American Tower, Harrah's, AMC price, deal lifts existing Harrah's; Verso, Virgin, Terex slate

By Paul Deckelman and Paul A. Harris

New York, May 27 - Harrah's Entertainment Inc. priced an upsized $1 billion-plus offering of secured bonds on Wednesday as part of the company's refinancing efforts. While the new bonds came to market too late in the session for any meaningful secondary activity, traders said that the Las Vegas-based casino giant's existing paper was meantime smartly higher, gaining points across the board.

AMC Entertainment Inc. also priced an upsized offering, though well outside of mega-deal territory. Traders saw little or no impact on its existing bonds, and said the new deal slipped back from its initial aftermarket highs to go out trading below issue.

Also pricing, though too late in the session for any kind of secondary activity, was a 10-year issue from American Tower Corp., whose existing bonds were seen to have mostly firmed -- particularly the issue which is to be tendered for using the proceeds from the new deal

High yield syndicate sources meantime reported that new deals for Verso Paper Corp., Virgin Media Finance plc and Terex Corp. were circulating in the market. Price talk was heard on the Verso offering, which is expected to be Thursday's business, along with Terex; Virgin Media is expected to price on Friday.

In the secondary market, apart from the aforementioned rise in Harrah's outstanding issues, there was more upside seen in Rite Aid Corp.'s debt, with that company also having announced refinancing plans, which may, or may not, involve an issuance of new junk bonds. General Motors Corp.'s bonds continued to trade in a relatively narrow 6-7 range, with a bankruptcy filing - something once considered unthinkable for the auto industry leader - now appearing all but certain following the resounding failure of its bond exchange offer.

Overall, traders said, Junkbondland pretty much held its own, in the face of a slide in both stocks and Treasuries.

Cash bonds were up during the morning, but came under pressure as stock markets dove throughout the afternoon, ending flat, a high yield syndicate source said.

However a high-yield mutual fund manager, speaking well after the session closed, said that net asset values were definitely higher on Wednesday.

$2.275 billion day

The primary market roared back to life, with three issuers - each bringing a single tranche of junk - priced $2.275 billion of new issuance.

Two of the deals were massively upsized.

Harrah's upsized

Harrah's priced an upsized $1.375 billion issue of 11¼% eight-year senior secured notes (B) at 96.225 to yield 12% on Wednesday.

The yield was printed on top of talk. The discount came within the 3 to 4 points of discount talk, and the deal was increased from the original $1 billion amount.

The deal went very well, with bank loan investors as well as traditional high-yield investors participating because the new secured notes rank pari passu with Harrah's bank debt, according to an informed source.

Banc of America Securities LLC, Citigroup and JP Morgan were joint bookrunners for the deal.

The Las Vegas-based gaming and entertainment company will use the proceeds to repay bank debt and for general corporate purposes.

AMC doubles deal-size

Elsewhere AMC Entertainment Inc. doubled the size of its notes offering to $600 million from $300 million.

The Kansas City, Mo.-based movie theater company priced its new 8¾% 10-year senior notes (B1/B-) at 97.582 to yield 9 1/8%.

The yield came at the tight end of the 9¼% area yield talk, while the price came within the 2 to 3 points of original issue discount price talk.

The new AMC 9¼% notes due June 2019 broke to 97¾ bid, 98¼ offered in early trading, according to a hedge fund manager.

Credit Suisse, Citigroup, Deutsche Bank Securities and JP Morgan were joint bookrunners for the Rule 144A with registration rights/Regulation S offer.

A portion of the proceeds will be used to fund AMC's tender for its $250 million of 8 5/8% senior notes due 2012 and for general corporate purposes, which may include the retirement of any of the 2012 notes not purchased in the tender, or portions of other existing debt of the company and its parent companies through open market purchases or other means.

American Tower prices $300 million

American Tower Corp. priced a $300 million issue of 7¼% 10-year senior notes (Ba1/BB+) at 98.279 to yield 7½% on Wednesday.

The yield was printed at the tight end of the 7½% to 7¾% yield talk. The issue price came within price talk specifying 2 points of original issue discount.

Credit Suisse and JP Morgan were joint bookrunners for the quick-to-market deal.

Proceeds will be used to finance the repurchase of the company's 7½% senior notes due 2012 through a tender offer and to redeem any notes not tendered, to repay $50 million outstanding under the company's revolver and for general corporate purposes.

Verso for Thursday

Verso Paper Corp. talked its $325 million offer of senior secured notes due 2014 with an 11½% coupon at approximately eight points of original issue discount to yield 13¾% on Wednesday, according to a high-yield mutual fund manager.

