Production Resources, Masonite, Pittsburgh Glass deals top off $5 billion week, new bonds gain

By Paul Deckelman and Paul A. Harris

New York, April 8 - The high yield primary market put the cap on a week which saw some $5 billion of issuance with a series of well-received deals on Friday.

Production Resources Group Inc., which provides equipment and services to the concert and live-events industries, priced $400 million of eight-year notes.

Auto glass producer Pittsburgh Glass Works LLC priced an upsized issue of five-year senior secured notes.

And Masonite International Corp., a producer of doors for residential and commercial applications, came to market with an upsized $275 million issue of 10-year notes.

When the three deals moved into the secondary market, traders saw all of them having pushed strongly higher after having all been issued at par, pushed up by the unending demand for paper generated by continued inflows of money needing to be put to work.

A fourth deal - an issue of five-year senior secured notes from print and publishing company Sheridan Group - also priced, though at a steep discount to par in order to get the deal done. It did not make an appearance in the aftermarket.

While those deals were pricing, several others were joining the forward calendar, including a big secondary offering of payment-in-kind notes issued by communications satellite company Intelsat (Luxembourg) SA, as well more conventional deals from American Rock Salt Co. LLC, Commercial Vehicle Group and Spencer Gifts.

In the secondary market, Expedia Inc.'s bonds fell on plans to spin off its TripAdvisor unit. Catalyst Paper Corp. firmed, though on no news. Market indicators were generally firm on the both the session and the week.

Franshion sells $500 million

The primary market saw five issuers, each one bringing a single tranche of notes, raise $1.63 billion on Friday.

Franshion Development (China) Ltd. priced a $500 million issue of 10-year notes (Ba1/BB+) at par to yield 6¾%.

The yield printed tighter than price talk.

HSBC, Royal Bank of Scotland plc, Deutsche Bank AG, Singapore Branch and Nomura International plc were the lead managers.

The Hong Kong-based real estate company will use the proceeds for working capital, to refinance outstanding debt, capital expenditures and other general corporate purposes.

Production Resources prices

Production Resources Group priced a $400 million issue of eight-year senior notes (B3/B-/) at par to yield 8 7/8%, in the middle of the 8¾% to 9% price talk.

Merrill Lynch, Goldman, Sachs & Co., Barclays Capital Inc., Deutsche Bank Securities Inc. and Wells Fargo Securities, LLC were the joint bookrunners.

Proceeds will be used to repay the company's existing credit facilities, to fund acquisitions and for general corporate purposes.

Pittsburgh Glass' massive book

Elsewhere, Pittsburgh Glass Works priced an upsized $325 million issue of five-year senior secured notes (B2/B+) at par to yield 8½%.

The yield printed at the tight end of the 8½% to 8¾% price talk. The size was increased from $300 million.

Credit Suisse Securities (USA) LLC; Merrill Lynch and UBS Securities LLC were joint bookrunners.

Proceeds will be used to refinance debt, to pay a dividend to shareholders and for general corporate purposes.

The deal played to a massive order book, according to market sources. The issue traded up three points in the secondary market.

Masonite upsized

Masonite priced an upsized $275 million issue of 10-year senior notes (B3/B+) at par to yield 8¼%, at the tight end of price talk which had been set in the 8 3/8% area.

Merrill Lynch, Wells Fargo Securities, LLC, Deutsche Bank Securities Inc.

RBC Capital Markets, LLC were the joint bookrunners.

The Mississauga, Ont.-based door manufacturer plans to use the proceeds from the notes sale for general corporate purposes, which may include funding future acquisitions and a return of capital to shareholders.

Sheridan brings three-years

Finally, Sheridan Group priced a $150 million issue of three-year senior secured notes (B3/B-) at 94 to yield 15.059%.

The coupon and reoffer price came on top of talk. The yield came in line with yield talk of 15.06%.

Jefferies & Co., Inc. ran the books for the debt refinancing.

$5.73 billion week

Counting Friday's deals, the primary market cranked out $5.73 billion of issuance in 18 tranches during the week just completed.

Year-to-date, issuance now tops the $100 billion mark: $100.66 billion in 238 junk-rated dollar-denominated tranches.

Commercial Vehicle's roadshow

Looking to the week ahead, the new deal calendar fattened on Friday.

Commercial Vehicle Group, Inc. will start a roadshow on Monday for its $225 million offering of eight-year senior secured notes.

Credit Suisse Securities (USA) LLC has the books for the debt refinancing and general corporate purposes deal.

American Rock Salt marketing

Also bringing a secured deal is American Rock Salt Co. LLC.

