Upsized HealthSouth prices; Logan's Roadhouse too, moves up; Sears, ICON, Omega plan deals

By Paul Deckelman and Paul A. Harris

New York, Sept. 28 - HealthSouth Corp. was heard by high-yield syndicate sources to have come to market on Tuesday with an upsized, quickly shopped $525 million two-part bond deal. However, the Birmingham, Ala.-based hospital and rehabilitative clinic operator's eight-year and 12-year paper priced too late in the session for any kind of aftermarket dealings.

Also pricing, considerably earlier in the day, was Nashville-based restaurant company Logan's Roadhouse, Inc., which served up $355 million of new seven-year senior secured notes at par. Traders saw the new bonds push above 102 bid when they were freed for secondary action, in line with a recent trend that has seen many of the new deals that have come over the past few sessions firming by at least 1½ to 2 points on the break and then pretty much staying put at, or even above, those elevated levels. Among them have been such varied issuers as Vertellus Specialties, Inc., whose deal priced on Monday, and last week's deals from Stoneridge Inc. and NBTY, Inc.

Apart from issues that have already priced, Sears Holdings Corp., Associated Materials, LLC and Omega Healthcare Investors, Inc. each announced new deals, and ICON Health & Fitness, Inc. was also heard by sources to be shopping an offering around. The sources further said that while Sears and ICON were hitting the road to sell their respective offerings, price talk emerged on Omega, which is expected to price its deal Wednesday morning. Talk also occurred on West Corp.'s $500 million eight-year deal, seen as a possible mid-week pricing.

While all of that positive news was coming out of the new-deal arena, LodgeNet Interactive Corp. was perhaps having some second thoughts about the $435 million secured bond deal it's currently shopping around; the Sioux Falls, S.D.-based company said that it was eyeing possible alternatives, which could include downsizing the deal or even deferring it altogether for a while.

HealthSouth upsizes drive-by

In Tuesday's primary market, HealthSouth priced an upsized $525 million two-part issue of senior notes (B2/B+).

The Birmingham, Ala.-based provider of inpatient rehabilitative health-care services priced an upsized $275 million tranche of eight-year notes at par to yield 7¼%

The tranche, which was upsized from $250 million, priced at the tight end of the 7 3/8% area price talk.

The company also priced a $250 million tranche of 12-year notes at par to yield 7¾%.

The yield on the 12-year notes printed on top of the price talk.

Citigroup was the left bookrunner for the debt-refinancing deal, the overall size of which was upsized from $500 million.

Bank of America Merrill Lynch, Barclays Capital Inc., Goldman, Sachs & Co. and Morgan Stanley & Co. Inc. were the joint bookrunners.

Talking the deals

Elsewhere, West talked its $500 million offering of eight-year senior unsecured notes (B3/B) with an 8¾% to 9% yield.

Deutsche Bank Securities Inc., Wells Fargo Securities, Goldman Sachs and Morgan Stanley are the joint bookrunners for the bank debt-refinancing deal.

Meanwhile, in quick-to-market action, Omega Healthcare Investors talked its $200 million offering of 12-year senior notes (expected ratings Ba2/BB+) with a 7% area yield.

Pricing is set for Wednesday morning.

Bank of America Merrill Lynch, Deutsche Bank Securities, Jefferies & Co. and UBS Investment Bank are the joint bookrunners for the debt-refinancing and general corporate purposes deal.

Sears starts roadshow

Sears Holdings kicked off a brief roadshow on Tuesday for a $500 million offering of eight-year senior secured notes (Ba1/BB+).

The company also announced its intention to privately place an additional $165 million of the notes directly with its domestic pension plan.

Both the syndicated notes and the private placement notes will have identical terms and will settle concurrently, according to a source familiar with the matter.

Bank of America Merrill Lynch, Wells Fargo Securities, Barclays Capital, Deutsche Bank, Goldman Sachs and Citigroup Global Markets Inc. are the joint bookrunners for the notes, which are to be syndicated.

Both the syndicated notes and the privately placed notes will be formatted according to Rule 144A with registration rights and Regulation S.

The Hoffman Estates, Ill.-based retail merchandise company intends to use the proceeds to repay revolver debt, fund working capital requirements of the retail business, fund capital expenditures and for general corporate purposes, including common share repurchases and pension funding obligations.

ICON starts roadshow too

ICON Health & Fitness will begin a roadshow on Wednesday for its $205 million offering of six-year senior secured notes (B2/B-).

The offering is expected to price early in the week ahead.

Bank of America Merrill Lynch and Credit Suisse are the joint bookrunners for the debt refinancing.

Finally, LodgeNet Interactive announced in a Tuesday filing with the Securities and Exchange Commission that it is considering alternatives to the $435 million offering of six-year senior secured second-lien notes that it began marketing on Sept. 20.

Bank of America Merrill Lynch and J.P. Morgan Securities Inc. were managing the deal.

