Integra, Radiation Therapy lead $1.6 billion primary; secondary strong as retailers rally

By Paul Deckelman and Paul A. Harris

New York, April 9 - A half-dozen new bond deals were heard by high yield syndicate sources to have come to market on Friday, closing out a fairly busy week in which an estimated nearly $7 billion of new paper was priced, including over $1.6 billion on Friday alone.

There was nary a well-recognized "big" name or a mega-deal in the bunch, in contrast to earlier in the week, when such familiar junk bond issuers as Ford Motor Credit Co. LLC and Freescale Semiconductor Inc. - each pricing $1 billion-plus offerings - were the dominant names.

Friday saw new deals price from Integra Telecom Holdings, Inc., which sold a downsized $475 million of six-year senior secured first-lien notes; from Radiation Therapy Services, Inc., which did $310 million of seven-year senior subordinated notes; from Western Express, Inc., which upsized a $285 million issue of five-year senior secured notes; from Patheon Inc., with a $280 million seven-year secured bond offering; from American Residential Services LLC/ARS Finance Inc., which came to market with an upsized $164 million tranche of five-year secured paper; and from NFR Energy LLC, which chimed in with a $150 million add-on to its existing 9¾% senior notes due 2017.

Most of the day's new issuance came late in the session, limiting their aftermarket activity. However, traders - who saw the overall market firm on Friday - estimated that the new paper firmed pretty much across the board.

Away from new deals trading around, traders saw the secondary market predominantly firm. They noted some upside movement in bonds of retailers like Bon-Ton Department Stores Inc. and Neiman Marcus Group.

Primary raises $1.6 billion

Half a dozen issuers, each pricing a single tranche of junk, raised slightly more than $1.6 billion during Friday's primary market session.

Although the pace of the primary market remains brisk, it is difficult to get invested and remain so, a high-yield mutual fund manager lamented on Friday.

That's because so much of the new issue activity has issuers rolling investors out of old debt securities and into new.

Meanwhile, demand for new paper is sufficiently intense that at the end of the day you wind up less invested than you were at the start.

Allocations are bad for investors holding the old bonds, and worse for those who are new to a given name, the fund manager said.

In order to stay invested, it becomes necessary to contemplate deeper levels of risk, the source explained.

"In the morning you're calling your salesman and saying 'I can't believe you're bringing such a crummy deal,'" the manager said.

"In the afternoon you're calling back and saying 'I can't believe my allocation was so bad!'

"That's the kind of market this is."

Integra downsizes

During the Friday session, Integra Telecom Holdings, Inc. priced a downsized $475 million issue of six-year senior secured notes (B2/CCC+) at par to yield 10¾%.

The yield printed on top of the price talk.

Deutsche Bank Securities Inc., Goldman Sachs & Co., Jefferies & Co. and Morgan Stanley & Co. Inc. were joint bookrunners for the bank debt refinancing.

Radiation Therapy prices at tight end

Meanwhile, Radiation Therapy Services, Inc. priced a $310 million issue of 9 7/8% seven-year senior subordinated notes (Caa1/CCC+) at 99.371 to yield 10%.

The yield printed at the tight end of the 10% to 10¼% yield talk. The reoffer price came rich to discount talk of 1 to 2 points.

Wells Fargo Securities, Bank of America Merrill Lynch and Barclays Capital Inc. were joint bookrunners.

Proceeds will be used to refinance existing debt, as well as to fund ongoing working capital and for other general corporate purposes, including acquisitions.

Western Express restructures deal

Western Express, Inc. priced a restructured $285 million issue of 12½% five-year senior secured notes (Caa1/B-) at 94.735 to yield 14%, in line with price talk.

The maturity was decreased to five years from eight years. Call protection was decreased to three years from four years.

JP Morgan ran the books.

Proceeds will be used to repay debt and for general corporate purposes, including funding capital expenditures in connection with a planned tractor fleet upgrade.

Patheon brings $280 million

Patheon Inc. priced a $280 million issue of seven-year senior secured notes (B1/B+) at par to yield 8 5/8%.

The yield printed in the middle of the 8½% to 8¾% price talk.

