Stater Bros., Altra price deals; Auto sector firm in secondary; Realogy talks megadeal

By Paul A. Harris

St. Louis, April 3 - The broad market was as much as ¾ point during a Passover Tuesday session that saw light volume, sources said.

Two deals were priced in the primary market, as Stater Bros. Holdings Inc. upsized its deal to $285 million and priced the 7¾% notes due 2015 on top of price talk, and Altra Industrial Motion Inc. completed a $105 tap of its existing 9% notes due 2011 at the tight end of talk.

Meanwhile traders said that paper from the automotive sector was on the move, disrupting an otherwise quiet Tuesday in the secondary market.

"The market was firm right out of the chute," one trader noted shortly after junk trading ended for the Tuesday session.

"Stocks opened up 100 points higher, and junk was off to the races, up ½ to ¾ point across the board," the source continued, adding that trading suggests that "there are big bids for bonds out there."

Stater upsizes

In a quickly shopped deal, Stater Bros. Holdings priced an upsized $285 million issuer of eight-year senior notes (B2/B+) at par to yield 7¾% on Tuesday.

The issue, which was increased from $275 million, priced on top of the price talk.

Banc of America Securities LLC was the bookrunner.

Proceeds will be used to redeem all of the Colton, Calif., supermarket chain operator's $175 million issue of floating-rate senior notes due 2010, fund construction of its new distribution center and corporate offices and purchase $15 million of its class A common stock and pay a $5 million dividend to La Cadena Investments, its sole shareholder. Any remaining proceeds will be used for general corporate purposes.

A trader saw the bonds trading late Tuesday afternoon at 100.50 bid, 101 offered.

Later a source close to the deal saw them at 101 bid.

Asked for a spot on the broad market this latter source, a high yield syndicate official, said that junk was up ¼ point at most on Tuesday.

Altra at the tight end

Elsewhere Altra Industrial Motion priced a $105 million add-on to its 9% senior notes due Dec. 1, 2011 (B2/CCC+) at 101.00.

The premium issue price, which came at the tight end of the 100.50 to 101.00 price talk, results in a yield to worst of 8.668%.

Jefferies & Co. ran the books for the acquisition deal.

Altra is a Quincy, Mass.-based electromechanical power transmission products company.

Realogy talks megadeal

With regard to deals on the road, price talk and covenant changes surfaced Tuesday in the Realogy Corp. $3.15 billion multi-tranche junk bond deal.

The Parsippany, N.J., real estate franchisor is in the market with $2.25 billion of seven-year senior notes (Caa1/B-) in three tranches.

A tranche of fixed-rate notes is talked at 10% to 10¼%.

A tranche of toggle notes is talked to price three-eighths behind the fixed-rate notes.

Meanwhile a tranche of floating-rate notes is talked at Libor plus 525 to 550 basis points.

In addition Realogy is offering $900 million of eight-year senior subordinated notes (Caa2/B-) which it has talked to price 150 basis points behind the senior fixed-rate notes.

At the same time changes surfaced in the debt test and restricted payments test covenants.

The leverage threshold for the credit facility carveout changed to the greater of $3.25 billion and 4.25 times leverage from the greater of $3.25 billion and 4.75 times leverage.

The notes are expected to price on Thursday morning.

JP Morgan, Credit Suisse, Bear Stearns and Citigroup are joint bookrunners for the LBO deal.

More coupon, more security

Meanwhile, as evidence surfaced that investors may be searching for more security in the form of tighter covenants on the Realogy bonds, sources in the bank loan market told Prospect News that the company's $1.95 billion term loan due 2014 is firming up at Libor plus 300 basis points, the wide end of the upwardly flexed 275 basis points to 300 basis points price talk.

A leveraged loan market source recounted that the term loan initially came with talk of Libor plus 225 to 250 basis points.

A trader who is active in both bank loans and bonds said that Realogy may be struggling a little, but added that the financings will "get done."

