Hub International, OSI Restaurant, W&T Offshore deals price; Dura finally declines

By Paul Deckelman and Paul A. Harris

New York, June 8 - OSI Restaurant Partners, LLC - which a month ago had scrubbed a planned junk bond offering as it continued to negotiate a buyout deal - hopped back into the high-yield market Friday with a quickly-shopped offering of eight-year notes.

Also pricing were scheduled forward calendar deals from Hub International Ltd. - downsized somewhat from its originally envisioned $790 million - and W&T Offshore, Inc.

Roadshow details meantime emerged on Surgical Care Affiliates, LLC's planned two-part offering, as well as the euro-denominated floating-rate deal for German issuer Versatel AG.

In the secondary market, the incredible rise in Dura Automotive Systems Inc.'s bonds - its senior notes had jumped over 15 points over the course of several sessions - finally came to an end, as the Rochester Hills, Mich.-based automotive components manufacturer's bonds retreated several points.

A trader saw further upside in the bonds of Trump Entertainment Resorts Inc., attributing the gain to more buyout buzz about the Atlantic City, N.J.-based gaming operator, as news reports identified two possible bidders for the company.

Another upsider was Tembec Inc., whose bonds firmed as the recent rise in the Canadian dollar seemed to moderate - a trend which could help the Montreal-based forest products company's export sales.

Sell-side sources gave various marks on the broad high-yield market session shortly after Friday's close.

One senior syndicate source had the broad market up an eighth of a point to a quarter of a point, adding that it had struggled early Friday, but got a lift from rallying U.S. equities.

Another sell-side official, however, said that trailing Thursday's sell-off junk remained a little weak on Friday. This source marked junk down as much as ¼ point, noting that the session had been very quiet.

Meanwhile in the primary Friday's new issue executions betrayed the familiar signs of a junk market that has sailed into choppy waters, as deals came downsized and restructured (in some cases both), while price talk was hiked (in one case it was hiked twice).

And one deal came 25 basis points wide of price talk.

All told the primary market saw $1.7 billion of dollar-denominated issuance as three issuers combined to price four tranches.

Hub downsizes

Friday's biggest issuer by dollar amount was Hub International Ltd.

The Chicago insurance broker priced a downsized $700 million two-part notes transaction.

Hub priced a $305 million tranche of 7.5-year senior fixed-rate notes (B3/CCC+) at par to yield 9%. The yield was printed on top of price talk that had been increased from earlier talk of 8½% to 8¾%.

Hub also priced a $395 million tranche of eight-year senior subordinated notes (Caa1/CCC+) at par to yield 10¼%, on top of price talk that had been increased from earlier talk of 9¾% to 10%.

The issuer downsized the overall offering from $790 million, abandoning a proposed tranche of 7.5-year senior floating-rate notes and shifting $90 million of its LBO financing to the bank loan market.

Morgan Stanley and Merrill Lynch & Co. were joint bookrunners for the LBO deal.

OSI returns

One month after canceling an identically sized and similarly structured deal, OSI Restaurant Partners, LLC returned to the high yield primary with a $550 million issue of eight-year senior notes on Friday.

This time, however, the steakhouse chain came with $80 million more of leverage and a downgrade of the notes by Standard & Poor's to CCC+ from B-.

And a source close to the deal noted that the increased leverage and the rating downgrade took place against the backdrop of a Treasury market that had backed up by 25 basis points since OSI priced its original deal a month ago.

On Friday OSI priced its notes (Caa1/CCC+) at par to yield 10%, three-eighths higher than the May deal that was canceled because the company had not received sufficient shareholder approval to proceed with the going-private transaction for which the notes were issued.

However the yield on Friday's issue was printed on top of the price talk.

Banc of America Securities LLC was the left bookrunner for the deal from the Tampa, Fla., casual dining restaurants company. Deutsche Bank Securities was the joint bookrunner.

An informed source attributed that three-eighths of a percent increase in yield to the factors cited above - increased leverage, the rating downgrade and the Treasury sell-off - but also added that after the company's "acrimonious first attempt," it was decided to add some yield to the deal.

The source said that Friday's deal played to more or less the same book as the early May deal, but added that the volatility in junk may have caused some of the more speculative investors to lose interest.

