DynCorp, upsized Bankrate price, Vanguard sells add-on; Sorenson slides again, First Data off

By Paul Deckelman and Paul A. Harris

New York, June 29 - DynCorp International Inc. priced a nearly half-billion-dollar offering of seven-year notes on Tuesday. But traders said that the Falls Church, Va.-based defense contractor's new issue's early gains faded and it proved to be a dud in the aftermarket.

Also pricing was an upsized $300 million offering of five-year secured notes from Bankrate Inc., a North Palm Beach, Fla.-based provider of consumer loan information, whose deal moved up a little from issue.

Vanguard Health Systems, Inc. meantime priced a quickly appearing add-on to its existing 8% notes due 2018. The Nashville-based hospital operator's new bonds firmed a little in the secondary.

Also on the new-deal scene, price talk emerged on Insight Communications Co., Inc.'s upcoming $400 million of eight-year notes, the roadshow for which is scheduled to wrap up on Wednesday, with pricing expected afterward.

Away from the primary, Sorenson Communications Inc.'s bonds - which fell by several points on Monday - continued downward by several more points on Tuesday, amid investor disappointment with the level of reimbursement the government said the provider of telecommunications services to the handicapped would receive.

Traders said the junk market generally was heavy, and saw losses in a number of issues, such as First Data Corp., off multiple points despite a lack of fresh news out about the Atlanta-based electronic transactions processor.

Energy names that have recently been battered in connection with the Gulf of Mexico oil spill disaster, such as well owners BP plc and Anadarko Petroleum Corp., rig owner Transocean Inc. and another Gulf operator, ATP Oil & Gas Corp., were down again on Tuesday, not helped by an overall downturn in oil prices.

DynCorp tight to talk

Against a backdrop of falling stock prices, the high-yield primary saw some notable executions on Tuesday, as a trio of issuers, each bringing a single tranche, raised $969 million of proceeds.

DynCorp brought the day's biggest deal, a $455 million issue of seven-year senior unsecured notes (B1/B) which priced at par to yield 10 3/8%.

The yield printed at the tight end of the 10½% area price talk.

Citigroup Global Markets Inc., Bank of America Merrill Lynch, Barclays Capital Inc. and Deutsche Bank Securities Inc. were the joint bookrunners.

Proceeds will be used to help fund the buyout of the company by Cerberus Capital Management LP and to repay debt.

The DynCorp order book was heard to be four-times oversubscribed, according to a high-yield mutual fund manager.

"On a day like today, a lot of people would be naturally inclined to flip it away," said the manager, who added that a lot of bonds were offered away from the underwriter.

Nevertheless, the new par-pricing 10 3/8% notes out at 100¼ bid, 100¾ offered, the manager noted.

"It outperformed the market," the investor added.

Bankrate upsizes

Meanwhile, Bankrate priced a slightly upsized $300 million issue of 11¾% five-year senior secured notes (B2/B) at 99.077 to yield 12%.

The yield printed on top of yield talk, while the reoffer price came in line with discount talk of approximately 1 point. The amount was increased from $280 million.

Jefferies & Co. and RBC Capital Markets Corp. were joint bookrunners.

Proceeds will be used to partially finance the acquisition of NetQuote Inc. and the acquisition of CreditCards.com, Inc.

The bonds were up 2½ to 3 points in the secondary market, according to an investor who played the deal.

"We heard that $100 million of the $300 million was protected, and the other $200 million was three-times oversubscribed," the buy-sider commented.

Vanguard sells $225 million add-on

Finally, Vanguard Health Holding Co. II, LLC and Vanguard Holding Co. II, Inc. priced a $225 million add-on to their 8% senior notes due Feb. 1, 2013 (B3//) at 96.25. The resulting yield is 8.686%.

The reoffer price came at the cheap end of the 96.25 to 96.50 price talk.

Bank of America Merrill Lynch, Barclays Capital Inc., Citigroup Global Markets Inc., Deutsche Bank Securities Inc., Goldman, Sachs & Co. and Morgan Stanley & Co. Inc. were joint bookrunners for the quick-to-market acquisition-related deal.

The Vanguard add-on was at 96.50 bid, 96.75 offered in the secondary, according to a buy-side source.

