BWAY slates eight-year deal, TransUnion, Spectrum hit road; ATP bounces but Transocean sinks

By Paul Deckelman and Paul A. Harris

New York, June 2 - The recently quiet high-yield primary arena showed more signs of life on Wednesday. There still were no deals pricing, but the forward calendar continued to build, with BWAY Holding Co. announcing plans to sell $200 million of eight year notes, a pricing which is expected early next week.

Syndicate sources heard that TransUnion Corp. - previously reported to be planning an eight-year senior deal at some undetermined point - will begin a roadshow Thursday for its $645 million offering, with pricing also expected next week.

Spectrum Brands Inc. also began a roadshow for its $500 million secured note offering; after marketing to investors Wednesday and Thursday, the eight-year deal is expected to price late this week.

In the secondary realm, energy names continued to make the most noise in the wake of the ongoing Gulf oil rig disaster. ATP Oil & Gas Corp.'s bonds, which have been the favored sector punching bag over the past few weeks, actually firmed off their lows. However, Deepwater Horizon operator Transocean Inc.'s still nominally investment grade bonds were heard being dumped by many high-grade accounts and scooped up at sharply lower prices by junk marketers, resulting in heavy volume. Oil well owner BP Capital Markets plc's bonds also widened out badly.

General Motors Corp.'s bonds were better, as the top U.S. carmaker reported much better-than-expected May sales versus last year's admittedly weak figures. However, there was little activity in GM domestic arch-rival Ford Motor Co.'s paper, even though the Number-Two U.S. automaker posted an even bigger sales gain, also better than expected, and officially announced that it was junking its historic, but unprofitable, Mercury nameplate.

TransUnion roadshow starts Thursday

No new issues priced during the Wednesday primary market session.

However the dealers rolled out a pair of LBO deals set to price in the week ahead.

TransUnion Corp. will begin a roadshow on Thursday for a $645 million offering of eight-year senior notes (B3/B-).

The roadshow wraps up on June 9, and the deal is expected to price the same day.

J.P. Morgan Securities Inc., Bank of America Merrill Lynch, Deutsche Bank Securities and Credit Suisse are joint bookrunners.

Proceeds will be used to finance a portion of the purchase of TransUnion's equity as part of the acquisition of the company by Madison Dearborn Partners, LLC and to repay debt.

BWAY to bring eight-year deal

BWAY Holding Co. also plans to price $200 million of eight-year senior notes (B3/B-) early in the week ahead.

Bank of America Merrill Lynch, Deutsche Bank Securities and Barclays capital are joint bookrunners.

Proceeds will be used to help fund the buyout of BWAY by Madison Dearborn Partners in a transaction valued at $915 million, including the assumption of debt.

Meanwhile, Triumph Group, Inc. began a roadshow on Wednesday for a $350 million offering of eight-year senior notes (Ba3/B+).

The deal, which was announced before the Memorial Day recess, is set to price early in the week ahead.

RBC Capital Markets is the left bookrunner. UBS Investment Bank is the joint bookrunner.

Proceeds will be used to help fund the acquisition of Vought Aircraft.

LBO financings will be the pioneers as the primary market reopens, a debt capital markets banker asserted in a Wednesday email message.

Since those deals have pretty wide flex, they will get done, the banker added.

Once they do it will clear the market for more price sensitive issuers.

Market indicators on the rise

A trader saw the CDX North American HY Series 14 Index closing Wednesday up ¾ point on the session at 94½ bid, 95 offered, after having lost 1¼ points on Tuesday.

Meanwhile, the KDP High Yield Daily Index eased by 6 basis points on Wednesday to end at 69.81, on top of a 14 bps fall on Tuesday. Its yield was unchanged at 8.93%, after having widened by 4 bps on Tuesday.

Advancing issues trailed decliners for a second straight session on Wednesday, although the margin of difference shrank to just a couple of dozen issues out of more than 1,300 tracked from Tuesday's ratio of better than six-to-five.

Overall market activity, represented by dollar-volume levels, nearly doubled (up 93%) on Wednesday, after having risen by 35% on Tuesday from the anemic pre-holiday levels seen during Friday's shortened session.

Energy issues dominate dealings

Traders said that a huge chunk of Wednesday's much-increased secondary market activity took place in energy credits, particularly those with exposure to the Gulf of Mexico, which has now been closed to any new drilling by presidential order.

A trader said "the question everyone is asking is, how long is the Obama-induced hold on drilling going to last?" with the answer by no means clear. He said that was "dragging down all of the oil and gas names" that have some offshore drilling exposure.

He said "the uncertainty in D.C. on this has got people spooked."

