Toys, Wind two-part, Casella, Real Mex price deals; Unisys, Vought, Lear bonds all jump

By Paul Deckelman and Paul A. Harris

New York, July 1 - The high yield primary market opened the year's third calendar quarter on Wednesday the same way it had closed out the second period the day before - with a burst of new-deal activity that saw five dollar-denominated deals collectively worth nearly $3.5 billion, as well as a €1.25 billion tranche of euro-denominated bonds, come to market.

The busy pace was due to issuers rushing to get their deals done ahead of the Independence Day holiday break which - for all intents and purposes - begins with what is expected to be a quiet Thursday, even though technically speaking it will be a normal, full-day session.

The biggest deal of the day came from Wind Acquisition Finance SA, a unit of Italy's Wind Telecomunicazioni SpA. It priced $2 billion in dollar-denominated eight-year notes and €1.25 billion euro-denominated eight years. Both moved up several points when they were freed for secondary dealings.

The day's other really large offering came from a unit of Wayne, N.J.-based specialty retailer Toys 'R' Us, Inc., which priced nearly $1 billion of eight-year notes. Unlike the Wind deal, the Toys 'R' Us bonds paper was seen struggling to just stay at its issue price when it began secondary dealings.

More modestly-sized offerings were priced by Commercial Barge Line Co., Casella Waste Systems, Inc. and Real Mex Restaurants, Inc. While Commercial Barge Line's deal came in at the anticipated size, the Casella deal was downsized and Real Mex was upsized. In the aftermarket, Commercial Barge and Casella traded slightly above their respective issue prices, but Real Mex was unseen.

Among the established issues, Unisys Corp.'s bonds were up generally and its shorter-dated notes especially were surging after the Blue Bell, Pa.-based information technology company threw in the towel on an unattractive debt-exchange offer it had made to its noteholders, instead coming back with a sweetened deal that it negotiated with representatives of those investors.

Vought Aircraft Industries Inc.'s bonds were heading skyward on news reports that aerospace giant Boeing Co. was in talks with Vought to buy the latter's operations that manufacture part of the fuselage for Boeing's

much-anticipated - but trouble-plagued and delayed - 787 Dreamliner aircraft.

Another big gainer was Lear Corp., whose bonds accelerated dramatically during the session as investors awaited word on the Southfield, Mich.-based automotive systems supplier's expected bankruptcy filing. The company finally released word late in the day that it would enter Chapter 11 to implement a restructuring plan it had worked out with its bondholders and other creditors.

Wind brings €2.7 billion equivalent

The primary market saw its biggest day since mid-May in terms of dollar-amount of issuance. Five issuers priced a face amount of $3.46 billion in five dollar-denominated tranches.

Wind Acquisition, a financing unit of Italy's Wind Telecomunicazioni SpA, priced €2.7 billion equivalent of 11¾% eight-year senior notes (B2/BB-/) in two tranches on Wednesday.

In its dollar-denominated tranche, the company priced $2 billion at 97.492 to yield 12¼%.

That brought the tranche in at the tight end of the 12¼% to 12½% yield talk, with the coupon coming on top of coupon talk.

In the euro-denominated tranche, Wind priced €1.25 billion at 96.271 to yield 12½%.

The euro-denominated notes, therefore, printed at the wide end of the 12¼% to 12½% price talk, with the coupon coming atop coupon talk.

Deutsche Bank Securities, Credit Suisse and Banca IMI were joint global coordinators and lead bookrunners. BNP Paribas, Calyon Securities, Citigroup, Goldman Sachs, J.P. Morgan, MPS, RBS Securities and UniCredit were joint bookrunners.

Proceeds will be used to refinance €2 billion of payment-in-kind loans due 2011 and to fund a dividend to Weather Investments SpA, the holding company that acquired Wind in 2005.

The books for both the dollar- and euro-denominated Wind bonds were strong, according to a syndicate source.

Toward the Wednesday New York close the official marked the dollar-denominated bonds at 101 5/8 bid, versus the 97.492 issue price.

The euro bonds were at 98 7/8 bid, versus the 96.271 issue price, the source added.

A lot of accounts put in for big allocations, the official said.

There was also a modicum of generosity, on the part of the issuer, the source intimated.

"If you want a deal to price well and trade up in the secondary, you have to give it a little juice."

