American, CKE, Deluxe deals price; Kodak jumps on new-deal news; Hooters, Dresser-Rand next

By Paul Deckelman and Paul A. Harris

New York, Mar. 9 - American Airlines, Inc. landed in Junkbondland on Wednesday, bringing a $1 billion offering of secured notes to market. The new bonds were later seen trading near their issue price.

Two other smallish deals which priced Wednesday, but which were not seen in the aftermarket, came from check printer Deluxe Corp., which did a $200 million issue of eight-year notes, and from restaurant operator CKE Holdings, Inc., which served up an upsized $200 million platter of five-year PIK toggle notes.

CKE sector peer Hooters Restaurants was seen likely to price on Thursday, after talk emerged on its $165 million six-year secured notes. High-yield syndicate sources also heard talk out on Dresser-Rand Group Inc.'s $375 million of subordinated 10-year paper not too long after the industrial equipment manufacturer's offering was first announced; they were expecting this deal, too, to price on Thursday.

The forward calendar fattened further as oilfield services concern Precision Drilling Corp. announced plans for a Canadian dollar-denominated eight-year offering; Norwegian energy concern DNO International ASA said it was considering issuing as much as $300 million of new notes; and First Data Corp. said in a regulatory filing that it would have to do a $750 million bond deal for lenders to okay an amend-and-extend deal for its credit facility debt.

The day's big news in the secondary market, meanwhile, also came out of the primary sphere, as Eastman Kodak Co. began shopping around a $200 million offering of secured notes - which in turn sent the photographic products giant's existing 2013 bonds up solidly in heavy trading.

American prices at higher talk

The primary market saw three issuers, each pricing a single tranche of junk bonds, raise $1.4 billion on Wednesday.

Against a backdrop of rising oil prices, and evidence of "pushback" from the high-yield buy-side, American Airlines got "pushed around" before it eventually priced its $1 billion issue of five-year senior secured first-lien notes (B2/B+).

The deal priced at par to yield 7½%, on top of price talk which was increased from earlier talk of 7% to 7¼%.

Citigroup Global Markets Inc. was the left bookrunner. Credit Suisse and J.P. Morgan Securities LLC were the joint bookrunners for the general corporate purposes deal.

Crude oil prices that have shot up 19% during the past month could not have helped the Fort Worth, Texas-based commercial air carrier's deal, market sources said.

The bonds were not trading well in the secondary market, according to a debt capital markets banker who spoke well after the Wednesday close.

Deluxe restructures

Further evidence of investor pushback surfaced in the form of a restructured deal from Deluxe Corp.

The St. Paul, Minn.-based check printer priced a restructured $200 million issue of eight-year senior notes (Ba2/BB-) at par to yield 7%, at the tight end of the 7% to 7¼% price talk.

The maturity of the notes was reduced to eight years from 10 years, while call protection was decreased to four years from five years.

J.P. Morgan Securities LLC and Credit Suisse Securities (USA) LLC were the joint bookrunners for the quick-to-market debt refinancing deal.

The reduction in the tenor of Deluxe's new 7% notes is a reflection of a surfacing preference among investors for shorter duration paper, according to a sell-side source who was not in the deal.

CKE Holdings upsizes

Coming to market with the new year's 10th deal to feature a dividend payment as at least a partial use of proceeds, CKE Holdings priced an upsized $200 million issue of five-year senior PIK toggle notes (Caa1/CCC) at 98.115 on Wednesday.

The notes pay a 10 ½% cash coupon, and an 11¼% PIK coupon.

The cash yield is 11%. The PIK yield is 11.759%.

The respective yields printed in line with final guidance. The amount was increased from $175 million.

Morgan Stanley & Co. Inc., Citigroup Global Markets Inc., RBC Capital Markets and Morgan Joseph Triartisan were the joint bookrunners for the dividend deal.

Hooters price talk

Looking ahead to the Thursday session, Hooters Restaurants talked its $165 million offering of six-year senior secured notes (expected B3/confirmed B) with an 11¼% to 11½% yield.

Jefferies & Co. is the bookrunner for the debt refinancing.

Dresser-Rand talk released

Meanwhile Dresser Rand Group Inc. talked its $375 million offering of 10-year senior subordinated notes (B1) with a yield in the 6½% area.

The order books for the quick-to-market deal close at 10:30 a.m. ET on Thursday.

UBS Investment Bank is the left lead bookrunner for the debt refinancing. Goldman Sachs & Co. is the joint bookrunner.

Kodak to bring $200 million

Kodak plans to price a $200 million offering of eight-year senior secured second lien notes (existing ratings B1/CCC) on Thursday.

Citigroup is the left bookrunner. Bank of America Merrill Lynch and Morgan Stanley & Co. are the joint bookrunners.

The Rochester, N.Y.-based provider of imaging technology products and services will use the proceeds for general corporate purposes, including the repurchase of debt.

Precision plans C$200 million

Precision Drilling unveiled a C$200 million offering of eight-year senior notes (Ba2), in the market via RBC Capital Markets Corp., Credit Suisse and TD Securities.

