TXU megadeal, Burger King drive-by lead $4 billion session; Calumet, Rock Salt set talk

By Paul Deckelman and Paul A. Harris

New York, April 14 - The high-yield primary market saw its biggest session in more than three weeks on Thursday, as nearly $4 billion of new paper priced. Almost half of that was in the form of an upsized, quickly shopped offering of senior-secured notes from utility operator Texas Competitive Electric Holdings Co. LLC.

Also weighing in with drive-by deals were Burger King Capital Holdings LLC, which served up an unusual offering of eight-year zero-coupon senior discount notes to raise $400 million, and Canadian marketing and communications company MDC Partners Inc. with an upsized $55 million add-on deal.

Off the forward calendar, technology provider iGate Corp. priced $770 million of five-year notes, energy operator Chesapeake Midstream Partners L.P. brought $350 million of 10-year notes to market, restaurateur Sizzling Platter LLC generated $135 million with a five-year secured deal and French shipping concern CMA CGM dropped anchor with an upsized $475 million of six-year notes, part of a big dual-currency deal.

Other European issuers pricing euro- or sterling-denominated deals were Elster Finance BV, Alba Group plc & Co. KG, Boparan Finance plc and Southern Water (Greensands) Financing plc.

Community Choice Financial, Inc. was heard to have hit the road with a $370 million issue of secured notes.

Price talk emerged on pending deals from American Rock Salt Co. LLC and petrochemical manufacturer Calumet Specialty Products Partners, LP, with pricing seen possible on Friday after the order books are closed.

The secondary market seemed firm, with recent new deals holding their own and statistical measures better.

Primary very active

A massive day in the primary market saw pricings of 13 tranches of junk spread across three different currencies.

Issuers raised $3.93 billion, £898 million and €863 million overall.

Texas Competitive upsized $1.75 billion issue of 11½% 9.5-year senior secured notes (B2/CCC) at 99.295 to yield 11 5/8%.

The yield printed in the middle of the 11½% to 11¾% price talk.

J.P. Morgan Securities LLC, Citigroup Global Markets, Credit Suisse Securities LLC, Goldman Sachs & Co. Inc. and Morgan Stanley & Co., Inc. were the joint bookrunners for the quick-to-market debt refinancing deal.

iGate prices $770 million

iGate priced a $770 million issue of five-year senior notes (B2/B+) at par to yield 9%.

The yield prints at the wide end of the 8¾% to 9% price talk.

Jefferies & Co., Inc. and RBC Capital Markets, LLC were the joint bookrunners for the acquisition financing.

CMA CGM upsizes two-parter

France's CMA CGM completed an upsize dual-currency bond deal (B2/B-).

The company priced an upsize $475 million of six-year notes at par to yield 8½%. The yield printed on top of price talk, which was tightened from original talk that had been set in the 8 5/8% area. The tranche was upsized from $375 million.

CMA CGM also priced an upsized €325 million tranche of eight-year notes at par to yield 8 7/8%. The yield printed on top of price talk that had been tightened from earlier talk that had been set in the 9% area. The tranche was upsized from €300 million.

Deutsche Bank Securities Inc., BNP Paribas, SG CIB, Citigroup and Natixis Bleichroeder are the joint bookrunners.

Deutsche Bank will bill and deliver for the dollar-denominated tranche. BNP Paribas will bill and deliver for the euro-denominated tranche.

The Marseille, France-based company plans to use the proceeds to refinance all of its dollar- and euro-denominated notes and for general corporate purposes.

Burger King discount notes

Burger King Capital Holdings and Burger King Capital Finance, Inc. raised $400 million via the sale of eight-year senior discount notes (Caa1/CCC+), which it priced at 58.613 to yield 11%.

The yield printed at the tight end of the 11% to 11¼% price talk.

The notes accrete to par in five years.

J.P. Morgan Securities LLC and Barclays Capital, Inc. were the joint bookrunners for the quick-to-market deal.

