Issuers dealt with a difficult market last week, causing several new deals to be pulled and many more to adjust pricing to attract buyers. Investors were also predicting heavy outflows from the high-yield market, which exacerbated an already weak environment.
* German retailer Metro Finance was one of the few European corporates to brave volatility last week, in sessions that were dominated by sovereign and supranational issuers. This included the first issue in the public debt markets by the European Bank for Reconstruction and Development in close to three years. As for Metro, it increased its 4.625% notes of '11 from E500 million to E600 million. They were priced at 67 basis points over mid-swaps, at the tight end of price guidance. Citigroup Global Markets, Deutsche Bank and Westdeutsche Landesbank underwrote the deal.
* Alpha Natural Resources, a coal-mining company, was planning to sell $200 million in eight-year senior secured notes in a deal led by Credit Suisse First Boston. Proceeds will be used as part dividend and part repayment of a credit facility. The offering was noteworthy because it indicated the overall tone of the market, which saw issuers struggle to tempt buyers. Price talk on the Alpha Natural sale was widened a full percentage point, from 8 3/4% to 9 3/4% as of last Thursday. One investor said despite the wider price talk, he expects the deal to get done at a reasonable level. He argued that the dividend portion of the deal is a little different than most, in that the initial capital infusion was used for asset purchases over the last couple of years. The sponsors paid those assets and are now structuring a more appropriate capital structure. "It's not as though they ran the company for three to four years and are now taking cash out." The offering is rated B3/CCC+.
*Revlon Inc. was planning to sell $400 million in senior unsecured seven-year notes through its wholly-owned subsidiary, Revlon Consumer Products, to refinance debt. The offering, led by Citigroup Global Markets, has been in the market for a couple weeks and price talk has widened. One high-yield investor noted that Revlon initially was looking for a 9% coupon; price talk was last week in the 10 1/4 to 10 1/2% range. Some investors noted that Revlon may not be able to pretty up the deal enough and may have to pull it, given the unfriendly environment and Revlon's struggling loan deal. The debt is rated Caa1/CCC.
