Norcraft, Dynegy price, market awaits Hanes; Pinnacle upsizes bond offering; Rite Aid rallies

By Paul Deckelman and Paul A. Harris

New York, Dec. 2 - Norcraft Cos. LP/Norcraft Finance Corp. was heard by high yield syndicate sources to have successfully priced an upsized offering of six-year secured notes on Wednesday. The Eagan, Minn.-based cabinetry company is one of a growing number of issuers hoping to get needed financing done before the approaching year-end holidays ring down the curtain on the 2009 junk primary market.

Also pricing was an offering of six-year mirror notes from Dynegy Holdings Inc. identical to an existing tranche of bonds, although this was no ordinary junk deal, since the Houston-based power generating company will actually receive no proceeds from the bond sale; Dynegy issued the notes to another company, LS Power Partners LP, as part of a previously announced deal to sell the latter entity a group of power plants for nearly $1 billion, which Dynegy will use to pay down near-term debt, while LS in turn will receive proceeds from selling the notes to investors.

Back among the more straightforward Junkbondland deals, price talk emerged on Hanesbrands Inc.'s upcoming issue of seven-year notes, which is expected to price on Thursday morning.

Pinnacle Foods Group LLC was meantime heard to have upsized the junk bond portion of the financing which the Cherry Hill, N.J.-based manufacturer and distributor of name-brand packaged foods will use to fund its acquisition of yet another well-known brand, Birds Eye frozen vegetables. At the same time, it downsized the bank debt portion of the funding for the $1.3 billion acquisition.

Away from the new-deal arena, several issues of Rite Aid Corp.'s bonds were seen up nearly 2 points on the session, although there was no fresh news seen out on the drugstore chain operator that might explain such activity.

There likewise was no news seen out about Clear Channel Communications Inc., even though the radio station group owner's bonds have firmed over the past two sessions.

Smurfit-Stone Container Corp.'s bonds were seen higher for a second consecutive session, given a boost by the news that the bankrupt Chicago-based packaging company had formally submitted a reorganization plan that envisions giving its junk bond holders and other unsecured creditors essentially all of the new equity of the reorganized company.

Norcraft prices tight to talk

The mid-week session generated a somewhat light news flow in the primary market.

Norcraft Cos., LP and Norcraft Finance Corp. priced an upsized $180 million issue of 10½% six-year senior unsecured notes (B1/B) at 98.37 to yield 10 7/8%.

The yield priced at the tight end of the 11% area price talk.

UBS Investment Bank was the left bookrunner for the debt refinancing deal which was upsized from $150 million. Jefferies & Co. was the joint bookrunner.

Shortly after the terms circulated late Wednesday morning, the new notes were seen at par ¾ bid, 101½ offered by an asset manager, who was seeing a strong bid to the market at that time.

Dynegy brings seller note

Also Wednesday Dynegy Holdings completed a $235 million seller note transaction on Wednesday.

The notes, which mirror the issuer's outstanding 7½% senior notes due June 1, 2015, priced at 87.50 to yield 10.56%.

The deal priced cheap to the 88.50 area price talk.

The mirror notes are non-fungible with the pre-existing notes.

Credit Suisse and Citigroup ran the drive-by deal.

The selling noteholder was Adio Bond, LLC, a subsidiary of LS Power Group.

Dynegy Holdings will not receive any proceeds from the deal.

Hanesbrands sets talk

Meanwhile, Hanesbrands talked its $500 million offering of seven-year senior unsecured notes (B1/B+) to yield 8¼% to 8½%, with 1 to 2 points of original issue discount.

The order books closed late Wednesday afternoon. The deal is expected to price on Thursday morning.

J.P. Morgan Securities Inc., Bank of America Merrill Lynch, HSBC Securities and Goldman Sachs & Co. are joint bookrunners for the debt refinancing deal.

Quintiles holds call

An asset manager who had just taken part in the Quintiles Transnational Holdings Inc. investor call Wednesday morning expressed the belief that the $400 million offering of conditional cash-pay five-year senior notes (B3//) is going to do fine.

The deal is running a brief roadshow, and is expected to price early next week via Morgan Stanley and Citigroup.

The deal's call structure, with the notes becoming callable immediately at 102.50, somewhat resembles a bank loan, the investor remarked.

Proceeds will be used to fund a $275 million dividend, as well as related payments to certain option holders of $8 million. Proceeds will also be used to provide $97 million of cash to support PharmaBio's future operations and cash out its fractional shareholders, as well as for general and administrative expenses.

