PNA deal prices; Movie Gallery up on refinancing news; ArvinMeritor continues climb

By Paul Deckelman, Paul A. Harris and Stephanie N. Rotondo

New York, Feb. 6 - PNA Intermediate Holding Corp. on Tuesday became the latest borrower to recently access the high yield market with a new issue of holding company bonds with a toggle feature allowing the company to pay its coupons either in cash or in kind with an additional premium over the cash interest rate. The new bonds were seen having firmed when they passed into the secondary market.

Elsewhere in the primary arena, Calfrac Holdings LP was heard by syndicate sources to have upsized its offering of eight-year senior notes, which could price as soon as Wednesday. Pre-deal market price talk emerged on PGS Inc.'s deal, which also could price Wednesday, as well as the upcoming offerings for Jarden Corp., Great Canadian Gaming Corp. and TerreStar Networks Inc.

In the secondary realm, Movie Gallery Inc.'s bonds got a big round of applause from the market on the news that the Dothan, Ala.-based video rental chain store operator had reached an accord with its bankers on refinancing its debt.

Financing news continued to be the catalyst behind the recent rise in Wolverine Tube Inc.'s bonds - while ArvinMeritor Inc. paper continued to firm, with the news of a planned sale of convertible notes following on the heels of its Friday announcement of a big planned asset sale that will maneuver the Troy, Mich.-based automotive components company out of a less-lucrative business area.

A high yield syndicate official said that the broad market seemed firmer on Tuesday, and added that for the week better quality paper is up 1/8 point to perhaps ¼ point.

Meanwhile the market saw a pair of PIK deals price on Tuesday: one was an offering of notes, while the other issue was comprised of loans that are exchangeabe into notes.

And sources took stock of a forward calendar that promises a purposeful primary market session on Wednesday.

However beyond Wednesday there is more or less an abyss in the high yield new issue market.

PNA upsizes PIK toggle deal

PNA Intermediate Holding Corp. priced an upsized $170 million issue of six-year senior floating-rate PIK toggle notes (Caa1/B-) with a three-month Libor plus 700 basis points cash-pay coupon at an issue price of 98.25 on Tuesday.

The issue was upsized from $150 million and priced in the middle of the 98.00 to 98.50 price talk.

Banc of America Securities LLC ran the books for the dividend deal.

As has been customary with the PIK toggle issuance seen since the beginning of the year, the coupon will step up by 75 basis points should the issuer elect to make an in-kind (as opposed to cash) interest payment.

The issuer is an intermediate holding company of Atlanta, Ga.-based PNA Group, which processes steel and distributes it to fabricators, manufacturers and distributors.

2007: year of the toggle

Since the beginning of the year the market has seen no fewer than half a dozen PIK toggle deals, according to market sources.

Some have been notes while others have been loans.

Recently, however, a senior capital markets banker who was close to at least one of these transactions told Prospect News that for practical purposes there is no difference between a PIK toggle note and a PIK toggle loan.

This source, who was close to one of the loan deals, said that the order book certainly contained high yield bond accounts.

Prior to PNA, the most recent of the deals came from AmeriPath Intermediate Holdings, Inc., which priced a $125 million issue of six-month Libor plus 525 basis points seven-year floating-rate PIK toggle notes at 99.00 on Monday, via Wachovia Securities.

Tracking back to Feb. 1, Simmons Holdco, Inc., priced a $275 million five-year senior unsecured PIK toggle term loan at an issue price of 99.00 with a cash-pay coupon of Libor plus 575 basis, in a deal led by Deutsche Bank Securities, Goldman Sachs & Co. and Citigroup.

In a January deal led by Credit Suisse and Citigroup, Memphis-based Verso Paper Finance Holdings LLC priced a $225 million six-year senior unsecured PIK toggle loan at 99.00 with a cash pay coupon of Libor plus 625 basis points.

Earlier in the month Norwalk, Conn., membership and loyalty program operator Affinion Group Holdings, Inc. priced a $350 million unsecured PIK toggle term loan (Caa1/B-) at 99.00 with a cash pay coupon at a 625 basis points spread to Libor, via Deutsche Bank Securities Inc. and Banc of America Securities.

