MarkWest, Hughes price; market awaits Gibson, upsized Apria; GMAC up on aid talk, Hertz gains

By Paul Deckelman and Paul A. Harris

New York, May 20 - The junk bond primary market was by no means quiet, even though the total dollar amount of new deals cooled a little from the red-hot pace seen in the previous session, when nearly $3 billion of new paper priced. Wednesday's session saw MarkWest Energy Partners LP and Hughes Network Systems LLC/HSN Finance Corp. price a pair of smallish drive-by offerings, both notes mirroring existing bonds and the latter deal upsized slightly from initial expectations.

New-dealers meantime heard price talk on pending deals for Gibson Energy ULC/GEP Midstream Finance Corp., for Berry Petroleum Co., and for Apria Healthcare Group Inc. Each is expected to price during Thursday's session, with Apria's offering heard to have been upsized, while a second planned Apria note offering, to follow on the heels of the currently pending deal, was understood by market participants to have been downsized by the same amount.

The forward calendar - rebuilding after having been recently depleted by the ambitious barrage of new deals - continued to fatten on Wednesday, with the inclusion of new offerings from UPC Holdings BV and Ameristar Casinos Inc.; the latter would be an add-on offering to the Las Vegas-based regional casino operator's recently priced five-year notes.

When the new MarkWest bonds were freed for secondary dealings they were seen having risen modestly. The Hughes Network deal came too late in the session for any meaningful aftermarket action.

Among the new deals which came to market in Tuesday's frenzied session, WMG Acquisition Corp.'s $1 billion-plus offering of seven-year secured notes firmed solidly to around par, versus the mid-90s level at which they had priced.

Apart from the new-deal arena, auto finance operator GMAC LLC's bonds were seen solidly higher, accelerating on a newspaper report that indicated the federal government was ready to give GMAC another $7.5 billion of bailout aid and could take a majority ownership stake in the lender, which provides loans to buyers of General Motors Corp. and Chrysler LLC cars, as well as doing mortgage loans through its Residential Capital LLC unit.

Another automotive-related name, Hertz Corp., was seen higher after the Park Ride, N.J.-based vehicle rental giant shored up its balance sheet with a big stock sale and a separate sale of new convertible notes.

And traders saw Pilgrim's Pride Corp.'s bonds - which had firmed solidly on Tuesday in response to the bankrupt poultry producer's positive monthly earnings figures - continuing to ride that momentum higher, against a backdrop of a mostly stronger junk and distressed-debt market.

Cash keeps flowing

Cash bonds finished higher on Wednesday, sources said.

"NAVs are sizably higher," a high-yield mutual fund manager said.

"Higher beta names, like Freescale and Sprint, were up big today."

Cash flows have not slowed down at all, the manager said, referring to inflows that have gushed into the high-yield asset class - to the tune of $6.5 billion over the past nine weeks, according to a Prospect News analysis of numbers reported during that time by AMG Data Services.

However, the investor cautioned, the market still feels as though it has gotten ahead of itself.

A senior high-yield syndicate source, speaking earlier Wednesday afternoon, also saw junk up on the session.

"The market feels better today," the banker said.

"Deals are getting done, and they are doing well in the aftermarket."

Meanwhile the primary market cranked out a decent share of news again on Wednesday, as a pair of $150 million mirror notes issues were priced in drive-bys, while sizable deals already in the market were talked, and in some cases re-jiggered.

And well after sunset Wednesday, Ameristar Casinos was heard to be coming on Thursday with a $150 million add-on to the 9¼% senior unsecured notes that it priced last week.

Most of that deal is likely spoken for, a buy-side source advised.

Mirror deals

Two issues of non-fungible mirror notes comprised Wednesday's only new issuance.

Hughes Network Systems, LLC and HNS Finance Corp. priced a $150 million issue of notes mirroring its 9½% senior notes due April 15, 2014 at 90.935 to yield 12%.

The quickly shopped deal came at the tight end of the 12% to 12¼% price talk.

JP Morgan ran the books.

Proceeds will be used for general corporate purposes, which could include working capital needs, corporate development opportunities (which may include acquisitions) and opportunistic satellite fleet expansion.

Meanwhile MarkWest Energy Partners, LP and MarkWest Energy Finance Corp. priced a $150 million issue of notes mirroring its 6 7/8% senior notes due Nov. 1, 2014 at 78.00 to yield 12.593% on Wednesday.

The notes came on top of the 78 area price talk. They jumped 1½ points on the break, according to a buy-side source who spotted them at 79½ bid.

