Avis, Holly, Zayo deals price, move up; Blockbuster, NewPage gains continue, secondary firm

By Paul Deckelman and Paul A. Harris

New York, March 5 - A trio of high-yield bond deals priced on Friday to close out a better-than $3.5 billion week in the junk primary.

Syndicate sources saw new deals come to market from Avis Budget Group Inc., Zayo Group, LLC/Zayo Capital, Inc. and Holly Energy Partners LP/Finance Corp. As has been the case with most of the new issues which priced during the past week, traders mostly saw the new bonds firmer when they hit the aftermarket.

Masco Corp. meantime priced a $500 million split-rated (Ba2/BBB) issue of 10-year notes, which attracted some interest from investors in Junkbondland as well as on the high grade side.

Prospective new deals from Sitel Corp. and Alion Science & Technology moved onto the forward calendar, while price talk was heard on Garda World Security Corp.'s upcoming offer of Canadian- and U.S.-dollar bonds.

Away from the new deal arena, secondary market prices were mostly firmer, with major numerical indexes showing gains on the day and the week.

Among specific issues, Blockbuster Inc.'s bonds were up by at least a point on Friday, extending the roughly 4 point gains the bonds recorded in Thursday's trading, apparently on the strength of bullish comments about Blockbuster's prospects from its chief executive officer. A trader, however, raised the possibility that at least some of the upside in Blockbuster was due to dealer short-covering rather than strictly fundamental developments.

NewPage Corp. bonds continued their recent firming trend, helped by the news earlier in the week that the U.S. government had imposed penalty tariffs on coated-paper coming from China and Indonesia due to what it described as improper manufacturing subsidies from their respective governments.

Avis Budget 'a blowout'

During Friday's primary market session, Avis Budget Car Rental, LLC and Avis Budget Finance, Inc. priced an upsized $450 million issue of 9 5/8% eight-year senior notes (B3/B) at 98.634 to yield 9 7/8%.

The yield printed at the tight end of the 9 7/8% to 10 1/8% price talk.

Also timing was moved forward; initially the roadshow was scheduled to end in Los Angeles on March 8.

The deal, which was upsized from $400 million, was a blowout, a syndicate source said..

Bank of America Merrill Lynch, Barclays Capital Inc., Citigroup Global Markets Inc., Deutsche Bank Securities Inc., J.P. Morgan Securities Inc. and Wells Fargo Securities were joint bookrunners.

Proceeds will be used to repay floating-rate term loan debt and for general corporate purposes.

Zayo prices at tight end

Meanwhile, Zayo Group, LLC and Zayo Capital, Inc. priced a $250 million issue of 10¼% seven-year first-lien senior secured notes (B2/B-) at 98.779 to yield 10½%.

The yield printed at the tight end of the 10½% to 10¾% yield talk. The reoffer price came slightly cheap to the approximately 1 point of discount talk.

Morgan Stanley & Co. Inc. and RBC Capital Markets Corp. are the joint bookrunners.

Proceeds will be used to pay down bank debt and interest rate swaps and for general corporate purposes.

Holly also tight to talk

Holly Energy Partners, LP and Holly Energy Finance Corp. priced a $150 million offering of eight-year senior notes at par to yield 8¼%.

The yield printed at the tight end of the 8¼% to 8½% price talk.

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

Proceeds will be used to refinance the company's outstanding senior secured revolving credit facility and to fund the acquisition of petroleum storage tanks.

Masco brings split-rated notes

In the crossover space, Masco Corp. priced $500 million of 7.125% split-rated senior unsecured notes (Ba2/BBB) on Friday at a slight discount to yield 7 1/8%.

The sale was done off the high-grade syndicate desks.

Initial price talk was whispered in the mid-7% yield area, then revised to 7 1/8% to 7¼%.

The pricing came at the tight end of that lowered talk.

Bookrunners were Bank of America Merrill Lynch, Citigroup Global Markets and J.P. Morgan Securities.

Proceeds are going for general corporate purposes, including repayment of floating-rate notes due on March 12, 2010.

Masco played predominantly to a high-grade audience, according to a syndicate source, who added that the deal did attract some attention from high-yield players.

Garda talks dollar tranche

Garda World Security Corp. talked a $250 million tranche of seven-year senior unsecured notes (B3/B) to yield 10¼% to 10½%, on Friday.

Books close at 1 p.m. ET on Monday.

No talk or timing was given for a concurrent C$75 million tranche of seven-year senior unsecured notes (also B3/B).

UBS Investment Bank is the left bookrunner for the dollar-denominated tranche; Macquarie Capital is the joint bookrunner.

