Upsized CB Ellis deal prices; Cinemark, Limited Brands slate, Brands' existing notes mixed

By Paul Deckelman and Paul A. Harris

New York, June 15 - CB Richard Ellis Services, Inc. successfully priced an upsized offering of eight-year senior subordinated notes on Monday; the Los Angeles-based real estate services company's new bonds came too late in the session for any aftermarket dealings.

High yield syndicate sources meantime saw a pair of prospective new deals clamber aboard the forward calendar, for Cinemark USA, Inc. and for Limited Brands Inc. Although Plano, Tex.-based movie theater operator Cinemark's offering is being done for the express purpose of funding a separately announced tender offer for an existing issue of company notes, those latter notes were already trading at or above the anticipated takeout level and showed no gains on the day.

On the other hand, Limited Brands' existing bonds were mostly firmer in the wake of the announced new deal, even though the company promised only generally to use the proceeds to pay down debt and for general corporate purposes, without identifying any specific debt to be repaid.

Among recently priced issues, Sealed Air Corp.'s new bonds that came to market on Friday were seen having firmed a little from their issue price. Connacher Oil & Gas Ltd.'s offering of bonds, which priced on Thursday, was seen trading well above its issue price, hanging onto the gains notched during Friday's session.

Among names with no new-issue connections, Six Flags Inc.'s bonds were seen lower on the not unexpected bankruptcy filing by the big New York-based regional theme park operator.

There was a fair amount of activity in the split-rated or high junk-rated hybrid securities of nominally investment-grade rated financial concerns such as Regions Financial Corp. and Genworth Financial Inc.

Junk outperformed equities on Monday, according to high-yield syndicate source.

Cash bonds ended the day ½ point lower, while the major U.S. stock indexes sustained losses of greater than 2%.

CB Richard Ellis oversubscribed

Only one issue priced during Monday's session in the high-yield primary market.

CB Richard Ellis Services priced an upsized $450 million issue of 11 5/8% eight-year senior subordinated notes (Ba3/B+) at 96.873 to yield 12¼%.

The yield came at the wide end of the 12% to 12¼% yield talk. The issue price came in line with the price talk which set out approximately 3 points of original issue discount. The amount was increased from a planned $400 million.

Banc of America Securities LLC, Credit Suisse and J.P. Morgan Securities Inc. were joint bookrunners for the deal.

Proceeds will be used to repay some of the company's outstanding credit agreement debt.

The deal was two-times oversubscribed, according to an informed source who added that the sell-off in stocks failed to generate a lot of pushback among the accounts who were in the CB Richard deal.

Limited Brands moves up timing

Limited Brands expects to price its $500 million offering of 10-year non-callable senior notes (BB) on Tuesday, an informed source told Prospect News well after the Monday close.

Initially the company planned to do a brief roadshow, and price the deal later this week.

However timing has been moved up, the source advised.

JP Morgan and Banc of America Securities LLC are joint bookrunners for the debt refinancing and general corporate purposes, which was launched on Monday morning.

Cinemark $470 million

Also expected to price bonds on Tuesday is Cinemark USA, which is in the market with a $470 million offering of 10-year senior notes.

Price talk is 8¾% to 9%.

Barclays Capital is the left lead bookrunner for the deal to fund the tender for Cinemark's 9¾% senior discount notes due 2014 and for general corporate purposes. Deutsche Bank Securities Inc., J.P. Morgan Securities Inc. and Morgan Stanley & Co. Inc. are joint bookrunners.

RailAmerica to price $700 million

RailAmerica Inc. plans to price a $700 million offering of eight-year senior secured notes (B1) this week.

A brief roadshow will run through Wednesday. The notes are expected to price on Thursday.

Citigroup, JP Morgan, Morgan Stanley and Wachovia Securities are joint bookrunners for the debt refinancing and general corporate purposes deal.

From Europe

There is also activity in the European high-yield market this week.

Ardagh Glass Finance plc is running a Europe-only roadshow for its €300 million offering of seven-year first-priority senior secured notes (Ba3).

Citigroup has the books for the debt refinancing and general corporate purposes deal from the Dublin, Ireland-based glass container manufacturer.

Another Ireland-based issuer, Smurfit Kappa Group plc, is believed to be headed to the high-yield market, according to a sell-side source in London.

