Easton-Bell, Koppers top off $7 billion week, JohnsonDiversey double-dips; Bon-Ton backs off

By Paul Deckelman and Paul A. Harris

New York, Nov. 20 -One of the busiest weeks in the high yield primary market in recent memory finally ground to a close on Friday, as Easton-Bell Sports Inc., Koppers Inc./Koppers Holdings Inc. and Cloud Peak Energy Resources LLC/Cloud Peak Energy Finance Corp. priced more than $1.2 billion in new paper, topping off a week which saw more than $7 billion of dollar-denominated junk bond debt and over €2 billion of euro-denominated bonds price in nearly a dozen-and-a-half separate deals.

Traders were impressed by the way the newly priced Easton-Bell bonds moved up smartly, after the Van Nuys, Calif.-based athletic equipment manufacturer's issue was freed for secondary dealings. The Koppers deal also traded up on the day, although off its initial highs, while Cloud Peak's two-part offering hovered right around its issue price.

Also coming to market Friday was a tranche of payment-in-kind notes from JohnsonDiversey, Inc. - the same JohnsonDiversey which had successfully visited the junk primary arena just 24 hours earlier, when it priced an issue of conventional 10-year junk bonds. Several traders commented on the fact that the company was actually able to sell an issue of PIK notes, since those cashless-interest bonds had fallen out of favor with junk investors when the latter were in a less forgiving, more skeptical mood last year and earlier this year - a mood which seems to have recently given way to a kind of giddy mania in which, as one trader said of bond investors, "they'll buy anything now."

The final deal of the day came from Spanish engineering concern Abengoa SA, which priced a €250 million issue of five-year notes.

Price talk was heard to have emerged on Salem Communications Corp.'s upcoming issue of seven-year senior secured notes, which are expected to price on Monday afternoon. Market players were also anticipating Advanced Micro Devices Inc.'s eight-year notes issue, which is expected to price early in the week; several participants also raised the possibility of more opportunistically appearing drive-by deals, especially in the early part of the week, as companies looking for financing try to get their deals done ahead of what is expected to be a very slow pre-holiday session on Wednesday, Thursday's full market shutdown for Thanksgiving, and Friday's scheduled half-session, during which little is expected to go on.

Trading in the new issues that came to market on Friday, as well as deals from earlier in the week, such as Clearwire Communications LLC and TRW Automotive Inc., dominated the secondary sphere on Friday. Among issues having no new deal concerns, traders saw a fair amount of dealings in such names as Bon-Ton Department Stores Inc., which was seen having backed off the gains it had notched Thursday on relatively favorable quarterly numbers.

Also lower were General Motors Corp.'s bonds, their wild upside ride this past week, also on not-unfavorable numbers, apparently stalling out.

Junk was softer for the second consecutive day on Friday, according to a portfolio manager.

"With the holidays coming up, it simply may be that the dealers are taking a little bit of the bid out of the market," the investor said, adding that with the primary market operating full tilt, as it has done through the Nov. 16 week, the bid from the underwriters needed to be firm to make certain that the recent deals held in.

"People are not going to be in the mood to buy bonds if the prices of the ones they just bought aren't holding in," the investor reasoned.

Cloud Peak prices $600 million

If prices in the secondary have sagged over the past couple of days, the pace of the primary market did not reflect it.

The Friday session saw another $1.5 billion of issuance price as four companies priced a combined five tranches.

Cloud Peak Energy Resources LLC and Cloud Peak Energy Finance Corp. brought a restructured $600 million two-part offering of senior notes (B1/BB-).

A restructured $300 million tranche of 8¼% eight-year notes priced at 99.268 to yield 8 3/8%. The yield printed in the middle of the 8¼% to 8½% yield talk. The reoffer price was slightly rich to the approximately 1 point of discount talk.

Ahead of pricing, the tranche's tenor was increased by one year. Previously it had been marketed as a tranche of seven-year notes.

Meanwhile the company priced $300 million of 8½% 10-year notes at 99.160 to yield 8 5/8%.

Once again the yield printed in the middle of the 8½% to 8¾% yield talk. The issue price came in line with discount talk of approximately 1 point.

Morgan Stanley, Credit Suisse and RBC Capital Markets were joint bookrunners.

Proceeds will be used to pay a distribution to Rio Tinto Energy America Inc., for general corporate purposes, including cash reserves for securing reclamation obligations, and for capital expenditures.