The original $950 million issue priced at 98.555 to yield 8¼% on Jan. 21, 2010. That issue was downsized from $1 billion.

Insight talks notes

Insight Communications set the stage for what promises to be a quiet Wednesday session.

The New York-based cable company talked its $400 million offering of eight-year senior notes (B3/B-) to yield 9¼% to 9½%.

Pricing is set for Wednesday.

Bank of America Merrill Lynch, J.P. Morgan Securities Inc., Credit Suisse Securities and Morgan Stanley & Co. Inc. are the joint bookrunners.

Proceeds will be used to fund a $300 million distribution to holders of the company's capital stock, with any remaining proceeds to repay its revolver and term loan A and to be used for general corporate purposes.

By using $100 million of the $400 million of expected proceeds to repay bank debt, and thus reducing leverage, the company is mollifying the buy-side for using the other $300 million to fund a dividend, a junk investor remarked.

"On the call they implied that they could do a bigger dividend," said the buy-sider.

"There's the possibility that the deal could upsize, but in a market like this, we'll see."

The only other dollar-denominated deal in the market heading into Wednesday is CKE Restaurants, Inc.'s $600 million offering of eight-year senior secured second-lien notes (B2/B), via Morgan Stanley & Co. Inc., Citigroup Global Markets Inc. and RBC Capital Markets Corp.

CKE's deal is possible Thursday business, according to a buy-side source who added that it appears to be coming together with an 11-handle.

"We hear there is a huge lead order, but they want quite a few covenant changes," the buy-sider said.

Oxea to raise €500 million

Meanwhile the European market remains active.

Germany's Oxea GmbH began a roadshow on Tuesday in Europe for a €500 million equivalent offering of seven-year senior secured notes (B2/B+).

A roadshow will get underway in the United States during the week ahead.

Deutsche Bank Securities, Morgan Stanley and JP Morgan are leading the Rule 144A and Regulation S for life offering.

Proceeds will be used to repay bank debt, to repay shareholder loans, to fund a distribution to shareholders and for general corporate purposes.

In addition to Oxea, German packaging firm Nordenia International AG began a roadshow on Tuesday for its €280 million offering of seven-year senior second priority notes (B2/B), via Barclays Capital and Deutsche Bank securities

Also a Rule 144A and Regulation S for life transaction, the Nordenia bonds could price late this week or early next week, an informed source said.

Taking a header

Volatility in the global equity markets, lately reappearing with renewed vigor, is taking a toll on high yield, a mutual fund money manager conceded, late Tuesday.

"Even though the markets are down over the past couple of days, it hasn't really cracked a lot," the investor said

"We're coming to the end of the quarter, and people really don't like to rejigger things, heading into that," the source added, noting that the new issue calendar that remains to clear before the three-day Independence Day weekend is light, now that Tuesday's transactions have cleared.

This manager has been seeing cash inflows, and based upon evidence seen in the run-up to Tuesday's close, does not expect Lipper-AMG to report outflows from the high-yield mutual funds for the week to Wednesday when it makes its weekly report on Thursday.

"Wednesday could change that," the investor warned, adding that net asset valuations, particularly those of high-yield investors with sizable exposures to convertibles, took a substantial hit, some in the vicinity of 1%, on Tuesday.

DynCorp disappoints

When DynCorp. International's new issue of 10 3/8% notes due 2017 were freed for secondary dealings, a trader flatly declared that the new deal was "pretty disappointing.

"They shaved the [price] talk from [10] ½% to [10] 3/8%, allocations were terrible and the bonds didn't do anything at all."

He said that the bonds - which had priced at par - were going out straddling issue at 99¾ bid, 100¼ offered, in "very subdued trading." He said that when they first went to the aftermarket, the bonds had opened up as firm as 100½ bid, 101½ offered, "but that didn't last very long."

While seeing the bonds off ¼ on the bid side late in the day, he said "maybe you could get out at par if you tried really hard - but I don't know."

At another desk, a trader initially saw the bonds offered at 1001/2, and then saw a two-sided market at about 99 7/8 bid, 100 1/8 offered.

Still another trader quoted them going home at par bid, 101 offered.

