Unitymedia, HealthSouth and Landry's price deals; market awaits Clearwire; GM gains again

By Paul Deckelman and Paul A. Harris

New York, Nov. 17 - Unitymedia Hessen GmbH, HealthSouth Corp. and Landry's Restaurants Inc. combined to price some $1.5 billion of new junk-rated paper on Tuesday, a session which also saw an additional more than €2 billion brought to market as part of the multi-tranche Unitymedia mega-deal.

When the new Unitymedia dollar bonds were freed for trading, they moved up, and the Landry's deal was seen up solidly in the aftermarket, along with Monday's offering from OPTI Canada Inc. However, a trader dismissed HealthSouth's new deal as the day's "laggard," seeing little aftermarket movement in the Birmingham, Ala.-based healthcare facilities operator's new bonds.

Pre-deal market price talk was heard on Clearwire Communications LLC/Clearwire Finance Inc.'s $1.45 billion behemoth of a deal, which is expected to price on Wednesday afternoon.

Market players were meanwhile looking beyond that big deal, to the latter part of this week, with a number of deals seen as possible candidates for pricing as Junkbondland tries to clean up all of the loose ends ahead of next week, when little of real substance is expected to get done ahead of the looming Thanksgiving holiday break. Among the issuers who could come to market before the end of this week, primaryside watchers believe, are such names as Alliance Healthcare Services Inc., Central European Distribution Corp., Cloud Peak Energy Resources LLC/Cloud Peak Energy Finance Corp., Easton-Bell Sports Inc., JohnsonDiversey Inc., Koppers Inc. and Stonemor Operating LLC.

Away from the new-deal arena, General Motors Corp.'s bonds continued to rise, in heavy trading, for a second straight session in the wake of the Detroit giant's latest quarterly numbers, showing a narrower-than-feared loss, and its declarations that it plans to start paying back billions of dollars of government bailout loans ahead of schedule.

Junk was firm on Tuesday, with cash bonds ½ point higher on the day, according to a trader who works for a high-yield mutual fund.

Although this source's fund did not participate in any of the session's five tranches, which totaled more than $1.45 billion and €2 billion, the trader expressed confidence that there is plenty of cash out there to manage the current calendar.

Unitymedia upsizes

Tuesday's biggest trade was the upsized Unitymedia three-part deal.

Unitymedia Hessen GmbH & Co. KG and Unitymedia NRW GmbH priced €1.43 billion and $845 million of 8 1/8% eight-year senior secured notes (B1/BB-) at 97.844 to yield 8½%

The yield printed on top of yield talk. The issue price came within the 1.5 to 2.5 points of discount talk.

The euro-denominated notes tranche was upsized from €1.4 billion. The dollar-denominated tranche was upsized from $825 million, after having previously been increased from $750 million.

In addition Unitymedia GmbH priced an upsized €665 million issue of 9 5/8% 10-year senior notes (B3/B-) at 97.652 to yield 10%.

Once again, the yield printed on top of yield talk, and the issue price came within the 1.5 to 2.5 points of discount talk.

The senior notes tranche was upsized from €650 million, after having previously been increased from €600 million.

Credit Suisse, Deutsche Bank, Goldman Sachs and J.P. Morgan were joint bookrunners.

Proceeds will be used to help finance the acquisition of the Unitymedia by Liberty Global.

Unitymedia equity portion reduced by upsizing

The upsizing of the bonds enabled Liberty Global to pare the amount of equity backing the deal, according to market sources.

"That's not really cool," commented one asset manager who played the dollar-denominated secured tranche.

The secured paper, which priced at 97.844, may have traded as high as par ½ bid, said the investor, who was marking it at 99½ bid, 99¾ offered, at the Tuesday close - off the day's highs.

"There has been an amazing amount of quotes on this paper," the manager said.

Asked if the sizable transaction had catalyzed notable activity among bond flippers, the buy-sider said: "Yes, but they prefer to be called short-term holders."

Another source had the Unitymedia dollar-denominated paper at 99½ bid, 99 7/8 offered just after the close.

