Oasis, Mentor cap $9 billion week; Egypt turmoil roils market; Terremark jumps on Verizon deal

By Paul Deckelman and Paul A. Harris

New York, Jan. 28 - Oasis Petroleum, Inc. priced an upsized $400 million offering of eight-year notes on Friday, closing out a roughly $9 billion dollar week in the high yield primary market. The Houston-based energy company's new issue moved up respectably when it was freed for secondary dealings.

The primary market also saw Boston-based home and community services provider National Mentor Holdings, Inc. price $250 million of seven-year notes, in a downsized deal, a relative rarity in the current market.

Icelandic food producer Bakkavor Group HF come to market early in the day - during the European morning, actually - with a £350 million offering of seven-year secured notes.

Meanwhile, price talk emerged on Westmoreland Coal Co.'s $150 million secured note offering, which is expected to price early in the coming week.

Other than those deals which actually priced, or are about to price, junk market syndicate sources heard that Ace Cash Express, Inc., rumored for a while to be in the market, though somewhere out on the horizon, will in fact shop around an offering of eight-year secured notes in the coming week, while GMX Resources Inc. and CPI International Inc. are hitting the road to market deals.

But they also heard that Excel Maritime Carriers Ltd.'s planned $250 million offering of eight-year notes had been scuttled by adverse shipping industry developments and financial market conditions.

Secondary traders too said that market conditions turned less favorable Friday, following the lead of equities, which sank in the wake of increasingly violent unrest in Egypt, amid questions whether that chaos in Cairo could imperil other governments in that area and hike energy prices.

But Egypt might as well have been a million miles away for bondholders and stock investors in Terremark Worldwide Inc. They got a big boost on the news that telecom giant Verizon will acquire the Miami-based cloud computing and information technology firm.

Oasis Petroleum upsizes

Friday's primary session saw two issuers, each bringing a single tranche of dollar-denominated notes, raise a combined $644 million.

Oasis Petroleum Inc. priced an upsized $400 million issue of eight-year senior notes (Caa1/B-) at par to yield 7¼% on Friday, according to market sources.

The yield printed at the tight end of the 7¼% to 7½% price talk. The amount was increased from $300 million.

J.P. Morgan Securities LLC, Wells Fargo Securities, BNP Paribas Securities Corp. and UBS Investment Bank were joint bookrunners.

The Houston-based independent oil and gas exploration and production company plans to use the proceeds to fund its exploration, development and acquisition program and for general corporate purposes.

National Mentor downsizes

Late Friday, National Mentor Holdings, Inc. priced a downsized $250 million issue of 12½% seven-year senior notes (Caa2/CCC+) at 97.737 to yield 13%.

The yield printed 37.5 basis points beyond the wide end of the 12½% area yield talk. The size was cut from $275 million.

UBS Investment Bank was the left lead bookrunner. Barclays Capital Inc. and Jefferies & Co. are the joint bookrunners.

Proceeds, together with borrowings under a new credit facility, will be used to repay all amounts owing under the company's existing credit facility and to help pay the consideration in tender offers and consent solicitations.

January issuance doubles previous record

With Friday's deals into the tally, the primary market saw $9.45 billion of issuance in 21 junk-rated dollar-denominated tranches, during the past week.

That extends year-to-date issuance to $33.54 billion in 76 tranches.

That is torrid pace, and a new monthly record of issuance - the 10th such monthly record in the past 13 months, according to one market source.

With one January session left to play out, the January 2011 total overshadows the January total of the record-setting year of 2010 by a vast amount.

January 2011's $33.54 billion more than doubles January 2010's $16.55 billion, previously the biggest January in market history.

Bakkavor prices sterling deal

Elsewhere on Friday, Iceland's Bakkavor Group priced a £350 million issue of seven-year senior notes (B2/B) at par to yield 8¼%, on top of the price talk.

Barclays Capital was the coordinator and joint physical bookrunner. Royal Bank of Scotland was also a joint physical bookrunner.

Bank of America Merrill Lynch and HSBC were the passive bookrunners.

The Reykjavik, Iceland-based food manufacturer will use the proceeds to refinance debt.

