Rain CII, Brightstar, American Reprographics price, but Performance Foods, Spencer drop out

By Paul Deckelman and Paul A. Harris

New York, Nov. 23 - Three new deals totaling nearly $850 million were heard by high-yield syndicate sources to have priced on Tuesday, as junk bond issuers continued to hurry to take care of their financing needs ahead of this week's Thanksgiving Day holiday and, beyond that, the inevitable wind-down in activity seen with the approach of the end of the year.

Rain CII Carbon LLC/CII Carbon Corp. had the big deal of the day, relatively speaking, with its $400 million issue of eight-year secured bonds. Brightstar Corp. priced $250 million of six-year notes, while American Reprographics Co. added a downsized and restructured $200 million offering of six-year notes.

CBS corporate parent National Amusements Inc. was heard by sources to be getting ready to hit the road next week with a $390 million bond deal. They also heard Canadian energy operator Paramount Resources Ltd. shopping around a Canadian dollar-denominated deal, while Franco-American telecommunications equipment maker Alcatel-Lucent will market a euro-denominated offering.

While those deals were joining the forward calendar, several others were dropping out due to the borrower's perception of unfavorable market conditions. Performance Foods Group Inc. had been trying to interest investors in its $550 million offering of seven-year notes, while Spencer Spirit Holdings Inc. had been hoping to borrow $150 million by issuing a tranche of secured notes.

Traders saw the new Rain CII deal firming by more than a point in the aftermarket and the new Brightstar bonds up modestly, while American Reprographics came to market too late for any trading.

Away from the new issues, traders described a mostly lackluster day of limited activity, with prices trending to the downside. They said people were cleaning things up before the holiday and predicted that Wednesday's session would be a snoozefest.

Statistical performance indexes remained in retreat.

Rain CII prices $400 million

Three issuers, each one pricing a single tranche of junk bonds, raised a combined $846 million on Tuesday.

The executions reflected the volatile circumstances that have held sway in the global capital markets since the week began, a debt capital markets banker said.

One of Tuesday's deals priced substantially wide of the original price talk, while another priced at the wide end of talk. Yet another deal was subjected to restructuring and covenant changes.

And the Tuesday session saw the third and fourth transactions to be postponed in the past four sessions.

Looking at the deals that cleared on Tuesday, Rain CII Carbon and CII Carbon priced a $400 million issue of eight-year senior secured notes (B1/BB-) at par to yield 8%, at the wide end of the 7¾% to 8% price talk.

Citigroup Global Markets Inc. was the left bookrunner. Goldman Sachs & Co. and Jefferies & Co. were the joint bookrunners.

The Kingwood, Texas-based calcined petroleum coke producer will use proceeds from the deal to repay debt.

Brightstar prices wide of talk

Elsewhere, Brightstar priced a $250 million issue of six-year senior notes (B1/BB-) at par to yield 9½%, 87.5 basis points beyond the wide end of the 8½% area price talk.

Jefferies was the left bookrunner for the debt-refinancing deal. Goldman Sachs, J.P. Morgan Securities LLC, Barclays Capital Inc. and Credit Suisse were the joint bookrunners.

American Reprographics downsizes, restructures

Finally, American Reprographics priced a downsized $200 million issue of 10½% six-year senior notes (B1/BB-) at 97.824 to yield 11%.

The coupon and yield came on top of price talk.

Bank of America Merrill Lynch, JPMorgan and Wells Fargo Securities were the joint bookrunners for the deal, which was downsized from $220 million.

In a restructuring of the deal, the maturity of the bonds was decreased to six years from eight years. Call protection was decreased to three years from four years. There were also covenant changes.

The Walnut Creek, Calif.-based provider of business-to-business document management will use the proceeds to repay and retire its existing senior secured credit facility, to pay swap termination costs and for general corporate purposes.

National Amusements deal ahead

With just one session remaining ahead of the four-day Thanksgiving holiday weekend in the United States, the forward calendar is much diminished from the $11 billion equivalent behemoth of just a week ago.

