FelCor, Dole, Continental price, FelCor, Continental quoted up; secondary dull as volume drops

By Paul Deckelman and Paul A. Harris

New York, Sept. 18 - The high-yield market closed out a busy week on Friday with three more pricings - for FelCor Lodging Trust, Dole Food Co. Inc. and Continental Resources Inc. - bringing the week's total domestic new issuance to the eminently respectable figure of about $7 billion - nearly double the previous week's roughly $4 billion of new paper.

Market participants took special note of the Dole deal, since it was just a month ago that the Westlake Village, Calif.-based supplier of fresh and processed fruits and vegetables had shelved a prospective bond offering due to apparently unfavorable conditions then-prevailing in the junk market - conditions which clearly have improved since then.

FelCor's offering, meanwhile was being quoted well above its issue price, as was the new Continental Resources deal. However, a trader said he had seen no actual transactions in either - par for the course on what he and others described as a quiet and dull day on the market, activity falling off as some participants made an early exit ahead of the Jewish New Year holiday, slated to begin at sundown.

While usually well-traded junk barometer issues like Community Health Systems Inc., First Data Corp. and Aramark Corp. were dying on the vine, there seemed to be a fair amount of activity in such quasi-junk crossover names as SLM Corp., DirecTVHoldings LLC and junk-rated hybrid offerings from such nominally high-grade financial issuers as Wells Fargo Corp.

FelCor prices, finally

The biggest new deal of the day came from Irving, Tex.-based lodging-industry real estate investment trust FelCor, whose FelCor Lodging LP unit priced $636 million of 10% non-callable five-year senior secured notes (B2/B-/) at 89.636 to yield 12.86%.

The company had announced the deal on Thursday morning, and there were market expectations that it would price later that same session; however, when that did not occur the deal was floated into Friday's session, when the pricing finally did take place.

When FelCor first announced the Rule 144A/Regulation S deal, it said it wanted to generate $530 million of proceeds, which it would use to fund the company's repurchase of two issues of existing 2011 bonds. Thanks to the upsizing and the level at which the deal did price, the issue generated proceeds of $570 million, $40 million more than planned.

A market source said that the yield on the deal - which was led by joint bookrunners J.P. Morgan Securities Inc., Bank of America Merrill Lynch, Deutsche Bank Securities Inc. and Citigroup Global Markets Inc. - came slightly inside of the 12 7/8% to 13% price talk. However the issue price came somewhat cheap to anticipated approximately 10 points of discount.

FelCor said that it would use proceeds, along with cash on hand, to fund an offer to purchase all of its $215 million floating-rate senior secured notes due 2011 and all of its $300 million 8½% senior secured notes due 2011, with remaining proceeds to be used for general corporate purposes.

News of the tender offer had caused both series of existing bonds to move up to levels around par - the total consideration which the company is offering for each - in Thursday's dealings.

Dole returns to the market

Perhaps the most interesting deal, in terms of background, was Dole's $315 million issue of 8% seven-year senior secured third-lien notes (B2/B-/). A market source saw those bonds price at 98.035 to yield 8 3/8%, via bookrunners Deutsche Bank, Bank of America Merrill Lynch and Wells Fargo Securities.

The Rule 144A deal was slightly upsized from the originally planned $310 million.

It was almost exactly a month ago - Aug. 17, to be precise - that the company, then expected to bring a $325 million secured seven-year bond deal, instead postponed the offering, citing market conditions.

With those conditions having apparently cleared up in the interim, Dole felt comfortable reviving the deal and plans to use the proceeds to fund the redemption at par of its 7¼% senior notes due 2010.

Continental comes to market

The day's other deal was a $300 million issue of 8¼% 10-year senior notes (B2/BB/) from Continental Resources, an Enid, Okla.-based independent oil and natural gas exploration and production company.

Syndicate sources said the new Rule 144A issue priced at 99.16 to yield 8 3/8%, coming in at the tight end of the 8½% area price talk.

The deal was originally expected to price early in the Sept. 21 week, but apparently liking the current market conditions and looking to jump aboard the accelerating new-deal bandwagon, Continental and its underwriters - joint bookrunners Bank of America Merrill Lynch, RBS Securities Inc. and Wells Fargo - moved the pricing up.

The company intends to use the deal proceeds to repay a portion of its revolving credit facility.

A $7 billion week

That troika of deals topped off a busy week which saw total domestic pure high-yield issuance - not counting such split-rated offerings as DirecTV and Textron Inc. - reach close to $7 billion, nearly double the previous week's $4 billion tally. The biggest deal, in terms of sheer size, was NewPage Corp.'s $1.7 billion senior secured behemoth deal, on Thursday, followed by Wednesday's $1 billion offering from Ford Motor Credit Co.

Apart from those mega-deals, the week also saw Blockbuster Inc.'s $675 million senior secured deal and Frontier Communications Corp.'s $600 million deal, both on Thursday; Qwest Communications International Inc.'s $550 million offering on Monday; MGM Mirage's $475 million and Del Monte Foods Corp.'s $450 million of bonds, both on Thursday; Concho Resources Inc.'s $300 million placement on Tuesday and Waste Services Inc.'s $60 million senior subordinated add-on deal on Wednesday.

