Toys 'R' Us prices, firms as new-deal pace slows; Mueller hits the road; Dynegy rebounds

By Paul Deckelman and Paul A. Harris

New York, Aug. 16 - Toys 'R' Us - Delaware, Inc. priced a $350 million offering of six-year senior secured bonds on Monday, and when the Wayne, N.J.-based specialty retailer's new issue was freed for aftermarket dealings, traders saw the paper firm smartly from its par issue price.

But the Toys deal was about the only thing really going on in a primary market, which saw a red-hot pace last week, with over two dozen deals collectively worth some $15 billion having come to market - the biggest week ever for new-deal activity. After that dizzying frenzy, players this week seemed to remember that we are now in the traditionally sleepy second half of August and seemed to act accordingly.

Apart from Toys 'R' Us, only two events of note emerged. Ford Motor Credit Co. was heard by syndicate sources to have privately placed a $550 million issue of five-year notes. And Mueller Water Products Inc. announced plans to sell $225 million of 10-year notes and was heard by the sources getting ready to hit the road on Tuesday to market that offering to would-be investors.

In the secondary arena, besides the strong showing by the new Toys 'R' Us bonds, Chemtura Corp.'s new $455 million issue of eight-year bonds, which priced Friday below par, were seen having moved up solidly.

Away from the new-deal realm, Dynegy Inc.'s bonds, which had fallen on Friday in the wake of news the company is to be acquired, were actively traded on Monday, with its busiest issue seen having firmed several points from the levels they fell to on Friday.

Allis-Chalmers Energy Inc.'s bonds, and its shares, moved up in reaction to the news that the Houston-based oilfield services company had agreed to be acquired.

Toys 'R' Us drive-by

Trailing last week's blistering, record-setting pace of issuance, the Aug. 16 week got off to a quiet start in the high-yield primary.

Toys 'R' Us priced a $350 million issue of six-year senior secured notes (B1/BB-) at par to yield 7 3/8%, at the tight end of the 7 3/8% to 7½% price talk.

Bank of America Merrill Lynch, JP Morgan, Citigroup and Deutsche Bank Securities were the joint bookrunners for the drive-by deal, which the retailer brought in order to repay bank debt.

A credit quite familiar to the high-yield universe, Toys was well-received, according to an informed source who added that the order book was multiple-times oversubscribed.

After the flood

Last week's $15.4 billion of new issuance that priced in 31 junk-rated dollar-denominated tranches may have created something of a flood, an investment banker conceded on Monday.

However, this is a new week, the source contended.

The primary market will remain active.

Issuance estimates for the Aug. 16 week range from $3 billion to $5 billion, market sources said.

NRG Energy Inc. is one name that has recently circulated. NRG and private equity firm Blackstone Group are acquiring Dynegy Inc.

From elsewhere in the energy sector, Energy Transfer Partners, LP is expected to bring a deal as well.

Mueller Water starts Tuesday

However, only one new deal surfaced during the Monday session.

Mueller Water Products will begin a roadshow on Tuesday for its $225 million offering of 10-year senior notes.

The deal is set to price on Thursday.

Bank of America Merrill Lynch and Goldman Sachs & Co. are joint bookrunners for the debt refinancing deal from the Atlanta-based manufacturer and marketer of drinking water transmission, distribution and treatment facilities.

New Toys 'R' Us trades up

When the new Toys 'R' Us 7 3/8% senior secured notes due 2016 first broke after the $350 million issue had earlier priced at par, a trader initially saw the paper at 100¼ bid.

But that soon changed as the bonds firmed solidly from that point. The trader later said he was seeing those bonds at 101 bid, 101½ offered.

The bonds were "much better" within a short time, said another trader, who pegged the issue at 101¼ bid, 101 5/8 offered.

Buoyed by news of the new deal, the proceeds of which will be used to help clean up the balance sheet by paying existing credit facility debt, the retailer's 7 7/8% notes due 2013 likewise firmed by 2 points, going out at 104½ bid.