The Miami-based fast food restaurant company plans to use the proceeds either to fund a dividend or fund a future strategic investment.

The company plans to use the cash by the end of 2011.

Chesapeake Midstream tight

Chesapeake Midstream and CHKM Finance Corp. priced a $350 million issue of 10-year senior notes (Ba3/BB+) at par to yield 5 7/8%.

The yield printed at the tight end of the 5 7/8% to 6% price talk.

Credit Suisse Securities (USA) LLC, Goldman, Sachs & Co., RBS Securities Inc. and Wells Fargo Securities, LLC were the joint bookrunners for the debt refinancing and general corporate purposes deal.

Sizzling Platter 12¼% notes

Sizzling Platter raised $135 million of proceeds via the private placement of its 12¼% five-year senior secured notes (Caa1/B-).

The notes priced at 96.429 to yield 13¼%.

Earlier in the week the deal was launched with a 12¼% coupon.

Knight Capital Americas, Global Hunter Securities and Maxim Group were the joint bookrunners.

The Murray, Utah-based restaurant company plans to use the proceeds to refinance debt and for general corporate purposes.

MDC prices add-on

MDC Partners priced an upsized $55 million add-on to its 11% senior notes due Nov. 1, 2016 (B2/B+) at 111.0, resulting in a yield of 8.048%.

J.P. Morgan Securities ran the books for the quick-to-market deal.

Proceeds will be used to repay the senior secured revolving credit facility maturing on Oct. 23, 2014.

Boparan seven-year deal

Boparan Finance priced £700 million-equivalent of seven-year senior notes (Ba3/B+) in two tranches.

The transaction included £400 million of 9 7/8% notes, which priced at 99.38 to yield 10%. The yield printed at the wide end of the 9 7/8% area price talk.

Boparan also priced a €340 million tranche of 9¾% notes at 99.380 to yield 9 7/8%. The euro-denominated notes also priced at the wide end of the 9¾% area price talk.

Goldman Sachs International ran the books.

Proceeds, along with proceeds from a new revolving credit facility, will be used to fund the acquisition of Leeds, England-based food manufacturer Northern Foods by Ranjit Boparan, to refinance debt and to fund pension obligations of Northern Foods.

Elster prices €250 million

Germany's Elster Finance priced a €250 million issue of seven-year senior notes (expected Ba2/confirmed BB-) at par to yield 6¼% on Thursday, according to a press release from the company.

Merrill Lynch and J.P. Morgan Securities LLC were the joint physical bookrunners. Merrill Lynch will bill and deliver. Deutsche Bank and Goldman Sachs International were the joint bookrunners.

Proceeds will be used to repay bank debt.

Southern Water at tight end

Southern Water (Greensands) priced a £250 million issue of eight-year notes at par to yield 8½%.

The yield printed on top of the price talk.

Deutsche Bank, HSBC and UBS are the joint bookrunners for the Regulation S-only deal.

The Worthing, England-based drinking water supplier plans to use the proceeds to refinance debt.

ALBA prices €203 million

Germany's ALBA Group priced a €203 million issue of 8% seven-year notes (B3/B) at 98.6694 to yield 8¼%.

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

Deutsche Bank, Commerzbank, IKB, UniCredit and WestLB are the joint bookrunners. Deutsche Bank will bill and deliver.

The waste management services company, which is based in Berlin, plans to use the proceeds to refinance debt.

Talking the deals

Looking ahead to a busy Friday session, Calumet Specialty Products and Calumet Finance talked their $375 million offering of eight-year senior notes (B3/B) with a yield in the 9½% area.

Merrill Lynch and Goldman Sachs & Co. are the joint bookrunners.

Meanwhile American Rock Salt Co. LLC downsized its notes offer to $175 million from $200 million and set price talk on Thursday.

The seven-year second-lien senior secured notes (B3/CCC+) are talked with a yield in the 8 3/8% area.

The deal is set to price on Friday.

Morgan Stanley & Co. has the books.