The deal, which had initially been expected to price on Wednesday, is now expected to price on Thursday.

It is basically done, the investor remarked, adding that the deal came to market on reverse inquiry.

Questions about Verso's cash position dominated Wednesday's investor call, the buy-sider added.

Participants in particular wanted to know if Verso might be able to pay a dividend to sponsor Apollo Group.

The answer to that question is "No," the buy-sider added, specifying that Verso's restricted payments basket would allow for no such dividend payment.

In order to satisfy this and other questions regarding its cash position, Verso filed an 8-K with the Securities and Exchange Commission late Wednesday, and put off pricing the bonds until Thursday morning.

The deal-size will not grow, the investor predicted.

Credit Suisse and Citigroup are joint bookrunners for the Rule 144A offer.

Proceeds will be used to repay $252.9 million outstanding under its senior secured term loan.

Terex to bring $300 million

Terex Corp. also plans to price a deal on Thursday: a $300 million offering of seven-year senior notes.

Credit Suisse, UBS Investment Bank and Citigroup are joint bookrunner for the debt refinancing and general corporate purposes deal

Virgin Media launches dollar/euro deal

Finally, Virgin Media Finance plc plans to price a $650 million equivalent offering of seven-year senior notes on Friday.

An investor call is scheduled for Thursday.

The notes are expected to be issued in dollar- and euro-denominated tranches, with tranche sizes to be determined.

J.P. Morgan, Deutsche Bank, Goldman, Sachs & Co., RBS Securities, BNP Paribas, HSBC, Calyon Securities and Crédit Agricole CIB are joint bookrunners for the bank debt refinancing.

New AMC bonds head south

A trader said that the new AMC Entertainment 8¾% notes due 2019 "kind of faded" from their initial aftermarket highs, seeing the bonds trading down into a 97 1/8 bid, down from their issue price at 97.582, which translates to a 9 1/8% yield.

"They never got out of their own way," he said.

He said that after pricing, the bonds opened up at 97½ bid, 98¼ offered, and "somebody bid as high as 973/4. They hit that bid, and then they just kept hitting bids going down."

At another desk, a market source saw the new bonds even lower, pegging them as low as 96½ bid, 97 1/8 offered.

The source said that Kansas City, Mo.-based movie theater operator's existing 8% notes due 2014 had initially blipped up to about 93 bid, a ½ point gain, when word of the new offering first circulated, but that advance had also faded as the day wore on. Several traders reported seeing no activity in the existing paper.

Allegheny Technologies has crossover appeal

AMC was the only one of the day's new junk bond issues to make it into the aftermarket, but there was some interest among high yield investors in 6-B credit Allegheny Technologies Inc. (Baa3/BBB-), which priced a $350 million offering of 9 3/8% notes due 2019, upsized from $300 million originally. The Pittsburgh-based diversified metals producer's bonds priced at 99.204 to yield 9½%. A junk trader quoted them as having moved up to 100½ bid, 101 offered in the after-market.

Outstanding Harrah's bonds climb on refinancing news

The new Harrah's Operating Co. 11¼% notes due 2017 came to market too late in the day for any kind of immediate trading, pricing at 96.225 to yield 12%.

But there was sufficient activity in the gaming company's outstanding bonds, which all moved to the upside on the news that Harrah's will use the proceeds to retire a portion of its existing term loan and revolving credit debt under Harrah's Operating's senior secured credit facilities, as well as for general corporate purposes.

A trader quoted its 10¾% notes due 2016 at 55 bid, up from 49 previously, on volume of $13 million. He saw its 7 5/8% notes due 2010 firm to 91½ bid from 87, though on only $3 million traded, while its 5½% notes due 2010 moved up to 88½ bid from 82¼ bid, with $3 million changing hands.

A second trader saw its 5 5/8% notes due 2015 up 3 points to 42½ bid, 45 offered, and said the company's bank debt had also firmed, to about 79 bid, 80 offered.

At another desk, a market source described the company's 5¾% notes due 2017 as having pushed up to 41 bid, up a point on the day, while seeing the 103/4s up 6 points to just below the 55 level, while the 51/2s gained over 6 points to plateau at 88 bid.

Harrah's - the world's largest gaming company, with casino properties in the three leading U.S. gaming jurisdictions, Nevada, New Jersey and Mississippi, as well as a number of other markets, domestic and overseas -- has struggled since assuming $12.4 billion in debt in a $30.7 billion buyout deal last year by affiliates of Apollo Global Management LLC and TPG Capital LP.