The proceeds, along with available cash, will be used to pay down the company's senior secured revolving credit facilities.

Pricing is expected during the present week.

LBI Media downsizes

LBI Media, Inc. downsized its offering of eight-year first lien senior secured notes (B2/B-) to $220 million from $240 million on Wednesday.

Along with the downsizing, the Spanish language broadcaster canceled plans to redeem its 11% senior discount notes due 2013 with proceeds from the deal. Approximately $28.7 million of pro forma cash on balance sheet and a $50 million undrawn revolver will be available to pay off the 11% discount notes beginning in October 2012.

Proceeds from the downsized bond deal will be used to repay bank debt.

There were no updates on the timing of the bond offer, which is presently in the market.

Credit Suisse Securities, Macquarie Capital and Wells Fargo Securities are the joint bookrunners.

American edges back up

When American Airlines' new 747-sized offering of secured paper was freed for dealings, a trader quipped that "at first, that jet definitely did not take off - they couldn't leave the gate." He saw the bonds initially at 99½ bid, par offered "everywhere," versus the new bonds' par issue price earlier.

Later on, though, "it slowly worked its way back up," to around 99 7/8 bid, 100 1/8 offered.

A second trader quoted those bonds at 99¾ bid, 100½ offered, while a third had them at 99 7/8 bid, 100¼ offered.

CKE, Deluxe trading no-shows

AMR's mega-deal overshadowed the day's other two offerings - CKE Holdings' upsized tranche of five-year PIK toggle notes, and Deluxe Corp.'s restructured eight-year transaction.

Neither was being quoted around in the aftermarket later Wednesday.

Headwaters moves ahead

Tuesday's sole dollar-denominated domestic deal, from South Jordan, Utah-based building products manufacturer Headwaters, Inc., moved up from its par issue price.

A trader pegged the $400 million issue of 7 5/8% notes due 2019 at 101 bid, 101½ offered. He said that "we saw it first thing this morning, and again the last thing today" at that level.

"It doesn't seem like there was a ton of trading going on in it," he said.

Although the bonds priced very late on Tuesday, well after most people had left, a second trader said that there had been "very light, very limited trading" in the new issue on Tuesday at 101½ bid, 101¾ offered, but by Wednesday afternoon, he saw them "wrapped around" 101.

Fish company continues to flounder

Going back to Monday's deals, Bumble Bee Holdco SCA's $150 million offering of 9 5/8%/10 3/8% senior PIK toggle notes due 2018 continued to trade below its issue price, even losing some more ground from Tuesday's already-lowered levels.

A trader saw the San Diego-based canned tuna fish company's deal offered at 971/2, without any bids.

That drive-by deal had priced Monday at 98.138 to yield 10%; after initially being quoted as high in the aftermarket as 99½ bid, par offered, they began to quickly sink, falling to 97½ bid, 98½ offered on Tuesday and then moving further down on Wednesday, with the previous session's already-lowered bid level becoming the new offer price.

A second trader said that he "didn't see 'em" during Wednesday's session, adding that people in the market "haven't been quoting them too readily."

Hertz heads lower

Monday's other new deal, for Hertz Corp., seemed to also be spinning its wheels; the Park Ridge, N.J.-based vehicle-rental giant's $500 million add-on issue to its 6¾% notes due 2019 was being quoted "a little lower," a trader said, at par bid, 100½ offered.

A second trader saw the bonds offered at 1003/4, "but I never saw a bid."

After pricing at 100.375 to yield 6.89%, that quick-to-market deal - which was hugely upsized from the originally announced $300 million and fully fungible with the existing $500 million of the notes priced in late January - had initially traded as high as 100 7/8 bid, 101 1/8 offered, but then had dropped down to 100 3/8 bid, 100 7/8 offered on Tuesday, and down to par bid on Wednesday.

Secondary mixed again

Away from the new-deal world, a market source saw the CDX North American Series 15 HY index off by 1/8 point on Wednesday to end at 103 7/16 bid, 103 9 1/16 offered, after having been up by 3/8 point on Tuesday.

The KDP High Yield Daily index meantime eased by 1 basis point on Wednesday to close at 75.92, on top of the 2-bps easing seen on Tuesday. Its yield held at 6.62% for a third consecutive session on Wednesday.

However, the Merrill Lynch High Yield Master II index rose by 0.224% on Wednesday, after having edged downward by 0.002% on Tuesday. That lifted its year-to-date return to 3.73%, a new peak level for the year. It was up from Tuesday's close at 3.705% and up as well from the previous year-to-date peak, 3.707%, seen on Monday.

Advancing issues led decliners for a second straight session on Wednesday, with their winning margin increasing a little to a still-slender several dozen issues out of the nearly 1,400 traded; on Tuesday, just a literal handful of issues - less than a dozen - had separated the winners from the losers.

Overall market activity, as measured by dollar-volume levels, was virtually unchanged on Wednesday, after having jumped by 46% on Tuesday from the previous session's levels.

