AK Steel, American Renal pricings lead busy day, Reynolds next; secondary follows stocks down

By Paul Deckelman and Paul A. Harris

New York, April 27 - AK Steel Corp. priced a $400 million offering of 10-year notes on Tuesday, one of a quartet of domestic junk bond deals. Besides the West Chester, Ohio-based Number-Three U.S. steelmaker's transaction, pricings were seen from American Renal Holdings Inc., Lennar Corp. and Syncreon Global (Ireland) Ltd/Syncreon Global Finance (US) Inc.

When those deals moved into the secondary arena, American Renal Holdings' upsized $250 million issue was seen to have firmed solidly from its pricing level and AK was up modestly, but traders said they were underwhelmed by the Lennar and Syncreon deals' aftermarket performance.

There was also a big deal coming out of Europe, as Dutch cable operator Ziggo Bond Co. BV priced €1.209 billion of eight-year notes.

Back on the U.S. side of the pond, junk bonders awaited the pricing of Reynolds Group Issuer LLC's eight-year mega-deal, which is expected to come to market after the final closing of the books for West Coast accounts on Wednesday morning.

Talk emerged on Levi Strauss & Co.'s big $825 million equivalent two-tranche offering of dollar-denominated 10-year notes and euro-denominated eight-years, with the books on the iconic San Francisco-based apparel company's deal slated to close on Wednesday ahead of a Thursday pricing.

Susser Holdings Corp., a Corpus Christi, Tex.-based convenience store chain operator, announced plans Tuesday for an issue of six-year notes pricing later this week. Syndicate sources also heard medical products company OnCure Holdings, Inc. and Aspect Software Inc., shopping new bond deals around for pricing next week.

In the secondary arena, traders described activity as relatively thin, sloppy and lackluster, as the market took its cue from equities, which were pushed lower on investor jitters over S&P ratings downgrades for Portugal and Greece - the latter now officially a junk bond - as well as Washington doings centered on the embattled Goldman Sachs.

The high-yield secondary market dropped by ½ point, on Tuesday, against a backdrop of stock prices that were in retreat throughout the session, market sources said.

However, the bearish sentiment failed to get a grip on the primary market, where dollar-denominated issuance came to a face amount of $950 million, with three issuers each bringing a single tranche.

"We didn't feel the chop in the primary market today," one syndicate banker commented following the Tuesday close.

"But if we keep seeing softer secondaries for another couple of days, that will take its toll," the sell-side source cautioned.

AK Steel prices $400 million

The biggest dollar-denominated deal to price on Tuesday came from Ohio-based AK Steel Corp.

The company priced a $400 million issue of 10-year senior notes (Ba3/BB) at par to yield 7 5/8%, in the middle of the 7½% to 7¾% price talk.

Credit Suisse and Bank of America Merrill Lynch were the joint bookrunners.

Proceeds will be used to fund a tender for AK Steel's 7¾% senior notes due 2012.

Severe allocations expected

One investor expected allocations to be very severe because holders of the AK Steel 7¾% notes, which are being taken out, were expected to be keen to maintain exposure to the name.

"There won't be that many bonds left over for people who want to increase their positions, or who are new to the name," the investor said, adding that steel is a "pretty good recovery story."

"The sector has come into favor," the investor added, pointing to recent 10-year deals from Steel Dynamics, Inc., which priced a $350 million issue of 7 5/8% senior notes due March 15, 2020 (Ba2/BB+/) at par on March 11, and United States Steel Corp., which priced a $600 million issue of 7 3/8% senior notes due April 1, 2020 (Ba2/BB/BB+) at 99.125 to yield 7½% on March 16.

Both of those deals came upsized, and priced at the tight end of price talk, and were very successful, according to the buy-sider.

Meanwhile, Tuesday's AK Steel 7 5/8% 10-year notes, which priced at par, were at par ½ bid, 101 offered in the aftermarket, sources said.

Syncreon brings $300 million

Elsewhere, Tuesday, Syncreon Global (Ireland) Ltd. and Syncreon Global Finance (US) Inc. priced a $300 million issue of eight-year senior unsecured notes (B3/B) at par to yield 9½%, on top of price talk.

J.P. Morgan Securities Inc. and Goldman Sachs & Co. were the joint bookrunners.

Proceeds will be used to repay debt and for general corporate purposes.

American Renal upsizes

American Renal Holdings Inc. priced an upsized $250 million issue of 8 3/8% eight-year senior secured notes (B2/B) at 99.28 to yield 8½%, , according to an informed source.

The yield printed at the tight end of yield talk, which gave an 8½% to 8¾% all-in-yield, at a to-be-determined discount. The amount was increased from $225 million.