J.P. Morgan, RBC Capital Markets and Wachovia Securities were joint bookrunners for the debt refinancing drive-by.

UPC upsizes

Meanwhile UPC Holdings disclosed plans to price $605 million equivalent of senior unsecured notes in two tranches on Thursday.

The deal initially announced was $400 million of nine-year notes, talked with a 9 7/8% coupon and a yield of 11¼%.

Later Wednesday the company announced it also plans to sell a €150 million add-on to its 9¾% senior unsecured notes due 2018.

Credit Suisse, BNP Paribas, JP Morgan and Morgan Stanley are joint bookrunners.

Proceeds will be used for general corporate purposes.

UPC previously priced €65.6 million of the 9¾% senior notes due April 2018 at a discount of 16½%. That deal settled on April 30. Those notes were an add-on to a new issue of notes which figured in an exchange offer involving the company's 7¾% senior notes due 2014 and its 8 5/8% senior notes due 2014.

UPC is a wholly owned Europe-focused subsidiary of Englewood, Colo.-based Liberty Global, Inc., a provider of video, voice and broadband Internet services.

People are going to be watching the UPC deal, because a European cable company is about to come with a dollar-denominated deal, a banker advised late Wednesday.

Apria upsizes A-1 notes to $700 million

Apria Healthcare Group upsized to $700 million from $600 million its offering of senior secured notes series A-1 due Nov. 1, 2014 (Ba2/BB+) late Wednesday, according to a high-yield mutual fund manager who agreed to speak on background.

Earlier in the day the series A-1 notes were talked at 11½% to 11¾%, with 2 to 3 points of original issue discount, according to an informed source.

However the upsizing of the A-1 piece is likely to push the yield out to 12%, sources said well after Wednesday's close.

Pricing is expected on Thursday.

Banc of America Securities LLC, Wachovia Securities LLC and Barclays Capital Inc. are joint bookrunners for the bridge refinancing deal.

In upsizing the series A-1 offering Apria shifted $100 million from the senior secured notes series A-, due 2014 (B1), downsizing that tranche to $310 million from $410 million.

The A-2 tranche could come to market soon after the series A-1 notes price, market sources say.

Whether the A-2 notes are offered depends upon demand, the sources add.

Reverse inquiry for the A-1 tranche is likely sufficient to bring more accounts into the A-2 deal, according to the fund manager.

In addition, there has likely been reverse inquiry into the A-2 tranche sufficient to get at least some of the remaining $310 million of it done, the source added.

The only deal likely to price on Thursday, however, is the A-1 tranche, the fund manager said.

Security for the A-1 notes is a first priority lien on substantially all tangible and intangible assets and capital stock and a second priority lien on the ABL collateral. The series A-1 notes will have priority over series A-2 debt in certain circumstances, including any acceleration of obligations in default or bankruptcy.

Setting the talk

Gibson Energy ULC and GEP Midstream Finance Corp. talked their $545 million offering of five-year first-lien senior secured notes (B1/BB-) to yield between 12¼% and 12½%, with 2 to 3 points of original issue discount.

The books are scheduled to close at 1 p.m. ET Thursday, with the notes pricing after that.

UBS Investment Bank is left bookrunner for the bridge refinancing deal from the Calgary, Alta.-based midstream energy company. RBC Capital Markets and RBS Securities Inc. are joint bookrunners.

Elsewhere Berry Petroleum set price talk for its $300 million offering of senior secured notes due 2014 (B2/B) at 12% to 12¼%.

Market sources expect the deal to come discounted by as much as 6 points.

Pricing is expected Friday.

Wachovia Capital Markets, LLC, RBS Securities Inc., BNP Paribas Securities Corp., SG Americas Securities, LLC and Calyon Securities (USA) Inc. are joint bookrunners for the debt refinancing deal.

Finally, Ameristar Casinos plans to price a $150 million add-on to its 9¼% senior unsecured notes due June 1, 2014 (existing ratings B2/B+) at par on Thursday, according to a buy-side source.

It is possible all of the add-on notes will be placed before the deal is announced, the source remarked.

Banc of America Securities will run the books.

The Las Vegas-based gaming and entertainment company priced the original $500 million issue at 97.097 to yield 10% on May 12, just over a week ago.

MarkWest marked higher

When the new MarkWest Energy 6 7/8% notes due 2014 were freed for secondary dealings, a trader saw the notes pushing up to 79½ bid, though with no offered level seen, somewhat above its earlier pricing at 78, which resulted in a 12.593% yield.

