Weyerhaeuser sells split-rated deal; Realogy shrugs off new loan; FairPoint dips on debt talks

By Stephanie N. Rotondo and Paul A. Harris

Portland, Ore., Sept. 28 – Traders saw continued firmness in the high-yield market Monday, though a lack of new issues and some empty desks resulted in overall muted trading.

One trader noted that the market started out strong, but ended up “kind of sloppy in the afternoon.” He attributed some of that sloppiness to players being absent due to Yom Kippur.

The new issue market was largely quiet, except for a new split-rated deal brought by Weyerhaeuser Co. The deal was upsized to $500 million.

Among existing issues, Realogy Corp.’s bonds were little fazed by the company new term loan, which was also upsized and is expected to be upsized again. Still, after last week’s surge, the bonds were essentially unchanged.

FairPoint Communications Inc. announced it had secured a forbearance agreement from its lenders and that restructuring talks were in process. However, as the restructuring could include a bankruptcy filing, the company saw its notes fall about 4 points on the day.

Elsewhere, Hawker Beechcraft Co. LLC said it would pay in kind an April 2010 coupon, in addition to the Oct. 1 coupon that the company also intends to PIK. But the notes shook off that news to end relatively steady.

Market shows continued strength

Market indexes showed firmness yet again, according to sources.

One source said the CDX High Yield Index improved by ½ point, closing at 94 3/8 bid, 94 7/8 offered. Another source placed the KDP High Yield Index at 69.14, with a yield of 8.33%, compared to 69.05, with a yield of 8.36%, previously.

Recent new issues, however, finished the session mixed. MGM Mirage’s 11 3/8% notes due 2018 – which priced Sept. 17 at 97.396 – were seen around 94¾, which a trader called “down about 2½ points from pricing.”

Developers Diversified Realty Corp.’s new 9 5/8% notes due 2016 were meanwhile seen slightly better around 101, versus Friday pricing of around 99½, the trader said.

Standard & Poor’s assigned a rating of BB to the new notes on Monday. They were rated Baa3 by Moody’s Investors Service.

Weyerhaeuser sells new notes

Weyerhaeuser brought an upsized $500 million 7.375% split-rated deal to market Monday.

According to a source, the 10-year notes were sold at Treasuries plus 420 basis points, down from expectations of 450 bps.

The notes were priced at 99.145 with a 7.498% yield and include a make-whole redemption of Treasuries plus 50 bps.

Morgan Stanley, Deutsche Bank Securities and J.P. Morgan Securities were the bookrunners.

Weyerehaeuser is a Federal Way, Wash.-based pulp and paper products company.

Stream, Tops to bring deals

Elsewhere in the new issue market, books close mid-day Tuesday for the Stream Global Services Inc. $200 million offering of five-year senior secured notes (B1). Price talk is 11% to 11¼%.

Goldman Sachs & Co. is the left lead bookrunner for the debt refinancing and general corporate purposes deal.

Also in the market for this week is the Tops Holding Corp./Tops Markets, LLC $250 million issue of six-year senior secured notes, via Morgan Stanley and Bank of America Merrill Lynch.

The Buffalo, N.Y.-based grocery store chain will use the proceeds, along with proceeds from an ABL facility and cash on hand, to refinance bank debt and the company's warehouse mortgage agreement, to pay the related swap agreement termination costs and to make a distribution to equity holders.

Realogy unaffected by new bank loan

Action in Realogy’s debt quieted down, even as the company priced a new $500 million 13½% second-lien bank loan at par.

A trader called the bonds unchanged, putting the 10½% notes due 2014 at 72 bid, 74 offered. The trader noted that the notes traded with a 73 handle throughout the day.

The trader also saw the 12 3/8% notes due 2015 “offered in the high-50s, but I don’t think there was a bid better than 51 or 52 around.” However, he added that the issue traded between 56 and 58, according to Trace.

Another trader said there was not “much movement” after last week’s gyrations. He also deemed the bonds unchanged, placing the 10½% notes around 73.

Parsippany, N.J.-based Realogy said it had already closed on $515 million of the incremental term loan, which was expected to be increased to $650 million. Proceeds from the financing will be used to reduce borrowings under its revolving credit facility, as well as to refinancing about $220 million of 11%/11¾% toggle notes due 2014 held by Icahn Partners LP.

Realogy also noted in a press release that its owner, Apollo Management, had informed the company that it has “substantially increased its investment in Realogy largely through open-market purchases of unsecured notes. Upon today’s closing of incremental term loans, Apollo’s ownership of Realogy’s existing unsecured notes is approximately $970 million in aggregate principal amount.”

“We are pleased with both our ability to raise new capital in today’s credit market and Apollo’s increased investment in our company through purchases of Realogy’s bonds,” said Richard A. Smith, Realogy’s president and chief executive officer, in the statement. “These are tremendous signs of investor confidence in Realogy, our business model and the value of our brands as well as the performance of our management team and our employees. Securing these incremental term loans goes a long way toward increasing our long-term liquidity and financial flexibility.”

As the housing market turned sour, so did Realogy’s bottom line. As such, the company has attempted to restructure itself and had entered into discussions with some bondholders regarding a potential debt exchange.

However, on Friday, the company said those talks unraveled. That followed Thursday’s news that Carl Icahn had agreed to a debt swap.

The deal with Icahn was contingent upon Realogy securing the new term loan debt.

Realogy is a provider of real estate and relocation services.

FairPoint bonds weaker

FairPoint Communications said it had entered into negotiations with its lenders regarding a restructuring that could involve a bankruptcy filing.

As a result of the news, a trader said the 13 1/8% notes due 2018 fell to 11 bid, 12 offered from 15 bid, 16 offered previously.

FairPoint also said it had received a forbearance agreement from lenders holding over 50% of its loans. Under the agreement, FairPoint does not have to pay principal and interest payments on its credit facility, as well as a $42 million payment due Sept. 30 related to its interest rate swap agreements.

However, FairPoint said it would likely breach its interest coverage ratio and leverage ratio covenants, though its lenders agreed not to take any action until Oct. 30.

“Today’s action by our lenders demonstrates that our discussions are progressing in a positive manner and allows additional time for a permanent restructuring plan to be resolved,” said David Hauser, chairman and CEO, in a press release

Like Realogy, FairPoint had begun speaking with noteholders about an out-of-court restructuring plan. Those talks also faltered.

FairPoint Communications is a Charlotte, N.C.-based provider of communications services.

Hawker steady on PIK news

Hawker Beechcraft Acquisition’s debt was largely unaffected by news that company had elected to pay in kind on an April 2010 interest payment on its 8 7/8%/9 5/8% notes due 2015.

The company had previously said it would also pay in kind on its upcoming Oct. 1 coupon.

A market source quoted the 9¾% notes due 2017 at 61 bid, 62 offered, calling that unchanged.

Hawker Beechcraft is a Wichita, Kan., maker of business and general aviation, training and special mission aircraft.

Broad market mixed

In the broader market, CIT Group Inc.’s bonds “drifted in a little bit on some of the 2011 maturities,” a trader said. He said the notes fell to the high-60s and were “probably a point or 2 higher last week.”

Wynn Las Vegas LLC’s 6 5/8% notes due 2014 ended unchanged at around 96, a trader said.

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