A trader said "the energy guys has a fun ride today," referring to ATP Oil & Gas' 11 7/8% second-lien senior secured notes due 2015, which have been gyrating wildly of late amid the continuing turmoil caused by the April 20 Deepwater Horizon oil rig disaster in the Gulf .

He saw the Houston-based independent energy exploration and production company's bonds - which had traded in the 60s on Tuesday - get as low as 65-66 during the day before ending at 73-74, "so that's a pretty good ride, and it was all today. There was a lot of volume."

Another trader saw ATP taking "an exciting ride," after having tumbled on Tuesday to 68½ bid, 71 offered from last week's levels in the mid-70s, pushed down by investor chagrin over BP's failure this past weekend to cap the leaking undersea oil well that is threatening large areas of the U.S. Gulf Coast from Louisiana to Florida with extreme environmental damage.

He saw the bonds open at 66 bid, down from their Tuesday close, but then firm by the end of the day to about 72½ bid.

ATP sold $1.5 billion of the bonds at 99.531 to yield 12% on April 19 - the day before the Deepwater Horizon exploded and capsized, killing 11 workers and starting the massive oil leak - and the bonds initially firmed to the 102-103 region, before starting to come down in the weeks that followed when it became apparent that the oil-rig explosion and resulting environmental problems had been far more serious than initially thought, leading to a government-ordered moratorium on new drilling in the Gulf - a potentially severe blow to a company like ATP, which has most of its proven reserves there.

But after having been beaten down far enough, the bonds seemed to be coming back on Wednesday, as were its Nasdaq-traded shares. On Tuesday, they had plunged some 18% on the day from their Friday closing levels, to $8.72, but on Wednesday, a trader saw them gain 52 cents, or 5.96%, to end at $9.24, on volume of 13.3 million shares, more than four times the norm.

Transocean, BP take their lumps

But while trading remained brisk in ATP, it exploded to the downside in Transocean, the owner of the destroyed undersea drilling rig. Bonds of BP, the owner of the well, which had contracted with Transocean for its rig and drilling services, were also being clobbered, now that the British oil giant's latest efforts to cap the well and contain the spill had failed.

Three of the most heavily traded bonds on the day were Transocean issues.

Transocean's 5.25% notes due in 2013, 6% bonds due 2018 and 6.80% due 2038 were all among the top bonds by volume in the secondary, a source said.

Not far behind was a 4.75% bond due 2019 from BP Capital Markets.

"Everyone's focused on the oil bonds," a trader said. "They're just getting absolutely crushed. BP is crushed, it's widened so much."

Bonds from BP are "now being quoted at dollar prices," they said.

"The bid to ask - you could drive trucks through them," a trader said.

A trader said that Transocean "took a big hit. You had it going from investment-grade accounts down to junk accounts, and once it stopped trading on spread to Treasuries, and started trading in dollar prices, it just went down from there."

He said that he had not seen any actual changes in the company's ratings - but the way the bonds were trading was the market's way of telling the ratings agencies where they thought it should really be.

"You've got investment-grade accounts that are possibly starting to puke this stuff out because there was a lot of it trading, and once they can't own it, the next stop on the elevator down is the high yield guys, so at one point, you had some of the RIG issues down 7½ or 81/2-plus points."

He did see the bonds "kind of bounce off their lows for the day," with the longer dated issues ending down between 5 and 6 points, improved from earlier in the day.

He saw more than $90 million each of several Transoocean issues trading, including the 6.80% bonds, the 5¼% notes and the 6% notes.

He saw the 6.80s down 6 points on the day at the end, going out at 83¼ bid, the 51/4s down 3 points around a 96ish level, and the 6s down more than 5 points at 92 5/8 bid.

He also saw about $20 million of the 7½% bonds due 2031 trading. Those gyrated around wildly between 80 bid and 90 bid - with most of the larger trades to the lower end of that range - before finishing around 80 bid.

Among the less busy Transocean bonds, the 7 3/8% notes due 2018 lost about 5 points to end at the 96 level.

"They all bounced off their lows - they were a good 2 to 3 points lower."

Another trader agreed that junk participants "are starting to see some of that [Transocean]."

He said that the "RIG was very active today," noting that the 51/4s racked up "pages of trades" on Trace, making them the most active bond. He saw that paper start in the high 90s and end in a 94-94½ context, at a yield of around 7.50%, while the 6% notes were the second-most active issue, trading at "slightly richer yields" around 7.25%. On a dollar-price basis, he said the 6s finished Tuesday around 98 bid, and "first thing in the morning, they were down 8 points, before ending down around 6 points at 921/2.

