Cambium prices, firms; market awaits Clear Channel; Hughes Network up on EchoStar buyout deal

By Paul Deckelman and Paul A. Harris

New York, Feb. 14 - Cambium Learning Group, Inc. priced a quickly shopped $175 million offering of six-year secured notes on Monday, the sole deal during the domestic dollar market session.

When the Dallas-based education services provider's new bonds were freed for secondary trading, they were seen to have firmed about a point from issue.

High-yield syndicate sources meantime heard talk emerge on Clear Channel Communications, Inc.'s planned $750 million bond deal, which is expected to price on Tuesday.

They also heard that Burlington Coat Factory Warehouse Corp.'s $400 million bond deal - back in the junk market three months after the retailer had pulled a similar, though somewhat larger, deal last fall - will price towards the end of the week.

Also expected to price this week is a $430 million secured bond deal from amusement park operator Palace Entertainment Holdings, LLC/Palace Entertainment Holdings Corp.

Away from the new deal arena, romance was in the air as Hughes Network Systems LLC's bonds firmed solidly on the Valentine's Day news of the engagement between parent Hughes Communications Inc. and EchoStar Corp., which swept the broadband satellite network services provider's majority shareholder off its feet with an offer to buy Hughes in a transaction valued at $2 billion, including debt refinancing.

Alcatel-Lucent's bonds, which finished last week up on good quarterly numbers from the Franco-American telecommunications equipment maker, tacked on about another point on Monday, traders said.

On the downside, OPTI Canada Inc.'s bonds were off by several points from where they had closed last week after some wild earnings-related gyrations.

Cambium prices $175 million

With Tuesday representing a cut-off day when financial numbers for many prospective high-yield issuers go stale, primary market activity remained muted on Monday.

Cambium Learning priced a $175 million issue of 9¾% six-year senior secured notes (B2/B) at 99.442 to yield 9 7/8%.

The yield printed in the middle of the 9¾% to 10% price talk.

Barclays Capital Inc. and BMO Nesbitt Burns were the joint bookrunners.

Proceeds will be used to refinance existing debt and for general corporate purposes.

Cambium Learning, a Dallas-based education services provider, pulled a secured bond deal of the same size and tenor from the market last December because it could not get an interest rate to its liking at that time.

The wait paid off, according to a source close to both the pulled transaction and the completed one.

While declining to furnish a specific rate comparison, the source said that improved financial numbers from the company and an early 2011 primary market that is even stronger than last December's paved the way for a good execution for Cambium.

Last week, the company stated that it expects to report fourth-quarter adjusted sales between $49 million and $49.5 million, compared with $43.8 million for the same period in 2009, representing an increase of roughly 12% to 13%. Cambium expects to report fourth-quarter adjusted EBITDA between $13.4 million and $13.9 million compared with $8.8 million for the same period in 2009, representing an increase of 52% to 57%.

Meanwhile, the relatively small size of Cambium's deal narrowed the field of investors willing to become involved, the source said.

Those that did play were mostly "buy-and-hold" investors.

Clear Channel talks $750 million

The Monday session perhaps set the tone for what could be a comparatively quiet week in the primary market heading into the three-day Presidents' Day holiday weekend in the United States.

Much of the news surfacing bore upon deals rolled out last week.

Clear Channel talked its $750 million offering of 10-year priority guarantee notes (Caa1/CCC+) with an 8¾% to 9% yield on Monday.

The books close 11 a.m. ET on Tuesday, and the notes are expected to price thereafter.

Goldman Sachs & Co., Citigroup Global Markets Inc., Credit Suisse Securities, Deutsche Bank Securities Inc., Morgan Stanley & Co. Inc., RBS Securities Inc. and Wells Fargo Securities are managing the deal.

The San Antonio-based media and entertainment company plans to use the proceeds, together with cash on hand, to repay $500 million of bank debt and to repay at maturity $250 million of its 6¼% senior notes due 2011.

Proceeds will also be used to pay fees and expenses in connection with concurrent amendments to the company's senior secured credit facilities and its receivables-based credit facility, the receipt of which is a condition to completion of the notes offering.

Burlington Coat for Thursday

Elsewhere, timing emerged on Burlington Coat Factory's $400 million offering of eight-year senior notes, which is expected to price on Thursday.

Goldman Sachs & Co. is the left lead bookrunner. J.P. Morgan Securities LLC, Bank of America Merrill Lynch and Wells Fargo Securities are the joint bookrunners.

