out of the box," as a trader put it, and to finish that session trading in a par-101 range,

On Friday, a trader said, the bonds got at as good as 100½ bid, 101½ offered.

Another trader saw the bonds touch 101, though they then "kind of stabilized" in a 1001/2-100¾ range, which he said was below the day's high but up from the bonds' close Thursday at 100 1/8 - 100 3/8.

Yet a third trader, describing "a lot of activity today" in the credit, saw almost all of that trading go off in a 100½ bid, 101 context, with closing trades centered around 100 5/8-100 7/8.

Calendar continues to fatten

Three more deals clambered aboard an already hefty forward calendar on Friday, which market players expect will still be mostly, or even completely swept bare in a frenzied borrowing barrage over the next week to 10 days, ahead of the inevitable year-end market wind-down.

The newcomers were Bumble Bee, United Maritime Group and Novasep.

San Diego-based Bumble Bee - producer of the iconic canned tuna fish brand that is a ubiquitous fixture on supermarket shelves coast-to-coast - began a roadshow for its planned offering of $220 million of senior secured notes due 2015 (B2/B+).

High yield syndicate sources said that there will be an investor call on Monday, Dec. 7, with pricing expected to take place late in the upcoming week.

The Rule 144A/Regulation S offering, which is being sold with registration rights, will come to market via joint bookrunners Wells Fargo Securities, LLC and Jefferies & Co. Inc.

The company plans to use the deal proceeds to refinance existing debt.

United Maritime - a Tampa, Fla.-based provider of ocean and inland maritime transportation of dry-bulk commodities like grain and coal - also hit the road on Friday with its $200 million offering of seven-year senior secured notes, which will continue through Tuesday, Dec. 15. Pricing is expected shortly after that via joint bookrunners Jefferies, Bank of America Merrill Lynch and Wells Fargo.

The Rule 144A/Regulation S offering is expected to carry a B3 rating from Moody's Investors Service, and a B- from Standard & Poor's.

The company will use the proceeds from the deal to repay existing bank debt.

French pharmaceutical industry services firm Novasep's €370 million equivalent of dollar-and euro-denominated seven-year senior secured notes will be exhibited to potential investors via a U.S. and European roadshow starting Monday and running through Tuesday, Dec. 15. After that, the Rule 144A/Regulation S offering - which is being sold without registration rights - will come to market via bookrunners JP Morgan Securities Inc. and BNP Paribas.

The bonds are expected to be rated B3 by Moody's Investors Service, with a stable outlook, and B with a positive outlook by Standard & Poor's.

Deal proceeds will be used to refinance its existing senior secured debt.

Talk heard on JDA

Syndicate sources heard price talk of 8¼% to 8½% emerge on JDA Software Group's $275 million offering of five-year senior unsecured notes, which are expected to price on Monday.

The Scottsdale, Ariz.-based supply-chain services provider's Rule 144A deal, which is being sold with registration rights, is currently being marketed to potential investors via a roadshow which began on Dec. 1 and which was originally slated to wrap up on Tuesday.

It will be brought to market by joint bookrunners Goldman Sachs & Co. and Wells Fargo.

The company plans to use the proceeds, along with cash on hand, to fund the cash portion of hits acquisition of i2 Technologies, Inc.

The more the merrier

The upcoming deals that circulated in the market Friday capped a busy week of calendar-building; in addition to issues which appeared and then priced, such as the deals for Hanesbrands and for Dynegy Holdings Inc. and Norcraft Cos. LP/Norcraft Finance Corp., other issues which slated during the week and which await pricing include a pair of mega-deals, from British oilfield services concern Expro Group International Ltd., shopping $1.35 billion of seven-year secured notes, and Mexican cement producer Cemex SAB de C.V., which was heard preparing a benchmark-sized offering that could be as much as $1 billion

Besides those behemoths, other companies formally announcing deals during the week, or just heard by market sources to be shopping them around without a formal announcement included Birch Communications Inc., Dollar Financial Corp., DuPont Fabros Technology, LP, the aforementioned JDA Software Group, Primus Telecommunications Holding Inc. and Viskase Cos. Inc.

Market indicators head higher

Back among statistical measures of market performance not related to the new-deal market, a trader saw the CDX Series 13 index up 3/8 point on Friday at 94¾ bid, 95¼ offered, after having risen by 3/8 point on Thursday. The left the popular market gauge well above the 92½ bid, 93 level at which the CDX had finished on the previous Friday.

Meanwhile, the KDP High Yield Daily Index rose by 15 basis points on Friday to 70.10, on top of the 30 bps surge seen on Thursday. Its yield tightened by 4 bps to 8.42%, after having come in by 4 bps the previous session. At the end of the previous week on Friday, Nov. 27, the index stood at 69.65, with a yield of 8.58%.

In the broader market, advancing issues stayed ahead of decliners for a fourth straight session, by about an eight-to-five margin.

Overall market activity, as measured by dollar-volume, fell nearly 18% from Thursday's pace.

A trader said that the market "seemed a little better," for instance quoting a popular benchmark issue, Community Health System Inc.'s 8 7/8% notes due 2015 at 103¾ bid, 104¼ offered. He said that was "up pretty nicely" from the 103 bid, 103¼ close on Thursday, and even better still than the low at the beginning of the week at 102 1/8. The Franklin, Tenn.-based hospital operator's $3 billion bellwether issue "had a good run," which he said was more "indicative of the market" than it was because of any company-specific developments.

Junkbondland, he said, enjoyed "a firm market tone - we moved up with equities early on, on the employment numbers, but when equity backed off later on" to end with just a modest gain on the day, "we didn't back off as much."

Another widely followed issue, Freeport-McMoRan Copper & Gold Inc.'s 8 3/8% notes due 2017, "saw a fair amount of activity, as you might expect when gold was getting slammed around - the precious metal fell some $48 an ounce in New York trading to $1,169.50 - but said that the Phoenix-based copper and gold company's bonds were only down ¼ point at 108½ bid.

Axle motors upward

A trader said that American Axle Holdings had "a nice move for them,' as its bonds were up anywhere from 3 to 5 points, although there was no news out seen out about the Detroit-based company that might explain the gain.

He pegged the company's 5¼% notes due 2014 up around 84, a 5 point gain on the day. Its 7 7/8% notes due 2017 were 3 points better at 79½ bid, 80 offered.

Another trader said that the '17s had firmed into the 80s from levels around 75-76 earlier in the week, suggesting that the relatively favorable economic news about employment - the jobless rate fell to an even 10% - played a key role.

"If the economy improves," a third said, "people will a start buying cars - and every car needs axles."

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