ArvinMeritor shops deal, existings jump on tender; Equinix, Pioneer hit road; secondary eases

By Paul Deckelman and Paul A. Harris

New York, Feb. 23 - ArvinMeritor, Inc. announced plans on Tuesday to tender for a majority of its shortest-dated bonds, maturing in 2012, and those bonds pushed sharply higher in heavy big-block trading. The Troy, Mich.-based automotive components maker also said that it would sell an issue of new junk bonds to fund the tender offer; high yield syndicate sources later filled in the blanks as to the size and duration of the issue. They said the company had begun a short roadshow to market the paper to would-be investors, anticipating a Friday pricing, and noted that unofficial price talk on the upcoming deal began circulating.

Elsewhere in the primary market, Pioneer Drilling Co. announced plans for a $250 million offering of eight-year notes. Sources heard that the San Antonio, Tex.-based contract energy drilling company was hitting the road on Wednesday with its deal, which is expected to price after the roadshow wraps up next week.

The sources also heard that a slew of other issuers had begun roadshows on Tuesday for their deals, including Central Garden & Pet Co., Equinix, Inc., Express, LLC/Express Finance Corp., Learning Care Group (US) No. 2 Inc. and Oshkosh Corp. Yet another prospective borrower, RDS Ultra-Deepwater, Ltd., was scheduled to have completed its ongoing roadshow on Tuesday, with pricing on tap for Wednesday morning.

Among recently priced issues, Wyndham Worldwide Corp.'s new 10-year notes, which had come to market on Monday and then pushed about a point higher, gave up most of that gain on Tuesday amid a generally easier secondary market, which took its cue from equity markets pushed down by investor response to disappointing consumer confidence numbers. TreeHouse Foods Inc.'s new eight-year issue - which had priced at par on Friday and then shot up by several points - was in a little from its post-pricing peaks, but traders said that the bonds mostly held their own.

Also a little lower was Rite Aid Corp., whose bonds had been firming over the previous few sessions on speculation that the big drugstore chain operator might be an attractive merger and acquisition target in the wake of the planned buyout of smaller sector peer Duane Reade Inc. by industry leader Walgreen Co.

Equinix starts roadshow

During Tuesday's primary market session, Equinix began a brief roadshow on Tuesday for a $500 million offering of eight-year senior notes.

The roadshow wraps up on Thursday.

Citigroup Global Markets Inc. and J.P. Morgan Securities Inc. are joint bookrunners.

Proceeds will be used for general corporate purposes, which may include expansion capital expenditures and debt repayment, including debt expected to be assumed in connection with the planned acquisition of Switch and Data.

Equinix is a Foster City, Calif.-based provider of network neutral colocation, interconnection and managed IT infrastructure services.

Central Garden markets $300 million

Meanwhile Central Garden & Pet began a roadshow for its $300 million offering of eight-year senior subordinated notes (expected ratings B3/B-).

That roadshow also wraps up on Thursday. The deal is expected to price late this week.

J.P. Morgan Securities Inc. and Oppenheimer are joint bookrunners for the debt refinancing deal.

ArvinMeritor to sell bonds, stock

ArvinMeritor began a brief roadshow on Tuesday for a $250 million offering of eight-year senior notes (expected Caa2/confirmed CCC-), according to an informed source.

The roadshow wraps up on Thursday.

The company is concurrently in the market with an offering of 15 million common shares of stock. The stock is expected to price on Thursday afternoon. The notes are expected to price on Friday morning.

Bank of America Merrill Lynch, JP Morgan, Citigroup and RBS Securities are joint bookrunners.

Proceeds from both the notes and the shares will be used to purchase up to $175 million of the company's 8¾% notes due 2012, as well as to pay down its revolver and its U.S. accounts receivable securitization program, and for general corporate purposes.

Pioneer Drilling starts roadshow Wednesday

Elsewhere, Pioneer Drilling Co. will start a roadshow on Wednesday for a $250 million of eight-year senior unsecured notes.

The roadshow wraps up on March 3, and the notes are expected to price after that.

Bank of America Merrill Lynch, Goldman Sachs & Co. and Wells Fargo Securities are joint bookrunners for the debt refinancing deal.

Recent offerings come off aftermarket highs

Among recently priced issues, a trader said that Wyndham Worldwide's 7 3/8% notes due 2020 started the session offered at 101, and then traded for a while in a context of par to 1001/2, "and then they just died."

He estimated them "a little lower," down about ½ point from the 100 5/8 bid level at which the bonds had gone home on Monday, after the Parsippany, N.J.-based lodging chain had priced its $250 million deal at 99.998 to yield 7 3/8%.

TreeHouse Foods' 7¾% notes due 2018 were down a little from the peak levels above 103 bid seen on Friday, when the Westchester, Ill.-based private-label food company priced its $400 million issue of the notes at par, and again on Monday.

However, a trader said that trading in the new bonds "went well," with only a slight erosion to a 1021/2-103, before going out at 102¾ bid.

"They held in nicely," opined a second trader, who saw the bonds going home around 102¾ bid, 103 offered.

