Jarden leads new-deal parade; power producer companies dominate secondary

By Paul Deckelman, Paul A. Harris and Stephanie N. Rotondo

New York, Feb. 7 - Jarden Corp. priced an upsized offering of more than a half-billion dollars of 10-year notes Wednesday - in a busy primary market session which also saw successful, if somewhat smaller pricings from Invacare Corp., Great Canadian Gaming Corp., PGS Inc. and Calfrac Holdings LP. The new bonds all firmed - some of them pretty handsomely - when they were freed for secondary dealings, traders said.

Also in the new-deal arena, Griffin Coal Mining Co. Ltd. was heard getting ready to sell a smallish $50 million add-on to its existing tranche of 2016 bonds, probably during Thursday's session.

In the secondary market, apart from the rise in the new-deal issues freed for trading, much of the activity took place in the bonds of power-producing companies in the news, including Aquila Inc., which agreed to be acquired by Great Plains Energy Inc., as well as Dynegy Inc., TECO Energy Inc. and Calpine Corp.

Apart from the utility operators, DirecTV Group Inc.'s bonds were better on solid quarterly results posted by the El Segundo, Calif.-based satellite TV broadcast industry leader.

The distressed-debt markets, meantime, saw continued gains in the bonds of the bankrupt Latrobe, Pa.-based fruit-juice producer Le-Nature's Inc.'s bonds.

A high yield investor told Prospect News that junk was firmer on Wednesday, with most of the focus on the new issue market.

That new issue market saw five companies, each pricing a one-tranche deal, raise $1.218 billion of proceeds.

Owing to the fact that high yield accounts are currently facing what one investor characterized as an historic scarcity of paper, those five companies saw their new junk bonds printed with interest rates they'd likely not have dreamt of in any other circumstances, sources said.

Two of Wednesday's five tranches came upsized. Two priced lower than price talk, one came at the tight end of talk and the other two priced in the middle of talk.

Jarden upsized to $550 million

In terms of dollar amount, Wednesday's biggest deal came from Rye, N.Y.-based provider of niche consumer products, Jarden Corp.

Jarden priced an upsized $550 million issue of 10-year senior subordinated notes (B3/B) at par to yield 7½%, at the tight end of the 7½% to 7¾% price talk.

Lehman Brothers and Citigroup ran the books.

A source close to the transaction, which was upsized from $400 million, said that the book contained $3 billion of orders and was more than seven times oversubscribed.

The source went on to say that Jarden, which had come to market expecting to have to pay interest at a higher rate, had been extremely well received by the market.

The source said that the order book, which had built rapidly, was not heavily skewed to hedge funds. Rather, long-term investors and buy-and-hold accounts were well represented.

The source also said that the new Jarden 7½% notes due 2017 went out approximately one point higher at the close of trading on Wednesday, even with the upsizing and the fact that the deal was priced at the tight end of talk.

The company had designated debt refinancing and general corporate purposes - including capital expenditures and potential acquisitions - for the original $400 million amount that it brought to the market.

The extra proceeds will be used for general corporate purposes.

That use of the additional proceeds represents the extent to which investors became comfortable with the credit, the source added.

PGS prices $190 million

Elsewhere on Wednesday, PGS, Inc. priced a $190 million issue of eight-year senior subordinated notes (Caa1/B-) at par to yield 9 5/8%.

The yield came in the middle of the 9½% to 9¾% price talk.

Wachovia Securities and Goldman Sachs were joint bookrunners for the LBO deal from the Arlington, Va., provider of information management and outsourcing services to government agencies.

A buy-side source told Prospect News that the deal had been multiple times oversubscribed.

Invacare at a discount

Invacare Corp. priced a $175 million issue of 9¾% eight-year senior notes (B2/B-) at 98.642 to yield 10%, in the middle of the 10% area price talk.

Banc of America Securities ran the books for the debt refinancing deal from the Ohio-based manufacturer and distributor of medical equipment used in the home.

Great Canadian a blowout

As it happens, Wednesday's two smallest deals by dollar amount were the ones that actually priced better than the price talk.

Great Canadian Gaming Corp. sold a $170 million issue of eight-year subordinated notes (B2/B+) at par to yield 7¼%, 12.5 basis points inside of the 7½% area price talk.

A source close to the deal said that it was massively oversubscribed blowout.

Goldman Sachs led the debt refinancing, working capital, capital expenditures and general corporate purposes deal from the gaming and entertainment company which is based in Richmond, B.C.

