NRG, upsized United Rentals lead busy primary, Mariner, Holly slate; GM off, Ford up on sales

By Paul Deckelman and Paul A. Harris

New York, June 2 - The high yield primary market kept cranking out new deals on Tuesday, with quickly marketed offerings from NRG Energy Inc., Tesoro Corp. and United Rentals North America, Inc. - the latter deal upsized - leading the way, along with scheduled calendar deals from Compagnie Generale de Geophysique Veritas and Affinion Group Inc. - both also upsized.

Meantime, prospective issuers crowded around to take advantage of the comfortable liquidity picture and the more optimistic market sentiment that has revived the primary, with Holly Corp. and Mariner Energy Inc. offering new deals up.

Monday's deals, from Tenet Healthcare Corp. and Interface Inc., were heard by traders to have firmed solidly from their respective issue prices when those bonds began trading in the secondary arena.

Apart from the new deals, traders saw Ford Motor Co.'s bonds up several points in busy trading, as the Number-Two domestic car producer reporting unexpectedly positive May sales numbers - while Ford's sales were well down from a year earlier, it has started to take market share from beleaguered, bankrupt rivals General Motors Corp. and Chrysler LLC, as well as from overseas competitors who produce cars in North America, such as Toyota.

GM's bonds, meantime, backed off some of the gains which they had notched on Monday, after the once-mighty Detroit giant filed for Chapter 11 protection, causing those bonds to trade flat, without their accrued interest, boosting their prices.

Overall junk continued to strengthen on Tuesday, a high-yield mutual fund manager said.

Net asset valuations were up across the board, the source added.

In some cases the prices of existing bonds rocketed during the second June high-yield session, the buy-sider added.

"Freescale was up anywhere from 5 to 10 points," the investor exclaimed.

The new Interface 11 3/8% senior secured notes due Nov. 1, 2013, which priced at 96.301 to yield 12½% on Monday, were offered at 103 on Tuesday, the source added.

"It's unbelievable!" the asset manager insisted.

$2.245 billion day

The primary market continued to purposefully crank out deals on Tuesday.

Half a dozen issuers, each bringing a single tranche of notes, priced a total of $2.245 billion.

Three of the six deals came upsized.

And three of the six deals - as well as the preponderance of the rest of Tuesday's primary market news - emanated from the energy or energy-related sectors.

NRG sells $700 million

NRG Energy priced the day's biggest deal - a $700 million issue of 8½% 10-year senior unsecured notes (B1/BB-) at 98.348 to yield 8¾%.

The yield was printed on top of yield talk, while the issue price came within the approximately 2 points of original issue discount price talk.

Morgan Stanley and Citigroup were joint bookrunners.

Proceeds will be used to cash collateralize the obligations of certain subsidiaries constituting the Texas electric retail business operations acquired from Reliant Energy, Inc.

"With the early termination of the transitional credit sleeve, NRG will benefit from a more efficient capital structure and realize operating synergies at an accelerated pace," said Robert C. Flexon, executive vice president and chief financial officer, in a news release.

"We took advantage of the current market window to put funding in place which ultimately will replace the credit sleeve supporting our retail business."

CGG upsizes

Meanwhile Compagnie Generale de Geophysique - Veritas priced an upsized $350 million issue of its 9½% seven-year senior notes (Ba3/BB) at 96.952 to yield 10 1/8%.

The notes priced at the tight end of the 10¼% area price talk.

Credit Suisse and BNP Paribas were joint bookrunners for the debt refinancing and general corporate purposes deal from the Paris-based provider of geophysical equipment and services.

The company's existing bonds are "put away," an investor commented.

"They don't really trade that much, so the deal didn't have a big following."

Tesoro at tight end of talk

Elsewhere Tesoro Corp. priced a $300 million issue of 9¾% 10-year senior notes (Ba1/BB+) at 96.172 to yield 10 3/8% on Tuesday.

By the close the bonds were quoted at 98 7/8 bid, a buy-side source said.

The yield came at the tight end of the 10½% area yield talk, while the issue price came within the price talk specifying approximately 4 points of original issue discount.

