WireCo, Catalyst price; market quietly slides with stocks; First Data, Ahern hit on results

By Paul Deckelman and Paul A. Harris

New York, May 14 - WireCo Worldgroup Inc. priced a $275 million issue of seven-year senior notes at a discount to par on Friday, to close out a strange week in the high yield primary arena which saw the market initially get spooked by last week's gruesome carnage in equities and the junk secondary, but then recover around mid-week to bring some decent transactions to market such as Wednesday's upsized Mylan Inc. mega-deal and Thursday's opportunistic Omnicare Inc. drive-by pricing. Both of those deals, meantime, held at around the same aftermarket levels seen on Thursday, as the new WireCo bonds firmed slightly from issue.

Friday also saw a quickly shopped add-on from Catalyst Paper Corp. mirroring an existing issue of the Canadian paper company's bonds, as well as a pair of euro-denominated pricings from German automotive components supplier TMD Friction Finance SA and Holland-based Central European coal operator New World Resources NV, the latter also a rapidly appearing add-on.

The junk secondary - which had started the week off with a bang as it rebounded strongly from the previous week's equity-driven slide, and then bounced around inconclusively for the next few sessions - once again followed the lead of stocks and turned definitively south on Friday, as measured by major statistical performance indexes, with many bonds again seen down multiple points. However, unlike last week's relatively high-volume rout, Friday's downturn was considerably quieter and more low key.

"Last week, it looked like the end of the world was coming," a trader said, "while today, it looks like nobody cares."

First Data Corp.'s bonds were major losers on the day, falling multiple points in fairly active dealings as the electronic transaction processor reported. first quarter results. Disappointing numbers were also the likely driver behind a fall in Ahearn Rentals Inc.'s bonds. But no further deterioration was seen in the bonds of one of Thursday's big losers, Cincinnati Bell, Inc.

WireCo brings $275 million

Against the backdrop of European and U.S. stock markets that were in retreat throughout the day, Friday's primary market remained active.

WireCo Worldgroup priced a $275 million issue of 9½% seven-year senior notes (B3/B) at 97.529 to yield 10%, on top of the price talk.

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

Proceeds will be used to redeem the company's 11% senior notes due 2015 and for general corporate purposes.

Before the deal was done there were covenant changes, and it was heard to be struggling, according to a mutual fund manager.

Nevertheless, this investor bought the deal.

"We like the company," said the buy-sider.

"And at 10%, the deal is coming wider than the market is right now.

"At some point you have to get invested. You can't just sit and churn new issues all day long."

TMD prices €160 million

Meanwhile, Germany's TMD Friction Finance priced a €160 million issue of seven-year senior secured notes (B3/B) at par to yield 10¾%.

The yield printed on top of the price talk.

Credit Suisse and Quirin Bank were the joint bookrunners.

Proceeds will be used to refinance an existing shareholder loan and for general corporate purposes.

Catalyst taps 11% notes

The remainder of Friday's primary market business came in the form of private placements.

Catalyst Paper priced $110 million of notes mirroring its 11% first-lien secured notes at 86.00 to yield 14.37%.

Cyan Capital Markets ran the books.

The deal was done as a private placement, according to a market source who added that the bonds will become free to trade under Rule 144A.

Proceeds will be used for general corporate purposes.

New World Resources adds on

Meanwhile New World Resources priced a €25 million tap of its 7 7/8% senior secured notes due May 1, 2018 (Ba3/BB-) at 99.50, a purchase price of par less 50 basis points of fees.

The deal was a bilateral private placement with one of the company's relationship banks, a source said.

Proceeds will be used for general corporate purposes.

The add-on notes will become fungible with the original €475 million issue which priced at par to yield 7 7/8% on April 20.

$3.2 billion week

With Friday's dollar-denominated issuance in the mix, the week of May 10 came to a close having seen junk issuers raise slightly less than $3.2 billion.

It extends year-to-date issuance to $108 billion.

The week ahead

The intense volatility that rocked the global capital markets late in the May 3 week failed to derail the high-yield primary market.

That's the stated verdict of both buy-side and sell-side sources who spoke with Prospect News late in the past week.

However, that volatility did manage to push back the pipeline somewhat, sources allowed.

At least one deal that was scheduled to be announced on Friday was pushed back into the week ahead owing to the weakness in stocks, sell-side sources said.