Easton-Bell upsizes

Meanwhile, Easton-Bell Sports, Inc. priced a restructured, upsized $350 million issue of 9¾% seven-year senior secured notes (B3/CCC+) at 98.765 to yield 10%.

The yield printed at the tight end of yield talk. The issue price came in line with discount talk of 1 to 2 points. The amount was increased from $325 million.

J.P. Morgan and Wells Fargo Securities were joint bookrunners.

Call protection was decreased by one year. The notes will be callable in three years at par plus three-quarters of the coupon. Prior to the restructuring, the notes were non-callable for four years.

Proceeds will be used to repay bank debt and to redeem the company's subordinated notes.

One investor who put in for the new Easton-Bell bonds said that a 9¾% coupon is the kind that attracts a crowd, these days.

"All of these deals are heavily oversubscribed," the investor said, adding that people continue to have cash that needs to be invested.

JohnsonDiversey brings PIK holdco deal

One day after pricing a $400 million senior unsecured notes deal, JohnsonDiversey returned to the high-yield primary with $250 million of 10½% senior unsecured PIK notes due May 15, 2020 (Caa1/B-).

The PIK notes, which were issued by JohnsonDiversey Holdings, Inc., priced at 96.00, where the deal had been talked, according to a market source who declined to provide either a yield to maturity or a spread.

The holding company notes' coupon may be paid in kind for the first five years.

Goldman Sachs was the left bookrunner. Citigroup Global Markets Inc. and Morgan Stanley were joint bookrunners.

Proceeds will be used to pay down Unilever's equity stake in JohnsonDiversey, which is a Sturtevant, Wis.-based provider of commercial cleaning, sanitation and hygiene solutions.

The deal came one day after JohnsonDiversey, Inc. priced a $400 million issue of 8¼% 10-year senior unsecured notes (B3/B-/) at 99.17 to yield 8 3/8%

A Midwestern fund manager who put in for the deal said that it was heavily oversubscribed.

There were feelers about the holding company PIK notes out there on Thursday, when JohnsonDiversey, Inc. priced the new 8¼% notes due 2019, the source said.

"You got the feeling that if you agreed in principle to play the holdco piece, should it surface, it would favorably impact your allocations on the cash pays," the buy-sider said.

The fact that the holding company can make PIK payments for the first five years does not bother this investor.

For one thing, leverage is not terrible, said the buy-sider, adding that the company is leveraged 3.6 times through the JohnsonDiversey, Inc. senior unsecured notes, and 4.6 times through the holdco PIK notes that priced Friday.

"And no matter how bad things get people are still going to have to clean the bathroom," the investor reasoned, making reference to the company's line of commercial cleaning products.

Koppers tight to talk

Meanwhile Koppers Inc. priced a $300 million issue of 7 7/8% 10-year senior unsecured notes (B1/B) at 98.311 to yield 8 1/8% on Friday.

The yield printed at the tight end of the 8¼% area price talk.

Goldman Sachs & Co. was the left lead bookrunner. Bank of America Merrill Lynch, RBS Securities Inc. and UBS Investment Bank were joint bookrunners.

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

Just after terms on the deal circulated, a Boston-based asset manager said that the deal played to a humongous amount demand.

"Every account was in the book," said that buy-sider who was awaiting allocations, confident that they would be horrible.

Salem sets talk

Looking ahead to the pre-Thanksgiving week, only two deals are on the active calendar as business that is expected to be priced.

Salem Communications Corp. set price talk for its $300 million offering of seven-year senior secured second-lien notes (B2/B) at the 9¾% area, on Friday.

The books close at noon ET on Monday. Pricing is set for Monday afternoon.

Bank of America Merrill Lynch and Barclays Capital Inc. are joint bookrunners for the notes, which are being marketed via Rule 144A with registration rights and Regulation S.

Proceeds will be used to refinance debt.

Also expected to price either Monday or Tuesday, of the pre-Thanksgiving week, is Advanced Micro Devices, Inc.'s $500 million offering of eight-year senior notes (expected ratings B2/B-).

J.P. Morgan and Citadel Capital are joint bookrunners.

Asked to comment on Citadel's surfacing as a bookrunner on the AMD deal, a buy-side source simply said that it was not too astonishing to see the hedge fund's investment banking arm get a piece of the action.

