Valeant, Tomkins mega-deals pace nearly $3 billion primary session; new Tomkins bonds trade up

By Paul Deckelman and Paul A. Harris

New York, Sept. 21 - The high-yield primary market kept up its brisk pace on Tuesday, with bonds totaling nearly $3 billion pricing in four deals.

The most notable deal was non-domestic, though dollar denominated. Tomkins plc, a British manufacturer of automotive, building and industrial products, came to market with an upsized and restructured $1.15 billion offering of eight-year notes through its special-purpose issuing units Pinafore, LLC and Pinafore, Inc. Big as it was, it wasn't the day's largest deal - but it clearly did the best when freed for aftermarket dealings, firming by several points.

In contrast, the day's largest offering - $1.2 billion of seven- and 10-year notes from drugmaker Valeant Pharmaceuticals International Inc. - edged up only slightly from their respective issue prices when those bonds were freed for secondary dealings.

That was also the case with Baltimore-based TV station owner Sinclair Television Group, Inc., which priced a $250 million issue of eight-year paper. However, Whiting Petroleum Corp., a Denver-based energy exploration and production operator, came with $350 million of eight-years, which moved up by nearly a point.

Tennessee-based restaurant operator Logan's Roadhouse, Inc. was heard to have hit the road with a new secured notes deal. Europe's high-yield market got busy, as French borrowers Rhodia SA and Picard Bondco SA were heard getting ready to price deals on Wednesday, as was Canada's CHC Helicopter SA, the latter deal weighing in at $1.1 billion.

Secondary trading in established issues again took a back seat to the primary.

Valeant upsizes

A quartet of junk issuers priced a combined face amount of $2.95 billion in five tranches on Tuesday.

Valeant Pharmaceuticals placed an upsized $1.2 billion of senior notes (B1/B+) in two tranches.

The Mississauga, Ont., specialty pharmaceutical company priced $500 million of 6¾% seven-year notes at 99.5 to yield 6.84%.

The yield printed inside of the 7% price talk.

Valeant Pharmaceuticals also priced $700 million of 7% 10-year notes at 99.375 to yield 7.09%.

The 10-year notes also priced inside of price talk, which had been set at 7¼%.

Goldman Sachs, Morgan Stanley & Co. Inc. and Jefferies & Co. were the joint bookrunners for the merger-financing deal, which was upsized from $1 billion.

Tomkins tight to talk

Meanwhile, Tomkins' Pinafore special-purpose vehicles priced an upsized $1.15 billion issue of eight-year second-lien notes (B1/B+) at par to yield 9%.

The yield printed at the tight end of the 9% to 9¼% yield talk, an informed source said on Monday.

Bank of America Merrill Lynch, Citigroup, Barclays Capital, RBC Capital Markets and UBS Investment Bank were the joint bookrunners for the leveraged buyout-financing deal, which was upsized from $1 billion.

Whiting Petroleum, at the tight end

Whiting Petroleum priced a $350 million issue of eight-year senior subordinated notes (expected ratings B1/BB) at par to yield 6½%.

The yield printed at the tight end of the 6 5/8% area price talk.

Bank of America Merrill Lynch, JPMorgan and Wells Fargo Securities were the joint bookrunners for the bank debt refinancing.

Sinclair Broadcast's $250 million

Finally, Sinclair Television priced a $250 million issue of 8 3/8% eight-year senior notes (B2/B-) at 98.57 to yield 8 5/8% on Tuesday.

The yield printed at the tight end of the 8¾% area price talk.

JPMorgan, Wells Fargo Securities and Citadel Capital were the joint bookrunners for the debt refinancing and general corporate purposes deal.

Talking Wednesday deals

CHC Helicopter talked its $1.1 billion offering of 10-year first-lien senior secured notes (B1//) with a 9¼% to 9½% yield.

The books close at 11:30 a.m. ET on Wednesday, and the deal is set to price thereafter.

Morgan Stanley, HSBC, RBC Capital Markets and UBS Investment Bank are the joint bookrunners.

France's Rhodia talked its $400 million offering of 10-year senior notes (B1//) with a 7% area yield.

The books close at 9 a.m. ET on Wednesday.

Credit Suisse and Credit Agricole CIB are the joint bookrunners for the debt refinancing deal.

