Upsized Burlington, Claire's deals price, trade up; Rite Aid up on loan news; funds gain

By Paul Deckelman and Paul A. Harris

New York, Feb. 17 - Retailers Burlington Coat Factory Warehouse Corp. and Claire's Stores, Inc. each came to market on Thursday with an upsized $450 million junk offering that priced at par.

When the new deals were freed for aftermarket trading, Burlington's seven-year notes shot up by at least 3 points, while the Claire's eight-year secured paper popped up a little more than a point.

Tuesday's upsized megadeal from Clear Channel Communications, Inc. was heard by junk traders to have continued to slog its way higher during Thursday's session.

Apart from the pricings, primary-side activity was muted, although price talk emerged on amusement park operator Palace Entertainment Holdings, LLC's $430 million offering of secured notes.

Away from the new deals, Rite Aid Corp.'s bonds rose by a point or more pretty much across the board, with traders seeing them helped by news of a new loan deal for the drugstore chain operator.

Some of the more recently active junk bond names from down in the distressed-debt precincts were also seen higher on Thursday, including OPTI Canada, Inc., Ahearn Rentals, Inc. and Great Atlantic & Pacific Tea Co.

Secondary market indicators were higher all around. Meanwhile, flows of new investor money into junk bond funds - a good barometer for overall junk market liquidity trends - showed yet another weekly gain, as investors continued to pour their money into Junkbondland.

Junk funds gain $375 million

After the session's activity had wound down, participants familiar with the weekly AMG high-yield mutual fund flow statistics generated by Lipper/FMI said that in the week ended Wednesday, some $375 million more came into those funds than left them.

As has been the case since the start of the year, the inflow was generally expected by market participants, given the strength seen in junk's performance since the start of the year.

According to a Prospect News analysis of the figures, it was the 11th consecutive cash injection, on top of the $1.299 billion inflow seen the week ended Feb. 9. That earlier inflow was the first of $1 billion or more seen since the week ended Dec. 8, when $1.03 billion more came into the funds than left them, and was the largest such cash infusion seen since the $1.391 billion inflow reported in the week ended last June 23.

In those 11 weeks dating back to Dec. 8, $7.091 billion of net inflows have come into the junk market, according to the Prospect News analysis.

On a year-to-date basis, 2011 net inflows have now totaled some $5.038 billion, according to the analysis, with cash infusions seen in each of the year's seven weeks so far, against no outflows yet.

That extends the strong inflow trend seen in 2010, when some $10.67 billion more came into the funds than left them, and inflows were seen in 37 weeks, against just 15 weeks experiencing outflows.

Cumulative fund-flow estimates may be revised upward or downward or be rounded off and could include unannounced revisions and adjustments to figures from prior weeks.

Analysts say the continued flow of fresh cash into junk - and the mutual funds represent but a small, though quantifiable, percentage of the total amount of money coming in - fueled the record new deal borrowing binges seen in both 2009 and then in 2010, as well as the robust secondary market seen both years. Both of those trends have continued on in 2011 as well.

Burlington Coat at tight end

The primary market saw a pair of issuers raise a combined total of $900 million on Thursday as market activity continued to wind down in front of the three-day Presidents' Day holiday weekend in the United States.

Both tranches were upsized to $450 million from $400 million.

Burlington Coat priced an upsized $450 million issue of eight-year senior notes (Caa1/CCC/) at par to yield 10%, at the tight end of the 10% to 10¼% price talk.

Goldman Sachs & Co. was the left lead bookrunner for the issue, which was upsized from $400 million.

J.P. Morgan Securities LLC, Bank of America Merrill Lynch and Wells Fargo Securities were the joint bookrunners.

The company will use $300 million of the proceeds to fund a distribution to equity holders. The $50 million bond upsizing will be used to increase that dividend from $250 million.

The Burlington, N.J.-based company will also use proceeds to redeem its 11 1/8% senior notes due 2014 and its 14½% senior discount notes due 2014.

Factoring the $50 million upsizing, the bond deal remained sized $50 million below the similarly structured $500 million offering that the discount retailer pulled last November.

At the time that original offering was withdrawn, the notes had been talked to yield in the 10% area.

While Burlington Coat's new 10% notes due 2019 priced at the tight end of price talk on Wednesday, they priced on top of the talk that had been set before the November deal was pulled.

