Hanesbrands $1 billion drive-by leads way; new Interline, USG jump; funds gain $259 million

By Paul Deckelman and Paul A. Harris

New York, Nov. 4 - Hanesbrands Inc. came to Junkbondland on Thursday with an upsized $1 billion offering of 10-year notes. The Winston-Salem, N.C.-based apparel maker's quickly shopped deal priced at par, although it did not move from that area in the aftermarket.

The underwear and socks maker's megadeal was only one of more than a half-dozen transactions pricing on a hectic day; other opportunistically timed and rapidly marketed deals came from issuers, such as USG Corp., Norwegian Cruise Line and InterXion Holding, the latter a smallish euro-denominated offering from the Dutch data centers operator.

Besides the unexpected drive-bys, there was also a slew of expected pricings from forward-calendar issuers, such as Interline Brands Inc., Spansion LLC, Frac Tech Services and Gateway Casinos & Entertainment Ltd., the latter a Canadian dollar-denominated deal.

All told, bonds having a face amount of some $2.65 million priced, plus the C$170 million from Gateway and €60 million from InterXion.

In the aftermarket, the new issues from Interline, USG, Frac Tech and Spansion were each seen having jumped 2 points or more after having priced - but Hanesbrands' did not pop at all.

Away from the deals that priced, the forward calendar grew with formal new-deal announcements from Cricket Communications Inc. for a $1.2 billion behemoth expected to price Friday, and Mercer International, Inc. Also heard shopping deals around in a less formal manner were Seneca Gaming Corp., Catalina Marketing and Kansas City Southern de Mexico SA de CV.

And high-yield mutual funds - considered a key barometer of overall junk market liquidity trends - continued to point to the upside for a ninth consecutive week, with $259 million more coming into those funds than leaving them in the latest week.

The primary market provided an abundance of signs on Thursday that the rally in high yield continues to run full-throttle.

In a session rife with drive-by deals and deals moved forward, six issuers each brought a single dollar-denominated tranche.

Five of the six deals priced at the tight end of price talk while four were upsized. Two were quick-to-market transactions. And one transaction was moved ahead.

Junk funds' inflow

It was the ninth consecutive weekly inflow, and this followed the $345 million cash infusion seen in the previous week ended Oct. 27, according to a Prospect News analysis of the figures provided by market sources. During that time, net inflows have totaled about $4.782 billion, the analysis indicated.

The latest week's inflow brought the year-to-date cumulative total for the weekly reporting funds to some $11.577 billion, a new peak level for 2010 according to the analysis. That eclipsed the previous high-water mark of $11.318 billion, set the week before.

Cumulative fund-flow totals may be rounded up or down and could include unannounced revisions and adjustments to figures from prior weeks.

Inflows have now been seen in 32 out of the 44 weeks since the beginning of the year, while there have been 12 outflows, the analysis indicated.

Analysts say the continued flow of fresh cash into Junkbondland - and the mutual funds represent but a small, though quantifiable, percentage of the total amount of money coming in - has fueled the sustained new-deal borrowing binge seen this year and last, as well as the robust secondary market.

Hanes massively upsizes

Hanesbrands priced an upsized $1 billion issue of 10-year senior notes (B1/BB-) at par to yield 6 3/8%, at the tight end of the 6 3/8% to 6½% price talk.

Bank of America Merrill Lynch, Barclays Capital, HSBC Securities (USA), J.P. Morgan Securities LLC and Goldman, Sachs & Co. were the joint bookrunners for the quick-to-market debt refinancing and general corporate purposes deal.

Frac Tech at tight end

Meanwhile, Frac Tech priced a $550 million issue of eight-year senior notes (B2//) at par to yield 7 1/8%, at the tight end of the 7¼% price talk.

Credit Suisse Securities (USA) LLC, RBC Capital Markets, Bank of America Merrill Lynch, Citigroup Global Markets Inc. and Wells Fargo Securities, LLC were the bookrunners.

Frac Tech plans to use the proceeds from the deal to repay existing secured debt, to fund a distribution to its owners and for general corporate purposes.

USG drive-by

USG priced an upsized $350 million issue of eight-year senior notes (B2/BB) at par to yield 8 3/8%, at the tight end of the 8½% area price talk.

J.P. Morgan Securities LLC and Bank of America Merrill Lynch were the joint bookrunners for the quick-to-market deal, which was upsized from $300 million.

Proceeds will be used for general corporate purposes, which may include debt repayment, working capital, capital expenditures and acquisitions.

Interline Brands upsizes

Interline priced an upsized $300 million issue of eight-year senior subordinated notes (B2/BB-) at par to yield 7%, at the tight end of the 7% to 7¼% price talk.