Bankrate deal up slightly

A trader said that the new Bankrate 11¾% senior secured notes due 2015 "got as tight" as par to 1001/2. "Maybe they hit that bid, and got to be 99½ bid," although the bonds later firmed back up to 100 1/8 bid, 100¼ offered, "but the offering was small there."

However, another trader saw a closing level around 99½ bid, 100½ offered.

The company had earlier priced the bonds at 99.077

Vanguard moves up

After Vanguard Health's 8% 2018 add-on notes priced at 96.25, a trader saw the bonds "tied up" at 96¼ bid, 96¾ offered.

A second trader later quoted the bonds as having moved up to 96¾ bid, 97½ offered.

Phibro feels easier

A trader said that Phibro Animal Health Corp.'s new 9¼% notes due 2018 were at 99¾ bid, 99 7/8 offered around midday, and said that "given that the market weakened during the day, it could be even lower than that."

The Ridgefield Park, N.J. -based animal health and nutrition products provider had priced $275 million of the notes on Monday at 98.628 to yield 8½%, and they had gotten as good as around a 1001/2-101½ context in initial secondary market dealings on Monday.

Market indicators head south

Back among issues having no new-deal connections, a trader saw the CDX North American HY Series 14 Index fall by 1¼ points on Tuesday to 94¼ bid, 94¾ offered, after having declined by about ½ point on Monday.

The KDP High Yield Daily Index meantime retreated by 34 basis points on Tuesday to 70.40, after having been essentially unchanged on Monday, while its yield gapped out by 10 bps to 8.71%, after having held steady on Monday.

Advancing issues trailed decliners for a fifth straight session on Tuesday, with the difference between the groups widening out to nearly a seven-to-five ratio from Monday's six-to-five margin.

Overall activity, represented by dollar-volume levels, rose by 29% on Tuesday, on top of Monday's 13% increase.

A trader said that the overall, the junk market was "softer, but there was not a heck of a lot of activity."

Another trader declared that the session was "just an ugly day all around," adding "no doubt there was a heaviness in the market," encouraged by weak equities, which "fell straight down," hurt by heightened investor fears of a slowing worldwide economy. The bellwether Dow Jones Industrial Average swooned by 268.22 points, or 2.65%, and fell below the psychologically significant 10,000 mark, closing at 9,870.30, and broader indexes like the Standard & Poor's 500 and the Nasdaq composite each lost more than 3% on the day.

Sorenson keeps sliding

A trader said that there were "a lot of trades " in Sorenson Communications Inc.'s 10½% notes due 2015 around 65 bid early in the session, and saw the bonds going out later in the day "still hanging around" 64 bid, 65 offered, "where the trading was most of the day, a lot of activity." That was down at least a point from earlier in the day, and further down from around 66 at the end of Monday's dealings, when the bonds were heard to have slid about 3 points on the day.

Another trader quoted the bonds as low as 63 bid, 65 offered, down several points from Monday's already depressed levels.

A trader said that this was "the second time" Sorenson's bonds were being knocked around "because they got clobbered once before," although he didn't see any levels on Tuesday.

Sorenson's bonds had been roundly beaten lower back in May, when the market first became aware of the .controversy between Salt Lake City-based Sorenson, a provider of products and services that enable hearing-disabled people to make telephone calls, on the one hand, and the telecommunications industry, on the other, over levels of reimbursement to be paid by the major carriers to companies such as Sorenson.

Sorenson at that time asked the Federal Communications Commission to reject reimbursement plans submitted by the National Exchange Carrier Association, a telecom industry trade group representing major telephone carriers, contending their suggested reimbursement rates to Video Relay Service providers like Sorenson would be inadequate. It warned in a federal filing that it conceivably be forced into bankruptcy if it did not receive sufficient levels of reimbursement.

News circulated in the market on Monday that FCC has adopted an interim reimbursement rate of $5.07 per minute for providers of 500,000 minutes or more. While that is above the initially proposed rate of $3.89, it is still lower than the current rate of $6.24, causing investors to take the bonds down about 3 or 4 points on Monday into the mid-60s.

"Sorenson is disappointed that the FCC, despite having access to the detailed audited financial materials submitted by Sorenson, chose a rate significantly below the rate that is required for Sorenson to maintain existing service levels," the company said in a statement. "In light of the FCC's reduced rate, Sorenson anticipates having to make certain operational changes and cost reductions. However, Sorenson intends to do everything possible to minimize the impact of reduced service levels to VRS consumers that this FCC action necessitates."

