Penney, Hillman price; Citgo, Allegiant slate; American Tire ahead; First Data falls again

By Paul Deckelman and Paul A. Harris

New York, May 18 - Retailer J.C. Penney Corp. priced a quickly shopped $400 million offering of 10-year notes on Tuesday, although the Plano, Tex.-based department store operator's bonds were heard trading around in the aftermarket on a spread-versus Treasuries basis, despite Penny's own BB junk ratings.

Hillman Group Inc. meantime priced a scheduled forward calendar issue of eight-year senior notes, which moved up a little when they were freed for secondary dealings.

Details emerged to flesh out previous whisperings on Citgo Petroleum Corp.'s upcoming $1.5 billion two-part bond deal, which is expected to price next week, while Allegiant Travel Co. announced plans for a $250 million offering of seven-year bonds, also expected to price next week. German business services company Loyalty Partner began a European roadshow for its euro-denominated five-year senior secured notes.

More immediately, price talk emerged on the offerings from American Tire Distributors and Games Merger Corp. - i.e. Dave & Busters, Inc. - which are likely to price on Wednesday afternoon.

In the secondary market, traders saw a largely featureless session, with few standout names.

One of those few was First Data Corp., whose bonds continued to take a beating on Tuesday, pushed lower for a third consecutive session in the wake of disappointing quarterly numbers reported Friday by the Greenwood Village, Colo.-based electronics transactions processor.

Elsewhere, General Motors Corp.'s bonds - which had been seen mostly higher in very active trading on Monday after the top domestic carmaker reported its first quarterly profit since mid-2007 - shifted into reverse on Tuesday, although its losses on the day, suffered in line with an overall downturn Tuesday in the risk markets like equities and junk, were not too bad.

JC Penney prices $400 million

JC Penney Corp. Inc. priced a $400 million issue of 5.65% five-year senior notes (Ba1/BB+/BBB-) at a 225 basis points spread to Treasuries.

The deal, which priced off the high-grade desk, was initially discussed at Treasuries plus 250 bps, and was subsequently launched at a 225 bps spread.

The notes came at a reoffer price of 99.719, resulting in a 5.687% yield to maturity.

Barclays Capital was the active bookrunner for the quick-to-market deal. Bank of America Merrill Lynch, JP Morgan and Wells Fargo Securities were passive bookrunners.

Proceeds will be used to make a cash contribution to the J.C. Penney Corp., Inc. pension plan.

The deal traded as tight as 212 bps, but ended the Tuesday session around the issue spread, according to an informed source.

Some accounts that threw in at 250 bps, dropped out when talked tightened to 225 bps, the source added.

Meanwhile a trader saw the new JC Penney notes trade 15 bps higher. However they gave about half that amount back, in Tuesday afternoon's softer market, the trader said.

"There was a decent amount of bonds that traded as allocations were severe," the trader commented, adding that the company is at the tail end of a tender process, so a lot of investors found themselves under-invested in the name.

Hillman prices at mid-talk

Meanwhile, Hillman Group, Inc. priced a $150 million issue of eight-year senior notes (B3/CCC+) at par to yield 10 7/8%.

The yield printed in the middle of the 10¾% to 11% price talk.

Barclays Capital Inc. and Morgan Stanley & Co. Inc. were the joint bookrunners.

Proceeds will be used to help fund a leveraged buyout of the company by Oak Hill Capital and to refinance existing debt.

The deal's comparatively small size was a prohibitive factor for some accounts, an informed source said.

However some investors who initially expressed concerns about the comparative illiquidity of a $150 million issue eventually came back into the deal, the source added.

The par-pricing bonds broke at 101½ bid, the source said.

Talking the deals

The dealers set the stage for the Wednesday session, putting out price talk for a pair of roadshow deals.

American Tire Distributors, Inc. talked its $250 million offering of seven-year second-lien notes (/CCC+/) to yield in the 9¾% area.

The books close at noon ET on Wednesday. Pricing is set for Wednesday afternoon.

Bank of America Merrill Lynch, Barclays Capital Inc., RBC Capital Markets Corp. and UBS Investment Bank are the joint bookrunners for the acquisition financing.

Elsewhere, Games Merger Corp. (Dave & Buster's, Inc.) talked its $200 million offering of eight-year senior notes (B3/B-) - also an acquisition deal - to yield 11% to 11¼%.

The books for Dave & Buster's also close at noon ET Wednesday, and the notes are expected to price after that.

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

Citgo rolls out $1.5 billion

The forward calendar grew during the Tuesday session.

Citgo Petroleum Corp. began a roadshow on Tuesday for a $1.5 billion two-part offering of first-lien senior secured notes.

