Terremark, Paetec, RailAmerica price deals, Quicksilver slates; E*Trade excels on debt plan

By Paul Deckelman and Paul A. Harris

New York, June 17 - Terremark Worldwide, Inc. successfully priced an upsized issue of eight-year senior secured notes on Wednesday. The new bonds were heard to have firmed slightly on ther break.

Late in the session, Paetec Holding Corp. and RailAmerica Inc. also brought offerings of eight-year secured paper to fruition - the latter was upsized - although the pricings came too late in the day to allow any aftermarket dealings.

Quicksilver Resources Inc. announced plans to sell $425 million of seven-year notes, with the Fort Worth, Tex.-based energy exploration and production company expected to price its deal on Friday.

Meanwhile, high yield syndicate sources heard pre-deal market price talk on the pending offering for Wendy's International Holdings, LLC.

Tuesday's new deals from Limited Brands Inc. and Cinemark Holdings Inc. were heard to have come down from the high levels they hit after their respective pricings that session, amid a generally softer high yield market.

But while the overall trend In Junkbondland was definitely to the downside, one notable exception was E*Trade Financial Corp., whose bonds soared, particularly two issues which the New York-based online financial services company plans to take out via a debt-exchange offer announced Wednesday.

Profit-taking sent junk lower on Wednesday, according to a trader from a high-yield mutual fund.

"We were due," said the trader, who characterized the mid-week session as the "first big down day," although the market was weak on Monday and Tuesday.

Higher-quality bonds fell ½ to 1 point, the trader said.

The lower-quality liquid bonds were perhaps down 2 to 3 points, the source added.

"A lot of fast money has come into the market with the result that some stuff has been up as much as 10 points to 20 points in the past couple of months," the trader remarked.

Net asset valuations fell approximately 0.5%, according to a high-yield mutual fund manager who remarked that economic fundamentals have not kept pace with the huge technical spring rally in the high-yield.

RailAmerica upsizes

The primary market saw just over $1.5 billion price Wednesday from three issuers, each bringing a single tranche of secured paper.

RailAmerica priced an upsized $740 million issue of 9¼% eight-year senior secured notes (B1/BB-) at 95.923 to yield 10%.

The yield was printed on top of yield talk. The issue price came within the context of price talk specifying approximately 4 points of original issue discount. Railpower increased its deal from an original $700 million.

Citigroup, J.P. Morgan, Morgan Stanley and Wachovia Securities were joint bookrunners for the deal.

Proceeds will be used to repay term loan debt, to repay a swap and for general corporate purposes.

The bonds new RailAmerica notes were at 98 bid, 98½ offered shortly after the terms circulated late Wednesday, a sell-side source said.

Terremark sees good demand

Terremark Worldwide priced a $420 million issue of 12% eight-year senior secured notes (B2/B-) at 95.134 to yield 13% on Wednesday.

The yield priced on top of the 13% yield talk, while the issue price came within the context of price talk specifying 4 to 5 points of original issue discount.

The deal was launched at a size of $400 million. Factoring the discount, gross proceeds come to $399.563 million.

Credit Suisse, Jefferies & Co. and RBC Capital Markets were the joint bookrunners for the debt refinancing and general corporate purposes deal.

The new Terremark 12% secured notes due 2017 traded up 1 1/8 points on the break, according to a syndicate source who spotted them wrapped around 961/2.

The order book was well oversubscribed, according to the source, who added that mutual fund accounts, as well as "a couple of accounts you don't see in every deal" participated.

A trader said that he "did not see a lot of trading" in the new Terremark notes.

He said that "it looked like there was a bid about ½ point or so" above the Miami-based information technology company's issue price.

Paetec prices $350 million

Elsewhere Paetec Holding priced a $350 million issue of 8 7/8% eight-year senior secured notes (B1/B) at 96.549 to yield 9½%.

The yield priced 12.5 basis points beyond the wide end of the 9¼% to 9 3/8% yield talk. The issue price came cheap to the price talk that set forth approximately 3 points of original issue discount.

Banc of America Securities and Deutsche Bank Securities were joint bookrunners.

Proceeds will be used to repay debt under the company's senior secured term loan.

Wendy's for Thursday

Wendy's International set price talk for its $550 million offering of seven-year senior unsecured notes at 9¾% to 10% on Wednesday.

Books close at noon ET on Thursday, with the notes expected to price thereafter.

Credit Suisse, Citigroup and Banc of America Securities are joint bookrunners.

Proceeds will be used to optionally prepay approximately $125 million of senior secured term loan debt, and to make a distribution of the remaining proceeds to Wendy's/Arby's Group, which will used for general corporate purposes. Those purposes may include working capital, the funding for key strategic growth initiatives including new unit development, acquisitions of other restaurant companies, repayment or refinancing of debt and the return of capital to its stockholders, including through stock repurchases and/or dividends.

