DaVita mega-deal, DJO price; new Burger King bonds jump; Univision, Thermadyne up on deal news

By Paul Deckelman and Paul A. Harris

New York, Oct. 5 - The high-yield primary market - which had started the week slowly, coming off last week's frantic, high-volume pace - hit its stride and recovered its swagger on Tuesday, pricing some $2.2 billion of new paper, more than 10 times the amount that came to market on Monday.

The big deal of the day was DaVita, Inc.'s upsized $1.55 billion two-part offering, although the Denver-based dialysis services provider's giant-sized transaction appeared too late in the session for any kind of aftermarket dealings.

Earlier, another health-care-sector name, DJO Inc., drove by with a quickly marketed $300 million offering of senior subordinated notes. The San Diego-based orthopedic device manufacturer's seven-year deal was heard by traders to have firmed smartly when it was freed for secondary activity.

Los Angeles real estate operator CB Richard Ellis Group, Inc. also unexpectedly showed up with an opportunistically timed, rapidly shopped $350 million tranche of 10-year notes. Those new bonds moved modestly higher in the aftermarket.

Recent new issues continued to do well there, but none quite so well as Burger King Holdings, Inc.'s eight-year bonds, which had priced Friday at par and lingered lazily around their issue price early Monday before taking off later that session to end up 2 points on the day. Investors apparently found the new bonds as tasty as a hot Whopper with fries and continued to gobble them up feverishly on Tuesday, pushing them up by nearly another 3 points.

Price talk emerged on the upcoming deals for DineEquity, Inc. and Reynolds Group Issuer Entities, with DineEquity slated to price on Wednesday morning and Reynolds possible later on.

The news that Univision Communications Inc. will sell bonds as part of the Spanish-language broadcaster's overall refinancing effort pushed its existing bonds up solidly. Also firmer was Thermadyne Holdings Corp. on the news that the St. Louis-based maker of metal-cutting and welding products and accessories is to be acquired via a leveraged buyout.

DaVita upsizes

Trailing an uncharacteristically quiet Monday session, which saw a single $205 million issue price, the new issue market regained its legs on Tuesday.

Three issuers, bringing a combined four tranches, raised $2.2 billion.

DaVita upsized its two-part bond deal to $1.55 billion from $1.45 billion and priced the two evenly split $775 million tranches of senior notes (B2/B) at par.

The Denver-based dialysis services provider priced a tranche of eight-year notes to yield 6 3/8%, which was at the tight end of the 6½% area price talk.

The longer-duration 10-year tranche priced to yield 6 5/8%, the tight end of the 6¾% area price talk.

Bank of America Merrill Lynch, J.P. Morgan Securities LLC, Credit Suisse, Barclays Capital Inc., Goldman Sachs & Co. and Wells Fargo Securities were the joint bookrunners for the debt refinancing and general corporate purposes deal.

CB Richard, at the tight end

The remainder of Tuesday's issuance came in the form of a.m.-to-p.m. drive-by deals.

CB Richard Ellis Group subsidiary CB Richard Ellis Services, Inc. priced a $350 million issue of 10-year senior notes (Ba1/B+) at par to yield 6 5/8%.

The yield printed at the tight end of the 6¾% area price talk.

Bank of America Merrill Lynch, Credit Suisse, HSBC and Barclays Capital were the joint bookrunners for the debt refinancing deal.

DJO - The roll factor

Meanwhile, DJO subsidiaries DJO Finance LLC and DJO Finance Corp. priced a $300 million issue of seven-year senior subordinated notes (Caa1/CCC+) at par to yield 9¾%.

The yield printed at the tight end of the 9¾% to 10% price talk.

Credit Suisse, Nomura Securities North America, LLC and Wells Fargo Securities were the joint bookrunners for the quick-to-market deal.

The Vista, Calif.-based medical devices company plans to use the proceeds to refinance its existing senior subordinated notes and to prepay a portion of its existing term loan.

The holders of the subordinated notes being taken out were keen to roll into the new notes, according to a source close to the deal.

The order book for the new notes built very quickly once price talk circulated, the source added.

Reynolds seeing huge demand

With DaVita having cleared, the market's attention turned to the week's biggest blockbuster.