The company will conduct an investor roadshow during the week ahead for its $200 million offering of seven-year second-lien senior secured notes (B3/CCC+).

An investor call is set for 10:30 a.m. ET on Monday.

Morgan Stanley & Co. has the books.

The Retsof, N.Y.-based producer of highway deicing rock salt plans to use the proceeds to repay debt at the holding company and to fund a dividend.

Spencer Gifts plans six-years

Yet another secured deal was unveiled by Spencer Spirit Holdings, Inc. in conjunction with Spencer Gifts LLC and Spencer Halloween Superstores LLC.

The New Jersey-based specialty retailer plans to begin a roadshow on Monday for a $150 million offering of six-year senior secured notes (expected ratings B2/B).

Wells Fargo Securities LLC and UBS Investment Bank are the joint bookrunners.

Proceeds will be used to repay debt and make a distribution to shareholders.

Dometic to sell €200 million

Dometic Corp. will begin a European roadshow on Monday for its €200 million offering of eight-year senior PIK notes (expected ratings Caa1/CCC+).

Goldman Sachs International is the bookrunner for the Rule 144A and Regulation S offering.

Proceeds will be used as part of the financing for the acquisition of the Dometic Group by funds advised by EQT V Ltd.

Opodo expected

Pan-European travel agency operator Opodo is expected to bring a €175 million offering of high-yield notes to market during the week ahead.

Goldman Sachs International and Credit Suisse will be the bookrunners.

Proceeds will be used to help fund the acquisition of Opodo by Permira Advisers LLP and AXA SA from Amadeus IT.

Intelsat in secondary sale

Finally, dealer Morgan Stanley & Co. plans to market an $854 million secondary offering of Intelsat (Luxembourg) SA's 11.5%/12.5% senior PIK election notes due Feb. 4, 2017 to institutional investors during the week ahead.

The Rule 144A for life notes originally priced in a $2.23 billion issue during June 2008.

The offering is being made on behalf of one of the sponsors.

No proceeds will go to Intelsat.

Market firm but slow

A trader said that "accounts were acting like there were a lot more deals getting priced than there were. It was kind of hard to get a hold of people.

"It was a strong day, but it was kind of quiet."

"It got really quiet this afternoon," another trader said, "but a couple of [the new issues] traded up really well."

He suggested that the bonds may have moved up, in part, because "the coupons are not 6% coupons."

The underwriters," he said "don't want to take a chance on a hung-up deal, so they're pricing them to move."

The people buying the deals "want to get some upside, so they're demanding better pricing."

Pittsburgh pops

A trader said that the new five-year senior secured notes from Pittsburgh Glass Works moved up smartly to around 103¼ bid, 103¾ offered after the upsized $325 million offering priced earlier in the session at par.

It was his impression that "they didn't get posted on a lot of trades - they went right to 103 bid on the break, and then they were in those same markets, basically a [103-104] context, before going out in that 1031/4-103¾ area.

A second trader saw the bonds bid as well at 1031/4-104.

Production Resources powers up

A trader said that Production Resources Group's eight-year notes "went right to a 103 bid shortly after the break," but then said that he never saw a two-sided market after that, "so I'm not sure how far they got."

The $400 million issue had priced late in the session at par.

A second trader saw the Armonk, N.Y.-based live-event services company's new issue get as good as 102½ bid, 103½ offered.

Masonite moves up

A trader saw Masonite's new 10-year notes at 102 bid, 102½ offered.

The Mississauga, Ont.-based maker of commercial and residential doors had priced its $275 million offering - upsized from the originally shopped $250 million - earlier at par.

A trader at another desk said the Masonite offering was among "a couple of deals [that] traded up real well," pegging the new bonds above 102.

Masonite, said yet another trader, mostly traded with a 102 handle. "It sounded like the book was pretty wild, and the underwriter was scrambling to get bonds back in the aftermarket." He said the bonds were going out in a 102-102½ context.

Sheridan a no-show

But the smallish $150 million deal from commercial printing and publishing company Sheridan Group was the only one of the day's new deals not to make it into the aftermarket.

A trader said that the after pricing at 94 to yield north of 15%, he thought "the underwriters are making them 95-96."

However, he added that "they're very closely held - and you're not going to see any trading in that one."

"That came?" another trader asked, incredulously.

Seeing the low price needed to push the yield up sufficiently to get the deal done, he observed drily "that sounds like a fun deal."

He saw no markets in the issue after it priced.

Noting that it is only a three-year deal, he opined that "there's a short fuse on 'em, so they've got to fix it, or they're going to have to go through this again in a couple of years.

"It's tough for a company to have to operate that way - it's like having a gun to your head."

Pricing pushes deals up?

