GEO Group, MTR price deals; talk heard on Solutia, Hercules offerings; CIT slide continues

By Paul Deckelman and Paul A. Harris

New York, Oct. 7 - GEO Group, Inc. priced an offering of eight-year notes late in the session on Wednesday, high yield syndicate sources said.

The sources also heard that MTR Gaming Inc. had come to market with a small $10 million add-on offering to the Chester, W.Va.-based racino and parimutuel track operator's existing issue of 12 5/8% senior secured notes due 2014 which had originally priced in July.

Neither new credit made it into Wednesday's aftermarket, secondary market players declared.

There was heavy activity in the new Comstock Resources Inc. eight-year notes which priced on Tuesday, but little in the way of actual price movement.

Among the existing bonds not connected to the new-deal side of things, CIT Group Inc.'s bonds were seen down multiple points in brisk dealings, as two key members of the committee representing the interest of the company's bondholders dropped off a bondholder steering committee - a further blow to the company's efforts to convince creditors to go along with its restructuring idea, which includes swapping new notes for its existing bonds.

GEO at tight end

In Wednesday's primary market, GEO Group priced a $250 million issue of 7¾% eight-year senior notes (B1/BB-) at 98.547 to yield 8%.

The yield was printed at the tight end of the 8% to 8¼% price talk.

Bank of America Merrill Lynch, SunTrust Robinson Humphrey Inc., Wells Fargo Securities, BNP Paribas Securities Corp. and Barclays Capital Inc. were joint bookrunners for the debt refinancing and general corporate purposes deal.

Talking the deals

Price talk on two of the week's pending deals surfaced Wednesday.

Hercules Offshore, Inc. talked its $300 million offering of eight-year senior secured notes (B2/B) with an 11% area all-in yield at a discount of approximately 2 to 3 points.

The books close at noon ET on Thursday.

UBS Investment Bank is the left lead bookrunner for the debt refinancing deal. Bank of America Merrill Lynch, Deutsche Bank Securities Inc. and Morgan Stanley & Co. Inc. are joint bookrunners.

Elsewhere Solutia Inc. set price talk for its $300 million offering of eight-year senior notes (B2/B) at 8¾% to 9%, with about 1.5 points of original issue discount.

The books close at 4 p.m. ET on Thursday. The deal is expected to price on Friday morning.

Deutsche Bank Securities Inc., Jefferies & Co. and Citigroup Global Markets Inc. are leading the debt refinancing and general corporate purposes deal.

Supply on the way

Once again on Wednesday, dealers warned that the primary market activity will increase, substantially, in the days ahead.

A few details on some of the pending supply materialized on Wednesday.

JohnsonDiversey Inc. plans to obtain approximately $1.9 billion in new bank debt and bonds in connection with a recapitalization transaction valued at $2.6 billion.

As part of the recapitalization, Clayton Dubilier & Rice Inc. will invest $477 million for a 46% equity interest in the company.

Goldman Sachs and Citigroup served as financial advisors to JohnsonDiversey on the transaction. Barclays Capital, HSBC Securities, Natixis, Rabobank and RBC Capital Markets served as financial advisors to Clayton Dubilier & Rice.

Elsewhere Viasystems Group, Inc. has eyes trained on the bond market, as part of its plans to "aggressively" refinance about $200 million in bonds now that its stock merger with Merix Corp. has been announced.

"Now that we've got the merger transaction announced, we will move aggressively to see what the market has available for us. The bond markets are pretty hot right now," Viasystems' chief executive officer David Sindelar said Wednesday.

Finally from Europe, Germany's HeidelbergCement AG could be headed to market as early as next week with €1 billion of junk, sources day.

Deutsche Bank Securities, RBS and Bank of America Merrill Lynch are expected be involved.

GEO, MTR bonds unseen in secondary

A trader said that "we haven't heard boo" about any secondary activity in the new GEO Group 7¾% senior notes due 2017. The company priced $250 million of those bonds at 98.547 late in the afternoon, to yield 8%.

