Rexnord leads $3 billion pricing parade; Allbritton, Penn Virginia next; Teck tornado goes on

By Paul Deckelman and Paul A. Harris

New York, April 21 - There was no let-up at all on Wednesday from the high yield primary market's rapid-fire pace of batting out new issues, whether drive-by or calendar deals, as over $3 billion of new dollar-denominated paper priced during the session in more than a half-dozen deals.

RBS Global Inc. and its affiliate Rexnord LLC took top honors for the big deal of the day, a $1.145 billion offering of eight-year senior notes, while another Milwaukee-based industrial manufacturer, Cleaver-Brooks, Inc., priced a $185 million offering of six-year senior secured notes, downsized from the originally shopped around $200 million.

Atlanta-based broadcaster Gray Television, Inc. tuned in with a $365 million offering of five-year secured notes, while Standard Pacific Corp. priced a $300 million issue of eight-year paper; the Irvine, Calif.-based homebuilder upsized that transaction substantially from its originally announced $200 million size.

South Carolina-based electronic components manufacturer Kemet Corp. priced $230 million of eight-year notes, slightly upped from the originally announced $225 million.

Also heard to have priced was Agile Property Holdings, Ltd., which came to market with a $650 million offering of seven-year senior notes, upsized from the originally shopped $500 million, while Kaisa Group Holdings Ltd. priced $350 million of senior guaranteed five-year notes, upsized from $300 million initially. Those two land development companies are just the latest of several Chinese real estate operators to recently tap the junk bond market, following in the footsteps of last week's deals for Evergrande Real Estate Group, Ltd. and Country Garden Holdings Ltd. and with Glorious Property Holdings Ltd. still in the new-deal pipeline.

Apart from the deals which actually priced, talk emerged on Allbritton Communications Co.'s $455 million and Penn Virginia Resource Partners, LP's $300 million eight-year deals, which are expected to price on Thursday.

Syndicate sources meantime heard DSW Holdings, Inc., Cooper-Standard Automotive Inc., American Renal Holdings Inc. and Southern States Cooperative, Inc. all shopping around new offerings of $475 million, $450 million, $225 million and $125 million , respectively, to potential investors.

A trader said the day's activities in Junkbondland consisted of "new deals and Teck," as Canadian energy and mining company Teck Resources Inc.'s bonds continued to trade at almost unbelievably busy levels following its release of first-quarter results.

Rexnord prices $1.145 billion

In the primary market, seven issuers priced a combined $3.225 billion face amount of junk during the high-volume Wednesday session - each bringing a single tranche of dollar-denominated notes.

RBS Global, Inc. and Rexnord LLC priced a $1.145 billion issue of eight-year senior notes (Caa1/B-) at par to yield 8½%, on Wednesday.

The yield printed at the wide end of the 8¼% to 8½% price talk.

Credit Suisse, Bank of America Merrill Lynch and Goldman Sachs & Co. were joint bookrunners for the quick-to-market deal.

Proceeds will be used to repay all of the company's outstanding senior unsecured notes.

Despite pricing at the wide end of the price talk, the deal was well over subscribed, and priced not to trade down, an informed source commented.

The notes were at par ¼ bid at Wednesday's close, the source added.

Gray prices tight to yield talk

Meanwhile, Gray Television, Inc. priced a $365 million issue of 10½% 5-year senior secured second-lien notes (Caa2/CCC) at 98.085 to yield 11%.

The yield printed at the tight end of the 11% to 11¼% yield talk. The reoffer price came at the cheap end of the 1 to 2 points of discount talk.

Bank of America Merrill Lynch, Wells Fargo Securities and Citadel Capital were joint bookrunners.

The Atlanta-based television broadcast company will use the proceeds to repay a portion of its term loans and to repurchase a portion of the outstanding shares of its series D perpetual preferred stock.

Shortly after the deal priced, a high-yield mutual fund manager spotted the new Gray Television 10½% notes due 2015 at 100¾ bid, versus the 98.085 reoffer price.

Standard Pacific upsized

Standard Pacific Corp. priced an upsized $300 million issue of eight-year senior unsecured notes (B3/B-) at par to yield 8 3/8%, on Wednesday, according to an informed source.

The yield printed at the tight end of the 8½% area price talk.

J.P. Morgan Securities Inc. ran the books for the quick-to-market deal, which was upsized from $200 million.

The Irvine, Calif.-based homebuilder will use the proceeds for general corporate purposes, including the repayment of its 7¾% notes due 2013 via a tender offer.

Kemet sells atop talk

Kemet Corp. priced a $230 million issue of 10½% eight-year senior notes (B1/B) at 98.685 to yield 10¾%.