Junkbondland also noted with some interest several appropriately rated overseas deals - CSN Islands XI Corp.'s $750 million offering, on Wednesday, Country Garden Holdings' $75 million add on deal on Wednesday, and Axtel SAB de CV's $300 million of new bonds on Thursday.

A busy week ahead

Looking forward to the upcoming week, primaryside players are anticipating pricings from ACCO Brands Corp, North American Energy Alliance LLC/North American Energy Alliance Finance Corp., Delta Air Lines Inc. and GeoEye Inc.

ACCO Brands, a Lincolnshire, Ill.-based provider of traditional and computer-related office products and supplies, is bringing a $425 million offering of senior secured notes due 2015 via Credit Suisse, Bank of America Merrill Lynch, Deutsche Bank Securities Inc. and BMO Nesbitt Burns. Price talk on the Rule 144A deal emerged Friday, envisioning a yield of 11% to 11¼%. Proceeds will go to repay debt.

New York-based North American Energy Alliance, which is purchasing some power generation facilities from Big Apple utility Consolidated Edison, is selling $205 million of Rule 144A senior secured second-lien notes due 2016 (Ba3/B+) via Barclays Capital Inc. and Bank of America Merrill Lynch. It will use the proceeds to refinance an unsecured term loan.

Atlanta-based major air carrier Delta plans to price $500 million Rule 144A senior secured notes due 2014 (expected ratings Ba2/BB-) via J.P. Morgan Securities Inc., Barclays Capital and UBS Investment Bank. It plans to use the proceeds, together with new credit facilities, to repay all of its outstanding senior corporate credit facility, with any remaining proceeds slated for general corporate purposes.

And GeoEye, a Dulles, Va.-based satellite imaging company, is bringing a $350 million Rule 144A/Regulation S senior secured offering due 2015 (B1/B+) to market via joint bookrunners J.P. Morgan and Bank of America Merrill Lynch. It plans to use the deal proceeds to find a tender offer for its $250 million of floating-rate senior secured notes due 2012 and for general corporate purposes, which may include funding a portion of the costs of constructing a new high-resolution satellite.

Also on tap during the upcoming week is QVC Inc.'s split-rated offering (expected ratings Ba2/BBB) of $500 million senior secured notes due 2019. That deal will be brought to market via joint bookrunners Wells Fargo Securities and Barclays. Proceeds of the Englewood, Colo.-based television and multimedia retailing company's Rule 144A transaction will go to repay existing term loans.

New FelCor, Continental deals seen higher

A trader saw FelCor's new offering of 10% notes due 2014 quoted as high as 95½ bid, 96½ offered, well up from the 89.636 level at which that upsized $636 million deal priced earlier in the session to yield 12.86%.

He likewise saw Continental Resources' new $300 million of 8¼% notes due 2019 at 101½ bid, 102½ offered, up from the 99.16 at which the deal had priced earlier to yield 8 3/8%.

A trader at another desk, meantime, declared that despite those impressive-sounding quotes, from where he sat "there has been almost no trading at all" in those deals. Continental, he said, "blew right through 8%" on a yield basis when it priced, but despite that, "maybe there are guys willing to chase them, but I haven't seen anybody come in as a buyer. The only bid seems to be in the Street."

The new Dole 8% senior secured notes due 2016, which priced at 98.035 to yield 8 3/8%, hit the market too late in the day for aftermarket activity.

NewPage continues climb...

Among the issues which priced on Thursday, a trader said that NewPage's 11 3/8% secured notes due 2014 continued to push solidly higher, seeing the bonds at 99 bid, 99¾ offered.

That was up from the 98¼ bid, 98¾ offered to which he had seen the Miamisburg, Ohio-based paper company' $1.7 billion issue - upsized from $1.2 billion earlier - rise after having priced earlier Thursday at 93.996 to yield 13%.

NewPage, he asserted, was "another one of those bonds that priced too cheaply."

...but Blockbuster backs off

The same case could likely be made for Dallas-based DVD, Blu-Ray and video game rental giant Blockbuster's new deal, which like NewPage was sharply upsized, to $675 million from $340 million immediately, also priced Thursday at the 94 level, and like NewPage, had zoomed points higher right out of the gate.

However, unlike NewPage, the Blockbuster bonds failed to keep much of those early gains. A trader saw them going out Friday at 96¾ bid, 97¾ offered - down from around 97 bid, 97¾ offered at Thursday's close. The bonds had priced earlier that session at 94 to yield 15.21%, and then were heard to have jumped to levels as high as par, before coming off that peak to end in a 97ish context.

The company's existing 9% notes due 2012 meantime were unchanged at 73 bid, on $7 million traded.

However, a market source at another desk pegged the 9s as high as 76 bid, up 3 points on the day.

