American Tire, Dave & Buster's price; NewPage, Verso lead paper sector lower in 'ugly' market

By Paul A. Harris and Rebecca Melvin

New York, May 19 - Two new deals priced in Wednesday's primary market session in high yield while the overall tone was generally weaker on lower-than-usual volume, sources said.

But they added that the "ugly" market moved off its lows toward the end of the session.

Both new offerings are being used to fund leveraged buyouts. American Tire Distributors, Inc. sold a $250 million issue of seven-year senior secured notes wider than talk while Games Merger Corp. (Dave & Buster's, Inc.) priced a $200 million issue of eight-year senior notes at the tight end of talk.

As two deals left the calendar, another two joined. Willbros Group, Inc. and DriveTime Automotive Group, Inc. both announced roadshows to promote new bond sales.

Among specific issues moving in the secondary, two coated-paper names, NewPage Corp. and Verso Paper Corp., were down particularly hard as the paper sector got hit early and didn't recover as well as the rest of the market, one trader said.

American Tire prices wide of talk

American Tire Distributors, Inc. sold a $250 million issue of 9¾% seven-year senior secured notes (B2/CCC+) at 98.76 to yield 10%.

The yield printed 12.5 bps wide of the 9¾% area yield talk.

Bank of America Merrill Lynch, Barclays Capital Inc., RBC Capital Markets Corp. and UBS Investment Bank were the joint bookrunners.

Proceeds will be used to help fund the acquisition of the company by TPG Capital.

Dave & Buster's at the tight end

Meanwhile, Games Merger Corp. (Dave & Buster's, Inc.) priced a $200 million issue of eight-year senior notes (B3/B-) at par to yield 11%.

The yield printed at the tight end of the 11% to 11¼% price talk.

J.P. Morgan Securities Inc. and Jefferies & Co. were the joint bookrunners.

Proceeds will be used to help fund the acquisition of Dave & Buster's by Oak Hill Capital Partners.

Games Merger will be merged with Dave & Buster's, a Dallas-based operator of family restaurant and entertainment properties.

Willbros to start roadshow Thursday

Willbros Group, Inc. will begin a roadshow for an acquisition financing deal on Thursday

The $250 million offer of six-year senior secured second-lien notes (B3/B+) is being led by left bookrunner, UBS Investment Bank. Credit Agricole CIB and Credit Suisse are joint bookrunners.

Proceeds will be used to partially fund the acquisition of InfrastruX Group, Inc.

DriveTime starts roadshow

Meanwhile, DriveTime Automotive Group, Inc. began a roadshow on Wednesday for a $200 million offering of seven-year senior secured notes (B3/B).

Jefferies & Co., RBS Securities and UBS Investment Bank are joint bookrunners.

Proceeds will be used to repay debt.

Prices, volumes lower

Even as the primary managed a respectable showing, sentiment was not so rosy at the secondary desks.

"All I can say is: ugly, ugly, ugly. Volumes are down," a New Jersey-based trader said, adding that it was weak across virtually all market sectors, and the market was generally sloppy.

Lower volume may have been caused by the Jewish Shavout holiday, with some market participants out of the office, sources said. But other sources said they didn't sense any real attrition in terms of market players.

"We were kind of busy. It's not like we saw a dramatic pick up in flows, not a ton of size, but a lot of names," a New York-based trader said.

Driving weakness in the credit and broader markets was the European debt crisis and uncertainty surrounding government intervention there and in the United States, and "the fact that you can't short the banks and all the political stuff going on," a trader said.

No one name in particular stood out, sources said; but the market overall was called lower by ¼ to ¾ point; and some players called the junk bond secondary market lower by ½ to 1 point.

Higher beta names were trading down by larger amounts than the rest of the market, they said.

NewPage and Verso Paper were cited as falling particularly hard.

A trader said that NewPage's 10% notes due 2012 were down about 4 points on the day to 58. A second trader said the Miamisburg, Ohio-based coated-paper maker's bonds were down close to 6 points.

Verso Paper's 11 3/8% notes due 2016 were down about 5 points at 86, according to one trader. And a second trader said the Memphis, Tenn.-based paper company's bonds were down 5.5 points on the day.

Chesapeake trades around call price

Chesapeake Energy Corp.'s call of all $1.33 billion of its 7½% notes due 2013 and its 6 7/8% notes due 2016 caused some action in that name.

"We traded a lot of Chesapeake on a call, right around the call price," a trader said.

Another trader said that the Chesapeake bonds were trading just above the call price.

The Oklahoma City-based natural gas producer said it will redeem $1,334,260,000 of outstanding notes on June 21.