J.P. Morgan Securities Inc. was the left bookrunner. UBS Investment Bank was the joint bookrunner.

Proceeds will be used to repay debt and for general corporate purposes.

American Residential sells $165 million

American Residential Services LLC and ARS Finance, Inc. priced a $165 million issue of 12% five-year senior secured second-lien notes (B2/B) at 99.541 to yield 12 1/8%, on Friday.

The yield printed 25 basis points wide of the 11¾% area price talk.

UBS Investment Bank is the left bookrunner for the Rule 144A and Regulation S for life offering. Jefferies & Co. is the joint bookrunner.

Proceeds will be used to refinance the company's second-lien term loan and to repay a portion of its revolver.

NFR adds on $150 million

NFR Energy LLC and NFR Energy Finance Corp. priced a $150 million add-on to its 9¾% senior unsecured notes due Feb. 15, 2017 at 98.754 to yield 10%.

The yield printed at the wide end of the 9¾% to 10% price talk.

UBS Investment Bank was the left bookrunner. Bank of America Merrill Lynch, J.P. Morgan Securities Inc. and BNP Paribas Securities Corp. were the joint bookrunners.

Proceeds will be used to repay the Houston-based oil and gas exploration and development company's outstanding senior secured revolver, to fund land acquisitions and for general corporate purposes.

The original $200 million issue priced at 98.733 to yield 10% on Feb. 9, 2010. That issue was downsized from $250 million.

$6.68 billion week

With Friday's business in the tally, the April 5 week in the new issue market saw companies raise $6.68 billion in 15 junk-rated dollar-denominated tranches.

That tops the previous week's $5.48 billion.

However it is dwarfed by the March 22 week's record-setting $12.34 billion.

The week ahead

Looking to the week ahead, Rosetta Resources Inc. is expected to price its $200 million offering of eight-year senior notes (expected ratings Caa1/B+).

JP Morgan is the left bookrunner. BNP Paribas and Wells Fargo Securities are joint bookrunners.

Also Merge Healthcare Inc. is expected to price its $200 million offering of five-year first-lien senior secured notes via Morgan Stanley.

Meanwhile, Chinese property developer Country Garden Holdings Co. Ltd. is marketing a benchmark offering of dollar-denominated seven-year senior notes (Ba3/BB-), via Goldman Sachs and JPMorgan.

And Spain's Obrascon Huarte Lain SA will begin a Europe-only roadshow on Monday for its benchmark-sized euro-denominated offering of five-year senior unsecured notes (expected ratings Ba1/BB-), a Regulation S deal being led by Santander, Citigroup, Credit Agricole, RBS and SG Corporate & Investment Banking.

Apart from those, RBS Global, Inc., the parent of Milwaukee-based power transmission and water management products firm Rexnord, is expected to bring an offering of unsecured debt in the week ahead, according to a buy-side source.

The company is tendering for $795 million 9½% senior unsecured notes due 2014 issued in 2006, $196.27 million of 9½% senior unsecured notes due 2014 issued in 2009 and $79.002 million of 8 7/8% senior unsecured notes due 2016.

The size of the deal will depend upon the results of the tender.

However the buy-side source expects the tender to go well.

Credit Suisse Securities, the dealer manager for the tender, will likely be the bookrunner for the bond deal, the source added.

Also possible for the week ahead is Kemet Corp., the buy-sider added.

The Greenville, S.C.-based manufacturer of capacitors postponed its $275 million offering of eight-year senior notes due to unfavorable market conditions in February.

Bank of America Merrill Lynch was the bookrunner for the deal that was postponed.

Proceeds were to have been used to repay substantially all outstanding debt under existing credit facilities and to fund a tender for a portion of its 2¼% convertibles due 2026.

Radiation Therapy roars upward

When Radiation Therapy Services' new 9 7/8% senior subordinated notes due 2017 were freed for secondary dealings, a trader saw the bonds firming right out of the gate, first to 100½ bid, versus their par issue price, and then to 100¾ bid. He later saw the bonds ending at 101 bid.

Another trader said that the new bonds of the Fort Meyers, Fla.-based provider of radiation treatments for cancer patients had moved up to 101 bid, 102 offered at the close.

