Aurora, Hornbeck, Ceridian, Hertz price; Ameren zooms on Dynegy deal; funds lose $418 million

By Paul Deckelman and Paul A. Harris

New York, March 14 - The high-yield pricing parade picked up on Thursday after Junkbondland had seen only one deal come to market on Wednesday.

A trio of opportunistically timed and quickly shopped transactions dominated the primary arena.

The U.S. arm of Australian energy operator Aurora Oil & Gas Ltd. priced an upsized $300 million of seven-year notes, which were seen having firmed smartly when the bonds moved into the aftermarket.

Out of that same energy sector, Hornbeck Offshore Services Inc. did a $450 million offering of eight-year notes, although that paper was seen pretty much anchored around its issue price.

Familiar borrower Hertz Corp. drove by with a $250 million issue of five-year notes.

The day's sole scheduled forward calendar pricing of dollar-denominated debt was business services provider Ceridian Corp.'s upsized $475 million of eight-year notes.

Electrical wire and cable manufacturer Belden Inc. priced an upsized €300 million of 10-year subordinated notes - a relatively rare euro-denominated deal from a domestic issuer.

Swiss telecommunications company Mobile Challenger Intermediate Group SA was originally going to return the favor by selling a tranche of dollar-denominated paper as part of a big multi-currency offering of six-year PIK toggle notes, but it was heard by syndicate sources to have scrubbed the dollar bonds, opting instead for just euro- and Swiss franc-denominated paper.

Also out of Europe came word of French health-care technology company Cegedim SA pricing a seven-year tranche of euro-denominated notes, while British electric utility NWEN Ltd. brought a sterling-denominated eight-year secured piece of paper to market.

Away from the new-deal world, there was once again heavy activity in Chesapeake Energy Corp.'s 6.775% notes due 2019, which moved to new highs even as a federal judge denied a company request that he issue a court order allowing it to redeem those notes at well below their current trading levels.

Ameren Corp.'s bonds soared on the news that the power producer will unload its merchant power generating operation in a deal with Dynegy Inc. - and shed more than $800 million of debt that will migrate over to the unit's new owners.

Statistical indicators of market performance turned higher across the board after three sessions of having been mixed.

But a key indicator of junk market liquidity trends - flows of money into and out of junk-rated mutual funds and exchange-traded funds - turned negative after two weeks on the upside, one of the major fund-tracking services said. However, the rival service reported an upturn in the amount of those funds.

AMG sees $418 million outflow

As Thursday's market activity was winding down, junk market participants familiar with the fund-flow statistics generated by AMG Data Services, Inc. reported that in the week ended Wednesday, $418.1 million more left those funds than came into them.

That snapped a two-week winning streak reported by Arcata, Calif.-based AMG, a unit of the Lipper analytics division of Thomson Reuters Corp., which had seen an $820 million inflow the previous week, which ended March 6, and a $69.9 million cash addition two weeks ago in the period ended Feb. 27.

Eleven weeks into the year, 2013 net inflows as reported by Lipper so far have amounted to about $616 million, according to a Prospect News analysis of the figures.

There have now been six inflows and five outflows reported by Lipper so far this year.

In 2012, when cumulative net inflows for the year totaled an estimated $32 billion, according to the analysis, inflows to the funds were recorded in 39 weeks of the year and outflows in the remaining 13 weeks.

EPFR sees $1.22 billion inflow

The other major fund-tracking service, Cambridge, Mass.-based EPFR Global, meanwhile saw its fourth straight inflow in the latest reporting week, also ended Wednesday, as $1.22 billion more came into the funds it tracks than left them.

That was a continuation of the trend seen the week before, when the service recorded a $1.9 billion cash injection.

Those recent inflows have totaled $3.54 billion, according to a Prospect News analysis of the EPFR figures.

The latest week's inflow was the ninth recorded so far this year by EPFR, against just two outflows, and thus raises the year-to-date net inflow total to nearly $6.3 billion.

EPFR and Lipper calculate their respective fund-flow statistics using different methodologies. EPFR includes some non-U.S. domiciled mutual funds and ETFs in its tabulations, while the Lipper number is purely domestic funds. Despite the differences in the actual numbers, the two services' weekly results usually point in the same direction, although not this week.

Reporting only the U.S. funds that it tracks - a category usually more closely aligned with the Lipper totals - EPFR said that those domestic funds accounted for $348 million of the overall number's rise. The week before, inflows to the domestic funds had come in at around $1.33 billion.

