Da-Lite Screen prices, delights in aftermarket; NES, Midwest slate deals; Six Flags flying

By Paul Deckelman and Paul A. Harris

New York, March 19 - Da-Lite Screen Co., Inc. came to market on Friday with a $105 million offering of five-year notes. After pricing at a sizable discount to par, the Warsaw, Ind.-based home-theater video screen manufacturer's issue was seen to have firmed smartly in the aftermarket.

Da-Lite brought to a close a busy week which saw more than $6 billion of new high-yield debt price, from such well-known issuers as Bombardier Inc., International Lease Finance Corp.., United States Steel Corp. and Ball Corp., as well as several billion dollars more from issuers like QVC Inc. and split-rated SLM Corp.

The forward calendar grew, with the addition of offerings from two Chicago-based companies - aerial equipment rental concern NES Rental Holdings Inc. and Midwest Gaming & Entertainment LLC, which plans to build a casino right near the Windy City's O'Hare International Airport.

High yield syndicate sources meantime heard price talk on two deals expected to price on Monday, Nationstar Mortgage LLC and Learning Care Group (US) No. 2 Inc., as well as on Wyle Services Corp., which likely will price early in the upcoming week.

Away from the new-deal realm, Six Flags Inc.'s bonds gained multiple points in busy trading on the news that the New York-based theme-park operator had reached an agreement with its unsecured bondholders that will give the latter control of the company when they pay off the more senior debt to bring it out of bankruptcy, subject to court approval.

Activity otherwise was seen muted, with March Madness running wild among trading-desk denizens.

As with Thursday, the Friday primary market session passed in relative quiet.

Market participants huddled around television sets to watch the unfolding NCAA Men's National Basketball Tournament, said a few disinterested bankers who were left to tend the mostly quiet telephones on Friday.

A trader at a high-yield mutual fund said the phone scarcely rang at all on Friday.

In addition to the basketball games, many school children in the New York area were enjoying Spring Break, which also served to thin the ranks, sources said.

Da-Lite prices $105 million

Da-Lite Screen Co. priced the Friday session's sole deal, a $105 million issue of 12½% five-year senior notes (B1/B) that came at 97.305 to yield 13¼%.

The yield printed on top of yield talk. The reoffer price came slightly rich to discount talk of approximately 3 points.

Morgan Stanley & Co. Inc. ran the books for the quick-to-market deal.

Proceeds will be used to retire the company's 9½% senior notes due 2011.

The Da-Lite deal took the week's issuance to just under $7 billion of proceeds, and extended year-to-date dollar-denominated junk-rated issuance to $51.3 billion, according to Prospect News data.

Restructured Learning Care returns

Elsewhere in Friday's primary market, Learning Care Group (US) No. 2 Inc. introduced a new structure and set price talk for its $265 million high-yield notes offer.

The company plans to sell 13% five-year senior secured PIK notes with a coupon that will pay 10½% in cash and the remaining 2½% in kind.

The notes come with penny warrants for 10% of the company's common equity.

Price talk is 96 to 97.

The order books close at 11 a.m. ET on Monday, and the notes/warrants deal is expected to price after that.

Barclays Capital Inc., Wells Fargo Securities and Morgan Stanley & Co. Inc. are joint bookrunners.

In late February the company began marketing five-year senior secured cash-pay notes, with no warrants.

In addition to the PIK structure and the warrants, call protection was increased to three years from 2.5 years.

Apart from the structural changes the deal underwent covenant modifications.

Nationstar talks $250 million

Meanwhile Nationstar Mortgage set price talk for its $250 million offering of five-year senior notes (B2/B) to yield 11% to 11¼%, according to an informed source.

Books close at noon ET on Monday. The deal is set to price on Monday afternoon.

Barclays Capital Inc., Bank of America Merrill Lynch, Deutsche Bank Securities Inc. and RBS Securities Inc. are joint bookrunners.

Wyle Services sets talk

Wyle Services talked its $175 million offering of eight-year senior subordinated notes (expected Caa1/confirmed B+), to yield 10½% to 10¾%.

The books close at noon ET, on Monday. The deal is set to price after that.

J.P. Morgan Securities Inc. and Barclays Capital Inc. are joint bookrunners for the debt refinancing.

Midwest Gaming starts roadshow Tuesday

Chicago-based Midwest Gaming Borrower, LLC and Midwest Finance Corp. will begin a roadshow on Tuesday for their $175 million offering of six-year senior secured notes.

The roadshow will run through the remainder of the week, with the notes expected to price after it ends.

Goldman Sachs & Co. is the left lead bookrunner. Credit Suisse is the joint bookrunner.

Proceeds will be used to finance the development costs related to the Des Plaines Casino, and to fund an interest reserve account.

