Market improves, new issues remain the focus; GM bonds active, weaker; Rite Aid ends mixed

By Paul A. Harris and Stephanie N. Rotondo

Portland, Ore., May 29 - The high-yield secondary world ended the week on a positive note, as market indexes showed strength. But some new issues, such as the Ford Motor Credit Co. LLC issue released Thursday, were not faring as well.

In the rest of the market, General Motors Corp.'s debt gave back some of Thursday's gains. The company is making its way toward a bankruptcy filing, expected Monday.

Meanwhile, Rite Aid Corp.'s bonds ended mixed after the company announced an upsized term loan deal. Trading in the name was also not as active as it had been earlier in the week.

The Friday primary market saw two issuers price $1.3 billion equivalent of high-yield notes in three tranches.

Virgin Media upsizes

Virgin Media Finance plc priced an upsized $1 billion equivalent of seven-year senior notes (B2/B-) in two tranches.

Both tranches came with 9½% coupons, and were issued at 95.574 to yield 10 3/8%, which was the middle of the 10¼% to 10½% price talk.

The $750 million tranche was led by JP Morgan.

The €180 million tranche was led by Deutsche Bank Securities.

The deal was upsized from $650 million equivalent.

Proceeds will be used to prepay a portion of the outstanding A and B tranches under the New York City-based media company's senior credit facility.

Terex prices $300 million

Elsewhere Terex Corp. priced a $300 million issue of 10 7/8% seven-year senior notes (B2) at 97.633 to yield 11 3/8%.

The yield was printed at the wide end of the 11¼% area price talk. However the price came slightly rich to the 2.5 to 3 points of original issue discount price talk.

Credit Suisse, UBS Investment Bank and Citigroup Global Markets Inc. were joint bookrunners.

The Westport, Conn.-based construction equipment manufacturer will use the proceeds to pay down its senior credit facility and for general corporate purposes.

Tenet $200 million minimum

Tenet Healthcare Corp. is expected to bring a $200 million minimum offering of senior secured notes during the week ahead, according to a market source.

Banc of America Securities LLC will lead the deal. Goldman Sachs & Co. and Citigroup are expected to be involved.

Details such as the tenor of the notes, call structure and credit ratings remain to be determined.

Proceeds from the notes will be used to help fund the tender for up to $1 billion of the company's 9 7/8% senior notes due 2015.

The first week of June

In addition to Tenet, market sources expect terms to emerge on at least two deals during the week ahead.

Interface, Inc. expects to price a $150 million offering of senior secured notes due Nov. 1, 2013 (expected ratings B1/BB-) early in the week.

Banc of America Securities LLC, Citigroup and Wachovia Securities are joint bookrunners for the deal to fund the tender for the Atlanta-based floor covering company's 10 3/8% senior notes due 2010.

Also in the June 1 week Valeant Pharmaceuticals International will begin a roadshow on Monday for its $300 million offering of seven-year senior unsecured notes, which are expected to price late in the week.

Goldman Sachs & Co. is the left lead for the deal to redeem or retire debt and/or equity securities.

However sources expect that Tenet, Interface and Valeant comprise only a small part of the primary market picture for the first week in June.

"The Leap Wireless deal caught a lot of people by surprise, this week," a syndicate banker said, referring to Leap Wireless subsidiary Cricket Communications, Inc.'s $1.1 billion issue of 7¾% seven-year senior secured notes (Ba2/B+) at 96.134 to yield 8½% on Thursday, via left lead bookrunner Goldman Sachs & Co.

The stage is set for "surprises" such as the Leap deal during the first week of June, the banker added.

The main reason: cash continues to gush into the high-yield asset class, creating demand for bonds - a demand that the accounts lately appear to be attempting to satisfy in the primary market.

The high-yield mutual funds saw $622.7 million of inflows for the week to Wednesday, according to AMG Data Services.

It was the 11th consecutive week of positive flows, during which time the funds that report weekly have seen $7.2 billion come in, a syndicate official said.