Another trader said he had not seen the new bonds, while estimating that the existing 6 7/8% notes had been trading somewhere around the 80½ level.

The new Hughes Network 9½% notes due 2014, which had priced at 90.935% to yield 12%, came to market too late in the session for secondary dealings.

Warner unit sweet music to investors

Among the deals which came to market during Tuesday's busy session, none was bigger than the $1.1 billion of 9½% secured notes due 2016 of WMG Acquisition Corp., a subsidiary of New York-based music content company Warner Music Group Corp. - and none traded better on Wednesday than that mega-deal.

A trader saw the new bonds at 99½ bid, par offered, well up from the 96.28 level at which those bonds had priced to yield 10¼%.

Another trader saw the WMG bonds as high as 99½ bid, 100½ offered.

Ashland deal hangs in

A trader saw Ashland Inc.'s new 9 1/8% notes due 2017 offered at 101, although he saw no bids on the issue. "I'm sure there were bids around," he said, "I just didn't see any."

With the offered level implying a theoretical bid level of par, that represents a solid gain from the 98¼ bid, 98¾ offered level at which that $650 million of new bonds, upsized from an original $600 million, traded in initial secondary dealings after Tuesday's pricing.

And that's an even bigger gain from the 96.557 level at which the Covington, Ky.-based chemical company actually priced the bonds, to generate a yield of 9¾%.

Corrections deal only up slightly

Corrections Corp. of America's new 7¾% notes due 2017 were quoted by a trader as hovering around a 97½ bid, 98½ offered context.

That's not far removed from 97.116, the level at which the Nashville-based private prisons operator priced its $465 million of notes - upsized from the original $300 million - during Tuesday's session.

Other newbies in hiding

Several traders meantime saw no levels in the other deals which had come to market earlier in the week: Hercules, Calif.-based Bio-Rad Laboratories Inc.'s $300 million offering of 8% senior subordinated notes due 2016 - upsized from $250 million - which priced Tuesday at 98.25, to yield 8.324%; Alpharetta, Ga.-based tissue-paper maker Cellu Tissue Holdings Inc.'s $255 million of 11½% secured notes due 2014, upsized from $230 million, which priced Tuesday at 96.368 to yield 12½%; and New York-based lottery and gaming technology provider Scientific Games International Corp.'s $225 million of 9¼% senior subordinated notes due 2019, upsized from $200 million, which priced Monday at 96.823 to yield 9¾%.

On Tuesday, Scientific Games's bonds had been seen trading as high as 98¼ bid, 98¾ offered, before coming down from that peak to end at 97½ bid, 98 1/8 offered, while Bio-Rad's issue had traded up to 99¾ bid, 100¼ offered. However, on Wednesday, neither deal was seen trading around, nor were the Cellu Tissue bonds.

A trader remarked that it was "pretty weird" not to see the new deals trading around. "It's a function of either - A), these deals are so well-placed," because there's so much cash on the sidelines, that dealers or underwriters don't have to go to the 'flippers' who quickly and opportunistically move in and out of such new offerings, "or B) - because there is a plethora of new issues, they [the lesser-noticed new deals] - are just not as active. "

He was of the opinion that "it's probably more the former than the latter, because typically - and especially on the first couple of days, you'll see 99% of the new issues in the Street - but that hasn't been the case so far."

Market indicators mostly stronger

Back among the established issues with no new-deal connections, a market source saw the CDX Series 12 High Yield index - which had gained 1 1/8 points on Tuesday - give up ¼ point on Wednesday, finishing at 79¾ bid, 80¼ offered.

The KDP High Yield Daily Index, which rose by 23 basis points on Tuesday, zoomed another 69 bps on Wednesday to end at 60.78, while its yield tightened by 24 bps to 11.19%.

Advancing issues, after having led decliners by around a nearly seven-to-five margin on Tuesday, increased their bulge on Wednesday, holding a better than two-to-one edge. Overall market activity, measured by dollar-volume totals, jumped about 27% from Tuesday's levels.

A trader agreed in citing "a little bit more volume today" versus Tuesday's levels, and noted the "positive tone" seen pretty much throughout Junkbondland. For instance, "most sectors and most issues that were active, were up."

Bellwether bonds are better

For instance, he saw popular market bellwether issue First Data Corp.'s 9 7/8% notes due 2015 more than 1½ points better on the day at 66½ bid. With $32 million of the Greenwood Village, Colo.-based financial transaction processor's bonds trading, that put the credit among the top three or four most actives on the day.