The alternatives under consideration include, but are not limited to, a possible amendment of the company's existing credit facility, together with a smaller issue of senior secured notes.

The proceeds from the notes would be used to reduce the amount outstanding under the existing credit facility, thus extending the term of a significant portion of the company's debt beyond the current maturity in 2014.

While a variety of alternatives are under consideration, it is also possible that the company may elect to defer any immediate transaction if the pricing and terms are not acceptable, as the company is compliant with the covenants in its existing credit facility and believes that it will remain compliant, the filing stated.

New Logan's Roadhouse bonds better

When Logan's Roadhouse's new 10¾% second-lien senior secured notes due 2017 were freed for trading, investors showed they were hungry for the new bonds, with a trader seeing them having been taken up to 102 bid, 102¾ offered from their par issue price earlier in the session.

Another trader saw the $355 million issue trading at 102¼ bid, 102¾ offered.

Recent new deals hold their own

A trader remarked that the Logan's bonds seemed to be the latest in a string of recent new deals that, after pricing, have moved up on the break by at least 1½ or 2 points - and sometimes even more - and then have remained at those lofty levels.

"They've just stayed there," said another trader who noted that same phenomenon.

For instance, he saw Monday's upsized $345 million offering of 9 3/8% senior secured notes due 2015 from Indianapolis-based chemical manufacturer Vertellus Specialties hanging in there up at 102¾ bid, 103¼ offered - the level to which the bonds had jumped on Monday after the issue had priced at par earlier that session.

Another trader, meanwhile, said that he had "nothing on Vertellus - I couldn't find anything moving today."

But that trader did see some other recent deals trading, all at the same kind of higher levels. He saw Friday's 6 7/8% notes due 2017 from Calgary, Alta.-based energy company Harvest Operations Corp. at 101 5/8 bid, 102 3/8 offered, around where the bonds had traded after the $500 million issue had priced at 99.319 to yield 7%

He saw another Friday deal - Stoneridge's $175 million of 9½% notes due 2017 - at 103 bid, 103½ offered. That was around the levels the Warren, Ohio-based automotive components maker's deal had reached late in that session after having priced at par earlier and was actually up from 102¾ bid, 103¾ offered seen on Monday.

Last Wednesday's $650 million offering of 9% notes due 2018 from Ronkonkoma, N.Y.-based nutritional supplement maker NBTY likewise held on to most of its gains, anchored around 103½ bid, 104 offered - about where the bonds had traded after their par pricing.

A market source noted that aftermarket movements seem to go in cycles lately, with the latest bonds up by several points, while just a couple of weeks ago, most issues pricing around par were seeing appreciation of less than a full point when they traded in the secondary realm.

Market indicators keep rising

Away from the new-deal world, a market source quoted the new CDX North American Series 15 HY index, which began trading on Monday, up 1/8 point at 97 bid, 97½ offered.

The KDP High Yield Daily index meantime rose by 6 basis points on Tuesday to finish at 72.96 after having gained 9 bps on Monday. Its yield came in by 3 bps Tuesday to 7.73% after having narrowed by 4 bps on Monday.

The Merrill Lynch High Yield Master II index rose by 0.12% on Tuesday after having improved by 0.186% on Monday. Its year-to-date return ended the day at 11.391%, establishing yet another new peak 2010 level, versus the old mark of 11.257%, which had been set just on Monday.

Advancing issues led decliners for a third consecutive session on Tuesday, although their advantage narrowed to around seven-to-six, versus the nearly seven-to-five ratio seen both Friday and Monday.

Overall activity, represented by dollar-volume levels, jumped by 46% on Tuesday after having fallen by 23% on Monday.

A trader said that as has been the case over most sessions recently, the day's dealings - and hence the jump in activity levels - were "just new issues, new issues, new issues."

A second trader agreed that secondary dealings in the established names were "a little bit slow."

Freeport remains actively bid

However, one established name that was anything but slow on Tuesday was Freeport-McMoRan Copper & Gold Inc., whose 8 3/8% notes due 2017 were among the busiest bonds of the day, with some $42 million changing hands - although traders pointed out that carrying a Ba2/BBB-/BBB- rating, the Phoenix-based metals mining company's issue was attracting activity from high-grade players venturing into crossover territory to pick up some yield as well as traditional junk marketers.

A market source saw the bonds get as good as just below 113 bid before going out around 112 3/8 bid, well up from previous levels in the mid-109 area. However, looking only at round-lot transactions and throwing out smaller trades as unrepresentative, the bonds were up not quite ½ point at just under 112.

The bonds have been propped up by strong gains in the two commodities it produces, gold and copper. Gold reached a high of $1,301.60 per ounce late last week and continues to hover just a little south of that on profit-taking.

Copper meantime rose on Tuesday for the fourth time in five sessions, pushed up by a weaker dollar and a decline in stockpiled copper inventories coupled with rising demand from China, now the world's largest industrial buyer of copper and other metals.

