Cumulus, iPayment, Xinergy lead $1.4 billion primary, new bonds firm; TXU trades actively

By Paul Deckelman and Paul A. Harris

New York, April 29 - Cumulus Media Inc., iPayment Inc. and Xinergy Corp. were among the junk issuers heard to have brought new bond deals to market on Friday, syndicate sources said. Radio broadcaster Cumulus and coal miner Xinergy priced $610 million and $200 million, respectively, of eight-year notes, while iPayment, a credit- and debit-card transaction processing company, did a restructured $525 million two-part offering along with its parent holding company, iPayment Holdings Inc.

All three of the new issues firmed smartly in the secondary, rising by multiple points, as traders noted investors' seemingly insatiable appetite for relatively risky big-coupon paper.

The market also saw a pair of add-on issues to existing bonds - a $12 million drive-by offering from homebuilder Hovnanian Enterprises Inc. and a $100 million tranche from racetrack operator Yonkers Racing Corp.

The more than $1.4 billion of new paper priced Friday closed out a week which saw more than $7 billion of new junk paper come to market, over double the amount priced in the holiday-shortened week before.

The forward calendar continued to build, with U.S. Foodservice Inc., construction equipment rental company Neff Rental LLC and Dutch electrical products distributor Sensata Technologies Holdings NV heard to be hitting the road to shop bond deals for pricing during the coming week.

Away from the new deals, there was continued activity seen in the various bonds of utility operator TXU Corp.

Statistical indicators showed the market up both on the day and on the week.

Cumulus prices at tight end

A busy Friday in the primary market saw five issuers bring a combined six tranches, raising an overall total of $1.46 billion

Cumulus Media Inc. priced a $610 million issue of eight-year senior notes (B3/CCC+) at par to yield 7¾%.

The yield printed at the tight end of the 7¾% to 8% price talk.

J.P. Morgan Securities LLC, UBS Investment Bank, Macquarie Capital, RBC Capital Markets and ING Financial Markets LLC were the joint bookrunners for the debt refinancing and general corporate purposes deal.

iPayment sells notes, warrants

Elsewhere on Friday, iPayment priced a restructured $525 million two-part notes and warrants transaction.

iPayment Inc., the operating company, priced an upsized $400 million issue of seven-year senior notes (B3/CCC+) at par to yield 10¼%.

The yield printed on top of the price talk. The amount was increased from $375 million.

J.P. Morgan Securities LLC, Merrill Lynch and RBC Capital Markets LLC were the joint bookrunners for the tranche.

Meanwhile, iPayment Holdings Inc., the holding company, priced a downsized $125 million tranche of units comprised of senior PIK notes (Caa1/CCC+) at par to yield 15%. Half of the 15% coupon is payable in cash, the other half in kind.

The yield printed on top of the price talk.

The holding notes were sold with penny warrants representing 2.5% of the company's common shares.

The warrant valuation also came on top of price talk. Initial guidance on the warrant valuation was 0% to 5%.

J.P. Morgan was the sole bookrunner for the holding company transaction which was downsized from $150 million.

There were also covenant changes to the holding company notes.

Altogether $25 million was shift to the operating company tranche from the holding company tranche.

The Nashville-based credit- and debit-card transaction processor plans to use the net proceeds from the offering of the notes and the units, together with borrowings under a proposed new $375 million six-year senior secured credit facility, for debt repayment.

iPayment also plans to repay all of its existing senior secured credit facility borrowings, which totaled about $431.6 million as of Dec. 31.

iPayment will also redeem its existing 9¾% senior subordinated notes due 2014; the company sold $205 million of the notes in May 2006 and had $194.5 million outstanding as of Dec. 31, according to the filing.

The company also plans to use some of the proceeds to make a distribution to its indirect corporate parent, iPayment Investors, LP, which will enable the latter entity to redeem all of its existing PIK toggle notes.

Xinergy prices inside of talk

Xinergy priced a $200 million issue of eight-year senior secured notes (Caa1/B-) at par to yield 9¼%, 12.5 basis points inside of the 9½% area price talk.

UBS Investment Bank was the left lead bookrunner. Griffiths McBurney Corp. was the joint bookrunner.

The Knoxville, Tenn.-based coal producer plans to use the proceeds to repay its existing senior secured notes, to fund capital expenditures and for general corporate purposes.

Yonkers prices at rich end

Yonkers Racing Corp. priced a $100 million add-on to its 11 3/8% senior secured notes due July 15, 2016 (B1/B+) at 109.50 to yield 8.621%.

