Rite Aid, Clearwater price; new Holly bonds higher while Western waffles; Sallie Mae soars

By Paul Deckelman and Paul A. Harris

New York, June 8 - Rite Aid Corp. priced an upsized offering of seven-year senior secured notes on Monday as part of the Camp Hill, Pa.-based drugstore chain operator's ambitious refinancing effort that also includes a new term loan as well as a new revolving credit facility. Rite Aid's new bonds priced too late in the day for any kind of aftermarket activity, while its outstanding bonds were mixed.

Also on the new deal front, Clearwater Paper Corp. earlier in the session priced an offering of seven year notes. The Spokane, Wash.-based paper producer's new bonds were seen to have firmed more than a point when they were freed for secondary dealings.

The forward calendar grew by one deal as Interpublic Group of Cos., Inc. announced plans for a $500 million offering of eight-year notes, which is expected to price later this week. Interpublic's existing bonds - some of which are to be taken out via a tender offer funded with the proceeds of the new bond offering - were solidly higher.

Holly Corp.'s new offering of eight year notes, which priced on Friday afternoon, were seen having firmed smartly in secondary dealings on Monday. The same, however, could not be said for Holly competitor Western Refining Inc. - like Holly, a Texas-based petroleum refining concern - whose new fixed-rate bonds traded below the issue price at which those bonds came to market late Friday, while the floating-rate part of that two-part bond deal stayed around issue.

Apart from the new-deal arena, a trader saw some high-yield interest helping to push up the nominally split-rated SLM Corp., whose New York Stock Exchange-traded shares meantime zoomed, helped by favorable analyst comment and an endorsement by TV stock pundit Jim Cramer.

Also moving up multiple points was Clear Channel Communications Inc., apparently helped by a published report quoting a senior company executive as saying that the company will likely prevail over balky bondholders skeptical of its pending debt-exchange offer.

Rite Aid upsizes

In Monday's primary market, Rite Aid priced a slightly upsized $410 million issue of 9¾% seven-year first-lien senior secured notes (B3/B+) at 98.196 to yield 10 1/8%.

The quickly shopped deal, which was upsized from $400 million, priced in the middle of the 10% to 10¼% yield talk, and came in line with price talk that had the notes pricing at a small discount.

Citigroup, Banc of America Securities and Wachovia Securities were joint bookrunners for the debt refinancing.

Clearwater Paper tight to talk

Elsewhere Clearwater Paper priced a $150 million issue of 10 5/8% seven-year senior notes (Ba3/BB) at 98.792 to yield 10 7/8%.

The yield was printed at the tight end of the 11% area price talk.

Goldman Sachs & Co. was the left lead bookrunner for the debt refinancing. Banc of America Securities LLC was the joint bookrunner.

Despite the fact that Clearwater was a first-time high-yield issuer, the deal went very well, according to a syndicate source.

Clearwater had gone on a non-deal roadshow, where it received a warm reception from the accounts, the source added.

Insurance companies seemed eager to get into the double-B name sporting a double-digit coupon and yield, the source added.

Also, Clearwater printed in the middle of two other recent issuers from the sector, the official pointed out.

Graphic Packaging International, Inc. priced a $245 million issue of 9½% senior notes due 2017 (B3/B-/) at 97.292 to yield 10% on June 2, while Verso Paper Corp. priced a $325 million issue of 11½% senior secured notes due 2014 at 91.968 to yield 13¾% on May 28.

CMS Energy for Tuesday

CMS Energy Corp. will host a Tuesday investor call for a $300 million offering of 10-year senior unsecured notes (Ba1/BB+/BB+).

The notes are expected to price late Tuesday afternoon.

The transaction will be run off the high-yield desk. However high-grade accounts are expected to be involved in the deal to a significant extent, the source said.

Barclays Capital and Deutsche Bank Securities are active bookrunners.

Proceeds will be used for general corporate purposes including the retirement of existing debt.

Given where the company's bonds maturing in 2017 are presently trading, a source close to the deal is looking for a yield on the new 10-year paper in the high 9% context.

Interpublic plans $500 million

Interpublic plans to price a $500 million offering of eight-year senior unsecured notes this week.

Morgan Stanley, Citigroup, JP Morgan and UBS Investment Bank are joint bookrunners for the deal.

Proceeds will be used to fund a tender for the company's notes maturing in 2010 and 2011, as well as to repay other debt, for general corporate purposes and for working capital.

