NewPage, Sino-Forest report earnings, bonds slow to react; retailers up; Lyondell hangs in

By Stephanie N. Rotondo

Portland, Ore., Aug. 15 - The secondary high-yield market started the week with a strong tone, market sources reported Monday.

"There was a very strong tone," a trader said. "But then it got a little lethargic." By the end of business, however, things picked up again, allowing some credits to gain more ground.

NewPage Corp. was an outlier on the day, as the papermaker reported a narrower loss. Still, the company said part of its revolving credit facility was being accelerated because it had not refinanced its second-lien paper by July 4. Overall, the company's bonds ended lower to unchanged.

Sino-Forest Corp. also reported numbers on Monday and despite a decent showing, the company's bonds were largely unaffected.

The retail arena has been gaining strength ever since the broader marketplace turned positive last week. Both Gap Inc. and Neiman Marcus Group Inc. closed the day on higher ground.

Also, LyondellBasell Industries NV's debt closed modestly higher, even though the company disclosed that it had been paying penalty interest on its debt since May.

Market indexes positive

The market was overall positive in Monday trading, as evidenced in certain high-yield indexes.

The CDX North American High Yield index moved up 1 11/16 points, according to a market source, finishing at 95 5/8 bid, 95 7/8 offered.

The KDP High Yield index closed at 72.40, with a 7.81% yield. That compared to Friday's reading of 71.96, with a 7.97% yield.

"Things were definitely better," a trader said. "A lot of stuff kind of snapped back a couple points."

Immucor sets talk

Immucor Inc. talked its a $400 million offering of eight-year senior notes (Caa1/B-) with an 11¼% to 11½% yield on Monday, according to a market source.

Books close at 11 a.m. ET on Tuesday, and the deal is set to price thereafter.

J.P. Morgan Securities LLC, Citigroup Global Markets Inc. and UBS Investment Bank are the joint bookrunners. RBC Capital Markets and Deutsche Bank Securities Inc. are co-managers.

The issuer is IVD Acquisition Corp., which will be merged with and into Immucor.

The deal is part of the funding for the leveraged buyout of Immucor by TPG Capital.

Immucor to 'come together'

The Immucor deal should come together at that price talk, said a mutual fund manager who is playing both the bonds and the concurrent Immucor term loan.

The bond deal may be coming a little bit on the cheap side, the manager added.

"That's because the bank loan is not going well."

Immucor increased pricing on its $600 million seven-year term loan to Libor plus 575 basis points from initial talk of Libor plus 450 bps to 475 bps.

The original issue discount also widened to 96 from 99.

However, that discount could drop even further to 95, the fund manager said.

Late last week, the manager feared that the rallying market could prompt the dealers to try to get the Immucor bonds done with a yield in the high 10% context.

"Ultimately they didn't do it," the manager said on Monday.

"When the bank deal is struggling, you can't keep clamping down on the bonds."

If the bond deal prices within the context of price talk, the order book could wind up being two-times oversubscribed, the buysider said.

HCA grinds higher

Turning to the secondary market, recently minted secured and unsecured bonds of HCA, Inc. continued to improve on Monday.

HCA's 7½% unsecured senior notes due February 2022 were 97 bid, 98 offered on Monday, a point better.

A week ago amid volatility, the unsecured bonds traded as low as 91 bid, according to a mutual fund manager who saw the HCA unsecured paper as high as 99 bid on Monday afternoon.

The HCA 6½% senior secured notes were par bid, par¼ offered on Monday, also up a point.

HCA priced $3.15 billion of the secured notes (Ba2/BB) and $2 billion of the unsecured notes (B3/B-) at par on July 26.

Before the selloff, the notes in both of those tranches traded as 101½ bid, 102 offered, market sources say.

Among other recently price issues, Rock Ohio Caesars LLC's new 12 1/8% second-lien notes due Sept. 1, 2018 were 102 bid, 104 offered on Monday.

The $380 million issue (Caa1/B/) priced at 98.266 to yield 12½% last Thursday.

NewPage weakens

NewPage put out quarterly results late Friday and despite a narrower loss, the company's bonds traded down to unchanged, traders reported.

One trader said the 11 3/8% notes due 2014 were "about unchanged" around 80. There wasn't much action in the 10% notes due 2012, he said, estimating a 10 to 11 bid for paper.

"All NewPage was weaker," said another trader.

The trader said that initially, the 11 3/8% first-lien notes moved under 79, then popped back up to 80 bid, 80½ offered.