Another sell-side source said that a lot of the Wind PIK loan holders were believed to have rolled into the new 11¾% notes due 2017.

Toys "R" Us: playing to the big guys

Also on Wednesday, TRU 2005 RE Holding Co. I, LLC, a subsidiary of Toys 'R' Us, Inc., priced a $950 million issue of 10¾% eight-year senior notes (B3/B+) at 97.399 to yield 11¼%.

Price talk was 10¾% to 11% with approximately 3 points of OID.

Banc of America Securities, Deutsche Bank Securities, Goldman Sachs and Wachovia Securities were joint bookrunners for the debt refinancing from the Wayne, N.J. -based specialty retailer.

A lot of big accounts came into the book, according to a source close to the deal, who added that the Toys trade went very well.

Commercial Barge sells $200 million

Elsewhere, Commercial Barge Line priced a $200 million issue of 12½% eight-year senior secured notes (B2/B+) at 95.181 to yield 13½%.

The yield was printed 25 basis points beyond the wide end of the 13% to 13¼% price talk.

Banc of America Securities, UBS Investment Bank, SunTrust Robinson Humphrey and Wachovia Securities were joint bookrunners for the debt refinancing and general corporate purposes deal.

Casella Waste downsizes

Casella Waste Systems priced a downsized $180 million issue of 11% five-year senior second-lien notes (B2/B+) at 97.212 to yield 11¾%.

The notes came in line with price talk that specified an 11¾% yield with approximately 3 points of original issue discount.

Banc of America Securities, J.P. Morgan and Calyon Securities were joint bookrunners.

The notes deal was reduced from $205 million, with $25 million of bond proceeds shifted to the term loan.

Proceeds, along with proceeds from the new credit facility, will be used to refinance the company's existing credit facilities.

Real Mex upsizes

Finally, Real Mex Restaurants priced an upsized $130 million issue of 14% 3.5-year senior secured notes (B3/B-) at 90.00 to yield 17.983% on Wednesday.

The deal, which was increased from $110 million, came in line with price talk that specified a 14% coupon, with an original issue discount, to yield approximately 18%.

Jefferies ran the books for the debt refinancing and general corporate purposes deal.

One deal left

With six tranches from five issuers having cleared on Wednesday, the active forward calendar is left with just one deal.

One Communications Corp., a Burlington, Mass.-based telecommunications company, is in the market with $275 million of first-priority six-year senior secured notes (expected B-).

Initial timing on the deal had it pricing early this week.

However it has been "radio silence" on the One Communications deal for several days, market watchers say.

Although it is possible that the deal will price Thursday,it could be pushed back into the post-holiday week because the ranks of players are expected to be significantly thinned ahead of the Fourth of July weekend.

Morgan Stanley and J.P. Morgan are joint bookrunners for the debt refinancing deal.

New Wind bonds gust higher

When Wind Acquisition Finance's dual-currency mega-deal hit the secondary market, both tranches were heard by traders to have moved up.

One quoted its dollar-denominated 11¾% notes - which had priced at 97.492 -- as having jumped to 101 5/8 bid, 101 7/8 offered on the break.

A second quoted those bonds as trading in "the 101-102 area," while yet another saw them going home at 101½ bid, 102½ offered.

Meanwhile, the euro-denominated 113/4s were also seen firmer, although not quite as robust as their dollar-denominated cousins. A trader saw the euro bonds - which had priced at 96.271 - at 99¼ on the break. Later on, those bonds were being quoted having dipped a little to 98¾ bid, 99¼ offered - but at another desk they were seen going out at 99 bid, par offered.

Toys 'R' Us trades tepidly

In contrast to the strength shown by the new Wind issue, particularly the dollar-denominated portion of it, Toys 'R' Us' $950 million of 10¾% notes were seen at best little changed from the 97.399 level at which the bonds priced.

One trader quoted them offered at 99, but with no left side, while a second pegged them at 97 bid, 97 ½ offered.

However, late in the day, yet another trader saw the bonds "trading below issue," quoting them at 96.875 bid, 97.125 offered.

On the other hand, a market source saw Toys 'R' Us' established 7 7/8% notes due 2013 up a point on the day at 84 bid.

Downsized Casella deal slightly firmer

A trader said that Casella Waste Systems' $180 million offering of bonds were trading in the secondary market at 98½ bid, 99½ offered, although he added that "there wasn't a lot of trading" in it, "not a lot of action in that one at all." The Rutland ,Vt.-based waste management and recycling company had priced its senior second-lien bonds at 97.212.

