Phillips-Van Heusen, Thermon, Landry's price; market firm; Harrah's up on asset-sale buzz

By Paul Deckelman and Paul A. Harris

New York, April 23 - A trio of deals priced on Friday, bringing to a close another very busy week in the high yield primary sector, one which saw some $11 billion of new paper pricing

New York-based apparel maker Phillips-Van Heusen Corp. came to market with a $600 million offering of 10-year bonds, upsized from the originally announced $525 million. When the new bonds were freed for secondary, they were seen to have firmed by more than 2 points from their issue price.

Thermon Industries, Inc., a San Marcos, Tex.-based producer of heat-tracing equipment, also upsized its offering of seven-year senior secured notes, but only to $210 million from $200 million. These bonds too were seen up by better than 2 points in the aftermarket.

Houston-based restaurant and gaming operator Landry's Restaurants, Inc. served up a $47 million add-on offering to an issue of senior secured notes due 2015 which priced last fall. The new bonds priced at a considerable premium over par.

Traders meantime saw continued strength in many of the new deals which priced on Thursday, including Penn Virginia Resource Partners, LP/Penn Virginia Resource Finance Corp., Telcordia Technologies, Inc. and LiveNation Entertainment, Inc. However, Berry Plastics Corp.'s new deal remained stranded around the bonds' issue price.

In the secondary arena, Harrah's Operating Co. Inc. bonds were seen trading better in late-session dealings, spurred on by news reports that what by many estimates is the world's largest casino company is shopping one of its Las Vegas casino properties around to prospective buyers, and could get as much as half a billion dollars for it.

The overall junk market was generally firm, as evidenced by gains in noted statistical indexes.

Phillips-Van Heusen upsizes

A comparatively quiet Friday session saw three high-yield issuers, each bringing a single tranche of bonds, price $857 million face amount of junk.

Phillips-Van Heusen Corp. priced an upsized $600 million issue of 10-year senior notes (B2/BB) at par to yield 7 3/8%.

The yield printed at the tight end of the 7 3/8% to 7 5/8% price talk. The amount was increased from $525 million.

Barclays Capital Inc., Deutsche Bank Securities Inc., Bank of America Merrill Lynch, Credit Suisse Securities and RBC Capital Markets Corp. were the joint bookrunners for the public deal

Proceeds will be used to partially fund the company's acquisition of Tommy Hilfiger and to repurchase its 7¼% notes due 2011 and 8 1/8% senior notes due 2013.

The deal played to a book containing $7 billion of "nominal" orders, according to an informed source, who expected allocations to be severe.

Related to the upsizing, Phillips-Van Heusen is planning on downsizing its $1.5 billion six-year term loan B as a result of increases to both its bond and common stock offering. However, the amount of the B loan reduction is still to be determined, according to a market source.

The company sold $332.5 million of equity in an offering of 5 million shares at a price of $66.50 each, up from a most recently planned size of $275 million.

When word of the transactions first hit the market, it was thought that the bonds would be sized at $600 million and the common stock offering would be $200 million. However, prior to launching, the bond size was reduced by $75 million and the planned equity deal was increased by the equivalent amount.

In addition to taking out some term loan B debt, the extra proceeds from the bond and stock upsizings will be used to add more cash to the company's balance sheet, the source added.

Thermon prices at tight end

Also Friday, Thermon Finance, Inc. priced an upsized $210 million issue of seven-year senior secured notes (B1/B+) at par to yield 9 ½%.

The yield printed at the tight end of the 9½% to 9¾% price talk. The size was raised from $200 million.

Jefferies & Co. ran the books for the deal.

Proceeds will be used to partly fund the acquisition of the company by Code Hennessy and to repay existing debt.

Timing on the Thermon deal was moved ahead. Marketing had been expected to last into the middle part of the week ahead.

Landry's taps 11 5/8% notes

Landry's Restaurants, Inc. priced a $47 million add-on to its 11 5/8% senior secured notes due Dec. 1, 2015 at 106.0 to yield 10.186%.

Jefferies & Co. ran the books for the quick-to-market deal.

Proceeds will be used to pay for the acquisition of The Oceanaire, Inc., if that acquisition is confirmed by the U.S. Bankruptcy Court, to repay outstanding revolver balances and for general corporate purposes.

$11 billion week

With Friday's business into the mix, the notably busy April 19 week saw issuers raise just over $11 billion in 25 tranches of junk-rated dollar-denominated bonds.

It was the highest volume week by dollar amount since the week of March 22, which saw $12.34 billion raised in 21 tranches.

The week closes with $93.8 billion having priced in 213 junk-rated, dollar-denominated tranches so far this year.

And with high-yield borrowers facing a "wall of maturities" ahead, in the form of bonds coming due in 2012, 2013 and 2014, the new issue market is expected to remain quite active, a buy-side source told Prospect News.

