Fresenius prices upsized $1.5 billion two-part deal; forward calendar swells; energy names off

By Paul Deckelman and Paul A. Harris

New York, Jan. 17 - Fresenius Medical Care US Finance II Inc. priced an upsized $1.5 billion two-part offering on Tuesday as junk market participants returned after a long holiday weekend. The transaction occurred too late in the day for any kind of aftermarket action.

The German provider of kidney dialysis services is expected to price another €250 million of 7.5-year notes on Thursday.

Fresenius' quickly shopped megadeal was one of a slew of prospective bond deals that came out of the woodwork on Tuesday and climbed aboard the forward calendar, which included a number of other European issuers looking to tap the dollar bond market, including Ireland's Ardagh Packaging, Danish oilfield services provider Welltec and British telecom operator Cable & Wireless Communications plc.

There were also several domestic companies shopping bond deals around, including gaming operator Creative Casinos, Inc. and Westmoreland Coal Co. Natural gas company Cheniere Energy, Inc. revealed plans for $3 billion of debt financing, which will include bonds at some point.

Issuers already on the radar screen seen moving up through the pipeline by starting roadshows or scheduling investor calls included consumer products company Prestige Brands Inc. and construction materials maker Summit Materials LLC.

Traders saw little real secondary trading in recent new issues, such as AAR Corp. or Physio-Control International, Inc., both of which priced on Friday.

Among non-new deal names, the traders saw energy names linked to the natural gas market, such as Chesapeake Energy Corp., continuing to fall amid weak gas prices.

But the overall market was quietly higher, including statistical measures of market performance.

Fresenius opens euro market

The primary market burst to life on Tuesday as the session saw the euro-denominated junk bond market spark to life.

Fresenius' deal included an $800 million tranche of 7.5-year notes, which priced at par to yield 5 5/8%. The yield printed at the tight end of price talk set in the 5¾% area.

Fresenius also priced a $700 million tranche of 10-year notes at par to yield 5 7/8%. The yield printed on top of price talk, which had the 10-year notes pricing 25 basis points behind the 7.5-year notes.

Bank of America Merrill Lynch was the left bookrunner for the two-part deal, the overall size of which was increased from $1.2 billion.

Deutsche Bank Securities Inc., Barclays Capital Inc., J.P. Morgan Securities LLC, Scotia Capital and Wells Fargo Securities were the joint bookrunners.

Proceeds will be used for acquisitions including the Liberty Dialysis acquisition, to refinance debt including term loan debt and for general corporate purposes.

Fresenius for Wednesday

Fresenius will make another pass on Wednesday, as it plans to price a €250 million offering of non-callable 7.5-year senior notes (Ba2/BB).

Deutsche Bank, Bank of America Merrill Lynch, Crédit Agricole CIB and UniCredit Bank are joint bookrunners. BayernLB, DZ Bank AG, Helaba Mediobanca, Raiffeisen Bank International AG, Société Générale CIB and WestLB AG are co-managers.

FMC Finance VIII SA, a special purpose vehicle of the German-base dialysis company, is the issuing entity for the Rule 144A and Regulation S notes.

Proceeds, along from a concurrent $1.5 billion two-part issue of senior notes which priced on Tuesday, will be used for acquisitions, including the Liberty Dialysis acquisition, to refinance debt and term loan as well as for general corporate purposes.

Ardagh kicks off $410 million

As forecasted in the run-up to the new year, European issuers are looking to raise dollars in the high-yield market.

Ireland's Ardagh Packaging kicked of a $410 million two-part high-yield bond deal on Tuesday.

Presentations are planned for accounts on the West Coast, as well as in New York City, New Jersey and Boston.

An investor call is set for 12:30 a.m. ET on Wednesday.

The deal comes in the form of two add-ons to existing issues.

The first is a fungible $160 million add-on to Ardagh Packaging Finance PLC's 7 3/8% senior secured notes due Oct. 15, 2017 (existing ratings Ba3/BB-). Those notes become callable on Oct. 15, 2014. The original $350 million issue priced at par on Sept. 30, 2010.

