UAL prices deal; Targa, Royal Caribbean slate deals, busy Tuesday expected; new paper holds

By Paul Deckelman and Paul A. Harris

New York, June 29 - United Air Lines, Inc. came in for a landing in Junkbondland, releasing terms on a late-Friday pricing of $175 million of senior secured notes that came at a big discount to par in order to boost its yield into the high teens. The Chicago-based airline operator's new paper was heard to have moved up a point or so when it broke for secondary dealings.

United was the only actual pricing seen in the market on Monday - but that doesn't mean there was no other activity. Quite the contrary. New issues were announced by Targa Resources Partners LP and Royal Caribbean Cruises Ltd., and price talk emerged on scheduled offerings from Bill Barrett Corp. and Real Mex Restaurants, Inc., as well as on the quickly-moving Targa deal.

Market participants were meantime expecting a busy slate of pricings on Tuesday, including Bill Barrett, Targa, possibly Royal Caribbean and possibly Wind Acquisition Finance SA's big dollar- and euro-denominated mega-deal, as the issuers wish to get their deals done at the end of the calendar second quarter and first half, and ahead of the expected fall-off in market attendance and activity heading into Friday's market closure in celebration of Independence Day.

In all, there are $2.44 billion and €2.7 billion equivalent of offerings on the forward calendar.

Dealers appear poised to attempt to price most - if not all - of it by Wednesday's close, sources say.

In the secondary realm, traders saw the continuation of last week's largely becalmed market, outside of activity in such recent deals as RSC Equipment Rental Inc. and Alliance One International Inc.

Targa rolls out $250 million

Targa Resources Partners set price talk for a $250 million offering of eight-year senior notes (expected ratings B2/B) at 12¼% to 12½% on Monday.

The deal is expected to price on Tuesday.

Barclays Capital, Banc of America Securities, Deutsche Bank Securities and RBS Securities are joint bookrunners for the debt refinancing and general corporate purposes deal from the Houston-based provider of midstream natural gas and natural gas liquid services.

Barrett talks seven-year deal

Elsewhere in the energy sector, Bill Barrett set price talk for its $200 million offering of seven-year senior notes (B1/B+) at the 11% area.

Barrett is expected to price Tuesday morning.

Banc of America Securities, Deutsche Bank Securities Inc. and J.P. Morgan are joint bookrunners for the debt refinancing deal from the Denver-based oil and gas exploration, development and production company.

Real Mex price talk

Meanwhile Real Mex Restaurants talked its $110 million offering of 3.5-year senior secured notes (B3/B-) with a 14% coupon, at a discount, to yield about 18%.

The roadshow was scheduled to conclude during the latter part of last week.

Jefferies & Co. is the bookrunner for the debt refinancing and general corporate purposes deal from the Cypress, Calif.-based restaurant company.

Wind launches €2.7 billion

Wind Acquisition Finance SA, a financing unit of Italy's Wind Telecomunicazioni SpA, plans to sell €2.7 billion equivalent of eight-year senior notes (B2/expected BB-) on Wednesday.

The deal will include dollar-denominated and euro-denominated notes. Tranche sizes remain to be determined.

Deutsche Bank Securities, Credit Suisse and Banca IMI are joint global coordinators and lead bookrunners. BNP Paribas, Calyon Securities, Citigroup, Goldman Sachs & Co., JP Morgan, MPS, RBS Securities and UniCredit are joint bookrunners.

Proceeds will be used to refinance €2 billion of payment-in-kind loans due 2011 and to fund a dividend to Weather Investments SpA, the holding company that acquired Wind in 2005.

Royal Caribbean $250 million

Elsewhere Monday, Royal Caribbean Cruises announced plans to price a $250 million offer of six-year senior unsecured notes (Ba3/BB-) on Tuesday afternoon or Wednesday.

Morgan Stanley, Banc of America Securities and Goldman Sachs are joint bookrunners for the debt refinancing deal from the Miami-based cruise vacation company.

In addition to the above, the pre-Independence Day calendar includes the following previously announced deals:

• One Communications Corp.'s $275 million offering of first-priority six-year senior secured notes (expected B-) via Morgan Stanley and J.P. Morgan;

• Casella Waste Systems, Inc.'s $205 million of five-year senior second-lien notes via Banc of America Securities, J.P. Morgan and Calyon Securities;

• Commercial Barge Line Co., with a $200 million offering of eight-year senior secured notes led by Banc of America Securities, UBS Investment Bank, SunTrust Robinson Humphrey and Wachovia Securities; and

• TRU 2005 Re Holding Co. I, LLC (Toys 'R' Us, Inc.)'s whopping $950 million offering of eight-year senior notes (expected ratings B3/B+) via Banc of America Securities, Deutsche Bank Securities, Goldman Sachs and Wachovia Securities.

United Air Lines prices Friday night

United Air Lines priced a $175 million issue of 12¾% three-year senior secured notes (B2/B+) at 90.07 to yield 17% late last Friday night, an informed source said.

The deal priced off the high-grade desk because of a high-grade syndicate banker's familiarity with the credit, the source added.

Goldman Sachs and Citigroup were joint bookrunners.

Proceeds will be used for general corporate purposes, possibly including debt repayment, financing capital expenditures or funding potential acquisitions or other business transactions.

UAL bonds gain altitude

After the new United Air Lines bonds priced, a trader said that he had not seen any of the 12¾% senior secured notes due 2012 trading. "If they bid, it was probably with the underwriters," he said.

At another desk, the $175 million of new paper was seen at 92½ bid, 93½ offered, but a trader added that he had "not seen a lot" of dealings in it.

A third trader also saw the bonds at 92½ bid, 93½ offered - well up from the 90.07 level at which they had priced earlier in the session.

