National CineMedia, Chaparral, Physiotherapy price; Chesapeake chokes on CEO loan revelations

By Paul Deckelman and Paul A. Harris

New York, April 18 - The high-yield primary market saw a pair of upsized quick-to-market issues price on Wednesday, as a moderately busy new-deal session broke a drought that had lasted a couple of days and racked up about $1 billion of new issuance.

Chaparral Energy Inc., an independent oil and gas exploration and production company, came to market with a quickly shopped $400 million offering of 10.5-year notes - upsized from an original $350 million - which rose modestly after it priced.

National CineMedia, LLC, which does in-theater advertising and live-event production, also did a same-day $400 million bond deal, upped from $315 million. Traders saw those 10-year secured notes move up about a point in initial secondary market dealings.

The day's roster additionally included Physiotherapy Associates Holdings, Inc.'s $210 million offering of seven-year notes that came off the forward calendar. But the outpatient rehabilitation company's deal came too late in the session for an aftermarket.

That same healthcare sector also put another deal onto the calendar, as hospital operator Prospect Medical Holdings, Inc. was heard by syndicate sources to be shopping a $325 million seven-year secured issue around, for likely pricing next week.

Apart from the new-deal realm, traders didn't see much happening - except for a pronounced slide in Chesapeake Energy Corp.'s bonds, in line with a plunge in the natural gas company's shares. That followed the disclosure in news reports that the company's chief executive officer has personally borrowed some $1.1 billion related to his interests in company wells. Chesapeake said Aubrey McClendon's loans are his own business and have no impact on the company - but some critics in the investment community said the matter raises questions about the CEO's judgment.

Chaparral prices at tight end

The primary market turned out $1.01 billion of new bonds on Wednesday as a trio of issuers each priced single-tranche deals.

In drive-by action, Chaparral Energy sold an upsized $400 million issue of 10.5-year senior notes (B3/B-) at par to yield 7 5/8%.

The yield printed at the tight end of the 7 5/8% to 7¾% yield talk. The amount was increased from $350 million.

Credit Suisse, Credit Agricole, J.P. Morgan, RBC and Wells Fargo were the joint bookrunners for the debt refinancing deal.

National CineMedia in demand

Also in quick-to-market action, National CineMedia priced an upsized $400 million issue of 10-year senior secured notes (Ba2/BB-) at par to yield 6%, on top of price talk.

The size was increased from the original $315 million.

Barclays was the lead left bookrunner. J.P. Morgan, Credit Suisse, Macquarie and Morgan Stanley were the joint bookrunners.

Proceeds will be used to repay $275 million of the company's outstanding term loan and to terminate a swap agreement.

The deal was a couple of times oversubscribed and went very well, according to a syndicate source.

A trader from a high-yield mutual fund said that there was an enthusiastic following for the secured, four-B rated deal.

Physiotherapy beats talk

Physiotherapy Associates priced a $210 million issue of 11 7/8% seven-year senior notes (B3/B-) at par to yield 12 1/8%.

The yield printed 12.5 basis points below the low end of the 12¼% to 12½% yield talk.

Jefferies and RBC were the joint bookrunners for the LBO deal which was marketed on a full roadshow.

The 12% yield got a lot of peoples' attention, according to a buyside source who recounted that when the deal was launched into the market preliminary guidance was in the 11% area.

Back-loaded week

As the dust cleared on the reasonably busy Wednesday session, the market had visibility on a substantial calendar of deals - seven offerings totaling $2.1 billion - which are scheduled to price before the Friday close.

Remarking on the volatility which has held sway in equities throughout the week so far, a trader said that there is still plenty of cash for the right deal.

Cash continues to flow into high yield, in particular to high-yield exchange-traded funds, the trader added.

Prospect Medical's secureds

The market heard just one new deal announcement on Wednesday.

Prospect Medical plans to host an investor call on Friday to present a $325 million offering of seven-year senior secured notes, a deal is expected to price late in the week ahead.

Morgan Stanley, Credit Suisse and RBC are the joint bookrunners.

Proceeds, along with cash on hand, will be used to repay outstanding debt including the company's notes due 2014, as well as to make a distribution to Ivy Holdings for the redemption of its 13½% senior redeemable exchangeable cumulative preferred stock, and for general corporate purposes.

