Clean Harbors, Lennar drive-bys lead $1.75 billion session; SuperValu rises on sale possibility

By Paul Deckelman and Paul A. Harris

New York, July 17 - The high-yield primary market caught fire on Tuesday, as four deals collectively worth some $1.75 billion priced during the session, according to syndicate sources. Three of those offerings were opportunistically timed "drive-by" deals just announced on either Monday or earlier on Tuesday.

The big deal of the day was environmental services provider Clean Harbors, Inc.'s upsized $800 million offering of eight-year notes.

Homebuilder Lennar Corp. came to market with an upsized $350 million five-year deal.

Business services provider Harland Clarke Holdings Corp. did a downsized $235 million issue of six-year secured notes.

Besides those three quickly shopped issues - Harland Clarke and Clean Harbors had just surfaced on Monday while Lennar was announced earlier Tuesday - there was a scheduled forward-calendar deal from maintenance and repair products distributor Interline Brands Inc., a $365 million issue of six-year PIK toggle notes.

All of the new deals firmed when they hit the aftermarket, with Interline Brands and Clean Harbors showing particular strength.

The primaryside was popping even beyond those deals that actually priced. SPL Logistics Escrow, LLC, Laureate Education, Inc. and Ireland's Ardagh Packaging Finance plc were all heard to be hitting the road to market new deals, some of which may still price later this week. Price talk emerged on Hologic Inc.'s dollar-denominated eight-year deal and Holland's Stork Technical Services Holdco BV's euro-denominated bonds, both of which are expected to price on Wednesday.

Traders said that the junk market was pretty much caught up in the new-deal frenzy on Tuesday; about the only non-new-deal name seen doing anything was embattled supermarket chain operator SuperValu Inc., whose beaten-down bonds rebounded sharply, gaining multiple points pretty much across the board on investor hopes the company might be acquired and the bonds then be taken out above the par level.

Statistical indicators of junk market performance were mixed for a second straight session.

Clean Harbors upsizes

The busy Tuesday primary market session saw four issuers each bringing a single tranche of junk, including Clean Harbors, which priced an upsized $800 million issue of eight-year senior notes (Ba3/BB+) at par to yield 5¼%.

The yield printed 12.5 basis points inside of price talk that had been set in the 5½% area, according to a high-yield mutual fund manager.

Goldman Sachs ran the books for the issue, which was upsized from $600 million.

The Norwell, Mass.-based provider of environmental, energy and industrial services plans to use the proceeds to fund the tender for its 7 5/8% senior secured notes due 2016 and for general corporate purposes.

Interline at the tight end

Interline Brands priced a $365 million issue of senior PIK toggle notes due Nov. 15, 2018 (Caa1/B-) at par to yield 10%.

The yield printed at the tight end of the 10% to 10¼% price talk.

Allocations were tough, according to a buyside source.

Goldman Sachs and Bank of America Merrill Lynch were the joint bookrunners for the acquisition financing.

Lennar drives by

Lennar priced an upsized $350 million issue of 5.5-year senior notes (B2/B+) at par to yield 4¾%.

The yield printed at the tight end of price talk that had been set in the 4 7/8% area.

Deutsche Bank, Bank of America Merrill Lynch and UBS were the joint bookrunners for the quick-to-market deal, which was upsized from $300 million.

The Miami, Fla.-based homebuilder plans to use the proceeds to make payments in connection with a tender offer to purchase its 5.95% senior notes due 2013 at 103, with remaining proceeds to be used for general corporate purposes, which may include the repayment or repurchase of its existing senior notes or other debt.

Harland Clarke downsizes

Harland Clarke Holdings priced a downsized $235 million issue of 9¾% six-year senior secured notes (B1/B+) at 96 to yield 10.666%.

The yield printed 54 basis points beyond the wide end of price talk, which had been set in the 10% area, according to market sources.

Credit Suisse, Citigroup, Bank of America Merrill Lynch, Deutsche Bank, UBS and Natixis were the joint bookrunners for the debt refinancing deal, which was downsized from $250 million.