Claire's Stores issue

Claire's Stores also completed an upsized $450 million issue on Wednesday.

The eight-year senior secured second-lien notes (Caa3/CCC/) at par to yield 8 7/8%.

The yield printed in the middle of the 8¾% to 9% price talk.

Credit Suisse Securities, J.P. Morgan Securities LLC, Goldman, Sachs & Co. and Morgan Joseph TriArtisan managed the deal, which was upsized from $400 million.

Proceeds will be used to repay bank debt.

The deal went well as evidenced by the upsizing, an informed source remarked.

Claire's most recent previous deal came in late May 2007, before the credit crisis, so investors had to do some work in order to freshen up on the credit, the source added.

The new deal had somewhat of an audience among bank loan accounts that were being taken out of loan paper and wished to retain exposure to the credit.

Palace Entertainment talk

The final session of the week gets under way with just one deal on the forward calendar left to complete before the close.

Palace Entertainment talked its $430 million offering of six-year senior secured notes (B2//) to price at par with a 9% to 9¼% yield on Thursday.

The order books closed late Thursday except for West Coast accounts with roadshow meetings.

Morgan Stanley & Co. Inc. and Credit Suisse Securities are the joint bookrunners for the debt refinancing deal.

Market activity could remain somewhat muted into the week ahead, syndicate officials say, adding that it won't be altogether dead but slower than the blistering January and early February pace.

Whether or not the accounts could use a breather, a period of reduced issuance can hardly be welcome because the buyside has piles of cash that need to be put to work, market sources say.

That big problem appears only to be growing.

New Burlington bonds up big

When the new seven-year bonds from Burlington Coat were freed for secondary dealings, a trader said the upsized $450 million issue "did really well," pushing up to 103 bid, 103 3/8 offered after having priced earlier in the session at par.

"Not a bad performance at all," he declared.

The new Burlington bonds had "a nice run," said a trader who saw them at 103 bid, 103¼ offered.

Claire's climbs in trading

The day's other new deal, from Claire's Stores, "did okay, too," according to a trader, "but not nearly as well" as the Burlington Coat offering.

He saw the eight-year secured notes at 101 1/8 bid, 101 3/8 offered, up from the par issue price.

He said the upsized $450 million issue was good as 101½ bid when it initially moved into the aftermarket, "then they came back in a little."

Burlington, on the other hand, "stayed strong."

A second trader agreed that while Claire's Stores' rise to 101¼ bid, 101½ offered was respectable enough, it clearly paled next to the solid jump the new Burlington bonds took.

Clear Channel churns higher

Clear Channel Communications' $1 billion of 9% priority guarantee notes due 2021were seen continuing to edge higher on Thursday.

A trader saw the San Antonio, Tex.-based media company's paper had pushed up to 102 bid, 103 offered from 101½ bid, 102½ offered around the middle of the day, but "now they're movin' up."

The company had priced that offering - upsized from the originally announced $750 million - on Tuesday at par. When the notes first hit the aftermarket later Tuesday, they had traded as high as 101 bid, 102 offered but then dropped back to around 100 5/8 bid, 101¼ offered going home.

On Wednesday, however, they had regained their stride and had pushed above the 101 mark, and then continued to firm on Thursday.

The trader saw the bonds open the day at 101¾ bid, 102¼ offered, then get as good as 102 bid before going to the mid-101 area and then bouncing back up to 102 bid. "The closest offering that I'm seeing is [10]3, but there's probably a somewhat cheaper offering around somewhere. It's exhibited some strength as the day wore on."

Wednesday deals a no-show

Traders meantime did not see any activity at all in the two offerings priced on Wednesday.

One of them said that someone had asked him about Country Garden Holdings Co., Ltd.'s $900 million issue of 11 1/8% notes due 2018, which had priced on Wednesday at 99.405 to yield 11¼%, but he said that he "couldn't even find a quote on that one," probably owing to the fact that the Hong Kong-based property developer's deal was largely oriented towards emerging markets investors.

And nobody was seeing much of the considerably smaller domestic deal from Dave & Buster's Inc. That $180.79 million of zero-coupon senior discount notes due 2016, which generated $100 million of proceeds for the Dallas-based operator of restaurants and entertainment centers, priced on Wednesday at 55.313 to yield 12¼%.

