Reynolds behemoth, DineEquity, Navios price, new debt up solidly; Alta Mesa next; market firm

By Paul Deckelman and Paul A. Harris

New York, Oct. 6 - The junk bond juggernaut rolled on as more than $4 billion of new paper was heard to have priced on Wednesday, most of it from Reynolds Group Holdings, which weighed in with an enormous two-part deal consisting of $1.5 billion of nine-year senior secured notes and $1.5 billion of nine-year unsecured notes. When the consumer packaging products company's new bonds were freed for secondary trading, both tranches initially shot up by as much as 3 points before coming off those peaks to still end more than 2 points better.

The Reynolds mega-deal completely dwarfed DineEquity, Inc.'s offering of eight-year notes, which under normal circumstances would be considered a pretty big deal in its own right at a size of $825 million. But the Glendale, Calif.-based restaurant chain operator's bonds still firmed smartly in the aftermarket.

Greek shipping operator Navios Maritime Holdings, Inc. sailed into port late in the session with an upsized $400 million issue of first-priority ship mortgage notes. But that seven-year deal did not appear in time for secondary market activity.

There was meantime plenty of secondary action in a big deal which had come too late in the day on Tuesday, as traders saw over $150 million of DaVita, Inc.'s $1.55 billion of new eight-year and 10-year bonds changing hands, up more than a point from each tranche's par issue price.

There was no further upside in the new Burger King Holdings Inc. bonds, which had shot above the 104 level on Tuesday, well up from Friday's par pricing level. But those bonds were still seen hanging in on Wednesday at those exalted levels.

Away from the deals which have actually priced, Michaels Stores, Inc., Tutor Perini Corp. and DuPont Fabros Technology, Inc. all announced new deals, the latter company planning perpetual preferred shares rather than bonds. Air Medical Group Holdings was hitting the road with an eight-year deal, while price talk emerged on two offerings expected to price on Thursday, for Alta Mesa Holdings, LP and German automotive repair chain A.T.U.

Traders meantime saw little happening in the non-new-deal secondary, although the market continued to have a firm tone and statistical measures kept moving up.

Reynolds multiple-times oversubscribed

In the hard-charging primary market, three issuers bringing a combined four tranches raised $4.225 billion on Wednesday.

With the biggest amount of issuance in half a year, Reynolds Group Issuer Entities priced $3 billion of notes due April 15, 2019 at par on Wednesday.

The Chicago-based food packaging company priced $1.5 billion of senior secured notes (Ba3/BB) to yield 7 1/8%. The yield printed at the tight end of the 7¼% area price talk.

Reynolds Group also priced $1.5 billion of senior unsecured notes (Caa1/B) to yield 9%. The yield on the unsecured notes printed tighter than the 9¼% area price talk.

Credit Suisse and HSBC were the joint bookrunners.

Proceeds will be used to help finance the acquisition of Pactiv Corp.

The deal was multiple-times oversubscribed, according to a syndicate source who conceded that allocations were severe.

Given the size of the deal, the impetus to own Reynolds bonds intensified during the time that the deal was in the market, as institutional players became keen to maximize their exposure to the new benchmark.

The buzz in the market held that bridge loan participants would receive favorable treatment.

When Prospect News inquired about that perception, the dealer replied that it's not necessarily a quid pro quo.

The bridge participants do the earliest work on the deal and get into it early - some with anchor orders, the source said.

By being in the deal early those accounts position themselves for better allocations.

Reynolds represented the biggest amount of issuance from a single issuer since Frontier Communications Corp. priced $3.2 billion on March 26, 2010, the syndicate source said.

DineEquity a blowout

Meanwhile, DineEquity completed its blockbuster, an $825 million issue of eight-year senior notes (B3/CCC+) which priced at par to yield 9½%.

The yield printed at the tight end of the 9 5/8% area price talk.

Timing was moved ahead on the deal, which was initially scheduled to price on Thursday.

