CommScope, NRG giants lead hectic $4 billion session; SuperValu busy but little changed on numbers

By Paul Deckelman and Paul A. Harris

New York, Jan. 11 - With another massive snowstorm rapidly bearing down on the U.S. Northeast on Tuesday, junk issuers unleashed their own furious blizzard of new paper, pricing more than $4 billion of bonds in over a half-dozen deals.

Mega-sized offerings from CommScope Inc., ($1.5 billion) and NRG Energy Inc. ($1.2 billion ) set the pace and were followed by smaller offerings from UCI International, Inc. ($400 million), Verso Paper Corp. ($360 million), Level 3 Communications Inc. ($305 million), Dycom Investments, Inc. ($187 million) and Cogent Communications Group, Inc. ($175 million).

Europe meantime saw Cirsa Gaming Corp. SA price a €280 million add-on tranche of bonds.

Reflecting the continued opportunistic mind-set among borrowers, the NRG, Verso and Level 3 deals were a.m.-to-p.m. drive-by offerings, priced just hours after they were first announced, while the deals from Cogent and Cirsa came to market just a day after having been unveiled. However, for the first time this year there were pricings that originated off the established forward calendar - CommScope, UCI and Dycom.

When they hit the aftermarket, traders saw solid gains in almost all of the new dollar-denominated deals, although NRG stayed right around issue and Level 3 struggled to even do that.

Although the day's dealings swept several offerings from the forward calendar, others stepped up to take their places. American Standard Brands and ACE Cash Express, Inc. made new-deal announcements, and France's Labco SAS was heard to be shopping a euro-denominated deal around.

Price talk meantime emerged on Grifols SA's $1.1 billion seven-year deal and on Laredo Petroleum, Inc.'s $300 million eight-year offering, which are both expected to price on Wednesday.

Away from the new-deal universe, traders saw not that much going on, with dealings in the new paper dominating the proceedings and some market participants making an early exit ahead of a snowstorm that was expected to dump as much as a foot of the white stuff - or perhaps even more - on New York and other Northeastern business centers in the overnight hours.

However, there was brisk activity - though relatively limited price movements - in the bonds of SuperValu Inc. after the big supermarket operator, as expected, reported disappointing fiscal third-quarter numbers.

CommScope prices $1.5 billion

The torrid Tuesday primary market session saw issuers raise $4.3 billion through eight tranches of junk. That included two billion-dollar-plus megadeals, both of which were helmed by J.P. Morgan Securities LLC.

CommScope priced a $1.5 billion issue of eight-year senior notes (B3/B) at par to yield 8¼%, on top of price talk that had been revised downward from previous talk in the 8½% area.

Proceeds will be used as part of the financing for the leveraged buyout of the company by the Carlyle Group.

NRG's $1.2 billion drive-by

Meanwhile NRG Energy priced a $1.2 billion issue of seven-year senior notes (B1/B-) at par to yield 7 5/8%, on top of the price talk.

The Princeton, N.J.-based power generation company will use the proceeds to repurchase up to $1.2 billion of its 7¼% senior notes due 2014 and for general corporate purposes.

UCI upsizes

Elsewhere, UCI International priced an upsized $400 million issue of eight-year senior notes (B3/CCC+) at par to yield 8 5/8%, at the tight end of the 8¾% area yield talk.

Credit Suisse, HSBC and Nomura Capital Markets were the joint bookrunners.

The issue size was increased to $350 million from $250 million earlier in the week, with the $100 million upsize amount being shifted away from the company's bank loan. The bond issue was upsized by a further $50 million, to $400 million from $350 million, when the bonds were priced on Tuesday.

Proceeds will be used to help fund the acquisition of the company by Rank Group Ltd. and to repay existing UCI debt.

Verso, at the tight end

In a drive-by deal, Verso Paper Corp. subsidiaries Verso Paper Inc. and Verso Paper Holdings LLC priced a $360 million issue of 8¾% eight-year second-priority senior secured notes (/B/) at 99.291 to yield 8 7/8%, at the tight end of the 9% area price talk.

Credit Suisse, Citigroup Global Markets Inc., Barclays Capital and Bank of America Merrill Lynch were the joint bookrunners for the debt-refinancing deal.

Level 3 drives by

Level 3 Communications priced a $305 million issue of 11 7/8% eight-year senior notes (Caa3/CCC) at 98.173 to yield 12¼% in another Tuesday drive-by deal.