Despite those recent gains, EPFR has actually still seen six weekly net outflows from the U.S.-only funds since the start of the year, against just five weekly inflows; the 2013 cumulative flows figure rose to $878 million, according to the analysis.

In 2012, EPFR's overall figure showed a cumulative net inflow of $72.3 billion. According to the Prospect News analysis of the data, EPFR recorded 42 weeks of inflows last year, against just 10 weeks of outflows.

Cumulative fund-flow estimates, whether from EPFR or from AMG/Lipper, may be revised upward or downward or be rounded off and could include unannounced revisions and adjustments to figures from prior weeks.

The continued flow of fresh cash into junk - and the mutual funds and ETFs represent but a small, though very observable and quantifiable percentage of the total amount of investor money coming into the junk market - has been seen by analysts as a key element behind the high-yield secondary market's strong performance last year versus other fixed-income asset classes and its record active new-deal pace, which easily topped the $300 billion mark - patterns of primary activity and secondary strength that have mostly continued into 2013.

Ceridian upsizes

New issue volume was intense during the Thursday primary market session.

In the dollar-denominated market, four issuers with single-tranche deals combined to raise $1.48 billion.

Executions were notable. Three of the four deals came at the tight end of talk, three came quick-to-market and two of the four were upsized.

Ceridian priced an upsized $475 million issue of eight-year senior notes (Caa3/CCC) at par to yield 11%.

The deal was upsized from $400 million, and the yield printed at the tight end of the 11% to 11¼% yield talk.

Deutsche Bank Securities Inc., Credit Suisse Securities (USA) LLC and BofA Merrill Lynch managed the debt refinancing deal.

Hornbeck prints at 5%

Hornbeck Offshore Services priced a $450 million issue of eight-year senior notes (Ba3/BB-) at par to yield 5%, on top of yield talk.

Barclays was the left bookrunner for the quick-to-market deal.

J.P. Morgan Securities LLC, Wells Fargo Securities LLC and DNB Markets were the joint bookrunners.

Proceeds will be used to refinance the company's 8% notes due 2017 and for general corporate purposes, including capital expenditures.

Aurora upsizes

In a deal that was in the market overnight, Aurora USA Oil & Gas Inc. priced an upsized $300 million issue of seven-year senior notes (Caa1/CCC+) at par to yield 7½%.

The yield printed at the tight end of the 7½% to 7¾% yield talk.

Credit Suisse and UBS Investment Bank were the joint bookrunners for the quick-to-market deal, which was upsized from $250 million.

The energy company plans to use the proceeds to fund the acquisition of additional acreage, to fund capital expenditures and for general corporate purposes.

Hertz drives through

Hertz priced a $250 million issue of non-callable five-year senior notes (B2/B) at par to yield 4¼%.

The yield printed at the tight end of the 4¼% to 4 3/8% yield talk.

BofA Merrill Lynch, Barclays, Deutsche Bank Securities Inc. and Goldman Sachs & Co. were the joint bookrunners for the quick-to-market deal.

The company intends to use the proceeds to replenish a portion of its liquidity after repurchasing shares of common stock.

Sunrise brings PIK toggles

The European market was also notably busy on Thursday.

Mobile Challenger Intermediate Group, the parent of Switzerland's Sunrise Communications Holdings SA, priced €518 million equivalent of six-year senior PIK toggle notes (/B-/B-) in a restructured dual-currency deal.

The deal, in tranches sized at €275 million and CHF 300 million, priced with a cash coupon of 8¾% at 99.5 to yield 8.859%. The coupon steps up by 75 basis points, to 9½%, in the event that the issuer elects to make an in-kind coupon payment.

The coupon came at the tight end of the 8¾% to 9% coupon talk. The reoffer price came in line with discount talk that specified up to one point of original issue discount.

A planned dollar-denominated tranche was withdrawn.

Global coordinator Deutsche Bank will bill and deliver. Goldman Sachs was also a global coordinator.

UBS, BNP Paribas, Credit Suisse and Morgan Stanley were the joint bookrunners.

The issuer will be required to make interest payments in cash if its restricted payments capacity and minimum cash requirements are met.

The Zurich-based integrated telecommunications services provider plans to use the proceeds to refinance preferred equity certificates.

Belden upsizes

St. Louis-based Belden priced an upsized €300 million issue of 10-year senior subordinated notes (Ba2/B+) at par to yield 5½%.

The deal was upsized from €200 million.

The yield printed at the tight end of the 5½% to 5¾% yield talk.

Joint bookrunner Deutsche Bank will bill and deliver. Goldman Sachs, JPMorgan and Wells Fargo were also joint bookrunners.

