Universal, Freedom Group price; Colt, Berry Plastics slate deals; CIT gyrates on Icahn move

By Paul Deckelman and Paul A. Harris

New York, Oct. 27 - Universal City Development Partners Ltd. - the operators of the popular Universal Orlando movie studio and theme park in Florida - successfully priced a two-part offering of senior and senior subordinated notes on Tuesday. When the new bonds were freed for secondary dealings, traders saw them having firmed slightly to levels above par.

Also pricing was a quickly shopped "drive-by" offering for Madison, N.C.-based firearms producer Freedom Group Inc., which did a smallish add-on tranche to its outstanding 10¼% notes due 2015. Demonstrating the continued recent strength of, and improvement in, the junk bond market, the add-on issue's yield represented a pickup of more than two full percentage points from where the original tranche priced back in mid-July.

Another gunmaker was also taking aim at the junk market on Tuesday was Colt Defense LLC, which manufactures small arms for the U.S military and other governments. It was heard by syndicate sources to be shopping a $225 million offering of eight-year notes, expected to price next week.

Also slating a new deal was Berry Plastics Escrow LLC, which will bring a $625 million two-part secured notes issue to market.

Syndicate sources also heard pre-deal market price talk emerge on two other offerings, each expected to price on Thursday - GCI Inc.'s $400 million 10-year deal, and Reynolds Group's $1.8 billion equivalent dollar- and euro-denominated two-part bond issue.

There once again was brisk activity in Navistar International Inc.'s new $1 billion offering of 12-year notes, which continue to trade above the level at which the mega-deal priced last Thursday, though in from the highs it eventually hit when it was freed for secondary activity.

Wynn Las Vegas LLC's bonds were seen higher, even as the Nevada gaming powerhouse reported lower third-quarter earnings - although the profits did beat the Street.

There was considerable activity in CIT Group Inc. bonds, as investors evaluated billionaire Carl C. Icahn's latest gambit in his ongoing battle against the sagging New York-based commercial lender's management.

Junk weakened a touch on Tuesday, according to a high-yield mutual fund manager.

The weakness may be more pronounced in lower quality bonds, which have run the hardest since mid-summer, the investor allowed.

The bonds of bankrupt Smurfit-Stone Container Corp. went out at 75¾ bid, 76¾ offered on Tuesday, after trading as high as 83 bid, 84 offered, mid-to-late last week, the manager said.

Also notable, this source's mutual fund saw two consecutive days of substantial redemptions, on Monday and Tuesday. They represented the first back-to-back negative days of 2009.

"That's noteworthy," the buy-sider said, adding that the negative flows might represent profit-taking, or they could be a reflection of some nervousness in the market.

Universal City's two-parter

The Tuesday session saw three tranches of junk from two issuers price, for a combined total of $700 million.

Universal City Development Partners Ltd. and UCDP Finance, Inc. priced a $625 million two-part notes transaction (B3/CCC+).

The Orlando, Fla.-based vacation destination and theme park operator priced a $400 million issue of 8¾% six-year senior notes at 98.856 to yield 9 1/8%. The yield on the senior notes printed in the middle of the 9% to 9¼% yield talk, while the discount came cheap to the zero to one point of discount talk.

Universal City also priced a $225 million issue of 10 7/8% seven-year senior subordinated notes at 98.796 to yield 11 1/8%. Again the yield printed in the middle of the 11% to 11¼% yield talk, while the issue price came cheap to the zero to one point of discount talk.

J.P. Morgan Securities Inc., Bank of America Merrill Lynch, Barclays Capital Inc., Deutsche Bank Securities Inc., Goldman Sachs & Co. and Morgan Stanley & Co. were joint bookrunners for the debt refinancing and general corporate purposes deal.

The buzz in the market had the deal "a few times oversubscribed."

Freedom Group saws off 214 bps

Elsewhere on Tuesday Freedom Group priced a $75 million add-on to its 10¼% senior secured notes due Aug. 1, 2015 (B2/B) at 106.25 to yield 8.61%.

Bank of America Merrill Lynch ran the books for the quick-to-market deal.

Proceeds will be used to contribute to the funding of the company's unfunded retirement benefit plans, and for general corporate purposes.

The original $200 million issue priced at 97.827 to yield 10¾% on July 15, 2009, so with Tuesday's print the Madison, N.C.-based firearms company realized 214 basis points of interest savings, versus the yield printed on the original bonds.

Reynolds talks $1.8 billion

Meanwhile Reynolds Group set price talk for its $1.8 billion equivalent two-part offering of seven-year senior secured notes at 7¾% to 8% with up to a point of original issue discount on Tuesday.

The planned tranche sizes are $1.125 billion and €450 million.

Pricing is expected on Thursday.

Credit Suisse is the bookrunner for the acquisition and related debt refinancing deal.

There was a buzz in the market that Reynolds talk may have tightened to 7¾% to 7 7/8%.

However a source close to the deal, who had heard the same buzz, said that official talk is 7¾% to 8%.

