Lamar prices upsized deal, new bonds up sharply; Ply Gem pushes up on note buy news, Pilgrim's Pride on asset sale

By Paul Deckelman and Paul A. Harris

New York, March 20 - Lamar Media Corp. came to market Friday with its upsized offering of five-year notes, which priced at a steep discount to par - but after the new bonds were freed for secondary dealings, they were seen up sharply, leading traders to theorize that the deal had priced way too cheaply to begin with, with the issuer seen getting the short end of that arrangement.

Meanwhile, the recently priced Dole Food Co. Inc. bonds - another offering which had priced well below par in order to boost yield to attractive enough levels to get the transaction done - continued to inexorably move up.

Back among the established bonds, Ply Gem Industries Inc.'s bonds notched solid gains, though on only a limited amount of trading, in response to the late-day announcement that the Cary, N.C.-based building products maker's equity sponsor will buy a majority of those notes.

Chemtura Corp., whose bonds had retreated Thursday after the Middlebury, Conn.-based chemical manufacturer's Chapter 11 filing, were seen having rebounded a little.

Other gainers included Pilgrim's Pride Corp., which announced a major asset sale, and Blockbuster Inc., up on financing news.

There was also upside activity in the normally little-traded bonds of Milwaukee-based food additives producer Sensient Technologies Inc.

Buyer demand prompts Lamar

Lamar Media priced an upsized $350 million issue of 9¾% five-year senior notes (Ba3/BB-) at 89.979 to yield 12½% on Friday.

The week's only deal, it was upsized from $250 million and priced on top of the price talk.

The offering was driven by reverse inquiry, according to a high-yield mutual fund manager, who added that the issue was almost entirely placed before it launched.

The $350 million issue played to $1.8 billion of demand, the investor said.

JP Morgan was the bookrunner.

Proceeds will be used to repurchase some or all of Lamar Advertising's outstanding 2 7/8% convertible notes due 2010 via a tender offer, one or more open market transactions or individually negotiated transactions, or to fund repayment of the notes at maturity. Pending the repurchase Lamar Media expects to temporarily pay down its revolver and maintain any excess amount as cash on hand.

Lamar paper rallies

Within hours of pricing, the new Lamar 9¾% notes due 2014 traded spectacularly higher. Mid-afternoon one trader spotted the paper, which priced just below 89.98, trading at 95 bid, 95½ offered.

People liked the structure of the new notes, the high-yield mutual fund manager commented, adding that the new paper jumps some of the company's existing bonds in terms of seniority in the capital structure.

Although in terms of maturity the new notes are sandwiched in between Lamar's existing 7¼% notes due 2013 and its 6 5/8% notes due 2015, the new paper is structurally superior, the investor said.

Nevertheless, the 2013 and 2015 bonds were rallying Friday afternoon, enjoying a boost from the new issue rally, the source added.

Thin volume

The Lamar deal, which generated just under $315 million of proceeds, was the week's only business in the high-yield primary market.

Hence the week beginning March 16 becomes the lowest volume week, in terms of dollar amount, in 2009 to date, replacing the previous week which saw $325 million of proceeds, all of it in one tranche from Dole Food.

There are deals on the horizon, high-yield syndicate officials told Prospect News late Thursday and Friday.

One offering, a deal from the industrial sector in the vicinity of $250 million, is expected to surface early in the coming week.

Elsewhere prospective issuers from the energy sector are believed to be teeing up deals, sources add.

Volatility hampers junk

With the new Lamar bonds rocketing a nickel above issue price Friday afternoon, market sources were commenting that the deal appeared to have been priced too cheap.

Two weeks earlier Plains Exploration & Production Co. priced a downsized $365 million issue of 10% notes due 2016 at 92.373. The bonds almost immediately traded lower, and opinions surfaced that it had been priced "too rich."

However "Goldilocks" executions are not the key to reopening the high-yield primary market in a meaningful way, a high-yield syndicate official said shortly after Friday's close.

Volatility in the capital markets in general is impeding the junk new issue market, the source added.

The S&P 500 stock index, which had rallied as much as 17% off 12-year lows seen on March 9, fell nearly 2% on Friday, after falling 1% on Thursday, the official pointed out.

"We need to see some stability, there, in order for people to start bringing new deals with some degree of confidence," the banker said.

Traders see 'too cheap' Lamar pricing

When the new Lamar Media 9¾% notes due 2014 were freed for secondary dealings, a market source estimated them as high as 95 bid. Later on, a trader at another desk confirmed that level, even topping it, seeing the new bonds get as good as 95.75 bid, 96 offered before settling in at 95.5 bid.

Lamar, he said, was "a joke" to have priced at so very low a level that would produce such explosive upside movement on the break.