J.P. Morgan, Banc of America Securities, Wachovia and RBS were joint bookrunners for the general corporate purposes deal from the San Antonio-based independent petroleum refiner and marketer.

Holly launches $200 million

Also from the refining sector, Holly Corp. began a brief roadshow on Tuesday for its $200 million offering of eight-year senior unsecured notes.

The roadshow runs through Thursday. Pricing of the notes is set to take place on Friday.

UBS Investment Bank is the left lead bookrunner for the acquisition financing and general corporate purposes deal from the Dallas-based independent refiner. Banc of America Securities LLC and Goldman Sachs & Co. are joint bookrunners.

Mariner brings $250 million

And finally from the energy sector, Mariner Energy plans to price $250 million of seven-year senior notes on Thursday.

The Houston-based oil and gas exploration, development and production company is concurrently in the market with an offering of 10 million common shares of stock.

Credit Suisse, J.P. Morgan, and Merrill Lynch & Co. are joint bookrunners for the debt refinancing and general corporate purposes deal.

United Rental upsized

Apart from the energy sector, United Rentals North America, Inc. priced an upsized $500 million issue of 10 7/8% seven-year senior notes (B2/B) at 97.04 to yield 11½% on Tuesday.

The yield was printed on top of yield talk while the issue priced within price talk specifying an original issue discount of approximately 3 points.

Morgan Stanley and Banc of America Securities LLC were joint bookrunners for the debt refinancing and general corporate purposes issue.

Graphic Packaging at the tight end

Graphic Packaging International, Inc. priced a $245 million issue of 9½% eight-year senior notes (B3/B-) at 97.292 to yield 10% late Tuesday.

The yield was printed at the tight end of the 10% to 10¼% price talk.

Banc of America Securities LLC, J.P. Morgan Securities Inc. and Goldman Sachs & Co. were joint bookrunners deal to fund the tender for the company's 8½% senior notes due August 2011.

Affinion to sell mirror notes

Finally, Affinion Group, Inc. priced an upsized $150 million issue of 10 1/8% senior mirror notes due Oct. 15, 2013 (expected ratings B2/B-) at 91.00 to yield 12.877%.

The issue price came spot on the 91 area price talk.

Banc of America Securities LLC and Deutsche Bank Securities Inc. were joint bookrunners for the issue, which was upsized from $125 million.

Proceeds will be used for general corporate purposes, which could include working capital, capital expenditures and the repurchase of the company's debt or the debt of its holding company.

The original $270 million issue priced at 98.662 to yield 10 3/8% on Oct. 4, 2005. Affinion also did a $34 million add-on, which priced at 103.50 on May 1, 2006 to yield 9.29%.

However the mirror notes are non-fungible with either the original issue or the previous add-on.

Focus on new deals

A trader said "it seems to be another one of those days where new issues drive just about everything."

He said "once again, they seem to have, for the most part, traded up handsomely."

Another declared "it's nuts" the way "they're just pricing everything" in rapid succession, "just insane."

CGG Veritas in upside earthquake

When the new CGG Veritas 9½% notes due 2016 were freed for secondary dealings, a trader saw them on the break at 99¼ bid, 100¼ offered - well up from the 96.952 level at which the Paris-based provider of seismic data and other geophysical services to the energy industry had priced the upsized $350 million of bonds earlier in the session to yield 10 1/8%.

"That was a quick couple-of-points jump."

Another trader saw the bonds get as good at 99¾ bid, par offered.

A third pegged the new bonds in a 99¾ -99 7/8 context.

Tesoro deal trades better

San Antonio, Tex.-based petroleum refiner and marketer Tesoro Corp.'s new bonds mo0ved higher after their pricing, traders said, with one seeing those 8¾% notes due 2019 senior notes at 98½ bid, 99½ offered.

Another saw the notes at 98¾ bid, 99½ offered.

Earlier the $300 million of the bonds priced at 96.172 to yield 10 3/8%.

NRG bonds underperform

The big deal of the day was Princeton, N.J.-based wholesale power producer NRG's $700 million offering of 8½% notes due 2019.

But unlike the CGG and Tesoro deals, NRG was not able to generate anything in the way of aftermarket upside.