"People are going to buy it because it's just the cheapest thing in the market right now," the trader said, referring to both the bond and bank pieces.

The source conceded that the negative headline news impacting the home building and real estate sectors might be blamed for higher price talk on the loans and tighter restrictions on the bond covenants.

"But [the sponsors] didn't exactly overwhelm the market with what they put in for equity," the trader said, adding that interest coverage on the loan is only 1.3 times.

"They're expecting home prices to rebound next year," the source added.

"I don't think anybody else sees that happening."

Beazer bonds lower

This trader, who marked the broad market unchanged on the day, said that the existing paper of Beazer Homes, lately under investigation by the feds with respect to the company's mortgage lending practices, remained under pressure on Tuesday.

The source saw Beazer's 8 1/8% bonds due 2016 down ¼ to ½ point on the session.

On Monday those bonds went out at 92 bid, 93 offered.

Elsewhere, however, the trader said that existing issues of home builders were unchanged on Tuesday.

Tereos talks €400 million

Back in the primary market, French sugar producer Tereos has lowered price talk on its €400 million offering of seven-year senior bullet notes (Ba3/BB-) to 6 3/8% to 6¼% from 6½% to 6¾%.

Pricing is expected on Wednesday.

Calyon Securities has the books for the debt refinancing deal.

Big March

A sell-side source, reflecting upon the above-mentioned Realogy news, mentioned that trailing the month of March, "one of the biggest months ever" in the primary market, investors still have some sizable LBO deals to digest.

The source added that, nevertheless, high yield investors remain very hungry for paper.

To lend an historical perspective to the month just concluded, according to Prospect News data it is the second-biggest month in the past half decade, with respect to the dollar amount of issuance that was priced.

March 2007 saw slightly more than $19.4 billion of issuance in 44 dollar-denominated tranches.

As such it is second only to the month of November 2006 which saw a whopping $29.8 billion of issuance in 48 tranches.

Better tone for autos

In the face of headline news that sales slid in March and the unions may be unprepared to make more concessions, the automotive sector rallied on Tuesday.

"Autos had better tone all day," one trader said, adding that auto parts names led the charge.

"Delco Remy bonds were better, and GM and Ford went along for the ride, although they had a good tone," the source added, noting that "as always GM and Ford are going to be up or down more than the rest of the market."

The source marked Ford Motor Co.'s bonds maturing in 2031 77.50 bid, 78 offered, up a point on the day.

Meanwhile the General Motors Corp. long paper, the GM 8 3/8% notes due 2033, were 89.75 bid, 90 offered, up ¼ point on Tuesday.

Pressed for an explanation as to why both the bonds and the stocks of Ford and GM traded up Tuesday, despite GM reporting a 7.7% drop in year-over-year sales for March while Ford reported a 9% drop, the trader said that sales were likely off by less than the market had anticipated, and added that Ford announced that it may increase production in the second half of the year.

"They may have just been following equities," the trader added, noting a dramatic Tuesday rally in stocks.

"Why fight the trend during a week when nothing else is going on."

Recent health deals see demand

Elsewhere another trader told Prospect News that the new health care issues had been holding steady, and were up a quarter on the day.

These included Centene Corp.'s new 7¼% senior notes due 2014 (Ba3/BB), which priced at par in a $175 million issue on March 15.

The trader marked them at 101 bid, and added: "We're looking for bonds."

Also up a quarter on the session were the new Sun Healthcare Group Inc. 9 1/8% senior subordinated notes due 2015 (B3/CCC+), which priced at par in a $200 million issue on March 22.

These the trader spotted at 102.50 bid, 103 offered.

The trader also pointed to Advanced Medical Optics new 7½% senior notes due 2017 (B2/B) which priced at par in a $250 million issue on March 27.

Marking those notes at 100.50 bid, 100.75 offered on Tuesday, the trader remarked that they have "scarcity value."

"There were $2.5 billion of orders for that $250 million deal," the trader said.

"It will continue to be bid for."

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