The reoffer price came at the rich end of the 109.25 to 109.50 price talk.

Credit Suisse Securities (USA) LLC and Merrill Lynch were the joint bookrunners for the debt refinancing and general corporate purposes deal.

The original $225 million issue priced at 97.095 to yield 12% on July 13, 2009.

Hence Yonkers realized 3.38% of interest savings versus the yield printed on the original notes.

Elsewhere on Friday K. Hovnanian Enterprises, Inc. priced a $12 million add-on to its 10 5/8% senior secured notes due Oct. 15, 2016 at 105.50 to yield 9.091%.

Credit Suisse (USA) Securities LLC ran the books for the quick-to-market debt refinancing.

A $7.84 billion week

With Friday's business in the tally, the final week of April saw $7.84 billion of issuance in 18 junk-rated dollar-denominated tranches.

Four of the past week's five sessions saw new deal business topping the $1 billion mark.

The month of April closed having seen $30.79 billion in 74 tranches - the second biggest month of 2011 to date, trailing March's $36.37 billion in 83 tranches.

Of April's 20 market sessions, 11 saw issuance of greater than $1 billion.

Friday's activity moves year-to-date issuance up to $125.2 billion in 293 tranches.

Given that total, average daily issuance for 2011 - with 82 market sessions to Friday's close - comes to $1.53 billion.

Of 2011's 82 market sessions, 44 of them have generated issuance of more than $1 billion.

Thus far the year's biggest session is January 13's $5.4 billion in 13 tranches - one of two sessions to top the $5 billion mark thus far this year.

U.S. Foodservice starts Monday

The torrid 2011 pace is likely to continue into the first week of May, a syndicate banker said on Friday.

The week could see another $8 billion to $10 billion, the banker added.

The active forward calendar contained $3.7 billion, at Friday's close.

That total factors in four deals that were unveiled on Friday

U.S. Foodservice, Inc. will begin a roadshow on Monday for its $400 million offering of eight-year senior notes (Caa2//).

Deutsche Bank Securities Inc., Citigroup Global Markets, Goldman Sachs & Co., J.P. Morgan Securities LLC, Morgan Stanley & Co. and Wells Fargo Securities LLC are the joint bookrunners for the debt refinancing and general corporate purposes deal.

Neff plans five-year deal

Neff Rental will conduct an investor roadshow of its $200 million offering of five-year second lien senior secured notes during the week ahead.

An investor call is set for 10:30 a.m. ET on Monday.

Morgan Stanley & Co. and Jefferies & Co. are the joint bookrunners.

The Miami-based privately owned construction equipment rental company plans to use the proceeds to pay down a portion of its ABL facility and to make a distribution to members of Neff Holdings LLC.

Sensata announces $600 million

Netherlands-based Sensata Technologies Holding is expected to bring to market a $600 million offering of senior notes during the week ahead, in a deal that will likely be quickly marketed.

Barclays Capital Inc. will lead a syndicate of bookrunners that was still taking shape as the Friday session was coming to a close.

Proceeds, in addition to proceeds from a $1.45 billion credit facility, will be used to refinance existing debt, and for general corporate purposes.

LDK brings debt refinancing

Finally, China's LDK Solar Co. Ltd. will run an investor roadshow for its dollar-denominated senior notes during the week ahead.

Morgan Stanley has the books.

Proceeds will be used to repay existing debt with remaining maturities of up to one year.

iPayment shows improvement

When the new two-part deal from electronic transaction processor iPayment was freed for secondary trading, both halves of the transaction were seen as having appreciated handsomely.

A trader said that the upsized $400 million operating company senior notes had pushed up from their par issue price into a locked market at 102, while the downsized $125 million holding company PIK notes, carrying a nice fat 15% coupon, had jumped to 103¼ bid, also from a par issue price.

"Everything is pretty good in here," he said, in noting that several of the day's new deals had zoomed by multiple points when they hit the aftermarket.

A second trader said that iPayment priced "and then traded for a few minutes. They went up a few points - but there was really not much trading."

At yet another shop, a trader saw the opco bonds at 102 1/8 bid, 102 5/8 offered, and pegged the holdco bonds at 103½ bid.

Xinergy stokes the furnace

Xinergy's offering of eight-year senior secured notes rose to 102 bid, 102½ offered, from its par issue price earlier in the session.

At another desk, the bonds were quoted at 102¼ bid, 102½ offered.