Talking the deals

Issuers and their bookrunners set the stage for the Wednesday session with price talk on deals that have been traveling investor roadshows.

Hologic talked its $750 million offering of eight-year senior notes (B2/BB) with a yield in the 6 3/8% area. The deal is in the market via bookrunner Goldman Sachs.

Stork Technical Services, based in the Netherlands, set price talk for its €315 million offering of seven-year senior secured notes (confirmed B3/expected B-) in the 11½%.

Joint bookrunner Goldman Sachs will bill and deliver. Jefferies is also a joint bookrunner.

Great Canadian Gaming Corp. talked its offering of C$400 million of 10-year senior notes (B1/BB+/) with a yield in the 6¾% area.

Scotia and HSBC are the bookrunners.

Ardagh $920 million deal

Ireland's Ardagh Group started a roadshow on Tuesday for a $920 million-equivalent, two-part offering of mirror notes.

Issuing entities for both tranches are Ardagh Packaging Financing and Ardagh MP Holdings USA Inc.

The transaction will feature $700 million equivalent of notes mirroring the 7 3/8% senior secured notes due Oct. 15, 2017 (expected Ba3/BB-) in dollar and euro denominations.

The 7 3/8% mirror notes will be non-fungible with the existing notes and will become callable on Oct. 15, 2014 at 103.688.

The original $350 million issue priced at par in September 2010. A previous $160 million add-on priced at 100.476 to yield 7¼% on Jan. 19, 2012.

In addition, the transaction includes a $220 million tranche of notes mirroring the 9 1/8% senior notes due Oct. 15, 2020 (expected B3/B-).

The 9 1/8% notes will be fungible with the existing notes and will become callable on Oct. 15, 2015 at 104.563.

The original $350 million issue priced at par in September 2010. A previous $260 million tranche of mirror notes priced at 96.356 to yield 9¾% on Jan. 19, 2012.

The roadshow, which opened on the West Coast of the United States on Tuesday, moves to New York City on Wednesday and to London and Boston on Thursday.

Citigroup is the bookrunner.

The Dublin, Ireland-based supplier of glass and metal packaging plans to use the proceeds to finance the acquisition of Anchor Glass Container Corp. from private investment funds managed by Wayzata Investment Partners LLC.

SPL brings $425 million

A roadshow starts Wednesday for a high-yield bond deal backing the acquisition of SPL Logistics.

The issuing entities are SPL Logistics Escrow, LLC, which will be merged with and into Caterpillar Logistic Services LLC, and SPL Logistic Finance Corp.

The offering is comprised of $425 million of eight-year senior secured notes.

UBS is the lead left bookrunner. Macquarie is the joint bookrunner.

Proceeds will be used to fund the acquisition of a 65% stake in SPL Logistics, a Peoria, Ill.-based service parts and logistics company, by Platinum Equity Capital Partners.

Caterpillar will retain a minority stake in the enterprise.

Laureate starts roadshow

Laureate Education started a roadshow on Tuesday in New York City for its $300 million offering of seven-year senior notes.

Citigroup and J.P. Morgan are the joint bookrunners.

The Baltimore-based provider of higher educational services plans to use the proceeds from the new notes to repay its revolver, which may be redrawn for general corporate purposes, including working capital, debt repayment or acquisition financing.

New deals dominate secondary

In the secondary arena, a trader declared, "The market is on fire today" with everybody and his brother wanting to trade in the days new deals.

"There just was a flurry of new deals throughout the afternoon, so a lot of folks have been focused on that," a second trader said.

The first trader said that he had been speaking with some portfolio managers. "You know, they've got to put cash to work," he said in explaining how some of the day's new deals did so well, even with what could be considered stingy coupons by usual Junkbondland standards.

Clean Harbors cleans up

For instance, he said, Clean Harbors' new 5¼% notes due 2020were trading around in a 1013/4-to102¼ bid range after the Norwell, Mass.-based environmental services provider's quickly shopped deal - upsized to $800 million from an originally announced $600 million - priced at par.

"They came with as 5¼% coupon," he said, "That shows you where our market is going [...] That's ridiculous."