Reynolds Group Issuer Entities set price talk for its $3 billion dual-tranche offering of 8.5-year notes on Tuesday.

A $1.5 billion tranche of senior secured notes (Ba3/BB) is talked to yield in the 7¼% area.

Meanwhile, a $1.5 billion tranche of senior unsecured notes (Caa1/B) is talked to yield in the 9¼% area.

The books close at noon ET on Wednesday.

Credit Suisse and HSBC are the joint bookrunners for the acquisition financing.

Demand for the new Reynolds paper is huge, according to a source close to the deal, who added that although $3 billion sounds like a lot, it likely won't make for notably generous allocations given the demand.

"Ridiculous," was the word one mutual fund manager used to describe demand for the new Reynolds paper.

"We're expecting allocations to be horrible," the buysider said.

Initial discussions on the secured tranche centered on a 7½% yield, according to a trader from a high-yield mutual fund, who noted that price talk later settled at 7¼%.

The unsecured paper, however, ended up talked in line with preliminary discussions of 9¼%, the trader added.

DineEquity talks $825 million

Elsewhere, DineEquity talked its $825 million offering of eight-year senior unsecured notes (B3/CCC+) with a 9 5/8% area yield.

Timing has been moved ahead. The deal is now set to price late Wednesday morning. When it launched, a Thursday pricing had been expected.

Barclays Capital and Goldman Sachs are the joint bookrunners.

Look for DineEquity to come at 9½%, at the tight end of that 9 5/8% area price talk, a buyside source warned.

Tough to stay invested

With non-traditional investors - from the high-grade space, insurance funds and elsewhere - moving into high yield, the job of getting invested is becoming more challenging for the everyday high-yield buysider, sources say.

What's more, although some of the weeks' deals are massive - Reynolds, DaVita and DineEquity, for example - the primary market has gotten off to a start that is slower than usual for the first full week of October, sources observed on Tuesday.

That may be nothing but a reflection of the fact that a new fiscal quarter is underway, causing some prospective issuers to wait until new numbers go up before plunging into the hard-rallying primary market, according to a syndicate banker who added that the calendar will continue to build, as issuers and dealers remain keen to provide the buyside with opportunities to put all of that cash to work.

DJO dominates in aftermarket

When the new DJO 9¾% senior subordinated notes due 2017 were freed for secondary dealings, a trader saw them having moved up handsomely to 102¼ bid, 102 5/8 offered versus their par issue price earlier in the session.

Another trader pegged the new bonds at 102 3/8 bid, 102 5/8 offered, while a third saw them offered as high as 1023/4.

CB Richard Ellis advances

The day's other new deal that made it to the aftermarket, CB Richard Ellis Services' 6 5/8% notes due 2020, firmed a bit to 100 5/8 bid, 101 offered, several traders said, although one had seen the new paper initially offered as high as 101¾ before they settled back down. The bonds priced at par.

The day's other deal, DaVita's $1.55 billion two-part behemoth, came too late in the day for any kind of an aftermarket.

Burger King bonds sizzle

Among recently priced issues, the star of the day clearly was Blue Acquisition Sub - i.e., Burger King Holdings, whose 9 7/8% notes due 2018 "were just on fire," a trader proclaimed.

"Those things were flame-broiled," he quipped about the Miami-based fast-food franchisor's $800 million offering - downsized from the originally announced $900 million. The deal priced at par on Friday and made no appearance in the aftermarket, and then they hung around their issue price in the early going on Monday before they started to heat up late in Monday's session, finishing just below 102 bid.

On Tuesday, investors filled their plates with the new Burger King bonds, pushing the issue up to 104½ bid, 105¼ offered by the close.

"Burger King was trading up like crazy," agreed another trader, who quoted them at 104 3/8 bid, 104 5/8 offered. "There was just insatiable demand" for them.

Other recent bonds seen strong

While Burger King was having a banner day, other recent issues weren't doing too badly themselves.

A trader said that Associated Materials LLC's 9 1/8% senior secured notes due 2017 had pushed up to 103 bid, 103 3/8 offered. That was up from Monday's levels around 102½ bid, 103 offered and well up from par, where the Cuyahoga Falls, Ohio-based building products company had priced its $730 million issue on Friday afternoon.