"It will be an interesting couple of weeks for the euro market," the sell-sider said.

"There are some encouraging signs out there."

While there are no services tracking cash flows into and out of the high-yield mutual funds in Europe in the way that AMG Data Services does in the United States, the sell-sider believes that lately the European accounts have been seeing substantial positive flows.

"Earlier in the year the European high-yield funds might not have been seeing as much as the American funds were," the sell-sider commented.

"Lately, however, inflows likely have stepped up."

New Ellis issue unseen; Limited a little firmer

The new CB Richard Ellis issue of 11 5/8% subordinated paper due 2017, which priced at 96.873, came to market too late in the session for any meaningful aftermarket activity, participants said.

Elsewhere among the existing bonds of prospective issuers, a market source saw Limited Brands' 6.95% bonds due 2033 having jumped more than 6 points on the session to the 69 level, on fairly busy dealings, as the Columbus, Ohio-based specialty retailer announced its planned new deal.

At another desk, a source also saw those bonds firm solidly to that same 69 context, on several large-block trades - but noted also that there had only been a few smallish odd-lot trades down in the lower 60s early in the month, and nothing since then.

The source also saw a similar pattern in Limited's 6 1/8% notes due 2012, which gained several points to end around 96 bid, although here too there had previously been only a few small odd-lot deals down in the lower 90s toward the beginning of the month. The company's other issue, its 5¼% notes due 2014 were quoted having traded down a point or two, though only in small-sized odd-lot dealings, to around 83 bid.

In the case of Cinemark, a trader said that its 9¾% notes due 2014 - which are to be taken out via a tender offer announced Monday, using the proceeds from the company's new bond deal - were actually about a point lower on the day at 102, on several small odd-lot trades. That level is well under the 104.875 total consideration level which the company announced for those bonds tendered by their holders by the June 26 consent deadline.

New Sealed Air slightly better

Among recently priced issues, a trader saw the Sealed Air 7 7/8% notes due 2017 having "traded up modestly" to around 98¼ bid, 99 offered. That was up from the 97.837 level at which the Elmwood Park, N.J.-based packaging products maker had priced its $400 million issue - upsized from an originally envisioned $250 million - on Friday to yield 8¼%.

Another trader, however, said he "never saw" the new issue.

Connacher keeps gains

A trader saw Calgary, Alta.-based energy exploration and production operator Connacher Oil & Gas' new 11¾% notes due 2014 at 96½ bid, 97½ offered, while a second trader quoted those bonds at 96¾ bid, 97¾ offered.

That's about the same levels at which the $200 million issue of bonds went home on Friday, after having priced on Thursday at 93.678, to yield 13½%. The new bonds had shot up to about the 96 bid, 96¼ offered level in initial aftermarket dealings late Thursday.

Wallace wallows around issue

A trader meantime saw Wallace Theater Holdings Inc.'s new units trading at 95½ bid, 96½ offered. That was little changed from the 95.531 level at which the Portland, Ore.-based movie theater operator had priced its $157 million of units on Friday to yield 14%.

That deal was upsized slightly from the $150 million originally envisioned, and emerged in a very different from those initial plans; the originally planned fixed-rate senior secured notes due 2013 became floating-rate notes carrying a coupon of 950 basis points over the six-month Libor rate, and they were combined with equity warrants for 10% of the company's common shares, to form units.

Other recent deals stay around par level

Among other recently priced deals, a trader saw Interpublic Group of Cos. Inc.'s 10% notes due 2017 trading at 100½ bid, 101½ offered. While that's somewhat off the peak levels around 101 5/8 bid, 102 offered at which the bonds were seen on Friday, it was still well up from the 97.958 price at which the New York-based advertising and marketing company had priced that $600 million of paper last Wednesday to yield 10 3/8%.

And a trader said that Penn Virginia Corp.'s $300 million of 10 3/8% notes due 2016 traded Monday around 101¼ bid, with $4 million traded. That was down slightly from the 101 3/8 close on Friday - but still well up from the 97.003 level at which the Radnor, Pa.-based independent oil and gas exploration and production operator had priced that deal - upsized from the planned $250 million - to yield 11% last Wednesday.