And Picard Bondco, a special-purpose entity of France's Picard Group SA, talked its €300 million offering of eight-year senior notes (B3/B-/B-) with a 9% to 9¼% yield.

The order books close at 9 a.m. ET on Wednesday, and the deal is expected to price thereafter.

Credit Suisse, Citigroup, Morgan Stanley and Credit Agricole CIB are the joint bookrunners for the LBO financing.

Logan's Roadhouse roadshow

Logan's Roadhouse began a roadshow on Tuesday for its $335 million offering of seven-year second-lien senior secured notes (B2/B-).

The deal is expected to price on Monday.

JPMorgan and Credit Suisse are the joint bookrunners for the LBO financing.

Meanwhile, Exopack Holding Corp. is expected to price a $100 million add-on to its 11¼% senior notes due Feb. 1, 2014 on Wednesday, according to a market source who added that Goldman, Sachs & Co. is running the books for the debt refinancing.

The company priced the original $220 million issue in January 2006.

Finally, Beijing-based China Medical Technologies, Inc. is marketing a $175 million offering of five-year senior notes (/B+/B+), according to a market source who added that the deal could be upsized by a modest amount.

Deutsche Bank Securities and Standard Chartered Bank are managing the debt refinancing.

Secondary takes backseat

A secondary trader said that as has been the case pretty much for the last 10 days, the new-deal arena "just kept pumpin' 'em out. That's where most of the activity was," to the detriment of the more-established names.

However, he said that the new issue flow was nowhere near as hectic as things had been on Monday, when there were seemingly non-stop new-deal announcements and price talk rumors, punctuated by the actual pricings of a half-dozen deals. Instead, on Tuesday, he saw the new issues "more spaced out - they were not jumping out at you every 10 minutes."

New Tomkins pop in aftermarket

When the day's new deals got to the secondary market, the star of the day was easily Pinafore LLC/Pinafore, Inc.'s $1.15 billion issue of 9% second-lien senior secured notes issued for parent Tomkins.

A trader saw the bonds having gotten as good as 103¾ bid, 104 offered, well up from their par issue price earlier in the session.

A second trader pegged those bonds at 103½ bid, 104½ offered.

Nobody had a particular handle on why the bonds of the London-based company, currently being bought out by the Canada Pension Plan Investment Board and Onex Corp., did as well as they did.

Whiting a winner

Also seen doing well once the bonds were freed for secondary dealings were Whiting Petroleum's 6½% senior subordinated notes due 2018. That $350 million issue, which priced at par, was quoted as having moved up to 100 7/8 bid, 101 1/8 offered.

A second trader saw the new bonds get even better at 101 1/8 bid, 101½ offered.

Valeant, Sinclair up modestly

The day's other mega-deal, Valeant Pharmaceuticals, was seen as no match for the Tomkins bonds in aftermarket action.

A trader saw Valeant's $500 million of 6¾% notes due 2017 at 100¼ bid, 100¾ offered, up moderately from the notes' 99.5 issue price.

Meanwhile, its $700 million of 7% notes due 2020 firmed a little to 100 3/8 bid, 100¾ offered from an issue price of 99.375.

Traders at the same time saw Sinclair Broadcast Group's new $250 million of 8 3/8% notes due 2018 firm a little to the par bid level after having priced at 98.57 earlier in the session.

Monday deals seen not much moved

The fruits of Monday's frantic new-deal session meantime were being quoted around somewhat, but "it didn't seem like any Monday name was moving higher," a trader said.

However, a trader at another shop did see AbitibiBowater Inc.'s 10¼% senior secured notes due 2018 - which actually priced fairly late in Monday's session and which did not circulate around after that - as having moved up when they finally reached the secondary, rising to 101 3/8 bid, 101 5/8 offered versus the par level at which the restructuring Montreal-based pulp and paper manufacturer's bonds had priced at.

But everyone else pretty much stayed around issue.

Monday's standout secondary performer, LifePoint Hospital, Inc.'s 6 5/8% notes due 2020, were meantime seen by a trader at 101 3/8 bid, 101 5/8 offered on Tuesday. That was down slightly from the 101½ bid, 102 level at which the Nashville-based hospital operator's $400 million deal had traded on Monday after pricing at par.

