Berry Plastics prices upsized floater deal; Valassis up on positive guidance; Moody's knock drops Aleris

By Paul Deckelman and Paul A. Harris

New York, April 16 - Berry Plastics Corp. successfully priced an upsized offering of floating-rate senior secured notes on Wednesday; after those bonds were freed for secondary activity, traders said they firmed by about a point or so. The company's already outstanding notes were also quoted better on the day.

Another upsider was Valassis Communications Inc., whose bonds and shares rose as the Livonia, Mich.-based publisher of newspaper advertising inserts issued earnings and revenue guidance for the first quarter that topped the consensus expectations of Wall Street analysts.

From out of the distressed-debt precincts came a pair of winners, each given a boost, traders said by their could-have-been-worse quarterly results - Burlington Coat Factory Warehouse Corp. and Portola Packaging Inc.

On the downside - a relative rarity, with the junk market generally better - was Aleris International Inc., whose bonds retreated in active dealings after Moody's Investors Service lowered its outlook on the Beachwood, Ohio-based aluminum processing company's prospects.

Back in the primary sphere, roadshow details were emerging on Macrovision Corp.'s $150 million junk bond offering, with the marketing campaign heard by high yield syndicate sources to be kicking off early next week.

On Wednesday sources were marking junk higher by 1 to 1½ points.

"The market is very strong right now," commented a source from a high yield mutual fund.

"There are buyers everywhere.

"It's up today; there is plenty of stuff up a point.

"If people have 10% cash right now they're afraid because they need to get it to work. The market is moving on them."

The buy-sider remarked on the suddenness of this seeming turn in the high yield.

"The risk trade is coming back," the source said.

"There are long-only buyers in the market.

"But it remains to be seen whether this comeback is real."

Berry Plastics upsizes

In the primary market Berry Plastics priced an upsized $680.6 million issue of three-month Libor plus 475 basis points first priority floating-rate senior secured notes due Feb. 15, 2015 (B1/BB-) at 94.25, in the middle of price talk that had been set at 94 to 94.5.

Banc of America Securities, Goldman Sachs and Lehman Brothers ran the books for the bridge refinancing, which was upsized from $530.6 million.

A syndicate source commented that the deal had been very well subscribed.

"Berry is a seasoned issuer with a great following," the source asserted, adding that the secured structure of the notes is very appealing in the current market environment.

Another source close to the deal spotted the new notes trading at 95¾ bid well after the Wednesday close.

Macrovision starts Tuesday

From elsewhere in the primary market Prospect News learned from a company source that Macrovision Corp. will start a roadshow on Tuesday for a $150 million offering of senior notes.

JP Morgan and Merrill Lynch will lead the deal.

The financing also includes a $500 million credit facility and about $965 million in cash and cash equivalents.

Proceeds will be used to help fund the acquisition of Gemstar-TV Guide International, Inc. in a cash and stock transaction valued at $2.8 billion.

At first, Macrovision planned on getting $800 million of debt for the Gemstar-TV Guide purchase, comprised of a $650 million term loan B and a $150 million bridge loan, but the amount of funds needed was reduced using proceeds from the recently completed roughly $200 million sale of its software business unit to Thoma Cressey Bravo.

Getting better on price

Sources continued to tell Prospect News on Wednesday that things have gone quiet on the LBO backlog that was expected to be placed last week.

"We put in for some Alltel at 13½%," said a source from a high yield mutual fund, referring to the bond portion of the hung up Alltel Communications Inc. bonds.

This source also mentioned that First Data Corp. bond debt had been expected, and added another name to the list: Intelsat Holdings Inc., which has $5.1 billion of hung bonds, from a deal led by Credit Suisse.

However, the buy-sider said, after submitting the bid for Alltel at 13½% there was no further word.

This source, as well as others from both the buy-side and the sell-side who have spoken to Prospect News since late last week, have said that with the perception that high yield is rallying the dealers have likely come to the belief that the price could improve.

New Berry bonds up, old ones also

When the new Berry Plastics floating-rate notes due 2015 were freed for secondary dealings, traders saw the bonds moving up smartly from their 94.25 issue price.

One saw the notes trading up more than a point at 95.5 bid, 96 offered. Another pegged the new issue at 95.5 bid, 96.5 offered, which he also called up a point.

A market source meantime quoted the company's 10¼% notes due 2016 up some 2 points on the session to around the 81 bid level. It moved more or less in tandem with the company's floaters due 2014, which were also up a deuce to the 81 neighborhood.

Perhaps the most actively traded existing Berry issue was its 8 7/8% notes due 2014, up nearly 2 points to 91 bid, with a number of large-block trades seen.

Market indicators move up

A trader saw the widely followed CDX index of junk bond market performance up a full point on Wednesday 95¼ bid, 95¾ offered. The KDP High Yield Daily Index was meantime up 8 bps to 74.37, while its yield tightened by 1 bp to 9.59%.

In the broader market, advancing issues led decliners by a nearly two-to-one margin, while activity, as measured by dollar volumes, rose by almost 23% from Tuesday's levels.

