Puma Energy, North Atlantic price, First Quantum up on swap; AK Steel, Texas Industries gain

By Paul Deckelman and Paul A. Harris

New York, Jan. 28 - The high-yield primary market saw a pair of dollar-denominated junk deals from non-U.S.-based energy-sector companies totaling more than $1.3 billion pricing on Tuesday.

Exploration and production operator Puma Energy Holdings Pte. Ltd. did a $750 million offering of seven-year notes, while offshore driller North Atlantic Drilling Ltd. came to market with $600 million of five-year paper. Both new issues were seen trading a little above their respective par issue prices later on.

Syndicate sources meantime said that live-event producer SFX Entertainment Inc. was hitting the road to market a $200 million five-year secured deal, while energy credit Westmoreland Coal Co. is shopping around a $400 million add-on to its existing 2018 notes.

Away from the new-deal realm, First Quantum Minerals Ltd.'s announcement of an exchange offer for two series of bonds originally issued by its Inmet Mining Corp. unit gave that paper a boost.

Elsewhere, Texas Industries Inc.'s bonds firmed smartly in heavy trading on the announcement that sector peer Martin Marietta Materials Inc. will acquire the cement manufacturer and assume its $700 million of debt.

AK Steel Holding Corp.'s bonds firmed after the specialty steelmaker reported favorable fourth-quarter results.

Overall, traders said the junk market was somewhat quiet, ahead of Wednesday's expected announcement of quantitative easing by the Federal Reserve, but they said the tone was definitely firmer.

Statistical indicators of market performance turned higher across the board after having been mixed on Monday and lower all around before that.

Puma prices atop talk

The dollar-denominated high-yield primary market generated a moderate flow of information during the Tuesday session, as emerging markets-related volatility ebbed in the global capital markets.

Coincidentally, the two issuers that priced dollar deals - raising a combined total of $1.35 billion - both came from issuers with emerging markets aspects.

Singapore-based Puma Energy Holdings priced a $750 million issue of seven-year senior notes (Ba3//BB) at par to yield 6¾%.

The yield printed on top of yield talk.

Goldman Sachs and SG were the joint global coordinators. ING, Natixis, RMB and Standard Bank were joint bookrunners.

Proceeds will be used to refinance debt and fund development.

The Singapore-based midstream and downstream oil group has refined petroleum products supply, storage and distribution operations in Central America, the Caribbean, Africa and Australia.

North Atlantic at wide end

Meanwhile, Hamilton, Bermuda-registered North Atlantic Drilling priced a $600 million issue of unrated non-callable five-year senior notes at par to yield 6¼%, at the wide end of the 6% to 6¼% yield talk.

Goldman Sachs, Credit Suisse and Morgan Stanley were the bookrunners.

Proceeds will be used to repay $500 million of 7¾% unsecured bonds held by Seadrill Ltd., including the $22.5 million early call premium.

North Atlantic Drilling is an offshore drilling company in which Seadrill holds a 74% stake.

SFX starts Wednesday

SFX Entertainment plans to start a roadshow on Wednesday for a $200 million offering of five-year senior secured second-lien notes (expected ratings Caa1/B-) in a deal set to price before the end of the week.

Barclays is the lead left bookrunner for the debt refinancing and acquisition-related transaction. Deutsche Bank, Jefferies and UBS are the joint bookrunners.

Meanwhile a couple of deals that are winding up their respective roadshows are expected to price on Wednesday.

Westmoreland Coal Co. is in the market with a $400 million add-on to its 10¾% senior secured notes due Feb. 1, 2018 (confirmed Caa1/existing B-), which is talked in the 106¾ area.

BMO and Deutsche Bank are the joint bookrunners.

Also, Ardagh Packaging is expected to complete its $830 million two-part offering of senior notes (expected ratings Caa1/CCC+), market sources say.

Although formal price talk remains to be announced, the five-year notes are whispered in the 6¼% area, according to a market source who added that the seven-year notes are whispered in the 6¾% area.

Citigroup is the sole bookrunner.

Jaguar upsizes

The European high-yield primary markets sparked to life as two issuers from the higher strata of high-yield credit quality drove though with upsized deals.

It was a good day to revive the European primary, a London-based debt capital markets banker remarked, noting that emerging markets-related volatility was down significantly.

The iTraxx Crossover index of high-yield credit default swaps narrowed by 20 basis points on the day to end at 299 bps, the banker said.