Meanwhile, the impact of the massive $1.7 billion outflow from the high-yield mutual funds for the week to May 12 - the third-largest outflow the funds have ever sustained - also is expected to be muted, sources say. That's because the outflow was also closely related to the intense volatility of the latter part of the May 3 week; most of the money went out on Thursday and Friday, May 6 and 7, according to one mutual fund manager.

As the past week got underway, the outflows pretty much ceased, the source said, and added that cash came in on both Tuesday and Wednesday.

Hence the week ahead should see at least a purposeful, if not massive, build up of the forward calendar, sources say.

LBO deals

The forward calendar, crossing over into the May 17 week, contains a trio of LBO deals.

Hillman Group, Inc. is expected to wrap up the roadshow for its $150 million offering of eight-year senior notes (B3/CCC+) on Tuesday.

Barclays Capital Inc. and Morgan Stanley & Co. Inc. are the joint bookrunners for the deal which is providing funds for the leveraged buyout of the company by Oak Hill Capital, as well as to refinance existing debt.

The Hillman Group is a Cincinnati-based distributor and provider of inventory management and in-store merchandising services.

One mutual fund manager told Prospect News that the deal may represent an opportunity.

"It's a $150 million deal, so the big guys won't be looking at it," the manager said.

"Right now you just can't get bonds in the big go-go names," the investor said, adding that orders for $20 million of each tranche of the Mylan, Inc. $1.25 billion two-part deal, which priced during the past week, resulted in allocations of just $4 million.

Hillman has the ability to generate a lot of free cash flow, the investor asserted.

"They're the category manager of the fastener aisle at Home Depot or Lowe's or Wal-Mart. They manage something like 60,000 SKUs.

"The margins are huge - 50%-plus gross margins. Their EBITDA margins are in the high teens.

"And people don't stop buying screws for one-off repairs during a recession.

"You're being bought for 9.2 times. And there is a lot of equity and trust preferred below you.

"This is kind of what the high-yield market was 20 years ago."

Meanwhile, Games Merger Corp. (Dave & Buster's, Inc.) is expected to wrap up the roadshow for its $200 million offering of eight-year senior notes (B3/B-) on Wednesday.

J.P. Morgan Securities Inc. and Jefferies & Co. are the joint bookrunners for the deal to help fund the acquisition of Dave & Buster's by Oak Hill Capital Partners.

Finally, SSI Investments II Ltd. and SSI Co-issuer LLC, financing units of SkillSoft plc, expect to price a $310 million offering of eight-year senior unsecured notes (Caa1/B-) late in the week ahead.

Morgan Stanley, Barclays and Deutsche Bank Securities are the joint bookrunners.

Proceeds, together with a new $365 million credit facility and an equity contribution, will be used to fund the acquisition of SkillSoft by an investor group comprised of Berkshire Partners LLC, Advent International Corp. and Bain Capital Partners LLC.

New WireCo bonds trade little changed

When the new WireCo Worldgroup 9½% notes were freed for secondary dealings, a trader saw the new issue left around 98-981/4.

A second trader pegged the new bonds at 98 bid, 99 offered.

That was up from the 97.529 level at which the issue had priced earlier in the session.

Thursday's Omnicare stays around issue

A trader saw Omnicare's new 7½% senior subordinated notes due 2020 at par bid, 100½ offered, while another quoted then at 100¼ bid, 100½ offered.

The Covington, Ky.-based provider of pharmaceutical services to healthcare facilities priced $400 million of the notes on Thursday at par. They firmed slightly to 100½ bid, 101½ offered in initial aftermarket dealings.

Wednesday's Mylan deal holds gains

A trader said that Pittsburgh-based generic and specialty pharmaceuticals maker Mylan Inc.'s new bonds, which priced on Wednesday, were slightly easier than their Thursday levels in line with the generally lower market on Friday.

He saw its $550 million of 7 5/8% notes due 2017 at 101 bid, 101 3/8 offered. Those bonds had priced Wednesday at 99.972 to yield 7 5/8%, and then had gotten as good as 102 bid by Thursday, before fading at the close to go home wrapped around 1011/2.

.He meantime did not see the other half of that deal - the $700 million of 7 7/8% notes due 2020, which had priced on Wednesday at 99.97 to yield 7 7/8%, and which had then moved up to a 101-101¾ context.