Other issues held near, or even slightly below, their Monday pricing levels.

Jackson, Mich.-based power producer CMS Energy Corp.'s $250 million of 4¼% notes due 2015 were quoted Tuesday at par bid, 100½ offered, just a little above the 99.892 level at which those bonds had priced on Monday to yield 4.274%.

Hertz Corp.'s $400 million add-on to its 7½% notes due 2018 were parked on Tuesday at 99¾ bid, 100 1/8 offered, versus the par level at which the Park Ridge, N.J.-based vehicle-rental company's deal had priced Monday.

Charter Communications Inc.'s upsized $1 billion of 7¼% notes due 2017 were seen Tuesday at 100¼ bid, 100 5/8 offered, versus the par level at which the St. Louis-based cable system operator's bonds had priced Monday.

And the big loser is ...

One Monday name that did have quite a move was GenOn Escrow Corp.'s $1.225 billion two-part offering.

A trader quoted the Houston-based power generating company's $675 million of 9½% notes due 2018 as having fallen to 97¼ bid, 98¼ offered, down from the 98.623 level at which those bonds had priced on Monday to yield 9¾%. Those bonds had initially managed to firm up to 99 bid.

The company's $550 million of 9 7/8% notes due 2020 were no better, retreating on Tuesday to 96¼ bid, 97¼ offered, down from their issue price of 97.676, which had yielded 10¼%. Those bonds had managed to firm to 97¾ bid in initial aftermarket trading on Monday.

A trader at another desk meantime said that while "everything that came did really well," the GenOn bonds were "the only blight." He said that both tranches "finally broke down and traded 5/8 point below new-issue."

Energy Transfer stays active

A market source saw Energy Transfer Equity, LP's new 7½% notes due 2020 trading at 103 7/8 bid - just a hair below the peak level around 104 bid that the Dallas-based natural gas company's $1.8 billion behemoth, massively upsized from the originally announced $1 billion mega-deal, zoomed to last Wednesday in the aftermarket after it had priced at par.

The source noted that well over $20 million of those bonds had changed hands by mid-afternoon, making it one of the busier issues on the day in Junkbondland.

Market indicators turn mixed

Away from the new-deal world, a trader saw the CDX North American HY Series 14 index retreat by 1/8 point on Tuesday to end at 98 3/8 bid, 98 5/8 offered after having gained ½ point on Monday.

The KDP High Yield Daily index meantime fell by 6 basis points Tuesday to 72.91 after having risen by 10 bps on Monday, while its yield moved out by 4 bps to 7.80% after having come in by 3 bps on Monday.

However, the Merrill Lynch High Yield Master II index rose by 0.118% on Tuesday after having improved by 0.196% on Monday. It continued to hit successive new year-to-date 2010 peak return levels, ending the day at 11.117%, up from Monday's 10.986%, the previous high point for the year.

Advancing issues led decliners for a 14th consecutive session on Tuesday, although their seven-to-six margin was narrower than Monday's better than eight-to-six advantage.

Overall activity, represented by dollar-volume levels, jumped by 49% on Tuesday after having fallen by 9% on Monday.

iStar bonds unmoved

Among specific issues, iStar Financial Inc.'s bonds were unchanged following news that the company was planning to make a pre-packaged bankruptcy filing, possibly sometime next year.

"There's been some trading, nothing huge," a trader said. "They are relatively unchanged."

He pegged the 5½% notes due 2012 around 81½ and the 5.95% notes due 2013 around 76.

Another trader said he "heard some people mumbling about it," though he didn't see much trading volume. About "$30-odd million" total of the company's various issues changed hands, with $15 million to $20 million of that being the 5½% notes.

He also placed that issue around the 81½ mark.

The New York-based real estate focused investment company is reported to be planning for a pre-packaged bankruptcy after attempts to amend its loans were blocked by creditors.

The creditor negotiations on the bankruptcy filing are expected to begin next month. Lazard Ltd. and Kirkland & Ellis LLP are said to have been brought on board as advisers.

Other options the company has in the way of restructuring efforts are to extend maturities or launch an exchange offer.

iStar has about $2.6 billion in debt maturing within the first six months of next year.

Stephanie N. Rotondo contributed to this report

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