Downsized Del Monte prices, trades up; Geo, MedImpact, Westmoreland price; OPTI gets bopped

By Paul Deckelman and Paul A. Harris

New York, Feb. 1 - Fresh off a record-busy January, the high-yield primary sphere kicked off February on Tuesday by pricing a slew of new issues totaling nearly $2 billion.

The day's biggest and most eagerly followed deal was the $1.3 billion of eight-year notes offered by canned fruit, vegetable and pet-food maker Del Monte Foods Co. After that mega-deal priced - downsized from $1.5 billion originally - the new bonds were heard by traders to have firmed smartly.

Also pricing were somewhat smaller offerings from Geo Group, Inc. ($300 million), MedImpact Holdings, Inc. ($230 million) and Westmoreland Coal Co. ($150 million).

Geo's new deal gained modestly in the aftermarket, but MedImpact moved up solidly after pricing at a discount to par. Westmoreland came too late in the day to trade. SM Energy Co., whose $350 million new deal priced too late on Monday for any dealings, moved up when it was freed to trade on Tuesday.

In Europe, Ardagh Glass weighed in with a quickly shopped, euro-denominated add-on to one of the Irish packaging company's existing issues.

High-yield syndicate sources meantime heard oilfield services company Basic Energy Services, Inc. shopping around an eight-year deal for pricing late in the week, while Australian metals company Midwest Vanadium Pty. Ltd. was hitting the road to market on offering of dollar-denominated seven-year secured notes.

Away from the new-deal world, Canadian energy producer OPTI Canada Inc.'s battered bonds got hit some more, on very heavy trading, as it hired yet another adviser to join the two it already has trying to line up a strategic transaction like the sale of a part or all of the troubled company - a signal to investors that it is nowhere close to such a deal, even after more than a year of searching for one.

Hovnanian Enterprises Inc.'s longer-dated bonds were seen having pushed several points higher on Monday's news that the homebuilder was tendering for some of its shorter-term notes and selling new bonds and equity to fund that balance-sheet cleanup.

Del Monte allocations 'awful'

The hard-charging primary market saw four issuers, each bringing a single tranche of junk, raise a combined $1.97 billion as February got underway in high yield.

Del Monte Foods priced a downsized $1.3 billion issue of eight-year senior notes (B3/B-) at par to yield 7 5/8% on Tuesday.

The yield printed at the tight end of the 7¾% area price talk.

The issue size was decreased from $1.5 billion, with $200 million shifted to a bank loan, increasing its size to $2.7 billion from $2.5 billion.

The physical bookrunners were Bank of America Merrill Lynch, which will bill and deliver, and Morgan Stanley & Co. Inc. Barclays Capital Inc. and J.P. Morgan Securities LLC were the joint bookrunners.

Proceeds will be used to fund the leveraged buyout of Del Monte by Kohlberg Kravis Roberts & Co. LP, Vestar Capital Partners and Centerview Partners.

Good news priced in

Once in the secondary market, investors chased the new 7¾% Del Monte paper down to 7.2% bid, 7.1% offered, a high-yield mutual fund manager lamented.

This buysider received an allocation that amounted to 10% of the order placed and added that such rough treatment was reportedly dished out to most of the accounts.

Recounting that initial discussions on Del Monte took place in a context of 8% to 8¼%, at which time management spoke of savings and synergies down the line, the investor insisted that at a 7¾% yield (let alone 7.1%!), all the possible good news the company could turn out going forward is already priced into the deal.

Investors liked Del Monte for much the same reason they liked Reynolds Group, which priced an upsized $2 billion two-part 10-year notes deal late last week. It was the size.

As for Tuesday's Del Monte deal, most of the participation seemed to come from mutual funds, the high-yield mutual fund manager said, adding that hedge funds were no doubt active.

"The hedge funds are probably not long for this market," the junk investor noted.

"There is not going to be anything close to the dramatic spread compression this year that we saw in 2010.

"Word is the hedge funds are heading to the muni market."

Lately there are also some straight high-yield mutual funds playing in munis, the manager admitted.