Cumulus climbs in aftermarket

Very late in the day, a trader quoted the new Cumulus Media Inc. eight-year notes at 101 bid, 102 offered.

The Atlanta-based broadcaster's new deal, the last to price during the session, had come to market at par.

Yonkers little-traded

The new Yonkers Racing $100 million add-on to the racetrack and slot machine parlor operator's existing 2016 senior secured bonds didn't even get out of the gate after it priced at 109.5, a trader said.

"People aren't even following that one," he said, despite the bonds being fungible with the company's existing $225 million issue.

Another source, meantime, did see the existing bonds as having firmed to around the 110 3/8 level.

Radio Shack on the rise

Among the deals which came to market on Thursday, a trader saw Radio Shack Corp.'s 6¾% notes due 2019 having firmed to 100 3/8 bid, 100 5/8 offered.

The Fort Worth, Tex.-based consumer electronics retail chain operator's $325 million issue, upsized from the originally announced $300 million, priced at 99.234 to yield 6 7/8%.

Ford falters in secondary

In contrast, a trader characterized the huge new Ford Motor Credit Co. issue as "the one that can't get out of its own way - and nobody expected it to."

He quoted the $1.25 billion tranche of 5% notes due 2018 as trading slightly below its par issue price at 99¾ bid, 99 7/8 offered.

Traders noted that - as reported by Prospect News, the Ford Credit issue had been "jammed down" on investors - what was originally talked around in the market at a yield of between 5 1/8% and 5 ¼% soon became 5 1/8% and eventually, just 5%, with, in the words of one market participant, "the company taking every last bit of money off the table."

A trader said "these banks, these underwriters right now - they don't care whether the investor makes any money - that's the least of their consideration. They know that Ford is going to be back in the marketplace, and these guys are so desperate for paper that you can sell them anything at any price and if you came back tomorrow with more of it, even if it didn't trade well, they'd probably buy some more."

'Just grabbing bonds'

Apart from Ford's not-unexpected underperformance, one of the traders said that "people were just grabbing bonds" in a continual reach for yield, pushing new-deal levels up.

He saw Allison Transmission Inc.'s 7 1/8% notes due 2019 trading at 101¼ bid, 101½ offered.

The Indianapolis-based automotive transmission manufacturer's $500 million issue had priced at par on Wednesday and then had moved up above the 101 bid area in initial aftermarket dealings later that same session, and was holding its gains to close out the week.

He also saw Brown Shoe Co.'s 7¼% notes due 2019 at 99¾ bid, 100¼ offered. While that was down somewhat from the levels as good as 100¼ bid, 101 offered seen when the upsized $200 million issue broke following Wednesday's pricing, it was still up from the St. Louis-based footwear retailer's issue price at 99.249 to yield 7¼%, "so those bonds are doing just fine."

Another Wednesday deal, from Franklin, Tenn.-based hospital operator Iasis Healthcare LLC/Iasis Healthcare Corp. 's 8 3/8% notes due 2019, was trading at 101 3/8 bid, 102 on Friday, up from the 99.277 level at which the $850 million deal - downsized from $935 million originally - had come to market to yield 8½%.

A trader said that the Iasis deal "traded poorly for a day and a half - then all of a sudden, a couple of guys decided to short it, and the Street ran it right up in their face."

A second trader pointed out that "it's an 8 3/8% coupon - and people are stretching for yield here. Everything else has a 6% handle - or even 5%, for Ford.

"I never thought I would see Ford again with a 5% handle in my lifetime."

Secondary up on day, week

Away from the new-issue realm, a trader saw the CDX North American Series 16 HY index up 3/16 point on Friday to end at 103¼ bid, 103 3/8 offered, after having gained ¼ point on Thursday.

The index thus moved up from the 102 7/16 bid, 102 11/16 offered at which it had ended the previous week.

The KDP High Yield Daily Index meantime was up by 9 basis points on Friday to finish at 76.09, after having been unchanged on Thursday to close at an even 76. Its yield came in by 3 bps on Friday to 6.47%, after having tightened by 1 bp on Thursday for a second straight session.

For the week, the index showed improvement from the week-earlier close of 75.93 and yield of 6.53%.

The Merrill Lynch High Yield Master II Index rose for an eighth consecutive session on Friday, adding 0.139%, on top of the 0.084% gain seen on Thursday. That lifted its year-to-date return to 5.45%, a new peak level for the year, from 5.304% on Thursday, the previous zenith.

The index showed a one-week gain of 0.445%, lifting its cumulative return from 4.983% at the end of the previous week.