However there were new additions on Tuesday.

National Amusements will begin a roadshow on Monday in Boston for its $390 million offering of seven-year senior secured notes.

Barclays Capital has the books for the bank debt-refinancing deal.

Alcatel-Lucent's €500 million

Meanwhile, Paris-based Alcatel-Lucent is marketing a €500 million offering of five-year senior bullet notes (B1/B/).

The order books are expected to close on Wednesday.

Initial guidance on the deal is 8¾% to 9%, a market source in Europe said.

Goldman Sachs and Citigroup are leading the Regulation S-only offering.

Proceeds will be used to refinance debt.

Paramount brings C$250 million

Elsewhere, Paramount Resources will start a roadshow on Thursday for its C$250 million offering of senior notes due 2017 (Caa2/B+).

Scotia Capital and BMO Nesbitt Burns are the joint bookrunners. RBC Capital Markets is the co-lead manager.

The Calgary, Alta.-based oil and natural gas exploration, development and production company will use the proceeds to purchase and/or redeem its 8½% senior notes due 2013, to repay bank debt, for capital expenditures and for general corporate purposes.

Two issuers pull deals

Spencer Gifts LLC postponed its $150 million offering of six-year senior secured notes due to adverse market conditions, a market source said on Tuesday.

Wells Fargo Securities and UBS Investment Bank were the joint bookrunners for the deal, which was going to be used to refinance debt and to fund a dividend.

Also, Performance Foods Group withdrew its $550 million offering of seven-year senior notes due to adverse market conditions on Wednesday.

Credit Suisse, Wells Fargo Securities, Bank of America Merrill Lynch and Macquarie were the joint bookrunners for that debt-refinancing and dividend-funding deal.

Performance Foods and Spencer Gifts became the third and fourth prospective issuers to pull deals in the past four sessions.

To recap, Burlington Coat Factory Warehouse Corp. pulled its $500 million notes offering and its proposed $1 billion term loan from the leveraged markets last Thursday.

Then on Monday, Ship Finance International Ltd. suspended its $400 million public offering of non-callable 10-year senior notes due to weakening market conditions.

Pulled deals and choppy executions notwithstanding, dealers expect a big December in the primary market, a syndicate official said on Tuesday.

That expected heavy volume for the final month of this record-breaking year is somewhat subject to market conditions, the official conceded.

However, people are prepping deals now for what figures to be a busy post-Thanksgiving week, the sellside source added.

Rain CII rises in secondary

When the new Rain CII Carbon eight-year notes were freed for secondary dealings, a trader said the bonds had broken during the morning at 101 bid, 101¼ offered, well up from their par issue price.

Another trader said that later in the day, the Norwood, Texas-based calcined petroleum coke producer's new deal was "up a touch" on the session, pegging them at 100¾ bid, 101½ offered.

However, yet another trader saw the new bonds going out at 101 bid, 101½ offered.

Brightstar a bit better

A trader said that Brightstar's new six-year notes were being quoted around 100½ bid, 101 offered, "on the wide side" of the talk.

He said, however that he did not "know how real that is," dismissing it as "just a manager's quote."

Several other traders said that they had not seen any sign of the Miami-based wireless solutions company's new deal, which had priced at par.

Recent deals a mixed bag

One of the traders observed that "some of the [newly priced bonds] are hanging in there."

For instance, he said that Northern Tier Energy LLC/Northern Tier Finance Corp.'s 10½% senior secured notes due 2017 "did OK," as he quoted the issue at 101¼ bid, 101¾ offered, little changed from the levels it hit in aftermarket trading on Monday.

The Houston-based energy operator's $290 million issue had priced at par earlier that session and then firmed to around the 101 bid, 101¼ offered level, where they remained on Tuesday.

Also on the upside, a trader said he guessed that "people are eating a lot of Dunkin' Donuts," because the recent Dunkin' Brands $625 million of 9 5/8% notes due 2018 were at 101 1/8 bid, 101 5/8 offered - continuing to climb even a week after their initial dealings.

