Hercules, Meritage, Vanguard price deals; new Lyondell little moved; forward calendar builds

By Paul Deckelman and Paul A. Harris

New York, March 27- The high-yield primary arena remained active on Tuesday, although overall new-deal volume was well off the total seen on Monday, when a gigantic $3 billion issue accounted for most of it.

Tuesday's total was more evenly distributed, as three transactions totaling $1.175 billion priced.

Two of the day's offerings were opportunistically timed and quickly marketed same-day "drive-by" deals.

Hospital operator Vanguard Health Systems, Inc. priced an upsized $375 million add-on to its existing 2019 notes. The bonds firmed slightly in the aftermarket.

Builder Meritage Homes Corp. did a $300 million issue of 10-year bullet notes, also upsized from the original amount. There was little aftermarket movement.

The biggest deal of the day came well after things had wound down for the session, as energy drilling contractor Hercules Offshore Inc. priced $500 million of paper off the forward calendar, broken into five-year secured and seven-year unsecured notes. The transaction happened too late for any kind of aftermarket activity.

While those deals were pricing, the new-issue pipeline continued to expand.

Canadian metals company New Gold Inc. announced plans to do a dollar-denominated eight-year offering and was heard to have begun a roadshow, aiming to price the deal next week.

Two other prospective offerings popped up on the radar screen - a $265 million deal from broadcaster Townsquare Radio LLC, expected to price this week after a short roadshow, and a $210 million issue from outpatient services provider Physiotherapy Associates. Marketing for the latter deal starts next month.

Price talk emerged on Lawson Software Inc.'s $1.15 billion equivalent dollar- and euro-denominated two-part deal and on cable operator Harron Communications, LP's $225 million eight-year offering.

Monday's $3 billion two-part deal from chemical maker LyondellBasell Industries NV began trading, but was little moved from its issuance levels.

Away from the new deals, traders saw brisk activity and stronger levels in Bon-Ton Stores Inc.'s bonds on investor hopes for an overall retail-sector improvement.

Hercules secured, unsecured

The news volume in the primary market remained high on Tuesday and is apt to do so for the remainder of the week, sources said.

Demand for paper - particularly bonds coming in big, liquid issues from known issuers - remains intense, sources say.

In addition to steady demand from domestic accounts, a lot of money is flowing into the dollar-denominated high-yield market from foreign investors, a Boston-based buyside source advised.

On Tuesday, three issuer brought a combined four tranches.

Hercules Offshore priced $500 million of high-yield notes in secured and unsecured tranches. The deal included a $300 million tranche of five-year senior secured notes (B1/B+), which priced at par to yield 7 1/8%. The yield printed at the tight end of price talk, which was set in the 7¼% area.

The execution of the unsecured tranche, however, was a different story.

The $200 million tranche of seven-year senior notes at par to yield 10¼%, 37.5 basis points beyond the wide end of price talk that was set in the 9¾% area.

Deutsche Bank, Credit Suisse, Goldman Sachs and UBS were the bookrunners.

The Houston-based provider of offshore drilling equipment and services plans to use the proceeds to repay all outstanding debt under the existing secured term loan and for general corporate purposes, including to fund a portion of the acquisition of the drilling rig Ocean Columbia, as well as the costs associated with its repair, upgrade and mobilization.

Vanguard Health upsizes

Vanguard Health Holding Co. II, LLC and Vanguard Holding Co. II, Inc. priced an upsized $375 million add-on to their 7¾% senior notes due Feb. 1, 2019 (confirmed B3/existing B-) at 99.25.

The pricing results in a 7.891% yield to worst.

The reoffer price came in the middle of the 99 to 99.5 price talk.

Bank of America Merrill Lynch, Barclays, Citigroup, Deutsche Bank, Goldman Sachs, J.P. Morgan, Morgan Stanley, RBC and Wells Fargo were the joint bookrunners for the quick-to-market add-on, which was upsized from $350 million.

Proceeds will be used for general corporate purposes, which may include working capital, capital expenditures, acquisitions and repayment of revolver debt.

The original $350 million tranche price at par in January 2011.

Meritage at the tight end

Meritage Homes priced an upsized $300 million issue of non-callable 10-year senior notes (B1/B+) at par to yield 7%, at the tight end of the 7% to 7¼% yield talk.

Citigroup was the left bookrunner for the quick-to-market issue, which was upsized from $250 million.

Deutsche Bank, J.P. Morgan and Bank of America Merrill Lynch were the joint bookrunners.

The Scottsdale, Ariz.-based homebuilder plans to use the proceeds to fund the tender for its existing senior notes due 2015.

Talking the deals

The final two days of the last week in March promise to be hectic ones in the primary market, with a $7 billion active deal calendar, most of it expected to clear before the Easter holiday.

Lawson Software set price talk for its $1.15 billion equivalent offering of seven-year senior notes (Caa1/B-).