Quicksilver announces $425 million

Quicksilver Resources expects to price a $425 million offering of seven-year senior notes on Friday, according to a late-Wednesday press release.

Credit Suisse, Deutsche Bank Securities and JP Morgan are joint bookrunners.

Proceeds, along with funds raised from the sale of an interest in oil and gas leases, royalty interests, mineral interests and related assets to Eni US Operating Co. Inc. and Eni Petroleum US LLC, will be used to repay the remaining debt under the company's second-lien term loan facility due 2013.

Limited Brands heads lower

A trader said that Limited Brands' new offering of 8½% notes due 2019 was "very active this morning," with the Columbus, Ohio-based specialty retailer's paper coming down from the initial gains they had notched after the $500 million deal priced on Tuesday at 96.752, to yield 9% and then moved up on the break to bid levels around 971/4-971/2.

In Wednesday's dealings, he said, the bonds came down to a range between 96¾ and 97. "The bulk of the trading was people trying to move them above the issue price," with a lot of trading around 96¾ and 96 7/8. He saw the bonds going home Wednesday around 96¾ bid, 97¼ offered.

Cinemark seen mixed

The trader said that Cinemark Holdings' new 8 5/8% notes due 2019 stayed in a narrow range, trading around 98-981/2.

That was up modestly from the 97.56 price at which the Plano, Tex.-based movie theater chain priced its $470 million of new paper on Tuesday to yield 9%.

However, a source at another desk said that Cinemark's new bonds had eased back to a 973/4-98¼ context, from Tuesday's late levels at 98½ bid, 99 offered.

CB Richard Ellis seen 'well done'

One new deal which does seem to have done fairly well in the aftermarket arena was Los Angeles-based commercial real estate services provider CB Richard Ellis Services Inc.'s upsized offering of 11 5/8% senior subordinated notes due 2017. Those bonds - upsized from the originally planned $400 million - priced on Monday at 96.873 to yield 12¼%.

In Wednesday dealings, the trader said they were "bracketing 98," pegged around 97¾ bid, 98¼ and thus "still trading above their issue price."

At another desk, the bonds were seen having done even better, holding in a 98-99½ range.

He said that the offering "looked like a good deal to me," with a "nice coupon and a nice discount" from par.

"I think the deal was well done." He pointed out the company's respectable ratings at Ba3 /B+, adding "it's a well-known name, big coupon, good discount, and it was well-received. I don't think anyone was really trying to get out [of it]."

He further said that an issue like CB Richard Ellis was a likely candidate to figure in the debt-swap strategies which some investors use.

"If you can sell something like the Corrections Corp. of America 7¾% [notes due 2017], which trades around 98, and buy CB Richard Ellis 11 5/8s, it's a pretty similar rating, with a big coupon. A mutual fund is going to look at that."

He said that "those are the kind of names that are going to get sold in a weak market, people thinking that if they need to step up in quality, they'll be able to buy them cheaper later, and take advantage of the big coupon that's coming to market now. That's going to trade up - because people want the yield."

Recent Virgin, Owens deals softer

At another desk, a market source saw some softness among such recently priced names as Virgin Media Finance plc and Owens Corning.

Virgin Media's 9½% notes due 2016 were seen down about 5/8 point, holding just above 99; the New York-based provider of broadband telecommunications services in the United Kingdom priced $750 million of those bonds at 95.574 on May 29 to yield 10 3/8%, as part of a nearly $1 billion equivalent dollar- and euro-denominated two-part offering. The dollar bonds had firmed off its initial pricing levels over the next few sessions to eventually reach the par level.

Meanwhile, Owens Corning's 9% notes due 2019 dipped by a point to 96.5, on busy dealings. The Toledo, Ohio-based insulation maker had priced an upsized $350 million of those bonds - versus the originally planned $250 million - on June 3 at 98.386 to yield 9¼ %. The split-rated deal (Ba1/BBB-) attracted considerable attention from junk accounts as well as from high-grade investors.

Market indicators plunge further

Back among the established issues, a market source saw the CDX Series 12 High Yield index - which had fallen by 1 3/16 points on Tuesday - continue to retreat on Wednesday with about a 1½ points swoon to end at 82¾ bid, 83¼ offered.

The KDP High Yield Daily Index, which had lost 18 basis points on Tuesday, plummeted by another 78 bps to end Wednesday at 62.50, while its yield gapped out by 25 bps to 10.55%.

In the broader market, advancing issues - which saw their amazing 20-session winning streak dating all the way back to May 18 come to an abrupt end on Tuesday - fell further behind the decliners on Wednesday, trailing them by about a seven-to-four margin.