The Burlington, N.J.-based company will use the proceeds to redeem its 11 1/8% senior notes due 2014 and its 14½% senior discount notes due 2014 and to make a distribution to equity holders.

As with Cambium Learning, Burlington Coat walked away from a late-2010 deal.

The present deal is sized $100 million below the similarly structured $500 million offering that the discount retailer pulled last November.

At the time the original offering was withdrawn, the notes had been talked to yield in the 10% area.

No price talk has been circulated thus far on the new deal, market sources say.

Palace $430 million

The Monday session did see one new offering surface.

Palace Entertainment plans to price a $430 million offering of six-year senior secured notes during the present week.

Morgan Stanley & Co. and Credit Suisse Securities are the joint bookrunners.

The will be issued via Palace Entertainment Holdings, LLC and Palace Entertainment Holdings Corp.

Proceeds will be used to repay debt.

They're 'in my sandbox'

Valentine's Day marked the midway point for February. At the close, year-to-date dollar-denominated junk issuance stood at an amazing $51.75 billion in 121 tranches. That's a 48% increase from the $26.92 billion seen during the same period of a record-setting 2010.

Investment-grade portfolio managers went without Valentine's greetings from one high-yield mutual fund manager who spoke with Prospect News.

Shopping in the junk primary market is elbow to elbow these days, said the manager, who has lately been expending considerable energy putting cash to work.

The funds are flush with cash, the buysider added, noting that the latest weekly funds flow report from Lipper-AMG, a $1.299 billion inflow for the week ending last Wednesday, paints a reasonably accurate picture of the situation.

To make matters worse, the high-yield primary has become crowded with irregulars, the junk-fund manager contended.

High-grade accounts and insurance funds - also needing to put cash to work and looking for a little bit of extra yield - are lately becoming involved in junk deals.

"They're playing in my sandbox," the fund manager fumed.

An excellent example was last week's deal from Chesapeake Energy Corp.

Chesapeake Energy priced a $1 billion issue of non-callable 10-year senior notes (Ba3/BB/BB) at par to yield 6 1/8% - a debt refinancing transaction via Morgan Stanley & Co. and Wells Fargo Securities, LLC.

The Oklahoma City company brought the deal on the heels of news that it expects to raise $5 billion via that sale of its Fayetteville assets and equity investments in two companies including Chaparral Energy, and intends to use the proceeds to pay down debt.

That scenario enhances Chesapeake's chances of garnering investment grade credits, so the high-grade crowd became a considerable presence in the deal.

What's worse, high-grade managers from the same respective funds as their high-yield counterparts are showing up for junk deals, and are receiving allocations which seem to be diluting those of the regular high-yield managers from the same fund.

No help from the loan market

In search of a little bit of elbow room, this high-yield fund manager visits the bank loan market from time to time.

However lately the high-grade bond accounts are hanging around in leveraged loans as well, the source said, adding that the high-grade folks appear to be using floating-rate bank loans as a hedge against possible upward moves in interest rates in the future.

The technical picture for the loan market is every bit as strong as that of the high-yield bond market, the buy-sider added, noting that the bank loan mutual funds saw $1.053 billion of inflows during the most recent week according to Lipper-AMG - the highest inflow ever for weekly reporters.

It seems to be creating a situation where almost everybody is laboring to put cash to work almost everywhere.

Few fixed income alternatives

News that the Credit Suisse High Yield Index touched its all-time tightest composite yield, 6.86%, last week came as no surprise to the fund manager.

"We've broken through 7% on most of the indexes," the mananger said.

"The market definitely looks frothy from a yield perspective. However the spread on high-yield bonds, per turn of leverage, doesn't look terrible.

"And if you look at the alternatives in fixed income - say, government bonds, investment-grade bonds or municipal bonds - you're running the risk of negative returns."

However lately the latter category, municipals, has gotten some attention even from high-yield accounts who are looking the asset class over because of the possibility that negative headline news has caused it to become overly beaten up.

New Cambium bonds up a point

Traders initially saw no activity in Cambium Learning Group's new six-year bonds after that deal priced, owing to the lateness of the hour, while one commented that "it's a pretty small issue" at $175 million.

A second trader said he "would not be surprised if we don't see it at all," dismissing the deal as "a one-off" event by a little-known market name.