GCI price talk

Elsewhere GCI Inc. set price talk for its $400 million offering of 10-year senior notes (B2/existing B-) at 8¼% to 8½% on Tuesday.

The deal is expected to price on Thursday.

Deutsche Bank Securities Inc., Calyon Securities, Morgan Stanley & Co. Inc. and RBC Securities Corp. are joint bookrunners for the Alaska telecom's debt refinancing deal.

Berry rolls out $620 million

Berry Plastics Escrow LLC and Escrow Corp. plan to price a $620 million amount of notes in two tranches on Thursday.

The deal will be comprised of $325 million of six-year first priority senior secured notes (expected ratings B1/B). The first priority notes come with three years of call protection.

In addition the plastic packaging products company is offering $295 million of 8 7/8% second priority senior secured mirror notes due Sept. 15, 2014 (expected ratings Caa1/CCC). The mirror notes become callable on Sept. 15, 2010 at 104.438. The original issue $525 million issue priced at par in September 2006. The mirror notes will be non-fungible with the existing notes.

Bank of America Merrill Lynch and Braclays Capital are joint bookrunners for the deal to fund the acquisition of Pliant Corp.

Colt roadshow starts Wednesday

Finally Colt Defense will start a roadshow on Wednesday for its $225 million offering of eight-year senior unsecured notes.

The roadshow concludes on Nov. 3. Pricing is set for Nov. 4.

JP Morgan and Morgan Stanley are joint bookrunners for the Rule 144A/Regulation S with registration rights offering.

The notes will come with four years of call protection.

Mid-single B credit ratings are expected.

Proceeds will be used to repay debt.

Colt Defense is a West Hartford, Conn.-based small arms weapons systems manufacturer.

New Universal Orlando bonds edge upward

When the new Universal City Development Partners two-part offering was freed for secondary dealings, a trader saw those new bonds modestly higher.

He pegged its $400 million of 8 7/8% senior notes due 2015 at par bid, up from the 98.856 level at which the issue had priced.

At the same time, its $225 million of 10 7/8% senior subordinated notes due 2016 got as good as 101 bid "right out of the box," versus its issue price of 98.796.

"We saw them pop up in a few spots," the trader said, "and then quiet down."

At another shop, a trader said that the 2015 bonds later eased back from par to 98¾ bid, 99¾ offered, virtually unchanged on the session, while the 2016s dipped from their high ro par bid, 101 offered - still up more than appoint on the day.

Navistar trades busily

A trader said that Navistar's new 8¼% notes due 2021 - which had been very active in Friday's session and which again were active on Monday - continued to circulate around, although volume fell off from the previous two sessions.

He saw $19 million of the new bonds having changed hands Tuesday - enough to include Navistar on his list of most active issues, though down from the whopping $91 million of the bonds which traded on Friday and the still-formidable $41 million of turnover seen in Monday's dealings.

He said that the bonds traded Tuesday at 98¼ bid, 98¾ offered, in slightly from the 98½ bid, 99 offered seen on Monday.

A second trader saw a "tight market" in the bonds at 98¼ bid, 98¾ offered.

Warrenville, Ill.-based truck and bus maker Navistar priced its mega-deal last Thursday at 96.328 to yield 8¾%, and the bonds had risen to a peak level of 99 3/8 bid, 99½ offered in last Friday's dealings. Several traders suggested that the fact that much of the new issue was distributed to bank debt holders, who rolled out of that paper and into the new bonds, helped to boost demand and thus, price levels, as bond investors eager to get a piece of what was left of the bonds, bid them up.

Market indicators mostly easier

Back among the existing bonds not connected with the new-deal market, a trader saw the CDX Series 13 index down 5/8 point on Tuesday at 93 bid, 93½ offered, after having eased by ¼ point on Monday.

Meanwhile, the KDP High Yield Daily Index fell by 23 basis points on Tuesday to end at 70.14, after having gained 3 bps in Monday's dealings. Its yield was steady at 8.53%, after having risen 4 bps the previous session.

In the broader market, advancing issues topped decliners for a second day in a row Tuesday, though by only a couple of dozen issues out of more than 1,500 tracked.

Overall market activity, as measured by dollar-volume levels, was up marginally from Monday's pace.

A trader called the market "very quiet," repeating that assessment several times for emphasis. He added that there "definitely was a little lighter tone."

Wynn a winner

A market source said that Wynn Las Vegas' 6 5/8% notes due 2014 were among the busiest issues Tuesday in Junkbondland, pegging them at Number-Three on the list.

Another market source had them right at the top, and said that over $20 million of the notes had changed hands by mid-afternoon.

The source quoted the Las Vegas-based casino company's up more than a point, in brisk trading, at just under par.

Wynn said Tuesday that its third-quarter net income fell by one-third to $34.2 million, or 28 cents per share, versus $51.2 million, or 49 cents per share, a year ago.

However, excluding property charges and other items, the company earned 33 cents per share - more than twice as much as the 15 cents per share that Wall Street was looking for.