Barclays Capital Inc. and Goldman Sachs & Co. were the joint bookrunners.

Proceeds will be used to refinance outstanding Applebee's and IHOP securitization debt and to redeem a portion of series A stock.

DineEquity is the Glendale, Calif.-based owner of Applebee's Neighborhood Grill & Bar and IHOP Restaurants.

The deal was a blowout, according to a syndicate source who added that the order book contained in excess of $5 billion, with 250 separate accounts in the book.

The deal traded to 103½ bid on the break, the official addded.

Navios upsizes

Navios Maritime Acquisition Corp. and Navios Acquisition Finance (US) Inc. priced an upsized $400 million issue of seven-year first priority ship mortgage notes (B2/B) at par to yield 8 5/8% on Wednesday.

The yield printed at the tight end of the 8¾% price talk. The amount was increased from $375 million.

Bank of America Merrill Lynch and J.P. Morgan Securities LLC were joint bookrunners.

Proceeds will be used to repay bank debt.

Alta Mesa sets price talk

Alta Mesa Holdings, LP talked its $300 million offering of eight-year senior notes (B3/B) with a 9½% to 9¾% yield.

The deal is set to price on Thursday.

Wells Fargo Securities and Citigroup Global Markets Inc. are the joint bookrunners.

A.T.U. restructures, sets talk

Germany's A.T.U Auto-Teile-Unger Handels GmbH & Co. KG surfaced with a new structure and revised price talk for its €450 million offering of 3.5-year non-callable senior unsecured notes (B3/B-).

The new deal structure includes €375 million of fixed-rate notes, which come with price talk of 11¼% to 11½%. That talk is increased from earlier levels of 10½% to 11%.

In addition the car and truck repair service franchisee plans to issue €75 million of floating-rate notes. The floaters are talked with a 975 basis points to 1,000 bps spread to six-month Euribor. The floating-rate tranche came in a restructuring of the deal.

Pricing is set for Thursday.

Goldman Sachs & Co. and Morgan Stanley are managing the sale.

Air Medical to roadshow

The forward calendar continued to grow on Wednesday.

Air Medical Group Holdings, Inc. and AMGH Merger Sub, Inc. will begin a roadshow on Thursday in New York for their $545 million offering of eight-year senior secured notes (expected ratings B2/B).

The deal is set to price on Oct. 15.

Barclays Capital, Bank of America Merrill Lynch, Citigroup and Morgan Stanley are the joint bookrunners for the LBO deal.

Tutor Perini marketing starts Monday

Meanwhile Tutor Perini Corp. will start a roadshow on Monday for its $300 million offering of eight-year senior notes via Deutsche Bank Securities.

Proceeds will be used for general corporate purposes which may include acquisitions and stock repurchases.

'All about the new issues'

A secondary market trader meantime said of Wednesday's session that "it's all about new issues again."

He saw the new paper, both that which priced on Wednesday and that which had come to market over the previous few sessions, "popping 2, 3, even 4 points and taking everyone's time."

A second trader said that "all of them are trading exceedingly well."

Reynolds rallies from issue

Case in point - the new Reynolds Group Issuer Entities $3 billion two-part deal, which saw the company's $1.5 billion of 7 1/8% senior secured notes due 2019 and its $1.5 billion of 9% senior notes due 2019 both price at par.

A trader said that he had seen both tranches of the new bonds get as good as 103½ bid in initial aftermarket dealings, although "they've come in a little bit" since reaching that zenith.

He saw both parts of the deal going out at 102½ bid, 103 offered, while at another shop, a trader reported that the 9s were trading as high as 102¾ bid, 103¼ offered by the end of the day.

Investors feast on DineEquity

The day's other new deal that actually made it into the secondary market, DineEquity's 9½% notes due 2018, "was really active" and "traded very well," in the words of a trader who saw the deal hit a high of 104¼ bid, after having priced earlier at par, and then go home "wrapped around" a 103-103¼ context.