Another trader quoted the new bonds at 98¾ bid, 99¾ offered.

Commercial Barge bonds better

A trader saw Commercial Barge Line's $200 million offering of 12½% notes - which had priced at 95.181 - offered at 97 bid, but said that was "all that I've seen. I thought there might be some flippers in that one - but I don't see the left side at all."

However, a little later on, a trader saw the Jeffersonville, Ind.-based marine transport and service provider's bonds at 95¾ bid, 96¾ offered, while a third said they had firmed to 96 bid, 97 offered.

Real Mex really unseen

The lone deal of the day which never made it to the secondary side was Cypress, Calif.-based restaurant operator Real Mex's offering of 14% senior secured notes. Several traders said they had not seen any trace of the issue, speculating that with such a fat yield the smallish deal was probably quickly put away.

Bill Barretts stay strong

A trader said that Tuesday's $250 million offering of 9 7/8% notes due 2016 from Bill Barrett Corp. - upsized from $200 million originally - continued to hold its own in the secondary realm.

The Denver-based independent oil and gas exploration and production operator had priced those bonds at 95.172 to yield 10 7/8%, and they had shot above the 99 bid level, before coming down slightly late Tuesday to finish in a 98ish context.

However, on Wednesday, a trader was quoting those bonds back up at 99 bid, par offered. Another saw them at 99¼ bid, 99½ offered.

Another energy name which priced Tuesday, Targa Resources Partners LP's 11¼% notes due 2017, stayed around the same 96 bid, 96½ offered level at which the Houston-based natural gas company's bonds had finished on Tuesday. Targa had priced $250 million of the bonds at 94.973 to yield 12¼%, and they had pushed up later Tuesday to that 96 neighborhood.

Digicel dials higher

Tuesday's late add-on offering of bonds from Kingston, Jamaica-based wireless provider Digicel Ltd. was seen to have firmed on Wednesday. Those 12% notes due 2014, which had priced at 99½ to yield 12 1/8%, and which then moved up to 100½ bid later that session, were seen by a trader to have improved on Wednesday to 101¼ bid, although he "had not seen a right side. But there were definitely better buyers around."

Another trader, later in the session, did see a two-sided market in the bonds at 102¼ bid, 103¼ offered.

Another name from Tuesday's primary, Royal Caribbean Cruises Ltd.'s 11 7/8% notes due 2015, was seen not much changed on Wednesday, "still" 98 bid, 98¾ offered.

The Miami-based cruise line operator had priced its $300 million of those bonds, upsized from the originally planned $250 million, at 97.399 to yield 12½%. They were seen late Tuesday having firmed a little to 98 bid, 99 offered.

Market indicators continue firming

Back among the established issues, the CDX Series 12 High Yield index - which had gained ¼ point on Tuesday - was heard by a trader to have gone up by another 3/8 point on Wednesday to end at 84½ bid, 85 offered.

The KDP High Yield Daily Index, which had gained 23 basis points on Tuesday, rose another 41 bps on Wednesday to end at 62.89, while its yield narrowed by 12 bps to 10.47%.

In the broader market, advancing issues - which had led decliners on Tuesday for a fifth consecutive session - did so again on Wednesday, by a nearly three-to-two margin.

Overall market activity, measured by dollar-volume totals, was unchanged from Tuesday's levels.

A trader said that the secondary market was generally quiet - but "there was some activity in selected names."

Unisys unusually busy

One such name was Unisys, whose bonds firmed smartly on the news that the company had terminated its previous offer to exchange new debt for its existing bonds, which had underwhelmed the bondholders, and had announced a new offer with better terms.

Traders saw the company's 6 7/8% notes due 2010 shoot up more than 10 points on the session, finally going out at just below par, versus an 88-89 context on Tuesday. At one point, those bonds got as good as 101 bid, before backing off that peak.

A market source noted that the 10s were the most heavily traded high yield bonds of the day, with over $47 million having changed hands by the late afternoon.

Unisys's 8% notes due 2012 were also on the most actives list, with over $24 million traded by the end of the day. The gains in the '12s even outpaced the hefty gains in the 6 7/8% notes, with the bonds zooming up as high as 84 bid, before finally going out at 81 bid, still up 20 points on the day.