Lamar Media moves up

A trader saw Lamar Media Corp.'s 7 7/8% senior subordinated notes due 2018 trade up to 1013/4, where the bonds were left bid.

A second trader quoted them at 101½ bid, 101¾ offered.

That was well up from the par level where the Baton Rouge, La.-based outdoor advertising company's $400 million issue had priced late Thursday.

Senior Housing seen better

A trader said that Senior Housing Properties Trust's new 6¾% senior notes due 2020 were trading at 99¼ bid, up from the 98.926 level at which the Newton, Mass.-based senior living properties REIT had priced its $200 million issue - upsized from $150 million - of split-rated (Ba1/BBB-) bonds to yield 6.9%.

New deals seen firmer

Overall, traders said that most of the new-deal paper which had come over the past several sessions was trading up. For instance, Freescale Semiconductor's 9¼% senior secured first-lien notes due 2018 were trading at 101½ bid, a trader said. The Austin, Tex.-based computer chip manufacturer had priced $1.38 billion of those bonds - dramatically upsized from the originally shopped $750 million - on Wednesday at par. The bonds had then bounced around in a narrow band between par and 101 for the next few sessions.

"All of the other new stuff was up" a trader said - even Western Express' 12½% senior secured notes due 2015, $285 million of which had priced at a deeply discounted 94.735 to yield 14%. He saw the issue being quoted around 96-97.

However, he said that a few new deals lagged, notably Stratus Technologies Bermuda, which stayed around 96-961/4, not far from 96.41, where the $215 million deal had priced last Wednesday to yield 13%.

Market indicators show strength

Among bonds not connected with the new-deal market, a trader saw the CDX Series 14 index up by ¼ point on the session Friday, pegging it at 99½ bid, par offered, after having also gained ¼ point in Thursday's dealings. The index thus ends the week well up from the 98¼ bid, 98¾ offered level at which the index had closed out the abbreviated session to end the preceding week, on April 2.

The KDP High Yield Daily Index meantime gained 4 basis points on Friday to end at 72.21, after having risen by 6 bps on Thursday, while its yield narrowed by 1 bp to 7.77%, after having tightened by 3 bps the session before. The KDP index thus improved modestly from its week-earlier levels of a 72.03 reading and 7.85% yield.

The widely followed Merrill Lynch High Yield Master II Index firmed to a closing level of 5.435% on Friday - a new peak level for 2010 -- from 5.282% on Thursday and from 4.986% the preceding Friday.

Advancing issues led decliners on Friday, widening their bulge from a few dozen issues to a more respectable advantage of better than seven to six.

Overall market activity, represented by dollar-volume levels, was off by almost 14% on Friday from levels seen the previous session.

A trader said that "volume was low all this week. Kids were on vacation, so a lot of people took off."

He also noted that with the Masters professional golf tournament going on in Augusta, Ga., "a lot of people were just watching golf all day."

Another trader said that overall, "the market was okay - it felt good. There was a fair amount of stuff going on, although that sort of died down as we got closer to the weekend."

"The market was fairly firm for most of the day," a third trader said. Meanwhile, "the new issues just keep rolling on."

Retailers are rallying

Among specific issues, a trader said that bonds of retailing names "continued strong," helped by improved sales in the face of a recovering economy.

"Look at Limited, Dollar General, and even Bon-Ton," he said, referring to Limited Brands, Inc., Dollar General Corp. and Bon-Ton Department Stores Inc.," calling the latter company's bonds "the perfect story."

The York, Pa.-based retailer announced on Thursday evening that in the five-week period that ended April 3, same-store sales - that is, sales at stores open at least one year, considered a key retailing industry economic performance metric - showed an 11.4% gain over March 2009 levels. Bon-Ton said that overall sales, including those generated at stores open less than a year, rose 11.2% to $272.4 million, versus a year-earlier figure of $245 million. Sales were strongest in shoes, children's clothing, sportswear and accessories.

The news gave a boost to its 10¼% notes due 2014.

"A couple of weeks ago," he said, "those bonds were trading at 97 or 98 [bid]. We traded bonds [on Thursday] at 1001/2- 1003/4, and today, they were 101 bid.