However, one of the traders noted that the Toys deal was "the only thing doing in new-issue," marveling at the contrast from a week ago, when the primary market came roaring out of the gate on its way to a new weekly volume record with mega-deals from such well-known issuers as Chesapeake Energy Corp. and Ally Financial Inc. - the former GMAC - and other deals from Rite Aid Corp. and Building Materials Corp. of America.

Another trader said that apart from the Toys 'R' Us deal, "you're winding into your end-of-summer travel plans."

New Chemtura notes better; Tower still

Chemtura's new 7 7/8% notes due 2018 were being quoted trading as high as 101 3/8 bid, 101½ offered. That's well up from the 99.269 level at which the Middlebury, Conn.-based chemical company, now restructuring under Chapter 11, priced the $455 million issue of notes on Friday to yield 8%.

Among other recently priced issues, traders saw Tower Automotive Holdings USA, LLC's 10 5/8% senior secured notes due 2017 around the 97.016 level at which the Livonia, Mich.-based automotive components company priced its $430 million of paper, downsized from $450 million originally.

One trader had the bonds at 97 bid, 97 5/8 offered, while a second quoted them at 97 bid, 97½ offered.

Traders did not see any activity in the new 11% notes due 2018 of Pennsylvania quarry company New Enterprise Stone & Lime Co. Inc.

The $250 million of new paper priced at par on Friday.

Gentiva Health Services Inc.'s $325 million of 11½% notes due 2018 were seen having gained another point, to 103 bid, 104 offered. The Atlanta-based home health care services provider had priced its deal on Thursday at par, and the new bonds had moved up to 102 bid, 103 offered soon after pricing.

Anadarko a busy name

A trader said that Anadarko Petroleum Corp.'s recently priced 6 3/8% notes due 2017 was the big volume mover on the day, with over $62 million of the bonds changing hands, although it should be acknowledged that the Woodlands, Tex.-based independent oil and gas company's deal, which came off the high-grade desks when the $2 billion of split-rated (Ba1/BBB-/BBB-) bonds priced at par just last Monday, has attracted the interest of traditional high-grade players searching for yield as well as junk-market investors.

He saw the bonds "pretty much unchanged," or maybe up 1/8 point at 99 5/8 bid.

Market indicators turn mixed

Away from the new-deal sector, a trader saw the CDX North American HY Series 14 index lose ¼ of a point on Monday to 96¾ bid, 97 offered, after having risen by½ of a point on Friday.

The KDP High Yield Daily index meantime lost 6 basis points on Monday to end at 71.75, after having declined by 5 bps on Friday. Its yield rose by 4 bps Monday to 8.32%, after having edged up by 1 bp Friday.

However, the Merrill Lynch High Yield Master II index turned upward on Monday, after having been down for the previous four sessions. Its year-to-date return rose by 0.119% to end the day at 8.387%, up from 8.259% on Friday. However, it still remains well below its peak level for 2010 so far - the 9.085% recorded just a week earlier on Aug. 9.

Advancing issues also broke out of a multi-session slump, posting their first gain against decliners after three days of trailing them. For a second straight session, the difference between the two groups was just a couple of dozen issues out of more than 1,400 tracked.

Overall activity, represented by dollar-volume levels, fell by 14% on Monday, on top of Friday's 25% slide.

.A trader said that away from the activity centered around the new Toys 'R' Us deal, "a few things were trading here and there. There was nothing really popping out, catching our eye here in any particular direction."

Dynegy notes rebound

A trader said that Dynegy Holdings Inc.'s 7¾% notes due 2019 was one of the most actively traded junk bonds on Monday, with about $30 million changing hands. He saw those bonds - which had fallen badly on Friday, down around 4 or 5 points on the session - up about 3 points on Monday, to around the 67 bid level.

However, he said that the company's 8 3/8% notes due 2016, which also lost ground on Friday, dropping about 2 or 3 points, were down another deuce on Monday, finishing around the 74 bid level. He said that there was more than $20 million of those bonds changing hands, putting them up on the Junkbondland Most Actives list along with the 73/4s.

A second trader saw the Dynegy bonds "a couple of points off the lows, today," pegging the 73/4s at 67, which he called a gain of 3 points.