Geo Group upsizes

Elsewhere on Tuesday, Geo Group priced an upsized $300 million issue of 10-year senior notes (B1/B+) at par to yield 6 5/8%, at the tight end of the 6¾% area price talk.

Wells Fargo Securities, Bank of America Merrill Lynch, Barclays Capital, JPMorgan and SunTrust Robinson Humphrey were the joint bookrunners for the quick-to-market issue, which was upsized from $250 million.

Proceeds, along with proceeds from a new credit facility, will be used to finance the acquisition of Behavioral Interventions Inc.

MedImpact, at the wide end

Meanwhile, MedImpact Holdings priced a slightly upsized $230 million issue of 10½% seven-year senior secured notes (Caa2//) at 98.799 to yield 10¾%, at the wide end of the 10½% to 10¾% yield talk. The reoffer price came in line with the 1 to 1.5 points of discount talk.

Credit Suisse Securities, Bank of America Merrill Lynch and Jefferies & Co. were the joint bookrunners for the issue, which was upsized from $225 million. There were also covenant changes.

The San Diego-based pharmacy benefits management company will use the proceeds to repay third-party claims and revolver debt as well as for general corporate purposes and to fund a dividend.

Westmoreland's $150 million

Westmoreland Coal and Westmoreland Partners priced a $150 million issue of 10¾% seven-year senior secured notes (Caa2/CCC) at 95 to yield 11.82%.

The coupon and reoffer price came on top of talk. The yield came in line with yield talk of 11.8%.

Gleacher & Co. ran the books.

The Colorado Springs-based coal producer expects to use the proceeds to pay all accrued and unpaid dividends on its series A preferred stock, to repay debt, to retire $2.7 million of the outstanding principal owed on its senior secured convertible notes, with the remaining principal balance to be converted to common stock at closing, and for general corporate purposes.

Ardagh taps 9¼% notes

Turning to European high yield, Ireland's Ardagh Packaging Finance plc priced a €200 million add-on to its 9¼% notes due Oct. 15, 2020 at 105.875 on Tuesday, resulting in an 8.201% yield to worst.

The reoffer price came at the rich end of the 105.75 area price talk.

Citigroup ran the books.

The Dublin-based packaging company plans to use the proceeds for general corporate purposes, which may include acquisitions.

Vanadium starts Wednesday

Australia's Midwest Vanadium will begin a roadshow on Wednesday for its $335 million offering of seven-year senior secured first-lien notes (expected ratings B3/B-).

JPMorgan has the books.

Proceeds will be used to refinance debt as well as to fund capital expenditures and for general corporate purposes.

Basic Energy's $250 million

Finally, Basic Energy Services plans to price a $250 million offering of eight-year senior notes late in the present week.

Bank of America Merrill Lynch and Wells Fargo Securities are the joint bookrunners.

Proceeds will be used to fund the tender offer and consent solicitation for the company's 11 5/8% senior secured notes due 2014.

Del Monte dominates attention

When Del Monte's new eight-year notes were freed for secondary dealings, a trader saw them "hugging" 102 going home, quoting the San Francisco-based human and pet foods company's deal at 101 7/8 bid, 102 1/8 offered.

Before that, he said, "basically all morning," almost from the get-go, that paper was trading around a 102-to-102¼ range before coming slightly off those highs to wrap up around 102.

The trader said that the $1.3 billion offering - downsized from the original $1.5 billion when it priced at par - "was fairly liquid most of the day. Just to let you know what kind of a day it was, here you had a new issue - and for part of the day, you had it locked at 102."

A second trader saw the Del Monte bonds at 101 7/8 bid, 102 3/8 offered, while at another desk a trader saw the bonds having firmed to the 102 level. He said dealings were "very active in that one - they moved right up to 102 and kind of stayed there for the rest of the session."

MedImpact moves up

A trader said of MedImpact's new deal that he did not think that "a ton of guys played it - but it's definitely trading well," up around 102½ bid. That was well up from the 98.799 level at which the San Diego-based pharmacy benefits management company had priced its transaction earlier.

A second trader saw the bonds at 102¼ bid.