The second tranche is a non-fungible $250 million add-on to the Ardagh Packing Finance PLC and Ardagh MP Holdings USA Inc. 9 1/8% senior notes due 2020 (existing ratings B3/B-). The 9 1/8% notes become callable on Oct. 15, 2015. The original $450 million issue priced at par on Sept. 30, 2010.

The roadshow wraps up on Thursday.

Citigroup Global Markets Inc. has the books.

Barclays Capital Inc. and HSBC Securities are the co-managers.

The Dublin, Ireland-based supplier of glass and metal packaging plans to use the proceeds for general corporate purposes including acquisitions and debt repayment.

Wireless & Cable sets call

England's Cable & Wireless Communications will host an investor call at 11 a.m. ET on Wednesday for its $350 million offering of eight-year senior secured notes.

The deal is expected to price by the end of the week.

J.P. Morgan, Barclays, HSBC and Royal Bank of Scotland are the underwriters.

Proceeds will be used to repay debt.

The issuing entity will be Sable International Finance, a subsidiary of Cable & Wireless, a Bracknell, England-based telecommunications company.

Welltec starts Wednesday

Denmark-based Welltec will begin a roadshow on Wednesday in the United States for its $325 million offering of seven-year senior secured notes.

A European roadshow is set to run during the week of Jan. 23.

Joint bookrunner Goldman Sachs International will bill and deliver. Credit Suisse is also a joint bookrunner. DnB NOR Markets Inc. is the co-manager.

The Allerod, Denmark-based oilfield services provider plans to use the proceeds to refinance debt, fund a distribution to shareholders and for general corporate purposes.

Summit Materials roadshow

Summit Materials LLC and Summit Materials Finance Corp. began a roadshow for a $220 million offering of eight-year senior notes (B3/B).

The deal is expected to price on Friday.

Citigroup Global Markets Inc. is the left bookrunner. Bank of America Merrill Lynch, UBS Investment Bank, Barclays Capital Inc., Credit Suisse Securities (USA) LLC and Deutsche Bank Securities Inc. are the joint bookrunners.

Proceeds, in addition to proceeds from a $550 million credit facility, will be used to refinance debt.

Westmoreland via Gleacher

Westmoreland Coal kicked off a $130 million offering of 10¾% senior secured notes due Feb. 1, 2018.

The roadshow wraps up on Friday.

Gleacher & Co. Securities Inc. has the books.

The notes are expected to come with terms similar to those of the existing 10¾% notes with the same maturity. That issue, sized $150 million, priced at 95 to yield 11.82% in February 2011.

The first call is Feb. 1, 2015 at 103.583. Also, there is an 35% equity clawback at 110.75 until Feb. 1, 2015.

The Englewood, Colo.-based independent coal company expects to use the proceeds, together with cash on hand, to finance the $74.4 million acquisition of the Kemmerer Mine and to provide $32 million of reclamation bonding collateral, with any remaining proceeds to fund initial Kemmerer working capital.

Prestige launches $290 million

Prestige Brands will host an investor call at 10:30 a.m. ET on Thursday for its $290 million offering of eight-year senior notes.

The deal is expected to price during the week of Jan. 23.

Morgan Stanley & Co. LLC, Citigroup Global Markets Inc. and RBC Capital Markets LLC are the joint bookrunners.

Credit ratings remain to be determined.

Proceeds from the bonds, in addition to a $670 million senior secured credit facility, will be used to fund the acquisition of 17 over-the-counter GlaxoSmithKline plc brands and to refinance existing term loan debt.

Creative Casinos brings notes

Creative Casinos plans to hold a group meeting at 7 p.m. ET on Wednesday at Aria Resort in Las Vegas for a two-part securities offer comprised of notes and preferred stock.

The Las Vegas-based company is offering $365 million of seven-year senior secured notes, which come with four years of call protection.