A trader saw West Corp.'s 8 5/8% notes due 2018 trading around Tuesday at 102 bid, 102½ offered, as the Omaha-based call-center and teleconferencing services provider's $500 million deal hung on to the gains that the bonds had notched on Friday after pricing at par on Thursday.

And a trader saw Sears Holdings Corp.'s 6 5/8% senior secured notes due 2018 move up to 101 bid on Tuesday. The Hoffman Estates, Ill.-based operator of the Sears and Kmart department store chains had priced its $1 billion of new bonds - doubled in size from the originally announced $500 million - at par on Thursday, and they had moved up to 100¾ bid, 101 offered on Friday.

Monday's $205 million offering of 11 7/8% senior secured notes due 2016 from Logan, Utah-based exercise equipment maker ICON Health & Fitness Inc. were seen offered at 100¼ Tuesday, but with no bid, by a trader who remarked that the various new issues "either go to the moon, or they get stuck somewhere in the atmosphere."

Another trader did see the bonds at par bid, 100½ offered. The issue priced on Monday at 99.468 to yield 12% and had firmed slightly in initial aftermarket dealings to 99 3/8 bid, 100 3/8 offered.

Univision news boosts bonds

The news that Univision Communications, the operator of a major Spanish-language television network, plans to sell $750 million of new bonds as part of an overall refinancing effort for its roughly $8 billion of debt, along with receiving a major equity investment in the company, pushed its 9¾% senior toggle notes due 2015 "up a bunch," a trader said. He quoted those bonds as having jumped to 104 bid from pre-news levels around 96.

Univision gave investors a double dose of good news about its capital and liquidity situation. It announced that it is seeking amendments to its senior bank credit facilities, totaling $8 billion, which would, among other things, extend the maturity of a substantial portion of its term loan facility by two-and-a-half years, out to early 2017, and extend the maturity of its revolving credit commitments by two years, out to early 2016. The agreement is conditioned upon the sale of at least $750 million of new bonds, the proceeds of which are to be used to repay a portion of the term loans.

Univision's bonds also were helped by the news that a one-time would-be acquirer and sometimes rival in the Spanish-language broadcasting world, Grupo Televisa, is investing $1.2 billion in Univision in exchange for a 5% stake and notes that eventually could convert into an ownership interest of as much as 40%. Grupo Televisa also agreed to provide its highly popular telenovelas to Univision exclusively at least through 2020 - and perhaps beyond 2025.

Market indicators seen mixed

Away from the new-deal world, a trader saw the CDX North American Series 15 HY index up 7/8 point on Tuesday to end at 98½ bid, 99 offered after having been unchanged Monday.

The KDP High Yield Daily index meantime jumped by 28 basis points on Tuesday to finish at 73.52 after having fallen by 6 bps on Monday. Its yield narrowed by 10 bps, to 7.54%, after having edged up by 1 bp on Monday.

The Merrill Lynch High Yield Master II index rose by 0.233% on Monday after having improved by 0.162% on Monday. Its year-to-date return rose to end the day at 12.416%, establishing yet another new peak 2010 level, versus the old mark of 12.155%, which had been set just on Monday.

Advancing issues led decliners for an eighth consecutive session on Tuesday, while their advantage widened to eight-to-five, versus the seven-to-five ratio seen on Monday.

Overall activity, represented by dollar-volume levels, zoomed by 84% on Tuesday after having fallen by 32% on Monday.

"What a day," a trader exclaimed. "It's ridiculous, insane."

He said that "everything has caught fire with the stock market," which surged to its highest level in five months Tuesday, heartened by data from the Institute for Supply Management, which reported that its index of business activity at U.S. service companies - by far the largest sector of the economy - expanded again last month for a ninth consecutive time and far faster than analysts were expecting. That pushed the bellwether Dow Jones Industrial Average up by 193.45 points, or 1.8%, to end at 10,944.72, its highest close since May 3. Other, broader market indexes likewise showed big gains on the day.