After the company priced those bonds at 98.348 to yield 8¾%, a trader saw them at 98 bid, 98½ offered.

However, later in the session, another trader saw them trading below issue, at 97¾ bid, 98 offered.

United Rentals existing bonds easier

The United Rentals 10 7/8% senior notes due 2016, which priced at 97.040 to yield 11½%, came to market too late in the session for any kind of aftermarket dealings.

A trader saw about $25 million of the Greenwich, Conn.-based industrial equipment rental company's outstanding 6½% notes due 2012 trading at 93½ ahead of the new deal, "down about a point."

A market source at another desk, though, saw those bonds as good as 95 bid.

Tenet, Interface bonds trade higher

A trader saw Tenet Healthcare's new 8 7/8% notes due 2019 as having pushed up to around par from the 95.229 level at which the Dallas-based hospital operator had priced its new bonds to yield 9 5/8% late Monday in a $925 million deal - massively upsized from the $200 million initially envisioned.

The bonds "traded up to par a bunch of times earlier, but not as much as I would have expected," he said.

Another trader pegged the new Tenet bonds at 99½ bid, par offered.

And he saw the other Monday deal - Interface's new 11 3/8% secured notes due 2013 -- having really shot higher, to 101 bid, 103 offered. The Atlanta-based floorcovering maker priced its $150 million of those bonds late Monday at 96.301 to yield 12½%.

Bonds still pricing too cheaply?

A trader noted that the recent pattern has usually been "the day they come [to market], it gets real crazy, and then they trade up. What's been remarkable to me is, they disappear pretty soon afterwards. They're out there, but not with a lot of volume. After the first day or two, it goes."

There are exceptions to the rule. A trader at another desk noted that there was still brisk activity in a bond which priced almost three weeks ago - Sealy Mattress Co.'s 10 7/8% notes due 2016. He saw those bonds Tuesday at the exalted level of 104 bid, 105 offered. The Trinity, N.C.-based bedding maker had priced that $350 million of bonds back on May 15 at 95.976 to yield 11¾%; the new bonds had moved up to par on the break, and continued to head higher from there.

Even so, the first trader - acknowledging the recent phenomenon of many issues being initially priced quite cheaply, and then showing explosive upside, at least for a session or two, as buyers take those bonds sharply higher - said that "we're still in an environment where the only way issues clear is to be underpriced - although I have to believe that there's going to slowly be some pushback from issuers. Certainly anyone that can hold out [against investor demand to sharply raise yield by steeply discounting the bonds at pricing] is. "

When a deal comes to market he opined, "you always want to leave a point or two - that looks good. But some of these deals, where they trade up 5 or 6 points on a $500 million or a $1 billion deal - that's an awful lot of money for a corporate treasurer to leave on the table, and it's that fine line. I'm not sure how long they're going to get away with pricing like this."

That having been said, however, he allowed that "if you go back six months, you couldn't bring anything to market.

"It's certainly nice to see that there's been enough of a revival that the capital markets are back and open, so I guess we have to be thankful for that."

He predicted that "pricing will get a little more normal as everyone gets a little more comfortable - but it's going to last for more than a month or two."

"The next month," he concluded "will tell us who wins out on this war."

Market indicators build on gains

Back among the established issues, a trader saw the CDX Series 12 High Yield index - which jumped 2¼ points on Monday - adding another point to that on Tuesday to end at 84¾ bid, 85¼ offered.

The KDP High Yield Daily Index, which had soared by 52 basis points on Monday, shot up by another 58 bps to close Tuesday at 62.65, while its yield tightened by 18 bps to 10.53%.

Advancing issues - which led decliners for a tenth straight session on Monday, with a nearly two-to-one margin, duplicated that performance Tuesday.

However, overall market activity, measured by dollar-volume totals, slid by nearly 30% versus Monday's levels.

However, that decline was spotty, with some shops still seeing brisk activity in the names they were involved in. A trader at one characterized volumes as "pretty good today," noting that overall activity was "just shy of $2 billion, which isn't too terrible."