The yield printed on top of price talk.

Bank of America Merrill Lynch ran the books.

Proceeds will be used to repay substantially all outstanding debt under the company's existing credit facilities and to fund a tender for a portion of its 2¼% convertibles due 2026.

The Greenville, S.C.-based manufacturer of capacitors postponed a $275 million offering of eight-year senior notes on Feb. 11, 2010 due to unfavorable market conditions.

Cleaver-Brooks downsized

Cleaver-Brooks, Inc. priced a downsized $185 million issue of six-year senior secured notes (B2/B) at par to yield 12¼%, according to an informed source.

The yield printed on top of price talk. The size was cut from $200 million.

J.P. Morgan Securities Inc. and UBS Investment Bank were joint bookrunners.

In addition to the downsizing, there were covenant changes to the deal. They included a reduction of the restricted payments basket to $1 million from $7.5 million.

In addition, the holding company becomes a guarantor of the notes.

There were also other minor changes, according to the source.

Proceeds will be used to repay debt and to fund a dividend. Due to the downsizing, the dividend will be decreased.

Agile Property upsized

Chinese property developers continued to raise cash in the dollar-denominated high-yield market on Wednesday.

Agile Property Holdings Ltd. priced an upsized $650 million 8 7/8% issue of senior notes due April 28, 2017 (Ba3/BB/) at par.

The issue priced at the tight end of the 8 7/8% to 9% price talk.

The deal was upsized from $500 million.

Bank of America Merrill Lynch and Morgan Stanley were the bookrunners.

Kaisa prices $350 million

Meanwhile, China's Kaisa Group Holdings Ltd. priced $350 million of 13½% notes due April 28, 2015 (B2/B+/) at par.

UBS Investment Bank, Citigroup and Credit Suisse were the bookrunners.

Talking the deals

Looking ahead to deals expected to price Thursday, Allbritton Communications Co. talked its $455 million offering of eight-year senior unsecured notes (/B/) to yield 8% to 8¼% with zero to 1 point of original issue discount.

Deutsche Bank Securities Inc. is the left bookrunner. Bank of America Merrill Lynch is the joint bookrunner.

Meanwhile, Penn Virginia Resource Partners, LP and Penn Virginia Resource Finance Corp. talked their $300 million offering of eight-year senior notes (B2/B) to yield 8¼% to 8½%, with zero to 2 points of original issue discount.

Wells Fargo Securities is the left lead bookrunner. Bank of America Merrill Lynch, J.P. Morgan Securities Inc. and RBC Capital Markets Corp. are the joint bookrunners.

DS Waters to tap junk market

DSW Holdings, Inc., a holding company for DS Waters of America, Inc., plans to price a $475 million offering of seven-year senior secured notes (B3/CCC+) during the week ahead.

An investor call is scheduled for 11 a.m. ET on Thursday.

Morgan Stanley, J.P. Morgan and Barclays Capital are joint bookrunners for the debt refinancing.

Cooper-Standard to bring $450 million

Meanwhile, Cooper-Standard Automotive Inc. will start a roadshow on Thursday for a $450 million offering of eight-year senior notes.

The roadshow wraps up on April 29.

Deutsche Bank Securities is the left bookrunner. Bank of America Merrill Lynch, Barclays Capital and UBS Investment Bank are joint bookrunners.

Proceeds will be used to repay the company's debtor-in-possession loan and other debt.

The Novi, Mich., manufacturer and marketer of systems and components for the automotive industry filed for bankruptcy on Aug. 3, 2009 in the U.S. Bankruptcy Court for the District of Delaware.

American Renal Holdings

American Renal Holdings Inc. began a roadshow on Wednesday for a $225 million offering of eight-year senior secured notes.

The roadshow wraps up on April 28, and the deal is set to price after that.

Bank of America Merrill Lynch, Barclays Capital and Wells Fargo Securities are joint bookrunners.

Proceeds are to be deposited into an escrow account. When released they will be used in conjunction with a cash equity investment from Centerbridge Partners LP to fund the acquisition of the company from Pamlico Capital, and repay debt.

Southern States starts roadshow

Finally, Southern States Cooperative, Inc. began a roadshow on Wednesday for its $125 million offering of five-year senior notes (B3/expected B+).

The roadshow wraps up on April 29.

Jefferies & Co. has the books.

Proceeds will be used to refinance the cooperative's outstanding senior notes due 2011 and to make a contribution to its pension plan.

New Rexnord remains around issue

When the new Rexnord 8½% notes due 2018 were freed for secondary dealings, traders saw those bonds little moved from the par level at which the $1.145 billion drive-by deal had priced.

