Calumet, American Rock Salt deals to close out week; Iasis plans bonds; funds add $234 million

By Paul Deckelman and Paul A. Harris

New York, April 15 - Calumet Specialty Products Partners LP/ Calumet Finance Corp. priced an upsized $400 million of eight-year notes on Friday, high yield syndicate sources said.

Also pricing was a $175 million offering of eight-year secured notes from American Rock Salt Co. LLC/American Rock Salt Capital Corp.

That capped a week which saw more than $7 billion of new paper come to market, exceeding the previous week's total of not quite $6 billion.

In a rare euro-denominated deal for a domestic borrower, Indiana-based Dometic Corp. priced €202 million of eight-year toggle notes.

There were also euro-denominated deals pricing from U.K.-based Geo Travel Finance SA, Italy's Guala Closures SpA and Belgium's Goodyear Dunlop Tires Europe BV

Price talk emerged on Carmeuse SA's $375 million of seven-year senior secured notes, which is expected to price Monday.

Meanwhile, Iasis Healthcare LLC was heard likely to do a bond deal as part of its debt refinancing and dividend refunding transaction.

And market participants belatedly heard that high yield mutual funds, considered a reliable barometer of overall junk market liquidity trends, showed a third consecutive weekly net inflow.

Funds gain $234 million

During the session, participants familiar with the weekly AMG high-yield mutual fund flow statistics generated by Lipper/FMI said that in the week ended Wednesday $234 million more came into those funds than left them.

The fund flow numbers generally percolate through the junk bond market late in the day on Thursday, but did not emerge until Friday morning this time around, for unknown reasons.

The inflow was the third consecutive cash infusion, coming on the heels of the $1.04 billion injection seen in the previous week, ended April 6, and in the week before that, ended March 30, a $510 million cash addition.

Those inflows, totaling some $1.78 billion, stood in sharp contrast to the outflows seen over the two previous weeks ended March 16 and March 23, totaling $1.146 billion, according to a Prospect News analysis of the figures.

The recent choppy pattern followed a 14-week streak of inflows dating back to the week ended last Dec. 8. During that time, a net of more than $8 billion had come into the junk funds.

Before the two weeks of downturns, inflows had been seen over the first 10 weeks of 2011, amounting to over $6 billion, the Prospect News analysis said.

The latest inflow lifted the year-to-date cumulative inflow total to $6.87 billion, a new peak level for 2011, from the previous week's $6.63 billion total.

With 15 weeks gone in the year, there have now been 13 inflows against just the two outflows.

EPFR sees $726 million inflow

Another fund-tracking service, Cambridge, Mass.-based EPFR Global, whose methodology differs somewhat from AMG, meantime reported a $726 million inflow in the latest week.

That followed the previous week's $1.49 billion cash addition, which the company called a record for the time that it has been tracking fund flows.

As was the case with the AMG numbers, the latest three weeks' EPFR inflow represented a reversal of a two-week pattern of cash-loss which had, in turn, broken the string of 14 consecutive inflows dating to early December.

The latest week's cash infusion lifted the year-to-date net inflow number up to $17.7 billion, EPFR said.

AMG and EPFR calculate their respective fund-flow totals differently, although the two services' numbers generally point toward the same trends most weeks. EPFR includes results from some non-U.S. domiciled funds as well as the domestic funds.

Cumulative fund-flow estimates, whether from Lipper/FMI or EPFR, may be revised upward or downward or be rounded off and could include unannounced revisions and adjustments to figures from prior weeks.

Analysts say the continued flow of fresh cash into junk - and the mutual funds represent but a small, though observable and quantifiable, percentage of the total amount of money coming in - fueled the record new deal borrowing binges seen in both 2009 and then in 2010 as well as the robust secondary market seen both years. Both of those trends have been pretty much continuing in 2011 as well.

Calumet prices at tight end

A brisk Friday primary market session saw two issuers price dollar-denominated junk bonds for a combined total of $575 million.

And four issuers priced euro-denominated junk for a total of €823 million

Calumet Specialty Products Partners, LP and Calumet Finance Corp. priced an upsized $400 million issue of eight-year senior notes (B3/B/) at par to yield 9 3/8%.

