Crown mega-deal "crowns" $2.55 billion of primary pricings; Visteon bonds lower on quarterly loss

By Paul Deckelman and Paul A. Harris

New York, Nov. 8 - The high yield primary market had by far its busiest day in many weeks on Tuesday, with four issuers pricing six tranches of new junk bonds totaling $2.55 billion. The biggest deal - you could say it was the session's crowning glory - was the two-part, $1.1 billion mega-deal from Crown Holdings Inc.'s subsidiary, Crown Americas. Almost as big was Tesoro Corp.'s $900 million two-part offering, evenly split between eight- and 10-year notes. Smaller deals also priced during the session for UnumProvident Finance Co. plc and Tunica-Biloxi Gaming Authority.

While all of that was going on, price talk emerged on several other issues expected to soon come to market - EPL Finance Corp./El Pollo Loco and, out of the emerging markets sphere, Cablemas SA de CV and Megasteel Harta.

The secondary sector definitely took a backseat to the red-hot new-deal market, traders said, although they did see some movement in issues reporting quarterly earnings, notably Visteon Corp. and Blockbuster Inc.

Overall sources marked the junk market lower on Tuesday, as the primary market swung into action with $2.55 billion pricing in half a dozen dollar-denominated tranches. It was the biggest day since July 27 - the day of the mammoth $3 billion SunGard Data Systems, Inc. transaction.

A buy-side source, marking the broad market as much as a quarter of a point lower on the session, said that the "very large" new issue calendar does not appear to be putting downward pressure on junk bond prices, for the time being.

"It's a weird market right now," the buy-side source commented.

"Good earnings helped out the stock market up until today. The Treasury market, coming back the way it has for the past couple of days - bouncing off of 4.60% again - was a good sign.

"A lot of people are now looking at a lot of deals. The bank loan market is the same, there are 30-plus deals in that market.

"It's an information overload right now."

A $2.55 billion day

With $2.55 billion of new issuance pricing in six dollar-denominated tranches, Tuesday was the biggest day in the primary market in well over three months.

It was July 27, of the present year, observers will recall, that the market saw $3.99 billion price in four tranches led by SunGard Data Systems which priced an upsized $3 billion. Also pricing notes that day was L-3 Communications Corp. which sold senior subordinated notes in a transaction that generated $990.9 million of proceeds.

Tuesday's six tranches all priced at their marketed amounts; none of them were upsized or downsized. Relative to price talk it was a mixed lot with one tranche pricing at the tight end, two pricing in the middle, two pricing on the wide end and one well wide of the price talk.

Crown Americas completes biggest deal

Tuesday's largest transaction was Crown Americas LLC's $1.1 billion of senior notes (B1/B) in two tranches.

The Philadelphia-based packaging company priced a $600 million issue of 10-year notes at par to yield 7¾%, on the wide end of the 7½% to 7¾% price talk.

Crown Americas also priced a $500 million issue of eight-year notes at par to yield 7 5/8%. The eight-year notes came 12.5 basis points lower than the 10-year notes versus talk which them coming 12.5 basis points to 25 basis points inside of the 10-year notes.

Citigroup, Lehman Brothers, Deutsche Bank Securities and Banc of America Securities were joint bookrunners for the company's debt refinancing deal.

Tesoro tranches price mid-talk

Elsewhere San Antonio-based oil refiner Tesoro Corp. priced $900 million of senior notes (Ba1/BB+) in two equally sized tranches.

The company priced a $450 million issue of seven-year notes at par to yield 6¼%, in the middle of the 6 1/8% to 6 3/8% price talk.

Tesoro also priced $450 million of 10-year notes at par to yield 6 5/8%, also in the middle of the 6½% to 6¾% price talk.

Lehman Brothers, Goldman Sachs and JP Morgan were joint bookrunners for the debt refinancing transaction.

A source close to the Tesoro deal commented that it was a "pretty solid" transaction.

UnumProvident plays to $1 billion book

Also pricing a Ba1/BB+ deal on Tuesday was UnumProvident Finance Co. plc.