Calfrac massively oversubscribed

Also lower than talk was Calfrac Holdings LP, which priced a $135 million issue of eight-year senior notes (B1/B) at par to yield 7¾%, 12.5 basis points inside of the 8% area price talk.

The size of the issue was reduced from $150 million after having been upsized to $150 million from $125 million on Tuesday.

A source close to the deal said that the Tuesday upsizing represented an attempt on the part of the company to make the new 2015 notes issue a more liquid one in the hope of gaining an advantage in pricing because of the $25 million of increased liquidity.

However, the source added, it subsequently became became apparent that the company would be able to achieve the interest rate it desired without issuing the full $150 million amount.

Hence, since Calfrac did not actually require that amount of capital, it reduced the deal size to $135 million, which ultimately represents a $10 million upsizing from the amount that the company originally launched.

The source also said that the order book for the Calfrac 7¾% notes due 2015 was multiple times oversubscribed.

RBC Capital Markets was the left bookrunner for the debt refinancing, capital expenditures and general corporate purposes deal from the oilfield services provider.

Calendar dwindles

In the wake of Wednesday's transactions, the forward calendar of deals in the market slipped below the $1 billion mark.

A high yield investor told Prospect News on Wednesday that accounts are now faced with the task of putting money to work in a market that is facing an historic scarcity of paper.

To put the scarcity in context the investor said that a CDO was recently liquidated - "unwound in order to take the equity profit" - and so great was the demand for paper that the cash bonds were absorbed with no problem.

"It didn't even cause a ripple in the market," the investor said.

Asked if the present scarcity of high yield assets is conspicuous in an historical context the investor answered "Yes.

"A lot of deals are now being done in the loan market," the source said, adding that in previous times those financings would have come to high yield - especially given the present level of demand from the buy-side.

"The forward calendar would be much larger if all of this financing were not able to be priced more attractively in the loan market," the investor added.

The source went on to say that this shift of financings to the loan market from the junk bond market has the appearance of being permanent, as the demand for bank loan paper is likely to be maintained.

"That market has really developed and expanded in the past couple of years," the investor said.

"It used to be small and more illiquid.

"Now you have more hedge funds active in the loan market.

"And it used to be that bond funds would never buy loans, but now they do, in small amounts."

The sell-side take

Sources at the investment banks, meanwhile, say that the new issue calendar is not likely to see a quick dramatic buildup, regardless of demand.

A syndicate official involved in one of Wednesday's sub-$200 million deals said that the scarcity is undoubtedly benefiting issuers because more attention is being paid to the smaller deals than would be the case were there bigger deals or multiple deals on the calendar.

However, this source added, beyond the range of expected LBO and acquisition financings it is not clear where issuance will be coming from.

"At these kinds of spreads anyone who was going to come would have come already."

Throughout the week sell-side sources have advised Prospect News to watch for drive-by deals in the near future.

"The market seems to be taking everything that is being shown to it," one observed.

Griffin add on

One drive-by deal did materialize on Wednesday.

Griffin Coal Mining Co. plans to price a $50 million add on to its 9½% senior notes due Dec. 1, 2016 (existing Ba2/confirmed BB-) on Thursday via Merrill Lynch.

The Western Australia coal company priced the original $400 million issue priced at par last November.

Reader's Digest LBO

Finally, on Wednesday the market had a look at the bond portion of the Reader's Digest LBO deal.

Doctor Acquisition Co. is expected to sell $750 million of guaranteed senior subordinated notes (B3) during the first quarter.

The financing for the Reader's Digest LBO deal also includes a $1.46 billion senior secured credit facility via JPMorgan, Citigroup, Merrill Lynch and RBS Securities.

Invacare's increase is impressive

The standout performers among the new deals in aftermarket activity were the Invacare and the PGS deals. The former's 9¾% senior notes due 2015 priced at a discount to par, at 98.642, but by the end of the session, had turned in what one trader termed a "very strong" performance, up almost 3 points to around 101.125 bid, 101.625 offered.

Another trader saw the new issue more restrained, at par bid, 100.5 offered, but a third also pegged the bonds in a 101-101.5 context.

PGS, Jarden bonds better

Two traders also saw the PGS solutions 9 5/8% senior subordinated notes due 2015 having risen smartly to 101.75 bid, 102.25 offered, up from their par issue price earlier, while a third saw the bonds even better, at 102 bid, 102.5 offered.