The yield printed at the tight end of price talk which had been set in the 9½% area.

Merrill Lynch and Goldman Sachs & Co. were joint bookrunners for the debt refinancing deal.

American Rock Salt heavily oversubscribed

Meanwhile American Rock Salt Co. LLC and American Rock Salt Capital Corp. priced a downsized $175 million issue of seven-year second-lien senior secured notes (B3/CCC+) at par to yield 8¼%.

The yield printed at the tight end of price talk which had been set in the 8 3/8% area. The amount was reduced from $200 million.

Morgan Stanley & Co. Inc. ran the books.

In addition to downsizing the bonds, the Retsof, N.Y.-based rock salt producer increased its term loan to $300 million from $250 million.

The overall amount of debt financing increased to $475 million from $450 million.

Proceeds will be used to repay debt at the holding company and fund a dividend. The additional proceeds generated by the upsizing of the overall debt financing will be used to increase the dividend.

The deal was heavily oversubscribed, according to an informed source, who added that the level of interest allowed pricing to be tightened down significantly from the pre-marketing whisper.

The deal was trading at 101½ bid in secondary.

The big high yield accounts played by the deal despite its relatively small size, the informed source added.

$7.6 billion prices in week

With Calumet and American Rock Salt in the tally, the primary market generated $7.6 billion of issuance in 18 tranches, during the week to Friday's close.

That extends year-to-date issuance to $109.3 billion in 259 tranches.

Goodyear Dunlop prices

Meanwhile activity also remained vigorous in the European high-yield on Friday.

Goodyear Dunlop Tires Europe BV priced a €250 million issue of eight-year senior notes (Ba2/BB) at par to yield 6¾%, at the tight end of the 6¾% to 7% price talk.

JPMorgan, BNP Paribas and Credit Agricole CIB were the joint bookrunners for the debt refinancing deal.

Guala brings €200 million

Beverage container-manufacturer Guala Closures SpA priced a €200 million seven-year senior notes (B2/B) at par to yield 9 3/8%, in the middle of the 9¼% to 9½% price talk.

Intesa Sanpaolo SpA, Natixis, Credit Suisse Group and UniCredit SpA managed the debt refinancing deal.

Dometic completes PIK notes

Frostbite 1 AB, a special purpose vehicle of Dometic Corp., priced a €202 million issue of 12¾% eight-year senior PIK notes (Caa1/CCC+) at 98.00, resulting in a yield of 13.16%, according to a market source.

Goldman Sachs International ran the books for the acquisition financing.

Geo Travel prices mid-talk

Geo Travel Finance SCA priced a €175 million issue of eight-year senior notes (Caa1/B-) at par to yield 10 3/8%.

The yield printed in the middle of the 10¼% to 10½% price talk.

Goldman Sachs International and Credit Suisse were the joint bookrunners.

Proceeds will be used to help fund the acquisition of Opodo by Permira Advisers LLP and AXA SA from Amadeus IT and to refinance the eDreams and Go Voyages credit facilities.

Europe sees €2.44 billion week

The euro-denominated market saw €2.44 billion price in nine tranches during the week to Friday.

It extends year-to-date euro issuance to €15.9 billion in 42 tranches.

Carmeuse talks $375 million

Looking toward the week ahead, Belgian limestone producer Carmeuse talked its $375 million offering of seven-year senior secured notes (B1/BB-) with a 6¾% to 7% yield.

The deal is set to price on Monday.

J.P. Morgan Securities LLC, BNP Paribas SA, Credit Agricole CIB and ING Group NV are the joint bookrunners.

Intelsat secondary offer completed

Meanwhile, dealer Morgan Stanley & Co. Inc. completed an $854 million secondary offering of Intelsat (Luxembourg) SA's 11½%/12½% senior PIK election notes due Feb. 4, 2017 to institutional investors during the past week, according to an informed source.

The deal was fully syndicated and an informed sourced call it a great outcome for Silver Lake Partners and Intelsat.