Thermadyne up on deal news

Among specific names in the non-new-deal secondary, a trader said that Thermadyne's 9¼% notes due 2014 rose by 1 point Tuesday on the news that the industrial equipment manufacturer is to be bought out by Irving Place Capital, a New York-based private equity firm, in a leveraged buyout transaction valued at about $422 million, with Thermadyne shareholders to get $15 per share.

He said the bonds, which had been anchored around 102 bid a week ago, traded up to 103 1/8 on Wednesday post-news.

"Those bonds don't trade that often," a second trader said, also seeing them up around a point at above 103.

"They've been around 101-102 bid, looking for offerings for the past week or so, but there was pretty good volume today at 103 1/8.

He further noted that the Thermadyne paper "was trading in the 80s" a year ago, but since then had been grinding slowly and steadily, if unspectacularly, higher.

Lease battle batters A&P

Elsewhere, a trader said that there was "uncertainty" surrounding Great Atlantic & Pacific Tea Co. Inc., pushing the Montvale, N.J.-based supermarket operator's unsecured bonds down.

He quoted its 6¾% notes due 2012 as having traded down to 53 bid from prior levels at 56 bid, 57 offered, while its 5 1/8% notes due 2011 dipped to a "69ish" level from 72 3/8 bid, 72 5/8 offered.

The trader said that investors were worried on the news that the company had decided to walk away from the leases on a number of its closed Farmer Jack stores in Michigan, totaling some 2 million square feet of space and $150 million in annual rent payments.

A&P, which has most of its operations in the Northeast - where it runs the iconic A&P store chain, along with Pathmark and Waldbaum's - decided in 2007 to get out of the Midwest, selling some of its 66 Farmer Jack stores in Michigan and Indiana to Kroger Co. or other operators, but it was unable to find buyers for 27 more stores. A&P kept paying the rents on the closed stores while it tried to find tenants who could sublease those premises, but it was unsuccessful. It notified the landlords that it was returning possession of the leased premises to them, including surrendering the keys to the stores, and would not pay any further rent. A number of landlords have, in turn, filed lawsuits against the retailer.

"A lot of people got nervous and started shorting the bonds," the trader said.

However, while the unsecured paper got pushed down and stayed down, he said that the company's 11 3/8% senior secured notes due 2015 initially dropped as well "but got stronger later."

He saw those bonds - which had been trading at 77 bid, 79 offered a couple of days ago - fall to 72½ bid on news of the lease problem, reported in Crain's Detroit Business. But after that, he said, they traded back up to stand almost unchanged at 76½ bid. "But the other two issues definitely were down."

Dynegy on the rebound

A trader said that after several sessions of decline, Dynegy Holdings, Inc.'s bonds "are now regaining some of their mojo."

He noted that the Houston-based power producer's bonds, such as the 7¾% notes due 2019, "started to get hit on Oct. 1," when Moody's Investors Service downgraded its corporate family rating to Caa1 from B3 previously and cut other Dynegy ratings, expressing concern about the fragile economic shape the company would be in, especially if the previously announced $4.76 billion buyout of Dynegy by Blackstone Group goes through, which seems increasingly likely.

He saw those 7¾% bonds trading before the downgrade at 68½ bid, 68¾ offered then fall as low as 67 post-downgrade and staying there on Friday and Monday. "They were drifting down - but it was nothing significant. They were not down that much."

"Then they started to come back," he said, seeing the bonds going out at 67¾ bid, 68 offered. He also saw the company's 8 3/8% notes due 2016 at 72½ bid.

The rebound, like the downturn, "is not that dramatic - but they're definitely off their lows."

At another desk, the Dynegy 2019s were seen up ¾ point at 68 bid.

Ford, GM bonds stay parked

A trader saw Ford Motor Co.'s 7.45% bonds due 2031 unchanged at 106 bid, 107 offered but noted that the No. 2 domestic carmaker's paper "has been on a tear," up some 4 points in the last week alone.

At another shop, a market source pegged the Ford long bonds up another 1½ points at 107¼ bid.

Meanwhile, General Motors Corp.'s benchmark 8 3/8% bonds due 2033 hung in around the same 34 bid, 35 offered level they held on Monday, a trader said. GM's 7 1/8% notes due 2013, however, lost a point to end at 321/4.

Stephanie N. Rotondo contributed to this report

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