Tekni-Plex trades sharply lower; MasterCraft prices $105 million; CDX High Yield 9 down ¾

By Paul A. Harris

St. Louis, Sept. 28 - While traders were spotting the broad market unchanged on Friday, with two remarking that traditional buy-and-hold players appear to be taking some positions, the CDX High Yield 9 index, which was launched on Thursday, traded lower during the final session of September.

A trader said that the index finished at 983/4+ bid, down ¾ point on the day.

Another trader, specifying that the broad market was unchanged on the day, said that oil and gas, and some of the commodity names were better, while some of the industrial and healthcare names seemed a little weaker.

This source saw existing issues of Tekni-Plex, Inc. sharply lower.

Meanwhile in the primary market MCBC Holdings, Inc. (MasterCraft) priced a $105 million issue of seven-year paper, and Mexico's Corporacion Durango SAB de CV priced $520 million of 10-year senior unsecured notes.

Tekni-Plex trades off

A trader said that the existing bonds of Tekni-Plex took it on the chin Friday, and attributed the move to disappointing earnings.

The source spotted the Tekni-Plex 12¾% senior subordinated notes due 2010 down 5 or 6 points at 71 bid, 72 offered, while the 8¾% due 2013 were "down a couple of points" at 91 bid, 92 offered.

This source also noted that names from the homebuilding sector felt softer.

An exception, the trader said, was KB Home, which on Thursday reported a $35.6 million quarterly loss.

Recounting that KB Home is beset by the litany of ills that presently engulfs the sector - oversupply of new homes, downward pressure on new home values, tighter lending standards, low affordability, greater buyer caution, higher foreclosure activity, and efforts on the part of builders and investors to monetize real estate investments - the trader said that the company's 7¾% notes due 2010 were actually a little better on Friday at 94¾ bid, 95 offered, perhaps up ½ point.

The trader was amazed that the debt was holding in, and not down 5 points.

It was a different story, however, for Standard Pacific Corp., the trader said, adding that the homebuilder's 7% notes due 2015 traded lower to 73 bid, off about 2 points.

Real buying

Noting that volume had been "kind of thin" on Friday, this trader reported that there has lately been "real buying" taking place on the part of mutual funds, insurance funds and pension funds.

To make the case the trader noted the CHC Helicopter Corp. 7 3/8% notes due 2014.

Recounting that the company provides helicopter services from the mainland to oil rigs, the trader said that lately CHC had run into some chop because it has been changing equipment.

"When they buy new equipment it takes six to nine months to train the pilots until they can use that equipment, which amounts to a huge capex, eating into their profits," the trader said.

"But people seem to think these guys are fine, and are going to do better, especially with oil at $83 per barrel.

"Every time they weaken up we have buyers. They weakened up a little on Friday and people stepped in and bought some."

This source reported trading some of CHC's paper at 95¼ bid, 95½ offered.

Recent issues mostly better

Elsewhere sources continued to discuss recent issues resulting from a series of drive-by junk bond deals that have cleared the market in the past 10 days.

Much of that new paper is reported to be trading at a premium.

The most universally mentioned deal on Friday was the Quebecor Media Inc. 7¾% senior notes due March 15, 2016 (B2/B), which priced in an upsized $700 million add-on at 93.75 to yield 8.82% on Wednesday

A high yield syndicate official watching the bonds in the aftermarket told Prospect News that the new Quebecor 73/4s traded as high as 95½ to 96 bid, then dropped down to the low 95s.

"But it pulled back up to 95 3/8 bid, 95 5/8 offered mid-Friday afternoon," the source added.

At the close a trader had the Quebecor paper at 96¼ bid.

Earlier in the day a hedge fund manager spotted that new Quebecor Media 7¾% notes at 95½ bid, 96 1/8 offered, compared to 95¾ bid, 96 offered at Thursday's close.

This source also saw the recently priced Leucadia National Corp. 8 1/8% eight-year senior notes, which were priced at 98.307, trading early Friday at 100¼ bid, 101 offered.

The manager saw the R.H. Donnelley Corp. 8 7/8% notes due 2017, which priced at par, trading Friday morning at 101½ bid, 102 offered.

Meanwhile CompuCom Systems' 12½% notes due 2015 were at 95½ bid, 96½ offered. They were priced at 94.613.

And the new Range Resources Corp. 7½% senior subordinated notes due 2017 (Ba3/B+), which priced at par, were at 102½ bid, 103¼ offered on Friday morning, according to the hedge fund manager.

Stronger hands

A trader who was marking the broad market unchanged on the day asserted that the recent issues are holding in because they are going to smaller groups of accounts who may not be looking to flip the bonds for a couple of points.

"The deals have been place well," the trader said.

This source gave spots on a couple of benchmark issues.

The General Motors Corp. 8 3/8% notes due 2033 were going out Friday at 88½ bid, 89½ offered, while the General Motors Acceptance Corp. 8% notes were going out at 98¼ bid, 99¼ offered

Both were unchanged on the session.

MasterCraft at mid-talk

In the primary market, MasterCraft priced a $105 million issue of seven-year senior secured floating-rate notes (B3/B-) at par to yield six-month Libor plus 637.5 basis points on Friday.

The coupon was printed at the midpoint of the Libor plus 625 to 650 basis points price talk.

Jefferies & Co. ran the books for the acquisition deal from the Vonore, Tenn.-based designer and manufacturer of luxury inboard sport boats.

Elsewhere Mexico's Durango priced a $520 million issue of 10-year senior unsecured notes (B+/B+) at par to yield 10½%, on top of price talk.

Merrill Lynch ran the books.

Ahead of pricing, Durango was down 0.25 in the gray market, but after freeing to trade rose from its issue price to 100.25 later in the session.

Thin calendar

With Friday's business having cleared only one junk deal remains officially in the market.

Ryerson Inc. is expected to be on the road until midweek with its $575 million two-part offering of senior secured notes.

The acquisition financing deal, which is being quarterbacked by Banc of America Securities, is comprised of a $425 million tranche of eight-year notes and a $150 million tranche of seven-year notes.

And sources continued to suggest that the cash-pay notes in the Allison Transmission $1.1 billion senior notes (Caa1/B-) two-part deal could surface during the first week of October.

The deal is being led by Citigroup, Lehman Brothers and Merrill Lynch.

Throughout the latter part of September sources have told Prospect News that underwriters succeeded in placing approximately $1.5 billion of the Allison secured risk: first $1.0 billion at 96.00, with MFN protection, then another $500 million at 96.50 without MFN.

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