While declining to specify the specific reoffer price, the source said that the notes were priced at a marginal discount to the issue's current secondary levels.

No proceeds will go to Intelsat.

The Rule 144A for life notes originally priced in a $2.23 billion issue during June 2008.

The original issuer is a Luxembourg-based provider of fixed satellite services.

New Calumet bonds climb

When the new Calumet Specialty Products eight-year notes were freed for secondary dealings, a trader at first said that he was looking for the Indianapolis-based petrochemical products manufacturer's bonds but wasn't finding any.

But after that, the upsized $400 million offering did began trading around, and traders saw the new paper firm smartly from their par issue price.

A trader quoted the bonds at 102¾ bid, 103¼ offered.

At another desk, a trader saw the issue going home at 103 bid, 103¾ offered.

American Rock Salt strengthens

The day's other dollar denominated pricing, for American Rock Salt Co., also traded up in the aftermarket.

A trader did say that at his shop, "we've been trying to buy bonds most of the day, ever since they priced, and I haven't been able to buy anything."

He opined that the Retsof, N.Y.-based salt mine company's $175 million issue "is pretty much put away."

However, a second trader quoted the bonds at 101¼ bid, up from their par issue price.

And at another desk, a trader saw the bonds going home as good as 101¾ bid, 102¼ offered.

Burger King around issue

Among the deals which priced during Thursday's busy, nearly $4 billion primary session, one of the most notable was Burger King Capital Holdings LLC/Burger King Finance, Inc.'s $400 million drive-by offering of eight-year zero-coupon discount notes, both because of its unusual structure - a trader said that it was the first zero-coupon issue in Junkbondland since Vanguard Health Systems' holding company did a similar deal back in January - and the fact that Burger King, which did a more conventional $800 million 9 7/8% bond deal last fall, is a well-regarded junk name.

Even so, a trader flatly declared that the Miami-based fast-food chain operator and franchisor's new deal "was sucking wind."

He said he didn't think that much was traded, and "the quotes were all over the place."

A second trader pegged the bonds at 58½ bid, 59 offered, not much different from the 58.613 at which the bonds had priced on Thursday to yield 11%.

At another shop, a trader said that he had heard that "a lot of [the new paper] was placed in South America," linking it to the ownership of a majority stake in Burger King by3G Capital of Brazil, which acquired its position in the company late in 2010, in a deal valued at $3.26 billion

He noted that "most of the trading I'm seeing is in the Regulation S bonds, not in the 144As."

He said there was "a fair amount of trading" in the 59-59½ range.

He went on to note that a zero-coupon discount bond - while commonly seen in the 1980s, the 1990s and even in the earlier part of the current decade - "we used to have them all day long," he pointed out - seems to have gone out of fashion.

As for the reason for the unusual structure, "they had to do it this way, because the bonds are issued at the holding company level, not at the same level that the bank debt and the 9 7/8s are at."

With the use of proceeds from the deal being "kind of iffy at the moment" - Burger King could use the proceeds for strategic investment in the company, or could decide to pay a dividend to its equity sponsor - "that's why they did it at the holding company.

"They probably can't get money out of the operating companies and up to the holding company immediately. So the zero coupon allows them to play with it for a few years before they have to decide how to get the money [for interest payments] up to the holding company."

Texas Competitive above par

Another notable deal from Thursday, Texas Competitive Electric Holding Co. LLC's new issue of 11½% notes due 2020 was "stuck around" 100 5/8 bid, 100 7/8 offered, a trader said.

Another trader placed the issue at 100 5/8 bid, 100¾ offered, "pretty much where it was trading all day."

At another desk, a trader located the bonds at 100½ bid, 101 offered.

The Dallas-based energy producer priced the new $1.75 billion issue at 99.295 to yield 11 5/8%.

The offering was a condition of an amend-and-extend agreement the company recently secured from its credit facility lenders. Proceeds from the sale will be used to pay the lenders higher interest rates, as well as fees associated with securing the extension.