A trader said it was "pretty much put away."

Secondary indicators steady

Away from the new deal world, a market source saw the CDX North American Series 15 HY index up ¼ of a point on Thursday to end at 104 5/8 bid, 105 1/8 offered, after having gained 1/8 of a point on Wednesday.

The KDP High Yield Daily index meantime gained 6 basis points on Thursday to finish at 76.05, on top of the 4 bps gain seen on Wednesday. Its yield came in by 3 bps on Thursday to 6.63%, after having tightened by 1 bp during each of the prior two sessions.

The Merrill Lynch High Yield Master II index posted its fifth consecutive gain on Thursday, firming by 0.175% on top of Wednesday's 0.051% advance.

That lifted the index's year-to-date return to 3.268% - yet another new peak level for 2011 - from Wednesday's finish at 3.087%, the previous high for the year so far.

Advancing issues topped decliners for a third straight session on Thursday, leading them for a second consecutive session by a better than seven-to-six margin.

Overall activity represented by dollar-volume levels rose by 6% for a second straight session on Thursday.

However, traders were expecting a likely falloff of activity on Friday, with the week's forward calendar pretty much done and with a long three-day weekend looming. Although Friday is technically and officially a full session, to be followed by Monday's full market shutdown for the Presidents' Day holiday, market participants were expecting an early exodus.

"You clearly have drawn the short straw if you have to be sitting in the seat after 3 p.m. ET tomorrow," one said.

Rite Aid rallies

Among specific names, a trader said that Rite Aid was "a name that had a lot of activity in it," with "hundreds of millions of these things traded today."

Rite Aid's bonds were apparently getting a boost from the Camp Hill, Pa.-based drugstore chain operator's financing activities in the bank debt market, where it launched a $353 million tranche of five-year term-loan financing on Thursday with plans to use the money to repay about $321 million of existing term loan borrowings due in 2014.

The trader said that there was "a lot of trading throughout its whole capital structure," seeing the company's 9½% notes due 2017 up a point at 92 bid.

He also saw its 8 5/8% notes due 2015 up 1 point at 93 bid, 93½ offered, with "a decent amount of trading in that one."

Rite Aid's 9 3/8% notes due 2015 gained 1 point to end at 93½ bid, 93¾ offered.

Another trader said Rite Aid "seemed a little bit active today" on the bank loan news, seeing its 9 3/8s trading as high as 93 7/8 going home versus the trading range between 91 and 92 seen over "the last couple of days."

Rite Aid, yet another trader said, "had a good day, up 1 to 2 points depending on the issue." He said news that it is refinancing some of its term loan debt "helped that name to really rally."

NewPage pops on numbers

A trader said that NewPage Corp.'s bonds "did okay today," following the release of the Miamisburg, Ohio-based coated paper manufacturer's fourth-quarter and year-end 2010 results.

He saw its 10% notes due 2012 as "quite active," seeing them around 65 bid, 65½ offered, up from around the 64¾ level seen late Wednesday and the 64-64¾ context observed Tuesday, "so they were up a little on the news."

He also saw the company's 11 3/8% notes due 2014 "also up from [Wednesday], but kind of unchanged from the day before.

He quoted the bonds as trading Thursday between 100½ and 100¾ bid, up from a 991/2-to-99¾ range seen on Wednesday, "but the day before, they were trading around the par level.

"So it's up - not dramatically, but up."

NewPage posted net sales of $946 million for the fourth quarter, a 10% increase year over year. For the full year, sales came to $3.6 billion, up 16% from 2009. The gains were due, in part, to an increase in printing paper demand in 2010.

"This was a result of a recovery of advertising spending and magazine and catalog circulation during 2010 following a decline in 2009 attributable to weak economic factors and inventory reductions by customers," the company said in its earnings release.

Still, NewPage posted a wider fourth-quarter loss at $240 million, compared to $55 million the year before. Full-year net loss came to $656 million, up from $308 million the previous year.

"The decrease was primarily a result of lower average sales prices, asset impairment charges and lower other income recognized for the alternative fuel mixture tax credits, partially offset by higher core paper sales volume and lower interest expense," the company said.

As of Dec. 31, NewPage had $149 million of liquidity, consisting of $8 million of cash and equivalents and $141 million available under its revolving credit facility.