However, the buy-sider added, it would be notable, indeed, should Citadel emerge as lead bookrunner.

The reason is that an issuer who elected to go with a small or novel lead underwriter would have to expect to pay a premium.

A big dealer can push pricing on a deal, because buyers know they are going to get behind it, and the price will hold in, the buy-sider counseled.

A smaller shop would not be able to be nearly as aggressive on the issuer's behalf, because the bond buyer would have to be concerned with the level of support that the smaller underwriter would provide once the bonds were free to trade.

"Investors would push pricing on that basis," the investor assured, "and issuers would have to pay up to get the deal done."

New Easton-Bell deal excels

A secondary trader observed "those issues just keep coming."

A trader said that "the best deal" of the session was the new Easton-Bell Sports 9¾% senior secured notes due 2016. He saw them trading up at 101½ bid, 101¾ offered - well up from the 98.765 level at which the $350 million of bonds - upsized from the originally planned $325 million - priced to yield 10%.

Another trader quoted said those bonds "did pretty well in secondary," seeing them bid at 101 to 1011/2.

A third trader quoted the bonds at 101, but said there "may be a better bid out there."

New Koppers offering comes off highs

A trader said that the new Koppers 7 7/8% notes due 2019 "were up a little bit" on the day, finishing at 99½ bid, 99¾ offered, after trading up as high as par" earlier in the day

Another trader saw the bonds trading at bid levels of 99-993/4, and were left at 99 5/8-99 7/8.

While that was off the day's highs, it remained above the 98.311 level at which the Pittsburgh-based chemical company had priced the $300 million issue earlier to yield 8 1/8%.

Cloud Peak not much seen

A trader said he really had not seen much of the new Cloud Peak deal, although he said he finally found, late in the session, a 99¼ bid on its 8¼% notes due 2017, $300 million of which had priced at 99.268, to yield 8 3/8%

He meantime saw the Gillette, Wyo.-based coal mining company's 8½% notes due 2019 at 99½ bid, versus the 99.16 level at which they had priced to yield 8 5/8%.

Johnson PIK deal surprises

A trader said that JohnsonDiversey's 8¼% notes due 2019 were trading in a par-100½ range, up a little from the 99.17 level at which the commercial cleaning, sanitation and hygiene services provider's $400 million deal priced on Thursday to yield 8 3/8%.

He did not see any dealings in the company's follow-up junk deal - the $250 million offering of 10½% payment-in-kind notes due 2020, which priced Friday at 96.

A trader - surprised to see the first PIK deal in more than a year surface, since that type of issuance dried up when the market went into its downturn last year and buyers applied much more scrutiny to prospective issuers, at least for a while - exclaimed "Holy cow! - I haven't seen one of those in a while!" and jokingly proclaimed "it's 2007 all over again!"

Another trader said the fact that an issuer is bringing such an issue to the now red hot primary market is an indicator that "they [i.e. bond investors] will buy anything now."

Most airline certificates better

A trader said that Delta Air Lines' new 7¾% class A pass-through certificates "continued to hang in there," at 101 bid, 101¾ offered. The Atlanta-based air carrier sold $568.796 million of the certificates on Wednesday at par.

However, he also said that the other part of that $668.74 million financing - Delta's $119.944 million of 9¾% class B certificates were "still sucking wind, trading below issue," which was at par.

He further saw United Air Lines Inc.'s recently priced 9¾% pass-through notes trading at a 101-101½ context - even though the Chicago-based air carriers' new deal came off the high-grade desks and seemed largely focused toward high grade rather than junk buyers.

"That's the one that really trades more," he said, certainly more than UAL's junk-rated $112.606 million of 12% pass-throughs due 2016, which priced last Monday at par.

Healthcare issues looking anemic

One of the traders, while acknowledging that "there was some secondary stuff that traded, this week, all the portfolio managers were just overwhelmed with the amount of new issues, and they were deciding what they should take and what they shouldn't."

One new deal which would definitely fall into the latter category, he said was Alliance Healthcare Services Inc., which he called "the one deal that did not go well at all."

On Thursday, the Newport Beach, Calif.-based medical diagnostic imaging company priced $190 million 8% notes due 2016 - down from the originally announced $200 million - at 98.69 to yield 8¼%. The trader saw the bonds offered near their pricing level.