As the Big East college basketball tournament in New York and other regional preliminary tournaments elsewhere began to heat up, traders saw March Madness starting to put at least a partial damper on market activity, which will intensify next week as the main NCAA championship tournament opening rounds get under way, leading up to the "Final Four" games in early April.

A trader said that "lots of accounts seemed to be there [at Madison Square Garden], or as soon as the market closed at 4 o'clock [ET], it seemed like a lot of people were logging off and going out to watch." The hoops tournament is also televised, providing distractions even for those New York-based market participants not fortunate enough to have scored one of the coveted tickets to the Garden.

Even outside New York, he said, "at least we'll have something to do" while all of this is going on - "keep track of our brackets."

Kodak climbs on new-deal news

Kodak's announcement of its $200 million upcoming senior secured bond deal was the catalyst for heavy trading in the Rochester, N.Y.-based photographic and imaging products maker's 7¾% notes due 2013, which one trader called "the big name" of the day.

He saw those existing bonds get up to 98½ bid, 99½ offered, which he called at least a 41/2-point rise, on the news.

Another trader, seeing the bonds trading at around the same level, said that although the company announcement did not specifically refer to the 2013 bonds - it only said the company would use the deal proceeds for general corporate purposes, which is understood to include possible debt repayment - he said that the news "made people feel better that they'll be able to take out the '13s when they mature," or perhaps even before that.

A market source at another desk said that well over $30 million of the bonds had changed hands heading into the close, making Kodak the busiest junk issue of the session. He quoted the notes as having risen to about the 98 level, while yet another source saw them all the way up at 99 bid, calling that a better than 6-point rise from the levels seen on Tuesday, when the bonds had also risen by more than a point despite there having been no formal announcement of the new bonds deal at that point.

Bankruptcy buzz drops Dynegy

Elsewhere, Dynegy Inc. was making headlines again for all the wrong reasons and the bad news put pressure on the company's debt - although the losses were not as bad as some were expecting.

The Houston-based power producer warned of a potential bankruptcy filing in a 10-K filed late Tuesday with the Securities and Exchange Commission. As a result, the company's debt - both corporate and bank - traded down.

Still, a bond trader said he "would have expected it to have fared worse" than it did, calling the bonds "fairly steady."

The 8 3/8% notes due 2016 were "off the most," losing 1 to 1½ points to close around 761/4. The 7¾% notes due 2019 were deemed unchanged at 681/2.

At another desk, however, the 7¾% notes were seen dropping over a 1 point to 68¼ bid.

Dynegy said in the filing that, based on available forward commodity price curves and considering current derivative contracts, it will likely be unable to comply with the EBITDA to consolidated interest expense covenant, particularly in the third and fourth quarters of this year.

Additionally, the company expects its available liquidity will continue to be reduced as a result of borrowing limitations under the covenant regarding the ratio of secured debt to EBITDA.

Dynegy went on to disclose in the 10-K filing that it is attempting to amend or replace the existing credit facility to avoid non-compliance with covenants, and that any amended or new deal will likely be smaller than the current $1.8 billion capacity currently available and carry higher pricing.

Despite Dynegy's warning, one market watcher wondered if the company wasn't simply "posturing" in an effort to "try to extract more from lenders and bondholders."

"There's an end-game I haven't fully figured out," he said. In his view, the bonds are likely covered at their current trading levels.

"There's more upside than downside," he said. "If you told me I had to either buy or sell, I'd buy."

"We don't anticipate a near-term chapter 11 filing and expect the company and its activist shareholders will find a way to amend/extend the current bank agreement or come up with alternative financing," wrote Gimme Credit LLC analysts in a note to clients. However, "we continue to be concerned that bondholders will be subjected to asset sales used to fund shareholder enhancements or even a debt restructuring that proposes a principal haircut."

Elsewhere in that same sector, a trader said Rosemead, Calif.-based power generator Edison Mission Energy's 7% notes due 2017 "continues to drift lower," quoting them at 71 bid, 72 offered.

Sbarro suffering continues

And from deep in the distressed-debt precincts, a trader said that Sbarro Inc.'s bonds were lower - or at least that's where they were being quoted. He said that the 10 3/8% notes due 2015 ended at 25 bid, 28 offered, although he said that it's just a small "$150 million deal - and there were no trades. It was just quoting - but the quote is 25-28."

He said that a couple of days ago, the bonds were being quoted in "a very wide market,"

at 20-30, "but you don't get much trading in it."

Another market source pegged the bonds 3 points lower at 26½ bid.

The Melville, N.Y.-based operator of Italian-style quick-service restaurants said in a regulatory filing on Monday that its lenders had agreed to extend the forbearance agreement under its first-lien credit facility for an additional 30 days, until April 1.

The company's 8-K report filed with the Securities and Exchange Commission said that the forbearance - its third since early January - covers non-compliance with the EBITDA covenant requiring it to show minimum EBITDA of $43 million. Besides that covenant breach, it also covers a notice of default received under the bonds' indenture, and Sbarro's failure to make an interest payment on the bonds that was due on Feb. 1.

Stephanie N. Rotondo and Sara Rosenberg contributed to this report

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