The yield printed on top of the 12¼% area yield talk. The reoffer price came in line with the discount talk of 1 to 2 points.

Citigroup, Bank of America Merrill Lynch, Morgan Stanley and Deutsche Bank Securities Inc. were joint bookrunners for the quick-to-market issue, which came slightly upsized from $300 million.

The Broomfield, Colo.-based provider of fiber-based communications services will use the proceeds to redeem its outstanding 5¼% convertible senior notes due 2011 and for general corporate purposes.

Texhong sells $200 million

China's Texhong Textile Group Ltd. priced $200 million of five-year senior notes (Ba2/BB/) at par to yield 7 5/8% via Deutsche Bank.

Proceeds will be used for general corporate purposes, to repay an outstanding credit facility, to redeem $25 million of guaranteed index-linked notes due 2012 and for capital expenditures, including the expansion of production facilities.

Dycom, at the tight end

Dycom Investments priced an upsized $187 million issue of 10-year senior subordinated notes (Ba3/BB-) at par to yield 7 1/8%, at the tight of the 7¼% area price talk.

Goldman Sachs & Co. was the left bookrunner for the issue, which was upsized from $175 million. Bank of America Merrill Lynch was the joint bookrunner.

Proceeds will be used to repurchase any and all of the company's $135.35 million of 8 1/8% senior subordinated notes due 2015 via a concurrent tender offer and consent solicitation. Any leftover proceeds will be used for working capital and general corporate purposes.

Cogent upsizes

Cogent Communications priced an upsized $175 million issue of seven-year senior secured notes (B2/B-) at par to yield 8 3/8%, at the tight end of the 8½% area price talk.

Bank of America Merrill Lynch, Citigroup and Deutsche Bank were the joint bookrunners for the quick-to-market issue, which was upsized from $150 million.

Proceeds will be used for general corporate purposes and/or repurchases of common stock or convertible notes or to fund a special dividend to stockholders.

Cirsa taps 8¾% notes

Finally, Cirsa Gaming priced a €280 million add-on to its 8¾% senior notes due May 15, 2018 (/B+/) at 100.5 on Tuesday, resulting in an 8.652% yield to worst.

The reoffer price came in the middle of the par-to-101 price talk.

Deutsche Bank ran the books.

The Madrid-based gaming firm will use the proceeds to redeem Cirsa Capital Luxembourg SA's outstanding €230 million of 7 7/8% senior notes due 2012 and to repay other debt.

Talking the deals

The Wednesday New York session was somewhat up in the air, according to market sources who cited forecasts of heavy winter weather closing in on the East Coast of the United States.

The weather notwithstanding, Spain's Grifols talked its $1.1 billion offering of seven-year senior notes (B3/B) with an 8¼% to 8½% yield on Tuesday.

Deutsche Bank, Nomura, BBVA, BNP Paribas, HSBC and Morgan Stanley are the underwriters.

Meanwhile, Laredo Petroleum talked its $300 million offering of eight-year senior notes (Caa2/CCC/) with a 9¾% area yield.

The order books close at 12:30 p.m. ET on Wednesday, and the notes are set to price thereafter.

Bank of America Merrill Lynch, JPMorgan and Wells Fargo Securities are the joint bookrunners.

Labco starts roadshow

Only one issuer began a roadshow during the Tuesday session.

France's Labco began a roadshow for its €500 million offering of seven-year senior secured notes (//BB-).

The roadshow continues on Wednesday in London.

Credit Suisse, Deutsche Bank, Natixis Bleichroeder and UBS are the joint bookrunners.

The Paris-based clinical laboratory operator will use the proceeds to refinance existing debt.

Level 3 lags in aftermarket

When the new Level 3 Communications eight-year notes were freed for secondary-market dealings, a trader saw the Broomfield, Colo.-based telecommunications backbone service provider's drive-by deal trading no better than 97¾ bid, 98¼ offered - down from the 98.173 at which the issue had priced earlier in the day. A second trader saw the bonds at that same level, although at another shop, a trader pegged the bonds as high as 98¼ bid, 98½ offered.

"I thought they would do much better," the first trader said. "I really thought they would be better because we were told that the deal was four times oversubscribed, so I'm a little surprised."

He also noted that of all of the day's issuers, Level 3 arguably was the one that junk-market players would likely know the best due to the company's long and often high-profile history in issuing and buying back bonds, which at least in theory would make the name the one they would be the most comfortable with.