There likewise was no action seen in either the old or the small new issue of MTR Gaming's 12 5/8% notes due 2014. The $10 million of add-on notes priced at 96 to yield 13.793%.

A cornucopia of Comstock trades

On the other hand, a trader saw "a very active day" in the new Comstock Resources 8 3/8% senior notes due 2017, which had priced on Tuesday.

"This, according to Trace, was the Number-One traded bond today," he said, estimating volume late in the session at a whopping $59 million.

However, despite the intense level of activity, he saw the new bonds little moved from the 98.571 level at which the Frisco, Tex.-based independent energy exploration and production company had priced its $300 million issue - upsized from $200 million originally - on Tuesday to yield 8 5/8%.

"These things basically all day traded between 98½ and 98 7/8, in that range, almost all of them. Usually, you'll see $5 million or $10 million trade - and here, it's almost $60 million."

He continued that "at the very end of the day, it looked as though some small pieces were breaking at the 99 1/8 level - but the bulk of them were somewhere between 98½ bid and 99.

"It was just all day long" that there were trades at 981/2, 98 5/8, 983/4, and 98 7/8, he said. "If the thing traded up 5 or 6 points, you'd have a boatload of people flipping out [of them], but here, it was just slightly above issue - but a lot changed hands."

Market indicators ease

Back among the existing bonds not connected with the new-deal market, a trader saw the CDX Series 13 index down ¼ point Wednesday at 92½ bid, 93 offered, after having been unchanged on Tuesday.

The KDP High Yield Daily Index lost 7 basis points on Wednesday to finish at 68.83, after having risen by 20 bps on Tuesday, while its yield widened by 3 bps to 8.45%, on top of having narrowed by 8 bps the session before.

However, in the broader market, advancing issues led decliners for a fourth consecutive session on Wednesday, although their margin narrowed to only a relative handful of issues out of nearly 1,400 tracked, versus the better than four-to-three advantage which they held on Tuesday.

Overall market activity, as measured by dollar-volume levels, fell by 16% on Wednesday from Tuesday's pace.

CIT staggers as bond group erodes

A trader said that CIT Group paper "was off - obviously - with a lot of news coming out."

He said the troubled New York-based commercial lender's bonds were off between 1 and 3 points, "depending on the maturity."

He saw CIT's 4¼% notes due 2010 trading last at 64½ bid, down some 2¼ points on the session. He said the 4 1/8% notes slated to mature on Nov. 3 "really get hit," with the paper trading at 65½ bid, down from 71½ on Tuesday, "so they were off about 5, 6 points." He saw the 6 7/8% notes coming due just two days before the 4 1/8s, on Nov. 1, trading at 67, down from 72½ on Tuesday.

Looking at some of the longer issues, the trader saw the 5.65% notes due 2017 down about a deuce at 62½ bid, while its junior subordinated 6.10% bonds due 2067 fell to 9 cents on the dollar, down from a 10-11 context on Tuesday.

"So their whole [capital] structure was off."

CIT's issues, a second trader said "were making their way lower, so the short stuff traded down a few points," pegging them in the mid-to-high 60s. He quoted the 2010s and 2011s in a 63-66 context, with "a lot of the floaters right in that 63-64 [area], "so that's down a few points."

He saw the November 6 7/8% and 4 1/8% bonds "in that range," calling them down 3 or 4 points, right around 66.

In the longer issues, he saw the 7 5/8% notes due 2012 "down a couple of points, figure around 62."

CIT, yet another trader said, "had news out - and there were a lot of 'bid-wanteds' on it, from people looking to get out of the paper." He said there was "just a ton of different issues, all trading all over the place" at mostly lower levels.

He quoted the Nov. 3 4 1/8s at 66 bid, after having traded in a wide 66-70 range.

He saw the company's 4¼% notes at a 64 bid, without an offered side, "so that probably paid a little bit more."