A trader said that with the exception of the Sheridan deal, all of the day's new issues "are going. They're up a couple of points - or more - in the secondary."

He thought that "the orders in the books seemed to be pretty large."

He raised the possibility that the deals were moving up so strongly because they had been too cheaply priced - and not just the Sheridan deal.

He opined that the deals, like Masonite and Pittsburgh Glass, and especially the latter, "were B2/B+ and came at 8½%. But B2/B paper is coming at 7½%. So I don't know why they had to price it that cheap, and its trading at close to 104. It doesn't make sense.

"So stuff that probably couldn't have gotten done in the past month is coming to market and it's blowing out because there's nothing else to buy."

Junk players fall into The Gap

A trader said that some high yield players were dabbling in the new deal that priced Thursday from San Francisco-based clothing retailer Gap Inc.

The $1.25 billion of 5.95% 10-year notes was priced at 99.65 to yield 5.997% for a yield of Treasuries plus 245 basis points. On Friday, he said the spread had narrowed to about 230 bps.

The company used to be a junk issuer, but after several upgrades, is now split-rated (Baa3/BB+/BBB-).

With the deal priced and trading on spread, the trader said that "initially, the high-yield guys didn't want to do it, but there seems to be a mix [now] and it's trading with half high-yield guys and half high-grade guys."

Thursday deals hold gains

Among the deals that priced on Thursday, AEP Industries Inc.'s 8¼% notes due 2019 "are still up there," a trader said, seeing the South Hackensack, N.J.-based plastics packaging maker's bonds trading around 101 7/8 bid, 102 1/8 offered, "a little bit higher" than where that $200 million issue had traded on Thursday after pricing at par.

In Thursday's dealings, AEP had gone home around 101¼ bid, 101¾ offered.

A trader said that he had not seen much doing in Mirabela Nickel Ltd.'s 8¾% notes due 2018, an upsized $395 million of which had priced at par on Thursday and then traded up later that session to 102¼ bid, 102¾ offered.

On Friday, the trader said, the bonds had been bid at 102¾ bid, but with no right side, although he estimated that the Australian metals producer's bonds could be "at their highs" around 102¾ bid, 103¼ offered.

A second trader said the bonds traded at 103 on Friday, and probably left off at 102¾ bid, 103¼ offered.

As for deals from earlier in the week, trader said he had "not seen a market all day" in the $200 million offering of 8¾% senior secured notes due 2018 from Oppenheimer Holdings, Inc. The New York-based financial services company's bonds priced at par on Wednesday and then "kind of took off after the pricing," firming first to 102¾ bid, and then on Thursday to 103 bid, 104 offered.

A trader saw Aramark Holding Corp.'s 8 5/8% PIK toggle notes due 2016 "still hanging around" a 102 5/8-103 level.

The Philadelphia-based food service and uniform supply company's $600 million offering of paper priced at 99 bid this past Monday to yield 8.874%, moved up above 101 bid on Tuesday and above 102 on Wednesday, and has stayed up there since then.

A trader said that Sappi Papier Holding GmbH's $350 million of 6 5/8% notes due 2021 "looked like they might have backed off a touch." While he saw the South African paper company's Wednesday-priced deal offered at 1011/2, "that was the bid side going out [Thursday]. So maybe there was no follow through there, and it got a little ahead of itself."

"Everybody is trying to figure out where is the best value in the stuff you can buy - and it's really like splitting hairs."

Indicators firm on day, week

Away from the new-issue realm, a trader saw the CDX North American Series 16 HY index unchanged on Friday to end at 102¾ bid, 102 7/8 offered, after having lost 1/8 point on Thursday.

It thus ends the week up only marginally from the 102 9/16 bid, 102 13/16 reading seen at the close of trading the previous week, ended Friday, April 1.

However, the KDP High Yield Daily Index gained 3 basis points on Friday to close at 76.02 , on top of the 5 bps rise seen on Thursday. Its yield narrowed by 1 bp to 6.52%, after having come in by 3 bps on Thursday.

The index thus improved from the previous Friday's level of 75.82, with a yield of 6.62%.

The Merrill Lynch High Yield Master II index rose by 0.06% on Friday, on top of Thursday's 0.095% gain. It was the eighth consecutive session-over-session rise. That lifted its year-to-date return to 4.62% - a new peak for 2011, up from Thursday's 4.557% level, the previous high for the year.

On the week, the index rose by 0.532% from the previous Friday's finish at 4.067%.

Advancing issues also held their lead over decliners for an eighth straight session on Friday, while their winning margin widened out to better than six to five, versus the couple dozen issues out of the nearly 1,300 traded that had separated the two groups on Thursday.

