New Immucor bonds firm smartly; Vangent jumps on General Dynamics deal; secondary stronger

By Paul Deckelman and Paul A. Harris

New York, Aug. 17 - There were no deals seen having priced on Wednesday in the high-yield bond market - but then again, there didn't have to be.

Investors were kept plenty busy with the $400 million issue medical chemicals provider Immucor, Inc. priced late in the session on Tuesday - too late for any trading then.

When those bonds started trading on Wednesday, market participants saw them move up sharply from their below-par pricing level.

Traders also saw continued strong levels for recent deals like Rock Ohio Caesars LLC and HCA Inc.

Syndicate sources also heard that Kinetic Concepts, Inc., which is planning $2.15 billion of junk financing in support of its own leveraged buyout, is likely to come to market with this deal as early as next month.

Also on the merger-and-acquisitions scene, the news that giant defense contractor General Dynamics Corp. will acquire information technology company Vangent Holding Corp. sent the latter company's bonds up by multiple points in fairly busy trading.

Numerous other high yield issues were up by at least a point or more, including such familiar names as Caesars Entertainment Corp., Rite Aid Corp. and Eastman Kodak Co., as the overall junk market was solidly better despite just mediocre performance in equities. Statistical indicators finished on the upside.

However, some issues continued to get punished, including Travelport, Inc., which was still reeling from Tuesday's ratings downgrade, and Aquilex Holdings, LLC, which drew down its revolver and warned of possible liquidity troubles down the line.

There was no news from the primary market on Wednesday.

The fates of a pair of deals that have been hung up on the forward calendar for weeks remain unknown, sources say.

Jeld-Wen, Inc. launched a $575 million offering of seven-year senior secured notes (B3/CCC+) on Aug. 2.

The debt refinancing and general corporate purposes deal, in the market via Bank of America Merrill Lynch, Wells Fargo, Barclays and KeyBanc, was slated to price during the Aug. 8 week.

A buyside source who looked at the deal said that the privately held Oregon window company's story was not an easy one to like in a slow economy that is wreaking havoc on the residential construction industry.

Standard & Poor's, while assigning its CCC+ rating the notes, said that Jeld-Wen maintains a leading position in residential doors in North America, Europe and Australia and derives more than half its revenues and profits from outside the United States.

Moody's assigned its B3 rating to the notes.

A Wednesday call to the company was not returned.

There hasn't been any word on the M&G Finance Corp. $500 million offering of seven-year senior notes (expected ratings B3//BB), which began a roadshow on July 25.

The company came into the market with a deal, via bookrunner JP Morgan, in order to raise money to fund capital expenditures and repay debt, as well as to provide liquidity and working capital.

Jeld-Wen and M&G notwithstanding, some market-watchers are saying that the active forward calendar is presently empty for all practical purposes.

September - a tough call

No one is ruling out a possible pre-Labor Day deal. However with many high-yield players vacationing or planning to do so in the two weeks heading into the three-day holiday weekend, the primary market's focus has shifted to September.

There is uncertainty as to how busy the new issue market will be when players resume their places on Sept. 6, sources say.

"We have a healthy September pipeline," a syndicate official said on Wednesday.

"However, since we have seen the market back up 100 basis points over the past two weeks, some issuers will want to see evidence of improvement before they go forward with their deals."

With the market having now moved into the latter half of the August Dog Days, syndicate bankers have been customarily bringing that "market conditions" caveat into play when asked to forecast the post-Labor Day primary.

It should be busy, they say, depending upon market conditions.

Immucor up in aftermarket

Traders saw the new Immucor 11 1/8% notes due 2019 having pushed solidly higher when they finally moved into the aftermarket.

Those bonds - officially issued by IVD Acquisition Corp., which is to be merged with an into Immucor as part of the acquisition of the Norcross, Ga.-based company by TPG Capital - were priced on Tuesday at 98.714 to yield 11 3/8%, in line with pre-deal market price talk.

The $400 million issue came too late in the day on Tuesday to trade, but on Wednesday, a trader said, "they did very well," moving up to 101½ bid, 102¼ offered.

"There were not a lot of bonds around on the right side, it seems, so that one traded very well."

A second trader agreed, pegging the new bonds at 101 bid, 102 offered.

At another desk, a trader said that the bonds opened at 100¾ bid in the morning when they were freed and "then improved throughout the day," hitting a high of 101¾ bid, before going out around 101 5/8 bid, 102 3/8 offered.

He noted that the company's shares trade on the Nasdaq under the appropriate ticker symbol "BLUD," since Immucor is a provider of blood-testing equipment and chemical reagents used by hospitals, clinical labs and blood banks.

