Olin prices 10-years to cap busy week, Dole slates deal; PlyGem jumps on favorable quarter

By Paul Deckelman

New York, Aug. 14 - The high yield primary sphere closed out a rousing week on Friday in high style with - what else? - another pricing, as chemical and ammunition manufacturer Olin Corp. successfully brought a 10-year offering to market, which then proceeded to trade up solidly when it was freed for secondary dealings.

That deal was relatively small, as far as junk bond deals go, weighing in at $150 million. But there was nothing small about the total haul of proceeds from the nearly 20 deals which came to market this week; it came to more than $8.3 billion, the biggest and busiest week of the year so far in both dollar terms and number of issues priced, outweighing the roughly $7.8 billion of net proceeds seen in the week of May 11-15, the previous high-water mark for the year.

With the forward calendar's cupboard swept clean by the heavy pace of issuance and in need of replenishment, Dole Food Co., Inc. announced plans for a $325 million issue of secured bonds. Primaryside sources said that deal is likely to price on Monday.

In the secondary arena, meantime, traders noted, the junk market, after several straight weeks of strong gains, seemed to be running out of gas, as evidenced by indicators like the CDX HY 12 index, and the KDP High Yield Daily Index, which were both lower on Friday and ended the week below where they had been a week earlier.

But while traders noted that the robust rally seemed to have died down, they said that volume, apart from new-deal issues was small, making it difficult to assess anything.

Olin right on target

Olin Corp. priced a $150 million offering of 10-year senior notes (Ba1/B) to yield 9%. High yield syndicate sources said that the bonds came right at pre-deal market price talk envisioning a 9% yield and a negligible original issue discount.

Those 8 7/8% notes due Aug. 15, 2019 priced at 99.19.

The off-the-shelf deal, which was announced Thursday, was brought to market via bookrunners Citigroup Global Markets Inc. and Bank of America Merrill Lynch.

Olin, a Clayton, Mo.-based manufacturer of chemicals and small-caliber ammunition for firearms, the latter sold under the iconic Winchester brand, said when it first announced the deal on Thursday that it would pursue to bond sale to strengthen its long-term liquidity "given uncertain economic times," and will also use part of the proceeds to pre-fund a debt maturity in 2011.

Olin was the last of 18 deals to price during the week, the busiest so far this year by funds raised.

Dole doing a deal

Once the Olin pricing was out of the way, primaryside players didn't have very much to do except to speculate where the next junk deal might be coming from, and they did not have long to wait, with Dole Food - which in the previous week had indicated in a regulatory filing that it would do a secured notes deal sometime this quarter - deciding that there was no time like the present.

The Westlake Village, Calif.-based producer and marketer of fresh fruit and vegetables including organic bananas - announced plans for a $325 million offering of seven-year senior secured notes. New-deal sources said that offering is expected to price on Monday afternoon via joint bookrunners Deutsche Bank Securities, Inc., Bank of America Merrill Lynch and Wells Fargo.

They said an internet roadshow presentation would be available to potential investors on Monday, with pricing expected later that same day.

Dole said that it plans to use the net proceeds to fund the redemption, at par, of its existing 7¼% senior notes due 2010. Dole said in a recent regulatory filing with the Securities and Exchange Commission that it has $363 million of the 2010 notes outstanding and indicated that in addition to the new bond sale it might also use cash on hand and/or borrowings from its revolving credit facility to help redeem "the bulk" of those notes, with any remaining notes to be redeemed in the third or fourth quarter.

A trader suggested that Dole might take out the remaining bonds with some of the proceeds of a new $500 million initial public stock offering, which the company announced concurrently - but separately - when it announced the bond deal. Dole in fact said in a registration statement for that transaction filed with the SEC that it plans to use the net proceeds of that offering to pay down debt, with the remaining proceeds, if any, earmarked for general corporate purposes.

"The equity deal is so big," he said, "that they'd only have to raise $40 million or $60 million to take out the entire issue." However, he noted that not all of the equity issue will be new money from stock issued by the company to investors - some of it will be a secondary offering to the public of shares by the current shareholders in the privately held company, possibly including its principal owner, the octogenarian billionaire David H. Murdock.

New Olin bonds trade up

When Olin's new 8 7/8% notes due 2019 were freed for secondary dealings, a trader saw the bonds push upward to 101½ bid, 102½ offered - well up from the 99.19 at which they had priced earlier in the day to yield 9%.

Elsewhere among the recently priced issues, a trader saw NII Capital Corp.'s 10% notes due 2016 trading around 99½ bid. That was well up from the 99.568 level at which the Reston, Va.-based international wireless service provider's upsized $800 million issue of bonds priced on Thursday, to yield 10½%.

But not all of the new issues were necessarily on the upside. For instance, a trader said that Sprint Nextel Corp.'s $1.3 billion issue of 8 3/8% notes due 2017, which had priced on Monday at 98.575, to yield 8 5/8%, but which then struggled all week after that, "continued to languish," on Friday, trading down around the mid-96 level.

"A couple of times" they traded down to 96½ he said, finally going out at 96 3/8 bid, 96¾ offered, well below issue.

Satellite broadcasters are no stars

Other new issues, however, were no-shows

A trader saw no activity at all in the new DISH Network Corp. 7 7/8% notes due 2019. The Englewood, Colo.-based satellite television broadcaster's $1 billion issue had priced late Wednesday at 97.467 to yield 8¼%.

