SandRidge, Actuant price drive-bys with Vantage, New Gold deals adding to $2 billion day

By Paul Deckelman and Paul A. Harris

New York, April 2 - The high-yield primary market opened the month of April pretty much the same way it closed out March during Friday's session with a $2 billion barrage of new junk bonds, most of which traded up when freed for aftermarket activity.

Vantage Drilling Co. had the big deal of the day, a $750 million add-on to its $1.225 billion of outstanding 2015 secured notes, which priced well above par, in line with the existing issue. It was seen by traders as moving about a point when the bonds were freed for secondary dealings.

Out of that same sector, SandRidge Energy, Inc., an exploration and production operator, came to market with a quickly shopped $750 million of 10.5-year notes. The bonds were quoted as edging up from their par issue price.

Also coming with a quick-to-market same-day deal was diversified industrial manufacturer Actuant Corp., which brought a $300 million 10-year issue. That deal - upsized from an originally announced $250 million - moved up about a point in the aftermarket.

But the star of the session was metals mining company New Gold, Inc.'s $300 million issue of eight-year notes, which was seen solidly higher in the secondary market.

Last week's deals, including Friday's offerings from Taylor Morrison Communities, Inc., Aircastle Ltd. and Thursday's megadeal from Lawson Software, Inc., were seen pretty much holding the initial aftermarket gains those transactions notched.

And as has been the case recently, secondary activity was centered on the new issues.

However, there was some continued trading in coal names, like Peabody Energy Corp. and Patriot Coal Corp., which have been active recently on news that the federal government plans to impose tough, new regulations on coal-fired power plants in order to curb carbon dioxide emissions.

Statistical market performance measures were seen on the positive side.

The four-session week ahead of the Easter/Passover holidays got underway Monday in a very busy fashion.

Four issuers, each pricing single tranches, raised $2.9 billion.

Vantage Drilling Co. priced a $775 million fungible add-on to its 11½% senior notes due Aug. 1, 2015 (B3/B-) at 108.

The reoffer price, which came on top of the price talk, renders a 7.642% yield to worst.

Jefferies, Citigroup and RBC were the joint bookrunners.

The proceeds will be used to purchase from Valencia Drilling Corp. all of Valencia's rights and obligations under the shipbuilding contract for the deepwater drillship Dragonquest, together with related rig equipment, for $169 million. Valencia Drilling Corp. is an affiliate of F3 Capital, Vantage's largest shareholder. The proceeds also will be used to pay for the remaining construction and startup costs for the Dragonquest and for general corporate purposes.

The original $1 billion issue priced at 96.361 to yield 12½% in July 2010. A previous $225 million add-on priced at 107 to yield 8.904% in May 2011.

SandRidge drives by

SandRidge Energy priced a $750 million issue of 10.5-year senior notes (B3/B) at par to yield 8 1/8% on top of the yield talk.

Bank of America Merrill Lynch, SunTrust and RBS were the joint bookrunners for the quick-to-market issue.

The Oklahoma City-based oil and natural gas company plans to use the proceeds, along with 74 million shares of common stock, to acquire Dynamic Offshore Resources, LLC.

Actuant upsizes

In other drive-by action, Actuant priced an upsized $300 million issue of senior notes due June 15, 2022 (Ba2/BB) at par to yield 5 5/8%.

The yield printed at the tight end of the 5 5/8% to 5¾% yield talk.

Wells Fargo, Bank of America Merrill Lynch and J.P. Morgan were the joint bookrunners for the debt refinancing deal, which was upsized from $250 million.

New Gold comes at tight end

Canada's New Gold priced a $300 million issue of eight-year senior notes (B2/BB-) at par to yield 7%.

The yield printed at the tight end of the 7% to 7¼% yield talk.

J.P. Morgan and Scotia were the joint bookrunners for the debt refinancing and general corporate purposes.

El Paso rolls out $3 billion

EP Energy Corp. kicked off a $3 billion two-part notes offer with a Monday lunch for investors.

The deal, which is expected to price early in the April 9 week, features a $500 million tranche of seven-year senior secured notes that come with three years of call protection and a $2.5 billion tranche of eight-year senior unsecured notes that come with four years of call protection.

Citigroup is the left bookrunner for the LBO deal.

The joint bookrunners are J.P. Morgan, Credit Suisse, Deutsche Bank, BMO, RBC, UBS and Nomura.

Cengage slates for Tuesday

Cengage Learning Acquisitions, Inc. downsized its offering of eight-year first-lien senior secured notes (B2/B) to $525 million from $575 million.

The Stamford, Conn.-based company talked the notes with a yield in the 12% area.

The deal is set to price on Tuesday morning.

J.P. Morgan, Deutsche Bank, Morgan Stanley, RBC and UBS are the joint bookrunners.