At another desk, a trader pegged the new bonds at 101 7/8 bid, 102 3/98 offered, while yet another saw them at 102 bid.

Lennar well liked

The first trader saw Miami-based homebuilder Lennar's new 5.5-year notes offered at 1011/2, although he did not see a left side. He estimated that the bonds would likely trade in a 1001/2-to-101 context when they finally did get some two-sided markets.

He said that the level was pushed up even though the quick-to-market 350 million deal, upsized from an original $300 million, had priced at par to yield just 4¾%.

"I can't believe that coupon," he exclaimed. "You feel like shorting it on principle."

Other deals do well

The new Interline Brands deal, on the other hand, had a generous enough 10% coupon on its $365 million offering of six-year PIK toggle notes, which priced at par, and it also did quite well when the Jacksonville, Fla.-based maintenance and repair products distributor's new issue hit the market.

"There were a lot of them trading up at 103," a trader said, before easing slightly from that peak and going home wrapped around 103, at 102 7/8 bid, 103 1/8 offered.

A second trader saw the bonds at 103 bid, 103¼ offered, and a third at 103 bid, 103 1/3 offered.

A trader said that the one issue he thought was "having a little bit of a problem" was Harland Clarke Holdings' new 9¾% senior secured notes due 2018.

He noted that the San Antonio, Texas-based business services provider's deal - downsized to $235 million from $250 million originally - had to price at a steeply discounted 96, yielding 10.666% in order to get the transaction done.

Later in the session, though, another trader saw even those bonds edge up to 96¼ bid, 97 offered.

MEG Energy holds gains

A trader said that MEG Energy Corp.'s new 6 3/8% 10.5-year paper, which priced on Monday at par, seemed to be holding its own, trading 101 3/8 bid, 102 offered. That was around the levels to which Calgary, Alta.-based oil-sands petroleum producer's quick-to-market $800 million deal had risen after it was upsized from $700 million originally.

A second trader waxed enthusiastic about the new deal, declaring that MEG is "a great company."

He said, "[The bonds] traded well - all of the big accounts bought it. The big boys - the really sophisticated accounts - and I'm not saying they're always right, but they love this company."

Market signs stay mixed

Away from the new-deal arena, a trader said, "The whole market was strong," although some of the statistical market performance measures did not bear that out. They instead were mixed for a second consecutive session on Tuesday, after having been mostly higher on Friday.

A trader saw the Markit Group CDX North American Series 18 High Yield Index gain 5/16 point on Tuesday to end at 96 3/8 bid, 96 5/8 offered; the index had fallen by that same 5/16 point on Monday.

The KDP High Yield Daily Index lost 6 basis points on Tuesday to finish at 73.41, after having eased by 2 bps on Monday. Its yield rose by 1 bp for a second straight day, ending at 6.44%.

But the widely followed Merrill Lynch U.S. High Yield Master II Index posted its third straight gain on Tuesday, adding 0.064%, on top of Monday's 0.079% advance.

The latest gain lifted its year-to-date return to8.015% from Monday's 7.946%. Tuesday's level was a new peak level of 2012 so far and marked the first time the index has been above the 8% mark. It beat the old high-water level just set on Monday. The index's recent levels are the highest they've been since the end of 2010, when the market measure returned 15.19%.

Market up after Bernanke

Junk seemed to be following the lead of equities, which rebounded on Tuesday from Monday's downturn, helped by profitable quarters reported by such major names as Goldman Sachs & Co. and Coca-Cola Co., as well as Federal Reserve chairman Ben Bernanke's appearance before Congress.

The Fed boss did not explicitly promise any new stimulus measures, but he did not reject them either, appearing to leave the door open for some kind of Fed action should the economy continue to weaken.

"The flavor of the market after Bernanke spoke was it got a little nervous," a trader said, "but then he reassured the marketplace."

SuperValu surges

Among specific names, traders said that SuperValu was the only one that stood out in an otherwise new-deal-dominated market.'