Traders also noted fairly brisk activity Tuesday in some other split-rated crossover names, such as long-dated hybrid bonds issued by such financial borrowers as Capital One Financial Corp. and Wells Fargo Corp.'s Wachovia unit, and Anadarko Petroleum Corp.

Some names moving about ...

Back among purely junk names, however, traders saw considerably less trading volume, although some names did show movement.

For instance, a trader said that he was "kind of surprised" to see McJunkin Red Man Corp.'s 9½% senior secured notes due 2016 trading at levels under 90 bid - he quoted the Tulsa, Okla.-based industrial piping manufacturer's paper having gone as low as 88½ bid, 89 offered.

He noted that the company priced $1 billion of the bonds last December and then did a $50 million add-on in February, with both tranches pricing in the mid-97 range. After that, he said, "I hadn't seen them in a while." There was no fresh obvious negative news out on the company that might explain the slide down into the upper 80s since the add-on deal got done.

A trader saw Dynegy Inc.'s 7¾% notes due 2019 "up a little bit from [Monday]," continuing the strengthening trend seen on Monday. He pegged the Houston-based power-generating company's bonds at 69 bid, calling that up ½ point to 1 full point, on "some activity."

Another market source meantime estimated the bonds had risen about ¾ point on the day to reach their close at 69 and estimated that the company's 7½% notes due 2015 were up about a point at just under 80 bid.

Those bonds had been busily traded on Monday, along with the company's New York Stock Exchange-traded shares, on market buzz that the Blackstone Group, which agreed over the summer to buy Dynegy in a $4.76 billion deal, might be persuaded to sweeten the $4.50-per-share price it has offered for those shares. The deal includes Blackstone's assumption of $4.2 billion of Dynegy debt - but the buyer is under no contractual obligation to actually buy back any of that debt, traders and other market-watchers said.

Chesapeake Energy Corp.'s 7 5/8% notes due 2013 were quoted up around 109 bid, up 1¼ point on the session, while its 9½% notes due 2015 were seen about ½ point better, at the 115 level. There was no fresh news seen out about the Oklahoma City-based natural gas company.

Elsewhere among energy-related names, a trader saw ATP Oil & Gas Corp. bonds "moving up. They were feeling better," with the Houston-based energy exploration and production company's 11 7/8% second-lien senior secured notes due 2015 ending around 86 bid, which he called up about a half-point, "up a little bit on some activity."

... while others stay put

On the other hand, a trader said that NewPage Corp.'s 11 3/8% senior secured notes due 2014 "seemed unchanged," situating the bonds at 90 bid, 91 offered. "There was some activity" right around 90½ bid, he said, but he added that the Miamisburg, Ohio-based coated-paper manufacturer's bonds were "for the most part unchanged."

Sector peer Catalyst Paper Corp.'s 11% notes due 2016- which had been moving up over the past several sessions - were at 82 bid, 83 offered, while its 7 3/8% notes due 2014 were at 41 bid, 43 offered. A trader said the Richmond, B.C.-based papermaker's bonds were "pretty much" unchanged.

Out of the deeply distressed precincts, Blockbuster Inc.'s 11¾% senior secured notes due 2014 were "pretty much unchanged" around a "56ish" level, the same as the past two sessions, a trader said, adding that he "didn't see much activity" in the bankrupt Dallas-based video rental company's bonds.

Auto names cruise higher

In the autosphere, a trader said that Detroit-based drive-train components manufacturer American Axle & Manufacturing Holdings Inc.'s 7 7/8% notes due 2017 gained some 2 3/8 points on the session to finish just above 99 bid. Axle's bonds and shares have been firmer over the last several sessions in the wake of its announcement at the end of last week that it had agreed to go into a joint venture with Saab Automobile to deliver components that improve vehicle fuel efficiency. The new e-AAM Driveline Systems AB - to be based in Sweden but majority controlled by Axle - will engineer, develop and commercialize electric all-wheel-drive and hybrid driveline systems for passenger cars and crossover vehicles.

A trader meantime said that paper from two big Axle customers - Ford Motor Co. and domestic arch-rival General Motors Corp. - were "continuing to do better."

He quoted Ford's 7.45% bonds due 2031 at 102 bid, 103 offered, versus Monday's levels at 101½ bid, 102 offered, on "decent activity." GM's benchmark 8 3/8% bonds due 2033 were at 33½ bid, 34 offered, "up a little bit, with some activity there," versus 33 bid, 34 offered on Monday.

Another trader also saw the GM benchmarks at 33½ bid, 34 on Tuesday, calling them up ½ point on the day, while locating the Ford long bonds at 101¼ bid, 102¼ offered, which he called up 1 point. However, the No. 2 U.S. carmaker's 6 5/8% notes due 2028 dipped a point to end at 95 bid.

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