The company's 6.10% and 6.15% notes, both due 2013, were for sale in the low 60s. "It seemed like there were some bonds for sale at 64, then 63 - and by the end of the day, they ended up being offered at 60."

Its 5.40% notes due 2016 eased to 65½ bid, 64 offered, by midday.

The CIT bonds gyrated amid the news that two big bondholders - Pacific Investment Management Co and Baupost Group - have bailed out of a committee of CIT's biggest holders - a development seen in some quarters as yet one more setback for CIT as the company tries to convince its creditors to support its sweeping debt restructuring plan as an alternative to filing for a pre-packaged bankruptcy.

The remaining four creditors on the committee are Centerbridge Partners LP, Oaktree Capital Management, Capital Research & Management Co. and Silver Point Capital.

Those six firms had put in place $3 billion of emergency loans for CIT at the end of July - but according to The Wall Street Journal, Pimco, considered the world's largest bond fund, with over $850 billion in assets, had sold some of its CIT positions, making it ineligible to continue to serve on the bondholder committee.

Additionally, CIT's efforts to win bondholder support for its restructuring plan faced another challenge from a holder of its subordinated notes, Little Bear Investments, which is reportedly trying to put together a group of bondholders to press for a bigger stake in CIT.

That company's managing director, Zach Prensky was quoted as having said during a conference call that the sub noteholders are being forced to shoulder a disproportionate share of the painful "haircut" that the bondholders as a group will have to take to help CIT cut its debt and get its finances in order. Instead of receiving just equity in the restructured company, as CIT has offered, the dissident subordinated debtholders would like to be able to exchange their paper for new secured debt and equity, just like the senior bondholders and other creditors.

No Nortel boost from asset sale news

A trader said that Nortel Networks Corp. "was hanging right around" a 59-60 level on its 10¾% notes due 2016. Those bonds "are always active," and were "sort of unchanged" despite news regarding the bankrupt Canadian telecommunications equipment maker's attempts to sell its valuable ethernet assets. He did see "decent activity." in the credit.

Ciena Corp. said Wednesday it will pay $521 million - $390 million in cash plus 10 million shares of stock - buy the optical networking and ethernet assets of Nortel's Metro Ethernet Networks unit.

TXU trading continues

A trader said paper issued by the old TXU Corp. - now Energy Future Holdings Corp. - "for the most part actually was up," with its 10¼% notes due 2015 trading at 67½ bid, from a 66-handle on Tuesday.

He called the Dallas-based utility company's 6½% notes due 2024 unchanged at around 48 bid, with "nothing happening there," while its 10¼% notes due 2015 traded up to 68, a ½ point gain.

"So I'd call that up about ½ [a point] across the board.

Clear Channel churns upward

A trader saw Clear Channel Communications Inc.'s bonds "sort of active - there was news on them today," with The New York Post reporting that the private equity firms that own the broadcasting giant, Bain Capital and THL Partners, had approached some big banks to help them keep Clear Channel from defaulting on its loans - a story which the two private equity firms later denied and blasted as "a blatant misrepresentation of events."

He saw Clear Channel's 11% notes due 2016 at 35 bid, 35¾ offered and its 10¾% notes due 2016 at 54-55.

There was, he said, "a lot of activity today in this name - there were non-stop quotes on it." He called both issues up 2 points on the day on "a lot of volume."

Quieter day ahead seen

A trader suggested that activity in the corporate credit markets might be lighter than usual on Thursday and Friday, with many participants down in Florida for the annual Raymond James Bond Outing, held the weekend before Monday's Columbus Day holiday, when the U.S. fixed-income markets will be closed.

"A lot of the dealer desks will be lightly staffed, or staffed by the second-in-command," as the big boys bask in the warm Florida sun for what essentially amounts to a five-day weekend of golf, sailing and other fun and games, with some business networking thrown in for good measure.

"A lot of people left this afternoon to go down there, because much of the action in that outing is on Thursday and Friday.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.