Bank of America Merrill Lynch, Barclays Capital Inc. and Wells Fargo Securities were joint bookrunners.

Proceeds are to be deposited into an escrow account and, upon release, be used in conjunction with a cash equity investment from Centerbridge Partners LP to fund the acquisition of the company from Pamlico Capital. Proceeds also will be used to repay debt.

Ziggo at the tight end

Meanwhile in Europe, Dutch cable television operator Ziggo Bond Co. BV priced a €1,208,850,000 issue of 8% eight-year senior notes (B2/B) at 99.271 to yield 8 1/8%, on the tight end of the 8¼% area price talk.

Credit Suisse and Goldman Sachs were joint physical bookrunners. BNP Paribas, Deutsche Bank, ING and JPMorgan were the joint bookrunners.

Proceeds will be used to refinance mezzanine debt.

Shortly after terms circulated, the notes were trading at 98¾ bid, 99¼ offered, according to a buy-side source.

Levi Strauss sets price talk

Looking ahead, Levi Strauss & Co. set price talk for two tranches of senior notes (current ratings B2/B+) on Tuesday.

The San Francisco-based apparel maker talked both its $460 million offering of 10-year notes and its €275 million offering of eight-year notes at the 7¾% area.

The deal is expected to price Thursday morning, New York time

Bank of America Merrill Lynch and J.P. Morgan Securities Inc. are the joint bookrunners for the debt refinancing and general corporate purposes deal.

Another deal thought to be mid-to-late week business is Patriot Coal Corp.'s $250 million offering of eight-year senior unsecured notes (expected ratings B3/B+), via Citigroup Global Markets Inc., Bank of America Merrill Lynch and Barclays Capital Inc.

Although no official price talk surfaced on Tuesday, the whisper on the deal is 8½% to 8¾%, according to a trader from a high-yield mutual fund.

New names on the calendar

Tuesday also saw the continued buildup of the active forward calendar.

Susser Holdings, LLC and Susser Finance Corp. plan to price a $425 million offering of six-year senior notes (expected ratings B2/B+) late this week.

Bank of America Merrill Lynch, BMO Nesbitt Burns and Wells Fargo Securities are joint bookrunners for the debt refinancing.

Meanwhile, Aspect Software, Inc. plans to price a $300 million offering of seven-year second-lien notes (expected ratings Caa1/B-) early in the week ahead.

Bank of America Merrill Lynch and JP Morgan are joint bookrunners for the bank debt refinancing.

And OnCure Holdings, Inc. began a roadshow on Monday for its $210 million offer of seven-year senior secured notes (B2/B), via Jefferies & Co.

Proceeds will be used to refinance debt and for general corporate purposes.

American Renal rises

When the new American Renal Holdings 8 3/8% senior secured notes due 2018 were freed for secondary dealings, a trader saw the bonds firm slightly, first to 99½ bid on the break and then to 100 bid, 101 offered as two-sided markets emerged, up from the 99.28 level at which the Beverly, Mass.-based kidney dialysis services provider's issue had priced.

At another shop, a trader saw the new bonds doing even better, quoting them going home at 101 bid, 102 offered.

AK Steel improves

The trader also saw AK Steel's new 7 7/8% notes due 2020 at 100½ bid, 101 offered, up a little from their par pricing level earlier.

Another trader said that AK "should be solid. They're a fine company." He added that investors would appreciate that AK is improving its balance sheet by using the proceeds from the new bond deal to fund the just-announced tender offer for its existing 7¾% notes due 2012.

Syncreon, Lennar underperform

A trader said that Syncreon Global's new 9½% notes due 2018 were being offered at 101, but with no bid side seen. A little later on, he said the bonds - which had priced at par - were being offered at 1001/4, also without a bid.

He also saw Lennar Corp.'s 6.95% notes due 2018 initially trading at 97¾ bid, 98¾ offered - down from the 98.929 level at which the Miami-based homebuilder's $250 million deal had priced.

Later on in the session, he saw the 6.95s offered at 98 1/2, but with no bid-side seen.

Referring to Tuesday's widely watched televised Senate hearings at which present and former executives of Goldman Sachs & Co. were subjected to a barrage of frequently hostile questions from lawmakers angered at the big New York investment bank's actions during the 2007-2008 housing market meltdown that parked the recession - senators quoted liberally and literally from internal company e-mails which specifically called one credit derivative product being sold "one s----y deal" - the trader made the analogy that "it's fair to say that they two [new bond deals] were s----y deals, using today's theme."

A second trader quoted the new Syncreon paper a point below issue at 99 bid, 99½ offered, while seeing Lennar's new offering also under water at 97½ bid, 98½ offered.