One said that the new deal "sort of went so-so," quoting them at 100¼ bid, "marginally up, but we're seeing some buyers come in."

Other traders generally saw the Milwaukee-based power transmission and water management products manufacturer's new deal trading in a narrow par-to-100.5 context.

Kemet climbs a bit

A trader saw Kemet Corp.'s 10½% senior notes due 2018 trading at 99 bid, par offered, "but I'm not seeing much volume in it." Those bonds had priced earlier in the session at 98.685.

A second saw the new Kemet paper get as good as 99 5/8 bid, 100 5/8 offered, while another one pronounced them as having risen and tightened to 99 ¾ bid, 100 ¼ offered.

Gray trades in gray market

A trader said he had heard a 99½ bid, but no offering levels, on Gray Television's new bonds - even before he had received actual pricing details of the $365 million 10½% second-lien senior secured notes due 2015, characterizing it as "a gray market bid."

The TV station group owner's deal priced late in the session at 98.085.

Cleaver-Brooks firms slightly

A trader quoted Cleaver-Books Inc.'s 12¼% senior secured notes due 2016 at 100½ bid, 101 offered - up a little from the par level at which the $185 million issue had priced earlier that day.

A second trader also saw the bonds at 1001/2.

Tuesday's CF, Limited trade actively

A trader said that "probably a couple hundred million" of the new CF Industries, Inc. and Limited Brands, Inc. bonds traded; they both priced during Tuesday's session.

He saw that Columbus, Ohio-based specialty retailer Limited's new 7% notes due 2020 "traded a fair amount," with some $57 million of the bonds changing hands - which he pointed out was all the more notable because it was only a $400 million deal. He saw the bonds at 101 7/8 bid - up from the 101½ bid, 102 offered at which the bonds had gone home on Tuesday, after the upsized deal had first priced earlier that session at par.

At another desk, a trader saw those bonds at 101 5/8 bid, 102 1/8 offered. Yet another trader had them as high as 102 bid.

The first trader meantime saw about $35 million of CF Industries' 6 7/8% notes due 2018 trading, "down from a gazillion" on Tuesday, with the bonds going home at 102¾ bid, versus the 102 bid, 102½ offered aftermarket level seen on Tuesday, and their par issue price earlier that session.

He also saw the Deerfield, Ill.-based chemical fertilizer company's 7 1/8% notes due 2020 at 103, up from Tuesday's aftermarket level at 102½ bid, 103 offered, as well as their par issue price. He saw about $30 million of the new bonds traded.

After that, he said, "volumes fell off pretty significantly."

Another trader pegged the CF 6 7/8s at 102¾ bid, 103¼ offered, while the 7 1/8s closed at 103¼ bid.

He also saw Limited's new deal at 102 bid, and International Wire Group Inc.'s new $140 million of 9¾% senior secured notes due 2015 at par bid, 100½ offered. The Camden, N.Y.-based electrical wire and cable maker's deal had priced on Tuesday at 99.038 to yield 10%, and then had firmed a little to an offered level later Tuesday at 1001/2.

Market indicators turn mixed

Among bonds not connected with the new-deal market, a trader saw the CDX Series 14 index lose ¼ point on Wednesday to end at 100 5/8 bid, 100 7/8 offered, after having risen by 5/8 point on Tuesday.

The KDP High Yield Daily Index meantime was up by 7 basis points on Wednesday, at 72.78, after having gained 13 bps on Tuesday, while its yield came in by 4 bps, to 7.57%, after having narrowed by 5 bps on Tuesday.

Advancing issues were ahead of decliners for a second consecutive session on Wednesday, continuing to hold a roughly four-to-three advantage.

Overall market activity, represented by dollar-volume levels, jumped by 27% on Wednesday from levels seen the previous session.

A trader characterized the overall market as strong. "Up, up and away," he declared. "The market is so firm, it's unbelievable."

A second trader said that "secondary-wise, we continued to see buyers of yield-to-call paper and short-maturity paper - but they're only selling because they need cash for new issues."

Other traders meantime saw the vast bulk of the junk market's activity on Wednesday taking place in the just-priced primary deals, with one expressing the opinion that "it was all new deals and Teck Resources."

Teck trading intensifies

For a fourth straight session, there was considerable activity in Teck Resources, in the wake of the Vancouver, B.C.-based energy and mining company reporting a big first-quarter profit increase.

A trader said that Teck was "by far, after their earnings, one of the busiest" names in high yield. He saw Teck's 10¾% notes due 2019 go out at 120½ bid, which would be well down from prior levels around 124 bid, while its 9¾% notes due 2014 went home at 121¾ bid.