In the sterling-denominated primary, Jaguar Land Rover priced an upsized £400 million issue of non-callable eight-year senior notes (Ba2/BB) at par to yield 5%.

The deal was upsized from £300 million.

The yield printed on top of yield talk.

Physical bookrunner Deutsche Bank will bill and deliver for the debt refinancing deal. BofA Merrill Lynch, HSBC and Morgan Stanley were also joint physical bookrunners.

Credit Agricole CIB, Lloyds TSB and SG CIB were non-physical bookrunners.

The Whitley, Coventry, England-based automobile manufacturer plans to use the proceeds to refinance debt.

Fresenius comes inside talk

Fresenius Finance BV priced an upsized €300 million issue of non-callable 4% 10-year notes (Ba1/BB+) at a 201 bps spread to mid-swaps.

The deal was upsized from €200 million.

The spread came 4 bps inside of the 205 to 225 bps spread talk.

The notes came at a reoffer price of par to yield 4%.

Deutsche Bank, BNP, Credit Suisse, and Royal Bank of Scotland were the bookrunners for the acquisition-related deal.

Puma, Drilling bonds firm

In the secondary market, the new bonds from Puma Energy Holdings and North Atlantic Drilling were seen marginally better when they began trading after pricing.

A market source quoted Puma's 6¾% notes due 2021 at 100¼ bid, 100½ offered, up from their par issue price.

And he saw North Atlantic Drilling's 6¼% notes due 2019 having edged up to 100 1/8 bid, 100 3/8 offered from their par issue price.

Monday deals trade around

Among the deals that came to market on Monday, a trader said that Harland Clarke Holdings Corp.'s $815 million two-part offering was "a busy one" on Tuesday, seeing its 6 7/8% senior secured notes due 2020 at 100¾ bid, 101 offered, and its 9¼% senior unsecured notes due 2021 at 100 1/8 bid, 100 3/8 offered.

A second trader called the 6 7/8s down ½ point at 100½ bid, 100¾ offered and also saw the 91/4s off by ½ point at par bid, 100¼ offered.

Harland Clarke, a San Antonio-based producer of checks, credit cards and other transaction processing products and services, priced its deal after downsizing it from an originally planned $865 million. It priced $275 million of the 6 7/8s at par, and $540 million of the 91/4s, also at par, after downsizing the latter tranche from an original $590 million. The 6 7/8s initially traded up to the 101 bid mark, while the 91/4s mostly stayed around their par issue price.

A trader said that Forest Laboratories, Inc.'s $1.8 billion two-part offering "was kind of active, but not overwhelmingly so."

He saw its 4 3/8% notes due 2019 trading inside of a 100½ to 101 range all day before going home at 100 5/8 bid, 100 7/8 offered, while its 4 7/8% notes due 2021 were inside a 99½ to par range all day, finishing at 99¾ bid, par offered.

Forest, a New York-based specialty pharmaceuticals maker, priced $1.8 billion of new paper in a quick-to-market transaction, bringing $1.05 billion of the 4 3/8s and $750 million of the 4 7/8s to market, both at par. Those bonds priced too late in the session on Monday for any aftermarket dealings at that time.

A trader quoted Elizabeth Arden, Inc.'s 7 3/8% notes due 2021 at 107¼ bid, 107¾ offered, calling them up ¼ point on the session.

The Miramar, Fla.-based beauty products maker had priced its quickly shopped $100 million add-on to its existing bonds at 106¾ on Monday to yield 5.614%, and they had moved up to around the 107 bid area in initial aftermarket activity.

AK improves with numbers

Away from the new deals, AK Steel's 8 3/8% notes due 2022 gained 2 points on the day to close at 99 bid, a market source said, seeing over $14 million of the West Chester, Ohio-based specialty steel alloy manufacturer's paper changing hands, making it one of the busier issues seen in Junkbondland.

At another desk, its 7.65% notes due 2020 were quoted up ½ point at 98 bid.

Its New York Stock Exchange-traded shares jumped by $1.12, or 18.70%, ending at $7.l1, on volume of 27 million shares, more than three times the norm, after the company reported better fourth-quarter earnings.

AK reported per-share earnings of 9 cents, nearly double the nickel-per-share that Wall Street was expecting. Its revenue rose 2.9% year-over-year in the quarter to $1.46 billion, also beating analysts' expectations.