A trader said that not only was the CDX up a point - "everything was up about a point," including the widely followed automotive benchmark bonds. General Motors Corp.'s 8 3/8% bonds due 2033 ended at 72.75 bid, 73 offered, while Ford Motor Co.'s 7.45% bonds due 2031 rose to 70.625 bid, 71.125 offered.

Valassis victorious on company guidance

A trader said that Valassis Communications' 8¼% notes due 2015 were trading around between 86 and 86.5 on Wednesday, well up from the 83-84 context those bonds had occupied last week. He cited the guidance which the advertising insert company put out, venturing that "it probably was upward."

And, indeed, it was. The company said late Tuesday that it expects first-quarter earnings to come in between 22 cents and 28 cents per share, which exceeds the roughly 20 cents a share that Wall Street is looking for. Valassis also projected that revenues for the quarter should total $600 million - about $50 million more than the analysts believe. The company is scheduled to announce its results on May 1.

Valassis further said that it had drawn down its delayed draw term loan portion of its senior secured credit facility for about $160 million. The proceeds will be used to fund the anticipated put by holders of its 1.08% senior convertible notes due 2033.

Not-that-bad results boost Burlington, Portola

Also on the earnings front, Burlington Coat Factory Warehouse's 11 1/8% notes due 2014 were seen having opened at 79.5 bid, and then having moved up to 81.75 by the close, well up from Tuesday's 79.25 closing levels, and a trader suggested that the company's earnings for the fiscal third quarter ended March 1 were the catalyst for the move.

On the face of it, there was not much positive news there. The Burlington, N.J.-based clothing-store chain's parent company, Burlington Coat Factory Investments Holdings, Inc, reported a drop in earnings to $26.8 million compared with $31.1 million during the three-month period a year earlier, while net sales decreased by $200,000 to $987.1 million. Comparative store sales decreased 6%.

The fall in sales and earnings was attributed to weakened consumer demand, and as such was not unexpected - with investors apparently somewhat relieved that the deterioration wasn't worse. The company also said that its cash flow measures and operating results for the nine-month period ended March 1 were improved versus the year-earlier period.

In the case of Portola, a trader saw the Batavia, Ill.-based packaging producer's 8¼% notes due 2012 start the day at 43.75 bid, and then move all the way up to 55.25 by the close. He said that there were only a handful of large-sized trades, but remarked "what a disparity" between the opening and closing levels. "Definitely, there's something going on."

He suggested that the company's earnings during the fiscal second quarter ended Feb. 29 "were not as bad as expected, so maybe there was short-covering going on."

He said the bonds had "gotten beat up to the point where everyone was expecting really weak earnings. They weren't as bad as expected, so someone was buying the bonds to cover shorts."

Portola reported sales of $66.6 million for the quarter, versus $63.7 million for the year-earlier second quarter, an increase of 4.6%. For the first six months of fiscal 2008, sales were $139.2 million, up 6.2% from $131.1 million for the first six months of fiscal 2007. Portola posted an operating loss of $400,000 for the quarter, a $2.8 million deterioration from its year-earlier operating income of $2.4 million.

Although the second quarter "was extremely challenging principally due to resin and other energy related cost increases," Portola said, "there were some positives," including a 5.6% gain in unit sales for the first six months of fiscal 2008 versus a year earlier, cost-reduction initiatives, and the company's recent success in securing an extension to its $60 million senior secured revolving credit facility through April, 2011, as well as a $15 million second lien term loan. The latter financial transactions have increased its credit availability to approximately $19 million, which Portola called "adequate liquidity to support needs."

Tech bonds better on Intel guidance

Elsewhere, high-tech names were seen better, in line with sector bellwether Intel Corp.'s quarterly results, which came in about as expected on Tuesday, and the leading chip-maker's optimistic guidance. Intel's first-quarter earnings fell by 12%, but that was not unexpected; meanwhile, the company projected that second-quarter revenue would come in somewhere between $9 billion and $9.6 billion, better than analysts expected.

Freescale Semiconductor Inc.'s 10 1/8% notes due 2016 were being quoted up nearly 3 points at 72.5 bid.

Amkor Technology Inc.'s 7¾% notes due 2013 firmed nearly a point to just below 93 bid.

However, a trader said that he saw little or no activity in Intel's major rival, Advanced Micro Devices Inc., whose 7¾% notes due 2012 stayed anchored in a 79-80 context. At another desk, though, the bonds were seen up 1½ points to 80.5, although that rise was attributable to one odd-lot trade late in the session.

Aleris off on Moody's move

On the downside, Aleris International's 10% notes due 2016 were among the most actively traded bonds of the day, with a source calling them down nearly a point to about the 58 bid level.

That coincided with Moody's revising its rating outlooks for Aleris and its German subsidiary to negative from stable, citing the companies' ongoing performance challenges in light of weak end-market conditions, mainly in the U.S. residential and transportation markets.

The agency, which affirmed Aleris' B2 corporate family rating, also cited the continued high degree of leverage and its expectations that the company would have limited to negative free cash flow over the near term.

Moody's further expects manufacturing volume levels to decline again in 2008, although less than they did last year.

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