JBS, Encore price upsized deals, new JBS gyrates; market tone strong; Jarden up on stock sale

By Paul Deckelman

New York, April 22 -- Encore Acquisition Co. and JBS USA, LLC, successfully priced new high yield offerings on Wednesday, syndicate sources said. Both deals were upsized - considerably, in the case of beef and pork producer JBS. The latter bonds initially shot up 1½ points on the break, but then came down from that peak to end just modestly higher. No aftermarket activity was seen in Encore Acquisition's bonds.

Georgia-Pacific LLC's new notes, which priced on Monday and then firmed about 2 points in initial secondary dealings Tuesday, were seen adding to those gains.

Back among the established issues, traders reported signs of a firmer tone, even though numerical market measures seemed to tell a story that was murky at best. Among the credits posting multiple-point gains were such diverse names as Saks Inc., Graphic Packaging International and Jarden Corp. - the latter enjoying a boost as the company announced an equity sale, the proceeds of which will be used for debt repayment and other purposes.

Also seen solidly on the upside was Ford Motor Co., perceived by many investors as well as some analysts to be the only one of Detroit's traditional "Big Three" carmakers likely to get out of the present automotive apocalypse more or less healthy and intact.

JBS brings sharply upsized deal

The big primary deal of the day in Junkbondland was JBS USA's offering of five-year notes. Along with its JBS USA Finance, Inc. affiliate, the Greeley, Colo.-based meat processor priced $700 million of senior notes at 95.046 with a coupon of 11 5/8% to yield 13%.

That issue (B1//B+) was well upsized from the $400 million which had been shopped around the market. Market participants had originally expected the books to close at mid-afternoon on Tuesday, but they were reopened to allow the company to tweak covenants, a syndicate source said.

The bonds saw strong demand through Wednesday morning, prompting the deal's enlargement.

The Rule 144A/Regulation S offering came to market via joint bookrunners J.P. Morgan Securities Inc. and Banc of America Securities LLC.

JBS USA - a unit of international beef and pork processing giant JBS SA, best known in the United States for its ownership of the venerable Swift's Premium ham and bacon brand and Swift Butterball turkey line - plans to use proceeds from the deal to repay inter-company debt and credit facilities and for general corporate purposes.

New JBS bonds jump around

After the JBS bonds had priced, a syndicate source saw them quickly gain about 1½ points over issue to the 96½ area.

However, a secondary trader said: "They shot up to 961/2, on the first trade but truthfully the bonds were, I think, mostly in the hands of flippers," whom he described as in-and-out players looking to quickly take the bonds as high as possible and then just as abruptly cash out, rather than buying them as any kind of investment to hold on to. "Then they got out," he said, with the bonds coming back down to an offered level of 953/4.

Even allowing that "dealers don't always show the best executions in the brokers' market," he declared that he "definitely saw a 95¾ bid hit, and left offered."

A second trader agreed that the new JBS bonds had jumped to 96½ bid, 97 on the break, only to tumble back down to a closing level at 95 bid, 95½ offered.

Yet another trader saw them going home off their highs at 95¾ bid, 96¼ offered.

Encore Acquisition upsizes

Encore Acquisition, a Fort Worth, Tex.-based domestic energy exploration and production company, brought a quickly-shopped deal to market, pricing it in a matter of hours after announcing the offering. It upsized the offering of seven-year senior subordinated notes to $225 million from the original $200 million figure.

The notes (B1/B), carrying a 9½% coupon, priced at 92.228, to yield 11 1/8%, in the middle of pre-deal market price talk envisioning a yield in a range of 11% to 11¼%.

The new deal came to market via joint book-running managers Banc of America Securities LLC and Wachovia Capital Markets, LLC.

The company plans to use the proceeds of the offering to help pay down its revolving credit facility debt.

A buyside source active in energy credits told Prospect News that the bond deal is "a credit positive for EAC, as it removes bank debt. Once again, the high yield market is open for good E&P companies."