Another trader said that Dynegy was "weak most of the day," but after "the stock started to move up at mid-day," the bonds improved to 67 bid, 68 offered at the close versus a session low earlier of 64, about where they had gone home after being beaten down on Friday.

A market source at another desk said the bonds firmed from Friday, but only by about 1¼ points to finish at 65½ bid, but saw the 8 3/8s down a point at 76 bid.

The Dynegy bonds had taken a tumble in heavy trading on Friday as bond investors - though not stockholders - expressed dismay at the news that the Houston-based producer and seller of electric energy is being acquired by the Blackstone Group LP in a transaction valued at $4.7 billion, including the assumption of existing debt. Blackstone would not be obligated to buy back any of the bonds upon taking control of Dynegy due to the lack of any change-of-control covenants in the bonds' indentures, market sources said.

There had also been some fears among investors that Blackhawk might increase Dynegy's already steep leverage - although it would seem that Blackhawk's companion deal to sell four natural gas-fired facilities in California and Maine to NRG Energy Inc. for about $1.36 billion in cash would provide well more than enough liquidity to cover the $543 million cash portion of the Dynegy acquisition. However, published reports indicated that another bondholder concern is the effect that the loss of those four plants on Dynegy's overall profitability and its ability to service its sizable debt load.

Allis-Chalmers up on takeover deal

Another acquisition in the energy sector announced on Friday was pushing Allis-Chalmers Energy's bonds smartly higher on Monday.

The company's 8½% notes due 2017 were seen up by as much as 12½ points on the session, trading at 100½ bid on "decent" volume of at least $16 million.

A market source, while seeing the bonds trading around the par level, said that they were only marginally higher than their finish on Friday, when the bonds had risen around 8 points on the day from the 92 level.

But another source pointed out the bonds had traded around 92 for most of Friday, but for several small trades at around the par level shortly before the close. He also noted that the last previous round-lot level for the bonds had been the 88 bid level at which the bonds had traded last Thursday - putting Monday's gain at the 12 point on the day.

Allis-Chalmers' 9% notes due 2014 saw just a single sizable trade all day, at 100¼ near the end of the day. This was little changed from the level at which those bonds had gone home on Friday. However, the bonds were quoted up around 5 points from their previous round-lot level last week.

Allis-Chalmers' New York Stock Exchange-traded shares meantime were up 44 cents, or 11.89%, to end at $4.14 each. Volume of 6.95 million shares was about 12 times the norm. The bonds and the shares rose as the financial markets continued to digest the news that Allis-Chalmers had agreed to be acquired by fellow oilfield service company Seawell Ltd for $890 million, which includes the assumption of its debt, inclusive of the $430 million of outstanding bonds. Allis-Chalmers shareholders can elect to receive $4.25 per share in cash or 1.15 Seawell shares for each A-C share.

Blockbuster trading dies down

A trader said that Blockbuster Inc.'s 11¾% senior secured notes due 2014 - which on Friday had swooned to the tune of around a dozen points, down to the 47 bid level, in active trading after the company warned that liquidation was a possibility if it cannot work out its debt problems - were staying around there. He saw one trade for perhaps 250 bonds, and that was it.

He also saw the company's 9% senior subordinated notes due 2012, which had recently traded around 5 bid, but which were quoted lower during Friday's debt debacle, down around 2½ bid, on a single trade for $1 million of bonds.

The trader said there had also been a couple of odd-lot trades anywhere between 3 and 5 bid showing up on Trace, but he added, "I do mean odd lots - really small pieces."

He said that the Dallas-based movie-rental company's has now turned "interesting, because this weekend, all of the local newspapers were talking about Blockbuster and their woes. Once the mainstream press starts reporting [on a company, as opposed to the financial press], it's usually over."

Blockbuster warned in a regulatory filing that it might be forced to liquidate if current efforts to line up debtor-in-possession financing and restructure its big debt load did not succeed.

Autos not much changed

A trader saw General Motors Corp.'s benchmark 8 3/8% bonds due 2033 up ½ of a point at 34¾ bid, 35½ offered and saw Ford Motor Co.'s 7.45% bonds due 2031 unchanged at 96 bid, 97 offered.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.