When the new Jarden 7½% senior subs due 2017 were freed for secondary dealings, a trader saw the bonds having firmed to 100.625 bid, 101.125 offered from their par issue price earlier in the session.

But another trader noted that while the company's issue "traded a lot around 100.5-100.75," they were going home at the end of the day having reached 101 bid, 101.5 offered, "so that traded very well also."

A trader saw Great Canadian Gaming's 7¼% subs due 2015 at 100.75 bid, 101.25 offered, up from their par issue price, although another saw them slightly off those levels at 100.5 bid, 101 offered.

And Calfrac's 7¾% seniors due 2015 were seen going out with a modest gain at 100.375 bid, 100.875 offered, up from par. At another desk, the bonds held steady at par bid, 100.5 offered.

Market firms up as supply concerns fade

"The market was very firm in general," one of the traders said. "It started out the day up ½ point and was bid pretty much across the board all day.

"We saw a little bit of selling at the highs of the day, but the market's going out firm."

With the new-deal cupboard having been largely emptied out during Wednesday's hectic session, "there's not a lot of calendar next week," he said. "You start to run into the holiday weekend" kind of a situation, with some people choosing to take a few days off, since public schools in many areas will be off for inter-session around Presidents' Day. That holiday will see the bond markets in the United States closed on Monday, Feb. 19, and running at an abbreviated half-session the preceding Friday.

"The talk is that the calendar is going to be pretty slack after this week, probably for the next week or so, with no big deals on the horizon."

The junk market, he continued, "had been kind of laying around for a couple of weeks - for a week-and-a-half, at least - and things were sort of soft, and offered. We saw a lot of paper come out - we were talking last week about bid lists, and that sort of stuff."

Now, he said, "all of that supply has gotten soaked up, and the market is moving back up again.

"It was a very active day, with a lot of bonds trading out there."

Aquila sparks interest

One of the names with news attached to it that people were talking about was Aquila, after the Kansas City, Mo.-based utility operator announced that it will sell all of its assets to Great Plains Energy Inc. and to Black Hills Corp. in separate transactions.

A trader estimated that Aquila's bonds were at least ½ point up, "but were probably higher because of speculation that the bonds are going to be taken out."

A trader at another desk saw the company's 7¾% notes due 2011 up a point on the news to 106.5 bid, 107.5 offered.

However, the trader said, several Aquila issues were trading lower - since their indentures contain provisions stepping down the bonds' coupons should the company receive a ratings upgrade, just as the coupons stepped up on downgrades in order to compensate the bondholders for their increased credit risk. Standard & Poor's on Wednesday put Aquila's B credit rating on CreditWatch with positive implications.

One such bond was the 14 7/8% notes due 2012, which would step down to 11 7/8%, the trader said - and whose price stepped down by about 2 points on Wednesday to 130 bid, 131 offered.

Aquila said that Great Plains will acquire all the outstanding shares of Aquila for $4.54 in cash and stock in a deal valued at about $1.7 billion. Great Plains will also assume about $1 billion in Aquila's debt.

Before that sale, Black Hills will purchase Aquila's electric utility in Colorado and its gas utilities in Colorado, Kansas, Nebraska and Iowa for about $940 million total.

Dynegy powers up on plant sale

Elsewhere in the utility sector, the second trader saw the bonds of Dynegy about a point better on the news that the Houston-based power plant operator is shopping three plants to potential buyers.

That was enough to boost the company's 8¾% notes due 2012 to 107 bid, 108 offered, up a point. A market source elsewhere meantime saw the bonds up 1 1/8 at 107.25.

The company's chief financial officer, told attendees at a Colorado investment conference on Tuesday that Dynegy - which is in the process of reducing its non-core assets, using the proceeds for debt paydown - is looking to sell its Lyondell cogeneration facility in Texas, its Bluegrass facility in Kentucky and its Heard County plant in Georgia.

Nichols said the sale of those facilities could be accomplished by the end of the year.

Dynegy last year set a target of more than $500 million in proceeds from the sale of non-core assets this year.

Teco gains as barge sale eyed

Another gainer in the utility sector was Tampa-based TECO, whose 7.120% notes due 2011 were ½ point better at 105 bid, 106 offered after the company said that it was considering the sale of its TECO Transport barge unit and using the proceeds to reduce debt and strengthen its core Tampa Electric business.