Clearwater bonds firm up

When the new Clearwater Paper 10 5/8% notes due 2016 were freed for secondary dealings, a trader saw the bonds at par bid, 101 offered, up from the 98.792 level at which those bonds had priced earlier in the session to yield 10 7/8%..

Several other traders, meantime said they had not seen the new bonds trading around.

Rite Aid mixed ahead of offering

The new Rite Aid 9¾% senior secured notes due 2016 came too late in the session for any kind of aftermarket dealings.

Earlier in the session, traders saw the company's existing bonds mixed ahead of the pricing of the new deal, with one seeing its 10 3/8% notes due 2016 circulating around 90 bid, 90½ offered, which he called a 1 point gain on the day. He also saw its 8 5/8% notes due 2015 "right around" 671/2. He said that those bonds had "been there for the last few days" and so were unchanged, but he noted there was "more volume in them."

A second trader said that Rite Aid's 9½% notes due 2017 were a "surprise" member of the most actives club on Monday, seeing them firm slightly to 66¾ bid from 66 5/8, on $14 million.

Another market source also saw that latter issue edge up, gaining 1/8 point to just under 67 bid. Its 8 5/8s gained ¼ point to the 67 level.

Another trader, however, saw Rite Aid's bonds "almost unchanged, maybe off a little," estimating them down ¼ to ½ point in the face of the upcoming new bond issue. He said that "people are not sold on this deal yet," since it would "cram down" the existing bonds.

Rite Aid, the Number-Three U.S. drugstore chain operator, said it priced the bonds as part of its previously announced comprehensive plan to refinance the company's September 2010 debt maturities. Besides the bonds, the refinancing plan includes a new $525 million senior secured term loan due June 2015 and a new $1 billion senior secured revolving credit facility due in September 2012. Rite Aid said it had obtained $900 million in commitments.

Interpublic existing up on tender, deal news

New York-based advertising and marketing concern Interpublic Group's outstanding bonds got a lift from the news that the company is bringing a bond deal, the proceeds of which will fund a separately announced tender offer for those outstanding bonds.

A market source saw the company's 7¼% notes due 2011 up by as much as 7 points on the day at 103, just under the announced price at which the company will buy those bonds that are tendered by the holders.

New Holly bonds head upward

A trader saw Holly Corp.'s new 9 7/8% notes due 2017 at 96½ bid, 97½ offered, while a second pegged those bonds "up quite a bit" at 96¾ bid, 97¾ offered.

The Dallas-based petroleum refining and marketing company had priced its $200 million bond offering on Friday at 94.105 to yield 11%.

Western Refining deal seen struggling

While Holly did "very well," in the words of one trader, it was quite a different story for Western Refining's new two-part issue, which also priced on Friday.

A trader declared that the El Paso, Tex.-based petroleum refiner "couldn't get out of its own way," as both tranches of its bonds traded at or a little below their respective issue prices.

He saw its 11¼% senior secured notes due 2017 trading at 90 7/8 bid, 91 offered - down from the 91.445 level at which that $325 million of bonds had priced Friday to yield 13%. He also saw the other part of that deal - the $275 million of senior secured floating-rate notes due 2012 - trading at 91¾ bid, 92 offered, just under the 92 mark at which the bonds had priced.

Another trader saw the 113/4s at 90¾ bid, 91 ¼ offered, while seeing the floaters at 91¾ bid, 92¼ offered.

Recent Owens Corning paper easier

A trader saw Owens Corning's recently priced 9% notes due 2019 trading at 97 5/8 bid, on $14 million of volume. That was down from Friday's level at 98 1/8 bid.

The Toledo, Ohio-based insulation maker had priced $350 million of the bonds - upsized from the originally planned $250 million - last Wednesday at 98.386 to yield 9¼%. Although the split-rated bonds (Ba1/BBB-) priced off the high-grade desks at the respective investment banks that handled the deal, traders reported a fair amount of high-yield account interest in Owens Corning.

Market indicators mostly firm

Apart from the new deals, a trader saw the CDX Series 12 High Yield index - which gained 3/16 point on Friday - retreating by 3/8 point Monday to 83¾ bid, 841/4.

However, the KDP High Yield Daily Index, which had risen by 19 basis points on Friday, added another 17 bps on Monday to close at 62.90, while its yield tightened by 12 bps to 10.41%.

In the broader market, advancing issues - which had led decliners for a 14th consecutive session on Friday - again continued to do so on Monday, holding about an 11-to-10 edge.

