Re-tooled Western prices, Holly too; Thursday deals trade up; Michaels rises again, Cott adds

By Paul Deckelman and Paul A. Harris

New York, June 5 - Western Refining, Inc.'s $600 million bond deal priced - but not before some last-minute tinkering around changed the El Paso, Tex.-based petroleum refiner's offering from the originally envisioned structure of one eight-year fixed-coupon tranche to a two-tranche deal consisting of fixed- and floating-rate notes, thought it kept the same overall size.

A rival refiner - Dallas-based Holly Corp. - brought the day's other deal to market, a $200 million offering, also of eight-year notes, with no changes to the deal's structure.

Proving that this week was a busy one for companies in that business, bonds of yet another refiner that tapped the junk market for new cash, Tesoro Corp., were seen trading just under the par level - well above the level at which the company had priced its deal earlier in the week.

Oil and gas exploration and production operator Mariner Energy Inc.'s upsized offering of bonds - which had priced on Thursday at a discount of nearly 3 points to par - were seen by traders to have moved up into a 99ish context, well above its issue.

Apart from the energy names, Thursday's other new deal, for U.S. Oncology Inc., was seen doing even better in the aftermarket, moving up to the par level, a more than 2 point gain over issue

Traders saw further firming in Michaels Stores Inc.'s bonds, which had gained solidly on Thursday in response to the arts and crafts retailer's favorable fiscal first-quarter numbers.

There was, of course, also activity during the session among junk issuers that are not based in Texas - though Western Refining and Holly, Tesoro (San Antonio), Mariner (Houston), U.S. Oncology (The Woodlands) and Michaels (Irving) are all headquartered in the Lone Star State.

For instance, Canadian soft-drink bottler Cott Corp.'s bonds were sparkling Friday, while in the autosphere, Ford Motor Co.'s bonds' upside momentum was unbroken, while bankrupt arch-rival General Motors Corp. continued to rattle along in the break-down lane, shedding the gains which GM had notched earlier in the week.

The high-yield market was very quiet, but firmer on Friday, according to a high-yield mutual fund manager.

In the primary market the face amount of Friday's dollar-denominated issuance totaled $800 million, in three tranches.

All of it was issued by U.S.-based refiners.

Two of the three tranches saw yields printed wide of yield talk, and discounts that were cheap to price talk.

However the executions - both from different bookrunners - likely tell more about the refining sector than they tell about the market as a whole, the mutual fund manager said.

Western Refining restructures

Western Refining priced a restructured $600 million of two-part senior secured notes deal (B3/BB-) on Friday.

The company priced a $325 million tranche of 11¼% eight-year fixed-rate notes at 91.445 to yield 13%.

The yield came 25 basis points beyond the wide end of the 12½% to 12¾% yield talk. The issue price came cheap to the approximately 8 points of original issue discount talk.

Western Refining initially hit the market with a $600 million offering of fixed-rate notes.

However on Friday the refiner carved out a $275 million tranche of three-month Libor plus 750 basis points floating-rate notes which priced at 92.00. The floating-rate notes come with a 3¼% Libor floor.

The floating-rate notes priced on top of price talk.

Banc of America Securities LLC, Goldman Sachs & Co., RBS Securities Inc. and Wachovia Securities LLC were joint bookrunners for the El Paso, Texas-based refiner's debt refinancing deal.

About the restructuring, market sources said that bank loan accounts were looking to get into the deal, which is why the floating-rate tranche was carved out.

A trader said that the floater provided a means for the existing term loan investors, who were being taken out, to remain in the name.

Holly prices $200 million

Meanwhile Holly Corp. priced a $200 million issue of 9 7/8% eight-year senior unsecured notes (B1/BB/) at 94.105 to yield 11%.

The yield was printed 50 basis points beyond the wide end of the 10¼% to 10½% price talk. The issue price came nearly 2.9 points cheap to the discount talk which set out 2 points to 3 points of original issue discount.

UBS Investment Bank was the left lead bookrunner for the acquisition financing and general corporate purposes deal from the Dallas-based independent energy refiner. Banc of America Securities LLC and Goldman Sachs & Co. were joint bookrunners.

Imbalance in crude supply/demand

A mutual fund manager, who watched the Friday refining deals from the sidelines, expects to see some erosion of refiners' margins.

Crude oil inventories are up, the source said.

At the same time demand is repressed, owing to the economic downturn.

