Upsized MEG Energy drives by, firms later; Harland Clarke returns; SuperValu down again

By Paul Deckelman and Paul A. Harris

New York, July 16 - The high-yield market kicked off the second half of July on Monday with a quickly shopped, upsized $800 million offering of 10.5-year bonds from MEG Energy Corp.

The new bonds were heard by traders as firming smartly when they were freed for aftermarket dealings.

Monday also saw the return to the junk market of Harland Clarke Holdings Corp., which had postponed a planned bond-deal back in mid-May due to "market conditions."

Its quick-to-market new deal, somewhat changed from that May offering, was expected to price Monday, although no deal terms surfaced by the time the market closed.

Two other prospective issuers hit the road Monday to market eight-year deals, according to high-yield syndicate sources. Clean Harbor Inc. marketed a $600 million offering and j2 Global, Inc. is marketing $250 million of paper. Clean Harbor's marketing wraps up Tuesday, with pricing possible anytime after that, while j2 Global is expected to come to market somewhat later in the week.

In the secondary market, SuperValu Inc.'s battered bonds were seen on the downside for a third straight session Monday, still reeling from last week's report of poor quarterly numbers. However, news reports indicated that the company, which said it would explore strategic alternatives, will open its books soon to would-be buyers.

Coal names continued to take their lumps, with activity seen in such credits as Alpha Natural Resources Inc. and Arch Coal Inc. - both of whose shares were downgraded by BMO Capital Markets, as well as Peabody Energy Corp. and the recently bankrupt Patriot Coal Corp.

Nokia Corp.'s bonds were seen fairly active, as the Finland-based cell phone maker tries to fight back against entrenched rivals Apple Corp., the maker of the popular iPhone, and Samsung.

MEG Energy upsizes

The Monday session saw terms roll out on a single quick-to-market deal.

MEG Energy priced an upsized $800 million issue of 10.5-year senior notes (B1/BB) at par to yield 6 3/8%.

The yield printed at the tight end of price talk, which was set in the 6½% area.

Barclays, BMO and Credit Suisse were the joint bookrunners for the deal, which was upsized from $700 million.

The Calgary, Alta.-based oil sands development company plans to use the proceeds for general corporate purposes, including funding capital investments.

Elsewhere, Harland Clarke Holdings talked a $250 million offering of six-year senior secured notes with a yield in the 10% area.

The quick-to-market deal was expected to price Monday, however no terms were available at press time.

Credit Suisse, Citigroup, Bank of America Merrill Lynch, Deutsche Bank, UBS and Natixi are the joint bookrunners for the debt refinancing.

Roadshow for Clean Harbors

There were two roadshow announcements Monday.

Clean Harbors set out on a brief roadshow for its $600 million offering of eight-year senior notes (Ba3/BB+).

The roadshow is scheduled to wrap up on Tuesday.

Goldman Sachs has the books.

The Norwell, Mass.-based provider of environmental, energy and industrial services plans to use the proceeds to fund the tender for its 7 5/8% senior secured notes due 2016 and for general corporate purposes.

j2 Global starts roadshow

j2 Global started a roadshow Monday for its $250 million offering of eight-year senior notes, which are expected to price late in the present week.

Bank of America Merrill Lynch is the sole bookrunner.

The proceeds will be used for general corporate purposes, which may include acquisitions.

MEG Energy bonds move up

When the new MEG Energy 6 3/8% notes due2023 were freed for secondary dealings, a trader said he saw "a little bit of activity" in the Calgary, Alta.-based oil-sands producer's deal, with initial aftermarket levels up around a 101 1/8-to-101½ context, although he noted that the issue just freed up.

A little later on, a second trader pegged the bonds at 101 3/8 bid, 101 5/8 offered.

Another saw the bonds going home at 101½ bid, 101¾ offered.

