Omnova, Sabra, Prestige price, gain in trading; Momentive, Hexion bonds busy on new-deal news

By Paul Deckelman and Paul A. Harris

New York, Oct. 22- Omnova Solutions Inc., Sabra Health Care LP and Prestige Brands, Inc. priced new high-yield bond deals on Friday, syndicate sources said. That rounded out a busy week which saw more than $7 billion of new dollar-denominated debt come to market.

Traders said that when the new deals hit the aftermarket, all of them firmed - Prestige a little, Omnova a little more and Sabra Healthcare quite smartly. They said that this was in line with the generally firm trend seen for recent new issues.

Among recently priced deals, they saw Thursday's offerings for American Achievement Corp. and United Rentals (North America), Inc. continuing to do quite well, with American Achievement in particular even extending the secondary gains the company's new bond deal had notched on Thursday. And even the week's first deal, and its biggest, Calpine Corp.'s $2 billion behemoth, was heard to have - finally - moved up after languishing around its issue price for several sessions.

Away from the new deals which actually priced, Simmons Foods, Inc. is planning to hit the road with a $250 million secured deal that is expected to price during the coming week.

And Momentive Performance Materials Inc. and Hexion Specialty Chemicals, Inc. - familiar high yield names in the chemical manufacturing sector which are now under the same Columbus, Ohio-based corporate umbrella following the recently completed merger of the two companies, but who for the moment each maintain their own capital structures - are bringing separate new deals to market for pricing in the coming week, with proceeds going to take out existing bonds.

The companies' outstanding bonds were meantime heard to be busily trading on the news of the new deals and in some cases, were quoted by traders up solidly on the day.

Overall, the market tone remained firm - helped by enthusiasm for the new deals plus simple supply-and-demand economics bidding up the prices of existing bonds on a lack of paper offered for sale. Statistical indexes of market performance finished the day, and the week, on the upside.

Omnova at the tight end

Three issuers raised a combined total of $577 million on Friday.

Omnova Solutions priced a $250 million issue of eight-year senior notes (B2/B) at par to yield 7 7/8%, at the tight end of the 8% area price talk.

Deutsche Bank Securities Inc. was the left lead bookrunner. Jefferies & Co. was joint bookrunner.

Omnova, a Fairlawn, Ohio-based maker of emulsion polymers, specialty chemicals and decorative and functional surfaces for commercial, industrial and residential end uses, plans to use the proceeds from the bonds and from a new $200 million term loan to fund its previously announced $300 million acquisition of French chemical company Eliokem International SAS, and to repay or replace all amounts outstanding under its existing term loan.

Sabra prices $225 million

Meanwhile Sabra Health Care LP and Sabra Capital Corp. priced a $225 million issue of eight-year senior notes (B2/B) at par to yield 8 1/8%, also at the tight end of price talk which was for a yield in the 8¼% area.

Bank of America Merrill Lynch, Citigroup Global Markets Inc., J.P. Morgan Securities LLC and Wells Fargo Securities LLC were the joint bookrunners.

Proceeds will go towards financing the pending spinoff of Sabra Health Care REIT Inc. by its corporate parent, Sun Healthcare Group Inc.

Prestige Brands taps 8¼% notes

In drive-by action, Prestige Brands priced a $100 million add-on to its 8¼% senior notes due April 1, 2018 (B3/B) at 102.00 to yield 7.788%.

Bank of America Merrill Lynch and Deutsche Bank Securities ran the books.

Proceeds, along with funds from a new term loan, will be used to acquire Blacksmith Brands Holdings, Inc.

The original $150 million notes priced at 98.564 to yield 8½% on March 11, 2010.

Momentive/Hexion plan deals

Momentive Performance Materials announced plans on Friday to tap the high-yield market via the capital structures of the former Hexion Specialty Chemicals, Inc. and Momentive Performance Materials Inc. in order to refinance bond debt which remains on the books in the wake Apollo Management's merger of the two chemical companies earlier this month.

Both entities plan to issue 10-year notes which are expected to come with triple-C credit ratings, and with five years of call protection.

Hexion plans to raise $440 million via the sale of second-lien senior secured notes. Proceeds will be used to help fund a tender offer for Hexion's $532.9 million of outstanding of 9¾% second-lien notes due 2014.

Momentive, meanwhile, plans to raise $840 million equivalent of springing lien notes. The Momentive notes, which will be offered in dollar and euro denominations, will be unsecured prior to the redemption of the company's 12½% notes due 2011, callable in December 2011 at 106.25. Following that redemption the new 10-year notes will be backed with second-lien security.

Momentive will use the proceeds to help fund its tender offers for $716.6 million of 9¾% notes due 2014, €245.2 million of 9% notes due 2014, and $214.2 million of 10 1/8%/10 7/8% PIK toggle notes due 2014.

