Nexeo is day's sole deal; secondary remains pressured; Leap dips on results; NewPage, OPTI up

By Paul A. Harris and Stephanie N. Rotondo

Portland, Ore., Feb. 23 - Primary market activity remained muted on Wednesday as Nexeo Solutions, LLC completed the day's only junk deal, and that a downsized offering.

Meanwhile trading volume was "moderately active," according to a trader, while another remarked that the market was "for the most part down, but it took a pretty strong bounce off the lows."

Leap Wireless International Inc.'s debt dipped in trading, just one day after the company announced its fourth-quarter and full-year results. Despite showing a gain in revenues, the company reported a wider net loss.

Meanwhile, iStar Financial Inc. paper was steady as the company readied to speak with lenders regarding a new $3 billion credit facility. The company intends to use proceeds from the proposed facility to pay down bank debt.

It was a "no news is good news" day for NewPage Corp. and OPTI Canada Inc., as both companies saw their bonds gaining ground on no news. However, Harrah's Entertainment Inc./Caesar's Entertainment Inc. didn't fare as well, as its bonds dipped, also on no news.

Nexeo cuts amount

Nexeo Solutions, LLC and Nexeo Solutions Finance Corp. priced a downsized $175 million issue of seven-year senior subordinated notes (B3/B-) at par to yield 8 3/8%.

The yield printed 12.5 bps inside of the 8½% to 8¾% price talk.

Bank of America Merrill Lynch, Citigroup Global Markets Inc. and Barclays Capital Inc. were the joint bookrunners.

Proceeds will be used to help fund TPG Capital's acquisition of Ashland Inc.'s chemical distribution business, which will be named Nexeo Solutions.

Nexeo cuts cost of capital

The company downsized the bond deal from $200 million, and upsized its term loan by $25 million, increasing its size to $325 million.

That's an easy play to understand, according to a high-yield mutual fund investor who watched the deal and said that the new Nexeo 8 3/8% notes due 2018.

Nexeo's term loan is being talked at Libor plus 375 basis points area with a 1.5% Libor floor, the buy-sider explained, pointing out that the bank loan represents a cost of capital in the low 5% context, whereas the bonds pay 8 3/8%.

Nevertheless, the downsized bond transaction went very well, a source close to the deal said.

Following the New York close the new par-pricing Nexeo 8 3/8% senior subordinated notes due 2018 were hanging in at 101 bid, the source added.

Volatility, data hurt junk

Junk bonds tracked lower on Wednesday in line with equities, a debt capital markets banker said, and added that the market was hit with a double-whammy of headlines indicating ongoing macroeconomic weakness and increasing political volatility.

On the macroeconomic front, the S&P/Case-Shiller index of home values for December 2010 fell 2.4% from a year earlier, indicating that the U.S. economy remains sluggish.

Also, crude oil prices hit the $100 per barrel mark on Wednesday, before settling lower. That rally has been driven by fear that the political unrest which has taken hold in northern Africa, particularly Libya, could spread more widely in the Middle East, the banker said.

Spiking oil prices could further imperil economic recovery in Europe and the United States, the source added.

Against this backdrop, junk bonds priced Tuesday by South African dry goods retailer Edcon Pty. Ltd. continued to flounder in the secondary, the banker said.

Edcon's 9½% senior notes due 2018 (B2//), which priced at par in tranches of €317 million and $250 million on Tuesday, were both trading below issue price, with the dollar-denominated notes at 99½ bid, and the euro-denominated notes at 99 bid.

Crossover action

The crossover space generated news on Wednesday.

Wyndham Worldwide Corp. priced $250 million of split-rated 5 5/8% 10-year notes (Ba1/BBB-/) at a 225 basis points spread to Treasuries.

The deal, which was priced on the high-grade desk, came at the tight end of the 237.5 bps area price talk. However Wyndham priced tighter than the initial Treasuries plus 250 bps guidance, according to a buy-side source.

Bank of America Merrill Lynch, Credit Suisse Securities LLC and J.P. Morgan Securities LLC were the bookrunners.

Meanwhile, junk market sources also noted that the £750 million of 10-year senior secured notes in the market from Virgin Media Secured Finance plc briefly had a speculative grade rating.

The Standard & Poor's existing rating was BB+ before the agency raised its rating on the notes to BBB- on Wednesday.

That S&P rating renders the Virgin Media deal a pure high-grade play, as it accompanies a Baa3 from Moody's Investors Service and a BBB- from Fitch ratings.

High-yield interest in Wyndham was very limited, and is extremely limited with respect to Virgin Media, sources said.

Jo-Ann Stores starts Thursday

There was a bit of news regarding the high-yield forward calendar.

Jo-Ann Stores, Inc. plans to start a roadshow on Thursday for its $450 million offering of eight-year senior notes (expected ratings Caa1/CCC+).

That deal is set to price on March 3.

J.P. Morgan Securities LLC, Bank of America Merrill Lynch and Barclays Capital are the joint bookrunners.

Proceeds will be used to help fund the $1.6 billion buyout of the company by Leonard Green & Partners LP and for general corporate purposes.

Upon completion of the LBO, the issuing entity, Needle Merger Sub Corp., will be merged with and into Jo-Ann Stores, a Hudson, Ohio-based specialty retailer of fabrics and crafts.

Expecting a gradual pickup

Aside from the interference resulting from negative financial and political headlines, other forces are constricting primary market activity, sources said on Wednesday.

