EXCO prices $750 million; issuance at record high, much more to come; market firm; CIT higher

By Paul A. Harris and Stephanie N. Rotondo

Portland, Ore., Sept. 10 – Despite a few empty desks, high yield traders said Friday it was an overall good day for bonds, both volume- and price-wise.

Meanwhile the primary market remained busy, with EXCO Resources, Inc. pricing $750 million of eight-year senior notes and OI European Group BV, a subsidiary of Owens-Illinois Group Inc., bringing €500 million of 10-year senior notes.

In trading, CIT Group Inc. benefitted from the market’s strength, as one trader said the lender’s debt was trading near its highs.

NewPage Corp. also inched up, albeit slightly so, as the bonds fluctuated with the market. Still, the company’s troubles are continuing, as a Canadian province looks to reject a power plant proposal between the papermaker and a local power producer.

Consumer-driven credits like Blockbuster Inc. and Harrah’s Entertainment Inc. were also boosted by the overall positive tone of the marketplace.

EXCO prices at wide end

EXCO Resources priced a $750 million issue of 7½% eight-year senior notes (B3/B) at 98.53 to yield 7¾% on Friday.

The yield printed at the wide end of the 7½% to 7¾% price talk.

J.P. Morgan Securities, Bank of America Merrill Lynch, BNP Paribas, RBC Capital Markets and Wells Fargo Securities were the joint bookrunners.

Proceeds will be used to redeem all $444.7 million of the company’s outstanding 7¼% senior notes due 2011 and to pay down a portion of the outstanding balance under its credit agreement.

Elsewhere in the dollar-denominated junk market on Friday, Brazil’s JBS Finance II Ltd. priced a downsized $200 million add-on (B1/BB/) to its existing $700 million 8¼% notes due Jan. 29, 2018 at 102.051 to yield 7 7/8%.

JPMorgan and Santander were the bookrunners for the debt refinancing and general corporate purpose deal, which was originally sized at $300 million.

A new record

With EXCO and JBS into the mix, the Sept. 6 week finishes having seen eight issuers raise $3.77 billion.

Hence, with well over one quarter remaining, the year 2010 goes into the record book as the highest year for issuance in the history of the market, with $165.5 billion of year-to-date issuance in 383 junk-rated dollar-denominated tranches.

That total wipes out the previous record, 2009's $161.8 billion, in 381 tranches, according to Prospect News data.

And the year could end up pushing at the $200 billion threshold, sources say.

At Friday's close there was visibility on an additional $25 billion to $30 billion of potential issuance that could hit the market by year-end, a trader said.

Owens-Illinois sells €500 million

Earlier, in Europe, OI European Group BV, an indirect wholly owned subsidiary of Owens-Illinois Group Inc., priced a €500 million issue of 10-year senior notes (Ba2/BB+) at par to yield 6¾%.

The yield printed on top of the 6¾% area price talk.

Citigroup and BNP Paribas were the global coordinators and joint bookrunners.

The Perrysburg, Ohio-based glass company intends to use the proceeds to repay Owens-Illinois Group’s credit facility.

Tomkins to roadshow $1.6 billion Monday

Looking ahead to what promises to be a busy Sept. 13 week, in the primary market, Pinafore, LLC and Pinafore, Inc., special purpose vehicles for Tomkins plc, will begin a roadshow on Monday for $1.6 billion of senior secured notes in two tranches.

The deal features $600 million of seven-year first-lien notes, and $1 billion of eight-year second-lien notes.

The roadshow wraps up on Sept. 20, and the deal is set to price on Sept. 21.

Bank of American Merrill Lynch, Citigroup, Barclays Capital, RBC Capital Markets and UBS Investment Bank are joint bookrunners for the LBO deal.

PolyOne investor call on Monday

Meanwhile, PolyOne Corp. will hold an investor call on Monday for a $320 million offering of 10-year senior notes (expected ratings Ba3/B).

The deal is set to price early in the Sept. 13 week.

Bank of America Merrill Lynch, Morgan Stanley and Wells Fargo Securities are the joint bookrunners for the debt refinancing and general corporate purposes deal.