The Houston-based refiner plans to sell 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 wraps up on May 27.

RBS Securities, UBS Investment Bank, BNP Paribas and Credit Agricole CIB are joint bookrunners for the debt refinancing and general corporate purposes deal.

Allegiant sets call for Wednesday

Meanwhile, Allegiant Travel Co. will host an investor call at 10:30 a.m. ET on Wednesday for a $250 million offering of seven-year senior unsecured notes.

The deal is expected to price during the week ahead.

Morgan Stanley has the books.

Proceeds will be used to pay the balance of the purchase price and induction costs for the MD 80 and Boeing 757 aircraft under contract and to make principal payments on existing debt payable in 2010 and 2011. Remaining proceeds will be used for other asset acquisitions, mergers or acquisitions and for general corporate purposes.

Loyalty Partner to bring euro deal

Finally, Germany's Loyalty Partner GmbH will roadshow a €160 million offering of five-year senior secured notes (B3/B) in Europe through the present week.

The deal is expected to price early in the week ahead.

JP Morgan is the active bookrunner. Commerzbank is the passive bookrunner.

Proceeds will be used to refinance debt.

Hillman's new bonds climb

A trader said that Hillman Group's new 10 7/8% senior notes due 2018 had moved up to 101 bid, 102 offered.

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

Penney trades on spread

Although the new J.C. Penney 5.65% notes due 2020 have a mostly junk rating (Ba1/BB+/BBB-), traders heard the new bonds being quoted on a spread versus Treasuries basis, as though they were investment grade - continuing a recent trend where some new issues straddling the border between high yield and high grade were choosing the spread side.

One trader said that the bonds had improved to 215/205 bps over, versus the 225 bps spread at which the $400 million issue had priced earlier in the session.

But another said that the bonds had improved to 220 bps bid, 215 bps offered initially, but then "widened back to issue," quoting them going out at 227 bps bid, 224 bps offered.

However, a third did see the bonds at 215 bps bid, 223 bps offered.

New L-3 attracts some interest

He meantime also saw the new L-3 Communications Corp.'s 8¾% notes due 2020 "trading a little above par," versus the 99.679 level at which the New York-based defense and security technologies provider's $800 million of bonds had priced, equivalent to 138 bps over Treasuries. The bonds carried a Baa3/BBB-/BBB- rating.

"There were a lot of trades at 993/4," he said, but they went home "a touch over par."

Existing L-3s active against new-deal backdrop

A market source meantime pegged L-3's junk-rated 5 7/8% notes due 2015 up more than 2 points on the day in busy dealings at 101½ bid, while the 6 3/8% notes due 2015 were 1½ points higher at 1011/2.

The existing bonds were seen to have gained inspiration from the company's new $800 million 10-year issue, which took place off the investment-grade syndicate desks of the various investment banks which handled the big deal.

Market indicators continue retreat

Among bonds not connected with the new-deal market, a trader saw the CDX Series 14 index off by a full point on Tuesday to 95 bid, 95½ offered, after having eased by 1/8 point on Monday, this on top of Friday's 1 3/8 point plunge.

The KDP High Yield Daily Index, meanwhile, lost 27 basis points on Tuesday to end at 71.06, after having retreated by 3 bps on Monday and before that, swooned by 47 bps on Friday. The index's yield widened out by 10 bps to 8.48% on Tuesday, after having edged up by 1 bp on Monday and having gapped out by 14 bps Friday.

Advancing issues were again behind decliners, for a third straight session, on Tuesday, by around a seven-to-six ratio, versus the six-to-five losing margin seen on Monday.

Overall market activity, represented by dollar-volume levels, jumped by about 32% on Tuesday from the previous session's levels, after having plunged by some 35% on Friday but then having risen 5% on Monday.

A trader said "the market's been softer today," although he added that "there are still bids out there for shorter paper, 2014 and under. Higher-quality, core-position kind of names has a bid for it, while the other stuff has been backing off"

He said that "the market was more active today" than on Monday and than on Friday when he noted the more than 30% volume slide. On Tuesday, he said, volume was about average, with trading concentrated in crossover names. "Big-cap, high-rated names seem to lead the activity."

Among such names, he said were the likes of Freeport McMoRan Copper & Gold Inc., "which is always at the top of the [actives] list, was trading pretty actively." There was also a hybrid issue from Capital One Financial Corp., and the recently priced 8% notes due 2020 from SLM Corp.

Another trader said that Junkbondland on Tuesday was "a little softer, along with equities," which fell on investors' renewed worries about Europe.