W&T Offshore wide of talk

Elsewhere Friday W&T Offshore priced a $450 million issue of seven-year senior notes (B3/B-) at par to yield 8¼%, 25 basis points beyond the high end of the 7¾% to 8% price talk.

Morgan Stanley ran the books for the debt refinancing deal from the Houston-based independent oil and natural gas company.

A six billion-week

With Friday's four tranches in the tally the primary market closed the June 4 to June 8 week having seen slightly more than $6.0 billion of issuance in 16 dollar-denominated tranches.

Thus it is the biggest week in terms of dollar-amount of issuance since the May 14 to May 18 week, which saw slightly more than $7.0 billion.

The most recent week was also the fourth-biggest of 2007 to date, in terms of dollar-amount.

Factoring in Friday's totals, year-to-date issuance at the close of the most recent week was $89.72 billion, 61% higher than the $55.8 billion that had priced as of the June 8 close in the record-setting issuance year of 2006.

Edcon downsized, restructured

Also pricing Friday was a downsized, restructured, talked and re-talked €1.81 billion two-part deal from South African clothing retailer Edgars Consolidated Stores (Edcon).

Edcon, issuing via Edcon (Pty.), priced a €1.18 billion of seven-year senior secured floating-rate notes (B2/B+) at par to yield three-month Euribor plus 325 basis points.

The senior notes priced on top of twice-revised price talk. Talk had increased from Euribor plus 275 to 300 basis points, after having initially been set at the Euribor plus 275 basis points area.

Meanwhile Edcon Holdings (Pty.) priced a downsized €630 million tranche of eight-year senior unsecured floating-rate notes (Caa1/B-) at par to yield three-month Euribor plus 550 basis points.

The unsecured tranche was downsized from €650 million, and was priced on top of price talk which had also been twice revised. The talk was increased from Euribor plus 450 to 475 basis points, after initially having been set at the Euribor plus 425 basis points area.

The overall transaction was downsized from €1.83 billion. A proposed tranche of senior fixed-rate notes was abandoned.

Barclays Capital and Credit Suisse had the physical books for the deal which will help to fund the biggest LBO in the history of South Africa.

Surgical Care launches $300 million

Surgical Care Affiliates, LLC will start a roadshow on Wednesday for its $300 million two-part notes offer.

The Nashville-based ambulatory surgery services provider is offering $150 million of eight-year senior PIK election notes and $150 million of 10-year senior subordinated notes.

The Goldman Sachs and JP Morgan-led acquisition deal is expected late in the week of June 18.

Versatel launches €525 million

German broadband provider Versatel AG will start a roadshow on Monday for its €525 million offering of seven-year senior secured floating-rate notes (high single-B ratings expected).

JP Morgan and Merrill Lynch & Co. are joint bookrunners for the debt refinancing deal from the Düsseldorf-based company.

European calendar

With Versatel poised to price before the Friday close, the June 11 to June 15 week gets underway with the preponderance of expected primary market business coming from non-U.S. issuers.

Clondalkin Acquisition BV is in the market with a €400 million equivalent offering of six-year senior secured floating-rate notes (Ba3/B+) via Deutsche Bank Securities and Lehman Brothers, which is expected to price on Wednesday.

And Norway-based paper and pulp company Norske Skogindustrier ASA (Ba1/BB+) will market its benchmark-sized inaugural euro-denominated notes offering via BNP Paribas, Citigroup and Deutsche Bank.

The notes are expected to come with a 10-year maturity.

A pan-European roadshow is set for Thursday and Friday, with pricing expected afterwards.

The week gets underway with only one deal on the calendar from a North American company.

Sault Ste. Marie, Ont.-based steel producer Algoma Steel Inc. is on the road with a $450 million offering of eight-year senior unsecured notes (Caa1/B-).

UBS Investment Bank is leading the acquisition deal.

The roadshow wraps up on Wednesday.

New Hub bonds mixed on break

When the new Hub International bonds were freed for secondary dealings, a trader said, the 9% senior notes due 2014 firmed slightly from their par issue price to 100.25 bid, 100.75 offered.

Meantime, its 10¼% notes due 2015 essentially straddled their par issue price, at 99.25 bid, 100.25 offered.