The company priced a $400 million issue of 6.85% 10-year senior notes at a 230 basis points spread to Treasuries.

The notes, which came at an issue price of 99.893 to yield 6.865%, priced at the tight end of the Treasuries plus 235 basis points price talk.

Goldman Sachs and JP Morgan were joint bookrunners.

The proceeds from the bond sale will be used to repatriate up to $450 million in unremitted foreign earnings under the Homeland Investment Act.

A buy-side source told Prospect News that there was at least $1 billion of interest in UnumProvident's $400 million deal

"Unum was priced very cheap," the source commented. "On a spread basis, they probably priced that 10- or 15 basis points through the long bonds. It seemed to be priced to travel, to say the least.

"It tightened in 15 basis points [in trading]."

"The calendar is very large right now," the source remarked. "..So I think [underwriters] realize that they are going to have to price deals in a way that gets peoples' attention.

"You're not going to be able to price deals and take every last penny out of it if you want to get it done."

Meanwhile a source close to the UnumProvident transaction suggested that the book might have actually been somewhat bigger than $1 billion.

Finally on Tuesday Louisiana tribal gaming enterprise, the Tunica-Biloxi Gaming Authority, priced a $150 million issue of 10-year senior unsecured notes (B2/B+) at par to yield 9%, 50 basis points beyond the wide end of the 8¼% to 8½% price talk.

Deutsche Bank Securities ran the transaction which was done in order to fund the expansion of the authority's Paragon Casino and Resort.

Crown edges higher in trading

When the new Crown Americas were freed for secondary dealings, a trader saw both tranches - the 7 5/8% notes due 2013 and the 7¾% notes due 2015 - only slightly better, at 100.125 bid, 100.375 offered, versus the notes' par issue price.

He also saw Tesoro's new 6¼% notes due 2012 right at their par issue price, at par bid, 100.25 offered, while the petroleum refiner's 6 5/8% notes due 2015 were up just a tad at 100.125 bid, 100.5 offered.

At another desk, a trader said the new eight-year Crown bonds were "all over the place," although he finally saw the 7 5/8s closing the day unchanged at par bid, 100.25 offered, while not seeing the 7 5/8s at all.

He also saw Tesoro's 61/4s at 100.125 offered, 100.5 offered, and its 6 5/8s at 100.25 bid, 101.25 offered.

The big mover, in his book, was Tunica-Biloxi's 9% notes due 2015, which he saw firm to 101 bid, 101.5 offered, well up from their par issue price. And he saw Vitamin Shoppe Industries Inc.'s seven-year floaters - priced late Monday - bid at 100.5, up slightly from their par issue price, with no offers seen.

Visteon weak on earnings

Back among the established issues, Visteon "had a sloppy, unimpressive" quarter, a trader said, and it showed in the behavior of the Van Buren Township, Mich.-based automotive components suppliers bonds.

He saw the company's 8¼% notes due 2010 drop to 89.5 bid, 90.5 offered from prior levels at 92.5 bid, 93.5 offered, while its 7% notes due 2014 retreated to 82 bid, 83 offered from 84.5 bid, 85.5 offered.

At another desk, a trader saw the Visteon 81/4s two points lower on the day at 90 bid, 91 offered, while the 7s were "down the same amount," ending at 82 bid, 84 offered.

Visteon "moved around a lot," yet another trader said, seeing the 81/4s start off at 92 bid, 93 offered, then plunge as low as 87 bid, 89 offered in intraday dealings, before coming off those lows to close out around 90 bid, 91 offered. "They definitely were moving around today."

Visteon's New York Stock Exchange-traded shares meantime plunged $1.26 (14.03%) to end at $7.72, on volume of 8.4 million, more than five times the norm.

Visteon posted a loss of $200 million ($1.58 per share) - larger than the $1.34 per share of red ink that Wall Street was looking for, even though it was considerably less than the year-earlier loss of $1.4 billion ($11.48 per share). It should be noted, however, that some $1.3 billion ($10.19) of that year-earlier deficit was attributable to a reduction in the value of deferred tax assets.