"I think I'm going to play the deal because I look for it to go up 2 or 3 points," the investor said, adding the expectation that Quintiles should come with a yield in the mid-to-high nines, with a couple of points of OID.

"You sit there with a nine-handle coupon, waiting for the IPO to come - there is some confidence that there will be an IPO within the year - and some of the comparables are trading at 10-times EBITDA," the buy-sider said.

"So you have a significant potential equity cushion below you."

The fact that it's a dividend-funding deal generated what this investor characterized as a "bifurcated reaction," among buy-siders who took part in the Wednesday call. Some bond buyers won't play, period, because it's a dividend deal, while others seemed keen to get in.

"I'm not really crazy about the use of proceeds," the asset manager said.

"Basically you are giving money back to the equity sponsors. And they've structured it so that there is very limited upside.

"But you have to look at it from the standpoint that if you buy it at 98 as a new issue, and they take it out at 102.50, and you have coupon payments for year, maybe it's an outperformer.

"The market is apparently willing to take this deal."

Conditional cash pay feature

One novel feature of the Quintiles note structure is that it has a "conditional cash pay" feature.

If there is not enough cash for the holding company to make an interest payment, it can pay in kind instead, and the notes do not default, the investor explained.

"The discussion seems to be heading toward what will happen if there is some cash with which to make the interest payment, but not enough to cover the entire payment, in which case will it be possible to get a payment that is part cash and part PIK?

"That could be hammered out in the next day or two."

New Norcraft, Dynegy bonds unseen

A trader said that he had not seen any traces of the new Norcraft 10½% notes.

He mentioned that the offering was "a pretty small deal" - an indication that the $180 million issue was likely put away and not available for aftermarket action.

Meanwhile, the new Dynegy Holdings bonds priced way too late in the day for any secondary activity.

Crunch time for year-end deals

A trader noted that with the calendar now in December, time would soon start to run out on getting new issues priced - and projected that the next two weeks would be busy ones, with a lot of paper waiting to be priced before the market calls it quits for the year.

"You've got a couple of $1 billion issues that look like they are on the horizon," he said, naming CDW Corp., CWI and IMS Health Inc. as likely candidates.

He added that "you're kind of running into a tight window here," with the very real possibility that issuers who do not get their deals done shortly "will have to wait until after New Year's" to do anything.

The market may lose some participants with the start of Chanukah, which begins at sundown next Friday, Dec. 11 and runs for eight days - followed two weeks later by Christmas, and then New Year's.

"Once the kids are out for Christmas vacation" - which in some school districts could be as early as the preceding Monday, Dec. 21 - "everybody is off on their pre-planned holidays. You lose your momentum - and you'll have to wait till after New Year's when everyone's back and back on the desk."

Market indicators seen mixed

Among statistical measures of market performance not related to the new-deal market, a trader saw the CDX Series 13 index up 3/8 point on Wednesday at 93 7/8 bid, 94 3/8 offered, after having risen by ¾ point on Tuesday.

The KDP High Yield Daily Index was meantime down by 4 basis points on Wednesday to 69.65, after having risen by 7 bps on Tuesday. Its yield was steady at 8.55%, after having narrowed by 1 bp the previous session.

In the broader market, advancing issues stayed ahead of decliners for a second straight session, by the same ratio of nearly three to two seen the previous session.

Overall market activity, as measured by dollar-volume, was about 9% ahead of Tuesday's pace.

Rite Aid reported robust

Among specific issues, a market source said that Rite Aid's 9½% notes due 2017 were up nearly 2 points to levels just above 85, in busy dealings of more than $14 million, making the Camp Hill, Pa.-based Number-Three U.S. drugstore chain operator's issue one of the more active ones of the session.

At another desk, a source saw Rite Aid's 8 5/8% notes due 2015 also push above 85, a gain of almost 2 points, although on considerably less volume.

The first source, however, said that the latter issue was actually up by not even a point.

There was no fresh news seen out that might explain the sudden popularity of the company's debt.

Clear Channel climb continues

The same could also be said about Clear Channel Communications. A trader said its bonds were "running" as they rose solidly for a second consecutive session.

He saw the San Antonio, Tex.-based broadcasting and outdoor advertising company's 11% notes due 2016 "right around 58," a gain of some 4 points on the session, on "good-sized trading"

He meantime saw its 6¼% notes due 2011 at 83, which he called a 4 or 5 -point gain from recent levels, though on "not as much trading."