NES to market $250 million

Meanwhile, another Chicago-land issuer, NES Rental Holdings will begin a roadshow on Tuesday for a $250 million offering of seven-year senior secured second-lien notes.

Deutsche Bank Securities and Bank of America Merrill Lynch are joint bookrunners.

Proceeds will be used to repay the company's second-lien term loan.

The roadshow wraps up on March 29, and the deal is expected to price early in the March 29 week.

Da-Light trades delightfully

When the new Da-Lite Screen 12½% notes due 2015 were freed for secondary dealings, a trader said that "they did okay," quoting the new bonds as having firmed from their 97.305 issue price to levels "at least 100½ bid."

The trader noted that the company will use the deal proceeds to redeem its existing 9½% notes due 2011.

"Do you know what that shows?'" he asked rhetorically. "The potential fear in the marketplace," explaining that despite the ample liquidity conditions in Junkbondland - typified by Thursday's report of another big cash infusion to weekly-reporting high yield mutual funds - many borrowers still fear that at some point the window of opportunity for getting a deal done will once again close, like it did in the latter half of 2008.

"Look at the coupon on that bond - 9½% due 2011. Look what they're giving up [by doing a 12½% coupon deal with a 13¼% yield] for the safety of liquidity. All of these companies are afraid that the window is going to close."

Recent deals hold their levels

A trader said that generally looking at the trading in such recently priced names as Ball Corp., Bombardier, QVC and Sallie Mae, "they're all kind of holding their gains. Some bids are a little softer, but the offerings are right where they were. I would not say the bids were down as much as it just was people trying to be a little opportunistic on a slow day.

"The deals that came and did well were able to hold on to the gains, while those that came and didn't do well, like Sirius [XM Radio Inc] still weren't doing well. No trends were broken today by how we were trading. I think it was more of the same."

Market indicators end mixed

Among bonds not connected with the new-deal market, a trader saw the CDX Series 13 index down ½ point on Friday at 99 1/8 bid, 99 3/8 offered, after having been off by 1/8 point on Thursday. The index thus ends the week a little off the 99½ bid, 99¾ offered level seen at the close of the previous week, on Friday, March 12.

The KDP High Yield Daily Index meantime eased by 1 basis point on Friday to finish at 71.94, after having risen by 3 bps on Thursday. Its yield was unchanged at 7.86%, after having tightened by 1 bp on Thursday. The index ends the week slightly improved from the previous Friday's 71.81 reading, its yield a little narrower than the previous week's 7.91% close.

Another widely followed junk market measure, the Merrill Lynch High Yield Master II index, closed on Friday showing a year-to-date gain of 4.287% - a new peak level for 2010 - continuing the trend seen last week, which closed out with the index having risen solidly to a 3.775% gain. Since bottoming in mid-February, the index has bounced steadily 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 8.423% from the previous week's 8.552%, while its spread to worst tightened to 611 bps from 624 bps the previous Friday.

Advancing issues led decliners for a 16th consecutive session on Friday, by a margin of better than seven-to-six.

Overall activity, measured by dollar-volume levels, rose by around 3% from Thursday's pace.

A trader characterized Friday's session as "sort of boring."

He said it was "a weird day," with everyone glued to the TV monitors to watch the college basketball playoffs. He added that "whatever quadruple witching there was" - the expiration all on the same day of futures and options on stocks and equity indexes, which occurs once every 3 months - "was not such a big deal, for all of the hoopla they were making about quadruple witching." Equity-watchers said that market was more focused on macroeconomic developments, such as continued concern about Greece's debt problems, than they were on technical factors like quadruple witching; the bellwether Dow Jones Industrial Average eased by 37.19 points, or about one-third of a percentage point, to end at 10, 741.98.

Another trader called the market mixed and added that "quite honestly, from 12 [noon ET] on, I think the focus was college basketball and not high yield."

Six Flags soars

A trader said that Six Flags Inc.'s bonds were "up a real good amount, probably between 5 and 10 points, depending on the issue," given a big lift by "the news all over the page that they settled with the bondholders. Obviously, that's been a pretty big legal battle, in terms of what's going to go on in the bankruptcy."

With the subordinated bondholders poised to take control of the company, the bonds shot up like the ride cars climbing the steep, 456-foot top-hat tower at the theme park operator's hugely tall Kingda Ka roller coaster at its Great Adventure park in suburban New Jersey.

For instance, a market source quoted the company's 9 5/8% notes due 2014, which had started the week at 27 bid and which had gone home on Thursday still in the 20s at 291/2, shooting as high as 38 during Friday's dealings - a nearly 30% jump - before finishing at 361/2. Several other bonds, such as the 8 7/8% notes that were to have come due on Feb. 1, the 9¾% notes due 2013 and the 4½% notes due 2015, all jumped from the upper 20s to end around 36, in busy dealings.

