Calpine, Sinclair, Drummond deals price, Reynolds slates; Tronox remains busy; funds gain $237 million

By Paul Deckelman and Paul A. Harris

New York, Oct. 15 - Calpine Corp., Sinclair Television Group, Inc. and Drummond Co. priced bond deals collectively worth nearly $2 billion, high yield syndicate sources said Thursday.

Birmingham, Ala.-based coal operator Drummond's new deal was heard to have moved up solidly when the bonds moved over to the aftermarket. Sinclair's offering came too late in the session for any trading, while Calpine's upsized deal - done as a private placement to holders of its term loan paper - traded more or less in line with where the loan paper was trading.

Also on the new-deal front, Richmond, Va.-based packaging company Reynolds Group was preparing to hit the road for the next two weeks to market is two-part, $1.8 billion equivalent offering of dollar- and euro-denominated secured notes.

Price talk emerged on offerings for Trico Shipping AS, Talecris Biotherapeutics Holdings Corp. and Lions Gate Entertainment Corp. The latter deal, a secured offering for the Vancouver, B.C.-based film and television producer, had been expected to come to market during Thursday's session, but syndicate sources heard that it had been put off until Friday. Another prospective movie industry issuer, Hollywood-based Deluxe Entertainment Services Inc., remained out of sight for yet another day, traders hearing that the company was tinkering around with some of the upcoming issue's covenants to make the $600 million secured offering more palatable to would-be investors.

Intelsat Jackson Holdings' new deal, which priced on Wednesday, was heard to be still hovering around the par level, up more than a point from where it came to market. Alon Refining Krotz Springs Inc., which priced Tuesday at a steep discount to par, was also "above water," as one trader put it.

Among issues not connected with the new deal market, Tronox Worldwide LLC's 9½% bonds were seen busy for a fifth straight session, pretty much holding the substantial gains they had notched over the previous four.

Junk funds up by $237 million

As trading was finishing up for the session, market participants familiar with the high yield mutual fund-flow statistics generated by AMG Data Services of Arcata, Calif. - a key barometer of overall market liquidity trends - said that in the week ended Wednesday some $237 million more came into the weekly-reporting funds than left them.

It was the eighth consecutive gain, and followed the $483.9 million cash inflow seen in the previous week, ended Wednesday, Oct. 7, and was the 15th week in the last 16 in which inflows were seen, dating back to mid-June. More than $5.89 billion of net inflows have been seen during that stretch, according to a Prospect News analysis of the AMG figures, interrupted only by a lonely $89.9 million outflow recorded in the week ended Aug. 19.

Counting the latest week's number, the year-to-date net inflow for the weekly-reporting funds rose to $17.444 billion, according to the analysis - a new peak level for the year so far, eclipsing the old mark of $17.207 billion recorded in the Oct. 7 week.

With 2009 now into its fourth and final quarter, inflows, including the latest weekly gain, have been seen in 36 weeks out of the 41 since the start of the year, according to the analysis, against just five outflows - the Aug. 19 retreat, a $110 million outflow in the week ended June 24, and three weeks of outflows in late February and early March, totaling $969 million. The inflows, on the other hand, include an incredible 14-week run of consecutive gains, dating from mid-March through mid-June, during which time the funds grew by a record $9.1 billion.

Such sustained inflows have helped the junk market come roaring back from last year's staggering 25%-plus loss and sharply reduced primary activity totals. Total returns so far this year totaled an eye-popping 49.78% as of Wednesday's close, according to the authoritative Merrill Lynch High Yield Master II index, handily beating virtually every other major investment asset class. Meanwhile, the $107.892 billion of new high yield debt issued so far this year globally, as of Wednesday's close -- $92.686 billion of it domestic - is running 56% ahead of the anemic pace of last year's global primary tally. Domestic new issuance is 64% ahead of its year-ago levels.

EPFR sees inflows continuing

Meanwhile, another fund-tracking service, Cambridge, Mass.-based EPFR Global , which uses a different methodology, calculated a $488 million inflow for the week, following the $579.2 million gain seen the week before. The latest inflow was the 16th week in a row, its analysts said, and also was the 30th such cash infusion into the junk funds in the last 31 weeks.