In addition to downsizing the bonds, the Retsof, N.Y.-based rock salt producer increased its term loan to $300 million from $250 million.

The overall amount of debt financing increased to $475 million from $450 million.

Proceeds will be used to repay debt at the holding company and fund a dividend. The additional proceed generated by the upsizing of the overall debt financing will be used to increase the dividend.

Community Choice roadshow

Finally, one new deal took a position on the forward calendar during the Thursday session.

Community Choice Financial started a roadshow on Thursday for its $370 million offering of eight-year senior secured notes.

The deal is set to price during the week ahead.

Credit Suisse Securities (USA) LLC and Jefferies & Co., Inc. are the joint bookrunners for the debt refinancing and dividend funding deal.

TXU existing bonds gain...

The new Texas Competitive Electric Holdings jumbo-sized offering of new secured notes came to market too late in the session for any kind of secondary dealings, according to market sources.

However, the Dallas-based merchant power and utility company's existing 10¼% notes due 2015 were seen up more than 2 points on the day at 66½ bid.

TCEH's corporate parent, Energy Future Holdings Corp. - better known to bond traders under its pre-buyout name of TXU Corp. - was also up on news of the upcoming big deal. A market source saw its 5.55% notes due 2014 at 81¼ bid, up more than 2 points.

EFHC's 6.55% bonds due 2034 were 1 point better, at 52½ bid.

...but not so for Burger King

The day's other headline bond deal, the Burger King Capital Holdings issue, likewise priced too late in the session for any meaningful aftermarket.

Unlike the TXU paper, the Miami-based fast-food franchisor's existing bonds were seen getting a little indigestion at the prospect of a major new bond deal, particularly one whose proceeds looked earmarked for paying a big dividend to the company's equity sponsor.

"Their bonds were pretty active and were just a little bit weaker, though not much," a trader said.

He saw its 9 7/8% notes due 2018 at 106½ bid, 107 offered, calling that down marginally, just a little off the prior session's levels.

Another market source saw the bonds down 1 point on the day at 106.

Sizzling Platter sizzles

Among the deals priced earlier in the session, the other new paper out of the restaurant sector - Murray, Utah-based Sizzling Platter's new five-year secured notes - were seen by a trader being offered at 991/2, though on "very little trading."

Even so, that level was well up from the 96.429 level at which the deal had priced.

However, several other traders said they had seen no level or trading at all in the smallish $144.6 million transaction. Proceeds came in at $135 million.

iGate does alright

A trader said that iGate's new five-year bonds "did okay" when they reached the aftermarket. He quoted the $770 million issue at 100½ bid, 100¾ offered, up a little from their par issue price.

A second trader saw the bonds going home "wrapped around" the 101 level.

At another desk, a trader pegged the bonds at 100¾ bid, 101 offered.

Chesapeake holds near issue

Chesapeake Midstream Partners' new 10-year notes were seen by a trader to be trading around 100½ bid, 100¾ offered, up from the par level at which the Oklahoma City-based affiliate of well-known high-yield energy credit Chesapeake Energy Corp. had priced its $350 million deal.

CMA CGM softens

A trader said that French shipping company CMA CGM's $475 million of dollar-denominated six-year notes was trading somewhat under the par pricing. He saw those 8½% notes due 2017 at 99¼ bid, 99¾ offered.

He meantime saw the deal's other half - its euro-denominated 8 7/8% notes due 2019 - trading at par bid, 100¾ offered, after pricing at par.

Ally off a little

Among Wednesday's deals, a trader said that the 4½% add-on notes due 2014 from Ally Financial was trading at 99¾ bid,100¾ offered versus the par price at which that $750 million tranche came to market.

He, meantime, did not see any levels in the Detroit-based automotive and residential lender's $750 million floating-rate tranche of add-on notes due 2014, which priced at par on Wednesday.