Neither the OSI deal nor the W& T Offshore offering priced in time for any meaningful aftermarket activity

Dura ride comes to an end

Back among the established issues, a trader saw Dura Automotive's 8 5/8% notes due 2012 "actually down a little bit" after having risen each session earlier in the week, with the bonds down 2 points to 64 bid, 66 offered. He saw the company's 9% notes due 2009 a point lower at 15 bid, 16 offered.

Another trader also saw the bonds lower, with the '12s at 64 bid, 65 offered.

The senior bonds - which had languished in the mid-30s for the longest time - began moving solidly upward around the middle of May, pushed by market speculation that the troubled company was making progress in its talks with potential backers who might guarantee an equity rights offering, which would be used to finance its exit from Chapter 11.

At the end of May, Dura asked for - and got - a four-month extension of its exclusive right to file a plan of reorganization and to solicit creditor approvals. The U.S. Bankruptcy Court in Wilmington, Del., which is overseeing the company's restructuring, gave the company through Sept. 30 to formally propose a plan, and through Nov. 30 to solicit approvals, subject to possible further extension.

On May 22 and May 23, Dura had presented a revised business plan to creditors, who signed confidentiality agreements. Details of the plan have not yet been released.

That progress on the bankruptcy front helped push the senior bonds up to levels around 50 by late May, where they continued for the first week in June. Then, this past week, they began moving upward by 4 or 5 points a session, peaking at 66 bid on Thursday, before coming slightly off that zenith in Friday's dealings - not on any news, traders said, but more likely, on some profit-taking from those handsome gains.

Dana bonds on rise again

The first trader meantime saw Dana Corp.'s bonds about 2 points better across the board, with its 6½% notes due 2008 at 101.5 bid, 102.5 offered.

The Toledo, Ohio-based automotive components maker's bonds had firmed smartly at mid-week on the news that the bankruptcy court in Manhattan overseeing its restructuring had given the green light to a pair of asset sales aimed at disposing of non-core assets.

The bonds had given back some of those gains during Thursday's session on profit-taking, but recouped that lost ground Friday.

Auto benchmarks mixed

Among non-distressed auto names, the benchmark General Motors Corp. 8 3/8% notes due 2033 were seen down ¾ point at 90 bid; a source said the GM notes were among the most busily traded bonds of the day.

However, its 7 1/8% notes due 2013 was seen up ½ point at 93.25

Bonds of GMAC LLC, GM's 49%-owned financing affiliate, were up as well, its 8% notes due 2031 5/8 point higher at around the 106 level, and its 6 7/8% notes due 2012 a point ahead at 100.75.

Arch-rival Ford Motor Co.'s 7.45% notes due 2031 were off 1¼ points at 79 bid.

Trump up as bidders seen

Elsewhere, a trader saw Trump Entertainment Resorts' 8½% notes due 2015 up a point on the session to 103 bid, 103.5 offered, on "more takeover rumblings" about the company.

The local Star-Ledger paper in Newark, N.J. reported Friday that Dune Capital Management LP, a New York-based fund manager run by former Goldman Sachs & Co. executives, is considering making an offer.

That report came on top of another news report indicating that a former Trump executive, Dennis Gomes, had signed a confidentiality agreement with Trump - a sign he and his backers might make a bid for the company.

There was no official confirmation from any of the parties on Friday.

Tembec takes off

A trader saw movement in Tembec's bonds, ascribing it to the apparent end of the Canadian dollar's recent surge - a development which would make the company's timber and paper products more affordable in the United States and other markets outside of Canada.

He saw the 8 5/8% notes due 2009 up 3 points at 63.75 bid, 64.75 offered.

At another desk, those bonds were pegged up 2 points at 63 bid, 65 offered, while its 8½% notes due 2011 were 2½ points better at 57 bid, 59 offered, and its 7¾% notes due 2012 were also up 21/2, at 56 bid, 58 offered.

While the Canadian dollar actually finished up slightly on the session, its strength was seen limited by the U.S. dollar's strong performance on international currency markets on the possibility of higher interest rates.

While the loonie had appreciated strongly throughout the latter-half of May, reaching 30-year highs against its American cousin, that upside movement had appeared to stall in early June. While the Canadian unit did not lose value, it has essentially plateaued over the first full week of the month.

© 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.