The Canton, Mass.-based donut shop and ice cream store franchiser's deal had priced on Nov. 15 at 98.5 to yield 9.9%.

The bonds immediately began climbing in the aftermarket over the next few sessions and had been quoted going home on Monday around 100½ bid, 100 5/8 offered, setting the stage for Tuesday's continued rise.

A trader said that ClubCorp Club Operations Inc.'s new 10% notes due 2018 had traded around 94¾ bid, 95¾ offered - not far from the 94.767 level at which the Dallas-based golf and country club operator's deal had come to market on Monday and below the 96 bid, 97 offered level at which they ended trading later that same session. However, he did see the new deal move up Tuesday to close a little above its issue price and its day's lows, at 95 bid, 95¾ offered.

A second trader saw the ClubCorp bonds offered at somewhere above the 95 level, but with no bid, "so they just drifted down" from Monday's close.

Also on the downside, a trader said that the recent Valeant Pharmaceuticals International 6 7/8% notes due 2018 "didn't do so well," quoting the bonds on Tuesday at 98¾ bid, 99 1/8 offered.

That was a little tighter than the 98 3/8 bid, 99½ offered level seen Monday but still down from the 99 bid, 99½ offered level seen when the bonds hit the aftermarket last week.

The Mississauga, Ont.-based drug maker's quickly shopped $1 billion offering - upsized from the originally announced $700 million - had priced late Thursday at 99.24 to yield 7%.

Secondary indicators slip

Away from the new-deal world, a trader saw the CDX North American Series 15 HY index dive by 1 3/8 points on Tuesday to close at 99 1/8 bid, 99 5/8 offered after having lost ½ point on Monday.

The KDP High Yield Daily index meantime retreated by 15 bps Tuesday to end at 73.69 after having fallen by 19 bps on Monday. Its yield rose by 6 bps to 7.45%, on top of Monday's 7-bps gain.

The Merrill Lynch High Yield Master II index fell by 0.34% on Tuesday versus its 0.026% easing on Monday. That left its year-to-date return at 13.701%, down from Monday's 14.089% and from the 2010 peak level of 15.602% recorded on Nov. 9.

Advancing issues trailed decliners for a third straight session on Tuesday by about a six-to-five margin, narrower than Monday's seven-to-five advantage for the losers.

Overall activity, represented by dollar-volume levels, rose by 41% on Tuesday after having fallen by 19% on Monday from the previous session's volume level.

However, a trader described the overall market as "pretty apathetic." He quipped that "there were more low-lights than highlights."

A second trader predicted that Wednesday would be brutally slow.

"Anybody who can disappear Wednesday will disappear, so it will be even less active than today was."

A case of nerves

A trader said that "the caution flag is up," with investors starting to get "nervous" about some segments of the market as "reality sets in, and the euphoria is off the rose."

For instance, he said that "there's a lot of nervousness" among investors buying coal company bonds, such as Peabody Energy Corp. and Arch Coal Inc.

"They're talking about demand for coal in China dissipating," which would be bad news indeed for the domestic coal industry since the Asian nation has now become the leading foreign market for coal mined in the United States.

He saw Peabody's bonds, like its 7 7/8% paper due 2026, easing to 109 bid from prior levels around 110 and beyond, while Arch's bonds, like its 8¾% notes due 2016, "went down just a little bit," although he called the latter "nothing significant. I don't know if it was the industry, or just the market."

OPTI Canada still struggling

Also in the energy sphere, a trader said he saw OPTI Canada's 7 7/8% notes due 2014 "go a little lower" on Tuesday, falling to 68 bid, 69 offered, which he called down 1½ points on the day.

Another trader saw OPTI's 8¼% notes due 2014 around that same area, quoting them at 69 bid, 70 offered. He said that "they just can't catch a [bid] yet," adding that he hasn't "seen them down at these levels in a long time," while also quoting the 7 7/8s at 68-69.