Proceeds will be used to repay revolver debt and for general corporate purposes.

Cegedim at the tight end

France's Cegedim priced a €300 million issue of seven-year senior notes (/B+/) at par to yield 6¾%.

The yield printed at the tight end of the 6¾% to 7% yield talk.

BNP Paribas, BofA Merrill Lynch, Credit Agricole CIB and SG CIB managed the sale.

Proceeds will be used to fund the tender offer for the company's 7% notes.

NWEN prices £180 million

England's North West Electricity Network Finance Ltd. priced a £180 million issue of non-callable senior secured notes due June 21, 2021 (/BB+/) at par to yield 5 7/8%.

The deal was led by Barclays and HSBC.

The Warrington, England-based electricity distribution network operator plans to use the proceeds to refinance debt.

Talking the deals

Friday also figures to be a busy day in the primary market.

Price talk surfaced Thursday on several deals expected to clear before the weekend.

McGraw-Hill Global Education Holdings LLC downsized its offering of eight-year first-lien senior secured notes (B2//BB) to $1 billion from $1.05 billion while upsizing its term by $50 million.

The notes are talked to yield 9¾% to 10%.

Credit Suisse, Morgan Stanley & Co. LLC, BMO Securities, Jefferies & Co., Nomura and UBS are the joint bookrunners.

Sun Products Corp. upsized its offering of eight-year senior notes (Caa1/CCC) to $575 million from $500 million and set price talk in the 7¾% area.

The initial call premium was decreased to par plus 50% of the coupon from 75%. The non-call period remained unchanged at three years.

Barclays, JPMorgan, BofA Merrill Lynch, Goldman Sachs and Morgan Stanley are the joint bookrunners.

And Toronto-based MDC Partners Inc. talked its $500 million offering of seven-year senior notes (B3/B-) to yield 6¾% to 7%.

JPMorgan and Goldman Sachs are the joint bookrunners.

Smart Technologies to price

There were also new deal announcements made during Thursday's session.

Smart Technologies ULC and Smart Technologies Finance Inc. plan to host an investor conference call on Tuesday to discuss their $250 million offering of seven-year senior secured notes, according to a market source.

The deal is expected to price on March 22 following a full roadshow.

Deutsche Bank is the left bookrunner. RBC Capital Markets is the joint bookrunner.

The Calgary, Alta.-based provider of technology solutions plans to use the proceeds, together with cash on hand, to repay its term loan and for general corporate purposes.

St. Barbara eyes 9½% yield

Australian gold producer St. Barbara Ltd. is talking a $250 million offering of non-callable five-year first-priority senior secured notes (B2/B) with a yield in the 9½% area, according to a market source.

The deal, via managers Deutsche Bank and Barclays, is set to price next week.

The Melbourne-based company plans to use the proceeds to repay A$150 million of bank debt, to provide collateralization for its A$20 million performance bond and for general corporate purposes.

Aurora lights up aftermarket

In the secondary market, a trader said that "one issue that surprised me the most" was Aurora USA Oil & Gas' 7½% notes due 2020. He said that the "first thing I saw in them" was a 101½ bid.

At another desk, a trader saw the Houston-based independent energy exploration and production company's upsized $300 million deal doing even better, quoting them at 102 bid, 102½ offered.

The U.S. arm of Australian energy operator Aurora Oil & Gas Ltd.'s quickly shopped deal priced at par after upsizing from an originally announced $250 million.

Hornbeck a little higher

Out of that same energy sphere, a trader saw Hornbeck Offshore Services' 5% notes due 2021 marginally higher at 100¼ bid, 100½ offered.

The Covington, La.-based oilfield services company's same-session $450 million issue priced earlier at par.

A second trader, though, said he had not seen any immediate activity in the bonds.

Hertz little-seen

One of the traders said that he had not seen any activity in Hertz's new 4¼% notes due 2018. The Park Ridge, N.J.-based vehicle-rental giant had driven by the junk market with a same-day $250 million issue of those bonds, which priced at par.

Hertz's five-year-bullet issue, he said, "was right in the sweet spot for a lot of IG guys or short yield-to-call buyers. It just was put away, and I haven't seen any trading in it."

Ceridian aftermarket no-show

The day's other dollar-denominated pricing, Minneapolis-based business services provider Ceridian's 11% notes due 2021, came to market too late in the session for any kind of secondary trading around.

The $475 million issue - the day's only offering that wasn't a quickly shopped transaction but that had actually gone through a roadshow process - priced at par after having been upsized from $400 million originally.