The buzz surrounding the deal, late last week, held that the secured tranches were doing well, while the unsecured 10-year paper had been struggling somewhat, the asset manager said.

However in the end the unsecured piece was upsized, and was priced on top of price talk, the manager added, concluding that it couldn't have struggled very mightily.

Because of the size of the euro-denominated tranches, investors in Europe grew keen to own those portions of the deal, according to a U.S.-based investment banker who watched the trade closely.

Landry's upsizes

Meanwhile Landry's Restaurants priced an upsized $406.5 million issue of 11 5/8% six-year notes (B3/B) at 98.427 to yield 12% on Tuesday.

The yield printed on top of the price talk. The reoffer price came in line with the approximately 1½ points discount talk. Landry's increased the size from $390 million.

Jefferies & Co. and UBS Investment Bank were joint bookrunners.

Proceeds will be used to refinance existing debt and either for general corporate purposes or, if consummated, to fund a portion of the acquisition of Landry's by Landry's chairman, chief executive officer and president Tilman J. Fertitta.

"Landry's came with a lot of yield, and is up in the market," said an investor who marked the paper at 101¾ bid right before the close.

A sell-side source had seen the notes as high as 101¼ bid, but marked them after the end of trading.

HealthSouth prices in the middle of talk

Also on Tuesday, HealthSouth priced a $290 million issue of 8 1/8% senior notes due Feb. 15, 2020 (Caa1/CCC+) at 98.327 to yield 8 3/8%.

The yield printed in the middle of the 8¼% to 8½% price talk.

J.P. Morgan Securities Inc., Barclays Capital Inc. and Goldman Sachs & Co. were joint bookrunners for the debt refinancing.

HealthSouth's "triple-hooks," idomatic for the triple-C ratings from both Moody's and S&P, prohibited some institutional investors from getting into the deal, according to a fund manager who bought a few of the new HealthSouth 8 1/8% notes due 2020.

"This is one of those companies that is actually a much higher credit quality than the ratings show," the investor said, adding that the fact that the deal was done for an 8 3/8% yield implied that it was not a difficult transaction.

Clearwire talks $1.45 billion

The Tuesday session was bereft of news about new roadshow starts, and generated a paltry amount of news with respect to the active forward calendar.

Clearwire Communications and Clearwire Finance, Inc. set yield talk for their $1.45 billion offering of six-year senior secured notes at the 12½% area on Tuesday, according to an informed source.

The issue is expected to price at a discount of approximately 2 points.

The order books close at 9 a.m. ET on Wednesday. Pricing is set for Wednesday afternoon.

J.P. Morgan, Bank of America Merrill Lynch, Morgan Stanley and Jefferies are joint bookrunners for the Rule 144A for life notes.

Also expected to price Wednesday is Stonemor Operating LLC's $150 million offering of eight-year senior notes.

Bank of America Merrill Lynch is the bookrunner for the debt refinancing deal from the Bristol, Pa.-based owner/operator of cemeteries.

Price talk is expected early in the Wednesday session, a source close to the deal told Prospect News.

Finally, the above-mentioned pricing of the HealthSouth deal is expected to clear the way for Alliance Healthcare Services, Inc.'s $200 million offering of seven-year senior notes, according to sources on both the buy-side and sell-side.

One buy-sider suggested that Alliance's audience might have had its attention focused on the HealthSouth deal up until the point that HealthSouth priced.

An investor said that Alliance could be priced during the Wednesday session.

Deutsche Bank Securities, Barclays and Morgan Stanley are the underwriters for the debt refinancing deal.

A secondary trader said that he was "just sitting here, waiting for tomorrow's [i.e. Wednesday's] onslaught [of issues]. You'll have quite a number of pricings [Wednesday and Thursday], notably the Clearwire transaction, which he said "seems to be generating some interest."

He said that the Kirkland, Wash.-based wireless broadband services provider "is a benchmark issue for the marketplace, and it will really give us an indication of how deep the demand [for new bonds] is. It's easy to put away a $200 million or $300 million, where you have $300 million in roll from an existing issue," but the giant-sized deal will provide a stiff test of market resolve.