Recent deals on a roll

Elsewhere among recently priced deals, Gray Television Inc.'s 10½% second-lien senior secured notes due 2015 were trading at 99 7/8 bid, 100 1/8 offered.

The Atlanta-based TV station group owner's $365 million issue of the notes had priced a week ago at 98.085 to yield 11%.

CF Industries Holdings Inc.'s 6 7/8% notes due 2018 were being quoted at 103¼ bid - well up from the par level at which the Deerfield, Ill.-based chemical fertilizer producer had priced its $800 million issue on April 20, and up as well from the levels around 102-102½ to which the bonds had moved in their initial aftermarket dealings.

CF's $800 million of new 7 1/8% notes due 2020, which also priced at par on April 20 and then moved up to 102½ bid, 103 offered, were seen on Tuesday having firmed above the 104 mark.

Standard Pacific Corp.'s 8 3/8% notes due 2018 were hovering around 101 bid, up from the par level at which the Irvine, Calif.-based homebuilder had priced its $300 million offering of the notes - upsized from the originally announced $200 million -- last Wednesday

Market indicators mostly lower

Among bonds not connected with the new-deal market, a trader saw the CDX Series 14 index tumble by 1¼ points on Tuesday to end at 99 5/8 bid, 100 1/8 offered, after having gained 1/8 point on Monday.

However, the KDP High Yield Daily Index meantime was up by 7 basis points on Tuesday at 73.07, after having risen by 10 bps on Monday, although its yield rose by 1 bp to 7.50%, after having tightened by 6 bps on Monday.

Declining issues overtook advancers on Tuesday, by a nearly four-to-three margin, breaking a two-session winning streak by the gainers.

Overall market activity, represented by dollar-volume levels, rose by nearly 5% on Tuesday from levels seen the previous session.

A trader called Tuesday's session "a lethargic day. Trading was sloppy and thin. Everyone just pulled back - which is understandable."

Junk was seen to be taking its cue from equities, which suffered their biggest plunge since early February - the bellwether Dow Jones Industrial Average plummeted by 213.04 points, or 1.90%, to finish at 10,991.99, with other, broader equity market measures likewise seeing similar-sized reverses, Wall Street spooked by the latest bad news on the international debt crisis front - Standard & Poor's cut Portugal's credit rating by two notches to A-, and actually dumped Greece down into Junkbondland at BB+, a three-notch haircut - as well as the prospects for tighter federal regulation of the financial world, with Goldman Sachs being held up by hostile lawmakers as an example of why more federal scrutiny and control of the financial services industry is needed

Goldman grabs the attention

A trader declared that there was "not a whole lot" going on. "Everyone was watching the Goldman inquisition," he said, referring to the televised Senate hearings.

While senators from both parties were firing rhetorical shots across Goldman's bow, company leaders, including chief executive officer Lloyd Blankfein, contended that the banking giant had done nothing wrong and had itself lost over $1 billion in the 2007-2008 housing meltdown. Blankfein also asserted that buyers of risky derivative securities who lost money on them as the housing market soured knew beforehand what they were getting into - but bought those deals anyway in an effort to maximize their returns.

"Yeah, Goldman really got grilled," a second trader said, although he asserted that "they did OK" in managing to rebut many of the congressional accusations of corporate greed, irresponsibility and malfeasance.

"The market in general was very lackluster and quiet," another trader said. "Once that testimony started, it seemed like everybody was just glued to the set." He expressed concern that the already long-running session would drag on all week," mesmerizing the marketplace. In fact, Tuesday's session did drag on for nearly 11 hours, until just before 9 p.m. ET, long after the markets had shut down for the day.

At yet another desk, a trader said that "everyone was watching Goldman, and the market got stomped on," with most issues trending lower.

Autos spin their wheels

A trader acknowledged, for instance that General Motors Corp.'s bonds "just went down," a day after the Detroit-based top U.S. carmaker's paper had firmed smartly, with many issues up more than 2 points that session.

On Tuesday, he said that its benchmark 8 3/8% bonds due 2033 lost about a point to around 38¼ to 381/2.

A second trader saw the GM benchmarks ending around 37¾ bid, 38¼ offered, down from 38¼ bid, 38½ earlier as "the just kind of drifted in at the end of the day" to finish well below Monday's closing level. GM got exactly zero boost from the news that the company will spend $890 million at five of its factories with the aim of upgrading its current V8 engines in order to produce a more eco-friendly, fuel efficient motor - even though the announcement of its big investment might ordinarily be seen as a clear expression of the company's confidence in its own prospects.

A trader meantime saw GM domestic arch-rival Ford Motor Co.'s 7.45% bonds due 2031 unchanged in a 931/2-94½ context.

