Bombardier, Chaparral deals shelved, Treehouse Foods on the road; Rouse rallies on buyout bid

By Paul Deckelman and Paul A. Harris

New York, Feb. 16 - It was back to work on Tuesday in Junkbondland - but the long weekend break that included Monday's Presidents Day legal holiday observance proved to be of no help in reviving a high-yield primary sector that was thrown badly off its stride last week, shaken to its core by news of a nearly $1 billion outflow from weekly-reporting junk bond mutual funds, a key indicator of overall market liquidity trends. That cash exodus - believed to be the biggest in five years - was being interpreted as a sign that investors were growing cautious about the formerly high-flying market, sobered by worries about international debt woes, the impact of mounting U.S. government budget deficits and predictions of a soft and soggy rebound from the recession of the last two years.

Accordingly, two junk deals which had looked so promising when they were announced just a week ago - a $1 billion two-part issue from Canadian aircraft and railroad equipment maker Bombardier Inc. and a $400 million offering from Oklahoma City-based oil and gas operator Chaparral Energy, Inc. - joined a growing list of deals, including a half-dozen last week alone, heard to have been pulled from the forward calendar by issuers concerned over the rapid deterioration of market conditions.

Another offering making the rounds, from Community Education Centers, Inc., was converted from a traditional Rule 144A bond market deal to a strictly private placement transaction.

The loss of those three deals from the calendar left primaryside players with not much to look forward to this week, other than a $400 million issue of eight-year notes announced by Treehouse Foods, Inc. Syndicate sources said that the Westchester, Ill.-based private-label brand food producer started a roadshow Tuesday for its offering, which will be used to partially fund the previously announced acquisition of sector peer Sturm Foods Inc.

An unsolicited acquisition offer for General Growth Properties Inc. sent its Rouse Co. bonds solidly higher, in very active dealings, making the Chicago-based shopping center operator - currently restructuring under Chapter 11 - easily the star of the secondary market on Tuesday. General Growth did not immediately embrace the roughly $10 billion bid from rival Simon Property Group, although the official committee for its unsolicited creditors has endorsed the proposal.

TreeHouse starts roadshow

TreeHouse Foods began a roadshow on Tuesday for its $400 million offering of eight-year senior notes (expected Ba2/confirmed BB-).

An investor call is scheduled for Wednesday.

Bank of America Merrill Lynch and Wells Fargo Securities are joint bookrunners.

Proceeds, along with expected new bank debt and a stock offering, will be used to fund a portion of the acquisition of Sturm Foods.

Bombardier pulls $1 billion

Elsewhere in Tuesday's primary market deal-postponements predominated the news.

Bombardier postponed its $1 billion two-part offering of senior notes due to market conditions.

JPMorgan, Deutsche Bank Securities and UBS Investment Bank were joint bookrunners.

Proceeds were to have been used to fund the company's concurrent tender offers and for general corporate purposes.

Also Chaparral Energy postponed its $400 million two-part offering of notes on Tuesday, according to Diane Montgomery, the company's director of corporate finance.

The deal was pulled due to market conditions, Montgomery said, adding that pricing backed up by approximately 100 basis points from Feb. 8, the time Chaparral announced it would sell the notes, until the postponement of the deal on Tuesday.

Late last week the Oklahoma City-based oil and gas exploration and development company talked a $200 million tranche of five-year senior secured second-lien notes to yield 9¾% to 10%, and a $200 million tranche of eight-year senior unsecured notes at 12¾% to 13%.

UBS Investment Bank was the left bookrunner. Credit Suisse Securities and RBS Securities Inc. were the joint bookrunners.

Meanwhile Community Education Centers converted its $210 million notes offering into a true private placement, and will no longer market its six-year senior secured notes via Rule 144A.

Late last week the notes were talked to yield 12¾% to 13%, with an original issue discount of about 2 to 3 points.

Jefferies & Co., which had the books for the Rule 144A deal, will now serve as placement agent.

Market watchers will recall that Birch Communications, Inc., which had been in the market with a $100 million offering of five-year senior secured notes, also opted instead to raise the cash via the private placement market.

Knight Libertas Capital Group, which was lead bookrunner for the note offering, is the placement agent.

Postponed deals

Bombardier and Chaparral Energy join a growing list of potential issuers which have postponed or delayed junk bond deals since the beginning of the year.