With Bakkavor having cleared, the forward calendar contains no other announced sterling-denominated deals.

However the week ahead could produce more sterling-denominated deals, according to a syndicate banker in Europe, who expects Towergate Finance plc and Gala Coral to show up in the near term.

Westmoreland Coals sets talk

Looking to the week ahead in the dollar-denominated market, which gets underway with $3.64 billion of expected issuance on the active deal calendar, Westmoreland Coal Co. talked its $150 million offering of seven-year senior secured notes (Caa2/CCC) with a 10¾% coupon at a reoffer price of 95 to yield 11.8% on Friday.

The deal, which is being led by Gleacher & Co., is set to price on Tuesday.

Ace Cash brings $350 million

Meanwhile the forward calendar continued to grow on Friday.

Ace Cash Express, Inc. announced plans to price a $350 million offering of eight-year senior secured notes in the week ahead, via bookrunner Credit Suisse.

The proceeds will be used to fund a tender offer for the company's 10¼% notes due 2014, as well a to repay existing term loan and revolver debt.

CPI plans seven-year deal

CPI International Acquisition, Inc. will begin a roadshow on Monday for a $215 million offering of seven-year senior notes (B3/CCC+).

UBS Investment Bank is the bookrunner.

Proceeds, together with a new credit facility and equity from Veritas Fund and affiliates, will be used to fund the acquisition of CPI International and its subsidiaries by Veritas Capital for $19.50 per share in cash. The transaction is valued at roughly $525 million.

GMX to market $200 million

And GMX Resources Inc. announced that it will begin a roadshow during the week ahead for its $200 million offering of eight-year senior notes.

Credit Suisse and Morgan Stanley are the joint bookrunners.

The Oklahoma City-based oil and gas exploration and production company will use the proceeds to repay its revolver and to refinance its convertible notes due 2013, as well as to fund an acquisition and for general corporate purposes.

GMX Resources has concurrently commenced a $100 million offering of common stock and a tender offer for up to $50 million of its 5% convertible notes due in 2013.

Excel Maritime postpones

Excel Maritime Carriers Ltd. postponed its $250 million offering of eight-year senior notes (Caa1/B-), according to a Friday press release from the company.

Price talk on the deal had been set at a 9½% yield.

However, talk subsequently pushed higher by as much as 100 basis points, according to a buy-side source.

Deutsche Bank Securities and Citigroup were leading the deal.

Proceeds were to have been used to repay about $240 million of revolving credit facility debt and for general corporate purposes.

Meanwhile, heading into the Friday session one other deal had been considered to be possible Friday business but no terms were available at press time.

Maxum Petroleum Operating Co. has been in the market with a $250 million offering of eight-year senior notes (B3//) via Credit Suisse, Bank of America Merrill Lynch, J.P. Morgan Securities LLC, Goldman Sachs & Co. and Citigroup Global Markets Inc.

Although official price talk has yet to surface on that deal, it has been discussed in the context of a 9% yield, according to a buy-side source.

Investors find relief at Oasis

When the new Oasis Petroleum eight-year bonds were freed for secondary dealings, a trader saw them trade up to 101¾ bid, 102 offered, versus their par issue price earlier in the day.

Then he saw the offering side pulled, but estimated the bonds to be going home at 101¾ bid, 1021/4.

However, there was "not a lot of trading though, at least not in the Street."

National Mentor a no-show

Traders did not see the National Mentor Holdings seven-year issue in Friday's aftermarket.

Reynolds rolled back

A trader said that Reynolds Group Issuer Entities' big two-part deal from Thursday "was sort of trading off" from its early peak levels. The Chicago-based food packaging company had priced $1 billion each of 6 7/8% senior secured notes due 2021 and 8¼% senior unsecured notes due 2021 at par on Thursday, doubling the size of both tranches from $500 million originally, and the new paper was seen having gone up to 101½ bid, 102 offered in the aftermarket.

In Friday's early going the trader saw the bonds firm a little bit more to around 101¾ bid, 102¼ offered.

