Petrohawk brings quickie deal to market; Allied Waste up on merger talks; Chiquita falls on loss projection

By Paul Deckelman and Paul A. Harris

New York, June 16 - Petrohawk Energy Corp. successfully brought a drive-by deal to the junk market on Monday, a tap off its already existing 2015 issue.

High yield syndicate sources also heard that Source Interlink Cos. Inc. was hitting the road to market a new issue of seven-year notes. At the same time, Linn Energy LLC has already begun a roadshow to find investors for its 10-year deal.

There was no appreciable aftermarket activity seen in Petrohawk.

Back among the established issues, Allied Waste Industries Inc.'s bonds were better on news that the Scottsdale, Ariz.-based waste hauler is in talks to be acquired, though trading was relatively restrained. While Allied's bonds were up, its shares fell on the prospect of an acquisition.

Also on the merger front, XM Satellite Radio Holdings Inc.'s bonds were also up, though on not a lot of trading, after the chairman of the Federal Communications Commission said he would recommend that the regulatory body approve XM's pending acquisition by rival satellite broadcaster Sirius Satellite Radio Inc.

Boyd Gaming Inc.'s bonds were also up for a second straight session, apparently spurred on by takeover talk.

On the downside, Chiquita Brands International Inc.'s bonds got peeled after the Cincinnati-based banana giant predicted a "significant" loss.

Petrohawk upsizes

In the new issue market, Petrohawk Energy Corp. priced an upsized $300 million add-on to its 7 7/8% senior notes due June 1, 2016 (B3/B) at 98.75 to yield 8.11%.

There was no official price talk on the deal, which was upsized from $250 million.

An informed source said that the order book had been well oversubscribed, and added that the new notes traded up on the break.

Merrill Lynch ran the books for the deal.

Proceeds will be used for capital expenditures, possible acquisitions and general corporate purposes.

The original $500 million issue priced at par on May 9.

The calendar builds

Timing surfaced on a pair of deals on Monday - one a new corporate, the other a bridge refinancing.

Linn Energy, LLC started a roadshow on Monday for its $400 million offering of 10-year senior notes (expected B3/confirmed B+).

Lehman Brothers has the books for the debt refinancing deal form the Houston-based independent oil and gas company.

Elsewhere Source Interlink Cos. Inc. will begin a roadshow on Tuesday for a $465 million offering of senior subordinated notes due 2015 (Caa2/CCC+), a bridge refinancing expected to price late this week or early next week.

Citigroup and JP Morgan are joint bookrunners.

Also on the calendar as business expected to price by the end of the week is Expedia Inc.'s $500 million offering of eight-year senior unsecured notes (Ba2/BB), a debt refinancing and general corporate purposes deal via JP Morgan and Banc of America Securities.

In addition, Lender Processing Services is marketing a $400 million offering of eight-year senior notes (Ba2/BB+), a spin off-funding deal via JP Morgan, Banc of America Securities and Wachovia Securities.

Less certain is the timing on another pair of deals which generated ratings news last week.

Telesat Canada is expected to price $910 million of high-yield notes (Caa1) in a bridge refinancing via joint bookrunners Morgan Stanley, UBS Investment Bank and JP Morgan.

And Rite Aid Corp. announced that it plans to sell $425 million of senior secured second-lien notes (B3/B+) to help fund a tender.

As part of the funding for the tender, the company also launched a $350 million term loan via Citigroup and Bank of America, on Thursday.

Late last week market sources advised Prospect News that both Telesat Canada and Rite Aid could be this week's business. However no news surfaced Monday on either one.

Market watches U.S. Open

The new Petrohawk deal came too late in the day, several traders said, for any aftermarket on Monday.

In general, the session was described as being very quiet. "What a struggle today was," said one.

Another quipped, tongue only partly in cheek, that "nothing was going on - we were all watching golf," with trading-room television screens all over Wall Street carrying live coverage of the U.S. Open tournament in San Diego, won by Tiger Woods, as pretty much expected, though in a most unexpected manner - a tough sudden-death playoff round against a previously unheralded Cinderella challenger ranked 158th in the world, Rocco Mediate.

With all of that distraction going on, not to mention beautiful late-spring weather in New York - perfect for playing hooky after a meteorologically miserable weekend - trading volume was even lower than Friday's sedate session.

A trader said that the widely followed CDX junk bond performance index was up about 3/16 point on the session, quoting it at 96 1/16 bid, 96¼ offered. The KDP High Yield Daily Index meantime fell 8 bps to 74.99, while its yield rose by 6 bps to 9.53%.

In the broader market, advancing issues again trailed decliners by a narrow margin. Activity, represented by dollar volume levels, declined about 7% from Friday's levels.

Allied bondholders see cash, shareholders just trash

Allied Waste's bonds were seen better across the board - although the same could not be said for the company's shares - as investors reacted to the news that the second-largest U.S. waste management company was in talks to be acquired by Number-Three Republic Services Inc. Those reports first hit the market very late in the day on Friday - too late for anyone to really do anything about it then - and were confirmed by the two companies on Monday. Allied and Republic said that they were in talks on a deal which would give Allied shareholders 0.45 share of Republic stock for each of theirs, for a value of $15.23 per share, or somewhere north of $16 billion total.

Allied Waste North America Inc.'s bonds were seen up anywhere from 1½ to 3 points on the session, although trading was surprisingly restrained for a name that could find itself being acquired.

Probably its most widely traded issue was the 6 7/8% notes due 2017, which pushed up nearly 3 points to the 101 level, with a number of large-block trades seen.