In addition to those deals, that list includes:

• Energy Transfer Equity, LP, which postponed a $1.75 billion two-part senior note offering (Ba2//BB) on Jan. 21;

• Regent Seven Seas Cruises, which postponed a $200 million offering of seven-year second-lien senior secured notes on Jan. 29;

• New World Resources N, which postponed its €700 million equivalent offering of eight-year senior secured notes on Feb. 10;

• Kemet Corp., which postponed its $275 million offering of eight-year senior notes on Feb. 11;

• Romanian telecommunications company RCS & RDS, which postponed its $200 million offering of seven-year senior unsecured notes on Feb. 12; and

• Italian gaming technology company SNAI SpA, which postponed its €350 million offering of seven-year senior secured notes on Feb 3.

In addition to those, at least two deals have been delayed.

Hudson Products Holdings Inc. delayed its $250 million offering of six-year senior secured second-lien notes (B2) due to market conditions on Feb. 11.

And on the same day, Cyprus-based Songa Offshore SE delayed its $200 million offering of seven-year senior notes.

Existing Bombardier bonds easier

The news that Bombardier had decided to postpone its $1 billion offering did not cause any great blow-up in the company's existing bonds, even though the mega-deal's proceeds were to have been used to fund its pending tender offer for up to $550 million of three series of notes - its 6¾% notes due 2012, 6.30% notes due 2014 and floating-rate notes due 2013.

A trader said that there was "nothing too exciting" going on in those bonds, at least according to the Trace tracking system.

At another desk, a market source quoted the 63/4s off ½ point on the day at 107½ bid, while the 6.30s were 1½ points off on the day at 102½ bid.

Recent Denbury bonds hold their own

A trader said that Denbury Resources Inc.'s 8¼% senior subordinated notes due 2020 were trading in a 101-101½ context. Noting that the Plano, Tex.-based energy exploration and production company's $1 billion of the bonds had priced at par on Feb. 3 to yield 8¼%, "that one seems to be holding in there well."

Another trader also saw the bonds trading around 1011/2.

New GMAC holds above issue

GMAC Financial Services' 8.30% notes due 2015 were being quoted around 99½ bid, par offered. A trader said that with the $2 billion behemoth of a deal having come to market on Feb. 9 at 99.19 to yield 8½%, "that's still OK in this market."

Other recent deals unseen

A trader said that he had not seen any trace of several other prominent new deals which priced last week - Severstal Columbus LLC's $525 million of 10¼% first priority senior secured notes due 2018, Freescale Semiconductor Inc.'s $750 million of 10 1/8% seniors secured notes due 2018 and Stallion Oilfield Holdings, Inc.'s $225 million of 10½% notes due 2015. While the Severstal Columbus had firmed solidly after pricing on Feb. 8 at 98.008 to yield 10 5/8%, the Freescale deal had traded below its Feb. 9 issue price of par, while Stallion was one of the worst performers among recent new deals, its issue dropping to around a 95-96 context after having priced at 99.094 to yield 10¾%.

He also quoted Appleton Papers Inc.'s 10½% senior secured notes due 2015 as bid at 91, although a second trader said that the "best bid" he saw on the Appleton, Wis.-based coated-paper maker's issue was around 89. The $305 million deal came to market on Jan. 29 at 98.035 to yield 11%, but was never able to get out of its own way.

Market indicators turn stronger

Among issues having no connection to the new-deal market, a trader saw the CDX Series 13 index gain ¼ point on Tuesday to end at 95 1/8 bid, 95 5/8 offered, after having lost ½ point on Friday.

The KDP High Yield Daily Index meanwhile gained 3 basis points on Tuesday to finish at 69.30, on top of the 5 bps gain seen on Friday. However, its yield widened by 2 bps to 8.78%, after having tightened by 3 bps during the previous session.

Advancing issues finally overtook decliners on Tuesday by about a seven-to-six margin, breaking a seven-session losing streak.

Overall market activity, as measured by dollar-volume levels, rose by about 4% from Friday's sleepy pre-holiday levels.

Even so, a trader described Tuesday's session as "a pretty quiet day."

"It was sort of a slow day," another chimed in, noting that the continued parade of new deals being pulled from the calendar "tells you it's slowing up."