"Jesus!" exclaimed another trader. "What a rip off to the company. These underwriters paint a picture that they can't get the deal done unless it's at a certain yield, when they fully realize by the demand [that they see] that they'll be popping points. It just seems so unfair that they can get away with that."

Meanwhile, Lamar's existing bonds - which had been seen down 2 or 3 points on Thursday as the market learned of the Baton Rouge, La.-based outdoor advertising company's pending new deal - came back on Friday, apparently buoyed by the successful pricing,

A trader saw Lamar's 7 1.4% notes due 2013 move up to 82.75 bid from 81 on Thursday, on $9 million of volume, adding "on the successful break" of the new bonds, "these popped as well."

Dole 'moving up'

A trader saw Dole Food Co.'s 13 7/8% secured notes due 2014 continuing to firm, putting those bonds at 96.5 bid, 96.75 offered. "They just keep on moving up," he said of the Westlake Village, Calif.-based fruit and vegetable company's upsized $350 million deal, which priced on March 13 at 92.883 to yield 16% and which has been continually gaining since then.

Another trader said that the Dole deal was "another one of those deals" which priced way too low and which then moved sharply upward after that, like Friday's Lamar placement. "It's so obvious that I'm shocked that it has never come to light with the issuers."

Dole's existing 7¼% notes due 2010, meantime, were seen down 3 points on the day at 91 bid.

Market indicators seen mixed

Back among the established issues, a market source saw the widely followed CDX High Yield 11 index of junk bond performance - which had eased by ¼ point on Thursday, down again in Friday's trading, quoting it at a mid bid-asked level of 68.65, well down from around 69.56 on Thursday. At another desk, a source quoted the index as off not quite so much at 69.31. It had closed the previous Friday at 69.75

The KDP High Yield Daily Index meantime firmed 4 basis points to 51.71, while its yield widened by 6 bps to 13.98%. A week earlier, the index had stood at 50.41, with a yield of 14.37%.

In the broader market, advancing issues continued to lead decliners by about a four-to-three margin.

Overall market activity, measured by dollar-volume totals, declined by about 14% from the levels seen in Thursday's session.

A trader called it "another typical Friday, with very little activity," likening the overall feeling of lassitude seen on recent Fridays to "a three-day holiday weekend."

For instance, he said that Community Health Systems Inc.'s 8 7/8% notes due 2015, sometimes considered to be a market bellwether, fell 3/8 point to 94.75 bid - but on volume of only $1 million, a tiny amount for the Franklin, Tenn.-based hospital operator's $3 billion-plus issue.

"That's a perfect example of what I'm talking about," he insisted, noting the really low trading volume in two other billion dollar-plus megadeals sometimes thought of as market barometers, First Data Corp.'s 9 7/8% notes due 2015, which lost ¾ point to end at 55, on volume of $3 million - a drop in the bucket for the Greenwood Village, Colo.-based financial transaction processor's $2 billion-plus issue - and the 1/8 point decline in Aramark Corp.'s 8½% notes due 2015. The Philadelphia-based uniform and food services provider's bonds ended at 90.5 bid, on volume of $6 million - again, a fraction of its more than $1.25 billion size.

'So clearly, all three of these were indicating that we were weaker on the day - but again, on very light volume, what I would categorize as holiday volume."

Ply Gems powers up

Late in the day, Ply Gem Industries, a maker of windows, doors and other building products, announced that affiliates of its financial Sponsor, CI Capital Partners, LLC, will make "a major cash investment" to acquire a majority of the company's outstanding 9% senior subordinated notes due 2012.

A market source saw those bonds jump more than a dozen points on the session to the 35 level, from around 22 previously.

Although there wasn't time for much trading - the announcement first came up after 4 p.m. ET, when many market participants had long since headed for the exits - the source still saw volume of around $15 million, most of it in large-sized transactions, before trading finally wound down for good.

When it made its announcement, Ply Gem also said that it intends to amend the notes' indenture to give the company "greater financial and operating flexibility."

Ply Gem's president and chief executive officer, Gary E. Robinette, said in a statement that "having our sponsor acquire a majority of our notes will give our company greater control over our debt and can provide the company with additional near-term liquidity during these challenging economic times."

Ply Gem is owned by CI Capital Partners, LLC, formerly Caxton-Iseman Capital, Inc., a New York-based private equity firm.

Chemtura bounces back

Chemtura's bonds - which had fallen on Thursday in the wake of the chemical company's Chapter 11 filing - were seen having bounced back, although on reduced activity levels.

While the company's 6 7/8% notes due 2016 had traded more than $20 million on Thursday in falling about 2 points to the 26 level, on Friday, those bonds were seen having moved back up to 28.5, with $5 million changing hands.