New Frontier, Del Monte bonds better

Among other newly priced issues, the first trader saw Frontier Communications' 8 1/8% notes due 2018 at 99 bid, 99¼ offered, up from 98.441, where the Stamford, Conn.-based telecommunications company had priced its $600 million offering on Thursday - upsized from $450 million originally - to yield 8 3/8%.

And Del Monte's new 7½% notes due 2019 were seen having moved up to par bid, 100 3/8 offered, versus the 98.272 level at which the San Francisco-based maker of both people-food and pet food had priced its $450 million deal to yield 7¾%.

Market indicators stay mixed

Back among the existing bonds not connected with the new-deal market, a trader saw the CDX Series 12 index down by ½ point on Friday to 93¾ bid, 94¼ offered, the same amount by which it had also eased on Thursday. However, even with those two consecutive down days, the index did well enough this week to have risen solidly from the 91¾ bid, 92¼ level at which it had closed out the previous Friday, Sept. 11.

The KDP High Yield Daily Index was up by 8 basis points Friday to 68.69, while its yield tightened 4 bps to 8.49%. That was something of an improvement from Thursday's session, when the index was unchanged at 68.61, while its yield narrowed by 3 bps. Like the CDX, the KDP index also posted a gain for the week, rising from the 67.48 level at which it had ended the previous Friday, with a yield of 8.93%.

In the broader market, advancing issues led decliners for a 12th straight session on Friday, although their lead had narrowed to about a 13-to-11 ratio from the three-to-two advantage they had held on Thursday.

Junk market activity, reflected in dollar-volume totals, eased about 6% from Wednesday's level.

Headin' home for the holiday

A trader said that "there was a flurry of activity this morning, but it seems [at mid-afternoon ET] like things have already shut down for the day, with the Jewish holiday." Volume, he added "was way down," even beyond the fall off usually seen on summer Fridays.

At another desk, a trader agreed that the pending holiday had diminished attendance and activity. "I came in, I left, I came back - and now we're drinking beer and I have no idea what's going on," he quipped. "It seems like a lot of nothing, from our point of view."

Yet a third trader said that "people put some stuff out for a bid - just a diversity of names, maturities anywhere from 2011 to 2033." He said "some phone paper was in for the bid - Sprints, Qwests. There was some HCA paper in for the bid earlier, and AES - but nothing in real size; $2 million, $3 million apiece, maybe up to $5 [million]. Some people put some bids on it, but so far, nothing has traded. So it may be a fire drill."

He continued that "people still have cash. I think everyone wanted to get home for the holiday, and the people who are left around are just sitting here, saying 'I don't know what to think.'"

End-of-quarter doldrums

Eyeing the calendar, he noted that "we've got the end of the quarter, really effectively, eight [business] days from now - but the last two days, the 29th and 30th, will be the Deutsche Bank conference, so [this upcoming] week will effectively end the quarter. We'll see a bunch of deals pushed then - and that will be it."

Barometers quiet, hybrids hotter

The first trader noted not much activity in the usually well-traded "barometer" issues. He saw Community Health Systems' 8 7/8% notes due 2015 unchanged at 103, on just $2.5 million of trading, while First Data Corp.'s 9 7/8s due 2013 were even quieter, with just 41 million trading at 93, down 1/2. He saw no round-lot dealings in Aramark's 8½% notes due 2015.

However, he said, "hybrids" and other crossover types "look active," with Wells Fargo's 5.80% perpetual securities up ½ point at 71 1.2, on $23 million traded, while SLM's 8.45% notes due 2018 were ¼ point better at 801/4, on $21 million traded.

Aiful is awful

Out of the distressed-debt precincts, a trader said that Aiful Corp.'s 6% eurodollar bonds due 2011 were quoted trading as low as 29 bid, 32 offered, finally going out around 32 bid, 33 offered - which he estimated to be down about 14 points from Tuesday's levels around 46-48 - after Japan's second-largest consumer lender by assets announced that it will try to delay debt repayments after being shut out of the credit markets and forced to refund interest charges to customers.

Among U.S.-based financial companies, a trader said that Capmark Financial Group's floating-rate notes due 2010 "seemed unchanged" around 27 bid, 28 offered, while its other bonds were likewise steady at 26-28.

However, he did see some movement in CIT Group Inc.'s bonds, saying the name "moved up a little bit. The most active CIT bond was the 5.20% notes due 2010 - "one of the short ones," he noted - all of these are playing 'Beat the Clock,' because [investors don't know what they're going to do with refinancing. The shorter ones are what trades."

He saw the 5.20s ending the day around 68, which he called up 3 points on the day, trading between 66½ and 68 in "good-sized trading.

"I don't know if there's a deal coming, or if they're going to make their next payment" - which for the 5.20s comes due on Nov. 3.

He noted that the CIT 6 7/8% coming due this Nov. 1 "traded a lot too, I would bet, because people don't know if [the company] is going to make this [redemption] or not."

He saw "a boatlload" of the bonds trading around 781/2-791/2, which he called up 1 to 1½ points.

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