Graphic Packaging prices drive-by; activity light due to holiday; Heinz busy; Supervalu splits

By Paul A. Harris and Stephanie N. Rotondo

Phoenix, March 25 - Graphic Packaging International, Inc. led Monday's activity in the high-yield market with a $425 million offering of senior notes.

But in contrast to the $17 billion of issuance that blew through the market last week, Monday's session was quiet in the primary, according to market sources.

And the pattern was the same in the secondary: trading was "muted, as you might expect" given the holidays and Spring Break, a trader said on Monday.

A majority of the day's activity was again centered on new issues, such as that from Graphic Packaging. Traders also noted that H.J. Heinz Co.'s $3.1 billion of 4¼% notes due 2020 were busy, as the deal came too late on Friday to see much play.

In the secondary, Supervalu Inc.'s bonds were officially separated into the "new" and "old" entities on Monday. The separation comes after the company completed a $3.3 billion sale of five of its chains on Thursday.

Elsewhere, Vanguard Health Systems Inc. came under pressure during the first trading day of the week. The bonds slipped as the company announced it had lost its Medicaid contract in Arizona, which accounts for 13% of its total revenues.

Graphic Packaging at tight end

Graphic Packaging priced a $425 million drive-by issue of eight-year senior notes (expected Ba3/confirmed BB+) at par to yield 4¾%.

The yield printed at the tight end of the 4¾% to 4 7/8% yield talk.

BofA Merrill Lynch, J.P. Morgan Securities LLC, Citigroup Global Markets Inc., Goldman Sachs & Co. and SunTrust Robison Humphrey Inc. were the joint bookrunners for the debt refinancing.

Ryman announces $300 million

Ryman Hospitality Properties, Inc. announced in a Monday press release that it plans to sell $300 million of senior notes due 2021.

Deutsche Bank Securities Inc. is the left bookrunner, according to a market source who said that as of the Monday market close the timing of the deal remained unclear.

BofA Merrill Lynch, J.P. Morgan Securities LLC, Wells Fargo Securities LLC, US Bancorp, and Credit Agricole CIB are the joint bookrunners.

The Nashville-based real estate investment trust plans to use the proceeds to repay revolver debt.

Quiet week ahead

Owing to the Passover holiday, and to the pending three-day Easter weekend which begins on Good Friday, the final week of March is expected to be a quiet one, sources say.

However there is a decent chance that at least a couple of well-known issuers will show up with drive-by deals before the four-day week is over, a debt capital markets banker advised late Monday.

Market holds steady

In the secondary, market indicators were steady to off a touch on Monday.

The KDP High Yield Index was holding at 75.67, with a 5.48% yield. But the CDX North American High Yield index was down fractionally at 104 bid, 104 1/8 offered, according to a market source.

Graphic, Heinz busy

Graphic Packaging International's newly priced 4¾% notes topped the day's most actively traded list, according to a trader.

He said at least $39 million of the $425 million issue changed hands.

The issue priced at par and rose up to 101 3/8, the trader said.

Another trader saw the bonds trading "all the way up" to 1011/2.

Proceeds from the offering will be used to redeem the company's 9½% notes due 2017, resulting in annual interest cost savings of over $20 million.

In other recent deals, traders also saw a fair bit of activity in H.J. Heinz's new 4¼% notes due 2020.

"They came so late Friday, all the action was rolled into today," one trader remarked.

He placed the notes in a par-par 1/8 context.

Another trader quoted the issue at par bid, par ¼ offered, which he said was unchanged. He noted that the issue got as low as 99 7/8 intraday.

Supervalu's split

Supervalu bonds got split up on Monday following the closing of a $3.1 billion asset sale on Thursday.

A trader said the 8% notes due 2031 were being shipped off with the "New Albertsons" entity that was created from the sale. That leaves the 8% notes due 2016 and the 7½% notes due 2014 remaining under the Supervalu banner.

The trader saw the 2031 paper trading up a point at 811/2.

Another market source pegged the 2016 maturity at 1041/4, up ½ point.

Eden Prairie, Minn.-based Supervalu sold five of its chains - Albertsons, Acme, Jewel-Osco, Shaw's and Star Market - to a private equity group led by Cerberus Capital Management LP for $3.1 billion. The sale came after the company struggled for several months to find a buyer or develop some other form of a restructuring plan.

Vanguard loses contract, falls

Vanguard Health Systems' 7¼% notes due 2019 dropped over a point on Monday as the company said it had lost its Medicaid contract in Arizona.

A trader placed the notes at 1071/4.

Another market source saw the 8% notes due 2018 at 1053/4, down ½ point.

The Phoenix Health Plan unit currently covers 186,000 low-income people in the state. The contract will end Oct. 1. The company has until April 1 to appeal the decision.

According to one analyst, revenues from that plan account for as much as 13% of the company's total revenue. Vanguard is asking for approval to continue serving 116,000 of its customers in the area, without adding any new subscribers.

Vanguard is based in Minnetonka, Minn.

Cengage holds its ground

Cengage Learning's 11½% notes due 2020 were "still" trading around 74, a trader said Monday.

He also saw the 12% notes due 2019 trading in the low-20s.

The company's extended term loan was meantime seen holding in to rising just slightly to 72¾ bid, 73¾ offered.

On Friday, Cengage announced it had drawn down its revolving credit facility and that it had hired restructuring advisors.

The company borrowed $430 million under its revolver, which basically puts the loan at fully drawn, in order to ensure that it has sufficient liquidity to fund working capital needs, a news release said.

And, the company retained Alvarez & Marsal as restructuring advisor, Lazard as financial advisor and Kirkland & Ellis LLP as legal advisor.

Cengage is a Stamford, Conn.-based provider of teaching, learning and research services for the academic, professional and library markets.

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