"Both new deals that came today did very well," he declared.

"A second trader saw the IHOP and Applebee's restaurant operator's deal finishing at 103½ bid, 104½ offered.

Burger King holds steady

A trader said the new Blue Acquisition Sub 9 7/8% notes due 2018 sold by Miami-based fast-food franchisor Burger King Holdings "didn't really move" on Wednesday from the levels north of 104 bid to which those bonds had jumped on Tuesday. He quoted them going out at 104 bid, 104½ offered.

"Everyone used it as a comp for DineEquity, so they sat" in that same 104-plus range.

"They've basically stalled at the 9% [yield] level," he said, "but that's still a heckuva move from where they priced."

The $800 million offering - downsized from the originally announced $900 million - had priced at par on Friday and made no appearance in the aftermarket, and then hung around their issue price in the early going on Monday before they started to heat up late in Monday's session, finishing just below 102 bid.

On Tuesday, investors filled their plates with the new Burger King bonds, pushing the issue up to almost the 105 level, before they finally went out in a 104-plus context by the close that day, and stayed there on Wednesday.

DaVita dominates actives list

A trader said that the new DaVita $1.55 billion two-part deal "was very active, since it never really traded [Tuesday] night." He saw the Denver-based dialysis services company's $755 million 6 3/8% notes due 2018 at 101 bid, 101½ offered after pricing at par, while its 6 5/8% notes due 2020 were seen at 101¼ bid, 101¾ offered.

A second trader said that the two tranches "were the two large-volume deals of the day," estimating that over $80 million of the 6 5/8s had changed hands around 101 5/8 bid, while more than $75 million of the 6 3/8s were traded, ending around 101¼ bid.

The second trader, however, noted that the new deal was being immediately tracked by the Trace bond data service, "so people believe it was more active than other new issues. Other new issues typically don't Trace right away."

DaVita, he said, "was definitely active," but added that "I think the other [new ones] were just as active, only you can't prove it on Trace."

Yet another trader pegged the 10-years at 101 5/8 bid, 101 7/8 offered, while the 8s were 101 bid, 101½ offered.

ICON an underachiever

A trader said that most of the new issues were moving up so solidly after pricing, and in busy dealings. "It's been that kind of a market right now."

He said that "a), there's a yield grab going on, and b) the refinancing window is open for everybody right now, so people are just comfortable grabbing the yield."

However, one issue not proving especially popular, despite a fat-yielding coupon was Logan, Utah-based exercise equipment maker ICON Health & Fitness, Inc., whose 11 7/8% notes due 2016 have turned out to be the proverbial 98-pound weakling on the beach amid the current crop of muscular new deals, despite being a senior secured piece of paper which priced carrying a nice fat 12% yield.

The trader asserted "I don't think they've gone anywhere, to be blunt," quoting them at 99½ bid, par offered, just a shade above the 99.468 level at which the $205 million issue had priced on Monday.

Market indicators seen mixed

Away from the new-deal world, a trader saw the CDX North American Series 15 HY index up 1/16 point on Wednesday to end at 98¾ bid, 99 offered, after having moved up by 7/8 point on Tuesday.

The KDP High Yield Daily index meantime advanced by 14 basis points Wednesday to close at 73.66, on top of Tuesday's 28 bps jump. Its yield came in by 4 bps to 7.50%, after having narrowed by 10 bps on Tuesday.

The Merrill Lynch High Yield Master II index rose by 0.303% on Wednesday, after having improved by 0.233% on Tuesday. Its year-to-date return rose to 12.757%, establishing yet another new peak 2010 level, versus the old mark of 12.416%, which had been set just on Tuesday.

Advancing issues led decliners for a ninth consecutive session on Wednesday, holding the same eight-to-five advantage they enjoyed on Tuesday.