J.P. Morgan Securities LLC, Citigroup, Credit Suisse, Morgan Stanley, UBS Investment Bank, Bank of America Merrill Lynch, Deutsche Bank Securities and Goldman Sachs & Co. are managing the combined notes offers.

Marketing commenced on Friday, and will continue into the week ahead, with the bonds expected to price on Wednesday.

Simmons starts Monday

Simmons Foods will begin a roadshow on Monday for a $250 million offering of seven-year second-lien senior secured notes.

The deal is expected to price late in the week ahead.

Wells Fargo Securities and BMO Nesbitt Burns are joint bookrunners.

Proceeds, together with proceeds from the company's amended and restated senior secured credit facilities, will be used to finance acquisition of Menu Foods Ltd., and to repay Menu Foods' senior credit facility and refinance certain other Menu Foods existing debt.

R&R Ice Cream to sell in euros

Meanwhile European ice cream manufacturer R&R Ice Cream plc is set to begin a Europe-only roadshow on Monday in London for a €280 million offering of seven-year senior secured notes (expected ratings B2/BB-).

Barclays Capital and Credit Suisse are joint bookrunners for the Rule 144A and Regulation S offering.

Proceeds will be used to refinance existing debt.

Ramp-up expected

With Friday's three deals in the mix, the Oct. 18 week came to a close having seen $6.9 billion of issuance come in 15 junk-rated dollar-denominated tranches.

The week ahead could see issuance ramp up, a debt capital markets banker advised Prospect News on Friday afternoon.

In addition to the above-mentioned Hexion/Momentive deals, Australia's Fortescue Metals Group Ltd. is expected to price its $2.04 billion offering of five-year senior unsecured notes (B1/B/BB+) via J.P. Morgan Securities LLC and the Royal Bank of Scotland.

The banker also professed visibility on drive-by deals for the week ahead.

And although none of them are expected to come sized quite as large as Fortescue, one, at least, could hit the $1 billion mark, the sell-sider said.

New Sabra bonds show strength

When the new Sabra Healthcare 8 1/8% notes were freed for secondary dealings after pricing late in the session, a trader saw the company's bonds move strongly up to 101¾ bid, 102¾ offered on the break.

At another desk, a trader later saw those bonds rise further on the bid side and tighten further to 102 bid, 102½ offered, versus the par price at which the health care real estate investment trust - which after its pending spinoff will hold the various properties now owned by Irving Texas-based Sun Healthcare - priced the $225 million deal.

Omnova bonds on the upside

Although it did not zoom up as much as the Sabra Healthcare deal, a trader said that the day's other sizable issue, the $250 million of 7 7/8% notes from Omnova Solutions, was "really the main thing today" in the secondary market.

He quoted the issue as having firmed to 101¼ bid, 101¾ offered, versus its par issue price earlier in the day.

At another desk, a trader saw the new issue from the Fairlawn, Ohio-based specialty chemical company and maker of decorative surfaces finishing at 101 bid, 101½ offered.

Prestige Brands pops a little

A trader saw Prestige Brands' 8¼% notes trading at 102½ bid, after the Irvington, N.Y.-based consumer products manufacturer priced its $100 million add-on to its existing bonds at 102 to yield 7.888%.

Another trader, though, said that he had not seen the deal, commenting that smallish deals like the add-on "get put away quickly."

American's Achievements continue

Among the deals from earlier in the week, Thursday's $365 million deal from American Achievement continued to firm in the aftermarket, with a trader seeing those 10 7/8% senior secured notes due 2016 at 102 bid, 102¼ offered.

That was up from the 101¼ bid, 101½ offered level to which the Austin, Tex.-based provider of school yearbooks and class rings' new issue had risen after it broke Thursday, and well up from its par issue price earlier Thursday.

A second trader quoted the bonds going home Friday doing even better than that, at 102¼ bid, 103 offered.

United Rentals remains robust

A trader said that United Rentals' $750 million of 8 3/8% senior subordinated notes due 2020 was "the most active new bond" on Friday, quoting the issue at 101½ bid, 102 offered.

That was up a little from the 101¼ bid, 102 peak seen in initial aftermarket dealings Thursday by the Greenwich, Conn.-based equipment rental company's new issue, and well up from the par level at which that quickly-marketed issue - upsized from the originally announced $500 million - had priced.

Another trader saw the new bonds Friday at 101 3/8 bid, 101 5/8 offered.

Week's earlier deals hold or extend gains

Looking back a little further, a trader saw Denver, Colo.-based natural gas operator MarkWest Energy Partners, LP/MarkWest Energy Finance Corp.'s $500 million offering of 6¾% notes due 2020 at 101 7/8 bid, 102 3/8 offered.

