NewPage, Blockbuster price, soar in secondary, MGM, Del Monte, Frontier also appear; funds up $414 million

By Paul Deckelman and Paul A. Harris

New York, Sept. 17 - New deals was the name of the game in Junkbondland on Thursday, with NewPage Corp.'s sharply upsized mega-deal and Blockbuster Inc.'s likewise enlarged offering the talk of the high yield market. After the two companies priced their respective deals, both right around the 94 level, each new issue was seen to have shot up by multiple points right out of the box when they were freed for aftermarket dealings and each went home up more than 4 points from their respective issue prices.

But the primary market was by no means done, with pricings also seen in quickly-shopped offerings from MGM Mirage, Del Monte Foods Corp. and Frontier Communications Corp., bringing the day's total to nearly $4 billion. Of those three, the latter deal was seen having firmed a little in the aftermarket - but the MGM deal went nowhere. A trader said the same was true of Wednesday's $1 billion offering from Ford Motor Credit Co.

FelCor Lodging Trust Inc. also announced a deal which was widely expected to price during the session, but which had not appeared by the time trading wrapped up for the day.

Also on the primary scene, price talk was heard on Continental Resources Inc.'s planned issue of $300 million 10-year bonds; market sources meantime were saying that the Enid, Okla.-based energy exploration and production company's deal, which had originally been expected to price early next week, has now been moved up and is expected to price Friday.

And Dulles, Va.-based satellite imaging company GeoEye Inc. announced plans for an issue of six-year senior secured notes. Syndicate sources said the company would hit the road Friday to begin marketing that deal to potential investors, with the roadshow stretching into late next week.

With the new issues, and those upcoming, hogging the spotlight, non-new issue related secondary activity was seen muted. There was some further movement in the bonds of Eastman Kodak Co. - which had firmed smartly on Wednesday on the news of the venerable photography and imaging products company's plans to shore up its balance sheet via private debt placements.

American Axle & Manufacturing Holdings Inc.'s bonds were meantime better on the news that the Detroit-based maker of automotive driveline and drivetrain components had reached agreement with its lenders on an out-of-court debt restructuring, after seemingly endless months of negotiations.

Junk funds add $414 million

As trading was winding down for the day, market participants familiar with the high yield mutual fund-flow statistics generated by AMG Data Services of Arcata, Calif. - a key barometer of overall market liquidity trends - said that in the week ended Wednesday, some $414 million more came into the weekly-reporting funds than left them.

"That will help bolster this market ," a secondary trader noted, although he acknowledged that an inflow was hardly any kind of big surprise this week "given what the market has done - it's been on fire."

It was the fourth consecutive gain, following the $223 million cash inflow seen in the previous week, ended Wednesday, Sept. 9, and was the 11th week in the last 12 in which inflows were seen, dating back to mid-June. Some $4.73 billion of net inflows have been seen during that stretch, according to a Prospect News analysis of the AMG figures, interrupted only by the $89.9 million outflow recorded in the week ended Aug. 19.

Counting the latest week's number, the year-to-date net inflow for the weekly-reporting funds rose to approximately $16.284 billion, according to the analysis - a new peak level for the year so far, eclipsing the old mark of $15.87 billion recorded in the Sept. 9 week.

With 2009 now nearly three-quarters over, inflows, including the latest weekly gain, have been seen in 32 weeks out of the 37 since the start of the year, according to the analysis, against just five outflows - the Aug. 19 retreat, a $110 million outflow in the week ended June 24, and three weeks of outflows in late February and early March, totaling $969 million. The inflows, on the other hand, include an incredible 14-week run of consecutive gains, dating from mid-March through mid-June, during which time the funds grew by a record $9.1 billion.

Such sustained inflows have helped the junk market come roaring back from last year's staggering 25%-plus loss and sharply reduced primary activity totals. Total returns so far this year totaled 46.184% as of Wednesday's close, according to the authoritative Merrill Lynch High Yield Master II index, up from 41.234% a week earlier, handily beating virtually every other major investment asset class. Meanwhile, the $91.019 billion of new high yield debt issued so far this year globally, as of Wednesday's close -- $77.694 billion of it domestic - is running almost 48% ahead of the anemic pace of last year's global primary tally. Domestic new issuance is nearly 59% ahead of its year-ago levels.

EPFR sees inflows continuing

Meanwhile, another fund-tracking service, Cambridge, Mass.-based EPFR Global , which uses a different methodology, calculated a $242 million inflow for the week, following the $265 million gain seen the week before. The latest inflow was the 12th week in a row, its analysts said - although they did note that for a second straight week, the figure again was "half the weekly average these funds maintained through late August."

Even though the inflow was smaller than the average and than the previous week's however, it was still the 26th such cash infusion in the last 27 weeks.