Visteon cited production cuts at its former corporate parent and still largest customer, Ford Motor Co., and the high cost of raw materials as key drivers of its loss. Looking ahead, the company predicted a smaller loss in the current fourth quarter - but still doesn't expect to make a profit.

Visteon barely avoided bankruptcy earlier this year when Ford agreed to take about 25 high-cost, unprofitable manufacturing plants off its problem child's hands, and it is looking at other ways to restructure its operations, which could include more plant transfers, sales or closings. The company said that the company will announce further restructuring plans in early January.

Auto sector lower

A trader said that the disappointing results at Visteon, and the resulting bond retreat, helped send other automotive names skidding lower Tuesday, including Dura Automotive Systems Inc., whose bonds had already been heading in that direction over the past several sessions. The Rochester Hills, Mich.-based automotive components maker's Dura Operating 9% notes due 2009 dipped as low as 55.5 during the session, a three-point loss, he said, before pulling out of their nosedive to end 57 bid, 58 offered, a loss of 1½ points.

Another auto name seen lagging behind Tuesday, he noted, was ArvinMeritor Inc., whose 8¾% notes due 2012 were a point down at 92.5 bid, 93.5 offered.

And he saw bankrupt Troy, Mich.-based automotive electronics giant Delphi Corp.'s bonds "a little lower, though not that much," going home at 61 bid, 62 offered, which he said was down a point.

Another trader also saw the Delphi bonds - which all trade on top of one another since the company's Chapter 11 filing - at 61 bid, 62 offered, which he called down two points.

"If you want guaranteed delivery, they're at 63," he remarked, noting that "there are a lotta shorts in that one."

Blockbuster up after volatile session

Outside of the automotive area, a trader saw Blockbuster's 9% notes due 2012 "moving around quite a bit." He saw those bonds starting the day at 86 bid, 87 offered, and then they "popped up on short covering" to hit an intraday high around 90 bid, 92 offered. However, since what goes up, must come down, the notes came off that peak level to finish out at 86.75 bid, 87.75 offered, a gain of about ¾ of a point on the session.

Another trader saw the bonds get as good as 89 bid, 90 offered before closing at 87.5 bid, 88.5 offered, which he pegged as unchanged to perhaps up half a point.

The Dallas-based video-rental chain operator lost $491.4 million, ($2.67 per share), during the third quarter ended Sept. 30, an improvement from the yawning $1.4 billion ($7.81 per share) year-ago loss. Blockbuster cited the elimination of most late fees as a major drain on its finances.

The second trader meantime saw Blockbuster's main rival, The Movie Gallery Inc., a little higher, with the 11% notes due 2012 of the Dothan, Ala.-based video chain operator - which bought out the Number-Two U.S. video rental chain, Hollywood Entertainment, earlier this year - up maybe a point at 80.5 bid, 81.5 offered.

Cablevision steady

Another company issuing third-quarter results was Cablevision Systems Corp. (see related story elsewhere in this issue), but traders didn't see very much movement in the bonds of the Bethpage, N.Y.-based cable TV system operator, pro sports team owner and proprietor of Madison Square Garden and Radio City Music Hall.

One saw its 7 5/8% notes due 2011 at 100.75 bid, 101.75 offered, which he called "about the same. There was no real price move."

Another trader saw Cablevision's 8% notes due 2012 maybe a point lower at 94.75 bid, 95.75 offered.

He saw Riviera Holdings Corp.'s 11% notes due 2010 - normally an issue that doesn't trade around much - down half a point Tuesday at 107.75 bid, 108.75 offered.

Meanwhile, the Las Vegas-based gaming operator's American Stock Exchange-traded shares plunged $4.48 (25.03%) to $13.42 on volume of 890,000, 13 times the usual daily handle, after Riviera announced that it had concluded its nine-month review of strategic options without opting for a merger or refinancing. The company said it would continue to evaluate its options.

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