The company and its corporate parent, Energy Future Holdings Corp. - the company formerly known as TXU Corp. - was prompted to secure the amend and extend from lenders holding about $17.77 billion in debt after Aurelius Capital Management alleged that certain intercompany loans constituted a technical default.

As part of its effort, TXU also asked lenders to agree that it had not breached covenants on its credit facilities.

The rest of the TXU complex was "not much changed," a trader said, seeing the company's 10¼% notes due 2015 falling ½ point to around 66, its 10% notes due 2020 slipping to 106¼ bid, 106 3/8 offered, its 10 7/8% notes due 2017 around 90 and its 6.55% notes due 2034 around 521/2.

The latter two notes he deemed unchanged.

The second trader meantime saw the 10¼% notes around 66, "probably about unchanged."

Indicators steady to firmer

Away from the new-issue realm, a trader saw the CDX North American Series 16 HY index up 1/8 point for a second straight session on Friday, at 102¾ bid, 103 offered.

For the week, the index ended about unchanged from the level it held at the end of the previous week, on Friday April 8.

The KDP High Yield Daily Index meantime was unchanged Friday at 75.82 after having fallen 3 bps on Thursday. Its yield declined 1 bp to 6.58% after having risen 1 bp on Thursday.

For the week, the index retreated from the previous Friday's 76.02 reading and widened from its 6.52% yield.

However, the Merrill Lynch High Yield Master II Index rose for a third consecutive session on Friday, by 0.055%, on top of the 0.011% gain seen on Thursday. That lifted its year-to-date return to 4.788%, a new peak level for the year, from 4.73% on Thursday, the previous zenith.

The index rose by 0.161% on the week, lifting it above the 4.62% level at which it had finished the previous Friday.

Advancing issues beat decliners for a third straight session on Friday, by around a six-to-five margin, a little wider than the couple dozen issues at most out of the more than 1,300 which traded. Overall market activity, as measured by dollar-volume levels, fell by 19% on Friday, after having slid by 34% on Thursday from the previous session's levels.

A trader noted that with the Passover holiday at the beginning of the week and the market closed for Good Friday at the end, the upcoming week will be "an odd week," with many participants likely to be out for vacations, and with a corresponding fall in overall activity levels.

Direct Buy turmoil continues

Among specific names, a trader said that "it did seem like Direct Buy Holdings was quoted lower" again on Friday, seeing the Merrillville, Ind.-based members-only showroom and home-design center's 12% notes due 2017 in a very wide 53-63 context, versus Thursday's levels around 64 bid, 65½ offered, and well down from the mid-70s region where the bonds had begun the week.

He said he had seen no fresh news out on the company, beyond the mid-week announcement that the attorneys general from 37 states, Puerto Rico and the District of Columbia are objecting to the settlement of a class action suit against the company over its sales practices

A second trader saw the bonds closing Friday at 60 bid, 62 offered.

Nortel holds around 90

A trader saw Nortel Networks Corp.'s 10¾% notes due 2016 at 90 bid, 91 offered, about the level to which the bankrupt Toronto-based communications equipment manufacturer's bonds had fallen to on Thursday, when they lost between 1½ and 2 points after mediation efforts trying to hammer out a formula for the allocation of the sale proceeds of Nortel's various business and asset divestitures had failed, raising the possibility of "significant" additional delays in distributed the asset proceeds to the creditors.

On Friday, there was some potentially positive news, with reports that Research In Motion Ltd., the maker of the popular BlackBerry smartphone devices, is considering making a bid for Nortel's portfolio of wireless technology patents which would exceed the $900 million offer already on the table from Google Inc., the designated stalking-horse bidder.

RIM is said to be considering working with other technology companies in an effort to buy control of the 6,000 Nortel technology patents in order to block Google from strengthening its already- commanding position in the high-tech world. Some of the patents in question are already used under license in BlackBerrys, as well as phones that run on Google's Android operating system

Under the rules of the bankruptcy auction, if RIM decides to challenge Google, it would have to bid at least $929 million for the patent portfolio. Subsequent bids from either company or from any other entrants must then increase in increments of at least $5 million.

Stephanie N. Rotondo contributed to this report

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