A trader, noting that those deals, and several others last week, had all come to market at a discount to par and then had firmed to make up those several points and hover around the par level - Connacher was the exception, although it too firmed by about 2 to 3 points from issue - opined that the issuers and their respective underwriters "probably priced them right, and didn't upsize them too much, so they kind of left some meat on the bones per se," the limited upsizing serving to help keep prices at firm levels as investors looking for a piece of the deal, or a bigger allocation, had to turn to the secondary arena to get it.

Market indicators turn mixed

Apart from the new deals, a trader saw the CDX Series 12 High Yield index - which rose by 3/8 point on Friday - off a little bit on Monday to end at 85½ bid, 86 offered.

The KDP High Yield Daily Index, which rose 18 basis points on Friday, retreated by 6 bps on Monday to end at 63.46, although its yield tightened by 3 bps to 10.24%.

In the broader market, advancing issues - which had led decliners for an amazing 19th consecutive session on Friday - managed to hang on, though only by a relatively narrow 11-to-10 ratio on Monday.

Overall market activity, measured by dollar-volume totals, was about unchanged from versus Friday's levels.

A trader called Monday's session "brutally quiet, while a second agreed that "not too much going on, is right."

"The first trader asserted that "it's Monday - a typical summer Monday at this point - and the selloff in the stock market kind of has people scratching their heads" and wondering what's next. The bellwether Dow Jones Industrial Average suffered its worst session since April 20, falling 187.13 points, or 2.13%, to 8,612.13, hurt by bad economic news and doubts about the market's ability to rally. Broader indexes also tracked the Dow lower, with the Nasdaq composite down 2.28% and the Standard &Poor's 500 off by 2.38%.

He said that junk generically "is probably unchanged to a quarter point softer, on very light volume."

He said that he had "heard a couple of chatters about some deals in the works," although he had heard no names.

"That's kind of keeping people's focus - wait and see what the supply is going to be."

He pointed out that "later in the week, you've got the U.S. Open [golf tournament], so a lot of people will be short-staffed later on. It's kind of a lazy start to what I think is going to be a difficult week."

With the world famous golf championship getting under way on Thursday at a venue which this year is not too far from New York, on the Black Course at Long Island's Bethpage State Park, there's a good possibility that besides market players who will be fixated by the coverage on TV screens in their trading rooms, others will be absent completely, playing hooky after having managed to score the coveted tickets to watch the proceedings in person. He said that there probably would be "a little bit of both.

"I'm not going to speak for anyone else, but I'm sure that those people who aren't [watching golf, one way or another,] will probably feel not compelled to really focus [on market action] - but that that's just more speculation."

He said "looking down the road, it's kind of disheartening to see at the end of the week, it's not like there's a big [deal or event to look forward to] - which may lead to a busy tomorrow [Tuesday] and Wednesday. I think we may see some new deals price, as people try to cram it in earlier in the week, with the expectation of thinner liquidity later in the week."

Yet another trader said that from where he sat, "the bull market in high yield took a nap today. Although I didn't necessarily see anything getting hit, I certainly didn't see anything really trading up."

Barometer issues trade around

One of the traders said that "it's "been a tough battle today" getting anything done, "A lot of the stuff that traded today has been the real go-go, on-the-run stuff, like Ford [Motor Credit Co.] '09s, or Freeport [McMoRan Copper & Gold Inc.] 8 3/8s, that people use almost use like a quasi-index or cash facility."

A trader saw the Ford Credit bonds - which carry a 7 3/8% coupon and mature Oct. 28 - trading at 99 bid, or a 10.20% yield to maturity, unchanged from Friday, on pretty active volume of $21 million.

And he saw Phoenix-based metals miner Freeport's 2017 notes - consistently one of the busiest junk bonds, day in and day out - living up to that reputation on Monday, with $16 million changing hands. He saw the bonds up to 101¾ bid from 101½ offered.

The trader saw another usually widely traded issue, Aramark Corp.'s 8½% notes due 2015 dipping to 98 1/8 bid, from 98½ on Friday, with $13 million traded. "There must be a little bit of cash-raising going on," he said. "That's what barometer [issues] are for."

He saw a sizable drop in another junk bellwether bond - First Data Corp.'s 9 7/8% notes due 2015, which dropped to 72 bid from 73 5/8 on Friday. "Ouch!" he exclaimed, adding: "I really didn't perceive the market to get hit that much." However, that downturn came on only about $4 million of trading.