WIND brings mirror notes

Italy's WIND Acquisition Finance SA plans to price €500 million equivalent notes mirroring its senior secured notes due Feb. 15, 2018 (Ba3/BB) during the middle part of the present week, according to a syndicate source.

The offering will be comprised of notes mirroring the euro-denominated 7 3/8% notes and the dollar-denominated 7¼% notes.

Tranche sizes remain to be determined.

Deutsche Bank, BNP Paribas and Banca IMI are joint global coordinators and joint bookrunners. Barclays, Credit Suisse, ING and SG CIB are joint bookrunners.

The telecommunications firm plans to use the proceeds to repay debt incurred to fund the acquisition of spectrum in an auction and for general corporate purposes.

In November 2010, the company priced €1.75 billion of the 7 3/8% notes priced at 99.327 to yield 7½% and $1.3 billion of the 7¼% notes at 99.323 to yield 7 3/8%.

New deals dominate secondary

Several traders said activity in new or recently priced deals seems to be where most of the action was during Monday's session, the first of the new month.

This was even with the month's-end and quarter's-end window-dressing and/or portfolio cleanup concerns, which affected the secondary market last week.

"It just seems like it's all new-deal," one said, "at least from my perspective. There doesn't seem to be a lot of excitement [away from the new deals] going on right now."

A second agreed. "That's where the market's focus is right now," the second trader said.

At another shop, a trader said, "The day was kind of dull until some deals started pricing" in the afternoon.

New Gold shines in secondary

When New Gold's $300 million issue of eight-year notes was freed for secondary market dealings, a trader initially saw those bonds bid at 1011/2, well up from their par pricing level, though he did not see an offered side.

He subsequently saw the bonds push a little further, to 101¾ bid.

A second trader, though, did see two-sided markets in the credit, at 101¾ bid, 102 3/8 offered.

At another desk, a trader saw those bonds even better than that.

"New Gold was easily the best performer and probably most active issue on the day," he said. That trader quoted the company's notes as having moved up to 102 bid, 102½ offered.

Vantage very solid

The day's other scheduled forward-calendar deal from offshore energy drilling contractor Vantage Drilling was seen by a trader at a wide 108¾ bid, 109¾ offered, up from the 108 level in which the company's $775 million fungible add-on to its 11½% notes due 2015 priced.

He said the Houston-based company's new deal "didn't trade that much."

A second trader saw the bonds opening as high as 109 bid, 110 offered when they hit the aftermarket and eventually saw them trading around a 109¼ level, suggesting a market in a 109 to 109½ context.

A third pegged them at 109¼ bid, 109¾ offered.

Actuant not that active

A trader saw Actuant's quick-to-market $300 million issue of 10-year notes at 101 bid, 101½ offered, up from the bonds par issue price. "It was thinly traded," he added. "There hasn't been a lot of it."

Two other traders said they did not see any trace of the diversified manufacturing company's new deal in the aftermarket.

SandRidge comes late

The day's other drive-by deal, from oil and gas exploration and production operator SandRidge Energy, priced fairly late in the session.

However, a trader saw the bonds initially trading at a wide 100¼ to 101¼ range, while a second trader said a little later that they tightened to bid levels around 100 1/8 to 1001/4.

Recent Aircastle is active

"Everything that had gains last week kind of held their gains," in Monday's trading, a trader said.

He said he "didn't see very much movement in that stuff from last week," with perhaps one or two exceptions.

One such exception was Aircastle's $800 million two-part issue of five-year and eight-year notes.

He said the Stamford, Conn.-based aircraft leasing company's deal priced late on Friday.

"It traded fairly actively today, particularly the eight-year," the trader said.

He saw both that $300 million tranche of 7 5/8% notes due 2020 and the other half of that transaction, the $500 million issue of 6¾% notes due 2017, going out trading at 101 to 1011/2.

Both pieces of the deal priced at par on Friday and then were quoted in the initial aftermarket at 100¾ bid, 101¾ offered.

"There's been a little bit of activity in Aircastle today," a second trader agreed.

He located the 6¼% notes at 101 1/8 bid, 101 3/8 offered and the 7 5/8% paper at 100¾ bid, 101¼ offered.

Yet another trader saw both bonds in a 100½ to 101¼ context.

Taylor Morrison holds gains

The secondary standout of Friday's $2 billion new-deal binge, Scottsdale, Ariz.-based homebuilder Taylor Morrison Communities' $550 million issue of 7¾% notes due 2020 was seen pretty much holding the gains those bonds recorded after the deal, which was upsized from $500 million originally and priced at par.

"It kind of held [its] gains, maybe gained a little more," a trader said Monday, seeing the bonds go home at 101¾ bid, 1021/4. A second trader saw the bonds at 101½ bid, 102½ offered.

The bonds were quoted around 101½ bid, 102 offered when they were freed for secondary trading on Friday.