ArvinMeritor tender bonds better

A secondary market trader saw Arvin Meritor's 8¾% notes due 2012 - the issue the company is tendering for - as having moved as high as 106 3/8 - not far from the 106½ total consideration, including the $30 per $1,000 principal amount, which the company will offer to holders who tender their bonds before the March 8 early tender deadline. Some $40 million of the bonds had changed hands during the session, most of them in big round-lot transactions.

Earlier, he had seen the bonds between 106¼ and 106½ "all day," with a final level around 106¼ bid, 106 5/8 offered, and noted that they were well up from levels around 103 7/8 last week.

He also said that he had heard unofficial price talk on the upcoming deal circulating, envisioning a yield of between 10¼% and 10½%. He said that although he had not heard specifically that the deal would come at a discount, "I would guess so, to yield that."

Even though the company announcement said that it would only accept for purchase up to $175 million of the $276 million of the bonds outstanding and would purchase the bonds on a pro-rata basis in the event the tender offer were oversubscribed, he said "I guess maybe [investors] think they're going to be able to take them all out, because they're trading around the 106.5 level."

The trader saw "a bunch" of ArvinMeritor's 8 1/8% notes due 2015 at 90½ bid, 91 offered level, which he said was "kind of unchanged."

Market indicators mostly ease off

Among bonds not connected with the new-deal market, a trader saw the CDX Series 13 index down by 7/8 point on Tuesday to end at 96 5/8 bid, 97 1/8 offered, after having edged up by 1 1/6 point on Monday.

The KDP High Yield Daily Index meanwhile fell by 26 basis points on Tuesday to finish at 70.42, completely wiping out Monday's gain of 23 bps. Its yield widened out by 9 bps Tuesday to 8.42%, after having come in by 5 bps on Monday.

Advancing issues topped decliners for a sixth consecutive session on Tuesday, although their previous eight-to-five bulge had dwindled to a narrow winning margin of just about a dozen issues out the more than 1,500 tracked.

Overall market activity, as measured by dollar-volume levels, rose almost 4% from Monday's pace.

Traders saw prices a little easier on Tuesday, as Junkbondland took its cue from the equity markets, which fell about 1% for most major indexes after the Conference Board reported an unexpected slide in February's consumer confidence .

"There was not a whole lot going on," a trader said. "Trace [volume] was a little light, but not horribly light."

He said that "it doesn't look like there's a lot of stuff ticking up in price. Stuff was going down - but there was not a lot of stuff that got killed, either."

For instance, he said, Community Health Systems Inc.'s 8 7/8% benchmark notes were "a little lower," reaching down to 1023/4, which he called a loss of about ¾ point to a full point.

Rite Aid rally fizzles out

A trader saw Rite Aid Corp.'s 9½% notes due 2017 at 82½ bid, which he said was down from 83¼ earlier, and down further from a Monday level around 83½ bid, "so they did trade down with the market," which was generally ¼ to ½ point easier. He called the bonds down "about a point on the day."

At another desk, the 91/2s were quoted around the 82½ level, which a market source called a drop of more than 3 points on the day, while its 8 5/8% notes due 2015 were pegged at 83 bid, down as much as 3 points on the session.

A trader at another shop said the drugstore operator's bonds "gave back one or two points" from the gains which they had notched since last Wednesday on the news that larger rival Walgreen Co. will acquire East Coast regional operator Duane Reade, Inc. in a deal valued at $1.1 billion of stock and debt assumption; analysts speculate that consolidation within the industry may put Rite Aid into play as a possible acquisition target.

Spheris solidly better

From distressed-debt territory, a trader said that Spheris, Inc.'s 11% notes due 2012 had moved up to 15¼ bid, which he called a better than 15% rise on the day.

He said that the Franklin, Tenn.-based medical transcription service - which filed for Chapter 11 on Feb. 3 - had been "quietly trading" around the 12-13 level a week ago, but then "out of the blue, there was some pretty good-sized trading today." Two weeks ago, he said the bonds were trading well below current levels - they had fallen to 8¾ bid on Feb. 5, shortly after the company's bankruptcy filing, "so they've almost doubled in value in two weeks, on some good-sized trading. It looks like an interesting story."

On Monday, company executives explained a reference in its bankruptcy documents which seemed to imply that Spheris was getting $9.2 million from Franklin neighbor and big customer Community Health Systems as part of a settlement agreement. They clarified that although Spheris and Community Health - which invested $10 million in Spheris - had reached a settlement agreement, the money will instead come from a Spheris affiliate as an internal transaction once the settlement takes effect.

Also in the healthcare sector, a trader said that Plano, Tex.-based hospital operator Lifecare Holdings Inc. is "a name you don't see too often" - bur he reported that its 9¼% senior subordinated notes due 2013 were being quoted in a very wide 60 bid, 80 offered market.

"Will the next trade be closer to 80, or to 60?" he inquired rhetorically. He said that at the beginning of January, the bonds had traded around 55 bid, and last week, there was some size trading around 60½ bid.

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