The inflow brought the year-to-date total up to $20.01 billion, EPFR said, from $19.5 billion the week before.

While the EPFR junk figures most weeks point essentially in the same direction as AMG's, the precise weekly and year-to-date numbers almost always differ due to EPFR's inclusion of some non-U.S. funds in its universe. All cumulative fund-flow totals, whether for AMG or EPFR, can include unannounced revisions and adjustments to figures from prior weeks.

The flow of money into and out of the junk bond funds is seen as a generally reliable market barometer of overall high yield market liquidity trends - although they comprise less of the total monies floating around the high yield universe.

Sinclair upsizes

Sinclair Television Group, Inc. priced an upsized $500 million issue of 9¼% eight-year second-lien senior securred notes (B3/B-) at 97.264 to yield 9¾% in Thursday's primary market action.

The yield printed 25 basis points beyond the wide end of the 9¼% to 9½% price talk.

J.P. Morgan Securities Inc. ran the books for the debt refinancing.

Drummond prices $250 million

Elsewhere, Drummond Co. priced a $250 million issue of 9% five-year senior notes (B1/BB-) at 98.053 to yield 9½%.

The yield printed on top of the price talk.

Citigroup Global Markets Inc., Bank of America Merrill Lynch, HSBC Securities, Wells Fargo Securities and Scotia Capital were joint bookrunners for the debt refinancing from the Birmingham, Ala., coal producer.

Friday's deals

Elsewhere the stage was set for a moderately busy Friday session.

Talecris Biotherapeutics Holdings Corp. set price talk for its $550 million offering of seven-year senior notes (B1) with an 8% area all-in yield including 1 or 2 points of original issue discount.

Morgan Stanley, Goldman Sachs, Wells Fargo and Citigroup are joint bookrunners for the debt refinancing deal.

Lions Gate Entertainment, Inc. talked its $200 million offering of seven-year senior secured second-priority notes (B2/B) at 11% to 11¼%, with 3 to 5 points of original issue discount.

The deal is a debt refinancing.

J.P. Morgan has the books.

Meanwhile Trico Shipping AS set price talk for its $400 million offering of five-year senior secured first-lien notes (B1) - yet another debt refinancing.

The notes are talked to yield 13% to 13¼%, including about 4 to 5 points of original issue discount.

Barclays Capital has the books.

Calpine upsizes bond-for-loan deal

Calpine Corp. priced an upsized $1.2 billion issue of senior secured notes due 2017 at par to yield 7¼%, a market source told Prospect News on Thursday.

That was at the wide end of the 7% to 7¼% price talk.

The issue came in a bond-for-loan exchange with holders of Calpine's Libor plus 287.5 basis points first-lien term loan due 2014, affording the Houston-based power generation company three years of breathing room with respect to the debt maturity.

The deal was upsized from $750 million.

Goldman Sachs & Co., Bank of America Merrill Lynch, Deutsche Bank Securities Inc. and Morgan Stanley & Co. Inc. ran the offering.

The notes will be guaranteed by the company's current and future subsidiaries that guarantee the existing credit facility and will be secured by the same assets.

Reynolds kicks off $1.8 billion

Reynolds Group will start a roadshow next week for its $1.8 billion equivalent two-part offering of seven-year senior secured notes, according to an informed source.

The planned tranche sizes are $1.1 billion and €450 million, and are subject to change.

The full roadshow will run next week, as well as the week of Oct. 26. Pricing is expected late in the week of Oct. 26.

Credit Suisse is the bookrunner for the deal which comes to market via Rule 144A and Regulation S, with registration rights.

The notes come with perfected security comprising mortgages and fixed- and floating-rate charges over substantially all the assets of each guarantor and borrower.

The notes will come with three years of call protection.

Proceeds will be used to help fund the acquisition of Reynolds Consumer Products by Beverage Packaging Holdings (Luxembourg) III SA, the parent company of SIG Holding AG, and to refinance SIG's term loan.