Another saw the 7.45s staying around the 94 bid level, which he called up slightly, though on only $5 million traded.

More active were the Dearborn, Mich.-based Number-Two domestic carmaker's 7% notes due 2015, with $18 million traded, the tops in the Ford structure, up ¼ point at 101¾ bid. The 9 7/8% notes due 2011 hung around the 106 mark, essentially unchanged, with $13 million of turnover.

The bonds were seen little moved despite Ford's considerably better-than-anticipated first-quarter results announced Tuesday morning, which saw Ford post its fourth straight quarterly gain and its best profit figure in six years, causing company executives to predict that Ford will enjoy "a solidly profitable" year. Ford earned $2.1 billion during the quarter, or 50 cents per share - 46 cents per share excluding special one-time items - versus its year-earlier loss of $1.43 billion, or 60 cents per share, 75 cents per share ex-items. The results blew right through analysts' expectations of about a $1.2 billion profit, or 30-31 cents per share.

Yet another trader, in explaining why the much-better numbers failed to move Ford's bonds, theorized that "the better earnings have already been priced in."

Harrah's declines post-numbers

Another company reporting numbers Tuesday was Harrah's Entertainment Inc., whose debt ended the day with a softer tone following the release of those first-quarter results.

A trader said the company's 10% notes due 2018 "traded a lot," though down "almost a point" to around 87.

Another trader called the issue a "tiny bit softer," also around the 87 mark. Though about $30 million to $40 million of the paper traded, he noted that the other issues were not as active.

"You would have thought that on the back of earnings you would have seen more," he said.

At another desk, the 10% notes were placed at 87¼ bid.

Yet another market source pegged the bonds down 1¼ points at around the 86½ level.

Harrah's first-quarter numbers showed a larger year-over-year net loss, a drop in revenues and a decline in adjusted EBITDA, according to traders.

For the first quarter, it reported a net loss of $195.6 million, wider by 47.4% from $132.7 million in the first quarter of 2009, while its Harrah's Operating Co. Inc. unit saw a net loss of $165.1 million, down 24.3% from $132.8 million last year.

Net revenues for the quarter were $2.188 billion for Harrah's Entertainment, down 2.9% from $2.255 billion in the previous year, while Harrah's Operating's revenues were $1.711 billion, down 2.4% from $1.753 billion.

And, Harrah's Entertainment's adjusted EBITDA for the quarter was $481.6 million, down 12% from $547.3 million last year, while Harrah's Operating's adjusted EBITDA was $383.1 million, down 5.9% from $407.3 million.

Trying to put the best face on the disappointing data, the Las Vegas-based casino giant noted that its debt reduction and maturity extension efforts have helped to improve its liquidity position.

During the quarter, Harrah's successfully secured consents from its commercial mortgage-backed securities lenders to amend the terms of about $5.5 billion in loans. The amendments allow Harrah's to extend maturities until 2015 and to repurchase the loans at a discounted rate.

Also, the company completed a $750 million sale of second-priority senior secured notes due 2018. The proceeds from the offering were used to buy back senior notes due 2010 and senior subordinated notes due 2011.

"The CMBS agreement, success of our most recent note sale and the other financing actions we've taken over the past 18 months have effectively deferred material debt maturities until 2015 and beyond," said Gary Loveman, president, chairman and chief executive, in the earnings release. "Today, the company is positioned with substantial liquidity and minimal near-term debt maturities and is better poised to capitalize on an eventual economic rebound and long-term growth opportunities."

Unisys gains despite Q1 loss.

Also on the earnings front, a trader noted that Unisys Corp. had posted first-quarter red ink, due to foreign exchange losses - but its bonds were firmer nonetheless.

He quoted the Blue Bell, Pa.-based information technology company's 12½% notes due 2016 as having moved up to 112¼ bid, from prior levels around 111.

He noted that the bonds had traded last week around 1121/4- 1123/4, "but there's better buyers than sellers of Unisys paper, across the board, because somebody put out a report saying they would have slow, but steady growth.

Even though the stock got murdered today" - its New York Stock Exchange-traded shares plunged $7.83, or 20.26%, to end at $30.81, on volume of 3 million shares, five times the norm - "the bonds were up. Go figure."

Unisys lost $11.6 million in the quarter, or 27 cents per share, mostly on forex losses - much worse than the roughly nickel per share of earnings that Wall Street had been looking for. The loss was, however, an improvement on the year-earlier deficit of $24.4 million, or 66 cents per share.

On an operating profit basis, Unisys earned $58.9 million this time around, nearly four times last year's $15 million of operating earnings.

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