Barclays Capital Inc. and J.P. Morgan Securities LLC were the joint bookrunners for the debt refinancing deal, which was upsized from $275 million.

NCL moved forward

NCL Corp. Ltd., a financing unit of Norwegian Cruise Line, moved up timing and priced a $250 million issue of eight-year senior notes (Caa1/B) at par to yield 9½%, on top of the price talk.

The roadshow had been expected to run into the middle part of the week ahead.

Deutsche Bank Securities was the left bookrunner for the debt refinancing deal, which was upsized from $200 million.

Barclays Capital, Goldman Sachs & Co. and UBS Investment Bank are the joint bookrunners.

Spansion at tight end

Spansion priced a $200 million issue of seven-year senior notes (/B/) at par to yield 7 7/8%, at the tight end of the 8% area price talk.

Barclays Capital Inc., Morgan Stanley & Co. Inc., Bank of America Merrill Lynch and Citigroup were the joint bookrunners for the debt refinancing deal.

From Europe

The European high-yield market remained active on Thursday.

Netherlands-based InterXion priced an upsized €60 million add-on to its 9½% senior secured notes due Feb. 12, 2017 at 106.50.

The reoffer price came rich to the 106.25 price talk.

Citigroup was the left bookrunner for the quick-to-market add-on, which was upsized from €50 million. Bank of America Merrill Lynch and Barclays Capital were joint bookrunners.

Proceeds will be used for general corporate purposes.

From elsewhere in Europe, France-based poultry processor Doux SA will begin a roadshow on Friday in Paris for its €400 million offering of seven-year senior notes.

HSBC, SG CIB and Barclays Capital are the global coordinators. Natixis Bleichroeder and Credit Agricole CIB are the joint bookrunners.

Proceeds will be used to refinance debt.

Cricket $1.2 billion on Friday

Cricket Communications talked its $1.2 billion offering of 10-year senior notes (expected ratings B3/B-) with a 7½% to 7¾% yield on Thursday.

Order books for the quick-to-market deal are scheduled to close at 11 a.m. ET on Friday, and the notes are set to price thereafter.

Goldman Sachs & Co. is the left bookrunner for the debt refinancing. Morgan Stanley is the joint bookrunner.

Although Cricket is the only deal on the calendar for Friday, look for a drive-by deal to materialize, a syndicate official said.

Seneca starts roadshow

The forward calendar continued to build on Thursday.

Seneca Gaming began a roadshow for its $325 million offering of eight-year senior notes (current ratings B1/BB).

The deal is set to price early in the week ahead.

Bank of America Merrill Lynch and RBS Securities are the joint bookrunners for the debt refinancing deal.

Affinity starts Monday

Meanwhile Affinity Group, Inc. will start a roadshow on Monday for its $325 million offering of six-year senior secured notes (expected ratings B3/B-).

Jefferies & Co. is the bookrunner for the debt refinancing deal.

Mercer's $300 million

Mercer will also start a roadshow on Monday for its $300 million offering of seven-year senior notes.

RBC Capital Markets and Credit Suisse are the joint bookrunners for the debt refinancing.

Catalina discount notes

Catalina Marketing is roadshowing a $260 million offering of five-year senior discount notes.

The deal, which is being led by JP Morgan and Bank of America Merrill Lynch, is expected to price during the week ahead.

Proceeds will be used to fund a dividend to sponsor Hellman & Friedman.

Finally, Oman's MB Petroleum Service LLC talked its $350 million offering of senior notes (/B+/) with an 11¼% yield on Thursday.

The offering is expected to price on Monday.

Barclays Capital, HSBC and Standard Chartered are the joint bookrunners.

Notwithstanding the fact that the offering from the Oman-based oilfield services company falls squarely in the emerging markets category, the deal is playing to U.S. high-yield accounts, many of them flush with cash and facing an uphill battle in putting that cash to work, an informed source said.

Interline leads deals higher

A trader called the brisk new-deal activity - and the rise that most of those bonds took when they were freed for secondary dealings - "just unbelievable."

For instance, he saw Interline Brands' new 7% senior subordinated notes due 2018 bid in a range of 103 to 1031/4, then come off those highs to finish at 103 bid, 103¼ offered. "up 3 points."

A second trader quoted the bonds going home more along the lines of 102½ bid, 103½ offered.

The Jacksonville, Fla.-based supplier of janitorial supplies and building repair and maintenances parts priced its $300 million deal - upsized from the originally announced $275 million - at par earlier in the session.

New USG climbs

Another standout performer in the aftermarket was USG Corp.'s 8 3/8% notes due 2018, which a trader saw as good as 102¾ bid on the break.

The Chicago-based building products company's quickly shopped $350 million offering - upsized from the originally announced $300 million - priced at par.

A second trader quoted the bonds trading at 102 bid, 103 offered.