However, somewhat later in the session, a trader saw the bonds at 100½ bid, 101½ offered, up from the 99.442 level at which they had priced.

Some new deals hold gains...

With a dearth of fresh new-deal activity on Monday, traders were scrutinizing the behavior of some of the issues which came to market last week, finding that some of those new bonds which had moved up when they were freed for secondary trading continued to hold those gains.

One saw Provident Funding LP's 10 1/8% notes due 2019 trading as well as 102 7/8 bid, 103 3/8 offered on Monday morning - up from the 102¼ bid, 103¼ offered level at which the Burlingame, Cal.-based mortgage company's $200 million issue had traded after pricing at par on Thursday.

He also saw Venoco Inc.'s 8 7/8% notes due 2019 at 102 bid, 102¼ offered, about where the Denver-based oil and gas exploration and development company's $500 million offering had traded on Friday after having priced at par late Thursday.

Regal Entertainment Group's 9 1/8% notes due 2018 were trading around 107¾ bid on Monday - actually up from the bid range between 106¼ and 107¼ seen late last week, after the Knoxville, Tenn.-based movie theater operator's $100 million add-on issue - which is fungible with the $425 million of already outstanding bonds - priced at 104½ bid as a drive-by deal on Thursday, but then proceeded to shoot above the 106½ level in the aftermarket.

A trader saw Midwest Vanadium Pty. Ltd.'s 11½% senior secured notes due 2018 having moved up further to 104½ bid, 105½ offered; the Australian mining company had priced its $335 million issue on Wednesday at par, and the bonds had risen to around the 103½ -104½ level by the end of last week.

...but others stay near issue

Other deals which priced last week and then stayed anchored around their respective issue prices in the aftermarket continued to not stray far, such as Houston-based Energy XXI Gulf Coast Inc., whose $250 million quick-to-market offering of 7¾% notes due 2019 priced at par on Thursday and stayed there later Thursday and Friday; a trader Monday said that the issue "has quieted down," with the bonds trading just a couple of times Monday at around 100 1/8 bid.

Clear Channel active

A trader said that with Clear Channel Communications supposed to price its $750 million of 10-year priority guarantee notes on Tuesday, market views on the San Antonio, Tex.-based media company's upcoming deal were "kind of mixed - I can't seem to find many accounts that are playing it, yet I'm hearing that [lead underwriter] Goldman [Sachs] is saying that the deal is in good shape. So I'm not quite sure what's going on there."

Clear Channel's existing bonds had pushed higher last week on the news of the upcoming bond deal, but ultimately gave back much of those gains over the space of several sessions.

On Monday, its 11% notes due 2016 were busily traded, but gave up nearly 2 points of early gained to end unchanged at 96¾ bid, while its 5¾% notes due 2013 were up ¼ point at 98¼ bid.

Indicators little changed

Away from the new-deal world, a trader saw the CDX North American Series 15 HY index down 1/8 point on Monday to end at 104 3/8 bid, 104 7/8 offered, after having gained ¼ point on Friday.

The KDP High Yield Daily index meantime rose by 2 basis points on Monday to 75.89, after having lost 6 bps on Friday. Its yield narrowed by 2 bps on Monday to 6.68%, after having risen by 1 bp on Friday.

Advancing issues ended in a virtual dead heat with decliners Monday, after having led them by a better than six-to-five edge on Friday.

Overall activity, represented by dollar-volume levels, fell 22% on Monday after having risen by 20% on Friday from the previous session's level.

A trader likened the pace in Monday's market to "watching paint dry. It was another one of those exciting days."

He said that "one or two accounts mentioned today that a lot of stuff has just come to a grinding halt. Treasuries are in, so bids are lower, but offerings aren't necessarily coming in across the board.

"Nobody wants to sell cheap, and nobody wants to buy high."

Another trader said that apart from the activity in the Hughes Network bonds, "it was kind of a fairly uneventful day - nothing else was jumping out at me.

"It was pretty much an unchanged day - I would say firm and mostly 'unched.'"

Hughes higher on EchoStar buy

A trader said that Hughes Network's 9½% notes due 2014 was "fairly active," calling them up around 1 1/8 points on the news that the Germantown, Md.-based broadband satellite services provider had agreed to be acquired by EchoStar Corp. for $1.34 billion; including the refinancing of Hughes' debt, the total transaction is valued at $2 billion.