NANA holds gain

A trader noted that Wednesday's 9½% senior secured notes due 2019 from NANA Development Corp. "were up a point on the break" and stayed at that level on Thursday.

A second trader meantime saw the Anchorage-based engineering, construction, resource development, facilities management and logistics company's new issue unchanged on the day at 100¾ bid, 101½ offered.

The company had priced its $275 million forward-calendar offering at par, and the new bonds had moved up when they were freed to trade late Wednesday.

Chesapeake still volume champ

In the non-new-deal secondary market, Chesapeake Energy's 6.775% notes due 2019 once again easily topped the most-active issues list, their fourth consecutive session on top.

A market source saw more than $78 million of the Oklahoma City-based natural gas company's bonds having traded just in big round-lot trades and estimated that counting in busy odd-lot dealings, the total volume figure might approach $100 million.

He saw the bonds - which had finished on Wednesday around 105½ bid - trading for most of the day at that same level as market players awaited a judicial decision on the company's efforts to call those bonds at par plus accrued interest - well below recent trading levels. The issue has been the subject of a heated legal battle between Chesapeake, the trustee for the notes and a bondholders' group over the last several session.

And when that ruling finally came down during the afternoon, the notes shot up as high as 108 bid before coming back down a little to end around 1071/2. Manhattan federal judge Paul Engelmayer denied the company's request for a preliminary injunction allowing it to proceed with that par call.

A second trader quoted them at 107¼ bid, 108¼ offered, up as much as three or four points.

Traders were a little puzzled by the continued strength of the bonds, which had initially moved well above par on market belief that Chesapeake had waited too long to do any kind of a par redemption under the notes' indenture and would now probably have to redeem them with a more expensive make-whole call if it chooses to take them out. Chesapeake had already said that if it did not prevail in its court battle, it would not do a make-whole call on the bonds but would just leave them outstanding and not call them at all.

"They're looking at it from a point of view, probably, of where would a 6.775% non-call piece of Chesapeake paper trade," the second trader suggested.

Ameren jumps on sale news

Elsewhere, Ameren announced Thursday that it was selling its merchant generating business to Dynegy.

The official sale agreement comes after the company said it was looking to divest the asset back in January.

"I guess that's good news for them; the bonds are flying," a trader remarked, seeing Ameren Energy Generating Co.'s 7% notes due 2018 jump to 76¾ from previous levels around 55.

"They were the most notable distressed mover," another trader said, pegging the 7.95% notes due 2032 at 72, versus previous trades in a 52-53 context.

"It was one of the most active ones," yet another trader said.

At another desk, a trader pronounced the bonds "up a ton" on volume in the 7% notes of more than $40 million at mid-afternoon.

Ameren will not receive any cash from the sale but will shed $825 million of debt. The company also expects to receive about $180 million of tax benefits. (See related story elsewhere in this issue.)

The full benefits are expected to be seen by 2015.

"We think all of this is very good news, giving the business time to recover as industry-coal fired capacity is retired and increased demand increases natural gas prices, making surviving coal plants more profitable," wrote Gimme Credit LLC analyst Philip C. Adams in an afternoon comment. "A very good outcome for Genco bondholders."

Overall market quiet

A trader said that "secondary market-wise, it was just very difficult" to get anything done other than trading in the active issues like Chesapeake or Ameren.

"There was a little bit of re-trading in some of the new issues, but not a lot. It was hunt-and-peck all day long.

"Everything that went on here was one-off trades, except for Chesapeake, where there was still a little sport trading going on."

A trader at another desk meanwhile agreed that except for the big names, "it was really pretty quiet. I don't really have a good read on anything."

Market indicators strengthen

Overall, statistical junk performance indicators turned northward across the board on Thursday after having been mixed three consecutive sessions before that. They had also been higher for most of last week.

The Markit Series 19 CDX North American High Yield index gained ¼ point to end at 104 9/16 bid, 104 13/16 offered, its second straight advance, after having risen 7/32 point on Wednesday.

The KDP High Yield Daily index rose by 8 basis points to end at 75.62, after having backtracked on Wednesday by 2 bps.

Its yield came in by 3 bps to 5.51%, after having been unchanged Wednesday.

And the widely followed Merrill Lynch High Yield Master II index made it a full one dozen days in a row of gains on Thursday, rising by 0.087%, on top of Wednesday's 0.038% gain.

That latest improvement lifted its year-to-date return to 2.575% - a new peak level for 2013 so far, and the eighth straight session in which it has reached a new high point for the year. The previous zenith was Wednesday's 2.485% reading.

Stephanie N. Rotondo contributed to this review

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