Clarke hangs back

One of the traders noted that the launching of the Harland Clarke deal allowed the company to take "a second bite of the apple to get this one done," having postponed a $295 million offering back in mid-May due to unfavorable market conditions.

"They chopped $45 million off it," he said, adding that he was "hearing that a good amount of it is on reverse [inquiry], so we'll see."

However, while price talk eventually emerged on the deal, no deal terms were seen by the time things wound down for the day.

Recent deals show strength

The trader also pointed out that the market remains firm, so that last week's new deals, such was WOW! Internet, Cable & Phone, Beazer Homes USA Inc. and CHS/Community Health Systems Inc. were all holding their gains.

"I haven't seen anything different from where they were. They're all still holding onto their gains," the trader said.

In fact, a trader at another desk saw the new WOW! 10¼% senior notes due July 2019 moving up, quoting them Monday at 101 5/8 bid, 102 1/8 offered - up from Friday's levels between 100 5/8 and 101. That upsized $725 million of bonds priced at par Thursday.

He did not see the other half of the Denver-based telecommunications and broadband operator's two-part mega-deal - the downsized $290 million of 13 3/8% senior subordinated notes due October 2019. Those bonds priced Thursday at 98.337 to yield 13¾%, but struggled in the aftermarket both Thursday and Friday, going home at the end of last week quoted at 97¾ bid, 98¼ offered.

Community Health Systems' upsized $1.2 billion of 7 1/8% senior notes due 2020 were quoted by a market source as trading Monday around the 103 bid level.

The Franklin, Tenn.-based hospital operator's quickly-shopped offering - upsized from an originally announced $1 billion -priced at par last Monday, immediately moved to a 1011/2- to 102-context when they went into the aftermarket and moved about the 102 level by the end of last week.

A trader said that he did not seen Atlanta-based homebuilder Beazer's quick-to-market 6 5/8% senior secured second-lien notes due 2018 in the market Monday. He said a $300 million deal - upsized from $275 million originally - priced at par last Wednesday, traded a little above that for the remainder of that session and on Thursday, then rose risen to 101 bid, 101½ offered by Friday.

Market signs turn mixed

Away from the new-deal arena, a trader characterized the session as "a typical summertime Monday," with not a whole lot going on.

Statistical market performance measures turned mixed on Monday, after having been mostly higher on Friday.

A trader saw the Markit Group CDX North American Series 18 High Yield Index fall by 5/16 point on Monday to end at 96 1/16 bid, 96 5/16 offered, after gaining 7/16 point on Friday.

The KDP High Yield Daily Index eased by 2 basis points Monday to close at 73.47, after going unchanged Friday.

Its yield rose by 1 bp, to 6.43%, after coming in by 1 bp on Friday.

But the widely followed Merrill Lynch U.S. High Yield Master II Index remained on the upside Monday for a second straight session, rising by 0.079%, on top of Friday's 0.016% gain.

The latest gain lifted its year-to-date return to7.946% from 7.86% on Friday. Monday's level also was a new peak for 2012 so far, beating the old high water market of 7.94%, set last Wednesday.

The index's recent levels are the highest they've been since the end of 2010, when the market measure returned 15.19%.

SuperValu struggle continues

Among specific names, a trader said that SuperValu's bonds "were pretty active today - and they just keep going down."

It was the third consecutive session in which the Eden Prairie, Minn.-based No. 3 U.S. supermarket operator's bonds have been getting clobbered following its announcement late last Wednesday of considerably less-than-anticipated quarterly earnings.

He saw the most active issue, the 8% notes due 2016, down another two points, to 83¼ bid, on volume of some $30 million, making it one of the busiest Junkbondland issues of the day while its 7½% notes due 2014 lost 1½ points to close around 89¾ bid.

And its shortest-dated issue, the 7¼% notes due 2013 originally issued by Albertsons Inc. before that store chain was absorbed by SuperValu several years ago, also lost 1½ points to close at 97 bid, on volume of $11 million.