Recent deals stay strong

Among other recently priced issues, a trader said that Rock Ohio Caesars LLC's 12 1/8% senior secured second-lien notes due 2018 had pushed as high as 104 bid in Wednesday's dealings.

On Monday and Tuesday, the $380 million offering had traded in a 102-103 context, up from its Friday trading levels around 100½ bid, 101½ offered.

The Cleveland-based gaming casino developer had priced the forward-calendar issue last Thursday at 98.266 to yield 12½%.

A second trader, though, said that he did not see any sign since the end of last week of either the Rock Ohio bonds or of the $150 million of 10% notes due 2016, which Midland, Texas-based energy operator CrownRock LP's had priced as a drive-by offering on Friday at 92.681 to yield 12%.

A market source meantime saw Nashville, Tenn.-based hospital operator HCA Inc's $5 billion two-part behemoth of a bond offering having improved, in contrast to Tuesday's session, when the bonds had eased off a little from solid gains notched on Monday.

He saw its new 7½% senior unsecured notes due 2022 gaining three-eighths of a point Wednesday to stand at 98 1/8 bid, on volume approaching $9 million, while the other half of that deal - the new 6½% first-lien senior secured notes due 2020 - were up by 1 1/8 points to close around 101 bid on volume of more than $12 million traded, putting it among the Junkbondland volume leaders.

Another trader said that the 61/2s were "doing okay," seeing them trade as high as 100 1/8 bid, before dropping back to 99 5/8, which he called their low for the day, but still up a little from Tuesday's trading range between 99¼ and 1001/2.

But he saw the real movement in the 71/2s, calling them "a little bit better," as they got as high as 98 5/8 bid, before going home around 98 1/8 bid. On Tuesday, he had seen the bonds trading most of the day between 97¾ and 98.

HCA had originally priced $3 billion of the 6½% bonds and $2 billion of the 71/2s in a quickly shopped deal on July 26, which saw both parts of the enlarged deal price at par and then move marginally higher.

Both of those tranches rose a point or more on Monday, in line with the general market rebound, before giving up some of the gains on Tuesday.

Market indicators improve

Away from the new deal sphere, market statistical indicators - mixed on Tuesday after solidly positive finishes on both Friday and Monday - were seen having moved back into the black across the board on Wednesday.

A trader saw the CDX North American Series 16 HY Index having firmed by 13/16 of a point on Thursday to finish at 95 7/16 bid, 95 11/16 offered versus Tuesday's loss of¾ of a point.

The KDP High Yield Daily Index, rose by 29 basis point on Wednesday to close at 72.79, on top of Tuesday's 10-bps gain.

Its yield came in by 10 bps to 7.68%, after having narrowed by 3 bps on Tuesday.

And the Merrill Lynch U.S. High Yield Master II Index posted its fourth consecutive advance on Wednesday, gaining 0.25%, which followed Tuesday's 0.237% advance. Those four straight sessions of gains, going back to last Friday, had snapped a skid of eight consecutive downside sessions, which brought its cumulative 2011 return down to near its lowest levels on the year, set in early January.

Wednesday's gain, though, lifted the index's year-to-date return to 2.483%, up from 2.228% on Tuesday, although it remains well below the peak level for the year of 6.362%, set on July 26.

A trader said: "There was some volume today, but it wasn't concentrated on anything in particular. It seems to be pretty much across the board."

A second trader observed that the junk market "had a firm tone, up a half-point generically."

Level 3 gets busy

A trader said that Level 3 Communications Inc.'s 10% notes due 2018 "are the biggest trader right now," in terms of volume, although there was no fresh news out on the Broomfield, Colo.-based telecommunications network operator and internet service provider that would explain the activity.

He said that the bonds were ending somewhere between 102 and 102½ bid, well up from 100¾ bid, 101¼ offered on Tuesday, and the 101½ bid level at which they began trading on Wednesday.

A market source at another shop said that over $13 million of those bonds had changed hands, putting it among the busiest issues. He saw the bonds trade as high as 102¼ bid, up 1 point on the session.

The first trader, looking over the list of company press releases for some clue as to why the bonds went up, said there were a few announcements of the company winning a contract here and there, "but nothing dramatic."

He suggested that "maybe it was just up with the market," which he noted had an overall firmer tone, despite a mediocre showing by equities.

The bellwether Dow Jones Industrial Average, which had recently seen such wild volatility, going up or down by literally hundreds of points in the course of a single session, closed the day on Wednesday up just 4.28 points, or 0.04%, at 11,410.21. The broader S&P 500 index also posted a miniscule percentage gain, while the Nasdaq composite index actually ended the day a little lower.