He likewise saw no aftermarket in New York-based satellite radiocaster Sirius XM Radio Inc.'s 9¾% senior secured notes due 2015. Its $257 million issue had priced on Thursday at 97.248 to yield 10 3/8%.

Another trader agreed that "DISH is a disappointment," after having traded Thursday around issue at 97-971/4. On Friday, he said, "nothing today - DISH just died."

He meantime said that while the Sirius bonds had actually reached heights of 99¼ bid late Thursday, "now they're 981/2. I don't know why - but they just died" too.

Market indicators stay mixed

Back among the established issues, the CDX Series 12 High Yield index, after having fallen 3/8 point on Thursday, continued its nearly week-long slide to dip another ¾ point on Friday to finish at 88 bid 881/2. That was well down from the 91¼ bid, 91¾ offered level at which the index had closed out the previous week, ended Aug. 7.

The KDP High Yield Daily Index, which had eased by 2 basis points on Thursday, lost another 18 bps on Friday to end at 66.45, while its yield - which had been about unchanged on Thursday - widened to 9.24%. Both levels represent a deterioration from the previous week, when the index had ended at 67.09, with a yield of 8.99%.

In the broader market, advancing issues - which had led declining issues for a 20th straight session on Thursday - continued to hang in there on Friday, although the gainers led the decliners by only a relative handful of issues.

A trader said that "the euphoria - the buying frenzy - that we had been seeing has toned down. We're still seeing some good inflows," such as the $713 million reported Thursday by AMG Data Services for the latest week, "but the plethora of new issues we've been seeing has put a lot of that money to work.

"That's not to say that accounts aren't still flush with cash - but it's not like it was a couple of weeks ago."

He added that while the whole week in the secondary market "has been like a vacation week," the lack of activity was especially pronounced on Friday when it was almost like [the market] shut down for an early close for a three-day weekend.

He noted, for instance, only relatively light activity in some of the big and usually fairly well-traded benchmark issues, like Community Health Systems Inc.'s 8 7/8% notes due 2015. The Franklin, Tenn.-based hospital operator's bonds eased to 100¼ bid from 100 7/8 on Thursday, though on relatively restrained volume of only about $5 million.

"It wouldn't surprise me," he said, "to see what volume we have go to the downside, the way equities are getting hit." Stocks, in fact, were under water pretty much all day on investor fears about sagging consumer sentiment, although the bellwether Dow Jones Industrial Average, which was down as much as 165 points, managed to trim its losses later in the session to finish down by 76.79 points, or 0.8%, to 9,321.40.

Among other such barometer issues, Philadelphia-based food-service company and uniform provider Aramark Corp.'s 8½% notes due 2015 dipped ¼ point to 981/2, on $2 million traded, while First Data Corp.'s issue of 9 7/8% notes due 2015 "was actually up" by a point at 841/2. Some $3 million of the Greenwood Village, Colo.-based financial transaction processor's bonds changed hands.

PlyGem pops up

Ply Gem Industries Inc.'s bonds were seen having jumped - 8 points for its senior notes and as much as 12 for the junior paper - after the Cary, N.C.-based building products maker showed favorable quarterly numbers and executives spoke about its liquidity position on its conference call.

A trader said that its bonds "raced up", with the 11¾% notes due 2013 trading as high as 85, up from 77 the previous day, before ending at 84½ bid, 85½ offered.

The 9% subordinated notes due 2012 traded up to 36-37, better by 11 points on the day. However, he said there were "not a lot of trades, just one or two" on the latter bonds, "not a lot of volume."

For the second quarter, Ply Gem posted net sales of $260.6 million, a decline of 23.6% from the same period of 2008. For the first half of 2009, sales came to $443.3 million, a 25.8% decline year over year.

Adjusted EBITDA improved to $41.5 million from $41.2 million. Net loss was meanwhile better at $8 million, versus $19.5 million in 2008.

"Ply Gem's second quarter and first half of 2009 sales and adjusted EBITDA results continue to reflect the challenging conditions that exist in the housing market today," the company's president and chief executive officer, Gary E. Robinette, said in the earnings release.

"However, despite the fact that single family housing starts were down 51.6% and 36.2% in the first and second quarters of 2009, respectively, Ply Gem demonstrated an improvement in our second quarter adjusted EBITDA versus last year.

"We will continue to realign our cost structure as necessary for current and future market demand," he concluded. "At the same time, we are focused on maximizing cash flow and outperforming the market place in all business units, allowing us to emerge stronger when the housing market recovers."

During the conference call to discuss the results, management also noted that liquidity was $72.2 million, including $19.5 million cash on hand.

CIT short bonds floating just under par

Elsewhere, a trader saw CIT Group Inc.'s bonds down around a point pretty much across the board -- except for the floating-rate notes maturing Monday. He saw those latter bonds still hovering in the high 90s, around 97-98.

Those bonds had firmed to that level from the low-to-mid 90s earlier in the week, on investor assumptions that the New York-based commercial lender would redeem at par any remaining bonds which had not been tendered by their holders for considerably less in the company's tender offer, which was expiring this week. CIT had last tinkered with its offer to give tendering holders 87.5 cents on the dollar for those bonds.

Stephanie N. Rotondo contributed to this report

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