A trader predicted before the pricing that the offering would be "in decent shape. It's a legitimate bond for accounts. It's a pretty well respected name in [this] environment."

Traders saw no immediate secondary dealings in the bonds, which priced fairly late in the afternoon.

Besides announcing plans for the debt issue, Encore on Wednesday also reported disappointing first-quarter financial results, including a slide into a net loss from a year-earlier profit, and lower adjusted earnings that came in under Wall Street expectations, as the results were hurt by falling oil and gas revenue and higher expenses.

The company reported a net loss of $7.6 million, or 15 cents a share, versus year-earlier net income of $31.2 million, or 58 cents a share, as oil and natural gas revenue dropped 58% year-over-year to $113.5 million from $268.8 million previously. Excluding certain unusual items, Encore reported a quarterly profit of $12.2 million, or 23 cents a share, down from $58.3 million, or $1.08 a share, last year. Those adjusted earnings came in well short of consensus analysts' estimates in the 35 to 40 cents per share range.

Georgia-Pacific rise continues

A market source meantime saw Georgia-Pacific's new 8¼% notes due 2016 continuing to firm despite what he called "a weak high yield market."

The Atlanta-based paper and pulp maker priced $750 million of the bonds - upsized from $600 million originally - at 96.155 late Monday, to yield 9%. Traders saw the bonds having pushed up to around 98 bid, par offered in Tuesday's initial secondary activity.

On Wednesday, the source said the bonds had risen at least 3 points from their pricing levels.

Market indicators mixed

Back among the established issues, a market source saw the CDX Series 12 High Yield index - which had lost 5/8 point on Tuesday - ease by another 1/8 point on Wednesday, closing at 73¾ bid, 74¼ offered.

Meanwhile, the KDP High Yield Daily Index, which had fallen by 39 basis points on Tuesday, edged up on Wednesday by 3 bps, to 56.18, while its yield widened by 2 bps to 12.53%.

Advancing issues, which on Tuesday had fallen behind decliners by a narrow margin, regained their lead on Wednesday, topping the laggards by a five-to-four ratio.

Overall market activity, measured by dollar-volume totals, declined about 2%.

Despite the lackluster indicators, a trader said that he would categorize the overall market as "very firm and healthy, at this point, between the recent new issues and the strength in the better-quality parts of high yield. It really demonstrates the amounts of cash that was on the sidelines, waiting for everyone to get comfortable."

He continued that "even with equities and Treasuries turning lower during the day" - the bellwether Dow Jones Industrial Average fell 82.99 points, or 1.04%, to 7,886.57, while the yield on the benchmark 10-year government note widened about 4 bps to 2.94% and the 30-year's yield rose by 6 bps - "I did not see any sell-off. Sure there are a few specific issues that were lower, but I think overall, our market seems to be very healthy and firm at this point."

Jarden jumps on stock sale

One of the more actively traded upside issues was Jarden Corp.'s 7½% notes due 2017, which pushed up some 2 points on the day to 89½ bid, on volume of $21 million.

That followed the announcement by the Rye, N.Y.-based maker of such diverse products as Mr. Coffee coffeemakers, Coleman lanterns, Bicycle playing cards and Rawlings sporting goods that it had priced a 12 million share equity offering at $17.50, for total gross proceeds of $210 million.

Jarden plans to use the proceeds for general corporate purposes, including debt reduction.

Saks keeps rising

A trader noted the continued gains in New York-based luxury retailer Saks Inc., declaring that the bonds "are up like crazy - I wish I knew why," since the retailing industry remains challenged; Saks itself said last week that its same-store sales, the key industry performance metric, fell 23.6% in March from a year earlier. The downturn was worse than most analysts expected.

Even so, he said, its 9 7/8% notes due 2011 were going home Wednesday at 88 bid, 90 offered, which he called a gain of "5 to 7 points".