"I'm really surprised with this one," he continued. "I don't know if it's because a lot of people aren't focused in or a lot of people left" ahead of the worsening weather, "I just don't know."

NRG: Not Really Going anywhere

A trader meantime said that NRG Energy's quickly shopped eight-year behemoth of an offering just traded around the par level where the Princeton, N.J.-based power-generating company had priced its deal.

Two other traders agreed, seeing the bonds straddling issue at 99 7/8 bid, 100 1/8 offered.

CommScope comes up

But away from Level 3 and NRG, the day's other new issues in the dollar-denominated market were seen doing quite well, with some of them heard to have jumped multiple points on the break.

For example, a trader said he'd heard that CommScope's billion-dollar-plus of new eight-year bonds "did pretty well." He saw the bonds last quoted at 103 1/8 bid, well up from their par issue price earlier.

"That one just flew, absolutely," he said of the Hickory, N.C.-based telecommunications infrastructure services company's new issue. A second trader saw them at 102 7/8 bid, 103 1/8 offered, while yet another quoted them going home as good as 103 bid, 103½ offered.

Verso very solid

A trader said that Verso Paper's new eight-year bonds "did OK too," quoting the Memphis-based paper manufacturer's deal as having firmed to 102 5/8 bid, 103 offered, versus its below-par issue price of 99.291.

He said that at one point during the day the new bonds had gotten as good as 103 bid before backing off that peak level slightly.

Another trader saw them at 102½ bid, 103 offered, although at another desk, a trader saw a somewhat more conservative gain on the day, quoting the bonds going home traded at 102¼ bid, 102¾ offered.

UCI up in aftermarket trade

UCI International's eight-year notes - after having been twice increased to their ultimate size - were seen going home as good as 103 bid, 103¼ offered, versus their par issue price, "so that did very well.

"There's still a lot of cash out there, and [accounts] are looking to put some money to work," he said, in analyzing the strong appeal that most of the day's new deals had for investors.

"The refinancing just keeps coming, and coming and coming."

Cogent climbs in secondary

A trader saw Cogent Communications' new seven-year senior secured notes trade up to 101½ bid, 101¾ offered.

That, too, was up from the par level at which the Washington, D.C.-based internet service provider had priced its second-day drive-by offering earlier.

Dycom's 10-year subordinated notes were the only bonds that priced too late in the session for any kind of an aftermarket.

Monday deals trade well

Among the deals that had priced during Monday's session, a trader said that Calpine Corp.'s 7 7/8% senior secured notes due 2023 were "hanging right in there" at 101 3/8 bid, 101½ offered - up from the par level where the Houston-based power-generating company had priced its quickly shopped $1.2 billion offering.

"They were immediately trading with a 101 handle," he said.

Several other traders also saw the new mega-deal - which had priced too late in the session on Monday for any aftermarket activity - trading a little more than a point above issue.

Monday's other new deal - the $315 million that Los Angeles-based Spanish-language media company Univision Communications, Inc. priced as an add-on to its existing 8½% notes due 2021 - continued to climb on Tuesday from the gains that it had notched late in the day on Monday.

A trader saw those bonds - which on Monday had priced at 101¾ to yield 8.191% - having jumped to 103 bid, 103¼ offered - well up from the 102½ bid, 103 offered level to which the bonds had risen late in the day on Monday.

Two other traders saw Univision up at 103 bid, 103½ offered.

Secondary indicators firm up

Away from the new-deal arena, a trader saw the CDX North American Series 15 High Yield index up by 5/8 point on Tuesday, finishing at 103 1/8 bid, 103 3/8 offered after having been down by ¼ point for a second consecutive session on Monday.

The KDP High Yield Daily index meantime inched up by 1 basis point on Tuesday to close at 74.80 after it gave up 7 bps on Monday. Its yield, however, rose by 3 bps for a second consecutive session to finish at 7.17%.

The Merrill Lynch High Yield Master II index - which on Monday had lost 0.007%, its first daily downturn in more than two weeks - rebounded on Tuesday with a 0.086% gain. That left the index's year-to-date cumulative return at 0.953%, up from Monday's 0.866%. It was also a new peak level for 2011, eclipsing the old mark of 0.872% set last Friday.

Advancing names topped decliners for an 11th straight session on Tuesday and widened their advantage to nearly eight to five versus the relative handful of issues - just a couple dozen out of the more than 1,300 that traded - that had separated the two groups on Monday.