All three of those issues were trading at or above par before the earnings news hit the market last Thursday.

"SuperValu continued to get weaker," a second trader said, seeing similar levels. He said the 71/2s "got as low as 89, but went out straddling 90," quoted at 89¾ bid, 90¼ offered.

"They were definitely off the lows, but were still down for the day."

"They lost a couple of points across the board," another trader declared.

But SuperValu's New York Stock Exchange-traded shares, which got hammered mercilessly last week after the company reported sharply lower quarterly earnings, were actually up on the day Monday, gaining 16 cents, or 6.90%, to close at $2.48, on volume of 34.6 million, about four times the norm.

The company reported after the close Wednesday that it had net earnings of $41 million, or 19 cents per diluted share, on net sales of $10.6 billion during the fiscal quarter ended June 16 - badly missing Wall Street expectations of earnings in the 38- to 40-cents per share range. It's year-ago earnings were considerably better, at $74 million, or 35 cents per share, on revenues of $11.1 billion.

SuperValu, which is fighting to retain market share against upstart rivals Wal-Mart Stores Inc. and Costco, said last week that it would explore possible strategic alternatives, including the sale of part or all of the company.

The Wall Street Journal reported Monday evening that SuperValu will open up its books for possible buyers within the next several weeks, one of the first steps needed to facilitate a potential sale.

Citing unidentified sources, the newspaper reported that potential buyers for some or all of SuperValu could include C&S Wholesale Grocers Inc., which is interested in buying Supervalu's distribution operations, as well as such large private-equity firms as Cerberus Capital Management, Kohlberg Kravis Roberts & Co. and TPG Capital.

Nokia notes active

Elsewhere, traders saw Nokia's paper trading fairly actively - one pegged the Finnish cell phone maker's 5 3/8% notes due 2019 at 75 bid, 76 offered for most of the day with more than $10 million of the bonds changing hands

He saw its 6 5/8% bonds due 2039 at 74 bid, 75 offered, on volume of $6 million.

He called the bonds largely unchanged on the session.

Another trader saw their price "down a smidge on both," estimating them a quarter-point easier.

He put the 2019 bonds at 75½ bid and the 2039s at 741/2.

Nokia's NYSE-traded shares were off by 4 cents, or 2.17%, ending at $1.80. Volume of $40 million was a little more than the usual turnover.

Senior analyst Dave Novosel of the Gimme Credit investment advisory service said in a research note Monday that Nokia, which has been fighting to hold on to market share against such larger rivals as Samsung and Apple Corp. will cut the price of its Lumia 900 phone to $50 from $100 with the signing of a two-year contract with AT&T, hoping to undercut its competitors.

He said the move "suggests that sales of the Lumia have not been as robust as originally expected, despite reviews that were generally positive."

The analyst also warned that second-quarter results are due out Thursday. "We do not expect them to be pretty," the analyst said.

Coal gets clobbered

There was more carnage in coal, with bonds seen lower pretty much across the sector after BMO Capital markets downgraded the shares of two operators, Alpha Natural Resources and Arch Coal.

Alpha's 6% notes due 2019 fell by 1½ points, to 84½ bid, on round-lot volume of more than $6 million, while its 6¼% notes due 2021 lost about three-quarters of a point, though in light trading of just a couple million.

Arch's 7¼% notes due 2020 eased by about a half-point to 82½ on volume of $5 million.

Among other sector players, Peabody Energy's 6½% notes due 2020 dipped nearly a point to 100¾ bid with more than $5 million traded.

As for Patriot Coal, which recently filed for Chapter 11 protection, a trader saw its 8¼% notes due 2018 actually "up a couple of points" to 42½ bid going home, but only on trading of $2 million to $3 million.

"There was not a lot of price action or trading today," a second trader agreed.

Those bonds were whacked down into the 30s on the news that Patriot would seek bankruptcy protection.

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