Mirabela, AEP, Kennedy-Wilson price; Pittsburgh Glass, Sheridan await; funds jump $1 billion

By Paul Deckelman and Paul A. Harris

New York, April 7 - Mirabela Nickel Ltd. came to market on Thursday with an upsized $395 million offering of seven-year notes. Traders said the Australian mining company's new bonds firmed smartly when they moved into the secondary market.

Also seen pricing and then moving up was plastic packaging maker AEP Industries, Inc.'s $200 million issue of eight-year paper.

And recent high-yield issuer Kennedy-Wilson Inc. made a quick return visit to Junkbondland with a $50 million add-on tranche to its deal that priced just a week ago.

German issuer KION Finance SA meantime priced an upsized €500 million two-part deal.

Apart from the actual pricings, talk emerged on a slew of deals, which could come to market during Friday's session, including Pittsburgh Glass Works LLC, Production Resources Group, Inc., Sheridan Group, Sizzling Platter LLC and Masonite International Corp.

British foods producer Boparan Finance plc was heard to be shopping around a two-part deal consisting of euro- and sterling-denominated seven-year notes, with presentations to investors in various European cities.

Away from the new deal arena, traders saw continued firmness, though not much in the way of any issues breaking out and heading either north or south by multiple points. Rite Aid Corp.'s bonds were seen modestly better after the drugstore operator released fourth-quarter numbers.

Secondary market numerical measures mostly pointed higher.

Meanwhile, high-yield mutual funds - considered a reliable barometer of overall market liquidity trends - showed a more-than $1 billion inflow in the latest week, their second straight gain after two previous consecutive downturns.

Junk funds gain $1.04 billion

After the session's activity had wound down, participants familiar with the weekly AMG high-yield mutual fund flow statistics generated by Lipper/FMI said that in the week ended Wednesday, $1.04 billion more came into those funds than left them.

It was the second consecutive inflow, coming on the heels of the $510 million cash infusion seen during the previous week ended March 30.

Those inflows, totaling some $1.55 billion, stood in sharp contrast to the outflows seen over the two previous weeks ended March 16 and March 23. Those outflows totaled $1.146 billion, according to a Prospect News analysis of the figures.

And that pair of outflows had, in turn, snapped a 14-week streak of inflows dating back to the week ended last Dec. 8. During that time, a net of more than $8 billion had come into the junk funds. Before the two weeks of downturns, inflows had been seen over the first 10 weeks of 2011, amounting to over $6 billion, Prospect News analysis said.

The latest inflow lifted the year-to-date cumulative inflow total back up to some $6.634 billion - a new peak level for 2011 - from the previous week's $5.59 billion total, the analysis said. With 14 weeks gone in the year, there have now been 12 inflows against the two outflows.

EPFR $1.49 billion inflow

Another fund-tracking service, Cambridge, Mass.-based EPFR Global, whose methodology differs somewhat from AMG, meantime reported a $1.49 billion inflow in the latest week, which the company calls a record for the time that it has been tracking fund flows.

That followed the previous week's $945 million cash addition, which had come on the heels of outflows of $802 million and then $419 million.

As was the case with the AMG numbers, the latest two weeks' EPFR inflow represented a reversal of a two-week pattern of cash-loss that had, in turn, broken the string of 14 consecutive inflows dating to early December. The latest week's cash infusion lifted the year-to-date net inflow number up to $17 billion, EPFR said.

AMG and EPFR calculate their respective fund-flow totals differently, although the two services' numbers generally point toward the same trends most weeks. EPFR includes results from some non-U.S. domiciled funds as well as the domestic funds.

Cumulative fund-flow estimates, whether from Lipper/FMI or EPFR, may be revised upward or downward or be rounded off and could include unannounced revisions and adjustments to figures from prior weeks.

Analysts say the continued flow of fresh cash into junk - and the mutual funds represent but a small, though observable and quantifiable, percentage of the total amount of money coming in - fueled the record new deal borrowing binges seen in both 2009 and then in 2010 as well as the robust secondary market seen both years. Both of those trends have been pretty much continuing in 2011 as well.

Mirabela upsized

Primary market activity remained vigorous on Thursday. In the dollar-denominated junk market, three issuers raised a combined $645 million.

In the new deal market, Australia's Mirabela Nickel brought the day's biggest dollar-denominated deal.

The nickel producer priced an upsized $395 million issue of seven-year senior notes (B2/B-) at par to yield 8¾%.