Secondary indicators mixed

Away from the new issue realm, a trader saw the CDX North American Series 16 HY index up by one-eighth of a point on Thursday, to end at 102¼ bid, 102½ offered. On Wednesday, the index finished down three-sixteenths of a point.

The KDP High Yield Daily Index meantime fell by 3 basis points on Thursday to close at 75.82, after having risen by 1 bp on Wednesday. Its yield rose by 1 bp to 6.59%, after having narrowed by 1 bp on Wednesday.

However, the Merrill Lynch High Yield Master II Index rose for a second consecutive session on Thursday, by 0.011%, on top of the 0.051% gain seen on Wednesday. That lifted its year-to-date return to 4.73%, a new peak level for the year, from 4.719% on Wednesday, which was the previous zenith.

Advancing issues beat decliners for a second straight session on Thursday, although as had been the case on Wednesday, the gainers led the losers by a couple dozen issues at most out of the more than 1,300 traded.

Overall market activity, as measured by dollar-volume levels, slid by 34% on Thursday, after having risen 5% on Wednesday from the previous session's levels.

Market participants meanwhile waited in vain for a key statistic, which is usually a fixture on Thursday afternoons or early evenings: the weekly AMG high-yield mutual fund flow statistics generated by Lipper/FMI. The figures are seen as a reliable indicator of overall junk market liquidity trends.

The number did not surfaced by the market close and still was not seen by press time.

Based on the market's recent performance, traders had been looking for a net inflow of between $200 million and $300 million in the week ended Wednesday.

Last week, $1.04 billion more came into those funds than left them, marking the second straight cash infusion and the 12th so far this year against only two outflows, according to a Prospect News analysis of the fund-flows data.

Through last Thursday, net inflows have totaled $6.634 billion so far this year.

Although they make up but a relatively small percentage of the total monies going into and out of the junk market, the mutual fund-flow numbers are seen by analysts as a reliable proxy for overall junk market liquidity

trends.

Market participants say the continued flow of fresh cash into junk exemplified by the fund flows fueled the record new deal borrowing binges seen in both 2009 and then in 2010 as well as the robust secondary market seen both years. Both of those trends have been pretty much continuing in 2011 as well.

Buyers chasing yield

A trader said it seemed that lately when it came to new paper, "the theme is less liquidity" in terms of the amount of available paper.

"There's not a lot of supply, and the buyers are chasing yield."

Put that all together, he said, and "the new issues are going up, up and away."

'Easter eggs' prove elusive

A second trader agreed that there was "not a heck of a lot going on"

With an eye on this month's holiday calendar, he suggested, "The market kind of has a feel right now like a children's Easter egg hunt. You lay out all of the eggs in the yard, and the kids are running around with their baskets and they start grabbing all of the eggs. When there are just a few eggs left, everyone is huddled around that one bush in the back, trying to find those last eggs and get them."

Likewise in Junkbondland, he continued, "now everybody's working on the same four or five things. There are a couple of things going on, and everybody is focusing on those, falling all over themselves and each other, trying to do the trade."

Now, he said, "everyone's trying to do the same trade. Instead of stuff trading for a quarter [point higher or lower], you see the stuff trading for a sixteenth, because you've got eight guys involved, trying to do it."

Continuing the analogy, he said: "Now, everybody's 'basket' is full, and you've got everybody in the same spot where those last 'eggs' are."

Community Health back

Away from the new deals, traders noted that activity in Community Health Systems' benchmark 8 7/8% notes due 2015 seemed to be back to normal after a three-day binge, which saw an astounding $370 million of the Franklin, Tenn.-based hospital operator's bonds changing hands: $200 million on Monday, $120 million on Tuesday and over $50 million on Wednesday.

In Thursday's dealings, a market source saw the bonds back down around the $20 million turnover market - enough to put it fairly high on the Most Actives list, but not the kind of chart-topping dominance of the prior three days.

The bonds traded around the same 102-102½ level seen on Wednesday. They had originally plunged to around 100-101 on Monday from prior levels at 104-105 in very heavy dealings and on adverse legal news connected with the company's takeover effort against smaller sector peer Tenet Healthcare Corp., which made serious allegations of misconduct in a lawsuit.

