Upsized Iron Mountain deal prices, also Novelis, Inverness; earnings lift names in trading

By Paul Deckelman

New York, Aug. 5 - Iron Mountain Inc. priced an upsized $500 million issue of senior subordinated notes on Wednesday in a quickly-shopped drive-by offering, as the junk bond primary market priced several new deals after having taken a two-day hiatus at the beginning of the week.

Also pricing were new issues for Novelis Inc. and Inverness Medical Innovations Inc.

Price talk was meantime heard on a pair of deals which are expected to price during Thursday's session, offerings from Affinia Group, Inc. and Global Aviation Holdings Inc.

The Inverness and Iron Mountain deals came to market too late for any kind of secondary activity - but Novelis, which priced earlier in the day, firmed smartly up to the par level after having priced about 2 points below that.

The recently priced Ford Motor Credit Co. mega-deal continued to trade actively, holding the gains of several points which the gigantic offering had notched after it was priced a week ago.

Elsewhere in the secondary sphere, traders saw gains in a number of credits which reported earnings, including troubled automotive partsmaker American Axle & Manufacturing Holdings Inc., even though that company's numbers turned out to be a mixed bag. Other names moving up even as they reported numbers - not all of them necessarily positive - included Dean Foods Co. and Mohegan Tribal Gaming Authority.

Irion Mountain paces pricing parade

After two straight sessions in which no new issues priced - although a number of them climbed onto the forward calendar and some hit the road for marketing to potential investors - Junkbondland saw three new deals price Wednesday, totaling $885 million in principal amount.

The biggest deal of the day was for Boston-based document storage and information protection company Iron Mountain; in fact that offering of 12-year senior subordinated notes (B2/ B+) was upsized to $550 million from the originally announced $450 million the company had planned to bring.

Only a matter of hours elapsed between the morning announcement that a deal was in the works and the afternoon pricing. The 8 3/8% notes due Aug. 15, 2021 priced at 99.625 to yield 8.425%, causing a primaryside source to remark that the difference between the issue price and par was "the smallest OID [original issue discount] this year on a dollar-denominated new issue." The deal came in the middle of price talk envisioning a yield between 8 3/8% and 8½%, with around 1 point of OID.

The SEC-registered deal was brought to market via joint bookrunners Barclays Capital, Inc., Bank of America Merrill Lynch, J.P. Morgan Securities, Inc. and Scotia Capital (USA) Inc.

Iron Mountain said in its filing with the Securities and Exchange Commission that it plans to use the deal proceeds to pay for the redemption of its existing 8 5/8% senior subordinated notes due 2013; as of June 30, it had $447.951 million of those notes outstanding.

It also said that it could use part of the proceeds for the possible repayment of unspecified other company debt, and for general corporate purposes, including potential future acquisitions and investments.

The new Iron Mountain bonds came too late in the session for any kind of aftermarket, several traders said. Meanwhile, its existing 8 5/8s were being quoted off nearly a point at the par level. Its 7¾% notes due 2015 also traded at par, on busy mid-afternoon volume approaching $10 million.

Inverness prices wide of talk

Among the pricing deals which had originally been announced on Tuesday was Inverness Medical Innovations, a Waltham, Mass.-based provider of consumer and professional medical diagnostic products and services as well as vitamins and nutrition supplements.

It brought a $150 million issue of 6.5-year senior notes (B2/expected B-) to market via joint bookrunners Jefferies & Co., Inc., Goldman Sachs & Co. and Wells Fargo Securities, LLC.

Those 7 7/8% notes due Feb. 1, 2016, priced at 98.144 to yield 8¼%. That offering came 12.5 bps above the wide end of pre-deal market price talk envisioning a yield in the 8% area, including an original issue discount of unspecified size.

Like the Iron Mountain deal, Inverness Medical's notes were being sold though a public offering under the company's shelf registration statement already filed with the SEC - a relative rarity in a new-deal world dominated by unregistered Rule 144A offerings.