The statement went on to say that the Salt Lake City-based provider of telecommunications services to the deaf intends to seek a stay on the rate order.

Embattled energy names off as oil slips

A trader noted that oil prices were down more than $2 - actually, crude for August delivery fell by $2.31, or 3%, on Tuesday on the New York Mercantile Exchange - and that helped push already beleaguered oil names, hurt by the continued problems stemming from the Deepwater Horizon oil-rig disaster at a BP undersea petroleum well in the Gulf of Mexico, even lower.

"It looks like they were just selling everything" in the sector, he said. "Oil itself was going down, and all the companies followed it."

A trader said that BP Capital Markets plc's bonds were active - although he noted that the embattled British oil giant's paper "is always active." He saw its 5¼% notes due 2013 trading in a 91-92 range, but ending closer to the 91-91½ end of that range. "That's down a bit. BP is staying at the lower level" of the trading range.

He also saw BP's 4¾% notes due 2019 ending around 82 bid, calling them lower as well.

A trader said that Anadarko Petroleum Corp.'s 5.95% notes due 2016 lost ½ point to a full point to around the 86 bid level, where "most of their paper was trading, on real size."

Another trader said that the Woodlands, Tex.-based independent oil and gas exploration and production company's 5.95s were "pretty active again" calling them "off a little" at 86 bid, 86¼ offered from Monday's levels at 86¼ bid, 86½ offered.

Anadarko owns a 25% interest in BP's ruptured Macondo Prospect well, which continues to spew oil into the Gulf of Mexico despite BP's best efforts to contain that leakage.

A trader said that Deepwater Horizon owner Transocean Inc.'s 6% notes due 2018 were around 91 bid, which he called down 1 to 1½ points.

A second trader said that "RIG's" most active issue was its 5¼% notes due 2013, which he saw "kind of unchanged" from the 94-96 levels at which the bonds had traded on Monday.

The trader said that news that the government had ordered BP, Anadarko, Japan's Mitsui Group, which owns a 10% stake in the well, and Transocean to not sell any assets, in order to presumably keep the companies whole and able to meet potential legal liabilities arising from the April 20 explosion and fire aboard the Deepwater Horizon and the subsequent huge oil spill, had little impact on the companies' bonds. "I thought it might have affected them," he said, "but it doesn't seem to have."

Meanwhile, a trader said that ATP Oil & Gas Corp.'s 11 7/8% second-lien senior secured notes due 2015 "weakened up a bit," quoting the Houston-based energy E&P company's issue down by "a couple of points" from recent levels, at a 72-73 neighborhood.

ATP played no role in the Deepwater Horizon explosion and subsequent oil spill, but investors have hammered its bonds down ever since the mid-April mishap on fears that tough new restrictions on offshore and deepwater drilling in the Gulf of Mexico imposed by Washington in the wake of the accident will harm the company, which has most of its proved petroleum reserves in the Gulf.

First Data falters

First Data Corp.'s bonds "got hit pretty hard," a trader said, seeing its 9 7/8% notes due 2015 at 76-761/2, "down a lot," which he then estimated to be around 3 points, on "a lot of volume."

A market source at another desk saw the company's 11¼% notes due 2016 fall to 61 bid, a nearly 5 point loss.

Nobody saw any fresh news out on the company which might explain the drop off.

Rite Aid retreats

A trader said that Rite Aid Corp. "had a very active day - there was nothing but Rite Aid markets coming across all day long."

He said the Camp Hill, Pa.-based drugstore chain operator's 9½% notes due 2017 finishing right around 79½ bid, with "pages and pages" of Rite Aid trades on Trace. He said that the bonds started the day around 80 and were finishing around 791/2.

He saw its 10¼% notes due 2019 going to 99-par after starting around par-1001/2. Its 8 5/8% notes due 2015 at 81-82, "about where they were - there was not as much movement in that one. There were some trades in it and the bonds went home around 82," which he called down ½ point. "There were some trades and some good size, but not as much as the others."

There was no apparent news out on the company that might explain the elevated activity level in Rite Aid paper.

Stephanie N. Rotondo contributed to this report

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