Overall market activity, measured by dollar-volume totals, fell about 7% versus Tuesday's levels.

A trader said that the market "opened up pretty weak, with some stuff down," and things in general "kind of all over the lot."

He said that "the larger liquid issues were probably down the most, because people would get rid of that stuff."

For instance, he said that Community Health Systems Inc.'s 8 7/8% notes due 2015, which had been trading as high as 99 on Tuesday morning before coming off that peak to end down around the mid-97 range later that session, continued to retreat on Wednesday. He saw the Franklin, Tenn.-based operator's $3 billion issue - thought of as a general market barometer in some quarters because of its great size and widespread distribution -- going home on Wednesday at around a 96¼ bid.

He added that "healthcare paper that had been up a lot the last couple of days," including the Community Health bonds, "is probably down a fair amount today, because they had strong, stable bids up there for a while" and the market was now pulling back.

Besides the heavy trading in E*Trade Financial bonds, "after that, you saw a variety of issues trade. I think people were looking at the market and saying 'it looks kind of crummy, and the [forward] calendar is getting big,' so I think the game is to try and sell stuff as close to par as possible with the lowest coupons, keep you cash position intact and buy stuff cheaper in the calendar."

E*Trade explodes upward

A trader said that E*Trade Financial "was probably the volume leader on the news that they're raising equity and are going to tender for debt."

He estimated that the company's most active three issues "are probably three of the top five on volume on Trace today."

He saw the company's 8% notes due 2011 going home around 98½ bid, 98¾ from level "below 90" on Tuesday, while its 12½% springing lien notes due 2017 were trading around the 89 level.

He saw the company's 7 3/8% notes due 2013 "not so active" as the other two issues, mostly trading in "smaller pieces" rather than big round-lot transactions. He saw the bonds get as high as 80 from the lower 70s previously."

Another market source agreed that E*Trade topped the volume charts, seeing at least $30 million of the 8s having traded up to above 97 by mid-afternoon, and about the same amount of 121/2s having traded to just under the 90 mark, noting that the strong volume reflected the fact that the 2011 and 2017 bonds are to be exchanged for new convertible debt as part of the company's $1.2 billion strategy for strengthening its capital structure, announced Wednesday morning.

The source saw relatively less volume - about $10 million - in the 7 3/8s, which are not being taken out, seeing them still having risen to 76 bid.

At another desk, a market source saw the 8% bonds going out just a tad below par, solidly up from the 83 level seen at Tuesday's close and up substantially further from the most recent previous round-lot trade, around 69 bid, earlier in the month. Trading was called heavy.

The source also saw the 121/2s jump over 20 points on the day to 91 bid, also on very busy dealings. The 7 3/8s, which saw a limited amount of round-lot trading and a lot of trading in smaller-sized pieces, the source said, ended around the 80 mark - up about 15 points from Tuesday's close and up nearly 20 on a round-lot basis.

The source meantime saw relatively few dealings in E*Trade's normally lightly traded 7 7/8% notes due 2015, which still managed to jump to the mid-70s, though mostly on small pieces, versus previous levels last week in the upper 50s.

The E*Trade surge followed the company's morning announcement that it will bolster its capital structure by selling $400 million of common stock, and by mounting an exchange offer aimed at the 2011 and 2017 bonds. E*Trade will offer to exchange more than $1 billion of newly-issued zero coupon 10-year convertible debt for all of the 8% notes and a portion of the 12½% notes.

E*Trade's largest stock and bondholder, Citadel Investment Group LLC, has agreed to participate in the exchange transactions for an total principal amount of at least $800 million face value of the existing long-term debt, including $200 million of the 2011 notes and at least $600 million face value of the 2017s, subject to reduction under certain circumstances. E*Trade will meantime offer to exchange all of its 2011 notes and up to $310 million face value of its 2017s not held by Citadel on the same terms. E*Trade expects to begin the exchange offer immediately after the pricing of the common stock offering; at that time, it will announce the full nuts-and-bolts details of the exchange transaction.

Retailers in retreat

Apart from E*Trade, market participants saw many issues on the downside.

Retailers, for instance, were among the laggards, hurt by the same trends that caused national chain-store sales overall to fall 4.5% in the first two weeks of June versus the previous month, according to data released this week by the authoritative Redbook Research, which keeps track of the industry.

Dallas-based high-end department store Neiman Marcus Group's 10 3/8% notes due 2015 lost nearly 7 points on the session to creep below the psychologically important 60 bid level.

Michaels Stores Inc.'s 11 3/8% notes due 2016 were seen down more than 4 points. The Irving, Tex.-based arts and crafts retailer's paper closed at 74 bid.

Rite Aid Corp.'s 8 5/8% notes due 2015 lost 5 points to end at 64, although another market source put the loss at 4 points.

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