Market improves, new issues still the focus

Market players said investors remained focused on new issues during the final trading session of the week. The positive momentum of the recent onslaught of deals served to help the broader market as well.

The CDX High Yield index gained 1¼ points, a source said, ending at 81 3/8 bid, 81 7/8 offered.

The KDP High Yield index was likewise better at 61.55, yielding 11%, compared to Thursday levels of 61.34, with a yield of 11.05%.

Among new issues, Ford Motor Credit's 8% five-year notes dropped to 80 bid, 81 offered, compared to 82 bid, 82.75 offered at Thursday's close. They had priced at 82.036 on Thursday.

Harrah's Entertainment Inc.'s new 11¼% eight-year senior secured notes remained static in the 96 area, right where the issue originally priced.

GM active, weaker

In the automotive realm, General Motors remained active, following the company's new debt swap offer announced on Thursday.

A trader said the 8 3/8% notes due 2033 ended around 9.5, with about $28 million changing hands.

"Almost every GM issue traded with a 9 handle," he said. "And most were down a point."

Another trader said the bonds were "still active around 9 and change."

Yet another source quoted the notes generically at 6 bid, 8 offered, down a point.

On Thursday, the nearly bankrupt company announced a new debt-for-equity offer that held not only the approval of the U.S. Department of the Treasury, but also an ad hoc committee of bondholders.

Under the new deal, bondholders would receive 10% of the equity of the reorganized company, along with warrants for an additional 15%. That offer was deemed much better by the committee, as the original offer gave the group only a 10% interest.

"The ad hoc committee of GM bondholders supports the revised offer from GM and believes that when contrasted with the alternative - uncertain and costly bankruptcy court litigation - that it represents the best alternative for bondholders in the current difficult and dire situation," the committee said in a statement Thursday. "Since the initial offer was made on April 27th, circumstances have materially changed that make today's offer more attractive.

"While the committee continues to remain troubled by preferential treatment that the UAW VEBA is receiving compared to the bondholder class - rejecting this offer in the expectation that the bondholders will do better in a litigated outcome was a risk the committee is unwilling to take," the committee added.

Visteon eases

Meanwhile, Visteon Corp., which filed for Chapter 11 protections on Thursday, saw its bonds slipping some after moving higher in the previous session.

One trader said the notes were "not overly active," placing the 7% notes due 2014 at 4 bid, 5 offered. Another pegged the paper at 5 bid, 6 offered, down ½ point.

Ford Motor Co.'s benchmark 7.45% notes due 2031 fell 2 points to 55 bid, 57 offered.

Rite Aid debt mixed

Market sources gave mixed readings of Rite Aid's bonds after the Camp Hill, Pa.-based company priced an upsized term loan.

A trader called the 7½% notes due 2017 and the 10 3/8% notes due 2016 higher by ½ point at 78.75 and 90, respectively. However, he saw the 8 5/8% notes due 2015 unchanged at 68.

Another trader said the debt dropped 2 points on the day, the 6 7/8% notes due 2013 closing at 59.5 bid, 60.5 offered.

The second trader noted that Moody's Investors Service had confirmed its negative outlook on the company.

Earlier in the week, market chatter was that Rite Aid would launch a $400 million term loan at Libor plus 650 basis points. Come Friday, the deal was seen increasing to $525 million, with the coupon in line with expectation and the price talk for the original issue discount at 96.

The term loan is part of the company's "comprehensive plan" to refinance its debt. Proceeds from the financing are expected to be used to pay a term loan maturing in 2010.

Broad market improves

Elsewhere in the world of high yield, Harrah's Entertainment Inc.'s notes were "not overly active," a trader said. He saw the 10¾% notes due 2016 gaining 2½ points to 55, while the 7 7/8% notes due 2010 inched up to 91.75.

Another source called the 5¾% notes due 2015 a point lower at 42 bid.

The always-active Freeport-McMoRan Copper & Gold Inc.'s 8 3/8% notes due 2017 jumped up to around par, a trader said, with $40 million trading.

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