Overall market activity, as measured by dollar-volume levels, jumped by 64% on Friday, after having fallen by 19% on Thursday from the prior session's levels.

Even so, a trader said that things seemed pretty quiet - he joked that "everyone was watching the Masters," although, in fact, the televised broadcast of the golf tournament was more of a late-afternoon distraction. Earlier, he said, it was a case of the usual Friday lassitude settling over the market and keeping much from happening in the absence of any compelling reason to do anything.

Perhaps in explanation of why the volume numbers were inflated while so little seemed to be going on, he said that "with the exception of some Catalyst paper trading today, and some TXU, everything else" seems to have been "five-B" paper appealing mostly to crossover players rather than pure high-yield accounts.

He said that he had been seeing "some large accounts that have two sides to their investment activities, a high-yield side and a high-grade side, I'm seeing the high-grade side trying to reach down for some of that crossover stuff that looks like it might actually become investment grade somewhere shortly down the road."

On the other side of the equation, he said, "I'm seeing guys that really wouldn't [normally] buy CCC paper, buying it because they sort of have to," for lack of anything else really for sale.

He suggested that "the guys that are almost looking at zero [%] yields in high grades are looking at crossover stuff, so they can get some yield and some spread.

"It's just more of the same - too much cash and not enough paper."

Expedia excoriated

Among specific names, a trader saw "some activity going on in Expedia," in response to the Bellevue, Wash.-based online travel services company's announced plans to split the company in two, either by spinning off its TripAdvisor, which accounts for approximately 11% of the overall company's revenue, to shareholders or else by reclassifying Expedia's stock

While the move proved popular among equity players - Expedia's Nasdaq-traded shares jumped $2.90, or 12.95%, to end at $25.30 on volume of 41.7 million shares, more than five times the norm - bondholders were not pleased.

The trader saw Expedia's 5.95% notes due 2020 trading between 98 and 98¾ bid, down from 101 on Thursday and earlier in the week.

He also saw company's 7.456% notes due 2018 having fallen to the 110½ area from pre-news levels around 112¾ bid, 113 offered

Rite Aid retreats

Traders saw the bonds of Rite Aid give back some of the gains of ½ to ¾ point which the Camp Hill, Pa.-based third-biggest U.S. drugstore chain operator had notched on Thursday in response to fiscal 2011 fourth-quarter and full-year results that were about steady from the previous years, while containing some positive messages about the company's debt and liquidity picture.

A market source said "they gave up a little of what they gained," seeing the 7.70% notes due 2027 - which had traded at a 67-68 context on Wednesday and which then moved up to 69-70 on Thursday - having come back in on Friday, going out at 68½ bid, 69½ offered.

At another desk, a market source saw Rite Aid's 8 5/8% notes due 2015 down ¼ point on the day at 92 bid, after having gained nearly a full point on Thursday.

A second source there said the notes were down ¾ point at 92.

Rite Aid on Thursday reported revenues of $6.5 billion, as same-store sales trends improved. Still, revenues were about the same as the previous year.

The net loss was slightly lower year over year, down from $208.4 million, or 24 cents per share, the year before.

For the fiscal year, revenues fell just a tad to $25.2 billion from $25.7 billion. The company said the declines were due in part to fewer stores being open than in the previous filing period.

Net loss was also wider at $555.4 billion, versus $506.7 billion the year before.

On their conference call following the release of the numbers, Rite Aid executives noted that the company had cut its net debt levels by almost $150 million from the previous year, and said the company ended the fiscal year with about $1 billion of liquidity, most of it in borrowing availability

Catalyst climbs

From deep in distressed-debt territory came word that Catalyst Paper's bonds "moved up on the day," a trader said, seeing the Richmond, B.C.-based paper manufacturer's 7 3/8% notes due 2014 around 74 bid, which he said was up about 3 points on "decent volume," although he was unaware of any news that might explain investors' interest in those bonds.

"So that had a good showing today."

A second trader said he was "not sure why Catalyst popped up, but they seemed to gap up and down" on the 7 3/8s.

"They traded down earlier in the week, and now they're back up." He suggested that after the bonds initially dropped on investors anticipating there might be bad news coming on the company, they went back up as people wanted to buy bonds on the cheap since there is ample cash to be put to work. He saw the bonds ending at 74 bid.

A market source said that more than $13 million of the bonds traded in round-lot transactions, making Catalyst one of the most active purely junk issues - on other words, not a "five-B" type crossover credit. While the bonds initially eased slightly from Thursday's closing level around 71 bid, by the day's end, the source saw them trading back up in a 73-74 context, calling it a 3 point gain.

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