Frac Tech trades firmly

Frac Tech Services' 7 1/8% notes due 2018 firmed to the 102½ bid level when they were freed for secondary dealings, a trader said.

A second trader saw two-sided markets in those bonds at 102½ bid, 103½ offered .

The Cisco, Tex.-based oilfield services company's $550 million deal had priced earlier in the session at par.

Spansion seen higher

Spansion LLC's 7 7/8% notes due 2017 were left "wrapped around 102," a trader said, versus the par level where the Sunnyvale, Calif.-based semiconductor device manugfacturer's $200 million offering had priced early in the session.

Another trader quoted those bonds at 102 bid, 103 offered.

Hanesbrands hangs back

But while all of the day's other dollar-denominated bonds were seen gaining at least a point - and, in some cases, considerably more than a point - from their par issue prices, the biggest deal of the day, the Hanesbrands 6 3/8% megadeal due 2020, was seen showing little or no pop from the par level at which that $1 billion deal had priced.

A trader saw those bonds initially trade up to 100½ bid from their par issue level - but after that, they came down, with him seeing them left at 100¼ bid, 100½ offered.

Other traders saw the bonds stuck in a narrow range of 100 1/8 and 100 3/8 or 100 5/8.

A trader suggested that upping the size of the new deal by a full one-third - from $750 million originally announced - to $1 billion was a key factor in lessening aftermarket demand, since presumably anyone who wanted an allocation was able to get one from the increased size and did not have to then go buy the bonds in the market.

Earlier deals trade well

A trader saw Jarden Corp.'s 6 1/8% notes due 2022 bid at 101¼ "and looking" for offers.

The Rye, N.Y.-based consumer products company's $300 million offering of those bonds - upsized from the originally announced $250 million - priced at par on Tuesday, but then moved above 101 bid on Wednesday.

He said that he had not seen any further trading in Seminole Tribe of Florida Inc.'s new 7¾% first-lien gaming division bonds due 2017, noting that they had been up solidly in aftermarket dealings on Wednesday after the $330 million issue from the Hollywood, Fla.-based Native American gaming company priced at par, but "nothing this morning."

Another trader said the new Seminole bonds pretty much held their own between 103 and 104 bid, the aftermarket levels seen on Wednesday.

Market participants meantime noted the difference between how well the Seminole securities were doing in the market and how badly several other recent gaming deals - for MGM Resorts International and for Boyd Gaming Corp. - were continuing to flounder in the aftermarket.

The Boyd 9 1/8% notes due 2018 priced at par last Thursday, while MGM's 10% notes due 2016 came at 98.897 on Oct. 25, and both have traded at levels no better than their respective offering price and, frequently, worse.

Gaming analyst Joseph Farricielli at Cantor Fitzgerald said Thursday, "I am definitely not a buyer of the recent MGM deal, at almost any price."

As for the Boyd bonds, he said "I would buy them on a dip," but only then.

In contrast, Farricielli said that the upcoming Seneca Gaming Corp offering of eight-year senior notes, which began a road show on Thursday, "has a simple capital structure compared to those [others] and better leverage and credit statistics."

He said that the Seneca deal likely "should price tight to Treasuries and trade well, even though the term loan is ahead of it."

Secondary strengthens solidly

Away from the new-deal world, a trader saw the CDX North American Series 15 HY index zoom by 1½ points on Thursday to end at 102 5/8 bid, 102 7/8 offered, a jump which dwarfed Wednesday's ¼ of a point rise.

The KDP High Yield Daily index meantime soared by 24 basis points on Thursday to finish at 74.96, after having gained 4 bps on Wednesday. Its yield plunged by 11 bps to 6.99%, after having narrowed by 1 bp on Wednesday for a second consecutive session.

The Merrill Lynch High Yield Master II index climbed by 0.41% on Thursday after having gained 0.089% on Wednesday. The latest advance pushed its year-to-date return up to 15.175%, its 11th consecutive new 2010 peak level, eclipsing the old mark of 14.705% just recorded on Wednesday.

Advancing issues led decliners on Thursday for a sixth straight session, by an eight-to-five margin, widening from the six-to-five advantage they held on Wednesday.

Overall activity, represented by dollar-volume levels, climbed by 27% on Thursday, after having edged up by about 2% on Wednesday from the previous session.

A trader said that "it was very busy in the new issue world - though away from that, the secondary was very dead. Nothing's really trading."

Trading in the newly priced issues, he said, was the dominant factor. "I'm sure you probably talked to every desk in America - and I'm sure they're saying the same thing."

However, he also said that despite the relatively light trading in non-new deal names, the market retained its overall very firm tone of the last umpteen number of days.

"Everything's been moving up, up and away," he said. "Just when you think everything is going to come in, it just keeps trading up."

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