However, another market source saw the 103/4s at around the 125 level, calling them unchanged, basically throwing out the lower final trade of the day as an unrepresentative outlier. The source meantime saw the 93/4s about unchanged at 121 1/8, while seeing Teck's 10¼% notes due 2016 also at 121. The trader said that volume in the first two issues had been at least $60 million by mid-afternoon, while the third was $25 million, making Teck clearly the high-yield volume leader once again.

Teck, a trader said, "has been flying." He said that "investment-grade guys have been coming into the market in big numbers and buying the bonds," now that Teck's corporate credit rating was raised to the BBB level by Standard & Poor's. "We've been selling loads of them to high-grade accounts."

Another trader said that Teck has been "the clear volume leader" of late. On Wednesday, he said, "there wasn't a lot of change in price," although there was considerable trading activity, "mostly due to the paper changing hands from high yield guys to higher-grade guys."

Teck on Wednesday reported a first-quarter profit of C$908 million, or C$1.54 per share, versus its year-earlier C$241 million, or C$0.50 per share.

GM better amid loan repayment

A trader saw General Motors Corp.'s benchmark 8 3/8% bonds due 2033 up a point at 37 bid, 38 offered, following GM's announcement that it had repaid its TARP loans from Washington and the Treasury secretary's statement that GM is on "a strong path to viability."

A trader noted that about "$40-odd million" of the benchmark notes changed hands.

At a ceremony to highlight its recent $257 million investment in some of its assembly centers, Ed Whitacre, GM's chairman and chief executive officer, made the announcement that the Detroit-based automaker had made a final payment of $5.8 billion to the U.S. Treasury and the Export Development of Canada.

"GM is able to repay the taxpayers in full, with interest, ahead of schedule, because more customers are buying vehicles like the Chevrolet Malibu and Buick LaCrosse we build here in Fairfax," said Whitacre at the event.

During the peak of the economic crisis, GM had received $8.4 billion from the U.S. and Canadian governments. Of the funds repaid Wednesday, $4.7 billion went to the Treasury, while C$1.1 billion went to Canada.

"GM's ability to pay back the loans ahead of schedule is a sign that our plan is working, and that we are on the right track," Whitacre continued. "It is also an important first step toward allowing our stockholders to reduce their equity investments in GM. We still have much hard work ahead of us, but we are making progress toward our vision of designing, building and selling the world's best vehicles."

Elsewhere in the autosphere, GM domestic arch-rival Ford Motor Co.'s 7.45% bonds due 2031 were up ¼ bid at 92¾ bid, 93¾ offered.

Tronox trades well above par

There was some trading in bankrupt chemical pigments manufacturer Tronox Worldwide LLC's 9½% notes due 2012, which pushed as high as 120 bid before ending at 119 5/8 offered - up more than 2 points from Tuesday's closing level, or up about ½ point on the day on a round-lot basis.

There was no fresh news out about the Oklahoma City-based company, currently restructuring under Chapter 11, which manufactures titanium dioxide, a widely used paint component. Since the beginning the year, its bonds have risen nearly 40 points to around the 120 level from levels in the low 80s at which it began the year.

Tronox last year had agreed to sell its TiO2 operations to Huntsman Chemical for $415 million, on the assumption that would be a stalking-horse price to bring out other bidders, but backed out of that deal in December, claiming its creditors would do better if the company remained intact and continued the reorganization with the U.S. Bankruptcy Court in New York. It has since lined up commitments for exit financing, continuing to send its bonds up to around 120.

An analyst for a brokerage house said that "the reason why they're rallying is because the market is rallying, and it's all about valuation for Tronox. If valuations [in the chemical sector] are improving, people are thinking that the valuations for Tronox are improving. There has been no new news" on Tronox that would otherwise explain the popularity of those bonds, he said.

On a fundamental basis, he noted the TiO2 business of Tronox sector peers Huntsman and DuPont seem to be doing well - he said that Huntsman recently said it was starting to see a recovery in TiO2 volume levels internationally.

"Titanium dioxide is the white pigment in paint. Two thirds of the end markets" for the substance - which is also used to bleach paper - is in housing, where paint is used extensively, between new construction and remodeling. The analyst said that "you're starting to see some volume recovery there - Home Depot is hiring," which augers well for the housing industry.

"I think in that sector, people are starting to see that it's getting better year over year, and the valuation is better. Fundamentally, it's improving - people are convinced that it's the bottom for that industry and valuations in the chemical space are moving up. I think a lot of people suspect there's going to be increased M&A activity in the chemical space."

-Christine Van Dusen and Stephanie N. Rotondo contributed to this report

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