ProQuest marketing starts Monday

ProQuest LLC and ProQuest Notes Co. will also hold an investor call at 11 a.m. ET on Monday for a $250 million offering of eight-year unsecured notes.

The Rule 144A for life deal is expected to price late in the Sept. 13 week.

Morgan Stanley, Bank of America Merrill Lynch and Jefferies & Co. are joint bookrunners.

Good volume for bonds

Back in the secondary, it was “another good day,” a trader said of the bond market on Friday.

“Lots of bond trading,” he said. “Everything was up a solid half point, that’s for sure.”

“Part of what is happening,” he continued, “is the more generic stuff has taken a backseat.” That is allowing other credits to come in to fill the void, which benefits them as their prices increase.

“There was more volume than I would have expected, especially with no new issues,” the trader added – EXCO didn’t price until late in the session..

The amount of trading volume helped some market indicators improve, like the KDP High Yield Index. The index closed at 72.30, with an 8.05% yield, compared to Thursday’s reading of 72.20, with an 8.11% yield.

The CDX High Yield Index, however, remained steady at 97½ bid, 97¾ offered, according to a market source.

CIT ‘near highs

CIT Group’s outstanding bonds were trading “near their highs,” a trader said, though he added that “it depends on which issue” you were looking at.

He called the paper unchanged to up slightly, seeing the 7% notes due 2015 at 95 3/8 and the 7% notes due 2014 at 99½. He added that those were the most active of the CIT issues, though other pieces also saw some action.

The 7% notes due 2017, for example, traded around 96¼ bid, 96½ offered, while the 7% notes due 2016 closed at 96¾ bid, 97¼ offered. The 10¼% notes due 2013 meantime ended “with a premium” at par ½ bid, par ¾ offered.

Another trader said there was “a lot trading” in the New York-based middle-market lender’s debt. He quoted the 7% notes due 2015 at 98 bid, 98½ offered.

Elsewhere in the financial realm, a trader said a “bunch” of Nuveen Investments Inc.’s 10½% notes due 2015 changed hands. He said he considered it an “interesting” one, given the bonds were “trading in the 70s not that long ago and they are in the high-98s now.”

NewPage fluctuates with market

NewPage bonds “managed to trade up a little bit,” according to a trader.

He said about $10 million to $20 million of the 11 3/8% notes due 2014 turned over at 89 5/8.

Another trader, however, said the bonds were “about unchanged,” quoting them at 88½ bid, 89½ offered.

NewPage’s financial troubles might cause yet another hiccup for the company as it attempts to partner with Nova Scotia Power for what The Chronicle Herald calls a “controversial $208 million power-generating plant.”

The plant would burn wood waste to generate electricity.

However, NewPage’s financial constraints have come to the attention of the Canadian province’s utility regulatory board and a consultant has already recommended rejecting the proposal.

Blockbuster, Harrah’s head higher

The firmer market helped Blockbuster’s 9% notes due 2012 gain some ground, a trader said.

The trader pegged the notes at 7 bid, 8 offered, though he said the 11¾% notes due 2014 were “still” in the 52 bid, 53 offered context.

Another trader said he saw little trading going on in the credit – “I wish it would go away,” he quipped – but he did see “6 bids without [offers] for small pieces.” He added that the 11¾% notes were “bracketing 52.”

In another consumer-driven name, Harrah’s Entertainment’s 10% notes due 2018 moved up to 79¾, on $20 million to $30 million traded, a trader said.

At another desk, the 10% notes were placed at 79 bid, 80 offered and the 10¾% notes due 2016 were seen at 79¾.

Broad market mostly stronger

In the broader market, Ineos Group Holdings plc’s 8½% notes due 2016 moved up to 83 from offers around 80½ on Wednesday, a trader said.

ATP Oil & Gas Corp.’s 11 7/8% notes due 2015 finished the day “up a couple more points” at 82 bid, 82½ offered.

Tronox Worldwide LLC’s 9½% notes due 2012 were meantime unchanged at 91¼ bid, 92½ offered.

In the autosphere, General Motors Corp.’s 8 3/8% notes due 2033 dipped slightly to 31 5/8 bid, 32 1/8 offered. But Ford Motor Co.’s 7.45% notes due 2031 moved higher, closing at 98¼ bid, 99¼ offered.

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