Earlier still, Italy's Prysmian Cables & Systems priced a similarly structured €800 million PIK toggle loan at 99.50 with a cash-pay coupon of Libor plus 675 basis points.

One sell-side source told Prospect News on Tuesday that the buy-side may be holding its nose in public whenever the subject of the holdco PIK toggle deals comes up.

Nevertheless, the source said, in the present market which finds the accounts flush with cash and starving for paper - and in which the forward calendar of expected issuance continues to lag - people who are not proscribed by their charters from doing so are definitely getting into the PIK toggle deals.

CEVA upsizes

Elsewhere on Tuesday, Netherlands-based Louis Topco Ltd., the holding company for CEVA Logistics, priced PIK loans that are exchangeabe into notes.

The company upsized to €275 million from €250 million its offering of loans due June 1, 2017, and priced them at 99.00 to pay interest at a 775 basis points spread to three-month Euribor.

Hence the loans came on top of price talk that specified both the issue price and the coupon.

Credit Suisse was the bookrunner for the dividend deal.

Wednesday clearance

To the professed astonishment of at least a couple of high yield syndicate officials the Wednesday session will all but clear the forward calendar of deals in the market.

News materialized Tuesday on several of the deals.

Calfrac Holdings LP upsized to $150 million from $125 million its offering of eight-year senior notes (B1/B) while price talk on the deal, which is being led by RBC Capital Markets and Morgan Stanley, remains at the 8% area.

Pricing is expected on Wednesday morning.

Great Canadian Gaming Corp. has talked its $170 million offering of eight-year subordinated notes (B2/B+) at the 7½% area.

That deal, which is being led by Goldman Sachs, is also expected to price on Wednesday morning.

PGS, Inc. talked its $190 million offering of eight-year senior subordinated notes (Caa1/B-) at 9½% to 9 ¾% on Tuesday.

Pricing is expected midday Wednesday, with Wachovia Securities and Goldman Sachs at the helm.

In a deal being led by Lehman Brothers and Citigroup, Jarden Corp. talked its $400 million offering of 10-year senior subordinated unsecured notes (B3/B-) at 7½% to 7¾% on Tuesday.

Pricing is set for early Wednesday afternoon.

Elsewhere TerreStar Networks Inc. has talked its $450 million offering of eight-year senior secured discount notes at a yield in the 15% area.

The non-rated deal, via JP Morgan, Lehman Brothers and UBS Investment Bank, is also expected to price on Wednesday.

On Monday Invacare Corp. talked its $175 million offering of eight-year senior notes (B2/B-) at 10% area.

That deal, which is being quarterbacked by Banc of America Securities, is expected to price at noon, Wednesday.

Where is the calendar

Should all of that business clear, barring new deal announcements during the Wednesday session, only one deal will be left aboard the forward calendar.

Seitel, Inc. is expected to price its $400 million offering of seven-year senior notes (B3/B-) via Morgan Stanley, Deutsche Bank Securities and UBS Investment Bank on Friday.

Late Tuesday no price talk had been heard on the deal, according to sell-side sources.

As Prospect News went to press on Tuesday night, beyond the deals expected to price Wednesday, and Seitel, which is expected to price Friday, there were no deals thought to be in the market, sources said.

One high yield syndicate official said late Tuesday that drive-by issuance is almost certain to materialize.

However this source said that given the present cash position of high yield investors, the current scarcity of expected issuance is remarkable to say the least.

PNA up in aftermarket

When the new PNA Intermediate Holding floating-rate notes due 2013 were freed for secondary dealings, a trader saw them having broken at 99 bid, 99.5 offered, up from their 98.25 issue price, and then having moved up to 99.75 bid, 100.25 offered by the end of the day.

Another trader saw the notes going home at 100.375 bid, 100.75 offered, characterizing the rise as "a heck of a move for floater."

Yet another trader saw the bonds offered around par to 100.5, but without any bids observed.

Overall, one of the traders said, "the market had a lot of strength today, just an awful lot of strength today, across the board. It felt like an insatiable appetite."

Movie Gallery moves upward

Movie Gallery' 11% notes due 2012 were seen up 2 points at 85 bid, 87 offered, helped by the refinancing news the company announced. Those bonds had gradually been moving upward over the past several sessions, an indication that at least some market participants had anticipated the good news.

