Interactive Health Finance, MTU Aero price deals; secondary quiet

By Paul Deckelman and Paul A. Harris

New York, March 22 - Interactive Health Finance Corp. and MTU Aero Engine Investments Gmbh & Co. were heard by high yield syndicate sources to have priced new offerings Monday, the latter a euro-denominated deal. Several other prospective new deals, from Mission Resources, Port Townsend Paper and Cinemark Inc. moved up onto the forward calendar.

In secondary dealings, the steel sector, which had firmed strongly on Friday in the wake of Thursday's successful pricing of Ispat Inland ULC's $800 million two-tranche offering and investor feeling that things were looking up for the beleaguered industry, gave back a little bit of those gains Monday amid a generally quiet and softer market.

Overall the opening session of the March 22 week passed quietly in the primary market, according to one investment banker.

Terms emerged on two transactions, one from either side of the Atlantic, and timing was heard on three offerings lately seen lurking backstage.

Low defaults seen key

Another sell-side source who spoke to Prospect News soon after the Monday close pointed to the stock market, the U.S. Treasury market and the dire news pronouncements of the crawler beneath the CNN broadcast, and specified that this doleful combination need not necessarily spell out negative news for junk.

"The equity market took another hit today," the source conceded. "And there is a lot going on, geopolitically...in east Asia, the Middle East, everywhere. You have terrorism and political volatility. It's not good.

"And the Treasury rallied a little bit," the source added. "The 10-year is trading at 3.71%.

"So right now with the Treasury market hitting rock bottom levels there isn't really anywhere else besides junk to park your money," the official reasoned. "High yield paper, as a class, is yielding over 7%. As long as the default rate stays low you're better off clipping coupons.

"But the default rate has to stay low - below, definitely below 5%, and hopefully below 41/2," the source insisted.

"Right now it's a cat-and-mouse kind of game: you don't see a mass exodus of money out of high yield because there is just no place else to go."

MTU, Interactive Health sell deals

Terms on two transactions trickled out of investment banks on both sides of the Atlantic Ocean on Monday.

MTU Aero Engines priced an upsized issue of €275 million of 10-year senior notes (B2/B-) at par to yield 8¼%. The deal was increased from €240 million.

That print turned out to be spot-on to the price talk that was revised to 8¼% from the 8½% area.

JP Morgan and Credit Suisse First Boston ran the books on the acquisition financing deal from the Munich, Germany-based aircraft engine component manufacturer.

Also on Monday, terms emerged on a debt refinancing deal that priced Friday from Long Beach, Calif. robotic massage chair-maker Interactive Health LLC and Interactive Health Finance Corp.

The company sold $100 million face of 7¼% senior notes that were discounted to 80.424 to yield 11 3/8%, via Jefferies & Co.

That was wide of the talk, which had the notes coming at an issue price of 85.0 to yield 10¾%-11%.

Timing on Cinemark, Mission, Port Townsend

Deals took shape Monday from three issuers that had been generating buzz around the primary market with ratings news and press releases.

Cinemark, Inc. expects to price an offering of $360 million of 10-year senior discount notes during the middle of the March 29 week.

The Plano, Tex. movie house owner has Lehman Brothers and Goldman Sachs & Co. running the books on the deal, proceeds from which will be used to support the acquisition of Cinemark by Madison Dearborn Partners, LLC.

The roadshow starts Wednesday for Mission Resources Corp.'s offering of $130 million seven-year senior notes. The deal will possibly price during the week of March 29.

Guggenheim Capital Markets LLC will run the books for the Houston-based independent oil and gas exploration and production company's debt refinancing deal.

And Port Townsend Paper Corp. expects to price $125 million of senior secured notes (B3/B) on Thursday, via JP Morgan and UBS Investment Bank.

The Port Townsend, Wash. pulp and paper company will use the money to refinance debt.