CIT busy - but not much moved

A trader saw a lot of activity - but not much change in price levels - in CIT Group's widely traded "on the run stuff," such as the 7 5/8% notes due 2012 and the shorter issues coming due in early November, this as billionaire investor Carl Icahn, jockeying for position against company management, gave small bondholders another restructuring option.

"It's still in the 60s, all of them," he said.

The 6 7/8% notes coming due on Nov. 1 were still in a 68-70 range, he said, with "a lot of trades at 68 - pretty much unchanged, but volume in that."

The less widely traded CIT issues, he said that its 12% subordinated notes due 2018 were at 15 bid, 17 offered, while its 6.10% hybrid securities due 2067 were in a 5-7 context.

Among the CIT Group Funding Corp. of Canada bonds, such as the 4.65% notes due 2010, he saw them "still in the range they were in [Monday]," around 93½ - 94.

Another trader said CIT "seemed active," and quoted the 6.10s having fallen to about 5¾ bid, 6 offered, down from around 10 earlier. He said there was "a lot of activity" in the credit, adding "I don't know why - it's a piece of garbage."

He saw the 4 7/8% notes coming due on Nov. 3 offered at 70, and said the bonds had been trading all day in that 70-70½ context, "right in line" with where they have recently been. He noted that a week ago, on Oct. 20, the bonds had been trading with a 72-73 handle.

He said CIT paper "is definitely off a little bit. But volumes are starting to shrink up."

On Tuesday, Icahn announced that he was "providing downside protection for smaller CIT Group noteholders if they are willing to support him in his opposition to the company's pre-packaged bankruptcy plan," according to a press release.

Under the terms of Icahn's offer, he would pay 60% of par value for notes tendered by smaller noteholders. That group, he said, "have been disadvantaged by the restructuring process and completely ignored by CIT and its advisors, as well as by those purportedly representing them."

As such, "it is very important that the smaller holders realize that their vote matters greatly because, under applicable bankruptcy law, CIT's pre-packaged plan - which would entrench the board at the noteholders' expense - requires, among other things, 50% in number of those voting to approve the plan. This means that whether you own one note or 1,000 notes, your vote counts the same in determining whether the 50% in number is achieved.

"Let us show CIT once and for all that the small noteholder is the wrong group to ignore," he added. "Our tender offer provides downside protection to those noteholders willing to stand up to the company and reject their plan in the face of the scare tactics being used by the company."

This is not the first time Icahn has attempted to undermine the company's current restructuring plan. As previously reported, Icahn is said to have offered the company a $6 billion loan to wind down operations. CIT had previously gone to lenders - including a group of bondholders that had provided rescue financing over the summer - to seek participation in a new loan. However, by participating in the CIT-proposed loan, bondholders would be required to approve the company's plan.

Icahn lambasted the company's board of directors for what he deemed to be "Tammany" tactics and went so far as to send a letter to all bondholders urging them to vote against the plan.

Included with the Tuesday announcement was a letter to small bondholders, in which Icahn posed the question, "This board has been the overseer of the precipitous ruination of CIT, so why continue it in power?"

Those bondholders wishing to take part in Icahn's plan have until Oct. 29 to tender their debt - the same deadline set by CIT for most series being tendered for. CIT extended the deadline for some issues on Monday to Nov. 5.

In response to Icahn's announcement, CIT released a press release of their own, entitled "CIT Sets the Record Straight."

In the release, CIT said that "Icahn is seeking to convince smaller bondholders to vote against the company's proposed restructuring plan now in exchange for his ill-defined promise that some of Mr. Icahn's unidentified 'affiliated entities' will eventually deliver on that vague promise."

And, "under CIT's plan all bondholders within the same class, large and small, are treated equally."

The company went on to outline several "misrepresentations" made by Icahn, including the "fundamental economics" of CIT's proposed plan, as well as statements made regarding the company's board.

"First, CIT's board of directors will be comprised of a majority of new independent members, a significant number of whom will be proposed by the company's bondholders," the release said. "Second, with regard to restrictions on the use of cash, contrary to Mr. Icahn's assertions, CIT has incorporated into its plan a cash control process that places restrictions on the reinvestment of cash into the business and ensures that certain cash flows are used to accelerate the repayment of debt."

Tronox trades up

A trader saw "a lot of trades" in Tronox Worldwide LLC's 9½% notes due 2012 in a 64-64½ context "most of the day," which he said was about where the bonds had been on Monday. There was, he added, "decent volume."

A second trader quoted the bankrupt Oklahoma City-based chemical pigments maker's bonds at 64¼ bid, calling them up ½ point to 1 point, "on good volume."

Bon-Ton is better

A trader saw Bon-Ton Department Stores Inc.'s 10¼% notes due 2014 up around 2 or 3 points on the session to 83 bid, 84 offered, "on really good volume," helped by optimistic financial projections.

He said the York, Pa.-based retailer's bonds had been around the 80 mark "a couple of days ago," and saw them move up to 82-83 Tuesday where "a lot of trading took place," before finally ending in an at 83-84 context, with "most of the action" around 83.

Stephanie N. Rotondo contributed to this report

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