Showtime for National CineMedia

When National CineMedia's new 10-year senior secured notes were freed for secondary dealings, a trader said they moved up to a 100¾ to 101¼ context.

"They went out wrapped around 101," he said, up from the par level where the quickly-shopped $400 million issue had priced.

A second trader quoted the integrated media company's new issue at 100¾ bid, 101 offered, suggesting that "that one moved better" than the day's other $400 million drive-by deal, for Chaparral Energy.

Yet another trader located National CineMedia at 100¾ bid, 101¼ offered.

Chaparral churns around

A trader said that Chaparral Energy, which came to market earlier in the day, "didn't do as well" as the National CineMedia deal.

He said the oil and gas exploration and production company's $400 million of 10.5-year notes "kind of went up [after pricing at par] and then they came back down close to par," before bouncing off their day's lows to end around 100 3/8 bid, 100 5/8 offered.

"Chaparral started out slowly," a second trader agreed, but said that the upsized, quick-to-market issue closed around the 100 5/8 bid, 100 ¾ offered.

He said that he had heard that "somebody put a negative slant on them about their covenants" in a research report, and "their bonds traded slowly into a par bid, 100 1/8 bid, but then they moved up a little bit," to their closing levels.

On the other hand, another trader, who pegged the new deal at 100½ going home, said the bonds had been "a little higher earlier" - perhaps as good as 100 5/8 bid, 100¾ offered - before stabilizing at 1001/2.

"I'm not sure that a lot traded in between there," he said, calling 100½ bid "the right level."

The traders meantime saw no aftermarket dealings in Physiotherapy Associates' 11 7/8% notes due 2019, which priced too late in the session for any kind of a real aftermarket.

Chesapeake gets chopped down

Away from the new-deal arena, a trader declared that "the big story of the day today was Chesapeake [Energy]. Five of the top six trading [volume] issues were Chesapeake issues."

He ascribed the heavy trading and lower levels to news about CEO McClendon, who was the subject of a Reuters "special report" that hit the screens early Wednesday morning, detailing that he had personally borrowed some $1.1 billion, secured by his 2.5% interest in Chesapeake's wells, granted to him granted to him as one of the provisions of his contract.

With that news causing a sharp fall in Chesapeake's shares, the trader said the company's bonds "traded down but then they came back [from their lows] late in the day.

"I guess people decided it wasn't that big a deal at all."

The most active Chesapeake issue was the company's $1.3 billion of 6.775% notes due 2019, which the company sold in a drive-by deal back on Feb. 13. After upsizing from the originally announced $1 billion, those bonds had priced at 98.75 to yield 7%, and then were heavily traded, at mostly lower levels, in the intervening weeks.

On Wednesday, the trader said that "there were over 100 trades" on the Trace system in the credit, making it easily the busiest issue of the day in Junkbondland.

He saw the bonds fall from their late Tuesday levels in the 983/4-99 area to intraday Wednesday lows around 961/2, before going out at 97 1/8 to 971/4.

"So they traded down more than 2 points, and then came back a little bit to end down 1½ or 13/4."

At another desk, a market source saw "pages and pages" of Trace trades in those 2019 bonds, totaling well over $100 million on the day, including at least $75 million in round-lot dealings of at least $1 million or more.

"Chesapeake got destroyed," yet another trader said, quoting the 6.775% notes as "down a lot.

"I didn't know what the hell was going on," he said, before he found out about the McClendon revelations. "All of a sudden they were getting hit."

The first trader also saw heavy dealings in some of the company's other issues.

He saw the 6 5/8% notes due 2020, which had traded as high as 100¼ bid on Tuesday and as low as 96½ bid on Wednesday, "so that's down almost 4 points," before going out at 97 3/8, which he said left it down about 3 points on the day. Over $66 million of those bonds changed hands.

Chesapeake's 6 1/8% notes due 2021 finished the day at 95½ bid, down about 3 points, on volume of over $36 million. The 9½% notes due 2015 slid by nearly 3 points on the session to close at 111½ bid, on volume of nearly $24 million.

Its 7¼% notes due 2018 dropped by 4 points on the day to 101 bid, also in brisk activity.

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