He said that Community Health Systems Inc.'s 8 7/8% bonds due 2015 were typical - the hospital operator's benchmark issue "seemed to lose a little steam" as the day dragged on and equities dragged junk bonds lower, finally finishing around 102¼ bid, 103 versus morning levels above 103¼ bid.

Yet another trader opined that "nothing too much was going on - just dribs and drabs.

"Nothing was jumping out at you."

First Data faltering further

A trader said that "since the numbers came out last week," First Data Corp.'s bonds have been active - but getting shellacked.

"They were down a few points last week," he noted, "and there were a lot of trades today."

For instance, the 9 7/8% notes due 2015 "are down another couple of few points," falling to 82½ bid 83 offered, from Monday levels around 84-85.

A market source at another shop called First Data's 10.55% notes due 2015 down nearly 3 points in active trading at 77½ bid, although the source saw the 9 7/8s at just over 85, up ¼ point.

The company's 11¼% notes due 2016 lost nearly 3 points to close at 731/2.

The first trader said that "volume is pretty high," marking it at third on the day's most actives list.

On Friday, the company's bonds had plunged between 3 and 5 points - followed by smaller losses on Monday - after First Data reported a first-quarter net loss of $240 million, widening out from a $231 million loss in the prior year.

Adjusted EBITDA for the quarter was $424 million, down from $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. During the quarter, the company made $32.1 million of principal payments on its U.S. and euro term loans.

GM backs off

A trader saw General Motors Corp.'s benchmark 8 3/8% bonds due 2033 down 1½ points from prior levels in the 36 area, on reduced activity from the more than $140 million of the notes which were reported to have traded on the Trace system on Monday following the release of the carmaker's first-quarter numbers - its first profit in nearly three years.

Another trader saw the bonds go from pre-numbers levels of 34½ all the way up to a peak level of 37 on Monday before settling back in at 36 bid.

That 37 high bid was again seen on Tuesday, he said, "but then they backed off, a little since then" and were quoted going home at 351/2.

Yet another trader pegged them down a point on Tuesday at 35 bid, 36 offered.

The GM bonds had risen on Monday after GM reported first-quarter net income of $865 million, or $1.66 per share - the first quarterly profit GM had shown since the second quarter of 2007, when it earned $891 million.

The latest 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 under the bankruptcy scalpel last year, as well as to robust sales on some of its new vehicles, such as the Chevrolet Equinox, a small sport-utility vehicle, and the Buick LaCrosse luxury sedan.

Ford stays parked

A trader said that there seemed to be little or no reaction in Ford Motor Co.'s bonds to the news that the Dearborn, Mich.-based number-two carmaker's ratings had been lifted by Moody's Investors Service.

A trader saw the Ford 7.45% bonds due 2031 going out at 88 bid, after having gotten no higher than 89 earlier, "There was not a lot of trading in that one," he noted.

He also saw Ford's 7% notes due 2015 unchanged at 98¾ bid, 99 offered, saying the bonds had shown "no reaction" to the good ratings news, which was 'kind of weird."

Moody's lifted Ford's and affiliate Ford Motor Credit Co.'s ratings on Tuesday, citing Ford's "significantly improved operating and financial performance," as well as the possibility that Ford and Ford Credit might be able to undertake "meaningful deleveraging."

Gaming gets pushed lower

Apart from the autosphere, a trader said that the gaming sector was "probably down a good point to 1½ points today."

For instance, a market source saw Harrah's Operating Co. Inc.'s 10% notes due 2018 down nearly 2 points to finish at 81½ bid, while MGM Mirage's 6¾% notes due 2012 dropped more than 3 points to end at 93 bid. However, the source also saw the latter's 6 5/8% notes due 2015 as having firmed by a point to the 82 area.

And the first trader said that he "didn't see much trading in Boyd Gaming Corp." even on the news that investment king John Paulson's eponymous hedge fund had made major purchases of both Boyd's common stock and MGM's during the first quarter, according to newly released regulatory filings - 40 million MGM shares and four million Boyd shares. At one point during the day, Boyd shares jumped by more than 12% on the news, although they ended up with a gain of around 4%, while MGM retreated by 2½%

He saw just one sizable trade in Boyd's 6¾% senior subordinated notes due 2014 at around 93 bid, down 2 points from their previous round-lot close, adding that "they're not the most active name."

The company's 7 1/8% sub notes due 2016 were the busiest credit in the company's capital structure, although most of the activity came in odd-lot trades. The trader called the notes unchanged at around 88-plus and "with the rest of the gaming market being down, that's probably up by default.

"Harrah's have been down by about a point and MGM's down the same thing."

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