Forest Oil, Cricket price upsized deals; Bally bankruptcy boost continues

By Paul Deckelman and Paul A. Harris

New York, June 1 - Forest Oil Corp. and Leap Wireless International Inc. successfully brought quickly-shopped, upsized bond offerings to market on Friday, high yield syndicate sources said, the latter issuing a tranche of add-on notes to an existing series of bonds under the name of its Cricket Communications Inc. subsidiary. Neither new bond showed particular movement when freed for secondary dealings.

Elsewhere in the primary market, roadshow details emerged on offerings for two other issuers, Algoma Steel Inc. and Actuant Corp.

In the secondary market, Bally Total Fitness Holdings Corp. was the main topic of conversation for a second straight session, as the Chicago-based fitness club operator's subordinated bonds again climbed by several points on the session. Traders reported that not much else was happening in the overall market.

"The general market was probably unchanged to up a little," one said, quoting the widely followed CDX index of high yield market performance at 100.75 bid, 100.875 offered, steady on the day. "There was not a lot of trading, not a lot of interest, not a lot of activity. A lot of people left around 11 o'clock [a.m ET]."

A high yield syndicate official marked the broad market a touch weaker on Friday and noted that Treasuries had ended the day six to seven basis points weaker, impacting higher quality issues in the speculative-grade universe.

Apart from those higher rated names, the source added, junk got a lift from the late Friday run-up in the stock markets.

The Dow Jones Industrial Average closed 40 points higher on Friday, the official observed.

Friday primary tops $1 billion

In Friday's new issue market, two companies priced dollar-denominated deals, both of which were significantly upsized and came quick-to-market.

Forest Oil priced an upsized $750 million issue of 12-year senior notes (B1/B+) at par to yield 7¼%, on top of price talk. The deal was increased from $500 million.

JP Morgan, Banc of America Securities LLC, Citigroup, Credit Suisse and Deutsche Bank Securities were joint bookrunners for the acquisition-funding deal from the Denver-based oil and gas exploration, production and development company.

Elsewhere Cricket Communications, the operating subsidiary of Leap Wireless International, priced an upsized $350 million add-on to its 9 3/8% senior unsecured notes due Nov. 1, 2014 (Caa1/CCC) at 106.00, also on top of the price talk, resulting in a 7.983% yield to worst.

The add-on was upsized from $285 million.

Citigroup ran the books for the general corporate purposes deal. The company said it may use some cash for the build-out of new markets.

The San Diego-based wireless communications provider's original $750 million issue priced at par in October 2006. Hence, in terms of yield, the company shaved nearly 140 bps from the yield that was printed on the original notes.

A source from Leap told Prospect News that Thursday's bond sale by Denver-based wireless operator, MetroPCS Communications, Inc., an upsized $400 million add-on to its 9¼% senior notes due Nov. 1, 2014 (Caa1/CCC) at 105.875 to yield 7.89%, left some investors wishing they had more bonds.

This source noted that the MetroPCS paper, which priced Thursday at 105.875, was trading Friday at 106.25.

Meanwhile a sell-side source close to the Cricket/Leap deal told Prospect News that it had gone well.

Citing the familiarity of the credit, the sell-sider added that no sooner had the deal launched than there had been considerable clarity on who would play.

This source also said that the Cricket/Leap paper went out Friday at 106.25 bid.

The quick sale

With both of Friday's dollar-denominated transactions being quickly shopped deals, as were more than 40% of the deals that were priced during May in the high yield primary market, Prospect News asked the sell-sider to explain why drive-by activity has been so vigorous of late.

Names such as MetroPCS or Cricket are ones that everyone knows, the official replied.

"They made no secret that they were going to access the market," the source added.

The official went on to say that from an issuer's perspective, high yield is currently somewhat volatile, although quite strong.

"When you weigh doing a roadshow against the cost of the volatility, a lot of the issuers choose to do an investor call and market the deal in a day or a day and a half," the official said.

"If issuers stay in touch with the market, attend conferences and see investors, and are respectful, they have that kind of access."

The source said that obviously LBO deals and new issuers must carry out their transactions by means of investor roadshows.

$2.58 billion week

With Friday's deals in the tally, the holiday-shortened the May 28 to June 1 week came to a close having seen $2.58 billion of issuance in eight dollar-denominated tranches.

At Friday's close, 2007 issuance stood at $85.3 billion in 225 dollar-denominated tranches, a 55% increase over the $54.9 billion in 162 tranches that had priced to the June 1 close in the record-setting year of 2006.

Ardagh restructures

In the non dollar-denominated sector of the primary market, Ardagh Glass Finance plc priced a restructured €310 million issue of 10-year senior fixed-rate notes (B3/CCC+) at par to yield 7 1/8% on Friday.

The issue priced in the middle of the 7% to 7¼% price talk.

The Dublin, Ireland-based glass container company abandoned a proposed tranche of 10-year senior toggle notes.

Citigroup ran the books for the acquisition deal.

The calendar builds

The Friday primary market session saw a dramatic buildup in the new issue calendar, as the market is set to sail full-swing into June.

Algoma Steel Inc. will begin a full roadshow on Monday for a $450 million offering of eight-year senior unsecured notes, via UBS Investment Bank.