The inflow brought the year-to-date total up to $17.92 billion from $17.68 billion the week before, EPFR said.

While the EPFR junk figures most weeks point essentially in the same direction as AMG's, the precise weekly and year-to-date numbers almost always differ somewhat due to EPFR's inclusion of some non-U.S. funds in its universe. Any and all cumulative fund-flow totals, whether for AMG or EPFR, can include unannounced revisions and adjustments to figures from prior weeks.

The flow of money into and out of the junk bond funds is seen as a generally reliable market barometer of overall high yield market liquidity trends - although they comprise less of the total monies floating around the high yield universe.

NewPage brings $1.7 billion

The primary market came just shy of $4 billion of issuance on Thursday, as five U.S. companies, each bringing a single tranche, priced $3.9 billion.

NewPage priced an upsized $1.7 billion issue of 11 3/8% senior secured notes due Dec. 31, 2014 (B2/CCC+) at 93.996 to yield 13% on Thursday.

The yield was printed on top of yield talk. The issue price came in line with price talk that was set at approximately 94.

Credit Suisse, Goldman Sachs & Co. and Citigroup Global Markets Inc. were bookrunners for the deal, which was upsized from $1.2 billion.

Blockbuster upsizes

Elsewhere Blockbuster priced an upsized $675 million issue of 11¾% five-year senior secured notes (B1/B) at 94.00 to yield 15.21%.

The coupon came inside of the 12% coupon talk. The issue price came on top of the price talk. Blockbuster increased its deal from $340 million.

J.P. Morgan Securities Inc. ran the books for the Rule 144A and Regulation S for life deal.

Frontier sells $600 million

Frontier Communications priced an upsized $600 million issue of 8 1/8% nine-year notes (Ba2/BB) at 98.441 to yield 8 3/8%.

The quick-to-market deal, which was increased from $450 million, came tighter than the 8½% area price talk.

Credit Suisse Securities (USA) LLC, Citigroup Global Markets Inc., and J.P. Morgan Securities Inc. managed the transaction.

MGM Mirage upsizes

MGM Mirage priced an upsized $475 million issue of 11 3/8% senior notes due March 1, 2018 (Caa2/CCC+) at 97.396 to yield 11 7/8%.

The yield came at the tight end of the 12% area price talk while the amount was increased from $350 million.

Citigroup, Bank of America Merrill Lynch, RBS Securities, JP Morgan, and Wells Fargo Securities managed the deal.

Del Monte prints $450 million

Del Monte priced a $450 million issue of 7½% 10-year senior subordinated notes (B1/BB-) at 98.272 to yield 7¾%.

The yield came at the wide end of the 7½% to 7¾% yield talk. The issue price came within the context of discount talk that laid out 1.5 to 2 points of original issue discount.

Bank of America Merrill Lynch and Barclays Capital were joint bookrunners for the quick-to-market deal.

Continental Resources for Friday

Continental Resources, Inc. set price talk for its $300 million offering of 10-year senior notes (/BB/) at the 8½% area on Thursday.

Meanwhile timing on the deal was moved up. The books are scheduled to close at 10 a.m. ET Friday, with the notes expected to price after that. Originally the deal was expected to price early next week.

The deal is being led by Bank of America Merrill Lynch. RBS Securities Inc. and Wells Fargo Securities are joint bookrunners. Capital One Southcoast, Fortis Investments and Mitsubishi are senior co-managers.

Elsewhere FelCor Lodging Trust set price talk for its $530 million offering of non-callable five-year senior secured notes (Ba3/B+) at 12 7/8% to 13% with about 10 points of OID.

Some market sources had expected to hear terms on the deal by Thursday's close, however none were available as Prospect News went to press Thursday night.

JP Morgan, Bank of America Merrill Lynch, Deutsche Bank and Citigroup are joint bookrunners.

New Blockbusters bounce around

A secondary market trader exclaimed that the new Blockbuster 11¾% senior secured notes due 2019 were trading "like a house afire." He said that the issue "may have been quoted as high as par, coming out of the box," although after that, they "backed off.

"One of the first markets we heard was that they were straddling par - but that didn't last very long."

He said that the first real trade of the day in the new paper was around 98 bid, and after that, he said, they "settled down some more," going down to a 961/2-98 context, before coming off that temporary low to go back to the last market he saw, of about 97-971/2.

He said that there was not "tons of activity" in the new Blockbuster notes in secondary, though "obviously, the deal went very well." He noted that even having come down from the early peak levels, the close still represented a sizable gain from the 94 level at which that $675 million of bonds, upsized from the original $340 million, had priced earlier in the day to produce a 15.21% yield.

At another desk, a trader saw the new paper closing at 97¼ bid, 97¾ offered.

The trader said that there was there "definitely" was a lot of activity by "flippers" buying the new bonds at their sharply discounted levels and then selling them out for more, sending the prices soaring. "I would definitely think so."