It said in a recent Securities and Exchange Commission filing that it had $24.2 billion in long-term debt as of the end of the first quarter, on March 31.

American Tower bonds quietly firmer on deal news

There likewise was no immediate aftermarket dealings in the new American Tower 7¼% notes due 2019, which priced at 98.279 to yield 7½%.

However, a trader saw the Boston-based communications antenna tower company's 7½% notes due 2012 - which are to be tendered for using the proceeds from the bond issue - had pushed to a price of 102 bid, up from par last Friday, the most recent prior round-lot level, although he saw only $1 million of the bonds traded.

He also saw American Tower's 7 1/8% notes due 2012, which are not being taken out, rise to 101¾ bid from 99 7/8 a week ago, on $4 million traded.

Its 7% notes due 2017 were unchanged at 97¾ bid, with $2 million changing hands.

Recent new issues holding gains

A market source said that a number of recently priced bonds which had moved up after pricing, continued to trade at those firmer levels, among them Berry Petroleum Co.'s $325 million of 10¼% notes due 2014, which priced at 93.546 last Thursday, to yield 12%, but which subsequently pushed up to 96½ bid, 97 offered, and has stayed there.

Another deal from last Thursday which continues to hold its own is Compass Minerals International Inc.'s $100 million of 8% notes due 2010, last seen trading at 99 bid, 99¾ offered, up from the 97.497 level at which those bonds had priced to yield 8 3/8%.

Ashland, Inc., Bio-Rad Laboratories Inc., Cellu Tissue Holdings Inc. and WMG Acquisition Corp., which each priced an issue of bonds in the middle-90s on May 19, were all seen continuing to hover at or above par, as was Sealy Mattress Co.'s $275 million offering of 10 7/8% notes due 2016. The Trinity, N.C.-based bedding maker's bonds, which had priced at 95.976 on May 15 to yield 11¾%, were quoted Wednesday resting easy at 102 bid, 102½ offered.

Market indicators mostly better

Back among the established issues, a trader saw the CDX Series 12 High Yield index - which gained about 1/8 point on Tuesday -down ¼ point on Wednesday at 79½ bid, 80 offered.

The KDP High Yield Daily Index, which had risen by 14 basis points on Tuesday, gained another 25 bps to close Wednesday at 61.36, while its yield tightened by 5 bps to 11.03%.

Advancing issues - which led decliners for a sixth straight session on Tuesday, by a relatively narrow 12-to-11 margin - widened their lead on Wednesday, to around seven to five.

Overall market activity, measured by dollar-volume totals, rose more than 45% from Tuesday's restrained post-holiday levels.

Even so, a trader said that since he does not "do new issues, I was bored to tears."

A second trader said that from where he sat, the market was "extremely quiet. Even thought the barometer issues," like Community Health Systems Inc.'s 8 7/8% notes, First Data Corp.'s 9 7/8% notes and Aramark Corp.'s 8½% notes, all due 2015, "were up ¼ point to 3/8 point, I would pretty much just call it a non-event day."

He said he "definitely did not see any selling in response to the downward equity market," which saw the bellwether Dow Jones Industrial Average drop 173.47 points, or 2.05%, to end at 8,300.02, with broader market indexes deeply in the red as well.

However, he said "a combination of the weak equity market and it being a partial vacation week meant there was very little [real] activity, other than the new issues."

A trader said that generally, the market was "pretty strong, despite what happened to equities and Treasuries," which were also lower - the benchmark 10-year government note's yield, for instance, ballooned out by 18 bps to 3.73%.

"Our market did okay."

Rite Aid refinancing rally rolls on

A trader saw Camp Hill, Pa.-based drugstore chain operator Rite Aid's 8 5/8% notes due 2015 having pushed up to 68 bid from prior levels at 64. It was among the most actively traded issues on the day, with $24 million changing hands.

Another market source saw those bonds up as much as 6 points on the session to reach the 68 level, and meantime saw the company's 9½% notes due 2017 also around the 68, up nearly 5 points.

Rite Aid thus continued the rise seen on Tuesday, after the company said that it was seeking to enter a new $400 million six-year term loan under its existing senior secured credit facility.

Rite Aid expects to use the proceeds from the new term loan to refinance a $145 million outstanding term loan slated to come due in 2010, as well as to repay and cancel a portion of the commitments outstanding under its existing revolving credit facility, and for fees and other expenses.