New Landry's issue improves

When Landry's Restaurants' new 11 5/8% senior secured notes due 2015 were freed for secondary dealings, a trader said that the bonds had moved up solidly to 101¼ bid, 102 offered.

That was well up from the 98.427 level at which the Houston-based restaurant and gaming concern had priced its million issue.

New Unitymedia bonds better

A trader saw Unitymedia's new dollar-denominated 8 1/8% senior secured notes offered just under par - well up from the 97.844 level at which the German cable company had priced its $845 million tranche of bonds.

HealthSouth hangs around issue price

A trader said that HealthSouth Corp.'s 8 1/8% notes due 2020 had traded at 98½ bid after having priced late in the morning, but he said that was "the last he saw" of the bonds, which were not far removed from their issue price of 98.327.

Another trader saw the HealthSouth bonds at 98¼ bid, 98¾ offered. Viewed against the backdrop of the Landry's and Unitymedia deals having moved up, HealthSouth, he said, was "the laggard of the day."

He theorized that the company and its underwriters "probably should have left [the yield] at 8½% and not skinnied the coupon. That was an underwriter decision. I think if they had left [the coupon] at 8¼% and priced it [to yield] 8½%, you would have a hard time finding bonds right now."

Instead, he said, "they priced it to yield 8 3/8%. I don't know why they had to get cute like that."

OPTI Canada paper pops up

A trader saw OPTI Canada's new 9% senior secured first-lien notes due 2012 having opened the session at par bid, 100½ offered, and then saw those bonds get lifted to 100½ bid, although he said that after that, activity seemed to dwindle. "That was the last we saw" of the issue.

A second trader, though said that his shop "was busy in the entire OPTI Canada cap structure," and particularly in the new bonds. He saw the new 9s get as good as 101¼ bid, 101¾ offered, before tightening to 101¼ bid, 101½ offered.

The Calgary, Alta.-based energy exploration and production company had priced its $425 million deal on Monday at 97 bid, to yield 10.156%. The new bonds had been quoted late Monday at a very wide 97½ bid, par offered, before tightening up on Tuesday.

Market indicators stay firm

Back among the existing bonds not connected with the new-deal market, a trader saw the CDX Series 13 index up 3/8 point at 93 7/8 bid, 94½ offered on Tuesday, after having gained ¾ point on Monday.

Meanwhile, the KDP High Yield Daily Index was 1 basis point better on Tuesday at 69.65, after rising 6 bps during Monday's dealings. Its yield widened by 2 bps Tuesday to 8.62%, after having narrowed 3 bps the previous session.

In the broader market, advancing issues led decliners for a fourth consecutive session on Tuesday, although their winning margin slimmed to about four to three, versus the three-to-two advantage which they had held on Monday.

Overall market activity, as measured by dollar volume, rose 22% from Monday's pace.

A trader said that Tuesday's dealings in the secondary market were "kind of boring," since "the new issues were leading the way."

At another desk, a trader said that "the market seemed pretty firm today. There are some pretty tight markets out there, and if there's a half-way decent offering, people are buying it. So it sounds like people are still sitting on cash.

He said "a good way to describe [Tuesday's market] would be 'more offerings are being lifted, than bids getting hit.'"

Yet another trader opined that "the market is going out firm - even with all of the new-issuance today."

GM holds Monday gains

Among specific names not having any new-deal connections, a trader saw "hundreds of millions" [of dollars] of General Motors Corp. bonds trading. He said that although he was "sure that a lot of the other issues were trading too," the 8 3/8% benchmark bonds due 2033 "seemed to be the big one," and he saw them going out in a 23-23½ context, which he said was up about 2 or 3 points from Monday's late levels around the 20 bid region.

"Some of their other issues, too" were likewise higher, "so there was a lot in GM Corp. trading."

Another trader saw the benchmarks having opened around 21 bid, 21¾ offered, having traded during the day at a low of 20 3/8 and a high of 233/4, before going out late in the session at 23 bid, 24 offered. All told, he said, Trace was reporting turnover of $64 million in the issue.

Another GM bond, its 7.20% notes due 2011, traded between 21½ on the low side and 22 7/8 on the high side. He saw $16 million having traded on Trace.