IFCO upsizes

The euro primary market saw activity on Friday.

IFCO Systems NV priced an upsized €200 million issue of 10% seven-year senior secured notes (Ba3/BB-) at 95.75 to yield 10 7/8%.

The yield came in the middle of the 10¾% to 11% price talk.

Deutsche Bank Securities Inc. ran the books for the deal, which was upsized from €180 million.

Proceeds will be used to pay down the Amsterdam-based logistics provider's 10 3/8% guaranteed senior secured notes due 2010 and to pay down its existing revolving credit facility.

$5.9 billion week

With Friday's three tranches included in the tally, the weeks dollar-denominated issuance comes to just above $5.9 billion of proceeds, in 15 tranches.

It was the fourth to top the $5 billion mark thus far into 2009.

With Friday's deals in the mix, year-to-date the high-yield has seen $50.5 billion of dollar-denominated junk issuance.

That is more than $15 billion higher than the $34.9 billion which had priced during 2008 to the June 5 close.

In part the reason for the amped up issuance is technical, sources say.

Year-to-date, the high-yield mutual funds have seen nearly $18 billion of aggregate inflows, according to a sell-side source who analyses information reported by AMG Data Services. Included in the figure is the total of cash that has flowed into the funds that report to AMG on a weekly basis, as well as those that report on a monthly basis, the source said.

And the swells continue.

AMG reported $917.8 million of inflows to the weekly reporting funds alone for the week to Wednesday. That represented the 12th consecutive positive flow and the third-largest inflow of 2009 to date, according to the sell-sider.

All of that cash means that the primary market is almost certainly going to remain active, sources say.

However the June 8 week gets underway with only three deals, totaling $550 million, on the active forward calender.

Clearwater Paper for Monday

Clearwater Paper Corp. expects to price a $150 million offering of seven-year senior notes (expected ratings B1/BB-) on Monday.

Goldman Sachs & Co. is the left lead bookrunner. Banc of America Securities LLC is the joint bookrunner.

Proceeds will be used to satisfy and discharge the Spokane, Wash.-based company's obligation related to $100 million of credit-sensitive debentures due Dec. 1, 2009.

The debentures were issued by an affiliate of Potlatch Corp., with obligations retained by Clearwater prior to the spin-off of Clearwater by Potlatch in December 2008.

Proceeds will also be used for general corporate purposes, including capital expenditures and possible acquisitions.

The rest of the week

Clearwater Paper joins Wallace Theater Holdings, Inc. which is roadshowing a $150 million offering of four-year senior secured notes, via Jefferies.

The roadshow is scheduled to run until the middle of the June 8 week.

Also expected to price during the June 8 week is Penn Virginia Corp., which is marketing a $250 million offering of seven-year senior notes, via JP Morgan.

However as the first week of June wound to a close sources conceded visibility on at least four other transactions.

Names, as usual, were scarce.

However Solo Cup Co. could bring a deal in the week ahead, according to a buy-side source, who added that Goldman Sachs would lead.

Waiting for Western

A trader said that Friday's session had been "kind of a quiet day," with many in the market "waiting all day" for the Western Refinery deal to price - something which it did not do until the end, when activity had pretty much wound down for the session, and for the week.

The trader said that he had first thought that the Western Refining deal could price as early as Wednesday night - "but it just kept getting delayed."

He noted the company's announcement earlier in the session that apart from the junk market, it had increased the size of its concurrent, but separate, offering of convertible debt and its offering of shares - although that was partly outweighed by a sharp fall in its stock since the original announcement.

Tesoro trades up

Western Refining - and Holly - competitor Tesoro's new bonds "seemed to be trading OK," a trader said, quoting those 9¾% notes due 2019 trading in a 99ish context, although he said that was strictly on smallish odd-lot dealings, most of them relatively small-sized.

Later in the session, a market source pointed out that some of those small trades late in the day had lifted the bonds' price up to, and in some cases, above par, with the paper seen going out at its high point, north of 102. But the only trade on the day in significant size - a little below $900,000 - had located the bonds at 99.

Tesoro had priced its $300 million of 9¾% notes due 2019 at 96.172 on Tuesday to yield 10 3/8%,

Mariner 'hangs in there'

He said that energy operator Mariner's $300 million of 11¾% notes due 2016 were "hanging in there" at 99 1/8 bid, 99 5/8 offered, after having priced on Thursday at 97.093 to yield 12 3/8%. The level was "pretty strong," he said.