However, after that, he said that the bonds "notched their way downward," as part of an overall junk market easing in line with the stock slide that resulted from the increased civil violence in troubled Egypt. He saw them ratcheting downward to end around 100¾ bid, 101 offered, 1/8 to ¼ point at a time. "It was pretty hard-fought," he said of the gradual retreat.

New Realogy bonds hang on

Realogy Corp.'s $700 million issue of 7 7/8% senior secured notes due 2019 were seen by a trader hanging in around 100½ bid, 100¾ offered, before coming off that peak to around 100¼ bid, 100½ offered, about the level at which the Parsippany, N.J.-based real estate services company's new paper had reached on Thursday after having priced at par.

"I wouldn't say that a lot of bonds traded - but I'm surprised that they held their level," he said, noting that with just a CC rating from Standard & Poor's - and a not much better Caa1 from Moody's Investors Service - I thought it would be trading at a discount quicker."

He said some bonds had traded between 100¼ and 1001/2, and were still at 100 3/8 bid, "so they're holding better than I thought. They didn't go up much - but they're hanging in."

Indicators turn mixed

Away from the new-deal sphere, a trader saw the CDX North American Series 15 HY index down ½ point on Friday to end at 103¼ bid, 103 3/8 offered, after having been unchanged on Thursday.

The index thus ends the week down slightly from the 103 5/8 bid, 103 7/8 offered level seen at the close of trading the previous week, on Friday, Jan. 21.

The KDP High Yield Daily index meantime gained 1 basis point on Friday to close at 75.31, after having risen by 6 bps on Thursday. Its yield rose by 2 bps on Friday to 7.01%, after having come in by 4 bps on Thursday. Those levels represent an improvement on the week from the previous Friday's 74.97 reading and 7.10% yield.

But the Merrill Lynch High Yield Master II index was once again better on Friday, rising by 0.053%, on top of Thursday's 0.122% gain.

That lifted the index's year-to-date return to 2.093% on Friday, yet another new peak level for the year so far. It had closed on Thursday at 2.04%, the previous zenith.

For the week, the index gained 0.564%, lifting it from the previous week's 1.521% cumulative return.

Advancing issues led decliners for a sixth consecutive session on Friday, although their advantage narrowed to just a few dozen issues out of the nearly 1,300 that traded on Friday, versus the nearly six-to-five margin seen on Thursday.

Overall activity, represented by dollar-volume levels, rose by about 10% on Friday, after having plunged by nearly 37% on Thursday from the previous session's level.

A trader said that there was a general feeling of unease in the market, encouraged by the sharp slide which equities took in response to the political developments in Egypt, which was plagued by another day of rioting in the streets of the nation's capital city, Cairo, by protestors demanding the ouster of long-time strongman Hosni Mubarak.

"There wasn't a huge amount of selling pressure - but people were lightening up on their positions as the situation in Egypt worsened," even though relatively few high yield names have any direct exposure to the troubles there.

"When you see people in the street throwing [Molotov] cocktails and the streets are on fire, it's not good when that's on-screen most of the day on CNBC.

"Those aren't strong buying signals."

Terremark on a tear

A trader said that clearly the most notable non-new-deal name in the secondary market on Friday was Terremark Worldwide, whose 12% notes due 2017 got as good as 128 bid before backing off that peak to go out at 125 bid - which he said was still up some 9½ points on the day from their levels before the announcement after Thursday's close that Verizon Communications will acquire the cloud computing and information technology provider for $19 per share, or a $1.4 billion deal.

"You could say their bonds were up in the clouds," he quipped.

Not only was the price high, but the volume as well, with over $85 million having changed hands by the close, making it easily the most active issue in Junkbondland by several magnitudes.

Ford stalls as profit falls

Elsewhere, a trader said that Ford Motor Co. "had some weird news today" that pushed its bonds lower. The Dearborn, Mich.-based Number-Two domestic carmaker - which had been the darling of Wall Street the past couple of years as it consistently showed better than expected results quarter after quarter while rivals General Motors Corp. and Chrysler skidded into bankruptcy - surprised investors with a huge decline in fourth-quarter results, and while it more than doubled its full-year earnings, posting the best such results in almost a dozen years, it missed analysts' expectations, causing its shares to fall in tandem with the bonds.