Inverness plans to use the deal proceeds to fund its previously announced acquisition of Concateno plc, a London-based supplier of diagnostic products and services used to detect drug and alcohol abuse. The cash-and-stock deal, which the two companies unveiled on June 5, is valued at approximately £147 million, or about $236 million, and includes assumption of £24 million of debt. That transaction is expected to close next Tuesday.

While the new Inverness bonds did not trade, a market source saw its existing 9% notes due 2016 holding levels around par, on busy dealings approaching $10 million in late afternoon.

Novelis prices, moves up

The day's other pricing had, like Inverness, also been announced on Tuesday - Atlanta-based rolled aluminum producer and metal can recycler Novelis, which priced $185 million of new 5.5-year senior unsecured notes (Caa1/B-) on Wednesday to yield 12%.

The 11½% notes due Feb. 15, 2015, priced at 98.022. The pricing was in line with pre-deal market price talk indicating a yield of 12% and an original issue discount of 2 points.

Novelis was more in the usual high yield pattern in selling its deal under Rule 144A with registration rights, and under Regulation S.

The deal came to market via bookrunner Credit Suisse.

Novelis, which is wholly owned by Indian aluminum company Hindalco Industries - plans to use the deal proceeds to repay its unsecured credit facility from an affiliate of Indian conglomerate Aditya Birla Group, Hindalco's corporate parent. It also plans to repay a portion of its asset-backed revolving line of credit.

Alone among the deals pricing on Wednesday, Novelis' new bonds made it to the aftermarket - and were heard to have firmed solidly, with several traders quoting that paper in around par bid, 101 offered, although on limited volume. One saw the paper "right in there" at par bid, 100¾ offered.

Novelis' existing 7¾% notes were meantime seen by a market source down 1½ points on the day at the 85 level.

Affinia, Global Aviation on tap for Thursday

Market players are expecting at least two more pricings this week, most likely on Thursday, from Affinia Group and Global Aviation Holdings. Price talk on both deals emerged on Wednesday.

Ann Arbor, Mich.-based automotive parts manufacturer Affinia is expected to price its $225 million issue of senior secured notes due 2016 (B1) on Thursday morning, according to high yield syndicate sources. They indicated that price talk on the issue envisioned a yield of between 11% and 11¼%, with an original issue discount of approximately 2 points.

The Rule 144A for life offering is being brought to market by bookrunners JP Morgan Chase & Co., Bank of America Merrill Lynch, Barclays Capital and Deutsche Bank Securities, with JP Morgan on the left.

The debt will be secured by a first lien on everything except for Affinia's current assets, which will be security on a second-lien basis. Those current assets will meantime secure on a first-lien basis a $315 million asset-backed revolver which the company is expected to launch on Monday. That revolver will also be secured by a second lien against all of the company's other assets.

Affinia - which makes automotive aftermarket components like brakes, filtration and chassis products for passenger cars, SUVs, light and heavy trucks and off-highway vehicles - plans to use the deal proceeds, together with funds from unspecified other sources-i.e. the expected new revolver-to repay its existing term loan, its existing revolving credit facility, and its accounts receivable securitization facility.

Global Aviation Holdings's $165 million senior secured bond deal (Ba3/BB-) is expected to carry a 14% coupon and price at a discount to par to yield between 15% and 16%, according to price talk heard on Wednesday.

The books are expected to close on the deal at 2 p.m. ET on Thursday, with pricing expected sometime after that.

The Peachtree City, Ga.-based passenger and cargo air carrier's Rule 144A/Regulation S offering of first-lien notes due 2013, is being brought to market via Jefferies.

It plans to use the proceeds of the bond offering, along with those of its $64.1 million five-year senior secured second-lien loan being concurrently marketed to bank debt investors by Jefferies, to refinance its outstanding bank debt.

Recent Fords remain firm

Among recently priced issues, Ford Motor Credit's 7½% notes due 2012 remains one of the more busily traded credits; a trader saw those bonds remaining well above issue at 92¾ bid, 93¾ offered. Nearly $25 million of those bonds had changed hands by mid-afternoon, the source said, putting it high up on most everybody's Most Actives list.