Vangent in the vanguard

But the big winner on Wednesday in the junk precincts was Vangent Inc., whose 9 5/8% notes due 2015 "were up 5 or 6 points on the day," a trader said, locating those bonds at 105¼ bid. 105 3/8 offered, propelled by the news that the Arlington, Va.-based information technology company is to be bought by giant defense contractor General Dynamics for $960 million.

He noted that the bonds had been trading at 99 last Friday.

Another market source characterized it as a 61/4-point gain to 105¼ bid. Round-lot volume on Wednesday was a brisk $10 million-plus.

Vangent - currently privately held and majority-owned by Veritas Capital Fund III, LP - provides health care information technology services to the federal the Departments of Health and Human Services, Education, Labor, State and Defense.

Harrah's heads higher

Among other names doing well on Wednesday, a trader saw Caesars Entertainment Corp.'s 10% notes due 2018 trading around 82¼ bid, 82½ offered, up from Tuesday levels in the 81 neighborhood, but down from levels as high as 83 at which the Las Vegas-based casino giant's bonds had traded earlier in the day. The issue is perhaps better-known to junk investors under the company's former name, Harrah's Operating Co.

"They're fading toward the end," but the trader said that there was "nothing too dramatic going on" in the credit, which was one of the most actively traded junk bonds of the day, with over $20 million changing hands.

"It could just be noise, rather than a real move, just because they trade so often."

He had seen the bonds on Tuesday trading between 81¾ and 82¼ for most of the day.

Another market source said the bonds traded at 82¼ bid near the end of the day, up from 81 5/8 bid on Tuesday.

Patent valuation helps Kodak

Eastman Kodak's debt was quoted higher, though there were not many trades in the bonds.

The gains came on the back of "the bullish news story about the value of its patents," a trader said.

He said the 7¼% notes due 2013 edged up a couple points to the mid-80s.

Another trader said a "tiny piece" of the 7¼% notes traded at 86, which was "up a lot," though because of the small size, he said it was "hard to tell" how much the paper was actually up.

They were around 80," he noted.

A third source said the debt moved up 5 points to 86 bid.

In a new research report, MDB Capital Group Inc. said that the Rochester, N.Y.-based photographic products and digital imaging technology company's patents could be worth as much as $3 billion as various companies like Apple Inc. and Google Inc. aim to grab up patents.

Last month, Kodak said it was shopping its patents in an effort to increase its revenue stream.

Rite Aid heads higher

While Kodak was climbing on news, there was no news out on Camp Hill, Pa.-based drugstore chain operator Rite Aid, but the bonds were moving up anyway

A trader said the 9½% notes due 2017 were "real active" and up about 1½ points around 871/2.

Another trader saw the 9 3/8% notes due 2015 gaining a point to end around 891/2, while the 8 5/8% notes due 2015 inched up to 90.

Yet another source saw the 8 5/8% notes finishing 1½ points higher at 90 bid.

Aquilex agitated by liquidity

Not everyone was on the upside on Wednesday: A trader said that Aquilex Holdings LLC's 11 1/8% notes due 2016 were being offered in the mid-to-high -80s . That was down from offered levels at 90 on Tuesday, which in turn was well down from the most recent actual trades in the credit - around the 98 bid area - near the beginning of the month.

A trader at another shop saw the bonds around 83 bid, 85 offered.

That followed the Atlanta-based company's release late Monday of second-quarter results and its 10-Q filing with the Securities and Exchange Commission, during which it disclosed that it had drawn down the last $24 million available under its $50 million revolving credit facility in order to augment its working capital and said that it would explore as-yet unspecified avenues for increasing its liquidity.

The company - a provider of repair, maintenance and industrial cleaning services to oil and gas companies, petrochemical makers and nuclear energy operators, among others - also warned that it couldn't guarantee that it would still be in compliance with its credit facility covenants by the end of the current third quarter. It outlined plans to seek waivers of covenant compliance from its lenders and cautioned that an inability to improve its liquidity picture could raise "substantial doubt about the company's ability to continue as a going concern."

Travelport troubles continue

Also on the downside, a trader said that Travelport, Inc.'s 11 7/8% senior subordinated notes due 2016 were down about 5 points on the day at 74 bid.

He said it was "second-day trading" related to Tuesday's ratings downgrade of the Parsippany, N.J.-based travel distribution services company by Moody's Investors Service.

On Tuesday, its 9 7/8% senior notes due 2014 lost a point or two to finish at 86 bid, and on Wednesday, they dropped another 2 points, to 84 bid.

Stephanie N. Rotondo contributed to this report

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