Junk eases; Rite Aid slips post-numbers; Sprint steady to weaker; primary wraps record month

By Paul A. Harris and Stephanie N. Rotondo

Portland, Ore., March 31 - The secondary high yield market ended softer Wednesday, led in part by Rite Aid Corp.

The drugstore chain reported its fourth-quarter and March sales results early in the day. As a result, traders saw the bonds falling, though they managed to come off of the day's lows.

Sprint Nextel Corp. saw its bonds ending the day unchanged to somewhat weaker. The movement came as a market player speculated that the company could increase subscribers in 2011.

Meanwhile, General Motors Corp. and Ford Motor Co. debt closed mixed. The automakers are expected to release March sales reports Thursday.

The high-yield primary, meanwhile, roared its way out of the record-setting month of March 2010, with half a dozen junk-rated issuers, each pricing a single tranche of notes, raising well over $1.47 billion of proceeds.

AutoNation drives by

AutoNation, Inc. priced a $400 million issue of 6¾% eight-year senior notes (Ba2/BB+) at 98.488 to yield 7%.

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

Bank of America Securities LLC, J.P. Morgan Securities Inc. and Wells Fargo Securities, LLC were joint bookrunners for the quick-to-market deal.

Proceeds will be used to fund a tender for the company's existing notes, repay its term loan and for general corporate purposes.

Ferrellgas brings $280 million at par

Meanwhile, Ferrellgas Partners, LP and Ferrellgas Partners Finance Corp. priced a $280 million issue of 10-year senior notes (B2/B-) at par to yield 8 5/8%.

The yield printed in the middle of the 8½% to 8¾% yield talk. The reoffer price came rich to discount talk of about 1 point.

Wells Fargo Securities, Bank of America Merrill Lynch and J.P. Morgan were joint bookrunners for the quick-to-market deal.

Proceeds will be used to finance a tender for the company's 8¾% senior notes due 2012.

Maxim Crane sells $250 million

Elsewhere, Maxim Crane Works, LP and Maxim Finance Corp. priced a $250 million issue of 12¼% five-year senior secured second-lien notes (Caa1/B) at 97.29 to yield 13%.

The yield printed on top of the price talk.

J.P. Morgan Securities Inc., Morgan Stanley & Co., Inc. and Wells Fargo Securities, LLC were joint bookrunners.

Maxim Crane, a Pittsburgh-based crane and aerial equipment sales and rental business, plans to use the proceeds from the deal to repay an asset-backed loan and to fund an equity dividend.

Radnet comes wide of talk

Radnet Inc. priced a $200 million issue of 10 3/8% eight-year senior notes (Caa1/CCC+) at 98.68 to yield 10 5/8%.

The deal came 12.5 basis points beyond the wide end of the 10¼% to 10½% price talk.

Deutsche Bank Securities was the left bookrunner. Barclays Capital, RBC Capital Markets and Jefferies & Co. were joint bookrunners.

Proceeds, along with proceeds from a new credit facility, will be used to repay the company's first-lien and second-lien term loans and for general corporate purposes.

PharmaNet upsized

PharmaNet Development Group, Inc. priced an upsized $185 million issue of seven-year senior secured notes (B3/B+) at par to yield 10 7/8%.

The yield printed in the middle of the 10¾% to 11% price talk.

Jefferies & Co., Inc. and Deutsche Bank Securities Inc. ran the books for the deal, which was increased from $175 million.

Princeton, N.J.-based company clinical research firm, which serves the pharmaceutical and biotechnology sectors, will use the proceeds to repay its credit facility and fund a dividend to equity investors.

Midwest Gaming at the tight end

Finally, Midwest Gaming Borrower, LLC and Midwest Finance Corp. priced a $175 million issue of 11 5/8% six-year senior secured notes (Caa1/B) at 98.941 to yield 11 7/8%.

The yield printed at the tight end of the 12% area price talk.

Goldman Sachs & Co. was the left bookrunner. Credit Suisse was the joint bookrunner.

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

NES downsizes, hikes talk

NES Rental Holdings Inc. downsized its planned seven-year senior secured second-lien notes offer to $150 million from $250 million on Wednesday.

Meanwhile the Chicago-based equipment and heavy machinery rental company boosted price talk to 12½%, from previous talk of 11½% to 11¾%.

The deal is scheduled to price on Thursday.

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

Apart from NES Rental, terms are expected to roll out Thursday on Stratus Technologies, Inc.'s $215 million offering of five-year senior secured notes.

That deal was talked on Tuesday with a 12% coupon to price at 96.40 for a 13% yield. It also comes with 10% of the company's equity.

Market-watchers had been expecting the terms to surface late Wednesday. However none were available as Prospect News went to press.

Also in the market is MagnaChip Semiconductor SA's $250 million offering of eight-year senior notes (B2/B+), via Goldman Sachs & Co., Barclays Capital, Inc., Deutsche Bank Securities, Inc. and Morgan Stanley.

The Korean chip-maker's offering has not been officially talked.

However the whisper is 10%, according to an analyst who is watching it, and who added that the order book is likely significantly oversubscribed.

Some market-watchers were expecting the deal to price this week. However it is more likely next week's business, an informed source said on Wednesday.

Finally, SquareTwo Financial Corp. is in the market with a $300 million offering of seven-year senior secured second-lien notes via Bank of America Merrill Lynch and BMO Capital Markets Corp.

Also believed to be possible business for the March-April crossover week, no news was heard Wednesday on SquareTwo's deal.

Market indicators soften

Away from the new deals, market indexes continued to decline during Wednesday trading, market sources reported.