Ford firms on solid sales data

One of the big winners on the day was Ford Motor Co., whose bonds traded up after the carmaker reported May sales data - which showed it gaining market share on its domestic and overseas rivals.

A trader said the 7.45% benchmark bonds due 2031 were 3 points better on the day at 60 bid, 62 offered, while another had the bonds doing even better at 62 bid, 64 offered, which he called up 3 points.

For the month of May, total Ford sales were 161,531, down 24.2% from 213,238 in the same period last year - but less than the roughly 29% drop analysts had been expecting.

Ford, Lincoln and Mercury sales totaled 155,954, up 20% versus April and the highest sales for any month since July 2008. Compared to May 2008, Ford, Lincoln and Mercury sales were down 24.3% from 206,000.

Analysts said that Ford, which had been steadily losing market share for months on end, actually gained market share on its rivals, giving the company its biggest market share since 2006. Ford now controls 15.1% of the domestic marketplace, and some analysts predict that the relatively financially stable Ford could even leapfrog past the staggering General Motors in sales by the end of the year.

GM in reverse

A trader meantime saw between $40 million and $50 million of the GM benchmark 8 3/8% bonds due 2033, "trading a little bit softer, down around 13," after having shot up to levels above 14 on Monday when the bonds began trading flat, or without their accrued interest, following GM's bankruptcy filing. Besides the switchover to flat trading, which incorporates the missing interest into the bond's price, market participants also attributed Monday's 4 to 5 point across-the-board rise in GM's bonds to a sense of relief that the long-awaited other shoe of bankruptcy had finally been dropped, ending the suspense and uncertainty about whether GM would be able to dodge the bankruptcy bullet one more time.

Another trader saw the GM long bonds - and the rest of the company's capital structure - having come off their peak levels of Monday to end in a 13 to 13½ context, versus "14 and change" on Monday. He saw "a lot of volume" in GM Tuesday.

Yet another trader saw the GM bonds even lower, at 12½ for the 8 3/8s, down 1½ points on the day.

GM saw its sales fall 28.7% in May from a year ago. However, that drop was also less than feared, and its sales totals, boosted by customer incentives made May its best sales month of this year.

Motorola moves up

A trader said possibly the most active issue of the day was Motorola Inc.'s 5 3/8% notes due 2012, with over $75 million of the bonds having changed hands, "which is more volume than I've seen in that." He did not know what was generating such intense activity - much of it in large-block trades - in the Schaumburg, Ill.-based electronics manufacturer.

There seemed to be no fresh news out on the company that might explain the fevered activity in its bonds.

A market source saw those bonds going out at a round-lot level of 93.5 bid, essentially unchanged on t he session, although that was down from the closing level of 96, reached on some smaller trades, which had been seen at the end of Monday's session.

Sallie Mae seen active

A trader saw SLM Corp.'s bonds active, while seeing no fresh news out on the Reston, Va.-based provider of education financing.

He quoted Sallie Mae's floating-rate notes due 2010 trading at 90¼ bid, on $30 million of turnover. Its 4½% notes due 2010 traded at 93 5/8%, with $15 million traded, while its floating-rate notes coming due this year traded at 99 bid, on around $10 million of turnover, "so definitely, there was a little bit of action in that - and that name has been busy every day.

Community Health back over par

A trader saw Community Health Systems Inc.'s 8 7/8% notes due 2015 - considered by some in the market to be a bellwether issue because of its great size, liquidity and widespread distribution -- "back above par again," for the first time in over a month.

"That's usually when people start shorting it," he observed, although he added the caveat that "in this market, that may not take place."

The trader said that away from the heavily traded names, "everything else was very much $2 million to $5 million of all sorts of assorted credits. There was nothing that really drove the market, outside of the new issues."

Market "strong across the board"

A trader said Junkbondland was "strong across the board," Tuesday, even as it was dominated by new issues. For instance, he said MGM Mirage's 8½% notes due 2010 were trading at 95½ bid; a week or two ago, he said, "you couldn't give those bonds away at 94."

He also saw the Las Vegas-based gaming giant's 13% secured notes due 2013 firmer at 110¾ bid, 111¾ offered.

Sara Rosenberg contributed to this report.

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