Players are away from their desks owing to vacations taken in conjunction with a holiday week in New York schools.

Also potential issuers continue to wend their ways through the traditional February blackout period brought about by the need to refresh financial numbers in order to replace those from the fourth quarter of 2010, which went stale on Feb. 15.

Further deal announcements are expected during the present week, including at least one $1 billion-plus transaction, a syndicate banker said.

Meanwhile a tech deal rumored on Tuesday materialized in the form of a Wednesday press release from MEMC Electronic Materials, Inc.

The company announced that it plans to sell $500 million of eight-year senior notes via Rule 144A and Regulation S.

The St. Peters, Mo.-based company plans to use the proceeds for general corporate purposes. These would include working capital, capital expenditures and the construction of solar power projects, as well as acquisitions, investments, strategic transactions and joint ventures.

That deal is expected to launch on Thursday, according to a market source.

However underwriters had not officially stepped forward as Prospect News headed to press Wednesday night.

Market stutters, Nexeo better

The secondary market once again was under pressure during the midweek session, as market indexes slipped.

The CDX North American High Yield Index fell ½ point to 103 9/16 bid, 103 11/16 offered. The KDP High Yield Index meantime dipped to 75.88, with a 6.69% yield, from 76.06, with a 6.61% yield.

"Some of it is weakness, some of it is obviously fear of anything that [the rising cost of] oil might take a toll on, whatever might be effected by unrest in the Middle East," a trader said.

But despite the weakness, the new Nexeo deal managed to gain momentum once the deal was priced, according to a market source.

The $175 million issue - downsized from $200 million - priced at par with an 8 3/8% yield. At the close of the market, the notes had traded up to 101 bid, 101½ offered, the source said.

Another source said Claire's Stores Inc.'s recent new deal - $450 million of 8 7/8% senior secured second lien notes due 2019 - "suffered the most" of all the recent new deals, falling to around 991/2. The bonds had hit a high around 102½ on Friday.

The source said the declines were due in part to the general softness of the market and also due to the fact that the deal was "overdone."

Leap falls on numbers

A trader called Leap Wireless International's 7¾% notes due 2020 active, but weaker, as the market responded to the company's quarterly report.

The trader deemed the debt 1½ points lower around 94 3/4.

On Tuesday, the San Diego-based flat rate wireless carrier posted a fourth-quarter loss of $167 million. That was a wider loss than the $64 million lost in the fourth quarter of 2009.

For the year, net loss widened to $785 million from $238 million the year before.

Revenue, however, gained 9% during the year to $2.69 billion. The fourth quarter saw an 11% increase in revenues to $708 million.

The quarter also brought about 430,000 new customers to the Cricket brand, while the year saw a net gain of 242,000 customers.

iStar steady on loan news

iStar Financial bonds were unmoved by news the company had hired JPMorgan Chase & Co. to facilitate a $3 billion credit facility.

A trader also noted that trading was thin in the credit. He saw the 5 1/8% notes due April 1 closing around 99, while the 8 5/8% notes due 2013 finished around 101 1/8.

Another trader also called the debt unchanged, seeing the 5.15% notes due 2012 at 99.

On Thursday, iStar will meet with lenders to discuss the loan facility. The company intends to use proceeds to repay bank debt maturing in June 2011 and 2012.

The company has about $2.67 billion in long-term debt due in 2011 and $3.42 billion maturing in 2012.

On the news, Standard & Poor's placed the company on positive watch and Fitch Ratings said it expected to upgrade its ratings as well.

iStar is a New York-based real estate investment company.

NewPage, OPTI gain ground

NewPage notes were trending higher, according to traders, though there was no fresh news out on the Miamisburg, Ohio-based coated papermaker.

One trader quoted the 10% notes due 2012 at 66 bid, 67 offered, the 11 3/8% notes due 2014 at 101 bid, 101½ offered and the 12% "super subs" due 2013 at 34 bid, 35 offered.

Another trader called the 10% notes up a half-point at 661/2.

Also up on no news was Calgary, Alta-based oilsands producer OPTI Canada.

"Those have grinded forward," a trader said, seeing the 7 7/8% and 8¼% notes due 2014 at 55½ bid, 53½ offered. The 9% senior notes due 2012 meantime closed at par bid, par ½ offered.

At another desk, a trader said the 7 7/8% notes were up "almost 2" to 53 and the 8¼% notes up "almost 1" to 52.

Harrah's falls with market

On the opposite end, Harrah's Entertainment/Caesar's Entertainment paper fell about 2 points on the day, with no news to act as catalyst.

One trader pegged the 10% notes due 2018 at 93, versus levels around 96 just two days ago. Another trader also placed the bonds at that level.

But another source called the notes 93½ bid, though still down a deuce.

Harrah's is a Las Vegas-based casino operator.

Broad market weakens

In the autosphere, General Motors Corp.'s benchmark 8 3/8% notes due 2033 fell a point to 34 bid, 34½ offered, while Ford Motor Co.'s 7.45% notes due 2031 slipped slightly to 108¾ bid, 109¾ offered.

A trader said Solo Cup Co.'s 8½% notes due 2014 were "getting beat up," dropping "almost 2 more [points]" to 863/4.

The trader also saw Ahern Rentals Inc.'s 9¼% notes due 2013 losing a point to end around 47.

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