Reynolds is a Richmond, Va., manufacturer of consumer packaging and wraps.

SIG is a Switzerland-based packaging machinery manufacturer.

New Drummond deal 'does well'

When Drummond Co.'s new 9% notes due 2014 were freed for secondary dealings, a trader saw the bonds at par bid, 101 offered, up from the 98.053 level at which the $250 million issue had priced earlier in the session to yield 9½%.

A second trader saw the new bonds having done "really well," quoting the new notes at 100¾ bid, 101¼ offered, "up a good 2 points plus, or even almost 3 points."

Calpine bonds in line with loans

A trader saw Calpine's new 7¼% senior secured notes due 2017 at 94½ bid, 95 offered, versus their par issue price earlier in the session.

However, he noted that the San Jose, Calif.-based independent power producer was issuing the notes - upsized to $1.2 billion from the originally announced $750 million - in a private placement to holders of term loans under its existing credit facility, for a like principal amount of term loan paper outstanding under that facility.

"If the loans were trading at a discount," he said, "then the bonds would go down to [about the same level]."

Another trader quoted the new bonds at 94¾ bid, 95½ offered, and said that was somewhat above the 91 3/3 bid, 92½ offered level at which the loan paper had been trading.

Intelsat still above issue

A trader saw trader saw Intelsat Jackson Holdings' new 8½% notes due 2019 continuing to orbit more than point above where the Bermuda-based communications satellite operator's deal priced on Wednesday. He quoted the $500 million issue at 100¼ bid, 100½ offered, about the level to which they had risen in initial aftermarket dealings on Wednesday after having priced at 99.166 to yield 8 5/8%.

"So that's up nicely," he said, "up a little more than a point" from issue.

Alon also up from pricing

And he saw Alon Refining Krotz Springs 13½% senior secured notes due 2014 "above water," quoting the bonds in a 95-95¾ context. That is a little above the 94.85 level at which the Wilmington, Del.-based refinery operator's $216 million issue - upsized from the originally announced $205 million - priced on Tuesday to yield 15%.

Market indicators mostly better

Back among the existing bonds not connected with the new-deal market, a trader saw the CDX Series 13 index retreat by ¼ point on Thursday to 94¼ bid, 94¾ offered, after having shot up by 1¼ points on Wednesday.

However, the KDP High Yield Daily Index rose by 4 basis points on Thursday to end at 96.42, after having jumped by 25 bps in Wednesday's dealings. Its yield narrowed by 3 bps to 8.64%, after having come in by 7 bps the day before.

In the broader market, advancing issues led decliners for a second straight session, by a better than eight-to-five margin.

Overall market activity, as measured by dollar-volume levels, fell almost 11% from Wednesday's pace.

A trader said that "all of the big volume was all the same nonsense - the top three traders were all financials, CIT [Group Inc.], Ford [Motor Credit Co.] and one of those Wachovia things" - actually Wachovia Capital Trust III.

CIT seen little changed

"It doesn't look like CIT's levels are too much changed," he said, quoting the New York-based commercial lender's 4¼% notes due 2010, its most active issue, between 65 and 66 bid. He said those bonds had traded between 63 and 66½ on Wednesday, "so it settled inside of [Wednesday's] trading range."

Another trader saw CIT's paper "holding its own," seeing the short-dated issues, like those coming due next month, get up to 70 and trade in a 69-70 context, while somewhat longer-dated paper, like its 7 5/8% notes due 2012, stayed around 62-64." That was pretty much where the latter bonds had been on Wednesday, he said, "but it was still an active trader. There was good volume."

He also said that CIT "seemed to be the name bantered about, while there's news pending, as they say what this [financing] deal is going to look like."

The bonds - which had been sliding the previous several sessions - broke to the upside on Wednesday and stayed there on Thursday on news reports that CIT, currently trying to persuade its bondholders to voluntarily go along with an exchange of their current paper for new, longer-maturity debt, was getting closer to finalizing the terms of a new loan from a Bank of America-led consortium that would give it between $3 billion and $6.5 billion, with most of that going to repay existing debt.

