The primary market was relatively light last week after a few deals were dropped or downsized earlier in the month when spreads began to back up. Several small deals and a couple of large issues hit the market, including a $1.25 billion sale from Lehman Brothers Holdings. Here are some other notable offerings.
* Isle of Capri Casino sold $500 million in senior subordinated notes (B2/B) last Thursday via by underwriter Deutsche Bank, in a deal that was upsized from an original amount of $425 million. The notes, due in '14, were sold with a coupon of 7%, or 25 basis points wider than initial price talk, according to one trader. The proceeds will be used to repurchase the company's 8.75% notes of '09. Jacques Cornet, head of high-yield research at CIBC Capital Markets, notes that there has been a bit of a backup in the high-yield market in terms of outflows and says some investors are looking for more yield, which is perhaps why they demanded a coupon of 7%. At the same time, the deal was oversubscribed at that level. He notes that overall, gaming continues to do well among investors but says bonds in the sector are also trading at high premiums and predicts investors will not bid down yields much lower. Cornet says he's not sure if Isle of Capri could have secured a lower coupon even if it raised less cash, given that high-yield investors are looking for more than a 6%-type yield in the current market.
* Comstock Resources, an independent energy company, sold $175 million of senior notes (B2/B). The 6 7/8% bonds of '12 were priced at 310 basis points above Treasuries. The deal was upsized from $150 million. Ho Wang, a portfolio manager at Muzinich & Co., says he participated in the transaction for several reasons. He notes the company is performing well and is watching its balance sheet, and adds it has one of the highest success rates in the drilling industry. The offering was a refinancing of an expensive liability, its 11 1/4% of '07, and Wang says the new notes represent substantially less interest expense for the company, which bodes well for its creditworthiness. Banc of America Securities underwrote the deal.
