Hovnanian sells secured notes, NOVA, Hercules, Solutia, others slate deals; CIT, TXU active

By Paul Deckelman and Paul A. Harris

New York, Oct. 5 - K. Hovnanian Enterprises, Inc. priced a quickly shopped offering of seven-year senior secured notes on Monday, high yield syndicate sources said. When the new notes were freed for secondary dealings, they firmed anywhere between ½ and 1 point from their issue price.

Hovnanian - which will use the deal proceeds to fund a previously announced tender offer for two other series of secured notes, as well as for some of its outstanding unsecured paper - was just one of several companies announcing new bond deals in what one trader called "an onslaught" of upcoming transactions - motivated, he said, by a desperate desire to get needed new financing now, before the widely feared closing somewhere down the line of the window of opportunity.

The biggest prospective deal was announced by Calgary, Alta.-based NOVA Chemicals Corp., which is hitting the road on Tuesday to market a $500 million offering of seven- and 10-year notes. Tuesday is also the day that Comstock Resources, Inc.'s $200 million eight-year notes deal is expected to price.

Also announcing new deals were GEO Group Inc., Solutia Inc. and Hercules Offshore, Inc. The syndicate sources said that GEO's deal is expected to price late Wednesday after a short roadshow, while the Hercules Offshore and Solutia transactions are seen likely to price on Thursday.

Traders meantime saw only limited activity in new deals which priced last week from such companies as Tops Holding Corp./Tops Markets LLC and Venoco, Inc.

Among existing issues without new-deal connections, traders saw a fair amount of activity in CIT Group Inc. bonds and those of Energy Future Holdings Corp., both of which have announced debt restructuring efforts involving exchanges of new bonds, at a discount, for the existing issues.

Hovnanian brings $785 million

K. Hovnanian Enterprises priced Monday's sole junk-rated deal - a $785 million issue of 10 5/8% seven-year senior secured notes (B1/CCC+) that came at 98.208 to yield 11%.

Credit Suisse and Citigroup ran the books for the quick-to-market deal.

Proceeds will be used to fund its previously announced tender offer.

Comstock for Tuesday

Comstock Resources plans to price $200 million of eight-year senior notes (expected ratings B2/B) on Tuesday.

Bank of America Merrill Lynch, BMO Nesbitt Burns and JP Morgan are joint bookrunners for the debt refinancing deal from the Frisco, Tex.-based oil and gas exploration and development company.

Active calendar hits $2 billion

The active new issue calendar built to over $2 billion on Monday.

In addition to Comstock, Hercules Offshore began a brief roadshow for its $300 million offering of eight-year senior secured notes.

The roadshow for the deal, which it being led by left bookrunner UBS Investment Bank, ends Thursday. Pricing is expected the same day.

Bank of America Merrill Lynch, Deutsche Bank Securities and Morgan Stanley are joint bookrunners for the bank debt refinancing deal from the Houston-based drilling services company.

Elsewhere Solutia plans to price a $300 million offering of eight-year senior notes (expected B2/confirmed B) on Friday.

Deutsche Bank Securities, Jefferies & Co. and Citigroup are leading the St. Louis-based chemical company's debt refinancing and general corporate purposes deal.

From elsewhere in the same industry sector, NOVA Chemicals will start a roadshow on Tuesday for its $500 million two-part offering of senior notes (expected ratings B1/B-).

The deal will be comprised of seven-year notes, which come with four years of call protection, and 10-year notes which come with five years of call protection.

The roadshow is expected to wrap up on Thursday. The deal is expected to price early next week.

Barclays Capital, HSBC, RBC Capital Markets, Scotia Capital and TD Securities are leading the debt refinancing and general corporate purposes deal from the Pittsburgh-based chemical company.

Hovnanian bonds head higher

When the new Hovnanian 10 5/8% senior secured notes due 2016 were freed for secondary dealings, a trader saw the bonds almost immediately break at 98½ bid, 99½ offered -- up from the 98.208 at which the issue had priced.

At another desk, a trader subsequently quoted the new bonds as having firmed from their initial level, to 99¼ bid, 99¾ offered.

However, yet a third trader said that the bonds were "weaker" than that peak level, and had come back in to 98 5/8 bid, 99 1/8 offered.

"That deal just came, BOOM.," he exclaimed, noting that the deal priced pretty much under the radar screen after its morning announcement that it was doing a deal - the likely first step, he said in a renewed "onslaught" of new deals.

"You've got NOVA Chemicals coming, you've got Comstock Resources - hold on to your hat.

"It feels like everybody is trying to get in the door [with new financing] before it closes. I don't blame anyone for wanting to come to market now - if you need cash, come and get it while it's there."

Although the new Hovnanian bonds were going out above their issue price, the trader further cautioned that "I don't know how well that deal is going to hold up."

Among the Red Bank, N.J.-based homebuilder's existing bonds, a trader said he'd seen those bonds "pretty much unchanged," with the 6¼% notes due 2016 at 76 bid, 78 offered. "I'm not seeing activity in the name, really," he said though he added that there had "been rumblings over the last few days, the last couple of weeks" from "a few of the homebuilder-type things. So it seems like they've improved a bit."

At another desk, Hovnanian's 6 3/8% notes due 2014 were quoted going home at 79 bid, up more than 2 points on the session.

Recent Windstream bonds better

A trader saw Windstream Communications' new 7 7/8% notes due 2017 continuing to trade "slightly above issue" at 98¾ bid, 99½ offered.

