MGM sells $500 million eight-years, bonds rise; Dunkin' slates; Fortescue $2 billion awaits

By Paul Deckelman and Paul A. Harris

New York, Oct. 25 - MGM Resorts International brought a quickly shopped $500 million offering of six-year notes to market on Monday, although by the time the eagerly awaited deal - the day's only domestic pricing - finally came, it was too late in the session for any kind of aftermarket activity.

However, there was brisk trading in the Las Vegas-based gaming giant's existing bonds, which were seen mostly higher, presumably given a boost by the news of the new financing - this despite no bonds to be taken out using the proceeds. This seemed to outweigh the news that Boyd Gaming Corp., MGM's joint-venture partner in Atlantic City's glitzy Borgata resort, has chosen to pass on the buyout of MGM's 50% stake in the property. Boyd's own bonds were seen a little firmer in apparent reaction to that news.

Away from the gambling world, price talk emerged on Fortescue Metals Group Ltd.'s $2.04 billion offering of five-year notes, which is expected to price on Tuesday morning.

While only MGM Resorts and a euro-denominated add-on deal from German shipper Hapag-Lloyd AG priced Monday, the forward calendar swelled as a slew of deals slated. Dunkin' Brands, parent of the ubiquitous donut shop chain, was heard shopping a $625 million offering of senior notes.

Wooden cabinet maker WII Components Inc. and energy operator Carizzo Oil & Gas Inc. were hitting the road to market deals expected to price later this week.

Secondary activity was meantime called quiet, with market indexes seen firmer.

MGM Resorts drives by

The primary market saw a pair of issuers, each one bringing a single tranche of notes, raise $494.5 million and €155 million on Monday.

MGM Resorts International priced a $500 million issue of 10% senior bullet notes (Caa1 expected/CCC+ confirmed) at 98.897 to yield 10¼%, on top of the price talk.

Bank of America Merrill Lynch, Barclays Capital, BNP Paribas and RBS Securities were the joint bookrunners for the quick-to-market deal.

The Las Vegas-based owner and operator of casino resorts will use the proceeds to repay a portion of its $1.2 billion term loan that is not extending.

Hapag-Lloyd taps 9% notes

Meanwhile Germany's Hapag-Lloyd priced a €150 million fungible add-on to its 9% senior notes due Oct. 15, 2015 (B3/B) at 103.375.

The reoffer price came on top of the price talk.

Deutsche Bank Securities, Citigroup, Credit Suisse, Goldman Sachs & Co., JP Morgan Securities LLC and UniCredit were the joint bookrunners for the general corporate purposes deal.

The Hamburg, Germany-based container shipping firm priced the original €330 million tranche at 99.5015 to yield 9 1/8% on Oct. 1.

In a concurrent transaction, which took place on the same day, the company also priced a $250 million tranche of 9¾% notes due Oct. 15, 2017 at 99.3731 to yield 9 7/8%.

Fortescue talks $2.04 billion

Australia's Fortescue Metals talked its $2.04 billion offering of five-year senior unsecured notes (B1/B/BB+) with a 7% to 7 1/8% yield on Monday.

The Perth-based producer and sea-borne trader of iron ore also decreased call protection to two years from three years. After two years the notes will be callable at par plus 75% of the coupon.

The deal is expected to price on Tuesday morning, New York time.

J.P. Morgan Securities LLC and the Royal Bank of Scotland are leading the debt refinancing.

Rate talk for Fortescue dropped significantly during the time in which the deal was being shopped, according to a market source who added that an "eight-handle" yield was expected when the deal kicked off.

Carrizo shops eight-year notes

The forward calendar built on Monday. And it is expected to continue to do so throughout the week, sources say.

Carrizo Oil & Gas will roadshow its $325 million offering of eight-year senior notes (B3/B) this week, and is expected to price the deal late in the week.

Credit Suisse, Wells Fargo Securities and RBC Capital Markets are the joint bookrunners.

Proceeds will be used to fund a tender offer for Carrizo's $300 million of outstanding 4 3/8% convertible senior notes due 2028, and to pay down existing senior secured debt.

WII Components via Gleacher

Elsewhere, WII Components began a roadshow on Monday for a $115 million offering of five-year senior secured notes (/B-).

The deal is expected to price by the end of the week.

The bookrunner is Gleacher & Co.

Proceeds will be used to fund a tender and consent solicitation for the company's 10% senior notes due in 2012, and for general corporate purposes.

Gleacher makes its debut as a sole bookrunner/left bookrunner with this deal. However, look for this high-yield syndicate to surface again with a couple of more deals during the run-up to the new year, an informed source advised on Monday.

Dunkin' for November

Finally, Dunkin' Finance Corp., a financing unit of Dunkin' Brands, is expected to sell $625 million of senior notes in November, according to market sources.