Among Friday's other deals, a trader said that Vanguard Natural Resources LLC's 7 7/8% notes due 2020 "didn't really go anywhere" price-wise, even though it was among the day's volume leaders on Trace, with more than $13 million changing hands by mid-afternoon, placing it high upon the day's Junkbondland most-actives list.

That level of activity, he said, "is not surprising, because they're a new issue."

But he saw the bonds ending in a narrow 99 3/8 to 99½ bid context, just a little above the 99.274 level at which the Houston-based energy E&P company priced its deal after upsizing it from the originally announced $300 million to yield 8%.

The bonds were quoted as high as par bid, 100½ offered on Friday, before dropping back on Monday to just a bit above their issue price.

Another Friday deal - the $265 million issue of 9% notes due 2019 from Greenwich, Conn., broadcaster Townsquare Radio, LLC - was seen by traders Monday not really traveling far from their par issue price, or the initial aftermarket levels around 99 3.4 bid, par offered. One trader quoted them at 99¾ bid, par offered and a second at 99½ bid, par offered.

Lawson levels unchanged

Probably the most notable secondary performer among last week's deals - the $1.015 billion of 9 3/8% notes due 2019 from Lawson Software, Inc. - was seen on Monday still holding onto the solid gains that the St. Paul, Minn.-based business software provider's megadeal had notched when it traded after pricing on Thursday at par.

Several traders saw the bonds still at 103½ bid, 104 offered, which was slightly below the peak trading levels of about 104 bid seen on Thursday and again on Friday, but in line with most of the trading last week.

Lawson's well-received deal was part of a larger $1.35 billion two-part offering, upsized from $1.15 billion originally, which also included a €250 million tranche of 10% notes due 2019. It also priced at par.

Chicago-based building products maker USG Corp. - whose quick-to-market $250 million issue of 7 7/8% notes due 2020 also priced last Thursday at par - were quoted Monday at 100¾ bid, 101¼ offered, about where the bonds traded when they were freed for secondary dealings on Friday.

Coal keeps trading

Away from the new issues, a trader said there was some trading in coal-company bonds, which remain active in the wake of last week's sell-off in the sector following news that the Environmental Protection Agency plans to impose stringent new anti-emissions rules on coal-fired power plants to curb the release of carbon dioxide by those facilities.

He said that Peabody Energy's 6½% notes due 2020 were probably the most actively traded coal-sector issue, seeing them trading "anywhere between" 99 and par on the bid side, which he called down a bit from 100¾ bid on Friday.

"So they're down again," he reiterated.

Another market source said the bonds traded as high as the 102 level at one point during the session, but by the end of the day, they came back down to about the 99½ level, which he called down 1 point on the day. About $8 million of the St. Louis-based coal operator's bonds changed hands.

Peabody's cross-town rival, Patriot Coal's 8¼% notes due 2018 also were trading at lower levels, versus where they were before the EPA news, although they were little changed on the day.

A trader said that he saw "a bunch of trades" in a 76¼ to 76½ context. He later modified that initial assessment, saying there were not a lot of round-lot trades, just $4 million, $5 million or $6 million dollars.

He said they were unchanged, or maybe down one-quarter point, from Friday.

"But they're down from middle-last week," he said, when the bonds traded in a 79 to 81 bid range before that EPA announcement last Tuesday.

A market source said about $7 million of the bonds changed hands on a round-lot basis, leaving them little changed from Friday.

But that source said that late in the day, there was a flurry of smallish transactions that pushed the bonds up to about the 79½ bid level near the close.

Sector peer Alpha Natural Resources Inc.'s 6¼% notes due 2021 traded a half-point lower, around 90 bid, down a half point, although the Abingdon, Va.-based coal operator's 6% notes due 2019 were quoted up nearly 1½ points, at 92¾ bid.

Arch Coal, Inc. - yet another St. Louis-based coal company - also was better on the day. Its 7¼% notes due 2020 quoted up about 1½ points, at 92¾ bid.

Apart from the activity in the coal-company bonds, a trader said he "did not see anything else too dramatic."

Market indicators improved

Statistical measures of junk-market performance stayed firm for a second consecutive session on Monday.

A trader saw the Markit Group CDX North American Series 18 High Yield Index up by just under a quarter-point on Monday to end at 97 bid, 97¼ offered, on top of the 1/8-point gain seen on Friday.

The KDP High Yield Daily Index edged up by 1 basis point Monday to close at 73.91, after it was unchanged Friday. Its yield came in by 1 bp to 6.59%, after it was unchanged Friday.

And the widely-followed Merrill Lynch High Yield Master II Index recorded its second straight gain Monday, when it rose by 0.066%, on top of Friday's 0.046% advance.

That lifted the index's year-to-date return to 5.219% on Monday from Friday's 5.148% reading, although the cumulative return remains below its peak 2012 level of 5.361% recorded on March 2.

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