Unisys' other two bond issues covered in the exchange offer - its 8½% notes due 2015 and 12½% notes due 2016 - were each also up, but much more modestly and in far less-active dealings than the 6 7/8s and the 8s. The 2015 bonds were seen up 3 points at 56 bid, while its 121/2s were seen up about 5 points, again on reduced volume, at 67 bid.

Lear leaps forward

A trader said that "those two [Unisys and Lear Corp.] had some pretty big moves on a day like today," as the Lear bonds coursed sharply higher in busy trading as investors anticipated the company's bankruptcy filing, which was finally announced very late in the day. Even before the actual announcement, most in the market assumed that the company would file; they got some comfort out of news reports indicating that Lear had successfully lined up some $500 million of debtor-in-possession financing - a feat which might have been nearly impossible several months ago, when the credit markets were still mostly seized up and some companies were finding it difficult to line up DIP funding.

"There were a lot of Lear quotes , a lot of volume" in the name, he said, seeing the 8¾% notes due 2016 moving up to around 37 "even as we're speaking, literally -- because an hour ago, they were at 35." He called them up "10-11 points from [Tuesday]," adding that "if things are up 10 to 12 points, I guess something good happened."

Another trader saw Lear's bonds up about up about 8 points, seeing the 83/4s at 34 bid, 35 offered, which was up from the 27 level previously, he said.

At another desk, a trader recorded a 5 point rise to 30 bid, 34 offered. "The bonds are up as a result of the accrued interest claims, so there was a 5 point swing," he said.

A market source, seeing the 83/4s ending up 8 points, noted that the bonds were among the most actively traded on the session, with more than $16 million of turnover by late afternoon.

Lear's 5¾% notes due 2014 - also an active credit, with over $10 million traded - gained more than 6½ points to end at 32, the source said.

Elsewhere among the automotive names, a trader saw Ford Motor Co.'s 7.45% bonds due 2031 up a point at 59½ bid, 61½ offered, after the company's announcement of June sales figures - which showed a smaller drop versus a year earlier than had been expected.

Another trader saw the Ford bonds up a point or two at 60-61, though on "not a lot of activity." After it traded at 60, he said, "people lost interest."

Ford reported a 10.9% drop in domestic sales in June. That allowed the Dearborn, Mich.-based carmaker to gain market share on rivals like General Motors Corp., and let Ford take back its long-held Number-Two position in U.S. sales from Toyota Motor Corp - which had dethroned Ford last year - through the first half of 2009.

Vought bonds get bought

A trader saw Vought Aircraft Industries' 8% notes due 2011 "a few times today," quoting the Dallas-based aerospace company's paper as having moved as high as the lower 70s from prior levels in the low 60s, on rumors that it would sell its unit that helps build the new Boeing 787 Dreamliner to the giant aircraft manufacturer.

The trader said he saw them "quoted higher - but I'm not seeing actual trades."

Another trader saw those bonds going home at 73 bid, 75 offered, which he called up 10 or 12 points on the day, although he cautioned that Vought is a name that "doesn't trade much."

A market source at another desk, however, did see several large-sized trades at around 73, calling that about a 9 point rise on the day.

The bonds rose on a Wall Street Journal report indicating that Boeing has been in talks with Vought for some months on the possible purchase of the Vought factory in South Carolina where later company currently does some of the work on the fuselages for the 787. The paper said that the deal, should it be achieved, would be a key step in Boeing bringing the manufacture of various 787 components back under its own roof, rather than outsourcing those operations to third-part contractors like Vought. That, in turn, would let Boeing keep tighter control over the much-ballyhooed giant jetliner project, which has been plagued by missteps and delays.

Numbers no hindrance to Sealy, Constellation

Elsewhere, a trader saw Sealy Corp.'s 8¼% notes due 2014 up 2 points on the day at 83.5 bid, 84.5 offered, investors apparently unfazed by the Trinity, N.C.-based mattress maker reported a fiscal second-quarter net loss of $5.2 million, or 6 cents a share, compared with a profit of $12 million, or 13 cents a share, a year earlier.

The trader saw Constellation Brands' 7¼% notes due 2016 up at 92½ bid, 93½ offered. The Fairport, N.Y.-based liquor and wine giant reported an 85% first quarter profit drop versus a year ago.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.