The GM bonds had jumped to around 20-21 on Monday from long-held prior levels in the mid-teens, a gain of some 4 or 5 points, and they continued to move up on Tuesday on very active dealings, after the Number-One U.S. car producer announced that it would begin paying back $6.7 billion in U.S. government loans and another $1.4 billion in loans from the Canadian government by the end of this year - and projected that it could pay off that full amount as early as next year, a full year ahead of schedule.

The company's chief executive officer, Fritz Henderson, said that GM would be able to make the payments early because it had performed better than expected during its whirlwind bankruptcy reorganization earlier this year. He also noted that its sales and overall performance since then have modestly exceeded expectations.

GM had further good news for the financial markets on Monday when it also announced that it lost $1.2 billion from the time it left bankruptcy protection in early July through the end of the calendar third quarter on Sept. 30; analysts said those were better results than GM had reported in previous quarters, which has been interpreted in some quarters as a signal that the auto giant's fortunes are beginning to rebound. JP Morgan Chase & Co. was impressed enough to upgrade its rating on the company's bonds to a "buy" from a "hold" previously.

Little action on GMAC chief's exit

The surprise late-Monday announcement by GM's former loan financing unit, GMAC LLC, that its

CEO, Alvaro de Molina, has stepped down from that post, seemed to have little impact on the Detroit-based automotive finance and mortgage lending company's bonds on Tuesday.

A trader said those bonds "are quoted every day, there are all kinds of quotes," but called its 8% bonds due 2031 right around 84-85, and last seen at 85 bid, on "not much activity," while GMAC's 7¼% notes due 2011 were right around 99 bid, but also "on not much volume."

He further said that there are "a lot of other GMAC issues -- but I don't see them as being that active."

For instance, he said that GMAC's 6¾% notes due 2014 were right around 891/2-901/2, which he said was "maybe a point lower, but on not a lot of volume."

GMAC gave no immediate explanation for de Molina's departure; however, published reports said that he was asked to resign by the company's board, which was said to be looking for a chief with different skills at a time when GMAC is negotiating with the Treasury Department over additional taxpayer aid.

The trader meantime saw GMAC mortgage unit Residential Capital LLC's 8½% notes due 2010 "right around" an 85-87 range, apparently unchanged by the de Molina news, but said he "did not see activity in the name - they're quoted there, but I'm not seeing activity."

Beazer quiet despite CEO's SEC woes

Homebuilders, a trader said "were just quoted," but saw little actual trading.

He said Beazer Homes USA Inc.'s bonds did not really go anywhere Tuesday on Monday's news that the Securities and Exchange Commission staff had issued a Wells notice to CEO Ian McCarthy, indicating the regulators may try to get back some of the bonus money paid to the executive for periods when the Atlanta-based homebuilder restated financial results. The regulators cited anti-fraud provisions in the law allowing the government to "claw back" compensation in some instances.

"I see them quoted, but I don't see those things trading" he said of Beazer's bonds. "That's a name you just don't see activity in much."

"Maybe they're quoted a little higher - but no activity."

He saw the company's 8 1/8% notes due 2016 right around 76.

Ply Gems hangs on

A trader said that Ply Gem Industries Inc.'s 11¾% notes due 2013 "seemed like they're holding their quotes" in the same 96-96½ range at which those bonds had traded for the previous two sessions.

He said that "there was not much activity today -- but that's where they've been - and they're holding up at these levels."

He saw the Cary, N.C.-based building products company's 9% subordinated notes due 2012 quoted around 76, but said that he had not seen any trading in those bonds. "There was no activity in those. They're holding at the levels they moved up to."

Ply Gem's bonds had firmed solidly on Friday, in heavy trading, as the company reported third-quarter net income of $4.4 million, versus a year-earlier net loss before unusual items of $4.1 million, and posted a gain in third-quarter adjusted EBITDA, which came in at $57.6 million, versus $41.9 million a year ago.

Ply Gem also said on its post-numbers conference call that liquidity had grown by more than $44 million during the third quarter and has since further strengthened with the recent private placement of $25 million of 11¾% senior secured notes due 2013.

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