TD Securities is the sole bookrunner for the Canadian dollar-denominated tranche.

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

Garda is a Montreal-based security services provider.

Sitel starts marketing Monday

Meanwhile, Sitel Corp. will begin a roadshow on Monday for its $300 million offering of eight-year senior unsecured notes (Caa2).

The deal is expected to price late in the week ahead.

Goldman Sachs & Co., Bank of America Merrill Lynch and Credit Suisse are joint bookrunners.

The Nashville-based business outsourcing services provider plans to use the cash to pay down bank debt.

Alion to sell $300 million

Elsewhere, Alion Science and Technology Corp. will begin a roadshow on Monday for its $300 million offering of senior secured notes due November 2014.

The notes come with detachable warrants to purchase the company's common stock.

The deal is also expected to price during the week ahead.

Credit Suisse has the books.

Proceeds will be used to repay the company's first-lien credit facility and to take out its subordinated notes and warrants.

Avis drives higher

A trader said that with stronger economic news coming out of Washington, including a slowing rate of job losses, secondary levels "our market was up across the board."

When the new Avis Budget Group 9 5/8% notes due 2018 were freed for secondary dealings, a trader saw the Parsippany, N.J.-based vehicle-rental giant's new issue firm to 100 7/8 bid, 101 1/8 offered, well up from the 98.634 level at which the deal had priced earlier in the session.

Another trader quoted the bonds at 100¾ bid, 101¼ offered.

Zayo zooms

A trader saw Zayo Group's 10¼% first-lien senior secured notes due 2017 having pushed ahead to par bid, 100 3/8 offered.

The Louisville, Colo.-based telecom and internet infrastructure services provider's $250 million of new bonds had priced earlier in the session at 98.729, to yield 10½%.

Holly higher in secondary

When Holly Energy Partners' new 8¼% notes due 2018 were freed for secondary dealings, a trader saw the Dallas-based crude oil pipeline and transportation company's paper get up to 100¾ bid, 101 offered from its par pricing level.

Thursday deals stay strong

A trader saw the two deals priced on Thursday continuing to trade at a substantial premium to where they had priced.

San Antonio, Tex.-based contract energy driller Pioneer Drilling Co.'s $250 million of 9 7/8% notes were trading at 97½ bid, 98 offered, a trader said. The bonds had priced at 95.75 to yield 10.677%.

Littleton, Colo.-based telecommunications provider tw telecom Holdings, Inc.'s $430 million of new 8% notes due 2018 traded at 102 bid, 102½ offered; they had come to market at 99.284 to yield 8 1/8%.

Market indicators move ahead

Among bonds not connected with the new-deal market, a trader saw the CDX Series 13 index jump by 1 1/8 points on Friday to end at 99 bid, 99¼ offered bid, after having gained 1/8 point on Thursday. The index thus finishes out the week some 2 points better than the 97 bid, 97½ offered level at which it had closed out the previous week ended Friday, Feb. 26.

The KDP High Yield Daily Index meanwhile pushed upward by 20 bps on Friday to finish at 71.33, after having gained 11 bps on Thursday. Its yield tightened by 9 bps on Friday, to 8.06%, after having come in by 4 bps on Thursday. The index thus improved from the previous week's close at 70.51, and its 8.38% yield.

Another widely followed junk market measure, the Merrill Lynch High Yield Master II index, closed on Friday showing a year-to-date gain of 2.811% - a new peak level for 2010 - continuing the trend seen last week, which closed out with the index having risen solidly to a 1.580% gain. The index thus also surpassed the previous high-water mark for this year, of 2.292%, seen on Thursday, Jan. 14. The index had bounced all the way back from its low point of the year, a loss of 0.357%, recorded on Thursday, Feb. 11.

As of the Friday close, the index's yield to worst had narrowed to 8.755% from the previous week's 8.935%, while its spread to worst tightened to 646 bps from 674 bps the previous Friday.

Advancing issues topped decliners for a sixth straight session on Friday, by about an eight-to-five margin.

Overall activity, measured by dollar-volume levels, was down 1% from Thursday's pace.

A trader proclaimed that "they flooded the afternoon with new issues, and the market was strong, just about across the board."

"Equity was feeling good," a second trader noted - the bellwether Dow Jones Industrial Average was up 122 points on the day and other indexes rose as well in response to the slowing pace of lost jobs - "and bonds along with it."

More bounce for Blockbuster

Blockbuster's bonds "seemed like they improved a little bit" on Friday, a trader said, adding to the robust gains which the Dallas-based movie-rental company's bonds had notched on Thursday, in line with a big jump in its penny-stock shares, after its chief executive officer expressed confidence in the troubled company's prospects.