Also on Monday U.S. Oncology announced in a filing it made with the Securities and Exchange Commission that the acquisition of the company by Oiler Acquisition Corp., an affiliate of Welsh, Carson, Anderson & Stowe, will be financed in part by $625 million of high yield bonds, in addition to a $550 million credit facility. The company announced that on March 20 it received a commitment letter from JP Morgan, Wachovia and Citicorp for the bank financing.

Talk heard on Real Mex

Finally on Monday price talk of 9 5/8% area emerged Monday on Real Mex Restaurants' planned $105 million of six-year senior secured notes (B2/B-), which are expected to price on Wednesday afternoon.

Jefferies & Co. is the bookrunner.

Flight to quality

Secondary traders noted the general flight to quality - i.e. Treasury issues - and away from risk, such as corporate and high yield bonds and equities, in the wake of heightened terrorism concerns following the killing by Israel of the leader of Hamas and vows of revenge by that group and later, by al Qaeda.

"It was a really pathetic day," a trader said, "everyone was very much consumed with [the idea of] being blown up on the subway, and stocks showed it. People were running for the exits" and heading for the relative safety of government paper.

Also contributing to the market's lackluster tone, traders said, was a Lehman Brothers conference starting Monday in Florida, with many portfolio managers and other decision makers down there. It's the second straight major conference, following a well-attended JP Morgan event last week.

"Lehman will probably have a ton of participation there, and it's vacation week" a trader said, in explaining away a very quiet session that he called "an ugly cesspool.

"It's deathly, deathly, deathly quiet," he continued. "I'm looking at probably a hundred numbers that I went through today in 10 different sectors and I can't say that much of it traded. Things were quoted very, very well today - we had some nice quotes, but we surely didn't do a lot of trades."

He said that varied areas - "from casinos, to healthcare, to lodging, to supermarkets and retailers, to homebuilders to energy had, relatively speaking, zero movement."

Airlines weaken

About the only area he saw anything even remotely going on was in the airline sector - always a nervous area any time terrorism fears are on the rise.

He quoted Delta Airlines' bonds "a little softer," with the 8.30% bonds due 2029 dipping to 52 bid, 54 offered from prior levels around 54 bid, 56 offered.

Even in energy, he said - which sometimes moves in response to news developments that imply higher world oil prices - "there was nothing there."

Steel bonds retrace

Another trader said that the steels, which had been strong on Friday, "gave back a little ground and were down an eighth of a point to a quarter of a point."

He quoted the new Ispat Inland ULC 9¾% senior secured notes due 2014, which priced last week at 99.212 and then moved up to around a par bid, as straddling par at 99.875 bid, 100.375 offered.

Portola down again

A market source quoted Portola Packaging's 8¼% senior notes due 2012 as having "moved a little further down." He saw the San Jose, Calif.-based packaging company's bonds - which had slid down to the low 90s last week from prior levels above par, in response to weak earnings results - as having fallen further to around 86 bid from previous levels in the 91-93 area.

Portola had last week reported that in the fiscal quarter ended Feb. 29, it had an operating loss of $4.5 million, versus operating income of $1.1 million a year earlier. It had a net loss of $10.7 million for the latest quarter, widening out from a year-earlier net loss of $1.1 million.

EBITDA was negative $1.1 million in the latest quarter, versus positive $5.7 million a year ago.

The company cited a rise in raw materials costs, particularly resin prices.

News that Allied Waste North America Inc. is tendering for $1 billion of its 10% senior subordinated notes due 2009 (see Tenders and Redemptions elsewhere in this issue for details) was greeted by the junk market as a non-event, traders said, since the Scottsdale, Ariz.-based waste disposal company's notes had already moved up to 107.375, around the anticipated takeout level.

Likewise, there was little market response to Revlon Corp.'s announcement of the successful end of its exchange offer for its 8 1/8% and 9% senior notes due 2006 and its 8 5/8% senior subordinated notes due 2007 (see Tenders and redemptions for details).

The New York-based cosmetics company's 8 1/8% and 9% notes held steady around Friday's levels in the 98-98.5 bid area, while its 8 5/8% notes remained around 89 bid.

© 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.