That was up a little from the 101½ bid, 102 offered level at which the company's issue traded after pricing Tuesday at par.

Univision Communications Inc.'s $750 million offering of 7 7/8% senior secured notes due 2020 was seen by a trader as having gotten as good as 103 bid, 104 offered.

The Los Angeles-based Spanish-language broadcaster's deal had priced at par on Monday and then had reached levels around 102 bid in initial secondary dealings.

And even Monday's other big deal - from Houston-based power generating company Calpine, which had priced at par but then languished around that level for a couple of sessions - was said by a trader to have finally improved by Friday afternoon.

He quoted the $2 billion mega-deal - upsized from $1.5 billion initially - as going out on Friday after having traded as high as 101½ bid, 102 offered.

Momentive, Hexion gain on new-deal news

Traders also saw brisk activity at mostly higher levels in the bonds of Momentive Performance Materials and Hexion Specialty Chemicals, which are each doing new deals under their respective capital structures - the two companies completed their merger earlier this month - in expectation of using the deal proceeds to take out existing debt.

A trader saw Momentive's 9¾% notes due 2014 as having risen to 105 ½ bid, which he said was up by several points. Momentive plans to take those $716 million of bonds out using its new-deal proceeds.

At another desk, a market source saw those bonds going home at 105 3/8 bid, well up from 103½ bid on Thursday. Some $20 million of the bonds changed hands in round-lot trading on Friday, making it one of the busiest issues in Junkbondland.

Hexion's 8 7/8% notes due 2018 were also pretty active, with some $10 million trading, according to that source. The bonds were quoted up as much as 4 points on the day at just over the 104 bid level.

The company's $533 million of 9¾% second-lien notes due 2014, one of the issues to be taken out, were already trading around the anticipated 105 take-out price, but moved up by ½ point, although only about $3 million of the bonds were seen to have traded in round lots.

Market indicators end week on high note

Away from the new-deal world, a trader saw the CDX North American Series 15 HY index up ¼ point on Friday to end at 99 7/8 bid, 100 1/8 offered, after having moved up by 1/8 point on Thursday. The index thus ended the week up from the 99 3/8 bid, 99 5/8 level at which it had closed out the previous week, on Friday, Oct. 15.

The KDP High Yield Daily index meantime gained 9 basis points on Friday to end at 74.31, after having risen by 11 bps on Thursday. Its yield narrowed by 4 bps to end at 7.23%, after having come in by 3 bps in each of the previous two sessions. On the week, the index improved from the prior week's 74.22 reading and its yield declined from 7.29%.

The Merrill Lynch High Yield Master II index gained 0.095% on Friday, after having shot up by 0.102% on Thursday. The latest gain pushed its year-to-date return up to 13.776% - a new peak 2010 - from Thursday's 13.668%, the previous high point for the year. On the week, the index gained 0.234%, lifting its cumulative return from the previous Friday's 13.511% reading.

Advancing issues led decliners for a third consecutive session on Friday, holding a winning margin of six to five - an improvement over Thursday, when the gainers had led the losers by just a couple dozen issues out of the more than 1,400 tracked.

Overall activity, represented by dollar-volume levels, slid by 26% on Friday, after having risen by 8% on Thursday versus the previous session.

A trader said that "it was the same old song" in the secondary - "accounts were bellyaching that they had to sit on cash and couldn't put it to work, because everything has been bid up so much.

"There's just been nothing really for sale."

OPTI trading surges

Among the relatively few specific non-new-deal issues actually doing anything, there was what one trader termed "more than normal" trading in OPTI Canada Inc. bonds, though there wasn't any news to speak of that could have caused the surge.

"It was the one stand out to the downside," a trader said, "given that everything else was better."

He quoted the 2014 paper at 70 bid, 71 offered, "down another point."

Another source pegged the 7 7/8% notes due 2014 at 70 bid, 70½ offered and the 8¼% notes due 2014 at 70½ bid, 71½ offered. For the former, that compared to last round-lot levels around 73 bid, 74 offered and for the latter, that compared to levels around 72 previously.

The Calgary, Alta.-based oil sands producer will release its quarterly report next week.

Ford continues to cruise

In the autosphere, a trader said that Ford Motor Co.'s paper continued to take an upside ride on Friday.

He quoted the Dearborn, Mich.-based Number-Two U.S. car maker's 7.45% notes due 2031 up ¾ point for a second straight session, going out at 111¼ bid, 112½ offered. The Ford bonds strengthened after having eased all the way down to the109 bid level over several sessions earlier in the week.

He meantime saw Ford domestic arch-rival General Motors Corp.'s 8 3/8% benchmark bonds due 2033 unchanged on the session at 34½ bid, 35 offered.

-Stephanie N. Rotondo contributed to this report

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