To be redeemed are the company's $363.823 million of 7½% senior notes due 2013, $300 million of 7½% senior notes due 2014 and $670.437 million of 6 7/8% senior notes due 2016.

The redemption price is 102.5 for the 71/2s and 102.292 for the 6 7/8s.

Holders will also receive accrued interest through the redemption date.

Chesapeake's 7½% notes of 2013 and the Chesapeake 7½% notes of 2014 were the most active of the issues, and they were last trading in the 102.5 range, a trader said.

They had been down fractionally from that level before the call, he said.

The Chesapeake 6¼% convertibles due 2018 were trading unchanged at the 98 level. A little more than $15 million of that issue traded.

"Chesapeake was generally active and a little bit heavier. But Chesapeake has had a huge run up, so it's one of those places that guys looking to blow out of a position would go to" a trader said.

In contrast, some of the new issues, that have been trading fairly well, are names that market participants are tending to stay in, the trader said.

Financial names hold up

CIT Group Inc. saw its bonds hold up fairly well on the day, with the CIT 7% bond of 2017 down only about ¼ point at 91, a trader said.

"Financial stocks did okay also. But they have been getting battered so badly, that you'd expect a breather," a New York-based trader said.

The New York-based financer of small to medium businesses saw its shares pare losses midsession and end lower by only 49 cents, or 1.3%.

"Banks were 3 points wider to even, and brokers were 5 wider to 5 tighter," a trader said of financial bonds.

First Data a little heavier

First Data Corp., whose bonds have been taking a beating in recent sessions, remained weak and pretty liquid on Wednesday. The Greenwood Village, Colo.-based electronics transactions processor has been under pressure for the last four sessions since it reported a wider first-quarter net loss of $240 million last Friday.

"About $40 million [of bonds] traded. It was pretty liquid," a trader said.

GM, Ford extend dip

The two main engines of the autosphere, General Motors Corp. and Ford Motor Co. saw their bond spectrums down by about a point.

Market indicators flat

With market weakness especially in some of the higher beta names and then a bounce off the lows, the CDX Series 14 index, which tracks bonds not connected with the new-deal market, ended the day Wednesday essentially unchanged at 95 1/8 bid, 95 5/8 offered, after sinking to a low of 94 during the session. Most of the day was spent in the 94½ to 95 range.

"It had been quite a bit lower earlier, but it went out just about unchanged on the day," a trader said. The improvement was in tandem with credit markets in general, he said.

The KDP High Yield Daily Index, meanwhile, was seen down 0.16 basis points to 70.90 on Wednesday, from 71.06 on Tuesday.

"It closed basically where it opened. We saw customers buying, coming in at lower levels, and hitting bids to get out of risk, but there was no real significant follow-through from customers. They see buying opportunities, but they are in a wait-and-see mode; and they don't see any reason to jump in and start selling. Cash needs are going to drive that," a New York-based sellside trader said.

"A couple of deals priced that soaked up some cash. We had Dave & Busters, and JC Penney yesterday and Hillman and they are all trading pretty well." the trader said.

GM, Ford slip further

A trader saw General Motors Corp.'s benchmark 8 3/8% bonds due 2033 was down about a point to the 34 bid, 34.5 offered context after 4 p.m. EST, down from about 35.5, where they went out on Tuesday, and from the 36 area on Monday.

There were more than $30 million GM bonds trading on the day, a trader said.

"They had a good run in the last couple of days. They were as high as 36 bid, 37 offered," a trader said.

The strength was seen Monday when the Detroit-based automaker reported its first quarterly profit since 2007.

Ford Motor's 7.45% bonds of 2031 were also down about a point at 87.5 bid, 88.5 offered.

A second trader called the bonds of the Dearborn, Mich.-based automaker down ½ point.

The latest GM quarterly results represented a sharp turnaround from the car company's loss of $6 billion, or $9.78 per share, a year earlier, during the period when GM was readying itself for its bankruptcy filing. First-quarter revenue was $31.5 billion, a 40% jump from a year ago.

GM's performance also improved on a sequential basis from the $3.4 billion of red ink recorded in the fourth quarter of 2009 on revenues of $32.3 billion. That quarter was the company's first full quarter of operations out of bankruptcy protection, since GM spent a portion of the 2009 third quarter under the Chapter 11 umbrella.

GM attributed its improved performance to its having shed tens of billions of dollars of debt and other burdensome obligations after going through bankruptcy last year, and also to strong sales on some of its new vehicles, such as the Chevrolet Equinox, a small sport-utility vehicle, and the Buick LaCrosse luxury sedan.

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