The $1.25 billion two-part deal was upsized from the originally announced $1 billion.

Kratos holds premium

A trader saw Kratos Defense & Security Solutions Inc.'s new 10% senior secured notes due 2017 trading at 101 bid, 101½ in early dealings.

On Thursday, they had gone home at 101 bid, 102 offered.

The San Diego-based defense contractor's $225 million issue of the bonds - upsized from the originally announced $200 million - priced at par on Wednesday.

Market indicators pushed lower

Among bonds not connected with the new-deal market, a trader saw the CDX Series 14 index tumble by 1 3\/8 points on Friday to 96½ bid, 97 offered, on top of the 3/8 point loss seen on Thursday. The index thus finished the week down from its mid-week high of 98 3/8 bid, 98 5/8 offered, but still showed considerable improvement from the 94½ bid, 95 offered level seen the previous Friday, May 7.

The KDP High Yield Daily Index, meanwhile, fell by 47 basis points on Friday to 71.36, after having risen by 17 bps on Thursday. It thus ends the week under Thursday's peak level of 71.83, but still well up from 70.77 at the previous Friday's close. The index's yield gapped out by 14 bps Friday to 8.37%, versus the tight for the week at 8.23% on Thursday, but remained in from 8.60% at the previous week's close.

Another widely followed junk market measure, the Merrill Lynch High Yield Master II Index, closed the week showing a year-to-date gain of 5.22%, up from the 4.497% mark at which the index had finished out the previous week. The index value rose to a reading 720.742 from 715.784 a week ago, while its yield-to-worst came in to 8.57% from 8.743% and its spread to worst versus Treasuries likewise declined to 642 bps from 655 bps the previous Friday.

Advancing issues fell behind decliners by a better than three-to-two ratio Friday after having led them during the two previous sessions.

Overall market activity, represented by dollar-volume levels, fell by 35% on Friday, on top of the 16% slide on Thursday. Volume was off some 45% from the previous Friday.

"There was not a whole heck of a lot going on," a trader said, calling Friday's session "in general, a quiet day. Things seemed to be coming in."

He said that "there's not huge volume, but stuff is trading down." He couldn't tell whether it was because the market was heading into a weekend, and everyone just said 'screw it - ring the [closing] bell and let's go,'

He further characterized much of the activity going on in the street as "could just be dealers shuffling around their positions, lightening up towards the end of the week."

He said that there had been "a lot of '$5 million offered, $5 million offered,' whereas if an account is selling, you don't necessarily see everything advertised '$5 million offered' and then an hour later - price reduction, and it's ¼ to ½ cheaper."

"Stocks got beat up, the world feels a little heavy," a second trader said, "and people tired to lighten up on the way home. Everything seemed skittish."

Contrasting Friday's downturn with the sell-off seen a week earlier, he opined that "it wasn't a panic" on Friday.

The first trader, scrolling through a long list of bonds, "without going over any particular name," saw "a lot of 'em down, between two and three points today, just a lot of paper."

He said there had been "not huge volume, but we're not talking 200 bonds - we're talking $1 million to $3 million or $4 million."

He said the bottom line was that debt of many large companies was down between n 1½ and 3½ points, "across the board.

"It's more than just a handful - we're talking name after name after name."

First Data falters

First Data's debt dropped in Friday trading, following the release of the company's first quarter results.

In the bonds, a trader said there was "some activity" in the credit.

"It's strange to see all three of their issues trading," he noted.

The trader saw the 9 7/8% notes due 2015 opening around 87 and then falling to 85 bid, 86 offered. That compared to 89 bid, 90 offered on Thursday, he said.

The 11¼% notes due 2016 were meantime "down a good 5 points" at 76 bid, 761/2, versus 81 bid, 82 offered previously. And, the 10.55% notes due 2015 slipped to 81 bid, 82 offered from levels around 86 the day before.

At another desk, a trader said "more than $100 million of [First Data's] various issues" changed hands, with the bonds down 3 to 5 points, depending on the issue.

He called the 9 7/8% notes "down a solid 3 points" around 851/2, while the 10.55% notes fell 3½ points to around 81. The 11¼% notes lost the most, declining "at least 5 points" to the 76 area.

For the first quarter, First Data reported a net loss of $240 million, compared to a net loss of $231 million in the prior year.