In a statement accompanying the release of TECO's fourth quarter numbers, the company's chairman and chief executive officer, Sherrill Hudson, noted that TECO last year committed itself to retiring an additional $500 million of parent-company debt in the 2008 to 2010 period, beyond the $357 million of parent debt maturing in 2007. "We're now exploring our options to meet or exceed our debt retirement commitments, and to make additional investments in our principal business, Tampa Electric, to support its growing capital requirements."

Hudson said that "at the same time, given the growth opportunities available to TECO Transport, we want to ensure that the business is best positioned to realize its potential in today's transportation market. For this reason, among the alternatives we're considering to address our capital priorities is a review of the options for the long-term future of TECO Transport, including its possible sale."

He said that such a sale was "an option that is not taken lightly, as TECO Transport has a long history as a solid and profitable performer in the TECO Energy family of companies."

Nonetheless, he said, "today's strong M&A market for transportation companies could lead to good outcomes for all constituents and makes this an opportunity worth looking at, with the potential for good value for TECO Energy, growth for TECO Transport, and an excellent opportunity for an investor focused on marine transportation markets."

Calpine climbs on plant sale OK

And Calpine's bonds were on the rise, after the bankrupt San Jose, Calif.-based power producer received bankruptcy court approval to sell its 250-megawatt Goldendale Energy Center to Puget Sound Energy for $120 million.

Calpine's 8½% senior notes due 2011 gained a point, closing the day at 95 bid, 96 offered, while its Calpine Energy Canada Finance II 8½% notes due 2008 were also up a point at 100 bid, 101 offered.

The distressed power company said the sale to a utility subsidiary of Puget Energy will further the company's restructuring program. Calpine is selling off a number of assets to focus "on those core power assets and key markets in which Calpine can best compete," the company said.

Le-Nature's rise continues

Elsewhere in the distressed-bond market, a trader saw Le-Nature's 9% notes due 2013 jump 5 points to 35 bid, 36 offered, its third straight day of gains.

Those bonds had ended last week at 25 bid, and have gained a full 10 points since then.

Traders said they saw no news about the busted fruit-drink manufacturer, which slid into Chapter 11 last year amid allegations of massive wrongdoing on the part of ousted chairman Gregory Podlucky and his allies within the company's management.

A court-appointed trustee overseeing the disposition of the company's assets was recently reported to be close to hiring a broker to sell its idled bottling plant in Latrobe, Pa., where the company is based. He told the court that several prospective brokers have spoken with potential buyers and that a sale could occur within 90 days.

Trustee R. Todd Neilson also said recently that the federal government does not intend to claim the cars, diamonds and other assets seized by investigators as part of their investigation of Podlucky and the other ousted executives.

Federal-Mogul up on acquisition plan

Elsewhere in distressed-land, Federal- Mogul Corp. got the day's "biggest mover" award during a day of heavy trading, with investors still reacting to the a proposal which could ultimately give a controlling share of the company to billionaire investor Carl Icahn.

A trader pegged the company's notes as high as 85.5 bid, on heavy trading. The bonds came down a bit, settling at 83.5 bid, 84.5 offered, still up on the day.

The U.S. Bankruptcy Court in Wilmington, Del. approved the auto parts maker's fourth amended disclosure statement on Feb. 2. Under the plan, domestic asbestos creditors could receive a 50.1% stake in the company once it emerges from Chapter 11 protection. Ultimately, however, Icahn could become controlling stakeholder in the company.

Icahn already owns a significant portion of the Southfield, Mich.-based company's unsecured debt. According to the reorganization plan, Icahn also has an option to buy up to 86.12% of the asbestos creditors' stake through a stock purchase. The shares would be issued to a trust created under the plan to be used to compensate asbestos victims. If Icahn exercises the option, he will pay a total of $775 million into the trust.

Federal- Mogul was driven into Chapter 11 under a flood of asbestos-claim lawsuits in the fall of 2001.

A confirmation hearing, expected to end the restructuring process, will be held on May 8.

DirecTV up on better results

Back among the non-distressed names, a trader saw satellite TV operator DirecTV's 6 3/8% notes due 2015 rise to 96.75 bid, 97.25 offered, well up from 95.875 bid, 96.375 offered on Tuesday.

The rise coincides with sharply improved fourth-quarter profits reported by the company, which made $356 million (29 cents per share), versus $121 million (9 cents per share) a year ago. Revenues rose to $4.18 billion from $3.6 billion.

The improved results follow an intense company effort to focus on more profitable higher-end customers and eliminate marginal customers less likely to pay their bills.

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