Tesoro, Neff, Parkson price deals; Claire's Stores new issues trade lower; Fontainebleau talks $675 million

By Paul A. Harris

St. Louis, May 23 - A trio of high-yield issuers each completed single-tranche transactions to generated a combined $855 million of proceeds in Wednesday's session.

Meanwhile sources gave various marks on the broad market - either up or down an eighth.

Looking into the intermediate future, sources forecast that one of last year's mega-issuers, HCA, Inc., will return this summer, this time with a sizable dividend-funding deal.

And in what sources roundabout the market termed a "sloppy deal," three tranches of notes which Claire's Stores Inc. priced on Tuesday were all a point lower on Wednesday.

Tesoro prices $500 million

Wednesday's largest dollar amount of issuance came from San Antonio refiner Tesoro Corp.

In a quick-to-market sale, the company priced a $500 million issue of 6½% 10-year senior notes (Ba1/BB+) at a 165 basis points spread to Treasuries, 11 basis points tighter than the Treasuries plus175 basis points price talk.

The notes came at an issue price of par.

Lehman Brothers and JP Morgan were joint bookrunners for the deal to refinance debt related to an acquisition.

A trader saw the new Tesoro paper going out at 161 bps bid, 3 bps tighter than the issue spread.

Neff tight to talk

Elsewhere in the primary market, Neff Corp. priced a downsized $230 million issue of eight-year senior notes (Caa2/B-) at par to yield 10% on Wednesday.

The yield was printed at the tight end of the 10% to 10¼% price talk.

Banc of America LLC was the left bookrunner for the acquisition financing, and CIBC World Markets was the joint bookrunner.

Neff Corp. downsized the bond offer to $230 million from $250 million late last week, shifting $20 million of the acquisition financing to its second-lien term loan, which it upsized to $290 million from $270 million.

At the close a trader spotted the new Neff 10% notes due 2015 trading around 102.50 bid, 103 offered, and added that the deal was very well spoken for.

In addition to Neff and Tesoro, China's Parkson Retail Group Ltd. priced a $125 million issue of five-year paper at par to yield 7 1/8%.

JP Morgan led the debt refinancing and working capital-funding deal.

Claire's Stores down a point

In secondary action, the new deal from Claire's Stores struggled in their first full day of trading.

On Tuesday the company priced $935 million of notes in a three-tranche transaction.

The Pembroke Pines, Fla., specialty retailer brought $250 million of fixed-rate notes at par to yield 9¼%, a $350 million tranche of senior unsecured toggle notes at par to yield 9 5/8%, and a $335 million issue of 10-year senior subordinated notes at par to yield 10½%.

Several sources told Prospect News that in an otherwise quiet secondary market the story of the day was Claire's, and added that it was not a very good story.

"It was very sloppy, and remains sloppy on the break," one trader said, adding that the specialty retailer tightened the bond covenants, which went down well with investors, but then also tightened the price talk, which did not go down nearly as well.

"A lot of anchor orders dropped out then," said a trader, who marked all three issues a point lower on Wednesday.

The source recounted that the bonds ended the Tuesday session "a little north of par," to as much as 100.25 bid, but added that by Wednesday morning they were down a point or so, hitting 98.75 bid on all issues.

"7.5 times leverage for a specialty retailer made people a little nervous," the trader said, adding that: "There were a lot of hedge funds with outsized allocations, and those guys are just trying to right themselves, which put a little pressure on it."

The trader saw Claire's 9¼% notes at 98.25 bid, 99.25 offered, the 9 5/8% toggle notes at 98.50 bid, 99 offered, and the 10½% subordinated notes at 98.75 bid, 99.25 offered, all a point lower.

Another trader spotted the Claire's 9 5/8% toggle notes and the 10½% subordinated paper at 98.75 bid, 99.125 offered, also down a point.

The automotive sector

The same trader commented that lately the automotive sector has been firm.

The source said that the long paper of General Motors Corp., the 8 3/8% notes maturing in 2033, had been unchanged over the past two days at 93.375 bid.

The trader added that the level of GM's long paper needed to be considered against a back of long government paper drifting lower.

In this context GM is looking pretty good, the trader asserted.

The source also said that Dura Operating Corp.'s deeply distressed 8 5/8% notes due 2012 were up significantly on Wednesday.

The source reported seeing the paper as high as 45.50 bid, after having started the day at 42 bid, 43 offered.

Compucom, Fontainebleau talk deals

In primary market action slated for the final two days of the pre-Memorial Day week, CHR Intermediate Holding Corp., the holding company for Compucom Systems, Inc., set price talk for its $150 million offering of six-year senior floating-rate toggle notes (Caa1/B-) at Libor plus 700 to 725 basis points, with an original issue discount of 98.50.

Books are scheduled to close mid-day Thursday, with the notes pricing shortly after.

Banc of America Securities LLC is the left bookrunner for the dividend funding deal. Citigroup is the joint bookrunner.

Elsewhere Fontainebleau Las Vegas Holddings, LLC and Fontainebleau Las Vegas Capital Corp. set price talk for their $675 million offering of eight-year second-mortgage notes (Caa1/CCC+) at a yield in the 10 3/8% area.

Books will close at 10 a.m. ET Thursday, with pricing to follow at noon ET.

Banc of America Securities LLC is also the left bookrunner for Fontainebleau's debt refinancing and project financing deal. Barclays Capital, Deutsche Bank Securities and Merrill Lynch & Co. are joint bookrunners.

Meanwhile late Wednesday Rural Cellular Corp. was heard to be set to price $115.5 million of senior subordinated notes due 2013 (Caa2) on Thursday via Bear Stearns.

The Alexandria, Minn.-based wireless provider will use the proceeds to refinance debt.

HCA's storied dividend deal

Even before it priced its landmark $5.70 billion multi-tranche going-private transaction in the fourth quarter of 2006, HCA Inc. was widely anticipated to be taking a header on the high-yield primary with an eye to returning with a dividend funding deal.

Now the rumor is heating up again, according to a pair of traders who spoke to Prospect News on Wednesday, both of whom expect a sizeable dividend deal to materialize during the summer.

One trader who made the prediction reported seeing "a certain number of accounts trying to get out of some paper," during the Wednesday session, and added that there has been some selling pressure in the secondary.

"For the most part the new issues have remained pretty well bid, with guys trying to add on where they can in specific spots," the trader said.

"People are expecting a significant amount of issuance this summer.

"Cash levels are pretty high, so there is plenty of liquidity to absorb the calendar. But people are re-evaluating at these levels."

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