Jefferies & Co. Inc., Morgan Stanley & Co. and Capital One Southcoast are joint bookrunners for the notes.

In addition, Creative Casinos is offering $103.093 million of senior redeemable perpetual preferred stock, which come with two years of call protection.

Jefferies and Morgan Stanley are joint bookrunners for the preferred tranche.

Both tranches are in the market via Rule 144A and Regulation S with registration rights.

Credit ratings remain to be determined.

Pricing is set for late January.

Proceeds will be used to fund construction of a new casino and hotel located in Lake Charles, La.

Fresenius arrives too late

Several traders queried in the late afternoon said that they didn't see much going on, with much of the market sitting around and waiting for the big Fresenius deal to appear.

"I'm sure it will come across," one of the traders mused, "probably the minute I'm already heading out."

The two-part dollar-denominated portion of that deal finally did price, but too late for any kind of aftermarket activity.

Recent deals not much seen

Other than the Fresenius-watch, a trader said: "There was not too much excitement today," as the junk market tried to get back in gear after the three-day holiday weekend, which included a full closure of U.S. financial markets on Monday in observance of Martin Luther King Day.

He said, "It was one of those kind of days you see after a long weekend. The banking machine hasn't started [yet], you've got to get people and engage their attention again. Maybe it will take a day or two of [investor] calls and roadshows to get something priced."

A trader said that he had not seen AAR Corp.'s 7¼% notes due 2022 "ever," while seeing Phyisio-Control International's 9 7/8% senior secured notes due 2019 at 101 bid, 101 7/8 offered, though on "very small size."

Another trader pegged the AAR bonds trading in a 98-99 context, while the Physio-Control issue was at 101½ bid, 102½ offered, but added that he "didn't see much" of either credit.

AAR, a Wood Dale, Ill.-based provider of supply and logistics service to the aviation, government and defense markets, priced $175 million of its bonds on Friday after a short roadshow. The issue came to market at 98.268 to yield 7½%. It priced late in the day, meaning there was no aftermarket at that time.

Physio- Control, a Redmond, Wash.-based medical technology provider, priced $330 million of its bonds at par late Friday, upsized from the originally planned $315 million. Those bonds, which came to market through Physio's Charger Merger Corp. unit, also appeared too late in the day Friday for any kind of dealings.

A trader said he did not see any kind of activity on Tuesday in Houston-based offshore oil drilling operator Atwood Oceanics Inc.'s 6½% notes due 2020, although a second did see those bonds holding in the same 1011/2-to-102 context at which they had gone home on Friday.

Atwood had priced $450 million of the bonds - upsized from the originally announced $400 million - at par on Thursday after a short roadshow, and the securities quickly jumped to the 1011/2-102 area, establishing themselves as one of the secondary market stars last week.

One of the traders saw Sofia LP's $530 million of 9 ¾% notes due 2019 holding around the 101½ bid mark. Sofia, a unit of Fairfax, Va.-based Datatel Inc., priced the bonds at par last Wednesday as part of the financing for Datatel's acquisition of industry peer SunGard Higher Education, and they too moved up quickly when they were freed for aftermarket dealings, staying above the 101½ level for the rest of last week and on into this week.

Indicators show improvement

Away from the new deal realm, statistical measures of junk market performance - lower across the board on Friday after having been mixed - were on the rebound on Tuesday.

A trader saw the CDX North American Series 17 High Yield index up by 9/16 point on Tuesday to finish at 94 3/8 bid, 94 5/8 offered, after having been down by½ point on Friday.

The KDP High Yield Daily gained 11 basis points on Tuesday to end at 72.82, after having lost 15 bps on Friday, while its yield declined by 2 bps, to 7.25%, after having risen 5 bps Friday.

And the Merrill Lynch High Yield Master II Index, which on Friday had finally turned downward, snapping an amazing string of 20 consecutive gains dating back to mid-December, got back in the black on Tuesday, rising by 0.035%.