Six Flags has been the object of a heated legal battle between secured creditors and the unsecured bondholders being fought over the past two weeks before the U.S. Bankruptcy Court in Wilmington, Del., which has been overseeing the company's restructuring.

On Friday, the company said it had agreed to a proposal in which a Stark Investments-led group of unsecured bondholders would get control of the company post-bankruptcy.

According to the terms of the deal, the Stark group will invest $725 million in new equity. Bondholders also plan to borrow $1.1 billion to pay off more senior creditors and provide working capital.

Current management will receive warrants and options for up to 15% of the new equity in the reorganized company. The Stark group will get the remaining 85%.

The Stark plan will negate a previous plan filed with the court. That plan - led by Avenue Capital Group - would have given control over to Avenue in exchange for about $420 million in debt.

The new plan still allows for Avenue to be paid in full.

A hearing on the new plan is scheduled for April 16.

Vanguard Health a little anemic

A trader saw Vanguard Health Systems Inc.'s 8% notes due 2018 fall as low as 96 bid from prior levels around 99 bid, par offered, "before bouncing a little bit" to finish around 97 bid, 98 offered, amid the news that the Nashville-based hospital operator will spend about $1.5 billion to acquire the Detroit Medical Center. Vanguard plans to assume $639 million in debt and pension contributions and invest another $850 million in improvements over the next five years for the eight-hospital DMC system.

Financing the deal, he said, "is the market's concern."

Smithfield gains continue on takeover hopes

A market source saw Smithfield Foods Inc.'s bonds "definitely moving up" for a second straight day, citing speculation over M&A activity" involving the Smithfield, Va.-based hog producer and pork processor.

He said the bonds rose "even though they're so short." He saw its 7% notes due 2011 move up from 1003/4-101 to around the 102 ranges, which he called "a pretty significant move on a less than two-year piece of paper."

Those bonds, he pointed out, are "noncallable, so they'd probably have to be tendered for."

He also saw the company's other paper, including the 7¾% notes due 2017, up ¾ point to a full point, on top of the nearly full-point move seen on Thursday, which had left the latter bonds at 98 bid, 99 offered.

Market watchers are citing rumors that Chinese conglomerate Cofco might be interested in buying the company.

Auto names are improved

A trader saw General Motors Corp.'s benchmark 8 3/8% bonds due 2033 up 1/8 point at 34 bid, 35 offered, which he called up 1/8 point, while GM domestic arch-rival Ford Motor Co.'s 7.45% bonds due 2031 were up ¼ point at 92¾ bid, 93¾ offered.

Another trader said that Ford and GM "seemed to stay at their higher levels from [Thursday], with GM's benchmark bonds up another ½ to one full point at 34 bid, while Ford's 7.45s "hanging right around" the 93-95 range, on "not a lot of volume."

The trader saw Visteon Corp.'s 7% notes due 2014 finishing around 86-87, "maybe up a half point on not much volume," while the 8¼% notes supposedly going to mature later this year were around 87 bid as well, "up a point or so, on not much volume."

Blockbuster bleeding continues

A trader said that Blockbuster, Inc.'s bonds "are in a real quagmire. Nobody knows what the hell to do with that credit, because even though they're closing stores, and things like that, does it have a real business, even though they have cash on the balance sheet?"

He saw the Dallas-based movie rental company's issues "down another point or so," with the 9% senior subordinated notes due 2012 trading below 20 bid.

Another trader said, though that the bonds were "pretty much where they were, on very little volume."

He quoted the 11¾% senior secured notes at 73-74 and the 9% notes at 20-21, "unchanged quotes on the day."

U.S. Concrete climbs

A trader said that U.S. Concrete Inc.'s 8 3/8% senior subordinated notes due 2014 is "another bond that's coming off its lows because a lot of people believe the company is worth more" than initially believed.

He said that it's "recouping nicely" from previous lows and now trading flat, or without the accrued interest. He said that the Houston-based cement company's bonds were trading in a 53-54 range, flat, earlier in the week, but on Friday, he saw trades as high as 581/2. "So people are starting to re-visit that one too. That one is up sharply."

ResCap on a roll

A trader said that Residential Capital LLC's bonds were being quoted considerably higher, with the Minneapolis-based residential lender's 6½% notes due 2013 finishing the week at 97-98. "They jumped," he said. "They started the week probably 7, 8, 10 points lower than that. It all happened at the end of the week. I don't know how much volume there was, but I noticed it on a quote sheet that they were higher. The last two or three days, they jumped over [the] 90 [mark]."

He added that there was "not a lot volume, but they're definitely quoted up."

He said "the ResCap structure, all of their paper, from 95-par, all eight issues, here in the high 90s, up 7 or 8 points on the week."

He saw no fresh news out on the company - the residential lending arm of GMAC Financial Services - but opined that "I guess people think that there's less risk in the name."

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.