Even though there seemed to be no fresh news out there which might explain the recent surge in the bonds, he noted that the name was "an active one on the day."

Another market source saw the 61/4s up more than 2 points on the session, ending at 83½ bid.

Clear Channel's paper had also been firmer the previous week, with some participants citing rumors - at this point still unconfirmed and totally unofficial - that the company might float a bond issue and use the proceeds to take care of its near-term debt maturities.

Smurfit-Stone better again

A trader said that Smurfit-Stone Container's bonds continued the rise seen Tuesday, which followed the company's official filing of its reorganization plan with the federal bankruptcy court overseeing its restructuring.

He said that its paper "moved again," rising to the mid-80s on "a lot of activity."

He pegged both its 8% notes due 2017 and its 8¼% notes due 2012 in an 83-84 context, each up between 1 and 1½ points.

Another market source quoted the 8s at 82 bid, but called that a gain of more than 3 points on the session, while its 8¼ bonds were seen up 1½ points on the day at 83 bid.

On Tuesday, those bonds had risen some 3 to 4 points from the upper 70s to around 81-83, after Smurfit-Stone formally presented its plan to the U.S. Bankruptcy Court in Wilmington, Del., where the company had filed for Chapter 11 protection from its junk bond holders and other creditors nearly a year ago, in January.

The plan filed Tuesday envisions conversion of the company's unsecured debt into equity, with secured debtholders to get cash, new debt, or some combination. Existing shareholders would get nothing. The company anticipates emerging from Chapter 11 next spring.

GM bonds seen parked amid CEO exit

Traders reported no real movement one way or another in the bonds of General Motors Corp. as a result of Tuesday's unexpected announcement that the Fritz Henderson - appointed chief executive officer of the Detroit giant just eight months ago after the government-ordered ouster of his predecessor, Rick Wagoner - was likewise heading out the Renaissance Center exit door.

One said that GM's benchmark 8 3/8% bonds due 2033 were "hanging around" the 22 level, seeing them "active" around 21-22, with the bonds going out at the latter level, which he termed unchanged on the day.

"They've been 20-21 for most of the week; [on Tuesday] they ticked up to 22 after the news [of Henderson's abrupt resignation] and they're staying there."

At another desk, a trader quoted the GM long bonds up a point at 22 bid, 23 offered, and saw the 7.45% bonds due 2031 of GM's domestic arch-rival, Ford Motor Co., unchanged at 86 bid, 87 offered.

Also in the automotive realm, the first trader also saw Cooper-Standard Automotive Inc.'s bonds higher in "active" trading, with its 7% notes due 2012 a point better at 90 bid, and its 8 3/8% notes due 2014 also up a point, in a 28-29 context.

There was, he said, "decent activity" in both of the Findlay, Ohio-based tire manufacturer's bonds.

Cooper's bigger and more financially secure competitor, Goodyear Tire & Rubber Co., was also seen better, with the Akron, Ohio-based tire giant's 7.857% notes due 2011 up by ½ point at 1021/2.

Nakheel continues bounce back

A trader said that the bonds of Dubai's Nakheel Development were active, as they have been all of this week.

He saw its 3.172% euro-denominated notes slated to come due on Dec. 14 going home at 60-61, which he described as up by a point or so from levels around 58-60 seen on Tuesday.

Those bonds had been trading as high as 110 bid last week before the Nov. 25 Dubai government announcement that its Dubai World development arm, of which Nakheel is a subsidiary, would ask creditors to agree to a standstill on billions of dollars of debt owed, including the $3.52 billion of Nakheel bonds maturing on the 14th.

After that, the paper slid to the 80s by the end of last week, and down into the 50s earlier this week, hitting an intraday low at 52 bid Tuesday before climbing back up to close that session around 58, on the news that Dubai World will only seek to restructure $26 billion of its approximately $59 billion of debt. The company plans to meet with its main creditors next week to discuss its request that it be allowed to delay payments.

The trader also saw Nakheel's 2¾% euro-denominated notes due 2011 trading around 45-46, which he said was up some 2 points on the day. Those bonds had been trading in the 80s last week before the debt payment-delay announcement, then dropped into the mid-50s by the end of last week and continued to slide before bottoming at around a 40-42 context by Monday.

He said that there had been a fair amount of trading in both issues, which were "quoted all day long. It seems like they've been pretty active."

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