The first trader further said that "while you had a lot of RIG paper coming in, the British Petroleum paper was starting to trade a lot wider, and as those got pushed wider, that's when you saw the RIGs collapse - no pun intended."

He quoted the multinational oil major's bonds as widening out to around a 340 bps bid, 330 bps offered level before closing the day around 290 bps bid, 280 bps offered.

GM, Ford steady to firmer on sales data

Away from energy, a trader saw Ford Motor Co.'s 7.45% bonds due 2031 "pretty much unchanged," quoting the Number-Two U.S. carmaker's issue trading in an 87-89 context while doing out around 88, which he said was pretty much unchanged. "There was some trading, but not a lot."

He saw General Motors Corp.'s benchmark 8 3/8 bonds due 2033 "a little bit better," getting up to around 33 by the close, which he called up ¾ point on "decent volume."

Another trader pegged the GM benchmarks up ½ point on the day at 32¾ bid, 33¾ offered, while domestic arch-rival Ford's long bonds gained ½ point to 88 bid, 89 offered.

A trader said that Ford's 7% notes due 2015 were "fairly active," although he said that price-wise, "it doesn't look like they did anything," hovering all day in a 98-98½ range, off only slightly from Tuesday's 98¾ bid level, "so there was not much of a change, or maybe a tad weaker."

He said he did not know "if it was one of those 'buy the rumor, sell the news' things, but it was nothing significant."

Both GM and Ford had good news for their respective investors on Wednesday, reporting sharply higher May U.S. sales totals versus a year ago, although it should be noted that those year-earlier totals were fairly weak, with the economy still struggling and the "cash-for-clunkers" rebate program not yet in effect.

In May, GM sold 223,822 cars or light trucks, including pickups, vans and SUVs, versus its year-earlier sales of 191,875 vehicles, a 16.6% gain, well above the roughly 6% rise which Wall Street had been expecting. GM's year-to-date sales total swelled to 885,141 vehicles, a 13.8% gain over its year-earlier cumulative total of 777,785 vehicles.

Ford had even bigger gains, selling 196,912 cars and light trucks in May, up 21.9% from 161,153 vehicles a year earlier; analysts had been expecting a 16% sales gain. On a year-to-date basis, Ford had sold 807,056 vehicles by the end of May, a sizzling 30.1% increase over its year-earlier total of 620,303.

On a year-to-date basis, Ford was back in its usual second-place slot behind larger competitor GM but ahead of Toyota, versus a year ago, when the Japanese carmaker had moved ahead of Ford into the second slot, bumping Ford to Number-Three. Toyota's sales have been hurt this year by its well-publicized safety problems, culminating in several costly recalls that drove motorists away from its showrooms. As was the case both last May and this May, in both the monthly totals and the year-to-date figures, Japanese carmaker Honda held fourth place, followed by the smallest of the traditional "Big Three" carmakers, Chrysler, in fifth place.

End of an era

Ford also announced on Wednesday that its board of directors had agreed to end production of Ford's money-losing Mercury brand in the fourth quarter, bringing to a close a chapter of the company's history that began back in 1939, when Ford, seeking to compete with larger rival GM's broader menu of car choices for buyers, created Mercury as a mid-level brand between its basic Ford line and its more upscale Lincoln offerings.

Analysts had been suggesting for some years that Ford could improve its operating performance by junking the venerable but unpopular nameplate.

Ford said that it would shift resources now used by Mercury to the Lincoln division, giving the latter several more models. Mercury did not have any stand-alone dealerships, since all were sold through existing Ford or Lincoln dealers.

AIG paper mixed as Asia deal dropped

Traders saw bonds of various American International Group Inc. units mixed in the wake of Prudential plc's decision to withdraw its planned purchase of AIG's Asian insurance business, AIA Group, for $35.5 billion. Prudential backed out of the deal after AIG refused its request to lower the purchase price to $30.4 billion

A trader said that AIG's CDS paper had widened in price, reflecting investor worries that a default might be more likely. But he said the company's American General Finance Corp. 6.90% notes due 2017 were little changed to up ½ point at around a 79-80 context, going out at 79¼ on "decent volume." The small rise was "no great shakes," he said.

"There are always trades in that name," he said, "but based on the amount of messages I saw, it seemed pretty standard."

A trader at another desk saw the 6.90s go out at 79 1/8 on robust volume, calling that up nearly ½ point. However, the 5 5/8% notes due 2013 of AIG's aircraft leasing business, International Lease Finance Corp., lost 1¼ point to end at just above the 87 mark.

-Andrea Heisinger contributed to this report

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