The automotive financing arm of Dearborn, Mich.-based carmaker Ford Motor Co. priced its $1.75 billion offering of those bonds last Thursday at 91.589 to yield 10 7/8%, and the bonds have hovered above the 92 level ever since.

A trader meantime heard parent Ford's 7.45% bonds due 2031 down 2 points at 75 bid, 77 offered, while rival General Motors Corp.'s benchmark 8 3/8% bonds due 2033 were down ¼ point at 16 bid, 17 offered.

American Axle active, improved

Elsewhere in the autosphere, a trader saw American Axle & Manufacturing Holdings Inc.'s 7 7/8% notes due 2017 "maybe up a couple of points" - this despite the bigger-than-expected quarterly loss the parts maker reported.

He saw those bonds up 2 points on the day at 42 bid, 44 offered

American Axle - heavily dependent upon GM , its main customer - posted a narrower second-quarter net loss from a year ago, $288.6 million, or $5.20 per share in the latest period, versus the year-earlier $644.3 million of red ink, or $11.89 per share., even though the per-share loss excluding unusual items, $1.74, was nearly $1 per share more than the 75 to 80 cents that Wall Street had been expecting. The company also reiterated that it was uncertain of whether it would be able to successfully restructure its debt outside of the bankruptcy courts.

Another trader said that the market apparently shrugged off whatever Axle worries it may have had, seeing the 7 7/8s at 42½ bid, 43 offered late in the day - well up from 39½ bid, 40 offered at the opening, and well above Tuesday's levels around 36, "so they were up pretty good."

Reporting companies on the rise

A trader saw a number of companies that were reporting earnings trade better - whether or not their numbers were all that good. For instance, he saw Las Vegas-based casino operator Boyd Gaming Corp.'s 6¾% notes due 2014 up a point at 88 bid, 90 offered.

Boyd reported that its second-quarter earnings fell by 41% from a year earlier to $12.8 million, or 15 cents per share, versus $21.7 million, or 25 cents per share in the prior period. Excluding one-time items, the company's adjusted per-share income of 12 cents was in line with Wall Street's expectations.

The trader also saw Connecticut-based tribal gaming concern Mohegan - which runs the successful Mohegan Sun casino resort - up about 2 points on the day, its 8% notes due 2012 at 81 bid, 83 offered.

Another gainer among the reporting companies was Dallas-based dairy producer Dean Foods, whose 6.90% notes due 2017 were "maybe up a point" around 90½ bid, 92½ offered.

Graphic Packaging Holding Co.'s 9½% notes due 2013 were ½ point better at 98 bid, par offered. The Marietta, Ga.-based packaging company reported net income of $19.6 million and earnings of 6 cents a share in the second quarter, versus a net loss of $4.3 million and a loss per share of 1 cent a year before.

CIT seen higher

A trader said CIT Group Inc.'s 8% floating-rate notes slated to come due on Aug. 17 were "kind of up and down."

He saw the bonds having finished Tuesday and began dealings Wednesday in an 89-92 context, but added that "I think they've come down a little bit, although they didn't trade a ton today." While there were "some high prints" in the 93-94 region, he saw them ending up around 89 bid, 91 offered, unchanged to down a point on the day. "there was not a ton of movement today and not a ton of trades."

He said that "as we get closer" to the expiration deadline for the current tender offer for those bonds of Friday, Aug. 14, "we'll see them continue to move down a bit," to levels closer to the 87½ price at which the company is offering to buy the $1 billion of bonds back.

He said that the trading levels several points above that takeout price "don't make any sense," suggesting it was due to "people covering shorts and whatnot. I think people are really worried about getting bought in on some of this stuff, as opposed to just having to tender it and be short the tender."

Another trader meantime saw the CIT paper "kind of stronger, I guess," quoting the August floaters trading as high as 941/2, which, he said, was "kind of where they were [Tuesday]."

He said the company's 4¼% notes due 2010 were its second most-active issue, trading as high as 64, versus 62 earlier in the day and a "61ish" context on Monday.

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