Another trader pegged the bonds at 99¼ bid, 99¾ offered.

U.S. Oncology sees upside

U.S. Oncology's new 9 1/8% notes due 2017 were seen by a trader to have gotten as good as par bid, 100¼ offered - well up from the 97.926 level at which the company had priced its $775 million of bonds on Thursday to yield 9½%.

A second trader called the new bonds par bid, 100½ offered.

Market indicators firmer

Apart from the new deals, a trader saw the CDX Series 12 High Yield index - which lost ¼ point on Thursday - up 3/16 point Friday to 84½ bid, 85½ offered - well up from 81 3/8 bid, 81 7/8 offered at the end of the previous week on May 29.

In the broader market, advancing issues - which had led decliners for a 13th consecutive session on Thursday - kept the ball rolling again on Friday, continuing to hold a three-to-two edge.

Overall market activity, measured by dollar-volume totals, was down about 9% versus Thursday's levels.

More upside for Michaels

A trader said that Michaels Stores was "a big one, again," following Thursday's sizable gain in the Irving, Tex.-based arts and craft supply retailer on its favorable fiscal first-quarter numbers.

He saw the company's 11 3/8% subordinated notes due 2016, which moved up about 12 points on Thursday to the low 70s on active volume, push higher to 73 bid, 73¾ offered, which he called up a point "on decent volume."

Cott bubbles up

A market source noted that Cott Corp.'s 8% notes due 2011 had pushed up to 94.5, calling that a more than 8 point climb on the day from the mid-80s. Trading was busy, with over $9 million of those bonds changing hands.

At another desk, a source also saw the 94-ish level - but noted that on a round-lot basis, versus the most recent big-bloc transaction earlier in the week, the bonds were up perhaps 3 points on the day.

There was no fresh news out on the company that might explain such a move. Earlier in the week, Cott's New York Stock Exchange-traded shares hit a new 52-week high at $6.80 per share, largely fueled by technical factors.

The bonds' push into the 90s caps a remarkable rise in the Mississauga, Ont.-based soft-drink bottler, whose notes had begun the year mired in the lower 60s.

Cott - which bottles private-label beverages for retailers like Wal-Mart Stores Inc. - has recently been the focus of some takeover talk, centered on the possibility that one of the larger players in the industry, such as Coca-Cola, PepsiCo or Dr. Pepper Seven Up, may consider a purchase, or at least taking a stake, although there have to date been no official announcements of any such developments.

Saturn sale of little help to GM

In the automotive arena, a trader said he had not seen much doing in General Motors Corp.'s bonds, even on the news that the bankrupt carmaking giant had found a buyer for its Saturn unit, a day after announcing that a buyer for its money-losing Hummer division had been found,.

He said its bonds were "right around 11 for the most part - it seemed a little blah," although "there is always activity in it."

He said the Saturn news really did not have much impact, with the bonds still trading in a 10-11 context, "adjusting in that range."

Another trader quoted the bonds unchanged at 11-12.

Yet another quoted them generically at 10 bid, 12 offered.

A trader meanwhile quoted Ford' bonds higher, but he said it was "just quoting" - he saw no real trading - and estimated the 7.45% bonds due 2031 as "pretty much where they were in a 66-67 context."

A second trader saw Ford's 7.45% bonds due 2033 up 2 points at 68 bid, 70 offered.

Ford, another trader said, "continues to show strength," seeing its 7 3/8% notes due 2011 up a point at 90 bid, 92 offered.

Trump trades up

A trader saw Trump Entertainment Resorts Inc.'s 8½% notes due 2015 move up 3 points to 15 bid, 15½ offered, on "no news," although he said that the gaming sector "has been strong."

He also quoted sector peer MGM Mirage's 7¾% notes due 2012 up a point to 76.5 bid 78.5 offered.

Another trader also saw "some activity" in the Trump bonds around the 15-15¼ level, "up a good bit" from prior levels in the 12 area.

News reports quoted the company's CEO, Mark Juliano, as saying that the news earlier in the week that the company had terminated the $270 million sale of its Trump Marina casino and hotel in Atlantic City has aroused the interest of two to three "qualified buyers."

Juliano said selling the Marina, the smallest of the reorganizing company's three casino resorts, is "the right thing for us to do," and expressed confidence that such a sale could take place by the end of the year.

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