However, the buy-sider added, although a lot of wood remains to be chopped, quite an impressive amount of the pile has already been worked through.

Citing a report put out by strategists at Bank of America Merrill Lynch, the source said that in just over a year high-yield issuance has cut the amount of debt maturing by 2015 by $173 billion, or 20% of the total that existed prior to that time.

Reynolds to bring $1 billion

Reynolds Group Issuer LLC will host an investor call at noon ET on Monday for a $1 billion offering of eight-year senior unsecured notes.

The deal is set to price during the middle part of the week ahead.

Credit Suisse has the books.

Proceeds will be used to help fund the company's acquisitions of the Evergreen Packaging group of companies and the Whakatane Mill from Carter Holt Harvey Ltd.

Reynolds Group takes its place on an announced forward calendar which, at Friday's close included a dozen prospective issuers planning to raise $3.535 billion and €1.475 billion during the week ahead.

A trader said of the red-hot primary market's breathless break-neck pace that "it's insane."

Phillips-Van Heusen cuts a stylish figure

When the new Phillips-Van Heusen 7 3/8% senior notes due 2020 were freed for secondary dealings, a trader said that the clothing maker's deal "did really well. A lot of people didn't get bonds" in the original allocation, and so had to buy them in the secondary market, boosting the new issue to 102½ bid, 102 5/8 offered, well up from their par issue price.

A second trader saw the bonds at 102½ bid, 103 offered.

Thermon is hot in aftermarket

The day's other sizable issue, Thermon Industries' new 9½% senior secured notes due 2017, were also seen having firmed smartly when they reached the secondary arena. A trader quoted the deal at 102 1/8 bid, 102¾ offered.

Another trader said "everything is trading like a 102-103 range."

Thursday's deals holding their own

That was a slight exaggeration - but it seems to have been borne out by the Friday trading levels of Thursday's new deals.

A trader said for instance that Telcordia Technologies Inc.'s new $350 million of 11% second lien senior secured notes due 2018 were at 102½ bid, 103½ offered, declaring "we like that one a lot."

The trader also saw Penn Valley's 8¼% notes due 2018 at 102¼ bid, 102 5/8 offered, around the levels the bonds went out at on Thursday after the $300 million issue priced at par.

And he saw Live Nation's 8 1/8% notes due 2018 trading at 102½ bid, 102 5/8 offered, around where they went home on Thursday after pricing at par.

Berry, Rexnord little moved

Not all new issues were in on the gravy train, however. A trader saw Berry Plastics Corp.'s 9½% second priority notes due 2018 at 99¾ bid, 100¼ offered, straddling the upsized $500 million deal's par issue price.

Another trader said that Rexnord LLC's 8½% notes due 2018 were right at par, where the $1.145 billion deal had priced on Wednesday.

"They didn't go anywhere," he declared.

Market indicators turn higher

Among bonds not connected with the new-deal market, a trader saw the CDX Series 14 index gain ¼ point on Friday to end at 100 7/8 bid, 101 offered, after having gained 1/8 point on Thursday. The index thus ends the week up from 100¼ bid, 100¾ offered seen the previous Friday, Apr. 16.

The KDP High Yield Daily Index meantime was up by 4 basis points on Friday at 72.90, after having gained 8 bps on Thursday, while its yield actually widened by 1 bp to 7.55%, after having come in by 3 bps on Thursday. The index thus ends the week somewhat improved from 72.75 and 7.60% a week before.

The widely followed Merrill Lynch High Yield Master II index ended the week showing a year-to-date gain of 6.891% - eclipsing the old mark, set the week-before, of 6.569%.

Advancing issues regained their edge over decliners on Friday, leading them by a better than seven-to six ratio.

Overall market activity, represented by dollar-volume levels, fell by 23% on Friday from levels seen the previous session.

Harrah's higher on asset-sale talk

A market source saw Harrah's Operating Co.'s 10% guaranteed senior secured second-priority notes due 2018 trading in an 86-88 context all day before going out at 86¾ - off the high but still up more than a point on the session, in fairly brisk dealings, with over $21 million of the Las Vegas gaming giant's bonds changing hands.

A trader cited "rumors that Harrah's paper is going to take off" on news that it is looking at a possible asset sale - it's Rio All-Suite Hotel & Casino in Las Vegas.

He said that when the news broke late in the afternoon, "everyone was looking for offerings, so there's a little scrambling going on. We'll see what happens on Monday."

Bloomberg News, attributing its information to unidentified sources said to be close to the situation, reported that Starwood Capital Group LLC and Colony Capital LLC are among the companies that are weighing bids for the resort, which is located near, though not actually on, the famous Las Vegas Strip near Harrah's largest Vegas property, the Caesar's Palace casino resort. The news services said that some bids value the Rio at about $500 million. It said that Harrah's, Starwood Capital and Colony all declined comment on the story.