"They've held up pretty good," he said. "There's been a pretty steady 98½ bid out there, rising to 98¾ over the last two days. I would imagine the underwriters are probably bidding [99]."

The Little Rock, Ark.-based telecommunications company priced $400 million last Tuesday at 98.531 to yield 8 1/8%.

The company's existing 8 5/8% notes due 2016 were meantime seen trading actively, with nearly $10 million changing hands, at firm levels just below 104 bid.

Tops trades near issue price

A trader said he saw Tops Holding Corp./Tops Markets' new 10 1/8% senior secured notes due 2015 "a few times today," and quoted those bonds at 98½ bid, 99¼ offered. That was not far from the 98.354 level at which the $275 million issue, upsized from the original $250 million, had priced last Thursday to yield 10½%.

He said that Williamsville, N.Y.-based operator of Buffalo-area supermarkets' new bonds were "just kind of hovering around there, and nobody's doing anything" with it. He said the bonds had gotten as tight as 981/4-98¾ late Thursday, "when they came right out of the box. But other than that, we haven't heard any bids getting hit, so it's just one of those standoffs."

Venoco vanishes from secondary

The trader said that Venoco's $150 million of 11½% notes is "gonna be too small to see that" trading in the secondary.

The Denver-based energy exploration and development company priced the bonds on Friday at 95.03 to yield 12½%.

Stream Global issue 'put away'

A trader said that Stream Global Services Inc.'s new $200 million issue of 11¼% notes due 2014 hasn't been seen since around mid-week last week, when they were quoted around 96-97. "It's just been put away."

The Boston-based business-to-business software services provider priced its issue last Tuesday at 95.054 to yield 12½%.

Market indicators turn positive

Back among the existing bonds not connected with the new-deal market, a trader saw the CDX Series 13 index up by 1½ points on Monday to 92½ bid, 93 offered, on top of a one-point gain seen on Friday.

The KDP High Yield Daily Index gained 19 basis points on Monday to finish at 68.70, after having fallen by 32 bps on Friday, while its yield tightened by 6 bps to 8.50%, after having widened out by 10 bps the session before.

In the broader market, advancing issues led decliners for a second consecutive session on Monday, although by a relative handful of issues out of nearly 1,400 tracked.

Overall market activity, as measured by dollar-volume levels, fell by some 14% on Monday from Friday's pace.

CIT seen as a major feature

It was "a blah Monday," a trader said, pretty much a "sort of a boring day," outside of the continued activity in CIT paper, which had slid on Friday as details were released about the voluntary debt exchanges which the troubled New York-based commercial lender is offering to its bondholders - holding out the threat of a possible bankruptcy filing should it not get the desired level of investor response to the exchange offers.

He said that said that CIT was "still the big name on the day - the short paper is still trading a lot, in the low 70s," with the company's 6 7/8% notes coming due on Nov. 1 and its 4 1/8% notes maturing two days later "maybe down about a point" at about 73. "There's a lot of volume in that," he said, noting "they're right in the middle of this [new debt-for-old debt] exchange, and [people are] not exactly sure what's going to happen with them."

A market source at another desk saw brisk activity in CIT, with two of the company's issues - the 5.40% notes due 2016 and the 5.20% notes due 2010 - having traded over $10 million by mid-afternoon, putting them among the day's Most Active issues. The 5.40s were trading slightly better than their Friday levels, at just under 65 bid.

Another market source pegged the company's 5.85% notes due 2016 up more than 2 points to the 65½ level, although also seeing its 5% notes due 2014 down more than 2 points at just below 62.

A trader said that "we did see a lot of CIT names come across [the screens] today, and we had some guys with bid-wanteds, but those were smaller pieces."

He quoted the 7¾% notes due 2012 bid around 63 and "looking for paper." The 5.40% notes due 2012s, he said, were "circling right around that 63 number, in a 62-65 context, while the 5.60% notes due 2011 were trading in the lower 80s, "83ish to 85ish. But we didn't see huge amounts being quoted out there - just kind of people sticking their toe[s] in the water."

TXU trades on debt-exchange plan

Another active name was Energy Future Holdings Inc. - the old TXU Corp. - as investors tried to figure out the impact of the Dallas-based utility operator's announced plans to cut its more than $44 billion debt load by $2 billion by swapping new bonds for as much as $6 billion of existing paper, at a discount, to avoid a possible default.

A trader said "the big shops trade it in size - there's all kinds of activity in it," in the wake of the company plans for the debt-for-debt-exchange, with the 10¼% 2015 notes at 67-69, and its 10 7/8% notes due 2017 at 69-71.

"There was huge amounts of activity from the big shops," he opined. "It was quoted all day long. I'm sure they traded a gazillion of those things."

Another trader said the TXU bonds were "off a little - but it wasn't meaningful." Rather, he said, most players were "trying to digest" the meaning of the company's announced offer, to determine whether it would be better to tender the bonds under the offer, hold them, or get out of them now.

A trader said that the company's 7.46% notes due 2015 were offered at 75, while the most active issue, the 10 7/8% notes due 2017, were seen by a market source at 72 bid, well below its day's peak level near 78, but actually just ½ point lower on the session. A second source saw the latter bonds going home at a little over 70, down a deuce on the day. Nearly $20 million of the '17s had changed hands by mid-afternoon, making it one of the most actively traded credits.

TXU's Texas Competitive Electric Holdings Co. 10 ¼% notes due 2015, on the other hand, were being quoted up 3 points at 72½ bid.

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