On Tuesday, the bonds bounced back to around to 101½ with volume still heavy, while on Wednesday, they had firmed still further to back above the 102 mark, where they stayed on Thursday.

Supervalu up on numbers

Elsewhere, grocery store operator Supervalu Inc. reported better earnings than had previously been expected, causing its bonds to gain ground, traders reported.

One trader called the 8% notes due 2016 higher around the 102 mark. Another trader said the 7.45% notes due 2029 - linked to Albertson's LLC - were nearly a point higher at 801/4.

For the fourth fiscal quarter, Eden Prairie, Minn.-based Supervalu reported a 2.1% decline in earnings, posting a profit of $95 million, or 44 cents a share. That compared to $97 million, or 46 cents a share, a year earlier.

Revenue fell 5.9% to $8.66 billion after dropping 15% a year earlier.

Supervalu also provided guidance for the year, forecasting earnings of $1.20 to $1.40 per share on revenue of $37.5 billion. However, the company is expecting same-store sales to continue to decline.

Nortel knocked down

From out of the distressed-debt precincts came word that Nortel Networks Corp.'s bonds slid on the news that the Toronto-based communications equipment manufacturer - currently in the process of liquidating its operations through the bankruptcy courts in the United States and Canada - had announced the failure of the non-binding mediation process that had been trying to hammer out a formula for the allocation of the sale proceeds of Nortel's various business and asset divestitures. The mediators were also trying to resolve other inter-estate matters, including inter-company claims.

In its statement, Nortel warned of "significant" potential delays in coming up with an acceptable distribution formula in light of the mediation effort's failure and corresponding lengthy delays in any actual distributions of the bankruptcy estate's proceeds to bondholders and other creditors.

A trader said that Nortel's 10 ¾% notes due 2016 were down between 1½ and 2 points at 90 bid, 91 offered, while its floating-rate notes slated to come due later this year were down 1 point at 87½ bid, 88½ offered.

DirectButy takes a drubbing

Also in distressed-land, a trader said that DirectBuy Holdings'12% notes due 2017 have tumbled into the 60s, citing news that the attorneys general from 37 states, Puerto Rico and the District of Columbia are objecting to the settlement of a class action suit against the Merrillville, Ind.-based members-only showroom and home-design center over its sales practices.

"Whether it was new news or not, the price of the bonds dropped," he declared.

Another trader quoted the bonds at 64 bid, 65½ offered, calling them down half of a point on the session, but well down from their levels earlier in the week when they were trading around 75 bid.

A market source at another shop said most of the downside movement came on Wednesday, when the legal motion by the attorneys general was filed, and then the paper moved a little further downward on Thursday.

The $335 million bond deal, which had priced in late January at 97 bid to yield 12.721%, was still trading as high as around the 90 level in mid-March, but collapsed later in the month on the unexpected news of the chief financial officer's abrupt resignation. The news hammered the bonds down as low as the upper 50s over the space of several subsequent sessions. They began recovering from that nadir in late March and had managed to climb back up into the 70s before the latest legal setback.

DirectBuy reached the settlement with the original plaintiffs in the lawsuit, who had alleged that the company fraudulently misrepresented itself by implying in its sales materials that its paid memberships, ranging in price from $1,000 to $5,000, would entitle customers to purchase goods from manufacturers and suppliers at actual cost. The suit had contended that DirectBuy got kickbacks from the manufacturers and inflated the costs the members paid.

The attorneys general filed their objections to the deal with the federal court in Bridgeport, Conn., on Wednesday, saying it would provide little or no relief to the bulk of the company's customers - while enriching only the plaintiffs' lawyers - and didn't even officially bar the company from similar future conduct.

DirectBuy rejected the criticism and will defend the proposed settlement at a May 10 hearing.

Stephanie N. Rotondo contributed to this report

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