A market source at another desk meantime saw the 8¼% notes at 69 and the 7 7/8% notes at 681/4.

The company's bonds have been eroding since executives of the Calgary, Alta.-based oil-sands energy operator OPTI and its joint-venture partner, Nexen Inc., warned at an investor conference last week that their big facility at Long Lake, Alta., would produce less bitumen for distillation into usable light sweet crude oil next year than originally projected.

Dynegy down as deal dies

A trader saw Dynegy Inc.'s 7¾% notes due 2019 at a wide 66 bid, 69 offered, which he called down 1 point on the day, in the wake of the failure of Blackstone Group's $5.00-per-share takeover bid to gain the necessary shareholder support, causing the Houston-based power generating company to terminate its planned acquisition by Blackstone and seek other alternatives.

On Monday, the bonds had traded as high as 70 bid, though only in odd-lot trading, ending at a round-lot price of 67 bid.

A trader said that the Dynegy debt didn't trade "as much as I thought it would" on the news of the Blackstone deal's demise.

"I think part of why more didn't trade was that it was expected, but it wasn't unexpected," he surmised. "It didn't seem to raise too many eyebrows."

The takeover was first announced in August and at that time, New York-based private equity powerhouse Blackstone was offering $4.50 per share. Shareholders such as Carl Icahn and Seneca Capital vehemently opposed the transaction, calling the proposal undervalued.

Though Blackstone had originally said it wouldn't increase the offer, the investment firm did just that on Nov. 17 - when the shareholders were originally slated to vote on the bid. Shareholders were then given until Nov. 23 to digest the improved pricing, and management continued to affirm its belief that the sale was the right way to go.

Dynegy had been seeking a buyer for two years before the Blackstone deal came. Even once the offer was made, Dynegy had an opportunity to find better bids. But during its 42-day "go-shop" period, no others offers were found.

Dynegy said it would now "immediately engage interested parties, including Seneca Capital and Icahn Associates, who may have an interest in making an offer to acquire Dynegy," according to a company statement.

For his part, Icahn has already offered a $2 billion credit line.

Autos in reverse

In the autosphere, a trader saw Motors Liquidation Co.'s benchmark 8 3/8% bonds due 2033 down ½ point at 30¾ bid, 31¾ offered.

Another trader saw the bonds at 30½ bid, 31 offered, saying that he saw "decent volume" in the Detroit-based top U.S. carmaker's paper. He called the bonds down ½ point.

Those bonds had been issued by the company back when it was still General Motors Corp., which when it restructured subsequently off-loaded all of its profitable automotive operations onto the new General Motors Corp. while leaving the debt, other liabilities and any unprofitable, unwanted assets with the "old" GM, now renamed Motors Liquidation.

The bonds had recently been as high as the 37 region, but they then began trading down last week ahead of, and then after, the "new GM's" initial public stock offering, which establishes a valuation for the company that will determine the recovery that bondholders of the "old GM" will eventually see when their bonds are exchanged for stock.

GM domestic arch-rival Ford Motor Co.'s 7.45% bonds due 2031 meantime fell ½ point to 107 ¾ bid, 108¼ offered, well down from their recent highs around a 115 bid level.

A&P an exception to the rule

But a trader said that in contrast to the overall weak tone in the secondary market, "do you remember when everybody left A&P [the Great Atlantic & Pacific Tea Co. Inc.] for dead? Well, the bonds keep moving up."

He saw the Montvale, N.J.-based supermarket operator's 5 1/8% notes due 2011, which not too long ago were trading in the mid-high 60s and lower 70s after disappointing quarterly earnings, up to around 80½ bid, "the highest it's been in months."

He said that "when they sold real estate" - the company recently sold a half-dozen of its Pathmark locations in New York, New Jersey and Delaware in an $89 million sale-leaseback transaction - "people saw the company meant business," and the bonds recovered.

"So there are certain companies that are doing the right thing," he said.

Stephanie N. Rotondo contributed to this report

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