Should the debt exchange be successful - a prospect which some CIT-watchers now consider doubtful - the loan reportedly would work as a secured facility, while it would take the form of a debtor-in-possession loan if the bond exchange fails and CIT has to file for bankruptcy.

Ford Credit, Wachovia trust issue trade up

Among the other active credits seen by the first trader, Wachovia Capital Trust III's floating-rate notes due 2042 were seen by a market source at 74¼ on Thursday, up from 72 the session before. With over $20 million traded as of mid-afternoon, the bank's paper was one of the most active issues in Junkbondland.

Also seen trading actively was Ford Credit's 7¼% notes due 2011, which moved up to 99¾ bid from prior levels just above 98. Around $15 million of the bonds had changed hands by mid-afternoon, the market source said.

Tronox trading continues

But a trader said Tronox Worldwide LLC's 9½% notes due 2012, were probably the busiest bonds. He quoted them as rising as high as 66 bid, before settling into a 65-66 range. He called that "unchanged - but on a lot of volume."

He said "small pieces" even got as high as 67½ bid, "but really, 651/2-66 is where it ended up." There was, he reiterated, "a lot of volume. 66 was the big number today."

A second trader said that Tronox - up nearly 30 points from the upper-30s levels it held a little more than a week ago - "was pretty active again."

He saw the bonds get as good as 68 bid in the morning, before coming in to around 65¾ bid, 66 offered, which he said was still up from Wednesday's range of between 59½ and 66, with the bonds having ended Wednesday around a 62-64 area.

"It rose first thing in the morning, and then came back down again."

Yet another trader said that bankrupt Oklahoma City-based chemical pigments manufacturer's bonds were offered at 69 in the morning, "but then slowly came in, and tightened up, to go out on either side" of a 65-66 context. He quoted them going home at 65½ bid, 66 offered, in "fairly active" dealings. "The bulk of the trading was on either side of 66."

While Tronox was actively traded for a fifth consecutive session, the trader - noting that Thursday's session was the first in which it was not shooting up multiple points in apparent response to the release last week of favorable financial projections covering the next few years - declared that "Tronox has stopped its ascent." The bonds had jumped 10 points last Thursday to around the 47 level, another 6 or 7 points last Friday to 53-54, another 4 or 5 points Tuesday to about 57-59, and another 7 points Wednesday to 65-66, but, the trader added, "trees don't grow up to the sky."

Visteon sets the pace for auto names

A trader saw Visteon Corp.'s 7% notes due 2014 "up a little" at 31 bid, 34 offered.

A second trader said the company's bonds have been "moving quietly up." He said the 7s were at 30 bid on Thursday, versus 28 at the opening, 25½ on Wednesday and 24 two weeks ago.

He also saw the Van Buren Township, Mich.-based auto parts supply company's 8¼% notes due 2010 at 29 bid, versus two weeks ago, when they were offered at 25, without a bid. And its 12¼% notes due 2016 has recently been trading as high as 33-35 - although he saw no trades Thursday - versus 26-30 a week ago, "so they've been kind of creeping up also," helped by investor perception that former corporate parent Ford Motor Co. will continue to assist its problem child.

A trader saw Ford's 7.45% bonds due 2031 at 82 bid, 84 offered, "about where they've been," while Ford domestic arch-rival General Motors Corp.'s benchmark 8 3/8% bonds due 2033 were around 15-16. "That stuff has been pretty stable, around 151/2-16," which he allowed might be unchanged to up ½ point, "but not enough volume to prove it [upside movement]. A couple of trades don't exactly make it."

Tousa steady after big gain

A trader said that Technical Olympic USA Inc.'s 9% notes due 2010, which had shot up to the low 50s on Wednesday in response to a court ruling favoring bondholders and other unsecured creditors versus the bankrupt Florida-based homebuilder's secured lenders, "stopped in a low 52-53 range. The big move was [Wednesday], but it's holding in that range, on not a lot of volume."

He did see one trade as high as 56, but said generally, the bonds were unchanged from Wednesday.

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