Rite Aid said the new term loan is part of what it called "a comprehensive plan" to refinance its 2010 debt maturities, including its accounts receivable securitization programs.

It said the refinancing could take the form of some combination of various options open to the company, including the possible issuance of new high-yield notes.

Other financing options open to the company include a new revolving credit facility, new term loans, or entry into a new securitization program.

GM stuck in neutral as debt swap fails

Elsewhere, a trader called the resounding failure of General Motors' debt-exchange offer "no real surprise," but said that the company's bonds were mixed in the wake of that debacle, which most observers believe has now made a slide into bankruptcy by the once-mighty blue-chip automaker virtually inevitable.

He said its benchmark 8 3/8% bonds due 2033 were actively traded, with $19 million changing hands, and located them down 5/8 point on the day at 7 1/8 bid.

He saw GM's 7.20% notes due 2011 fall ½ point to 6¾ bid, on $7 million traded, while its 8.10% notes due 2024 rose to 7¼ bid from 6 on Tuesday, on $8 million traded.

A second trader said the benchmark bonds were unchanged at 6½ bid, 7½ offered.

Another trader saw GM bonds moving within a 6-8 bid context across the board, with "a few more 6 trades than 8 trades."

He said most of the day's trades had been around 6 to 61/2, adding that he "didn't see a whole lot of activity.

"At this point, whether it's at 6, or 61/2, really doesn't matter much anymore."

However, he saw the benchmark '33s "very active, and up a point" at 7 bid, 7½ offered.

Right up to the midnight ET Tuesday expiration of its exchange offer, GM had hoped to convince the holders of some $24 billion of its bonds, or about 90% of the outstanding amount, to go along with its plans to swap about 10% of the restructured company's equity for that debt. But only a relative handful of the bondholders went along with that idea, with the rest rejecting the deal and claiming they were being given the short end of the stick relative to other creditors with smaller claims who were still being offered more compensation, such as the United Auto Workers union.

Even though a bankruptcy filing is now considered a virtual certainty - and the bondholders will likely be blamed in the public eye for torpedoing any hope of an out-of-court settlement - they did the right thing by rejecting the deal, according to CreditSights, which said in a research report that the deal offered to the bondholders was "egregiously unfair and lopsided."

The independent credit research organization said that the terms offered the bondholders were "very much skewed against the largest pre-bankruptcy creditor."

It further asserted that the compensation being offered to the union in return for its claim "dwarfs the consideration being offered to GM bondholders for sacrificing almost $27 billion in unsecured debt."

GMAC, ResCap bonds level off

Bonds of GM's former auto-loan subsidiary, GMAC LLC - which had been rising handsomely over the past few days in response to GMAC being given another $7.5 billion of federal bailout money and approving commentary from the ratings agencies - were seen to have leveled off.

A trader saw GMAC's 8% notes due 2031 fall to 76¼ bid from 79 on Tuesday, on $7 million traded, although he said it was the company's 7¾% notes due 2010 that "looked like they had some activity today," with $15 million traded, as the bonds eased ¾ point to 961/4.

However, another trader said the GMAC long bonds, at 76 bid, were "pretty much where they were yesterday [Tuesday], maybe up a bit, bouncing around" in a 76-78 context. He said the short GMAC bonds were "also active, and trading about where they've been," with the 73/4s at 96 bid, 96½ offered.

A trader saw GMAC subsidiary Residential Capital LLC's 8½% notes due 2010 "right around" 90 bid, 91 offered, although he said he "[didn't] know how much action" it saw. The mortgage lender's bonds had been going up over the past several sessions, in tandem with those of its parent, GMAC.

At another desk, Res Cap's 8 7/8% notes due 2015 were seen down more than a point at 70 bid.

Also in the automotive realm, a trader saw Ford Motor Co.'s 7.45% bonds due 2031 rise to 58¼ bid from 54½ previously, though on only $2 million of trading. He saw Ford Motor Credit Co.'s 7 3/8% notes coming due on Oct. 28 ease to 97¾ bid, or a 13% yield to maturity, from 98¼ on Tuesday on volume of $7 million.

CIT next bailout boomer?

A trader said that CIT Group Inc. "should have moved up, since people think they're the next ones who will get government money."

He saw the New York-based commercial lender's 7 5/8% notes due 2012 "up maybe a point" to 76 on "not a lot of trading."

Another participant, though, saw CIT's 5.20% notes due 2010 jump more than 6 points to the 84 level.

"The first trader said the shorter end of the company's capital structure should improve soon, "on the hope they get money shortly."

But "if they don't," he warned, "it will get ugly."

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