Advancing issues beat decliners for a third straight session on Friday, by around a six-to-five margin, the same as was seen in Thursday's dealings.

Overall market activity, as measured by dollar-volume levels, slid by nearly 28% on Friday, after having fallen by 12% on Thursday from the previous session's levels.

A trader characterized Friday's session, apart from the trading in newly priced issues, as "a pretty dead day. Nothing was happening."

He flatly declared that "overall, volume really blew, excuse my language."

A second trader agreed that "activity today was pretty light, although it was firm."

Good gains for Goodyear

Among specific names, a trader said that Goodyear Tire & Rubber Co.'s bonds were up as "their earnings were off the charts."

He saw the Akron, Ohio-based tire maker's 10½% notes due 2016 at 112¾ bid, 113 offered.

"It's so crazy," he said of the 11/2-point surge.

Another trader saw a similar move in the company's 8¼% notes due 2020, seeing them go out at 111 bid, 112 offered.

Goodyear reported first-quarter earnings of $103 million - a record - which translates to 42 cents a share. That was well up from a year-ago loss of $47 million, or 19 cents a share.

Excluding one-time items, Goodyear earned 51 cents a share in the first quarter, more than quadrupling Wall Street's expectations of profits in the 10-to 12 cents per share area.,

TXU trades around

A trader said that he has seen buying "across the board" in the bonds of the company once known as TXU Corp.

He said "they have a lot of different securities, almost too many" to fully keep track of, which the Dallas-based utility operator and merchant power producer issued both before its $45 billion leveraged buyout in 2007 by Kohlberg Kravis Roberts & Co. and TPG Capital as TXU and afterward under its new name, Energy Future Holdings Corp., or under the name of the latter's main subsidiary, Texas Competitive Electric Holdings Corp.

Whatever the name, he said "there's a lot of demand for that paper across the board now - not running away, but up ¼ or ½ every day, people are looking for bonds."

He said he saw no news that might explain the popularity of the TXU complex's bonds, suggesting that perhaps "people are looking for yield."

With so many different TXU bonds of varying tenors and coupons - "they just have so many issues that it's ridiculous," he declared, "you really have to look at them item by item."

Even so, "I had a lot of people looking for that paper today."

The star of the TXU constellation seemed to be Energy Future Holdings' 5.55% notes due 2014, which were seen by a market source to be up as much as 8½ points at 87¾ bid.

Catalyst holds at lower levels

Elsewhere, a trader said that Catalyst Paper Corp.'s 7 3/8% notes due 2014 were trading around 68 bid, 69 offered on Friday - down around a point from the levels at which they finished on Wednesday, when they fell between 4 and 5 points after the Richmond, B.C.-based paper company reported disappointing quarterly numbers.

A market source at another desk noted that the bonds were once again among the most actively traded issues in the junk market, with over $10 million having changed hands by mid-afternoon. However, the source said that the bonds got as good as 70 bid at one point, according to the Trace tracking system.

The first trader also saw Catalyst sector peer NewPage Corp.'s 11 3/8% senior secured notes due 2014 remaining at the levels slightly under par to which they fell on Thursday, when the bonds eased by about a point on sector sympathy with Catalyst.

NewPage's 10% subordinated notes due 2012 were meantime down around ½ point, holding just over the 59 mark.

NewPage investors meantime digested the mid-week announcement appointing Ronald J. Arling to the position of controller and chief accounting officer, the latest in a series of executive moves at the Miamisburg, Ohio-based coated-paper manufacturer. He takes over those positions from Curtis H. Short, who was elevated to senior vice president and chief financial officer on an interim basis effective May 11, replacing CFO David J. Prystash, who resigned from NewPage to pursue other opportunities, the company said.

OPTI Canada stabilizes

A trader saw OPTI Canada Inc.'s subordinated 7 7/8% and 8¼% notes due 2014 "straddling" the 54 level most of the day, although he did see a little selling late in the session, sending the bonds home around 53½ bid, 54 offered.

That followed the wild gyrations which the Calgary, Alta-based oil-sands energy company's bonds saw on Wednesday and Thursday, on heavy volume, when they first plunged from the mid 50s down to around 48.5, but then came off those lows to eventually get back to pre-news levels.

The bonds went for their mid-week roller-coaster ride after the company warned that its troubled Long Lake, Alta. joint-venture facility for extracting thick bitumen crude oil from the ground and converting it to more marketable grades of oil will likely fail to meet its output targets for this year, which had already been lowered several times previously.

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