A market source quoted the company's 6 3/8% notes due 2011 having risen 2 points to 101 bid.

A trader also saw its 5¾% notes due 2011 closing right around par, up 1½ points from the mid-98 range where the bonds had traded last week, "so obviously those performed well."

He opined that "the bondholders are apparently confident that their bonds will tighten [further] or will be taken out."

At Friedman Billings Ramsey, analyst Brian Butler theorized in a research note that were the two waste-hauling companies to combine, the new entity that would emerge from that transaction would likely be strong enough to warrant an investment-grade rating from a ratings agency. Butler maintained his "outperform" rating on Allied's shares and his "market perform" rating on Republic's.

However, shareholders of both companies were not easily convinced of the merits of such a deal. Allied Waste's New York Stock Exchange-traded shares fell $1.16, or $7.73 on the day to end at $13.84. Volume of 9.6 million shares was more than double the usual turnover. Republic's NYSE shares lost $2.36, or 6.97%, to close at $31.49. Volume of some 3.6 million shares was more than four times the norm.

XM flies higher on FCC nod

Elsewhere in the merger and acquisition world, news that FCC Chairman Kevin Martin and the commission's staff are both backing Sirius Satellite's acquisition of more established rival XM Satellite gave the latter's bonds a boost, although they did come down from their peak levels. A market source saw the XM 9¾% notes due 2014 get as good as 97.75 during the session before pulling back from that level a little to finish at 97.25, still up nearly a point from the bonds' Friday finish. Trading was described as busy, at least by Monday's reduced standards, with several round-lot trades.

At another desk, the XM bonds were seen up more than a point at 97.625 bid. Yet another source saw them up ½ point at 97.5.

Sirius' 9 5/8% notes due 2013 gyrated around between a low of 83 bid and a high of 89, before splitting the difference and going out at 86, up about a point or so, though on mostly relatively small trades.

Although there are further regulatory steps to be taken before a final decision comes from the FCC, Martin's backing, and that of the commission staff, are seen as key victories for Washington-based XM and New York-based Sirius in their drive to merge. Both companies have been losing money since they got into the business and contend that the merger is the only way to create a financially viable entity. Regulators, including the Justice Department, seem to have so far rejected claims by opponents that giving the combined XM/Sirius what amounts to a monopoly would harm the public interest, citing the plethora of competing technologies.

The commission and the chairman announced their support for the merger after the two companies agreed to certain concessions, including a three-year freeze on subscriber prices. Besides the price freeze, XM and Sirius have agreed to set aside up to 8% of their channels for minority-owned stations and noncommercial use, let any manufacturer make satellite-radio equipment, create smaller service packages at lower prices, and let customers buy the services they want on an a la carte basis rather than being forced to take services they don't want or need, and pay for them.

Bondholders betting on Boyd

Also in the M&A area, Boyd Gaming's bonds - which gained about 2 or 3 points on Friday, a rise attributed to renewed buyout buzz about the Las Vegas-based gaming operation - were once again better, even though there was no firm news out concerning any potential transactions. There was busy trading last week in call options on Boyd stock, seen as a sign that such option-buyers believe the stock will be heading higher despite the current woes of the gaming industry.

A market source saw Boyd's 6¾% notes due 2014 up almost 2 points to 84.5 bid while its 7¾% notes due 2012 gained nearly a point to the 92 region.

A trader at another desk saw the 73/4s up 1¼ points at 92.25 bid, and the 63/4s almost 2 points better at 84.5, while noting that earlier in the day, they had been up nearly 3 points at 85.5, before surrendering some of those gains.

Boyd's 7 1/8% notes due 2016 got as good as 80.5 bid and ended at 80, well up from 78.25 on Friday, "so these [issues] are clearly up from Friday. With the low-volume day that this was, accounts and/or dealers were focused. There's some volume on these."

Landry's lifted on buyout

In yet another buyout deal that hit the tape Monday, Landry's Restaurants Inc. said chairman and 39% owner Tilman J. Fertita had agreed to take the Houston-based restaurant chain private in a $1.3 billion deal that includes the assumption of $885 million of debt.

Landry's 9½% notes due 2014 were seen having moved up more than half a point to just below par, on several round-lot trades.

Chiquita is sliced and diced.

On the downside, a trader saw Chiquita Brands International's 8 7/8% notes due 2015 down 3 points to 90.25 bid in round-lot trading. Its 7½% notes due 2014 were also down 3 points at 86.

The fruit and vegetable importer, which sells the said higher costs will likely weigh upon its finances in the third quarter, and will likely cause it to post a "significant" loss.

Poor weather in key growing areas, such as Central America, was also blamed for the lowered guidance. Inclement weather has resulted in weaker or flat volumes.

"We expect these factors to result in a difficult third quarter, which is likely to reflect a significant loss, and a more normal fourth quarter," said Fernando Aguirre, chairman and chief executive, in a statement.

Meanwhile, rival Dole Foods' bonds also ended the day softer, its 7¼% notes due 2010 at 91.75 bid, 92.25 offered and its 8 5/8% notes due 2009 at 97 bid, 97.5 offered.

Moog moves downward

One of the traders said that Moog Inc.'s 7¼% notes due 2018 - which priced on May 28 at par, had been "like a rock" since then, moving up to around the 101-101.5 level and staying up there "every day, regardless of Treasuries, equities, high yield bonds, whatever." On Monday, he said, the East Aurora, N.Y.-based precision control systems company's $200 million of new bonds "finally broke down" to par bid, 101 offered. "That caught my eye because it was the first time I had actually seen weakness in that specific issue."

Stephanie N. Rotondo contributed to this report

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.