JP Morgan Securities LLC, Barclays Capital, Bank of America Merrill Lynch and Goldman Sachs & Co. will lead the deal.

Proceeds, together with a new $1.35 billion senior credit facility and available cash, will be used to repay the outstanding securitization debt of Dunkin' Brands' securitization subsidiaries in full, and to pay a cash dividend to Dunkin' Brands' stockholders.

New MGMs too late; existings move up

MGM Resorts International's new $500 million offering of 10% notes, as noted, came to market too late in the session for aftermarket activity.

The company's existing bonds, however, were seen actively traded during the session in anticipation of the deal, at mostly higher levels.

Although the company does not plan to use the new-deal proceeds to take out any of its outstanding bonds - it will instead use the sale proceeds to repay some of its credit facility debt - a trader said that "their liquidity looks a lot better if they get rid of some of that bank debt," in explaining the probable cause for the bonds to rise.

A trader at another desk saw MGM's 6¾% notes due 2012, which he called "the most active issue" in the company's capital structure, up 1 point on the day at 98¾ bid.

He also saw MGM's 5 7/8% notes due 2014 gaining 2 points to finish around 91¼ bid, while its 7 5/8% notes due 2017 were "up a couple" of points at 93 bid.

MGM, the first trader meantime said, was "pretty active," seeing the 5 7/8s trading around 91 1/8 bid, 91¼ offered, and noting that those bonds "were trading with an 89-handle last week, and even got down as low as 88 at one point last week, so give them 3 points of upside from there."

A market source at another desk meantime pegged the company's 11 3/8% notes due 2018 at 105 bid, a gain of 3½ points, while seeing its 6 5/8% notes due 2015 netter by 2 points at 89 bid. However, while the source also saw the 6 ¾% 2012 bond ending at 983/4, he called that actually down a point from recent levels.

At the Gimme Credit research service, analyst Kim Noland said in a research note Monday that while "fundamentals remained challenged for casino operators in most of the major markets," the bigger operators in Las Vegas - MGM easily falls into that category, with nearly a dozen separate operations there - "have recently seen signs of stabilization - at least in occupancy."

Noland further noted that MGM specifically had also pretty much solved its near-term liquidity problems, between plans to issue $2.5 billion of new stock and bonds to pay off near-term maturities, and its agreeing upon a comprehensive plan with Dubai World, its partner in the company's massive CityCenter development project in Las Vegas, that will meet the project's funding needs.

However, Noland cautioned that while these actions "give it time to ride out the recession in Las Vegas, unsecured bondholders have been pushed down the food chain" by the company's issuance of new secured debt.

Boyd seen better

MGM bondholders also noted the announcement from Boyd Gaming that the Las Vegas-based company - MGM's 50-50 joint venture partner in the glitzy Borgata resort in Atlantic City, that market's biggest and most successful gaming palace - has chosen not to exercise its right of first refusal to buy out MGM's share of the resort by matching or exceeding a reported $250 million bid which MGM has received for its stake. The bidder has been identified in published reports as an affiliate of investor Leonard Green.

MGM came under pressure from New Jersey regulators to sell its half of the Borgata when the regulators indicated that they would not allow the company to operate in the Garden State because of MGM's continued relationship with Pansy Ho, its partner in the even more lucrative Macau gaming market; the regulators had expressed skepticism that Ho could operate independently from influence of her father, Chinese gaming baron Stanley Ho, who has been accused of having ties with Chinese organized crime, which the Ho family denies.

The news that Boyd will not be spending $250 million to buy out MGM was greeted positively by its bondholders, offsetting the company's report of weak third-quarter numbers attributable to the downturn in the Las Vegas locals market which it dominates.

A trader saw Boyd's 7 1/8% notes due 2016 at 89 bid, although there wasn't that much activity in it - just one round-lot trade. However, the bonds had traded in size last week around 88, "so they've been moving up a little bit from last week, today - but not running away."

A second trader, though, did not see any dealings in the Boyd bonds.

Friday deals moving up...

Looking back to the deals which were priced on Friday, a trader said that Sabra Health Care LP/Sabra Capital Corp.'s 8 1/8% notes due 2018 were trading at 102¼ bid, 103 offered.

A second trader quoted the bonds at 102¼ bid, 103¼ offered.

Those levels were actually a little better than the 102 bid, 102½ offered peak price at which traders saw those bonds going home on Friday.

The health care real estate investment trust - which after its pending spinoff will hold the various properties now owned by Irving Texas-based Sun Healthcare Group Inc. - priced the $225 million deal Friday at par.

A trader meantime saw Omnova Solutions Corp.'s 7 7/8% notes due 2018 on Monday at 102¼ bid, 102¾ offered.

At another desk, those bonds were seem Monday at 102½ bid, 102 5/8 offered.