The CDX High Yield Index dropped nearly half a point to end at 99¾ bid, par offered, according to one source.

The KDP High Yield Index meantime fell to 72.06, with a 7.82% yield, compared to Tuesday's reading of 72.10, yielding 7.80%.

Cash bonds were unchanged, according to a market source.

Rite Aid bonds give back post-numbers

Rite Aid bonds "traded down a lot, then worked their way back up" some, a trader said, noting movements following the release of the company's quarterly results and March sales report.

The trader said $20 million to $25 million of the 9½% notes due 2017 changed hands, closing around 84. That compared to levels around 85 "a day or two ago," he said.

Another trader also placed the 9½% notes around 84, calling that down 1½ points. He also saw the 10 3/8% notes due 2016 ending a point weaker at 1053/4.

And, another source deemed the 8 5/8% notes due 2015 over a point softer at 85¾ bid.

The Camp Hill, Pa.-based pharmacy chain announced its fourth-quarter results early Wednesday. The results showed a net loss of $208.4 million, or 24 cents per share, on revenues of $6.5 billion - a 3.6% decline year-over year.

"It was a difficult quarter with continued weak consumer demand, a weaker cough, cold and flu season than last year, and continued pressure on pharmacy reimbursement," said Mary Sammons, chairman and chief executive officer, in the earnings release. "But our team did a good job of improving front end margins and holding tight on expenses. Thanks to our working capital initiatives, we moved into the new fiscal year with a strong liquidity position."

For the fiscal year, Rite Aid reported revenues of $25.7 billion, compared to $26.3 billion the year before. The company said the decline in both the fourth-quarter and full-year revenues was "primarily driven by 121 net fewer stores and a decline in same store sales."

Net loss, however, improved to $506.7 million, or 59 cents per share, from $2.9 billion, or $3.49 per share, in fiscal 2009.

Rite Aid also provided guidance for fiscal 2011, which the company said was "based on current trends, a continued weak economy with high unemployment and the impact of the investment Rite Aid is making in its new customer loyalty program."

Sales are expected to be between $25.2 billion and $25.6 billion during the year, while the net loss is projected at $355 million to $570 million.

Also on Wednesday, Rite Aid released its March sales report, which showed a 0.1% decline in total same store sales.

Total sales came to $1.96 billion, versus $1.99 billion in March 2009.

Overall, market players saw the results as more of the same.

"The company had been reporting lackluster sales and its explanation was similar: a challenged consumer and a weak cough and cold season," wrote Gimme Credit LLC analyst Kim Noland in an afternoon comment.

Noland said that while the company was optimistic about what the recent health care legislation could mean for them, "we don't think its credit profile will improve this year." That was in line with the company's comments about its sales numbers.

"However, liquidity is adequate, having improved to $950 million at fiscal year end," Noland added.

Sprint unchanged to weaker

Sprint Nextel's debt was "a little active," a trader said, as a fund manager speculated that Sprint could gain more subscribers in 2011.

However, the trader called the bonds about ½ point weaker, seeing the 6.90% notes due 2019 at 91½ and the 8 3/8% notes due 2017 at par1/2.

Another trader placed the 6.90% notes "up and down" around 91, which he said was "kind of right where they have been." He added that about $10 million and change" of that issue traded.

BusinessWeek reported Wednesday that T. Rowe Price Group Inc.'s Dan Martino opined Sprint would begin gaining contract subscribers by the second quarter of 2011.

The Overland Park, Kan.-based wireless communications provider has lost nearly 6 million customers since 2007, when Dan Hesse took over as chief executive officer.

Still, the article noted that many in the market are not as optimistic, with about three-quarters of analysts polled recommending selling or holding the stock.

GM, Ford mixed

Market sources gave mixed reports about General Motors and Ford Motor bonds on Wednesday.

One source saw GM's zero-coupon notes due 2036 at 19, which he called up ½ point. However, the 8 3/8% notes due 2033 and the 7.20% notes due 2011 were unchanged at 37½ and 363/4, respectively.

"They are all in that 35 [bid], 37 [offered] range," he said of the automaker's various issues.

The trader also saw Ford's debt unchanged to better, the 12% notes due 2015 at 120 and the 7 7/8% notes due 2010 around 101. The 7% notes due 2013 were pegged at 103 1/8.

"They were all unchanged generally across the board," he said.

At another desk, a trader said that GM's benchmark 8 3/8% notes were off slightly at 37½ bid, 38 offered, while Ford's 7.45% notes due 2031 were steady at 94½ bid, 95½ offered.

According to a Bloomberg report, U.S. auto sales for the month of March are expected to increase at the fastest rate since the "Cash for Clunkers" program in 2009. The widely accepted reason for that has to do with Toyota Motor Corp.'s incentives, which it enacted as an effort to counter the bad press associated with its recent recall debacle.

Sales reports from GM and Ford are expected to hit the market Thursday.

Broad market mostly better

In the broader market, GMAC LLC's 7¼% notes due 2011 increased by ½ point to 1021/2, according to a trader.

The trader also called McClatchy Co.'s 4 5/8% notes due 2014 "up a couple" at 76.

Smurfit-Stone Container Corp.'s 8% notes due 2017 were ½ point better at 891/2.

And, Lyondell Chemical Co.'s 7.55% notes due 2026 finished unchanged at 93.

Another trader saw Realogy Corp.'s 10½% notes due 2014 at 86 bid, 87 offered, "not particularly different than where it has been." He noted that about $20 million of the paper changed hands.

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