The yield printed at the tight end of the revised 8¾% to 8 7/8% price talk. Earlier price talk had been 9% to 9¼%.

J.P. Morgan Securities LLC and Barclays Capital were the joint bookrunners for the issue, which was upsized from $375 million.

The notes, which are guaranteed by Mirabela Mineracao do Brasil Ltda. and Mirabela Investments Pty. Ltd., were marketed to a mix of high-yield and emerging markets accounts.

The Perth, Australia, nickel producer plans to use the proceeds to pay down its debt facilities, as well as to make prepayments in connection with the termination of certain commodity call options, interest rate hedging and foreign exchange hedging.

Proceeds will also be used to provide general working capital and for general corporate purposes.

The deal played to an enormous book, market sources said.

AEP at the tight end

Elsewhere, AEP priced a $200 million issue of eight-year senior notes (B2/B-) at par to yield 8¼%, at the tight end of the 8¼% to 8½% price talk.

Merrill Lynch ran the books for the debt refinancing.

Kennedy-Wilson taps 8¾% notes

Meanwhile, Kennedy-Wilson priced a $50 million add-on to its 8¾% senior notes due April 1, 2019 (B1/BB-) at 101.5.

There was no official price talk.

The resulting yield to worst is 8.425%

Merrill Lynch ran the books for the quick-to-market deal.

The Beverly Hills, Calif.-based real estate investment and services company plans to use the proceeds for general corporate purposes, including future acquisitions and co-investments.

The original $200 million issue priced at 99.297 to yield 8 7/8% on March 31.

KION upsizes two-parter

In the European high-yield realm, KION Finance priced an upsized €500 million two-part issue of seven-year senior secured notes (B2/B) on Thursday.

The trucking company priced a €325 million tranche of fixed-rate notes at par to yield 7 7/8%. The yield printed at the tight end of the 8% price talk.

KION also priced a €175 million tranche of floating-rate notes at par to yield Euribor plus 425 basis points. The floating-rate notes also priced at the tight end of price talk that had been set at Euribor plus 425 to 450 bps.

Deutsche Bank, which will bill and deliver, was the lead bookrunner for the debt refinancing deal, the overall size of which was upsized from €400 million.

BNP Paribas, Commerzbank, Goldman Sachs, KKR Capital Markets and UniCredit were the joint bookrunners.

Talking the deals

Apart from Thursday's completed transactions, the dealers set the stage for a busy Friday session.

Production Resources talked its $400 million offering of eight-year senior notes (B3/B-) at 8¾% to 9%.

Merrill Lynch, Goldman Sachs & Co., Barclays Capital, Inc., Deutsche Bank Securities Inc. and Wells Fargo Securities LLC are the joint bookrunners.

Pittsburgh Glass Works talked its $300 million offering of five-year senior secured notes (/B+/) with an 8½% to 8¾% yield.

That deal is being led by joint bookrunners Credit Suisse Securities, Merrill Lynch and UBS Investment Bank.

Masonite talked its $250 million offering of 10-year senior notes (B3/B+) with a yield in the 8 3/8% area.

Merrill Lynch, Wells Fargo Securities, Deutsche Bank Securities Inc. and RBC Capital Markets are the joint bookrunners.

And Sheridan Group talked its $150 million offering of three-year senior secured notes (B3/B-) with a 12½% coupon at a reoffer price of 94 to yield 15.06%.

Jefferies & Co. has the books.

Meanwhile, Sizzling Platter talked its $150 million offering of five-year first lien senior secured notes (Caa1/B-/) with a yield in the 12% area.

The deal, which is being led by Global Hunter Securities, Maxim Group and Knight Capital Markets, is expected to price early in the week ahead.

Boparan's £695 million

The active forward calendar took aboard a sizable sterling-denominated deal on Thursday.

Boparan began a Europe-only roadshow for its £695 million equivalent offering of seven-year senior notes (expected ratings Ba3/B+), which are to be sold in euro-denominated and sterling-denominated tranches.

Goldman Sachs International has the books.

Proceeds, along with proceeds from a new revolving credit facility, will be used to fund the acquisition of Leeds, England-based food manufacturer Northern Foods by Ranjit Boparan and to refinance debt and fund pension obligations of Northern Foods.

AEP, Mirabela move up

When Mirabela Nickel's new issue of seven-year bonds was freed for secondary dealings, a trader said that he last saw that paper quoted at 102¼ bid, well up from the par issue price earlier in the session.