He also remarked that there was not much going on in the 10% second-liens, saying that they were trading around $10.

For the second quarter, the Miamisburg, Ohio-based papermaker reported net sales of $888 million, down from $890 million the year before. Higher paper prices were offset by fewer sales, the company said in a statement.

Net loss, however, narrowed to $132 million from $174 million.

"During the quarter, we were able to realize improved pricing even as we experienced inflationary pressure and some softening in demand for our core products," said George F. Martin, president and chief executive office, in the earnings release.

At the end of the quarter, NewPage had $136 million in available liquidity, consisting of $9 million in cash and equivalents and $127 million under its revolving credit facility.

However, the company also said in its 10-Q that it will have to repay $30 million of its $500 million revolving credit facility by Oct. 3, as it was unable to refinance its floating rate and 10% notes by July 4.

If the company does not refinance or repurchase the notes by Dec. 2, the remaining $470 million will be accelerated to March 1, 2012 from Dec. 21, 2012.

And, if the debt is not dealt with by Jan. 31, 2012, the 11 3/8% notes will be accelerated to March 31, 2012.

NewPage has been working with advisors to come up with a restructuring plan but has yet to announce any plans. The company said that if it cannot find a way to deal with its debt obligations, it could be forced to file for Chapter 11 protections.

Standard & Poor's downgraded the company, giving it a CCC rating, cut from CCC+.

Sino-Forest reports earnings

Elsewhere in the forest products arena, Sino-Forest - the Chinese-based, Canadian-listed timber company that was plagued with allegations of fraud from Muddy Waters Research LLC earlier this year - also posted second-quarter earnings.

However, the results did little to move the bonds, according to a market source.

The 10¼% notes due 2014 were seen at 70, which was about unchanged. The 6¼% notes due 2017 opened around 62, but fell back to 59¾ bid, 60 offered by the end of business.

Still, that was up from levels around 58 last week.

For the quarter, the company saw a 6% gain in revenues at $317 million. Net income spiked 125% to $447 million.

After Muddy Waters published its research report in June claiming that the company's land holdings were overstated, Sino-Forest said the charges were meritless, but that it would nonetheless appoint an independent committee to look into the matter. In the earnings statement, the company said that the review was taking longer than previously anticipated due to "a prolonged data collection and review process."

The company also said that it was planning to redeem nearly $88 million of its 9 1/8% guaranteed notes.

Gap, Neiman up marginally

Retailer Gap's 5.95% notes due 2021 "traded a fair amount," according to a trader.

He placed the issue around the 93½ level.

Another trader also saw the paper trading actively, but noted that the price was "not really up all that much," just about a half-point, also around the 93½ bid, 94 offered mark.

Gap is scheduled to release earnings later this week.

Among other retailers, Neiman Marcus Group's 10 3/8% notes due 2015 were up "at least half a point, maybe three-quarters," a trader said.

He quoted the bonds at 102½ bid, 102¾ offered.

Lyondell crawls higher

Lyondell's 11% notes due 2018 inched higher in trading, though the company said in a regulatory filing that the issue has been accruing penalty interest since May 4.

One trader quoted the notes at 111 bid, 111¼ offered. Another placed the paper at 110½ bid, remarking that the bonds were "approaching levels that we haven't seen in weeks."

In its 10-Q, Lyondell said the increase was because the company had failed to conduct an exchange for the 8% notes due 2017. The company had also not filed a registration statement on the 11% notes that would allow the resale of paper held by affiliates of the Securities and Exchange Commission.

As such, the interest rate increased 25 basis points for the first 90 days. The rate will increase by 25 bps for each additional 90 days that the statements are not filed, with a maximum of 100 bps.

LyondellBasell Industries is a chemical company based in Rotterdam, the Netherlands.

Broad market gains strength

In the rest of the market, a trader said that Clear Channel Communications Inc.'s 10¾% notes due 2016 were unchanged, trading actively in the mid-70s.

CIT Group Inc.'s 7% notes due 2017 were meantime seen higher around 961/2.

Dynegy Holdings Inc.'s 7¾% notes due 2019 were also better, rising "a couple points" to end around 63.

The trader also saw Caesars Entertainment Corp.'s 10% notes due 2018 trading "somewhat actively" at 82 bid, 83 offered, up from levels around 81 previously.

At another desk, a trader said Intelsat (Bermuda) Ltd.'s 11¼% notes due 2017 were widely quoted.

"There were a ton of trades," he said, at 99½ bid, par½ offered.

"Everything was strong," he said.

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