On Friday, it had fallen by 0.92%. On Monday - with the debt markets officially closed and what activity that did take place extremely light - the index showed a 0.75% gain.

The advance raised the index's year-to-date return to 1.189%, up from 1.077% on Friday. Tuesday's figure is also the index's high point for the year so far, eclipsing the old mark of 1.171%, which was set last Thursday.

Shipwreck no bond disaster

Among specific issues, traders saw little activity in the bonds of Royal Caribbean Cruises Ltd., even though the Miami-based cruise ship operator's shares fell on Tuesday in the aftermath of last Friday's disastrous accident off the Italian coast involving a cruise ship operated by Royal Caribbean's larger rival, Carnival Corp., whose shares slid even more as a result.

Analysts said that fallout from the Costa Concordia debacle will likely hurt all players in the cruise industry, not just operator Carnival.

While Carnival's New York Stock Exchange-traded shares swooned by nearly 14% on more than eight times the normal volume and Royal Caribbean's lost over 6% on more than four times usual turnover, the latter's bonds, a trader said, were little moved.

"Royal Caribbean really only had about $2 million bonds traded overall," he said, with its busiest bond, the 7¼% notes due 2016, actually up by a half-point on the day, to around the 109 bid mark.

"It was really such a small trade that I don't think you can really say [anything definite]. It's not like $50 million traded up a point."

He suggested that bond players were not abandoning ship as they dad on ATP Oil & Gas Corp.'s paper following the BP Gulf of Mexico oil rig disaster in April of 2010 because unlike the latter disaster, which saw oil continuing to leak into the gulf for months on end. "[The current story], at least, is a more contained catastrophe - it may just be a headline for a couple of days, or a week, once they find everybody and get the ship out of there. Hopefully the story goes away and life goes back to normal, except for those who were directly affected, of course."

Carnival's investment-grade bonds were meantime also seen little moved on Tuesday, although credit-default swaps contracts on its paper widened out by 25 bps.

Gas gets gouged

Elsewhere, a trader said that "natural gas continued to get hammered" in the wake of softening prices for the fuel.

Chesapeake Energy Corp.'s 6 5/8% notes due 2020 lost some 2 3/8 points on the day, ending at 99 1/8 bid.

He also said that "all of this utility stuff is continuing to get drilled," including such names as GenOn Energy, the utility formerly known as TXU Corp. and Edison Mission Energy, to name just three.

"All off again."

GenOn's 9½% notes due 2018 lost more than 3½ points to close just under 96 bid, while Edison Mission's 7½% notes due 2013 dropped 3¼ points to just under 93 bid.

Catalyst paper pops on plan

In the distressed debt precincts, a trader said that Catalyst Paper Corp.'s 11% senior secured notes due 2016 moved up to the mid 60s, from prior levels around the 60 bid level.

He cited the weekend announcement by the Richmond, B.C.-based paper manufacturer that it has entered into an agreement for a recapitalization transaction, which it says will result in "a significantly reduced debt burden."

Catalyst said that it intends to implement the recapitalization through a plan of arrangement under the Canada Business Corporations Act, subject to approval by at least 66% of the votes cast by holders of the 11% notes and Catalyst's 7 3/8% notes due 2014 at meetings to be held to consider the arrangement.

Catalyst said that holders of some $208.1 million of its 11% notes, or more than 53.2% of the total amount outstanding, and holders of some $54.5 million of the 7 3/8% notes, representing more than 21.7% of the total outstanding, have signed the agreement and have agreed to vote in favor of, and support the recapitalization. The company expects further support of the recapitalization from additional holders of both classes of notes.

Implementation of the plan is also contingent upon the approval of the Supreme Court of British Columbia and receipt of all necessary regulatory and stock exchange approvals.

The Catalyst notes rose despite announcements of ratings cuts by both Moody's Investors Service and the Canada-based Dominion Bond Ratings Service.

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