A second trader saw the bonds around 102 bid.

At another shop, a trader saw the bonds hit an offer price of 1023/4.

A trader, meantime, said that AEP Industries' new eight-year notes traded up to 101 5/8 bid, after having priced earlier at par.

"AEP had a nice day," a second trader said, seeing the South Hackensack, N.J.-based company's $200 million issue having moved up to 101½ bid, 101¾ offered by the day's end.

Yet another trader located the bonds at 101¼ bid, 101¾ offered.

A trader said that he had not seen Kennedy-Wilson's $50 million "smallish" add-on to the tranche of 8¾% notes due 2019, which the Beverly Hills, Calif.-based real estate company had priced just a week earlier.

But at another desk, a trader said that the bonds "did well," seeing them up around 102 5/8 bid, 103 1/8 offered, up from their 101½ pricing level.

Oppenheimer stays up

Oppenheimer Holdings Inc.'s new 8¾% senior secured notes due 2018 were quoted by a trader on Thursday as trading at 102¼ bid, although he said he had not seen any offers for the bonds.

He said the New York-based financial services company's $200 million deal had traded a little bit higher than that on Wednesday after having priced earlier that session at par, with some quotes as high as 102¾ bid.

A second trader said that he "didn't see all that much" in Oppenheimer's new bonds, quoting them around a 102½ to 103½ context.

A third trader pegged the new Oppenheimer bonds somewhat higher, seeing them at 103 bid, 104 offered.

Overseas issuers little seen

Several traders said that they did not see any kind of dealings in the domestic high-yield market on Thursday in several dollar-denominated issues from non-U.S.-domiciled borrowers that priced on Wednesday and were seen trading off emerging-markets desks. These included the upsized $200 million offering of 9¼% notes due 2019 from Navios South American Logistics, Inc./Navios Logistics Finance (US) Inc., the Latin American operation of Greek shipping concern Navios Maritime; the $300 million tranche of 7 5/8% notes due 2016 from Hong Kong-based food additives producer Fufeng Group Ltd.; and Brazilian petrochemical operator Braskem SA's $750 million issue of 5¾% notes due 2021.

However, another trader saw the Navios bonds at 102 bid, 102½ offered. That deal, upsized from the originally shopped $185 million, priced on Wednesday at par and had then moved up to 101 bid, 101½ offered in initial aftermarket dealings later that session.

He saw Braskem's deal at 98½ bid, 98¾ offered, up a little from the 98¼ level at which the bonds had priced on Wednesday to yield 6%.

He did not see any trading on Thursday in the Fufeng issue, but noted that the bonds had traded around 101 bid, 102 on Wednesday after having priced at par.

Aramark adds to gains

Among deals priced earlier in the week, a trader said that Aramark Holdings Corp.'s new 8 5/8%/9 3/8% payment-in-kind senior toggle notes due 2016 were trading on Thursday at 101 3/3 bid, 102¼ offered.

That was up from the 101 bid, 101¼ offered levels to which the Philadelphia-based food and uniform services provider's $600 million issue had moved in trading on Tuesday, after the drive-by deal priced on Monday at 99 to yield 8.874%.

DJO doing better

Monday's $300 million offering from San Diego-based orthopedics and medical products maker DJO Global, Inc. was seen by a trader on Thursday as having moved as high as 101¾ bid.

That was well up from the par level at which those bonds originally priced via the company's DJO Finance LLC and DJO Finance Corp. units, after which they then moved up to around a 1001/2-100¾ context.

Ameristar still a winner

Going back a little further, a trader said that Ameristar Casinos Inc.'s 7½% notes due 2021have moved up to102 bid - an example, he said, of how "the market continues to push higher."

The Las Vegas-based gaming company priced that $800 million deal on March 31 at 99.125 to yield 7 5/8% and only gradually began to move up in the aftermarket, first to around par bid, 100¼ offered and then, by Friday, to 100½ bid, 100¾ offered, before dropping from sight, only to re-emerge at higher levels on Thursday.

Secondary indicators firmer

Away from the new issue arena, a trader saw the CDX North American Series 16 HY index off by one-eighth of a point on Thursday to finish at 102¾ bid, 102 7/8 offered, after having gained three-sixteenths of a point on Wednesday.