"All the retailers," he continued, "were strong across the board."

He said that Rite Aid Corp.'s bonds "continued strong" on the recent debt-cutting efforts by the Camp Hill, Pa.-based drugstore operator. "Limited bonds are up. It's like the world is wonderful, all of a sudden."

He further said that the surge extends even beyond the big, familiar names like Rite Aid to "lesser known companies," such as Chesterfield, Mo.-based branded apparel maker and retailer Kellwood Co.'s 7 5/8% subordinated notes due 2017

"Two weeks ago," he declared, "you couldn't get a bid on the bonds. Now, people are anticipating good earnings, and the bonds went from 44-45 to 491/2-51½ - if you can find them."

Higher-end Dallas retailer Neiman-Marcus Group's 10 3/8% notes due 2015 were seen trading well above the 104 mark, a gain of about 1/2, presumably helped by strong numbers released on Thursday. Neiman said at that time that total revenues for March were $341 million, up 11% from $307 million in March 2009, and comparable revenues for the month were $337 million, up 9.6% from $307 million last year.

In terms of liquidity, the company's cash balance as of April 3 was approximately $500 million compared to $193 million in the prior year, and there were no borrowings outstanding under its $600 million asset-based revolver.

Massey paper still struggles following blast

A trader said that Massey Energy Co.'s 6 7/8% notes due 2013 "have been fairly active" on the week in the wake of the disastrous explosion on Monday afternoon at a Massey-owned mine in rural West Virginia, which saw

25 miners killed and four others missing despite extensive search and rescue efforts; they are feared dead as well.

He noted that the bonds had begun the month around 1011/2. By Tuesday, the first full trading day after the blast, the notes had retreated to around the par level, and "they dropped throughout the week," down to around a 98-handle. The bonds firmed a little off their lows on Friday, he said, going out in a 991/4- 99¾ context, but overall, he said it still "looked like they dropped" about 4 points, give or take, from pre-accident levels around 1011/2-102.

Market sources had seen the Richmond, Va.-based coal company's bonds fall as low as 96 bid in small-lot trades during the week, before coming back up to around or just under par.

"They were down a couple of points, but probably rebounded a couple from their lows," the trader said.

At another desk, the bonds were quoted going home on Friday at just over 99, giving up the more than 1 point gain off the lows seen on Thursday.

On Friday, Massey - considered the fourth-largest U.S. coal operator by revenues - said that it plans to produce more coal from other mines to help recover from the business damage caused by the deadly explosion.

Massey said in a regulatory filing that its Upper Big Branch mine - which has been shut down indefinitely pending completion of the rescue and/or recovery efforts and then after that what is expected to be a lengthy federal investigation of the mining disaster - had been expected to produce 1.6 million tons of coal over the final nine months of the year. The company said that it can likely make up for that lost production by transferring miners from Upper Big Branch and spare equipment to other mines.

Massey projected in the filing that at an anticipated price of $91 per ton for the rest of the mine's 2010 output, some $146 million in expected revenues would not be realized by the company.

Pickup in Blockbuster activity

A trader said that Blockbuster Inc.'s 9% notes due 2012 were "a little more active" than they had been on Thursday, with "a 23-handle," up slightly from the 22ish levels at which the Dallas-based movie-rental company's senior subordinated bonds had been quoted at on Thursday, when no real trading in the credit had been seen.

Market participants were digesting Thursday's news that billionaire Carl Icahn had once again reduced his holdings in the company's stock. According to a regulatory filing, Icahn - who before last week had owned 17% of the company's class A stock, cutting that big position down to just 3.77% - cut that stake further, to 3.5%. And he completely liquidated what had formerly been his 5.65% stake in Blockbuster's class B stock.

GM bonds still busy

A trader said that General Motors Corp.'s bonds were still "fairly active," culminating a week which saw the Detroit-based top U.S. automaker's benchmark 8 3/8% bonds due 2033 slide into the middle 30s from around 37 earlier in the week, slipping as GM at midweek reported a $4.3 billion loss for the 2009 fiscal period running from its July 10 emergence from Chapter 11 until the end of the year.

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