Trader sees Wind generating interest

A secondary trader noted the plethora of new deals waiting to be priced.

He said he had heard that there was "the most interest" in the marketplace in the Casella, Wind and Bill Barrett transactions.

He said that for the others, like One Communications, the underwriters will likely have to price the deals at a steep discount to par, "much like they did with that United Air Lines deal."

He said he had heard that the Wind deal would be broken down into €1 billion and just under $2 billion. "You'll have some people looking to up their exposure, and how anxious they'll be to do that will depend on the price.

He continued that "it will have good liquidity - the knock on some of the other deals is that if you buy them, you generally get a lousy allocation, and then you have to make a decision whether to hold it or flip it. If you like it, then you have to chase it in order to build a position - and I don't know if people will be too anxious to do that on the last day of the quarter."

RSC remains well bid

A trader said that RSC Equipment Rental's new 10% first-lien senior secured notes due 2017 were trading Monday around 99¼ bid, 99¾ offered - not far removed from the 99 1/8 bid, 99½ offered level at which the Scottsdale, Ariz.-based industrial equipment rental company's paper traded late Friday when it was freed for secondary dealings, and well up from the 97.32 level at which the company had priced its $400 million of bonds - upsized from the originally planned $300 million - earlier Friday to yield 10½%.

Two other traders saw the new RSC bonds get as good as 99½ bid to 100½ offered, with one of them terming that a 1 point rise on the day.

New Alliance One again underperforms

A trader said that Alliance One's issue of 10% senior notes due 2016 was "really a dog,"

A second trader saw the Morrisville, N.C.-based independent leaf tobacco merchant's new $570 million offering -- downsized from an originally planned $600 million, the only issue last week to have come in at less than expectations size-wise - at 95 bid, 96 offered. The bonds had priced Friday at 95.177 to yield 10½%, but never seemed to catch fire after that, held back, some market participants said, by the perception that tobacco is not a good place to be right now, with the Obama administration having just rammed tough new anti-smoking laws through Congress.

Little interest in last week's offerings

A trader said that besides the dealings in RSC, "we may have seen a buyer or two of Smithfield [Foods Inc.'s 10% senior secured notes due 2014] - but that's pretty much it. Nobody came in looking around for stuff again this morning."

Compass sees some selling

The trader also said that he had seen sellers of Compass Minerals International Inc.'s 8% notes due 2019 in the 993/4-par area; the Overland Park, Kan., producer of inorganic minerals priced $100 million of those bonds on May 21 at 97.497 to yield 8 3/8%.

Noting the small size of the deal, he opined that "if you can't find a real buyer, you're not going to get a real bid."

Market indicators stay firm

Back among the established issues with no new-issue connections, the CDX Series 12 High Yield index - which had eased by ¼ point on Friday - was heard by a trader to have rebounded by 1 1/8 point on Monday to end at 83 5/8 bid, 83 7/8 offered.

The KDP High Yield Daily Index, which had gained 14 basis points on Friday, rose another 7 bps on Monday to end at 62.25, while its yield tightened by 1 bp to 10.65%.

In the broader market, advancing issues - which had led decliners on Friday for a third consecutive session, did so again on Monday, by around an 11-to-nine margin.

Overall market activity, measured by dollar-volume totals, fell 3% from Friday's levels.

A trader said that "there wasn't a ton [of activity] going on -- it was a terribly slow day."

A second trader called the market "pretty ugly - it's boring."

Yet another said that at his shop "this morning, we were somewhat busy, It was both buyers and sellers, to some carryover from last week," when the secondary market was struggling.

He said that they had observed "some selling of shorter maturity paper," such as 2009 and 2010 issues, "from a seller's standpoint, some of it probably to fund the calendar. From a buyer's standpoint, it's really been to put cash to work away from the calendar." Among the issues being sold, he said were "everything from short Ford paper," like the Ford Motor Credit Co. 7 3/8% notes coming due on Oct. 15, "to Cablevision, to USONs [U.S. Oncology Inc.], anything like that, we had people nosing around."

He said that "some things are being held up, simply through inactivity - lack of trading and no price change."

Supervalu bonds sent higher

Among specific issues, traders saw Supervalu Inc.'s 8% notes due 2016 actively traded, with over $12 million having changed hands by mid-afternoon.

One saw the bonds around 97 bid, 98 offered, calling them unchanged on the day. However, a market source at another desk, also seeing them at the 97 level, called them up more than 2 points on the session. The bonds were seen to have gotten as good as the mid-99 level, up more than 4 points from earlier lows, before coming off that peak to end up 2½ points.

There was no immediate fresh news out on the Eden Prairie, Minn.-based supermarket operator, which was bouncing back from some recent bad news; last week, the company warned that its fiscal first quarter earnings will come in below analysts' expectations when it reports on July 28.

First Data firmer on new venture

Another gainer, in brisk trading, was Greenwood Village, Colo.-based electronic transactions processor First Data Corp., whose 9 7/8% notes due 2015 were seen by one source up nearly 4 points to levels above 70. Over $16 million of those bonds had traded at those firmer levels at mid-afternoon, a trader said.

The jump in the bonds coincided with First Data's revelations Monday that it and Bank of America are forming a new company named Banc of America Merchant Services LLC, which will provide clients with a suite of innovative payments solutions including credit, debit and prepaid cards to merchant loyalty, check and eCommerce payments.

Bank of America will contribute approximately 240,000 merchant relationships and First Data will contribute approximately 140,000 merchant relationships to the new company.

The company will be approximately 46.5% owned by Bank of America and 48.5% by First Data, with the remaining stake held by Rockmount Investments LLC, an investment vehicle controlled by a third party investor.

Sara Rosenberg contributed to this report

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