He said the key in determining whether a deal was doing well or not was fundamental economics - the law of supply and demand. Speaking hypothetically, he said that if an account puts in for a $5 million allocation on a bond, and gets the whole thing, "it's not a good deal," since it could be taken as a sign that nobody else likes the deal.

In the case of Alliance Healthcare, "most accounts got what they put in for, so this was one of those deals."

He said that it was an almost identical situation for HealthSouth Corp.'s new bonds. The Birmingham, Ala. medical facilities operator priced $290 million of 8 1/8% notes due 2020 at 98.327 last Tuesday to yield 8 3/8%, and the issue has struggled to get out of its own way.

He said the lack of strength in the two new healthcare issues - at a time when virtually all of the other recent deals have moved up, some modestly and others, smartly - "is more political than anything," given the current Capitol Hill debate about healthcare and investor angst that a greater federal role in healthcare will of necessity mean problems for companies in that sector.

Another trader noted that "out of a 2,000-page health bill" that congressional negotiators are working on, "we don't know what the heck is going to happen, let alone next month or three years from now.

"That would be an area - I don't want to say 'avoid' - but I'd be very careful treading down that path, because we don't know what's going to change."

More new deals to come

Clearly, "the new deals dominated this week. I'm going home punchy, like the Aflac duck," a trader said, referring to the eponymous insurance company's crazily quacking mascot in its ubiquitous television commercials. "Everyone wants to get their deals done before the window closes."

A second trader, noting the likelihood of still more deals in the upcoming week, in addition to the already slated offerings for Salem Communications and Advanced Micro Devices, quoted the old maxim "you borrow money when you can, not when you have to. If the fund flows [into the market] continue," he opined "these bankers are out there, looking under every rock, to see what deals they can pull up."

Market indicators head south

Back among the existing bonds not connected with the new-deal market, a trader saw the CDX Series 13 index down ½ point on Thursday at 92 7/8 bid, 93 3/8 offered, after having been down ¼ point on Thursday. The index thus ends the week slightly below the 93 bid, 93½ offered level at which it had closed out the previous week, ended Friday Nov. 13.

The KDP High Yield Daily Index was meantime down 15 basis points on Friday to 69.56, after having gained 6 bps on Thursday. Its yield widened by 3 bps to 8.57%, after having narrowed by 1 bp the previous session. The index stood at a nearly identical 69.58 the previous Friday, with its yield at 8.63%.

In the broader market, advancing issues led decliners for a seventh consecutive session on Friday, with their advantage remaining around an 8-to-7 margin.

Overall market activity, as measured by dollar volume, fell about 10% from Thursday's pace.

A trader said that apart from the traffic in new issues, "it was a pretty quiet day."

At another desk, a trader said that "in sync with stocks," which were weaker on the day, the junk market "felt a touch softer," opening down ¼ point. "We really didn't see much activity outside the new issues. There was some of the on-run stuff like Freeport [McMoran Copper and Gold, Inc.] and stuff like that banging around, but it was mostly new issue focused."

Bon-Ton backs off

A trader said that Bon-Ton Department Stores Inc.'s bonds have recently "come back from the dead," moving up into the lower 90s from the high 80s, where they were before the release of the company's numbers earlier in the week.

However, in seeing the 10¼% notes due 2014 come in around a point to 91-92, from their levels at 92-93 on Thursday, he noted that they "got a little ahead of themselves, and gave some back."

The York, Pa.-based retailer posted a narrower third-quarter loss versus a year ago and projected a smaller loss for the full year than it had previously predicted.

Bon-Ton said that its third-quarter net loss was $4.2 million, or 24 cents a share, versus a loss of $14.3 million, or 85 cents a share, a year ago.

It also projected a full-year a loss of $1.20 to $2.30 a share for 2009, versus its earlier projection, made a month ago, of between $2.50 and $3.70 per share of red ink.

GM off recent highs

A trader saw General Motors Corp.'s 8 3/8% benchmark bonds due 2033 down ½ point on the day at 22¼ bid, 23¼ offered. That's off from the mid-week peak around 24 that the bonds hit, on heavy trading, after GM released quarterly results showing smaller-than-feared losses and predicted it would repay government loans ahead of schedule - but well up from levels in the mid-teens before the company's numbers and repayment promises.

The trader also saw GM domestic arch-rival Ford Motor Co.'s 7.45% bonds due 2031 down 1 point at 83 bid, 84 offered.

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