At another desk, a trader said that the growing list of new deals put on the shelf in hopes of better market conditions somewhere down the road means "the pendulum has started to swing in the opposite direction, along with close to $1 billion coming out of the market last week.

"The party is over."

However, another trader took a more sanguine view, seeing the secondary market with "some substance, some stability."

But the trader also noted that dealings were quite light, since "a lot of people will be out because their kids are off from school this week," in some areas, leaving desks manned by more junior staffers.

A rousing rally for Rouse

A trader saw Rouse Co.'s bonds "very active all day" on the news that Simon Property Group was offering to buy Rouse parent General Growth Properties out of bankruptcy in a deal valued at nearly $10 billion, most of that going to the Chicago-based shopping center company's creditors. "I'm seeing 14 and 15 different markets" in the company's various bonds.

He quoted the Rouse paper "up anywhere from 1 to 3 points," with its 8% notes that were to have come due last year at 108½ bid, 109½ offered, up 2 points on the day, its 5 3/8% notes due 2013 at 105 bid, 106 offered, up 3½ points, and its 7.20% notes due 2012 at 110½ bid, 111½ offered, up 3 points. General Growth's shares, he said were also up 2½ points to the 12 area.

A second trader characterized the Rouse bonds as "up a ton" on the Simon Property Group news.

Yet another contended that "the tide lifts everything," and said that there had been "pretty good volume" in the credit. He pegged the 8% notes "as good as 111," although by the day's end, he said, they mostly traded in a 1093/4-110½ context, "due to the Simon Property bump."

Simon said that its roughly $10 billion offer to acquire General Growth Properties out of bankruptcy would pay $7 billion to the company's creditors, with unsecured creditors, trust preferred holders, credit facility lenders and holders of the 3.98% exchangeable senior notes due 2027 in line for a full cash recovery. The company's official committee representing its unsecured creditors has endorsed the deal, urging General Growth to move on it expeditiously.

Stockholders would meantime get $6 per share in cash, plus an additional $3 from a spinoff of the master-planned communities General Growth owns. However, the $2.62 rise in the company's Pink Sheets-traded shares to $12.02 - a gain of 27.87%, on four times normal volume of nearly 16 million shares - led some analysts to speculate that another bidder could come along with a better offer.

Indeed, General Growth itself, in responding to the Simon offer, indicated that its shareholders would do better under the company's own plans to explore all potential alternatives to emerge from bankruptcy, including a sale and raising equity from institutional investors so that General Growth could remain a stand-alone company. While not accepting the Simon offer, the company's response left the door open for a possible higher bid.

Its largest single shareholder, 25% owner William Ackman of Pershing Square Capital, has argued that General Growth's stock is worth $24 to $43 a share. Ackerman did not comment directly on the Simon Property Group offer.

Toys 'R' Us trades around

Elsewhere, a trader said that "there seemed to be someone out there buying a lot" of Toys 'R' Us' 10¾% notes due 2017. He estimated activity in the Wayne, N.J.-based specialty retailer's paper of at least $7 million, although he didn't see any news that might explain the activity.

He said that in the morning, the bonds had opened at 105½ bid, none offered, but then they were offered at 1071/2, and that was lifted to a closing level of 107½ bid.

"Someone is buying a lot of them," he reiterated.

Little movement on Catalyst agreement

A trader said that even though Catalyst Paper Corp. had reached an inter-creditor agreement in principle, he saw "not much" going on in the Richmond, B.C.-based coated-paper company's bonds. He saw "one trade" in its 8 5/8% notes at 85 bid, up a point, and did not see any dealings in the company's other issue, its 7 3/8% notes due 2014, which have recently traded around 64.

In that same sector, NewPage Corp.'s 10% notes due 2012 were up 3½ points on "a lot of volume," while the Miamisburg, Ohio-based coated-paper company's 11 3/8% notes due 2014 were likewise up 3½ points at 911/2, on "some activity."

The rise was likely a continuation of the firmer tone seen in the company's bonds at the end of last week following the announcement that NewPage had named E. Thomas Curley to its president and CEO posts, which had been vacated by the abrupt and only vaguely explained Jan. 19 resignation of Richard D. Willett, Jr. - a resignation which started the bonds on their slide down to current levels from the low 80s for the 10s and around par for the 11 3/8s, the levels held before the news of Willett's resignation.

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