Another bond sometimes regarded as a bellwether, Community Health Systems Inc.'s 8 7/8% notes due 2015, eased to 99 bid from 99 7/8 on Friday, also on $4 million traded.

Six Flags on the slide

A trader called Six Flags "probably the only thing that was really active in our world, on the news front, the only thing where people were discussing, where there was any real chatter."

"Mr. Six," the company's elderly, but spry and fun-loving advertising mascot, did not show up at the U.S. Bankruptcy Court in Wilmington, Del., to do his usual wild and funky dance popularized on Six Flags' ubiquitous TV commercials, instead leaving the task of filing for protection from the company's creditors to its team of somber and reserved attorneys, as the big theme-park operator embarked upon what it called the "final phase of financial restructuring."

Six Flags seeks to implement a pre-negotiated plan of reorganization, which has the unanimous support of its senior lenders. The plan would result in a deleveraging of the company's balance sheet - swollen with some $2.4 billion of debt, a level which it admits "cannot be sustained, particularly in these challenging financial markets" - by approximately $1.8 billion.

The not unexpected news of the bankruptcy filing caused its most actively traded issue, the 9 5/8% notes due 2014, to drop to 10¾% bid from 12½ on Friday, a trader said, with $14 million changing hands.

He also saw its 8 7/8% notes due 2010 ease to 12 bid from 15 on Thursday, the last previous round-lot trade , with $2 million traded, and its 9¾% notes due 2013 fall to 11 bid from 12¾ on Friday, with $3 million traded.

Another trader quoted the bonds at "a generic level" of 101/2-12, except for the 12¼% exchange notes due 2016, which he saw down by several points in the mid-60s.

Junk units of high-grade names seen busy

A trader saw a lot of interest in split-rated or 4-B junk-rated hybrid tranches of nominally high-grade financial companies - paper which is trading like anything other than high-grade or near-high grade credits.

"The hybrids seem to be in vogue," he said, quoting Regions Financial Corp.'s variable-rate notes due 2047 (Ba2/BBB) unchanged at 67.5, on $45 million traded, which he said was the most active issue in the high-yield market on Monday "by far". He called it "a little unusual that $45 million would trade and be unchanged from Friday - but that's what it is."

He also saw Genworth Financial Inc.'s 6.15% variable-rate notes due 2066 (Ba1/BB+) at 45 3/8 versus 41 on Friday on $18 million traded while Lincoln National Corp.'s variable-rate notes due 2066 (Ba1/BBB) were trading at 67 versus 62.75 on Friday, on $10 million traded.

Also among the financial names, fallen angel CIT Group Inc.'s 7 5/8% notes due 2012 - recently downgraded to full junk status at Ba2/BB-/BB - were seen down more than 2 points at the 80 level, in busy dealings. Its 5.65% notes due 2017 dropped 4 points to 66 bid.

Ford falters; GM lower also

In the autosphere, a trader saw Ford Motor Co.'s 7.45% bonds due 2031 dip to 67 bid from Friday's close of 681/2, on $4 million traded.

Another trader saw the Ford long bonds unchanged at 67 bid, 69 offered.

The Dearborn, Mich.-based carmaker's bonds - which had been languishing below 30 at the beginning of April - had seen a spectacular rise since then, peaking at around the 70 mark last week, in the wake of the company's success in cutting its big debt load though an exchange offer, as well as investor optimism about Ford's prospects and the fact that the company did not need federal bailout money like bankrupt rivals General Motors Corp. and Chrysler did. However, after that mid-week peak, the bonds began to soften a little, easing into the current upper 60s context.

A trader meantime saw GM's benchmark 8 3/8% bonds due 2033 at 13¾ bid, off slightly from 14 on Friday on $10 million traded.

Another trader saw those bonds down 1 point at 13 bid, 14 offered.

Among the parts suppliers, ArvinMeritor Inc.'s 8¾% notes due 2012 gained 4 points to 75 bid, continuing the surge seen in Friday's trading. Traders attributed Friday's gains in the Troy, Mich.-based components maker's bonds, and those of such sector peers as American Axle & Manufacturing Holdings Inc., to investor hopes for a bigger federal bailout of the parts sector, as well as relief that major customer Chrysler has been bought by Fiat rather than liquidated.

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