Geo Group firms modestly

A trader said his shop had traded "a bunch" of the new Geo Group 10-year notes around 100¼ to 1001/2, not much moved from the par price at which the Boca Raton, Fla.-based operator of private corrections and metal-health facilities under government contract had priced its quickly shopped issue.

However, he noted that "it did price at the tight end of talk," which had envisioned a yield at or inside of 6¾% - meaning there was not much room left to run on that one.

SM Energy up in aftermarket

Denver-based independent oil and natural gas exploration and production operator SM Energy's 6 5/8% notes due 2019 came to market too late in the session on Monday for any kind of secondary dealings.

However, once the bonds were freed, a trader saw the $350 million issue - upsized from the originally announced $250 million - trade up to 101 bid, 101½ offered, although a second trader pegged the bonds at 100¾ bid, 101½ offered.

Secondary indicators firmer

Away from the new-deal sphere, a trader saw the CDX North American Series 15 HY index up ¼ point on Tuesday to finish at 103 7/8 bid, 104 1/8 after having gained 3/8 point on Monday.

The KDP High Yield Daily index meantime was up 7 basis points on Tuesday to 75.38 after having finished unchanged on Monday. Its yield came in by 5 bps on Tuesday to 6.94% after having narrowed by 2 bps on Monday.

The Merrill Lynch High Yield Master II index was once again better on Tuesday, rising by 0.095%, on top of Monday's 0.009% gain. That lifted the index's year-to-date return to 2.20% on Tuesday - yet another new peak level for the year so far. It had closed on Monday at 2.102%, the previous 2011 zenith.

Advancing issues led decliners for an eighth straight session on Tuesday, widening their advantage to around four to three from six to five on Monday.

Overall activity, represented by dollar-volume levels, jumped by about 35% on Tuesday after having risen by about 7% on Monday from the previous session's level.

A trader said that "trying to get people to do stuff" apart from trading in new-deal paper is difficult. "There's not a whole heck of a lot of stuff going on, and everybody's focusing on the one or two things that are trading at that time."

He added that it almost seemed like "everybody was on a frickin' conference call for a new deal."

OPTI Canada gets clobbered

Among specific names, a trader said that OPTI Canada "by far was the name of the day - I don't think anybody beat them. It seemed like non-stop trading, all down it seems."

When he looked at where the troubled Calgary, Alta.-based oilsands energy producer's bonds finished, he added, "WOW!"

He saw OPTI's 7 7/8% and 8¼% notes, both due 2014, finishing in a range of 55 to 561/2, with "huge amounts" of the bonds being traded, "a lot of volume," calling them down 4 to 5 points on the day.

The bonds apparently got hammered down on the news that OPTI has hired Lazard Freres & Co LLC as a financial adviser to assist in a search for strategic options, which could include asset sales or finding a buyer for the company. Lazard thus joins Scotia Waterous Inc. and TD Securities Inc., who have been beating the bushes since 2009 looking for a buyer or strategic investor, so far unsuccessfully. Analysts said the Lazard hiring sends a message to investors that no deal is currently in the offing and one is not expected any time soon.

The trader also noted a nosedive in OPTI's shares on the Toronto Stock Exchange; they plunged by C$0.24, or 34.78%, to close at C$0.45 on volume of 29.5 million, more than seven times the usual turnover, with trading in the name halted for a time. "It was ugly all around," he declared.

A second trader said that OPTI's news was "not something you want to hear about."

He pegged the 7 7/8s down 3¾ points on the day at 56¼ bid, with volume "north of $70 million trading today," while seeing over $80 million of the 81/4s trading, also down in that same 56¼ area.

"OPTI Canada got hit pretty hard again today," said another trader, citing "continued speculation about what's going to happen with that capital structure."

The 2014 bonds were being quoted down around 55¾ bid, 56¼ offered, well down from prior levels around 60 bid.

Hovnanian higher

A trader said that "obviously" Hovnanian Enterprises was one of the day's most watched names, seeing the Red Bank, N.J.-based homebuilder's 8 5/8% notes due 2017 up between 5 and 6 points on the day to around the 80 level, "on the back of their new-deal announcement and their tender announcement" from late Monday.