The dollar-denominated notes are talked with a yield in the 9½% area.

Euro-denominated notes, coming in a tranche sized at €250 million to €300 million, are talked to price 50 basis points behind the dollar-denominated notes.

Final tranche sizes remain to be determined.

The books close at 5 p.m. ET on Wednesday, and the deal is set to price on Thursday.

Left lead bookrunner Bank of America Merrill Lynch will bill and deliver. Credit Suisse, J.P. Morgan, Morgan Stanley, Barclays, Deutsche Bank, RBC and KKR are the joint bookrunners.

The combined $1.1 billion of paper is believed to be playing to $3 billion equivalent of demand, a buyside source said on Tuesday afternoon.

Elsewhere, Harron Communications talked its $225 million offering of eight-year senior notes (Caa1/B-) to yield 9% to 9¼%.

The books close at 1 p.m. ET on Wednesday, and the deal is set to price thereafter.

SunTrust Robinson Humphrey and Wells Fargo Securities LLC are the joint bookrunners.

New Gold starts roadshow

The calendar continued to build on Tuesday.

New Gold began a roadshow in Toronto for its $300 million offering of eight-year senior notes (expected ratings B2/BB-), which is set to price on April 3.

J.P. Morgan and Scotia Capital are the joint bookrunners. RBC Capital Markets and UniCredit Bank are the co-managers.

The Vancouver, B.C.-based copper and gold mining company plans to use the proceeds to fund the redemption of its Canadian dollar-denominated 10% senior secured notes due 2017 and for general corporate purposes.

Townsquare starts Wednesday

Townsquare Radio, LLC and Townsquare Radio, Inc. will begin a roadshow on Wednesday for a $265 million offering of seven-year senior notes.

A global investor call is set to take place at 12:30 p.m. ET on Wednesday.

The deal is expected to price late this week.

Bank of America Merrill Lynch is the left bookrunner for the debt refinancing deal. Macquarie, RBC and SunTrust are the joint bookrunners.

ING and UBS Investment Bank are the co-mangers.

Physiotherapy $210 million

Physiotherapy Associates is expected to begin a roadshow during the week of April 9 for a $210 million offering of senior notes.

Jefferies & Co. will lead the deal.

Proceeds will be used to help fund the buyout of the company by Court Square Capital.

Other funding will come in the form of a $125 million credit facility.

No Meritage movement

When Meritage Homes' new 10-year issue was freed for aftermarket dealings, a trader quoted the homebuilder's bonds at par bid, 101 offered, in line with the $300 million deal's par pricing level.

A second trader also pegged the bonds at par bid, 101 offered, saying they were "not as active" as the Vanguard Health bonds.

Vanguard firms up

The trader saw the hospital operator's $375 million add-on to its existing 2019 bonds trade as high as 99 7/8 bid, although a little later on, he saw the bonds at 99¾ bid, 99 7/8 offered.

"So they did okay," he said, noting the half-point gain from the 99.25 pricing level.

However, another trader, while also seeing the bonds in a 99¾ bid, 100¼ offered context, said he saw "only a small piece - I just haven't seen anything larger."

Hercules comes too late

There was no time for any aftermarket heroics from Hercules Offshore's $500 million two-part issue.

The five-year secured notes and seven-year unsecureds priced way too late in the day - well after trading had pretty much wound down - for any secondary trading.

Lyondell little-moved

That was the case on Monday with LyondellBasell Industries' big two-part deal; it came to market too late for any kind of real dealings, although there were some unofficial gray market quotes in the 1001/2-to-100¾ context.

The bonds were freed to trade on Tuesday, but traders saw little in the way of price movement from the par level at which the Rotterdam, Netherlands-based global chemical manufacturer's two issues - its $2 billion of 5% notes due 2019 and $1 billion of 5¾% notes due 2024 - had priced.

"They didn't go far," a trader said, seeing both tranches trading in a very narrow context.

He saw the 5¾% notes at par to 100 1/16 bid, while the 5% notes were in a par-to-100 1/8 range.

"You've got these deals that come - and they just don't go anywhere," he exclaimed. "They're just very, very thin markets, with not a lot of activity."

At another desk, a trader, noting the slight gains the bonds had been quoted at late Monday in the gray market said, "We surely did not see them higher this morning."

Both tranches, he said, "were trading into a par bid."

Avis issue spins wheels

A trader said that AvisBudget Car Rental LLC's new add-on tranche to its 8¼% notes due 2019 was quoted at 104 bid.

That's the same level the Parsippany, N.J.-based vehicle-rental company's quickly-shopped $125 million of bonds had been quoted going home on Monday, after having priced earlier in the session at 10.5 to yield 7.329%

Recent deals hold levels

Among other recently priced issues, a trader saw Alliance Data Systems Corp.'s 6 3/8% notes due 2020 at 101¾ bid, 102¼ offered.