Upside for OPTI Canada...

OPTI Canada's bonds "had a lot of action" on Thursday, a trader said, seeing the Calgary, Alta.-based energy company's 8¼% notes due 2014 finishing at 51 bid, 52 offered on "a lot of quotes and a lot of trading."

He said that the OPTI bonds had started the day at around 49 bid, "so you can call them up 2 points."

Another trader, noting that there seemed to be a lot of activity in the name, philosophized that "there's always been a lot of activity in it," including last week, when trading reached into several hundred million dollars of its various issues at one point.

Still, he said that OPTI'S 7 7/8% second-lien senior secured notes due 2014, which trade on top of the 8¼% unsecured paper, was "somewhat active" on Thursday. He noted that the bonds had moved steadily upward since Wednesday, when they were trading with a 47 handle, and Thursday, when they were in a 48ish context. On Thursday, he saw the bonds trading between 49½ and 51, quoting them going home at 50½ bid.

He did not see any specific news out on the company that might explain the strengthening trend, aside from generally stronger oil prices amid a backdrop of continued Middle East turmoil. Crude oil for March delivery rose $1.37 on Thursday on the New York Mercantile Exchange to settle at $86.36 a barrel. It was the biggest gain so far this month, while crude futures are up 12% in the past year.

Another market source quoted the 8¼% notes up 3 1/8 points, at 51½ bid.

...and for Ahern as well

Also from deeply distressed territory on Thursday, a trader saw Wednesday's most volatile issue, Ahern Rentals Inc.'s 9¼% notes due 2013, as having improved on Thursday to around a 41-43 context with final trades around 42 bid.

That was a gain of 5 to 6 points from the mid-30s levels seen late Wednesday, when the bonds gyrated wildly after the company missed the scheduled Feb. 15 interest payment on those bonds. He saw "decent volume" in the name.

Ahern, said another trader, "had a little more bounce" on Thursday, continuing the upside momentum the Las Vegas-based equipment rental company's bonds had shown late in the session on Wednesday, when the paper came back from its early lows that included quoted levels in the upper 20s to end around the middle 30s.

On Thursday, the trader saw the bonds at 41 bid, 42 offered, trading flat after missing the coupon payment.

A&P improves

A trader said that Great Atlantic & Pacific Tea Co.'s 11 3/8% senior secured notes due 2015 moved up by 1 point at 98½ bid, 99½ offered, although he saw no fresh positive news out on the bankrupt Montvale, N.J.-based supermarket operator, which this week announced plans to close 32 of its more than 300 A&P, Pathmark, Waldbaums, Food Basics and Super Fresh stores in six northeastern U.S. states.

Williams up on split-up plan

In the crossover sphere, the Williams Cos. bonds were being quoted sharply higher as the market reacted to news of the planned division of the big Tulsa, Okla.-based natural gas company into two units - one focused on exploration and production of gas, the other on delivery through its vast pipeline network.

As part of the plan, Williams would have an initial public offering for up to 20% of the new exploration and production entity and use proceeds from the IPO for debt paydown.

That helped push up Williams' split-rated (Baa3/BB+/BBB+) bonds, like its 7 5/8% notes due 2021, up nearly 6 points on the day at just over 124 bid on very heavy dealings of $47 million. Its 8¾% bonds due 2032 gained almost 4 points on the day to the 128 level on turnover of $33 million.

However, several traders said that although Williams still carries a nominally junk rating from Standard & Poor's, the market considers it an investment-grade name for all intents and purposes. While they said there may have been some junk accounts participating in the bonds' rise, most of the activity was likely to have come from high-grade investors.

Auto names parked

A trader said that there was "literally no activity" in the old General Motors Corp. 8 3/8% benchmark bonds due 2033.

He saw the bonds - now the responsibility of Motors Liquidation Co., the entity created during GM's bankruptcy reorganization to hold Detroit giant's debt, unwanted, unprofitable operations and other liabilities, thus leaving its profitable car-making operations unencumbered - unchanged on the day at 35¼ bid, 35¾ offered.

He meantime heard no levels on GM domestic arch-rival Ford Motor Co.'s y7.45% bonds due 2031, which had last been seen trading around on Wednesday in a 1083/4-109¾ context

Stephanie N. Rotondo contributed to this report

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