Texas Industries triumphs

Texas Industries' 9¼% notes due 2020 jumped more than 3 points on the session to 116 1/8 bid, a trader said, on volume of over $21 million, the heaviest in the junk space. Its NYSE-traded shares rose by $2.06, or 2.88%, to $73.60 on volume of 4.7 million shares - nearly 20 times heavier than usual.

That followed the announcement that Martin Marietta Materials will acquire the Dallas-based producer of cement and aggregates used in construction in an all-stock deal worth $2.06 billion, with Martin Marietta assuming $700 million of Texas Industries debt.

First Quantum up on swap offer

A trader said that there was "a lot of flow" in First Quantum Mining's 8¾% notes due 2020, which he said "popped a couple of points" on the news that the Vancouver, B.C.-based international mining company had begun an exchange offer for those bonds and for its 7½% notes due 2021, both of which had been originally issued by Inmet Mining Corp., which is now a First Quantum subsidiary.

He said the 83/4s jumped to 112¼ bid, 113 offered, up from prior levels around 109½ bid, 110 offered.

Verso busy but little changed

Also on the exchange offer front, Verso Paper Corp.'s 11¾% second-priority senior secured notes due 2019 were among the busier bonds on the day, with round-lot volume of over $8 million, on top of numerous smaller trades.

The notes went home at 107½ bid, down about ½ point on the day.

That activity came as Memphis-based Verso warned the board of directors of NewPage Holdings Inc. - which Verso is trying to acquire in a $1.4 billion deal announced several weeks ago - that it may fall short of obtaining the needed threshold in the exchange offers and consent solicitations related to those acquisition plans.

Verso subsidiaries Verso Paper Holdings LLC and Verso Paper Inc. began exchange offers on Jan. 13 for their $396 million of outstanding 8¾% second-priority senior secured notes due 2019 and $142.5 million of outstanding 11 3/8% senior subordinated notes due 2016.

Each exchange offer is conditioned on obtaining tenders for at least 85% of each outstanding note series, and the closing of the merger is conditioned on completion of the exchange offers - but Verso advised NewPage that "in light of substantially less participation by the early tender time as compared to the minimum participation thresholds, and based on the large disparity between what a group of non-participating noteholders has requested and what Verso is able to offer under the merger agreement governing the pending merger, Verso is concerned about its ability to consummate the exchange offers as required under the merger agreement," according to an 8-K filing with the Securities and Exchange Commission.

A trader said that "despite the news, there was not a lot going on, trading-wise," noting that apart from the 11¾ notes, there was virtually no real trading seen in any of the company's other bonds, including those which are the subject of the exchange offer.

And he said that "when you look at where the stuff is trading," relative to the exchange offer terms that Verso is offering its noteholders, "I don't know why anyone would think that a lot of people would participate in the tender [exchange offer]. I think people were buying the bonds because they thought they could get a much better deal," by forcing Verso to offer sweetened terms for its exchange offer in order to complete that offer and go through with the merger.

Market indicators get better

Statistical junk-market performance indicators were higher across the board on Tuesday after having been mixed on Monday and lower all around for two sessions before that.

The Markit Series 21 CDX North American High Yield index gained 5/8 point on Tuesday, its second straight advance, to finish at 107 bid, 107 1/8 offered. It rose by 3/32 point on Monday, its first improvement after seven consecutive losing sessions.

The KDP High Yield Daily index broke a three-session losing streak on Tuesday, edging upward by 1 basis point to close at 74.6 versus Monday's 18 bps slide and a 21 bps nosedive seen on Friday.

Its yield was unchanged at 5.54% after having risen over the previous three sessions, including Monday's 7 bps gain.

And the widely followed Merrill Lynch High Yield Master II index got back in the black on Tuesday with a 0.044% gain, breaking a three-session skid. On Monday, it had been down by 0.075%.

The gain raised its year-to-date return to 0.742%, up from 0.697% on Monday. However, it remained well down from last Wednesday's 1.185%, its high point of the year so far.

The index's yield to worst declined to 5.574% from Monday's 5.615%. But it remained well above its low level for the year, last Wednesday's 5.386%.

Its spread to worst tightened slightly to 423 bps over comparable Treasuries from 425 bps on Monday, its second straight new wide point for the year. The spread remained well out from the 398 bps over seen last Wednesday, its tightest level of the year so far.

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