He said Blockbuster's 9% senior subordinated notes due 2012 "did keep going up a point" on Friday to finish at 25½ bid, 26 offered, in active trading, while its 11¾% senior secured notes due 2014 were also a point ahead at the 76-76½ level.

Another trader noted that Blockbuster is "the name that continues to bounce off its lows. It's very strong." He saw the bonds trade as high as 26½ bid on Friday, "up a lot."

He opined that "you don't know if this is legitimate demand or short-covering, because the dealers are trading again."

He added that:"it's the same situation with RMIX," referring to U.S. Concrete Inc. He noted that the Houston-based cement company's 8 3/8% senior subordinated notes due 2014 "have really bounced back, very strongly, even though they're trading flat," or without their accrued interest. The bond's 58-59 levels are "up a pretty good jump the last couple of weeks."

Before its Feb. 19 announcement that it was exploring various alternatives to strengthen its balance sheet and had obtained waiver through April 30 of a default for any non-payment of interest on its notes, they were trading in a 53-54 range, which the trader called "a nice jump, on a percentage basis."

On Thursday, Blockbuster's 9s had zoomed more than 4 points in brisk trading after CEO James Keyes said during a CNBC interview that Blockbuster "has a bright future" and is "in the middle of a dramatic transformation" that includes a lessening of its nearly "total reliance on DVDs" and development of a "a different form of distribution for both DVDs and digital content."

That shot the company's New York Stock Exchange-traded shares - now languishing deep in penny-stock territory - up by nearly 33%, on more than six-times normal volume. The shares were marginally lower on Friday, on considerably less volume.

Visteon trades in the 80s

A trader said of Visteon's bonds that he "did not see much of them today." He said there was absolutely "no activity" in the company's 8¼% notes scheduled to come due on Aug.1, which most recently been pegged in the mid-80s. He saw the 7% notes due 2014 trading around 81 bid, 82 offered on "some trading, but not much." Later on, he said the bonds - after getting as good as the 85 level - ended in an 83-84 context, "so they're quoted down a couple of points, on not much trading." The 7s had also been in the mid 80s the previous several sessions.

The bankrupt Van Buren Township automotive components company's bonds had jumped the previous Friday after its release of favorable earnings data, and those gains had extended into this past Monday and Tuesday, fueled as well by generalized investor feeling that things might be looking up for such major Visteon customers as its former corporate parent and still-biggest customer, Ford Motor Co. and General Motors Corp. - especially after Barron's magazine ran a piece last weekend very bullish on GM, and after Ford, and to a lesser extent GM, had reported strong February sales gains versus a year earlier. All of that helped to lift Visteon's two series of bonds as high as a 90ish level heading into mid-week - but then the rally ran out of gas, and the bonds spent the rest of the week settling into the low-to-mid 80s.

Also in the automotive parking lot, a trader called GM's benchmark 8 3/8% bonds due 2033 up 5/8 point on Friday at 32¼ bid, 33¼ offered, while GM domestic arch-rival Ford's 7.45% bonds due 2031 were up by a point at 90½ bid, 91½ offered.

Another trader said the GM benchmarks "tended to hang in that low 30s range for most of the day, on decent volume." The bonds ended at 32 bid, 33 offered, which he called probably unchanged.

He also said that the Ford long bonds "didn't have much volume to them," leaving them unchanged around 89. However, he said that "the shorter end of the curve was better - up a little bit, and activity seemed to be more on the offering side of the markets than not." For instance, he said that Dearborn, Mich. -based carmaker Ford's 7% notes due 2013 were at 100¾ bid, 101½ offered, which he called up a point, on "a lot of volume in those shorter names."

New Page adds to gains

In the paper and packaging sector, a trader said that NewPage's 10% senior secured second-lien notes due 2012 were up about 3 points at around 64 bid, and "pretty active," while its 11 3/8% senior secureds due 2014 were a point better at 98½ bid, 99 offered, on what he called "decent activity."

The Miamisburg, Ohio-based coated-paper company's bonds had risen smartly during the week, on the news that the U.S. Commerce Department - responding to a request by NewPage and several other paper manufacturers - had found that imports of coated paper from China and Indonesia had been unfairly subsidized by the governments of those country, and imposed stiff duties on them to dilute that advantage.

The trader meantime saw Smurfit- Stone Container Corp.'s bonds, like its Jefferson Smurfit 8¼% notes due 2012, up "maybe a point" at 85 bid, 86 offered.

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