The Sault Ste. Marie, Ont.-based steel producer will also put in place an $850 million credit facility, with proceeds going to help fund Indiana-based Essar Steel Holdings Ltd.'s acquisition of the company for C$1.85 billion.

Short roadshows

The other three deals that were launched Friday are expected to price before the end of the June 4 to June 8 week.

W&T Offshore, Inc. will start a roadshow on Monday for its $450 million offering of seven-year senior notes (expected B3/confirmed B-), which is expected to price late in the week.

Morgan Stanley has the books for the debt refinancing deal from the Houston-based independent oil and natural gas company.

Elsewhere, in a transaction being led by Banc of America Securities, Actuant Corp. will begin a brief roadshow on Monday for its $250 million offering of 10-year senior notes, which are expected to price mid-week.

The Glendale, Wis., industrial equipment manufacturer will use the proceeds to repay bank debt.

And Bristow Group, Inc. will begin a roadshow on Monday for a $250 million offering of 10-year senior unsecured notes, which is also expected to price late in the week, via Goldman Sachs & Co. and Credit Suisse.

The Houston-based offshore transportation services provider to oil and gas industry will use the proceeds to fund a portion of the acquisition of additional large and medium aircraft under options.

In addition to the business unveiled on Friday, several other issuers have been on the investor roadshow circuit, and are planning to place notes during the June 4 to June 8 week.

Hub International Ltd. is expected to price its $790 million three-part notes offer, via Morgan Stanley and Merrill Lynch & Co.

Reliant Energy, Inc., plans to price its $1.25 billion two-part offering via Goldman, Sachs & Co., Deutsche Bank Securities, JP Morgan and Merrill Lynch & Co.

Finally, Pinnacle Entertainment, Inc. has been marketing a $350 million offering of eight-year senior subordinated notes (B-), via Lehman Brothers, Bear Stearns & Co., Deutsche Bank Securities and Banc of America Securities LLC.

The deal is expected to price on Tuesday.

New Cricket, Forest bonds barely moved

When the new Cricket Communications/Leap Wireless 9 3/8% senior notes due 2014 were freed for secondary dealings late in the afternoon, a trader saw the bonds having edged higher to 106.125 bid, 106.375 offered.

He also saw the Forest Oil 7¼% notes due 2019 at par bid, 100.25 offered, unchanged from its par issue price.

Traders detected no aftermarket movements in the new bonds of Spansion LLC, which priced $75 million of add-on notes to its floating-rate bonds due 2013 on Thursday, or of MetroPCS Communications, which brought an add-on offering of 9¼% notes due 2014 to market Thursday.

Bally moves higher once again

For a second straight session, Bally Fitness's bond, particularly its 9 7/8% subordinated notes slated to come due later this year, were seen solidly higher after the company announced Thursday that it had reached agreement with those bondholders on a restructuring plan, which would be implemented via a voluntary, pre-packaged Chapter 11 filing which will vest ownership of most of the company in the hands of its bondholders.

"Bally's pre-pack was again the big news," a trader said, quoting those bonds as having pushed up 5 points on the session to 94. He saw the company's other issue, its 10½% senior notes due 2011, up 3 points on the day at 101 bid, 103.

The sub bonds were rising much more than the seniors, he said, because "the 9 7/8% holders will get part of a new issue [of bonds], a 1% consent fee and equity, and the new notes will be senior to the 101/2s."

Under the terms of the plan outlined by Bally in a filing with the Securities and Exchange Commission, holders would swap their 9 7/8% notes for the stock and $150 million of new subordinated toggle notes paying 11½% interest. Those toggle bonds would pay a 13% coupon if Bally elects to pay its coupon in kind, or with additional bonds, rather than making its payments in cash.

A trader noted that the Bally bonds were "trading with due bills" attached to them, after having declared its intention of filing for Chapter 11, should it gain the approval of bondholders holding at least two-thirds of the company's debt.

He saw the subs trading up 4 points on the day, at 96-98, with the seniors at 101-103.

Several other traders indicated that Bally bonds were now trading flat, or without their accrued interest, the effective loss of several points of value despite a nominal rise in the bonds' price.

Although Bally is by far the biggest player in the health-club industry, with over 400 locations in 29 U.S. states plus international operations, and 3.5 million members, its operations in recent years have been anything but robust, with the company forced to dispose of underperforming non-core assets, and its long-time chairman pushed aside last year under pressure from unhappy shareholders.

Six Flags seen lower

With Bally the big name of the day, not too much was going on elsewhere, although a source did quote the 9 5/8% notes due 2014 of New York-based amusement and theme park operator Six Flags Inc. down as much as 3½ points in relatively active trading, at 95.5. However, no fresh news was seen out on the company, which earlier in the week announced the successful completion of an amendment to its credit agreement.

At another desk, Six Flags' 8 7/8% notes due 2010 were seen up ¼ to ½ point at 101.75.

Bombardier better on numbers

Bombardier Inc., the Canadian transportation equipment manufacturer, was seen a little better after having posted favorable first-quarter earnings data earlier in the week.

Its 6.30% notes due 2014 were seen up ½ point at 98.5 bid.

And credit default swaps contracts insuring its debt holders against a default also fell in price - a sign of increased investor confidence in the company - in the wake of those results, which saw the company more than tripling its year-earlier earnings.

Those CDS contracts were quoted about 9 to 10 basis points tighter since the start of the week, at 110 bps.

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