He also implored: "Look at its stock," which was up 10.56%, or 38 cents, in New York Stock Exchange trading on Wednesday, to close at $3.98, on 5.8 million shares traded, nearly double the norm.

And he pointed out that the company's 2% convertible notes due 2024 were trading at 53.25 bid, 53.5 offered on Wednesday, versus levels last week in the mid-40s

Saks seems to have benefited greatly from Monday's announcement by J.P. Morgan Chase & Co. upgrading its shares to an "overweight" from "neutral" previously."

Analyst Charles Grom said in a research note that liquidity concerns surrounding the retailer are "unwarranted," and he predicted that sales should recover over the next few months if equity markets stabilize, white collar employment improves, the U.S. dollar strengthens or the company takes a more hands-on approach to client service.

The trader meantime noted that retailing names "in general, are bouncing back strongly" in high yield these days. Macy's Retail Holdings notes in particular, "are well bid for."

A trader at another desk called the Cincinnati-based operator "another surprising upsider" on Wednesday, seeing its 5.90% notes due 2016 having coursed up to 78¼ bid from 76¼ on Tuesday, with $13 million of the bonds traded.

Ford firms on investor confidence

A trader saw Ford Motor Co.'s 7.45% bonds due 2033 jump to 39.5 bid, a 4 point gain from Tuesday's levels, on volume of $13 million.

At another desk, a market source saw the bonds just over 39, calling them up nearly 4 points.

Yet another trader pegged them at 38 bid, 40 offered, but called that a 3 point gain.

Ford Motor Credit Co.'s 7 3/8% notes coming due on Oct. 28 firmed to 93½ bid, or a 21% yield to maturity, versus 93 on Tuesday. Some $23 million of the bonds traded.

Ford got a vote of confidence when Goldman Sachs upped the Number-Two domestic carmaker's shares to a "buy from "neutral" previously, noting that Ford, alone among the major traditional automakers, does not need federal bailout help. The research report also speculated that Ford's perceived stability will likely be enhanced by the expected bankruptcy filings from key rivals General Motors Corp. and Chrysler.

Meanwhile, market reaction to the not-unexpected news that GM will likely not make a scheduled $1 billion debt repayment on June 1 was mixed. Its benchmark 8 3/8% bonds due 2033 finished at a round-lot level of 91/2, off from 9 7/8 on Thursday, on volume of $12 million, while its 8 1/8% notes due 2013 lost ½ point to end at 81/2, on $7 million traded. However, GM's 7.20% notes due 2011 firmed to 9¾ from 9¼ earlier, on $6 million of activity, the trader said.

Another saw the benchmark issue at 8 bid, 9 offered, which he called off ½ point on the day.

Graphic Packaging going great guns

One of the traders said Graphic Packaging "keeps chugging along - every day they're a little better." Even though the packaging industry has been hurt by the current downturn, he noted that the Marietta, Ga.-based Graphic Packaging "does light packaging, like egg cartons and things like that - the recession-proof stuff."

He saw its 8½% notes due 2011 "trading up every day," finishing Wednesday at 92¼ bid, "a really nice jump" from their week-earlier levels at 86 bid, 87 offered.

He said the 9½% notes due 2013, "which people are starting to pay attention to also, "are moving up too, " to 82½ bid, 83 offered, versus week-ago levels around 76 bid, 77 offered, "so that paper is definitely going in the right direction also."

Terex eases on earnings

On the downside, a trader said that Westport, Conn.-based machinery maker Terex Corp.'s bonds "got banged around a little bit" after reporting a first-quarter loss of $74.9 million, or 79 cents a share late Tuesday, versus a year-earlier profit of $163.3 million, or $1.59 per share.

He said the 8% notes due 2017 went from levels as high as 84 on Tuesday before the numbers, to 79 bid, 79 7/8 offered.

Another market source, also seeing the bonds at just under 80 bid, said that was a 3 point drop on the session.

Aaron Hochman-Zimmerman contributed to this report.

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