Overall activity, represented by dollar-volume levels, fell by 10% on Wednesday, after having zoomed by 84% on Tuesday.

Despite the plethora of new deals trading around and the very heavy activity in the new DaVita issues in particular, a trader called the day "pretty boring." He said that "most of the day, folks were sitting around, waiting for the larger deals," like the humongous Reynolds Group two-part offering, to come to market. "You had $4 billion being priced today, so that seemed to take up a lot of folks' attention."

Outside of the intense new-deal activity, it was "just a miserable day in general" in Junkbondland.

Ford keeps flying

But not for holders of Ford Motor Co.'s paper.

A trader said that Ford "keeps going through the roof," quoting the Dearborn, Mich.-based Number-Two domestic carmaker's 7.45% bonds due 2031 as high as 108 bid, 109 offered, which he called up 1½ to 2 points on the day.

Another trader who saw the bonds at those levels called them up 2 points, while seeing Ford domestic arch-rival General Motors Corp.'s benchmark 8 3/8% bonds due 2033 up ½ point at 34½ bid, 35½ offered.

A trader said another recently strong automotive-linked issue was former GM loan-financing unit GMAC, now trading under its new name, Ally Financial. "All the Allys were up," he said.

Michaels' bonds active on tender

Elsewhere, a trader said a "bunch" of Michaels Stores Inc.'s' 10% notes due 2014 changed hands on news the company was planning a tender offer.

He quoted the paper at 105 3/8 bid, 105 5/8 offered.

Another trader pegged the issue at 105½ bid, 105 5/8 offered, unchanged on the day.

The Irving, Texas-based art-supply retailer plans to sell $750 million of new senior unsecured debt due October 2018 in order to finance the tender.

The 10% notes have a redemption option coming up on Nov. 1, when the bonds can be called for 105 cents on the dollar.

Market yawns at Lehman news

From deep in the distressed-debt precincts, a trader did not see much real activity in the bonds of Lehman Brothers Holdings or Ambac Financial Group Inc., notwithstanding news about the two troubled New York-based financial companies. Bond insurer Ambac had agreed to drop $6.1 billion of legal claims against the failed investment bank Lehman. Lehman meantime dropped several of its own legal actions against Ambac.

He saw Lehman's 5 5/8% notes due 2013 around 22 5/8 bid, 23¼ offered while its 6 7/8% notes due 2018 were at 23½ bid, 24 offered. "That's where they've been and where they were [Tuesday]," pre-news. "There's always good volume in the name, big size - these are $1 billion deals," but he saw no bond price movement.

Another trader, though, said that there was "not a lot of volume" today in Lehman, seeing perhaps $4 million of the 5 5/8% notes trading, unchanged, at 23¼ bid, while "on all of the others, it was just one trade, for $1 million."

That trader also saw just one trade in Ambac's 5.95% bonds due 2035, at 28 bid, suggesting that the credit "is just not actively followed."

The first trader saw those Ambac bonds at 28, noting that was "up about 6 or 7 points" from the credit's most recent prior levels, in the low 20s about a week ago, but he cautioned that "you can't tell anything from just one trade - it doesn't mean a lot."

Ambac, he said, "doesn't trade actively - these are not big deals."

A&P gyrations fade

A trader saw Great Atlantic & Pacific Co., Inc.'s 11 3/8% senior secured notes due 2015 at 75 bid, 77 offered, which he said was "maybe down 1 point," following the Montvale, N.J.-based supermarket operator's bonds' gyrations Tuesday on investor angst over A&P's decision to break the leases of more than two dozen of its now-closed Farmer Jack stores in the Midwest.

Another trader saw those bonds offered at 78 in the morning but did not see anything happening with them otherwise. He saw the company's 5 1/8% notes due 2011 at 70½ bid and its 6¾% notes due 2012 at 52 bid, 54 offered, on "small size," versus Tuesday levels around 69 and 53, respectively.

-Stephanie N. Rotondo contributed to this report

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