However, the KDP High Yield Daily Index meantime gained 5 basis points on Thursday to close at 75.99 on top of the 6 bps rise seen on Wednesday. Its yield narrowed by 3 bps to 6.53%, after having come in by 4 bps on Wednesday.

The Merrill Lynch High Yield Master II index rose by 0.095% on Thursday on top of Wednesday's 0.15% advance. It was the seventh consecutive session-over-session rise. That lifted its year-to-date return to 4.557%, a new peak for 2011 and up from Wednesday's 4.457% level, the previous high for the year.

Advancing issues also held their lead over decliners for a seventh straight session on Thursday, although their winning margin was just a couple dozen issues out of the nearly 1,300 traded, narrower than the six-to-five advantage they enjoyed on Wednesday.

Overall market activity, as measured by dollar-volume levels, fell by 19% on Thursday, after having declined by 13% on Wednesday from the prior session's levels.

A trader bluntly characterized Thursday's session as "[expletive] boring."

He surely agreed with the suggestion that the junk market generally has been lacking pizzazz of late.

While suggesting that the prospect of a federal government shutdown amid the current budget impasse might be spooking some investors, he also noted - as have other market participants lately - that a lot of nominally junk market activity these days seemed to be driven by "these crossover market reaching down into the high-yield market and buying everything, and there's nothing for the traditional high-yield accounts to buy."

A loot at Trace, he said, discloses that almost all of the top-volume leaders are "BBB-, BBB-, BB+, BB+, BBB-. Then finally about 20 names down, you see a CCC in there."

Besides a lack of real junk paper for sale, another factor, he suggested, might best be summed up in two words: Spring Break. People in different parts of the country are taking vacations depending heavily on when their children's schools are off for the spring vacation.

"Some people have it this week; where we are we have it next week, and other places are the following week, so you've got almost a full month of rolling weeks where a lot of folks are out on spring vacations with their families. In this business, your vacations are pretty much planned when your kids are out of school."

And on top of that, several traders noted, even though March Madness is over with the college basketball championship having been decided, many TV screens in trading rooms are now tuned in to the Masters pro golf tournament, as the race for the fabled Green Jacket now becomes the new distraction over the next few days.

Another trader said that there was "not a ton of stuff" going on; instead, he said the junk market in general was "grinding higher," seeing many prices better by one-quarter to one-half of a point.

"The tone remains firm," he declared. " 'Up' is the theme."

Rite Aid up post-earnings

Among specific names, Rite Aid released its fourth-quarter and fiscal-year results on Thursday and despite posting a $205.7 million, or 24 cents per share, loss for the quarter, the bonds were "generally up half a point," a trader said.

He quoted the 7½% notes due 2017 at par bid, par ½ offered, the 9 3/8% and 8 5/8% notes due 2015 at 92 bid, 92½ offered and the 10 3/8% notes due 2016 at 108½ bid, 109½ offered.

However, he noted that trading in the credit was not as busy as he had expected, with just $40 million to $50 million of the whole complex turning over.

"I think it was because it was kind of a vanilla release," he said. "They are not in any imminent danger. It was more of a sleeper."

Another trader called the 8 5/8% notes a point better around 92½ and the 7½% notes a quarter-point stronger around par 1/4.

For the fourth quarter, the Camp Hill, Pa.-based drugstore chain reported revenues of $6.5 billion, as same-store sales trends improved. Still, revenues were about the same as the previous year.

Net loss was slightly lower year over year, down from $208.4 million, or 24 cents per share, the year before.

For the fiscal year, revenues fell just a tad to $25.2 billion from $25.7 billion. The company said the declines were due in part to fewer stores being open than in the previous filing period.

Net loss was also wider at $555.4 billion versus $506.7 billion the year before.

On the conference call following the release of the numbers, Rite Aid executives noted that the company had cut its net debt levels by almost $150 million from the previous year and said the company ended the fiscal year with about $1 billion of liquidity, most of it in borrowing availability.

Rite Aid also provided an outlook for fiscal 2012. The company said that "based on current same-store sales trends, a challenging reimbursement rate environment and the impact of continued investments Rite Aid plans to make in its customer loyalty program and other initiatives to grow sales," total sales are expected to be between $25.7 billion and $26.1 billion, with same store sales forecasted to increase 0.5% to 2% over the course of the year.

Net loss is expected to be between $370 million and $560 million, or 42 cents to 64 cents per share.

Stephanie N. Rotondo contributed to this report

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