The trader noted that "after all, Global Crossing did so well with a high coupon [priced] at a discount" - the Hamilton, Bermuda-based international telecommunications company's $750 million issue of 12% senior secured notes due 2015, which priced at 97.944 last Friday to yield 12½%, proceeded to blaze up above the 103 bid level later that session when it was freed for aftermarket dealings.

A second trader said that at his shop, "we talked about the fact that the business gives some people pause - but the combination of pricing it cheaply, the collateral [which the company is putting up], the structure of the deal, with the sinking fund, and, at least in the short term, some excess cash flow from operations, were enough to keep people interested."

Yet another trader opined that "it priced very cheap - but had to in order to get that amount of interest." He suggested that some of the activity in the new credit may have been "term loan investors rolling into the new deal," since their paper is going to be taken out with the deal proceeds.

Meanwhile, Blockbuster's existing 9% notes due 2012 - which have been rising over the past several sessions, ever since the Dallas-based DVD, Blu-Ray and video-game rental giant announced its bond-sale plans earlier in the week - continued to move up on Thursday.

"A lot of bonds traded today" around the 74½ bid level, a trader said - up from around 73-73¼ on Wednesday, from the 71-72 area earlier in the week, and in the high 60s last week, pre-news, "around 671/2-68, so they've been creeping up every day."

At another desk, a market source saw Blockbuster's existing bonds move as high as 75¼ Thursday, well up from 73 on Wednesday and 71½ on Tuesday. The source saw some $15 million of the notes having changed hands by mid-afternoon, making Blockbuster one of the most actively traded junk issues.

NewPage pops after pricing

Almost a twin of the Blockbuster deal in terms of its aftermarket action, was NewPage's gigantic $1.7 billion offering of 11 3/8% senior secured notes due 2014, which a trader said "did okay also."

Like the Blockbuster transaction, NewPage's offering - upsized from the $1.2 billion heard in the market Wednesday and radically upsized from the $595 million of proceeds originally talked when the possible deal first surfaced on investors' radar screens back in mid-July -- also priced around the 94 level (93.996, to be precise, yielding 13%), and then moved up by more than 4 points on the session.

The trader said the first market in the bonds "out of the box" was 97 bid, 98 offered, and then it continued to move up, before it ended at 98 3/8 bid, 98 5/8 offered. "It's quieted down since then."

A second trader saw those bonds at 98 3/8 bid, 98½ offered.

NewPage's existing 10% notes due 2012 were seen going home at 69½ bid, up from 68 on Wednesday, with over $20 million of the bonds having traded at mid-afternoon, putting it even higher up on the Most Actives list than Blockbuster.

Existing FelCor debt flies ahead of deal

While market players were still waiting late in the afternoon for FelCor Lodging Trust's new issue to appear, they noted that the Irving, Tex.-based lodging-oriented real estate investment trust's two issues of existing 2011 bonds, which are to be bought back via a tender offer using the new deal proceeds, were sharply better.

A trader said that the company's 2011 floating-rate notes had jumped as high as 99 7/8 on Thursday, versus levels earlier in the week - before the tender offer was announced - at 94.

Meantime, the company's 8½% notes due 2011 went as high as 100 3/8 on Thursday, after having traded around the 96 level earlier in the week, again, before Thursday's tender offer announcement. However, he said there was "not a lot of activity, though" in the credit.

MGM not much changed

A trader saw MGM Mirage's 11 3/8% notes due 2018 trading in the aftermarket around 97¼ bid, 97¾ offered.

That was not much changed from the 97.396 level at which the Las Vegas-based casino giant had priced its $475 million offering - upsized from the original $350 million - earlier in the session to yield 11 7/8%.

Frontier firms a little

The trader also saw Frontier Communications' 8 1/8% notes due 2018 move up a little to 99 bid, par offered, versus the 98.441 level at which the Stamford, Conn.-based telecommunications operator had earlier priced its deal.

Frontier's Citizens Communications Co. 9¼% notes due 2011 - which the company is tendering for, using the new deal proceeds - were seen by a market source to have risen to a final round-lot level of 109¼ bid, up nearly 3 points - although the bonds went home well below that on several smaller trades late in the day.

The Citizens 6¼% notes due 2013, also being tendered for, rose to about the 99 level, up more than a point on the day.

Del Monte bonds seen not much changed

A trader did not see much price action in Del Monte Foods' existing 8 5/8% senior subordinated notes due 2012, which are to be taken out using the proceeds of the San Francisco-based food and pet food producer's new deal.

"They were trading pretty high anyway," he said, noting that the bonds had risen to around 103-103 1/8, up from about 102 earlier in the week, "so they didn't have much room to run" as they moved up to levels around where they will be taken out.