"The headline numbers were that profit tumbled 79% on their European loss," the trader said, quoting Ford's 7.45% bonds due 2031 traded in a 108-109 context on Friday, after having moved as high as 110 bid during Thursday's session.

"They're almost unchanged - but they did drop about 1½ points in the beginning of the day," he said.

A second trader saw shorter Ford paper, like the 7½% notes due 2012, "maybe" down 1/8 to ¼ point, while the longer paper, such as the 7.45s, were off by ½ to 1 point. He said the 71/2s lost ¼ point to trade at 107 1/8 bid, while the 7.45s, "at the other extreme," dropped a full point down to 109 bid.

Yet another trader pegged the Ford long bonds at 108¾ bid, 109½ offered, down 1point.

Ford's New York Stock Exchange -traded shares slid by nearly 15% at one point before ending down $2.52, or 13.41%, at $16.27. Volume of 480 million shares was six times the normal turnover.

Ford reported on Friday that earnings for the fourth quarter swooned to $190 million, or 5 cents per share, down from $866 million, or 25 cents per share, in the year-earlier period. The company attributed the sharply lower results to a $960 million charge against earnings related to debt conversion.

Excluding charges, gains and other one-time events, Ford had adjusted per-share earnings for the quarter of 30 cents - well under the 48 to 50 cent gain which Wall Street had been looking for.

For the full year, Ford earned $6.6 billion, or $1.66 per share - its best full-year showing since 1999, far outclassing 2009's $2.7 billion, or 86 cents per share.

But here again, adjusted per-share income for the year, excluding one-time items, came in at $1.91 per share - well under analysts' projections of slightly more than $2 per share.

GM along for downside ride

With Ford stuttering along in the breakdown lane, bonds of Motors Liquidation Co. - the new name for the company that was the "old" General Motors before its 2009 bankruptcy reorganization - were being towed lower, with a trader seeing its benchmark 8 3/8% bonds due 2033 tumble by 1¾ points to 35½ bid, 36 offered.

Another market source saw those benchmarks down 2 points on the day at 35 11/16 bid.

Kodak calms after slide

A trader saw "wider markets" Friday around the mostly lower levels to which the bonds of Eastman Kodak Co. have fallen since the Rochester, N.Y.-based photographic film and digital camera company was hit with a double-whammy of negative news earlier in the week - worse than expected fourth-quarter earnings and a setback in Kodak's legal battle against several smartphone makers that Kodak claims violated its patents by illegally using Kodak's digital technology for the cameras built into their phones.

"There were just some wide markets, he said, quoting Kodak's 9¾% notes due 2018 at 98¾ bid, 99¾ offered, although that was a little tighter than earlier levels around 98½ bid, par offered.

He saw the 7¼% notes due 2013 actually up about ½ point on some small-sized trading around the 94 bid price.

Another trader said that he had heard that Kodak "seemed to stabilize," citing market rumors that Kodak stands a good chance of winning its appeal of a preliminary ruling this week by an administrative law judge of the federal government's International Trade Commission, disallowing Kodak's' suit against iPhone maker Apple Inc. and Research In Motion, the producer of the popular Blackberry device. Kodak had sued the two smart phone makers, claiming they had illegally integrated Kodak's digital picture technology into their phones' built-in digital camera features. Kodak had previously won similar cases it brought against cellphone makers Samsung and LG Electronics.

He said Kodak "gave a conference call and they were pretty confident that they are gonna reverse that [ruling], so we'll see what happens there."

Earlier in the week, the 9¾% bonds had topped the par level, while the 71/4s had been in the high 90s, but they were beaten down to around current levels after Kodak announced the preliminary ITC results after the market close this past Monday, and then increased investor angst on Wednesday, when it reported fourth-quarter net income of $33 million, or 12 cents per share, down from $430 million, or $1.36 per share, a year earlier, as revenues slid 25% year-over-year to $1.93 billion. The company posted an adjusted fourth-quarter loss of 37 cents a share - considerably worse than Wall Street's expectations that it would earn about a nickel per share after factoring out charges and other unusual items.

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