He also saw Franklin, Tenn.-based hospital operator Community Health Systems Inc.'s 8 7/8% notes due 2015 - another frequently cited bellwether issue - up nearly a point on the day at 98 1/8, on $12 million traded. Philadelphia-based uniform provider and food service operator Aramark Corp.'s 8½% notes due 2015 were 7/8 point better at 94 7/8 bid, on $8 million traded.

And he saw upside in the single busiest credit in the junk realm on Wednesday - Capital One Financial Corp.'s 7.686% hybrid preferred securities due 2036, which gained 4 points on the session to end at 64 bid. Some $41 million of the nominally investment-graded rated Richmond, Va.-based banking company's split-rated (Baa2/BB+) paper changed hands, continuing the junk market's recent trend of active dealings in the split-rated or junk-rated tranches of preferred notes or other hybrid securities issued by otherwise high-grade financial concerns.

Another such credit seen actively trading around on Wednesday was New York-based Citigroup Inc.'s 8.30% preferred securities due 2057, which ":has been active the last few days," the trader said. He saw them move up to 91 bid from 89, with $31 million traded.

GMAC jumps on possible government aid

Back among the solidly junk credits, a trader saw GMAC LLC's bonds up 4 to 5 points, quoting the 8% paper due 2031 at 71 bid, 73 offered, given a boost by a report in the company's hometown Detroit News indicating that the federal government was ready to pump another $7.5 billion in the company's sagging coffers.

GMAC, he said, "was the obvious one today, which is good." The 8s he said, "had a good run."

He also saw the short-term paper up strongly, with the 7¾% notes due 2010 at 951/2- 96½ at the end of the day. He saw "plenty of trades" around 941/2, and later trades between 95 and 96, "up a few points, so that's good." He called the gain in the 10s "an easy 5 points."

"If they give you $7.5 billion more dollars, it does help," he added.

Another trader saw the 8% bonds up 2 points at 70 bid, 72 offered, while its 6 7/8% 2011 bonds were 3 point gainers at 86 bid, 88 offered.

The Detroit News reported Wednesday that the U.S. Treasury Department was looking to invest another $7.5 billion in the company, on top of the $5 billion in preferred stock the Treasury already purchased.

Should the Treasury exercise its option on the previous investment, it would a have a nearly 35% stake in GMAC, plus voting rights - which were not included in the original investment. The potential ownership stake of the new investment is not clear.

"The only thing that would be particularly surprising about the Treasury's prospective capital infusion would be the timing [sooner than expected]," wrote Thomas Ferguson, a credit analyst at KDP Investment Advisors, in a note to clients. "We've long felt that the Treasury would continue to support GMAC, and that the company's unsecured bonds would benefit as a result."

Hertz not hurtin' after stock, converts sale

A trader saw Hertz Corp.'s 8 7/8% notes due 2014 start the day around 86, "and then it did move up a few points" to go out at around 90. He said he had seen "a lot of quotes in Hertz today," adding that there was "good volume in trading," pegging the day's advance in the bonds "around 4 or 5 points."

A second trader said the Hertz '14s went out on a round-lot basis at 88 bid, 88¾ offered, up from 84½ on Tuesday, with $8 million traded, while its 101/2s jumped to 86¼ bid from 771/2, with $3 million traded.

Hertz announced that it had priced separate public offerings of its common stock and convertible senior notes. Total gross proceeds from the offerings and the substantially concurrent private placement to investment funds associated with Clayton, Dubilier & Rice, Inc. and Carlyle Group, the existing stockholders of Hertz Holdings, will be approximately $949 million.

Hertz plans to use the proceeds from the offerings to increase its liquidity and for general corporate purposes, including the repayment of consolidated debt.

Proud gains for Pilgrim's Pride

A trader saw continued upside in Pilgrim's Pride, whose bonds had firmed smartly on Tuesday in response to better monthly operating numbers for April.

He saw the bankrupt Pittsburg, Tex.-based poultry producer's 7 5/8% notes due 2015 "up a couple of points" at 86½ bid, 87 offered, "so I guess it's up a little more" from Tuesday. "It's still feeling good, up a little higher."

He saw the 8 3/8% notes due 2017 at 73 bid, 75 offered, up from Tuesday's levels around 71.

At another desk, a trader pegged Pilgrim's 7 5/8s at 86½ bid, which he called up about 3 points on the day, with $9 million traded, while its 8 3/8s moved up to 74 from 72 5/8 before, on volume of $6 million.

Stephanie N. Rotondo contributed to this report

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