] One said that SuperValu's issues were up by several points across the board for the first time in four sessions, seeing its 7¼% notes due 2013 two points better, last trading at 98¾ bid, its 7½% notes due 2014 up 3½ points, to 93 5/8 bid, while the 8% notes due 2016 were up 4¼ points, at 87½ bid.

Going a little further out along the curve, he saw the company's 8% bonds due 2031 gained three-quarters of a point, last trading at 59 bid.

It was the first upside finish for those bonds after three straight days of getting pushed successively lower following the release last week of surprisingly poor quarterly numbers.

Trading activity in the bonds was brisk, with a market source seeing round-lot trading of over $22 million in the 2016 bonds and over $15 million in the 2014s, with that paper up over 4 points and almost 4 points, respectively.

There was less action in the '13s, where the source saw the bonds up 2 points on volume of about $8 million, and in the 2031 bonds, which also saw about $8 million of turnover but little price change.

"SuperValu bounced back, big time," yet another trader said.

He said that the troubled Eden Prairie, Minn.-based supermarket chain's various issues "are almost going to trade bond by bond" in the wake of the company's declared willingness to look at strategic alternatives that could include the sale of all or part of the company, which was driven home late Monday and on into Tuesday as The Wall Street Journal reported that SuperValu would, in fact, open its books to potential purchasers so they could do due diligence on the company, which has more than $6 billion of debt on its balance sheet.

He said that what the individual bonds might be worth in a white-knight acquisition scenario "will depend on the indentures. Some of them are SuperValu, others are Albertsons," assumed when SuperValu acquired the Albertsons chain a few years ago to become the third-largest U.S. operator of traditional supermarkets.

"The ones that look pretty good, like the 71/2s of 2014, for example, have a change of-control put in their indenture, so if somebody takes them over, that's a 101 takeout," he said, explaining the multiple-points upside moves of many of its bonds.

"So SuperValu had a nice day today. We'll see if it continues [Wednesday]" the trader said.

Supermarket company struggles

The SuperValu bonds had gotten hammered down last Thursday and Friday after the company announced after the close of trading on Wednesday that it had net earnings of $41 million, or 19 cents per diluted share, on net sales of $10.6 billion during the fiscal quarter ended June 16, badly missing Wall Street expectations of earnings in the 38-to-40 cents per share range.

Year-ago earnings were considerably better, at $74 million, or 35 cents per share, on revenues of $11.1 billion.

Those results caused the bonds, which, except for the 2031s, had all been trading right around or even a little above par prior to release of the numbers, to swoon badly in heavy trading over the next few sessions. The bonds continued to retreat on Monday.

Retail industry watchers note the difficulty that traditional supermarket companies, like SuperValu and its somewhat larger rivals Kroger Co. and Safeway Corp., are having in holding onto market share in the competitive, low-margin industry when faced with the challenge of new players moving into their long-time turf, including members-only buying-club store Costco and the ubiquitous Wal-Mart Stores, which is incorporating supermarket-style sections into its sprawling superstores.

On top of those secular trends, they say that SuperValu in particular has stumbled in relying on its everyday-prices strategy and shunning special discounts, while its rivals have generated store traffic by routinely slashing prices on selected items to appeal to budget-conscious customers.

The company's shares, which plunged badly in response to the poor numbers, but had risen modestly on Monday on buyout hopes, were again heading south on Tuesday, finishing down 20 cents in New York Stock Exchange trading, or 8.06%, to $2.28 each. Volume of 21.9 million shares was more than twice the norm.

In an awkward accident of timing, the company held its annual shareholders meeting on Tuesday, and management got an earful from shareholders who complained about the severe erosion in their holdings. The stock has lost 72% of its value so far this year, and the company compounded the hit by last week announcing the suspension of its regular dividend as a cash-conservation measure.

Several of the shareholders expressed anger at the recent award of a $950,000 bonus to the company's president and chief executive officer, Craig R. Herkert, demanding that he give back the bonus in light of the company's poor results and that he and other top level executives agree to work for nominal pay of $1 per year until they pull the company out of the doldrums. When directly challenged by a shareholder, Herkert said that he would do neither.

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