Del Monte, in separately but concurrently announcing its tender offer for the existing 8 5/8s when it announced its bond offering, noted that total consideration to be paid to holders tendering their notes by the Sept. 30 consent payment deadline would be $1,031.25 per $1,000 principal amount.

New Ford Credit bonds still faltering

Among other new deals in the market, a trader noted that Wednesday's 8.70% 2014 mega-deal from Ford Motor Credit Co. continued to spin its wheels. The bonds were being quoted at 98¼ bid, 98½ offered, down from the 98.805 level where Ford Motor Co.'s auto-loan unit had priced its deal on Wednesday to yield 9%.

So, it was "not great," the trader said, adding that the companies last several deals had been initially lackluster performers in the aftermarket.

Market indicators turn mixed

Back among the existing bonds not connected with the new-deal market, a trader saw the CDX Series 12 index down by ½ point on Thursday to 94¼ bid, 94¾ offered, giving up the identically sized gain seen in Wednesday's dealings and stepping back a little from the recently strong trend, which through Wednesday had seen the index post eight consecutive gains.

The KDP High Yield Daily Index was unchanged Thursday, at 68.61, while its yield narrowed by 3 basis points to 8.53%. That also represented a modest interruption of the recent trend of strong advances and notable yield tightening, as had been the case on Wednesday, when the index shot upward by 55 bps as its yield swooned by 17 bps.

In the broader market, advancing issues led decliners for an 11th straight session on Thursday, holding a three-to-two advantage, although that was narrower Wednesday's bulge of better than two to one.

Junk market activity, reflected in dollar-volume totals, eased nearly 21% from Wednesday's level.

"This morning, things felt a little wishy-washy," a trader said, "but it seemed like they finished the day pretty strong."

Kodak ricochets around

There was some movement Thursday in Eastman Kodak's 7¼% notes due 2013 - although participants acknowledged that the real price action had come on Wednesday, when those bonds were seen having gained more than 5 points on the day to end at 851/2, powered by the news that the iconic Rochester, N.Y.-based maker of cameras, film and other photographic and imaging technology products had announced plans to raise $700 million to shore up its balance sheet through the sale of $400 million of secured notes in a private placement to private equity powerhouse Kohlberg Kravis Roberts & Co., along with a separate sale of convertible debt.

A trader saw those bonds on Thursday get as good as 86 early on, but then ease to about 84 going out. Some observers cited the notion that the initial rise Wednesday was a sign of investor hopes that that the financing plan will help Kodak address a $575 million cash outlay a year from now - but that the later retreat reflected their fears that the financing could push the holders of the unsecured bonds further to the back of the line in terms of their claims in the event of a restructuring.

However, those bonds were still above their Wednesday pre-news levels around 79, and have had "a very nice move" since July, the trader said, when the bonds had been in the 60s.

He also saw a sharp gain on Thursday in Kodak's 3 3/8% convertible notes due 2033 that will be taken out with the proceeds of its debt sales, with that paper trading "close to par," up from around 94 Wednesday before the news. The converts have been drifting up steadily since July, when they were around 80, the trader said, ending at 99 bid, 99 7/8 offered, on "pretty active" dealings.

Axle up on debt plan

Elsewhere, American Axle & Manufacturing's bonds moved higher on news that it had finalized a restructuring plan with lenders and had received a loan from former corporate parent General Motors Corp., which is still its largest single customer.

A trader quoted the bonds generically at 72 bid, 73 offered, calling that "up a little bit."

But at another desk, the notes were seen largely unchanged. A source saw the 5¼% notes due 2014 open around 73, only to come back to around 70 bid, 71 offered, essentially unchanged on the day.

According to an 8-K report filed with the Securities and Exchange Commission, American Axle received the $110 million payment from General Motors for cure costs associated with contracts assumed and/or terminated by Motors Liquidation Co. in its chapter 11 bankruptcy cases, resolution of outstanding commercial obligations, and adjustment of installed capacity levels reserved for existing and awarded programs to reflect new estimates of market demand.

General Motors also provided the company with an up to $100 million second-lien term loan on Wednesday.

Plans for the payment and the second-lien loan had already been announced in August.

American Axle also announced that it amended and restated its term loan and revolving credit agreement after several months of negotiations with its banks, modifying financial covenants related to secured debt leverage and cash interest expense coverage. The company is also required to maintain an average daily minimum liquidity of $85 million until next June 30. The amendment and restatement - agreed to by JPMorgan and Bank of America as the joint lead arrangers and joint bookrunners on the bank debt, with JPMorgan as the administrative agent - was completed on Wednesday.

American Axle further also disclosed some third quarter numbers on Thursday, including that it expects to report a consolidated net profit, and sales are estimated to be approximately $400 million.

Stephanie N. Rotondo and Sara Rosenberg contributed to this report

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