Overall market activity, measured by dollar-volume totals, was down about 29% versus Friday's levels.

A trader termed Monday's session "one of those lackluster days."

Another agreed that it was "pretty much like a non-event, or a pre-holiday day, extremely quiet, with very light volume."

He suggested that high yield market players almost "don't want to sell bonds. They don't want to participate in a down market. It's almost like our market is either going to stay unchanged or go higher." While he saw at least "a few down bonds" among the volume leaders, he added that he "did not see any pressure on [junk] even though equities were down a hundred [points on the Dow Jones Industrial Average] earlier."

Stocks actually rallied late in the session after having been way down for most of the day, with the Dow managing to nose into the black just before the close, ending up 1.36 points, or 0.02%, at 8,764.49, while broader market measures such as the Standard & Poor's 500 and the Nasdaq composite came off their lows but still ended down 0.10% and 0.38% respectively.

The trader did see widely followed junk market bellwether bonds mostly slightly to the downside, with Community Health Systems Inc.'s 8 7/8% notes due 2015 down ¼ point from Friday's level to 991/2, on $13 million of volume, First Data Corp.'s 9 7/8% notes due 2015 off a point at 72 bid, on $3 million traded, and Aramark Corp.'s 8½% notes due 2015 unchanged at 97 bid, with $2 million changing hands.

Sallie Mae solidly higher

The trader saw SLM Corp.'s 8.45% notes due 2018 as the most actively traded bond in the market, with some $23 million changing hands. He quoted the bonds having pushed up to 79 bid from 77½ on Friday. There was considerable high yield interest in the split-rated (Ba1/BBB-/BBB) issue.

The bonds' rise coincided with a jump of $1.32, or 19.97%, in the Reston, Va.-based education loan provider's NYSE-traded shares, which closed at $7.93. Volume of 56 million shares was about five times the norm.

The shares and bonds firmed after William Blair & Co analyst David Long said in a research notes that that even if the Obama administration makes good on its threat to cut subsidies to student lenders like Sallie Mae, the company would still probably be able to make and service loans for the Department of Education.

Meanwhile, widely watched CNBC market guru Jim Cramer had on Friday called SLM his "speculative stock of the year," and said that its share price could double from current levels.

Clear Channel climbs

A trader saw Clear Channel Communications' 6¼% notes due 2011 having jumped to 51 bid, versus the prior round-lot level of 42 on Friday, with $6 million traded.

At another desk, a market source quoted those bonds at 48 - still a 6 point gain. However, its 5.50% notes due 2014 were down a deuce at 23.5 bid.

The Financial Times quoted a senior Clear Channel executive, William Eccleshare - appointed on Thursday as head of its international outdoor advertising business - as saying that the company is confident it will prevail in any showdown with creditors balking at the anticipated debt-exchange offer, which would see some parent company debt swapped for debt in its Clear Channel Outdoor Holdings Inc. U.S. billboard subsidiary. It is expected that the 89% owned outdoor company would repay a $2.5 billion debt to the parent company. Both media companies are based in San Antonio.

The terms of the exchange offer have not yet been officially cleared - but some senior creditors have said they would oppose it, hoping to bring on a breach of the company's lending agreements that might leave them in control of the company, at a steep discount.

Ford continues to firm

A trader saw General Motors Corp.'s bonds unchanged at 11 bid, 12 offered, while seeing sector arch-rival Ford Motor Co.'s 7.45% bonds due 2031 at 68 bid, 71 offered, having "moved up a couple" of points. He said investors "are lovin' Ford" - simply because it not GM.

Another trader saw the GM benchmark 8 3/8% bonds due 2033 lower by ½ point at 10½ bid, 11 offered, while calling the Ford long bonds unchanged at 68 bid, 70 offered.

Yet another trader saw the 7.45s up ¾ point at 69 bid, on $14 million. He also saw Ford Motor Credit Co.'s 7 3/8% notes coming due on Oct. 28 having finished at 98 bid, down 1/8, on volume of $5 million, although he saw considerable odd-lot trading in the credit.

Michaels move continues

A trader saw Michaels Stores Inc.'s bonds continuing to firm, with the 10% senior notes due 2014 trading up to 86 bid, a 3 point gain on the day.

Those bonds, and the company's 11 3/8% notes, had firmed to solid levels at the end of last week after the Irving, Tex.-based arts and craft store released favorable fiscal first-quarter financials.

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