Casino Gambling Web, a gaming industry website, reported that "several investment companies have already shown interest" in the Rio, which has 1,100 slot machines, 90 gaming tables and 2,520 rooms.

If Harrah's does sell the Rio, it would follow by several weeks its acquisition of Planet Hollywood's Las Vegas Strip operations. Harrah's is in a financially stronger position to pursue such acquisitions after having cut its debt by $4.2 billion in 2009 by offering creditors new bonds at a discount in exchange for their old ones, while extending maturities on another $5.5 billion this year.

Qwest remains busy

A trader said that there was more activity in Qwest Communications International Inc.'s bonds, which had been the day's most important movers on Thursday on the news that the Denver-based telecommunications company will be acquired by CenturyTel Inc. in a roughly $22 billion deal, which includes debt assumption.

He saw Qwest's 8 3/8% notes due 2016 - which had led the market on Thursday with over $75 million traded - "around the same" on Friday, holding in a 114-114½ context. Activity was still busy, at over $25 million during the afternoon.

Other than that, he said, "it was just bits and pieces - nothing dominating."

GM moves up

Elsewhere, a trader saw General Motors Corp.'s benchmark 8 3/8% bonds due 2033 trading all day within a 37-38 context, a little higher than recent levels, with the bonds going out at 37 7/8 bid, which he called up a point on the day.

He saw GM domestic arch-rival Ford Motor Co.'s 7.45% bonds due 2045 unchanged at 92 bid, 93 offered, opining "there's nothing there."

Another trader saw the GM benchmark issue up ½ point at 37½ bid, 38 offered, while Ford's long bond was up ¼ point at 93 bid, 94 offered

Auto component companies climbing

Also in that sector, a trader said that ArvinMeritor Inc.'s bonds "are on a roll," seeing the Troy, Mich.-based automotive components company's 8 1/8% senior subordinated notes due 2015 at 98¼ bid, 99 offered, remarking: "I haven't seen those numbers in a while." The bonds were essentially unchanged from the levels they had held in Thursday's dealings, but up from the mid-90s at the beginning of the month.

ArvinMeritor recently announced that its plans for gradually getting out of the passenger car parts business - so it can focus on the potentially more stable market for commercial vehicles like trucks and buses - is on schedule. The company sold most of its unprofitable car parts units last year in order to cut its dependence on the more volatile passenger car market and instead concentrate on supplying parts to commercial vehicle manufacturers.

It expects to sell the last remnants of its car parts business by the end of this year, claiming in a statement that it has s received a "great deal of interest" from potential buyers for its light-vehicle body systems unit, which makes roofs and door panels.

The light-vehicle supply operations - which earlier in the decade represented most of ArvinMeritor's revenue base - accounted for just 30% of ArvinMeritor's $1.1 billion sales in the 2009 fourth-quarter period.

A trader said that Cooper-Standard Automotive Inc.'s 8 3/8% notes due 2014 "have been moving up every day - they closed today at 78, up about 4 points," and well up from the levels in the upper 60s to around 70 seen in the market last week, although he noted that the bonds of the Novi, Mich.-based automotive components company are trading flat, or without their accrued interest.

"That whole sector is hot," he declared.

Earlier this week, high yield syndicate sources heard that the company was shopping a $450 million offering of new eight-year senior notes via a roadshow that runs through this coming Thursday, with proceeds to be used to repay its debtor-in-possession loan and other debt. Cooper-Standard filed for Chapter 11 protection last August with the U.S. Bankruptcy Court in Wilmington, Del., as a means of implementing a balance sheet restructuring.

Park Ohio pops up

A trader said that Park-Ohio Holdings Corp.'s 8 3/8% senior subordinated notes due 2014 - most recently seen in the 80s - have breached the psychologically significant 90 mark, quoting the bonds at 91¼ bid, 92½ offered - and observed that "I haven't seen that [kind of level] in a couple of years."

Another market source saw the bonds get as good as 93 bid on Friday - well up from the 871/2- 90 context in which the bonds had been trading on Thursday

There was no specific positive news out on the Cleveland-based industrial supply chain logistics and diversified manufacturing company that might explain its recent surge. Last fall, the bonds were trading in the 50s; by the beginning of this year, they had pushed their way up to around the mid-to-upper 70s, and to the upper 80s at the beginning of the month, apparently carried along by the overall junk market momentum, as well as investor sentiment that the gradually improving economy will see companies like Park Ohio - which among other things offers strategic planning, advanced technologies, global sourcing, technical services, parts and materials, logistics, distribution, inventory management, and program-implementation services to manufacturing companies - benefitting from an upswing in industrial activity.

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