He saw the bonds last trading at 104¼ bid, 104½ offered.

Another trader said the Hughes bonds were up around a point, in "fairly active trading."

He noted that "the bonds are call-constrained, so I think market expectation is that those are going to be refinanced at some point."

Alcatel-Lucent gain continues

A trader said that the bonds of telecommunications equipment company Alcatel-Lucent "continued to be strong," quoting that paper up another "point and change;" he said that the company had reported "good numbers" last week, sending the bonds up by as much as 3 points following those results Thursday, a point on Friday and then up another point Monday.

He quoted the company's 6.45% notes due 2029 at 86½ bid, 87 offered, versus around 81½ before the Paris-based company's better-than-anticipated quarterly results.

The company - formed by the 2006 merger of France's Alcatel and U.S.-based Lucent, posted a profit of €340 million ($465 million) for the 2010 fourth quarter - a considerable improvement from the €46 million reported in the year-earlier period. The earnings handily beat Wall Street's average expectation of €235 million of earnings.

At another desk, a market source pegged those bonds up 1¼ points at just under 87 bid.

OPTI on the slide again

A trader saw OPTI Canada's 7 7/8% second-lien secured notes due 2014 down around ½ point at 47½ bid, with $15 million changing hands during the session - not much compared with last week's heavy trading in the troubled Calgary, Alta.-based energy company's volatile paper, but a decent amount for a day during which not that much was happening.

He saw the company's 8¼% senior unsecured notes also due 2014 were trading "right on top" of the 7 7/8s at 471/2, with over $10 million trading.

Another trader quoted the 7 7/8s as having retreated to 46¾ bid, 47¾ offered, while seeing the 81/4s at 47 bid, 48 offered, opining that the two issues "are gonna keep dropping."

Those bonds started out last week in the lower 50s and held those levels over the first half of the week; then on Thursday, the bonds plunged as low as 41 or 42 bid after the release of the company's fourth quarter and fiscal 2010 earnings data, but managed to come off those lows, particularly following OPTI's conference call at which it discussed the operational status of its joint-venture project with Nexen Inc. The OPTI bonds firmed later that session to come back to around the 48-49 level, ending down just 3 or 4 points on the day instead of 10 or 12 points, as they had been earlier, and they stayed there on Friday.

OPTI's first-lien senior secured notes - the 9% notes due 2012 and the 9¾% notes due 2013 - meantime continued to hover around or just below par bid.

No U.S. Oncology call news

A trader saw U.S. Oncology's 9 1/8% senior secured notes due 2017 at about the 120 level Monday.

That was up a little from the bid levels between 119½ and 119¾ seen for most of last week, but still well below the 123½ bid level those bonds held prior to Feb. 4, when they plunged between 3 and 4 points as investors became worried that the Woodlands, Tex.-based healthcare company - which has called the bonds for redemption this Wednesday - would try to pay them less than they expected.

The trader said that "supposedly, the call price was supposed to be set on Friday afternoon - but we have not seen anything about the call price hitting the news."

Because the first-call date for those bonds is not scheduled until 2013, U.S. Oncology and its new corporate parent, McKesson Corp., can only redeem the bonds at this point via a make-whole call based on a spread of 50 basis points over a reference Treasury security - but traders and analysts said there was some confusing language in the bonds' indenture that indicated the company might calculate its call price using a Treasury issue maturing in 2017, the year of the bonds' scheduled maturity, rather than 2013, the year the bonds first become callable, even though the latter is usually the formula companies follow when they schedule a make-whole call. They said using the 2017 bonds as the reference security would result in a lower call-price payment, triggering the slide in the bonds' price earlier this month.

"Clearly, that's not the way this is typically done," said a second trader.

Neither of the traders had seen any news about what the call price would be.

"Unless they've sent notification [directly] out to the bondholders," rather than issuing a news release, "we haven't seen [the price]," the first trader said.

About the only thing he was completely sure of was "they didn't go back up to 123."

Auto names spin their wheels

A trader saw the 8 3/8% benchmark bonds due 2033 issued by General Motors Corp. - before its 2009 bankruptcy restructuring that transformed "old GM" into Motors Liquidation Co., quite separate from the profitable "new" General Motors Co. - up ½ bid at 35½ bid, 36 offered.

GM rival Ford Motor Co.'s 7.45% bonds due 2031 were meantime unchanged at 108¾ bid, 109¼ offered.

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