Those prices represented a solid gain for the Fairlawn, Ohio-based specialty chemical company's $250 million offering, which were seen going out on Friday no better than 101¼ bid, 101¾ offered, versus their par issue price earlier in the day.

Traders saw no activity in Friday's other deal, a $100 million add-on offering of 8¼% notes due 2018 from Irvington, N.Y.-based consumer products manufacturer Prestige Brands Holdings plc, which priced the deal at 102 to yield 7.888%. The new notes had firmed by perhaps ½ point to 102½ bid late Friday, but were not seen Monday.

...as do Thursday's issues

The traders also saw continued strength in two of the more notable deals that priced during Thursday's session.

A trader said that United Rentals (North America), Inc.'s 8 3/8% senior subordinated notes due 2020 traded Monday at 101 5/8 bid, 102 offered.

That's a little better from the 101½ bid, 102 offered peak level at which the bonds had been seen trading on Friday, or the 101 3/8 bid, 101 5/8 offered level at which a trader had seen the new bonds heading out the door on Friday.

The Greenwich, Conn.-based equipment-rental company had priced $750 million of the bonds - upsized from the originally announced $500 million - in a quick-to-market deal on Thursday at par.

Thursday's $365 million deal from American Achievement Corp. were meantime seen on Monday at 102¼ bid, 102½ offered - up a little from the closing level around 102 bid, 102¼ offered at which those 10 7/8% senior secured notes due 2016 had traded on Friday.

The Austin, Tex.-based provider of school yearbooks and class rings' new issue had priced at par on Thursday, and then moved up in it is initial aftermarket dealings later that same session to the 101¼ bid, 101½ offered level.

Market indicators continue rise

Away from the new-deal world, a trader saw the CDX North American Series 15 HY index up ½ point on Monday to end at 100½ bid, 100¾ offered, after having advanced by ¼ point on Friday.

The KDP High Yield Daily index meantime rose by 13 basis points on Monday to finish at 74.44, after having gained 9 bps on Friday. Its yield came in by 5 bps to 7.18% Monday, following the 4 bps tightening seen on Friday.

The Merrill Lynch High Yield Master II index zoomed by 0.216% on Monday, after having gained 0.095% Friday. The latest advance pushed its year-to-date return up to 14.022%, its third consecutive new 2010 peak level, eclipsing the old mark of 13.776% recorded on Friday.

Advancing issues topped decliners for a fourth consecutive session on Monday, continuing to enjoy a winning margin of about six to five.

Overall activity, represented by dollar-volume levels, rose by 2% on Monday, after having slid by 26% on Friday versus the previous session.

A trader said that apart from the excitement generated by the new MGM deal and the impact it had on the company's existing bonds, as well as the dealings in MGM-related names like Boyd Gaming, there was "nothing too exciting today."

CIT gets Barron's boost

Among specific names, a trader said that CIT Group Inc.'s bonds were "pretty active," seeing the New York-based commercial lender's 7% notes due 2017 at 99 bid, which he said that pretty much unchanged, while its 7% notes due 2013, which normally trade up about 3 or 4 points from the 2017s, were "not that high," calling them 101 3/8 bid, 101½ offered. He said there had been "a lot of odd-lot trading in the bonds.

He theorized the activity in the credit was due to a positive mention which CIT had gotten over the weekend in Barron's, which reported that the T. Rowe Price High Yield Fund likes the credit.

A market source at another desk , however, while seeing the 2013 bonds edge up to 100 5/8 bid, quoted the '17s down nearly ½ point at 98¾ bid, while seeing its 2016 bonds down ½ point at 98½ bid.

OPTI Canada bounces back

A trader saw OPTI Canada's 7 7/8% notes due 2014 rise to 72 bid, 73 offered, well up from levels around 70 bid, 71 offered on Friday, when the bonds had fallen, though on no news.

He again saw no news out Monday on the Canadian energy company, but suggested that "maybe something was going on" with another company in that same oilsands sector that would lift OPTI's bonds as well as those of other operators. "A rising tide, you know," lifts all boats, he said.

Another market source pegged the bonds nearly 2 points better at just over 72 bid.

A&P gains on financing plans

A trader said that The Great Atlantic & Pacific Tea Co. Inc.'s 11 3/8% notes due 2015 "moved around last week, in size," and quoted the Montvale, N.J.-based supermarket operator's bonds at 70 bid, 72 offered, which he said was up a point versus Friday's close.

A&P on Friday said that it was in the process of finalizing a new term loan that would boost its liquidity by "a significant amount" and would "provide us the time necessary to make the needed changes to our business."

However, the operator of the iconic A&P grocery store chain as well as the Pathmark and Waldbaum's chains in the northeastern U.S. warned in its 10-Q report filed Friday with the Securities and Exchange Commission that that if it is unable to improve its liquidity, "there is substantial doubt about our company's ability to continue as a going concern."

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