That was actually a little better on the day from the 101 5/8 bid, 102 1/8 offered level at which the bonds had been quoted trading on Friday.

The Dallas-based business services provider had priced $500 million of the bonds at par on Thursday, after the forward-calendar deal was upsized from it is originally shopped $350 million.

The bonds priced too late in the day Thursday for any kind of dealings, but traded on Friday before going back into hibernation on Monday.

The trader also saw Rexel SA's 6 1/8% notes due 2019 in a locked market at 101 5/8 on Tuesday.

The French electric equipment maker had priced $400 million of those bonds last Wednesday off the forward calendar at par, after upsizing from $300 million. The bonds initially traded 101 bid, 101 1/8 offered last Thursday.

Some new deals unseen

Some of the recent deals, however, were no-shows in the secondary market.

A trader said that J.B. Poindexter & Co.'s new 9% notes due 2022 were nowhere to be found on Tuesday.

He said that he saw the bonds trading around 103 bid, 104 offered on Monday, "but I haven't seen them since."

The Houston-based diversified manufacturer priced its $200 million issue at par on Friday after a short roadshow, and the new bonds were seen at that time to have firmed smartly, to the 102¼ bid, 102¾ offered level.

On Monday, a trader saw them in the morning at 101½ bid, 102½ offered, but by the early afternoon had moved up still further, to 103 bid, 104 offered.

The trader also said that Cenveo Corp. "went into a hole- and it's never coming out."

The Stamford, Conn.-based commercial printer had come to market with its 11½% notes due 2017 last Thursday.

That deal - radically downsized to $225 million from an original $450 million - priced at 96.328 to yield 12½%. There was no aftermarket activity on Thursday, but on Friday, traders saw the bonds tumbling down to bid levels as low as 89½ and offered levels not much better at 92.

He said the last that he had seen of the new issue was "a couple of days ago," trading in a 90 bid, 92 offered context.

Market indicators stay firm

Away from the new deals, traders said, it was another day of mostly limited activity.

"Pretty boring" was how one trader put it.

Statistical measures of junk market performance were seen better for a second straight session.

The CDX North American High Yield Index Series 18 began trading on Tuesday, completing the semiannual "roll" process, which sees Markit Group Ltd. change the composition of the index each March and September. The index closed at 97½ bid, 97¾ offered.

On Monday, a market source had said that the expiring Series 17 High Yield Index had been up around 5/8 point on the day to end at 98¾ bid, 99 offered, after having gained 3/16 point on Friday.

A direct comparison of the series 17 and 18 indexes is not accurate in view of the changes in the index's composition.

The KDP High Yield Daily index rose marginally for a second straight session on Tuesday, when it was up by 1 basis point to end at 74.03. That followed Monday's gain of 3 bps, which had broken a six-session losing streak. Its yield declined by 2 bps on Tuesday, to 6.56%, after having come in by 1 bp on Monday.

And the widely followed Merrill Lynch High Yield Master II Index notched its second gain in a row on Tuesday; those gains had followed two straight losses before that at the end of last week. The index was up by 0.096% on Tuesday, following Monday's 0.091% rise.

That gain lifted the Index's year-to-date return to 5.222 from Monday's 5.122%, although it remains down from its peak level for 2012 of 5.361%, recorded on March 2.

Bon-Ton bonds better

A trader said Bon-Ton Stores' 10¼% notes due 2014 "seem to be climbing up."

He saw about $21 million of paper changing hands, closing around the 88 1/8 mark. That compared to 87 bid the day before.

A second trader queried later in the day said that volume probably topped $30 million, with the bonds finishing at 88, which he called a half-point gain.

Another trader saw the bonds get as high as 88 5/8 bid, versus a bid range of 86 to 87¼ on Monday, "when they were all over the lot."

He noted that on Friday, the bonds had been quoted at 84, "so they're moving up."

Traders cited market expectations that retailers in general, including Bon-Ton, a York, Pa.-based department store chain operator, will see improved results.

According to the latest report published by Redbook Research, national chain store sales for March were up 0.5%. Expectations were that sales would be up 0.4%.

The report stated that sales were higher due to seasonal and Easter demand, as well as students going on the traditional spring break.

Solo surge subsides

A trader saw little activity in Solo Cup Co.'s bonds, which had risen solidly in brisk trading late last week on the news that that Lake Forest, Ill.-based Solo, a maker of disposable plastic and paper cups, plates, bowls and utensils, had agreed to be acquired by industry peer Dart Container Inc. in a $1 billion deal that includes Dart's assumption of around $700 million of Solo debt.

"Solo is at the same level" that its bonds had moved up to over that three-day stretch, "but on less volume."

He saw the 8½% notes due 2014 trading around 100¾ bid 100 7/8 offered, while its 10½% notes due 2013 hovered around the 102 level.

The 81/2s had gained 3 points last week and the 101/2s 1 point in response to the Dart news.

Stephanie N. Rotondo contributed to this report

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