Overall activity, represented by dollar-volume levels, jumped by 31% on Tuesday after having fallen by 38% on Monday from the previous session's level.

SuperValu seen very busy

Among specific names with no new-deal connections, a trader said that SuperValu's bonds "are under pressure - they're really under siege," especially with the release earlier in the day of financial results for the fiscal third quarter ended in early December - results that company executives called "disappointing" and that came in below analysts' estimates.

He saw the 8% notes due 2016 trading around 94 bid, versus recent levels a point or two higher.

A market source at another desk saw those 8s closing out the day actually higher, around 96 bid - but cautioned that disregarding mostly small and unrepresentative odd-lot pieces and just sticking to round-lots, the bonds were ending at 94¼ bid, down only ¼ point. Volume was very heavy, at over $50 million, making SuperValu easily the most actively traded junk issue.

The Eden Prairie, Minn.-based supermarket operator's 7½% notes due 2014 saw not quite $20 million traded, he said, and the bonds ended at 94½ bid, down about a point on the session.

For the fiscal third quarter ended Dec. 4, SuperValu rang up net sales of $8.7 billion and a net loss of $202 million, or 95 cents per diluted share; excluding charges and other one-time items, earnings were $50 million, or 24 cents per share - less than the 30 to 32 cents per share Wall Street had been looking for. In the year-ago period, the company earned $109 billion, or 51 cents per share, on net sales of $9.2 billion.

SuperValu projected fourth-quarter earnings per share of between 30 cents and 40 cents, and it cut its full-year earnings estimate to between $1.25 and $1.35 per share on an adjusted basis, down from its prior estimates of $1.40 to $1.60 per share.

On the company's conference call after the release of the numbers, SuperValu executives expressed chagrin and disappointment with the results. They also outlined the company's ongoing efforts to cut its debt, projecting that $850 million will have been shaved off the balance sheet by the time the fiscal fourth quarter and 2011 fiscal year end on Feb. 4 (see related story elsewhere in this issue).

A&P holders have plan worries

Out of that same supermarket industry - which a trader called "a very tough industry" in which to make any serious money - he said that bondholders of Great Atlantic & Pacific Tea Co., Inc. "do not know what to do. They're very unhappy with the terms of the reorganization. They're subordinated to the debtor-in-possession financing, which was larger than anticipated."

For that reason, he said, the bankrupt Montvale, N.J.-based supermarket operator's 11 3/8% senior secured notes due 2015 were being offered around 90. He said that he "couldn't believe" that those bonds had traded as high as 93 bid, 94 offered in the days immediately following the company's Dec. 12 Chapter 11 filing, and they have since come down on investor qualms. "There's a lot of little nervousness there."

The company's two convertible issues - the 5 1/8% notes slated to come due on June 15 and the 6¾% notes due 2012 - continue to trade in the lower 30s, in effect turned into plain old unsecured junk bonds by the erosion of the company's now-delisted shares down to penny-stock territory, at around 20 cents per share.

Autos improve

A trader said the 8 3/8% benchmark bonds due 2033 of Motors Liquidation Co. - the "old" General Motors Corp. before its 2009 bankruptcy restructuring - "moved up pretty nicely today." He saw the paper quoted as high as 40, up a couple of points from Monday's levels, but he added that there was no actual trading activity at that exalted level, just some quoting.

He did see the bonds actually trading 1 point above Monday's finish, seeing them going out at 38 bid. "That's all that counts, even though they were quoted higher," he added.

Another trader said the GM bonds gained ¼ point on the day, seeing them at 37¾ bid, 38¾ offered, while GM rival Ford Motor Co.'s 7.45% bonds due 2031 were ½ point better at 108 bid, 109 offered.

Paper names are popping

A trader said that Catalyst Paper Corp.'s 7 3/8% notes due 2014 moved "up a couple of points" to end at 81 bid, 82 offered. He meantime saw the Richmond, B.C.-based paper manufacturer's 11% senior secured notes due 2016 having now topped the par level, getting to par bid, 101 offered, which he said was also up a couple of points.

A second trader said that the 7 3/8s were up 2 points at the end of the day at 82 bid, 83 offered.

The first trader meantime saw NewPage Corp.'s 11 3/8% senior secured notes due 2014 "not far behind" the Catalyst secured paper, with the Miamisburg, Ohio-based coated paper company's bonds around 96½ bid, which he called up ½ point.

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