A trader saw the 6 7/8% notes due 2026 issued by one of Chemtura's predecessor companies, Witco, as having moved back up to 17 bid from 16.25, also on $5 million traded.

And the 7% notes coming due on July 15, issued by Chemtura ancestor company Great Lakes Chemical Corp., had firmed to 20.5 bid from 19 on Thursday, with $4 million traded.

Pilgrim's Pride gets asset-sale aid

Another company currently undergoing a Chapter 11 reorganization, poultry producer Pilgrim's Pride Corp., announced that it has agreed to sell its complex in Farmerville, La., to Foster Farms for $80 million - not exactly chickenfeed.

That helped to push the Pittsburg, Texas-based company's bonds several points higher, with its 7 5/8% notes due 2015 moving up to 66 bid from 62.5 on Thursday, "a nice move," a trader said, with $6 million of the bonds changing hands.

Meanwhile, its 8 3/8% notes due 2017 got as good as 36.325 bid, up from 31 on Thursday, with $8 million changing hands.

Pilgrim's Pride, which sought protection from its creditors on Dec. 1, said that the transaction is subject to the parties entering into a purchase agreement and needs the approval of the bankruptcy court. The company expects the transaction will be completed within 30 days from signing the purchase agreement.

The Farmerville operations include a processing facility, cook plant, hatchery, feed mill, protein conversion plant and any associated inventory.

Blockbuster up on financing news

Apart from those bankrupt names, another company making news was Dallas-based movie-rental operator Blockbuster, with a trader seeing its 9% notes due 2012 move up to 45.75 bid 46.5 offered, from prior levels at 43.5 bid, 44.5 offered.

"A ton of bonds were trading today," he declared.

During its fourth-quarter earnings call, Blockbuster said that it has reached agreements with JPMorgan Chase Bank and two of the largest lenders under its existing revolving credit facility, to amend and extend the facility through Sept. 30, 2010.

Jim Keyes, the company's chief executive officer, told analysts and investors on the call that the commitments from those lenders represent 65% of the expected total principal amount of the extended revolver, which is about $250 million.

Blockbuster is working toward funding the agreement in the next 60 days, he said. The company said it will be starting discussions with its other lenders and is optimistic about future conversations.

"We've been working hard to replace this revolving credit facility, and what we've found is that the high cost of funds in today's credit markets has indeed created a challenge," Keyes said.

"We're confident, however, that the company has adequate liquidity within the existing facility to allow us the time necessary to explore every possible source of existing and new funding to achieve the lowest possible cost of capital."

Blockbuster management declined to provide details on the pricing of the agreement but called it "expensive."

A subsequent Securities and Exchange Commission filing indicated that the amended and extended revolving credit facility is expected to be priced at Libor plus 1,000 basis points with a 3.5% Libor floor.

During the question-and-answer session of the call, Blockbuster chief financial officer Tom Casey said the company hopes to restructure its balance sheet when more practical costs of capital return to the markets.

In the meantime, the higher cost facility will motivate the company to delever over the next 12 to 18 months, he said.

Sensient seems stronger

Sensient Technologies' bonds, normally little traded in the market, were seen firmer Friday, a market source said, pegging the 6½% notes coming due on April 1, issued when the food chemicals producer was still known as Universal Foods Corp., pushing back up above the par level from its recent position around 91 bid.

Those bonds had hovered above par until early February, around the time of the most recent earnings report, when they dropped in the low 90s, even though the report trumpeted record results and a sizable cut in the company's debt.

There was no news seen out on Friday that might explain the bounce back above par.

Freeport McMoRan again most active

Elsewhere, a trader saw "who else?" as Junkbondland's most active issue, but Freeport-McMoRan Copper & Gold Inc. Inc. The Phoenix-based copper and gold mining concern's 8 3/8% notes due 2017 trading at 92 bid, unchanged from Thursday's levels, on volume of $41 million.

At another desk, a market source saw the company's 8¼% notes due 2015 down more than a point on the day at 93.5 bid, though on relatively restrained volume of about $6 million. The company's floating-rate notes due 2015 were quoted at 78 bid, on volume of more than $10 million.

Freeport's bonds have "typically" been at or near the most actives list over the last several months. They had been particularly strong on Thursday in response to surging prices for both of its principal products, copper and gold. However, on Friday, copper fell from the four-month highs that the metal had reached Thursday, as investors worried that the global recession will curb demand for the metal.

Showing how active the Freeport bonds were, particularly the 2017s, the next-most active junk issue Friday was Qwest Corp.'s 8 7/8% notes due 2012 - but the Denver-based telecommunications company's issue only turned over about $17 million - "quite a drop," the first trader said - while ending down ½ point to end at 98 bid.

Jennifer Lanning Drey contributed to this report

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