A second trader said that the 8 5/8% notes due 2017 were trading at 80 bid. "You didn't have a large amount trade on the day."

A market source at another desk saw the 8 5/8s going out around 80½ bid, which he called a 51/2-point jump in round-lot terms from the last previous large-block trade, last week. Over $13 million of the bonds changed hands on that basis.

The company's 10 5/8% notes due 2016 went home at 110 bid, a 5-point gain, though only $6 million traded round-lot.

Another market source called those bonds up about 3 points at the 110 level.

Hovnanian announced late Monday that it was tendering for the remaining outstanding 8% senior and 8 7/8% senior subordinated notes due 2012 and 7¾% senior subordinated notes due 2013 and would fund the tender using the proceeds from a $150 million bond offering and offerings of class A shares and equity units.

Traders saw little or no activity in the actual bonds being taken out, noting that only relatively small amounts of each currently remain outstanding.

Claire's cleans up

A trader said Claire's Stores Inc.'s bonds "had a nice day" after the Hoffman Estates, Ill.-based specialty retailer reported strong fourth-quarter sales.

He said that its 9¼% and 9 5/8% notes due 2015 and its 10½% notes due 2017 "are all up around par at this point in time, and you actually saw a premium get paid for the 9 5/8s today," as the latter bonds ended at 100½ bid.

Claire's reported net sales of $422 million for the fiscal 2010 fourth quarter ended Jan. 29, an increase of $11 million, or 2.7%, versus the fiscal 2009 fourth quarter. Consolidated same-store sales increased by 3.2% in the 2010 fourth quarter - up 4.7% in North America and 0.6% in Europe. Excluding the impact of foreign currency rate changes, sales would have increased by 4.5%.

For the full fiscal year ended Jan. 29, Claire's reported net sales of $1.43 billion, an increase of $84 million, or 6.3%, versus the 2009 fiscal year. Consolidated same-store sales increased 6.5% in fiscal 2010 - up 7.8% in North America and 4.3% in Europe. Excluding forex factors, sales would have increased by 7.4%.

No move for Massey

Massey Energy Co.'s 6 7/8% notes due 2013 were quoted Tuesday around the 102¼ to 102½ area, with a trader declaring that the Richmond, Va.-based coal company's bonds "didn't lose their ground - they're right up there" at the levels to which the bonds rose Monday in heavy trading.

A second trader, though, saw the bonds in by 1/8 to ¼ point on Tuesday, at 102 1/8 to 1021/4.

Monday's rise had been spurred by the news that Massey is to be acquired by Alpha Natural Resources Inc. for $7.1 billion in stock and cash - a transaction having an $8.5 billion value including debt refinancing.

Marking time with Terremark

Elsewhere, Terremark Worldwide Inc.'s 12% notes due 2017 remained at the higher levels they had reached on Friday and continued to hold on Monday on the news that the company is being acquired.

A trader said that "we traded a ton of those" around 125 bid after the news came out Friday that Verizon Communications Inc. will acquire the Miami-based cloud computing and information technology provider for $19 per share, or a $1.4 billion deal.

After that, however, "they just kind of quieted down. They're still holding those higher levels, clearly, but I don't think there's much volume in it.

"They're holding those levels - but not really changing much."

GM gains on strong sales

In the autosphere, a trader said that the 8 3/8% benchmark bonds due 2033 of Motors Liquidation Co. - which had been issued by the "old" General Motors Corp. before its 2009 bankruptcy reorganization and name change to Motors Liquidation - at 36 bid, 36½ offered on "good volume today," calling the bonds up ½ to ¾ point. "There was a little better trading, on some volume - decent volume" - after the "new" GM, which emerged from bankruptcy reorganization in 2009, reported that its overall January domestic sales were up 22% from year-earlier levels.

Another trader saw the GM bonds up ¼ point at 35¾ bid, 36¾ offered.

He also saw the 7.45% bonds due 2031 of GM's domestic arch-rival, Ford Motor Co., up ½ point on the session at 109¾ bid, 110¾ offered. Ford reported a year-over-year sales gain in January of 9%.

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