The Greenwood Village, Colo.-based provider of electronic commerce and payment services' adjusted EBITDA for the quarter was $424 million, compared with $472 million for the first quarter of 2009

Revenues for the quarter, however, were up 16% at $2.4 billion, versus $2.1 billion in the comparable period last year.

Also, as of March 31, the company had about $293 million outstanding under its revolving credit facility, compared to having nothing drawn at Dec. 31, 2009, and during the quarter, the company made $32.1 million of principal payments on its U.S. and euro term loans.

Ahern rocked by results

A trader said that Ahern Rentals Inc.'s 9¼% notes due 2013 had fallen as low as 55 bid, on "a couple of million traded," versus Thursday levels around 68½ bid.

"It's not a lot of trading, but there has been some trading."

Another market source said that the Las Vegas-based equipment rental company's bonds had opened at 55, well down from 68½ on Thursday, but then had pushed back up into the mid-60s and were there for most of the day - but said that late in the session there were a number of round-lot trades taking the bonds back down to around the 57 mark, with some $10 million of the paper having changed hands.

Ahern was scheduled to host a late-afternoon conference call Friday in which it would discuss its latest quarterly results, including a wider net loss of $20.214 million, versus its year-earlier red ink of $13.543 million.

Blockbuster bounces a little

Blockbuster Inc., a trader said, "had a bang up day," with the bonds "quoted all day long," the day after the Dallas-based movie-rental company released quarterly numbers which apparently disappointed the market.

He said "a bunch" of the 9% notes due 2012 traded, ending around 191/2-20, rebounding after having traded as low as 171/2-18½ earlier in the session. That left the bonds unchanged, he said, or maybe ½ point better.

Blockbuster's 11¾% notes due 2014 got down to around 65 bid, and then came off that low to finish around 66 bid, 67 offered, which the trader said was "maybe a half [point] different. He said the latter issue does not show up on the Trace bond-tracking system, but declared that "if the others [i.e. the 9% notes] were active, this was even more active, it's a bigger deal."

After the market closed Thursday, Blockbuster reported a net loss of $65.4 million, or 33 cents per share, for the quarter ending April 4. That compared to net income of $27.7 million, or 12 cents per share, the year before.

Total revenue fell to $939.4 million from $1.09 billion in the first quarter of 2009 and same-store sales declined by 7.8%.

Blockbuster finished the quarter with $109.9 million in cash and equivalents. Free cash flow was negative $54.8 million.

According to Gimme Credit LLC analyst Kim Noland, "Blockbuster's first quarter was weak but in line with our expectations."

Cincinnati Bell goes silent

A trader saw no further downside movement in Cincinnati Bell's bonds, which had fallen by multiple points on Thursday on the news that the Ohio-based telecommunications company plans to buy CyrusOne, a Texas-based data center operator, for about half a billion dollars.

Cincinnati Bell's 8¼% notes due 2017 fell more than 2 points Thursday to the 98½ bid level, while a trader at another shop pegged its 8¾% notes due 2018 at 96½ bid, 97½ offered, down 3 points on the session.

The company meantime outlined its plans to borrow nearly $1 billion via bank debt - although an unsecured bond offering is also a possibility - with about half of the sum being used for the CyrusOne purchase and the rest used to refinance existing debt, pay fees and for general corporate purposes

Auto names spin their wheels

A trader said General Motors Corp.'s benchmark 8 3/8% bonds due 2033 "went on a little ride," dropping as low as a 33-34½ context before going out at 341/2-35, which he said was down ½ point, on "a lot of volume."

He also saw GM domestic arch-rival Ford Motor Co.'s 7.45% bonds due 2031 quoted at 90-92, but on "no trading. They are unchanged."

At another desk, a trader saw the GM benchmarks down ½ point at 34 bid, 35 offered, while Ford's long bonds were down by a full point at 91 bid, 93 offered.

NewPage notes little moved

A trader said that NewPage Corp.'s 10% senior secured second-lien notes due 2012 were being quoted around 64-65, but said that he didn't think there was much activity in the Miamisburg, Ohio-based coated-paper manufacturer's debt.

He saw the company's 11 3/8% senior secured notes due 2014 settling in around a 96-98 context. But earlier, he said, "they were all over - they traded at 99, they traded at 971/2." Late in the session, he saw the bonds at 98, which he called down about a point, but said there was not much activity on that."

-Stephanie N. Rotondo contributed to this report

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