The company said Tuesday that it had entered a financing commitment with Goldman Sachs Credit Partners LP, which will act as sole lead arranger, to refinance an existing senior secured credit facility.

It said that it will use the funds from the proposed facilities to refinance its existing senior secured credit facility, to replace existing letters of credit, to provide working capital, to pay fees and expenses associated with the proposed credit facilities and for other general corporate purposes.

Wolverine Tube rise continues

Also on the financing front, a trader said that "Wolverine Tube keeps moving up" in the wake of the Huntsville, Ala.-based metal products maker's announcement last week of a recapitalization plan.

He saw the company's 10½% notes due 2009 at 97, up ¾ point on the session, and at least two or three points higher overall since the recapitalization was announced last Thursday. He said that the notes were trading "at new highs."

Wolverine, which makes various kinds of metal tubing products, said on Feb. 1 that an investor group comprised of Plainfield Special Situations Master Fund Limited and The Alpine Group, Inc. will invest up to $75 million in the company through purchasing new convertible preferred equity, and will also provide a standby commitment to a common stock rights offering, which will be available to all Wolverine shareholders.

It said that the recapitalization plan will provide a minimum of $75 million and could generate as much as $135 million of equity proceeds to the company.

Wolverine also announced that it will initiate an exchange offer to exchange and modify the terms of its existing debt, with the holders of its 7 3/8% senior notes due 2008 slated to exchange those securities for new notes similar to the existing 101/2s, but with less restrictive covenants.

ArvinMeritor continues upward

The trader saw ArvinMeritor's bonds "now up huge" in the wake of its announcement last week that it will sell certain of its assets for over $300 million - and its follow up announcement that it will enhance its liquidity with a new convertible note offering.

He saw the company's 8 1/8% notes due 2015 having moved up to 101.75 bid, 102 offered from prior levels at 99 bid, par offered, while its 8¾% notes due 2012 jumped to 106.5 bid, 106.75, up from 103 bid, 104 offered "just a couple of days ago."

The trader noted that among the intended use of proceeds from the asset sale and the converts transaction is repayment of some debt, notably its term loan, and he suggested that "maybe they'll also take out the 83/4s - I would."

Triad hangs in at high levels

A trader was quoting Triad Hospitals Inc.'s two issues of 7% notes pretty much unchanged at the higher levels to which those bonds had pushed up to on Monday on the news that the Nashville-based hospital company had agreed to be acquired by CMP Capital Advisors and GS Capital Partners for $50.25 a share, or $4.7 billion total. The deal would also see the assumption of $1.7 billion of Triad debt, bringing the total price tag to $6.7 billion.

But after that move Monday, he said, the 7% 2013 notes stayed "right there" at 104.25 bid, 105.25 offered, while the 7% 2012 notes were about half a point behind that.

"They had their 2½ point move [Monday]," he said, "and now they're stuck there."

Building materials names defy downturn

A trader said that "a lot of the building-materials companies keep moving up - which signals to me that people are looking past this slump " seen in housing construction over the past few months.

One such company, he said, is U.S. Concrete Inc.

He saw the Houston-based concrete producer's 8 3/8% notes due 2014 "on a steady roll." A month ago, he noted, the bonds were trading at 96 bid, 97 offered - but have now moved up to 101 bid, 101.5 offered.

He also noted that Louisiana Pacific Corp.'s bonds were trading "really tight to Treasuries," unchanged around 107 bid, 107.5 offered, even as the wood-products producer on Tuesday reported a wider-than-expected $24.6 million (24 cents per share) fourth-quarter loss versus its year-ago profit of $85.2 million (80 cents per share), citing the downturn in the homebuilding industry, a key customer.

"Nothing matters," the trader said in explaining the behavior of strong bonds in sectors having their problems right now. "Even companies that get downgraded, like Dole Food [Co. Inc., recently downgraded by Moody's Investors Service] - the bonds didn't even blink."

Another trader said that apart from names which had specific news attached to them, not much was shaking from where he sat.

"I couldn't get in trouble," he quipped, "if I wanted to."

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