SeaDrill prices, gains; NRG upsizes; Plains Exploration slides on debt-funded asset buys

By Paul Deckelman and Paul A. Harris

New York, Sept. 10 - The high-yield primary market began the new week with $1.99 billion of new bonds pricing in two quickly shopped tranches.

SeaDrill Ltd. brought a $1 billion offering of five-year notes to market; after they priced at par, the new bonds were heard firming solidly when freed for secondary dealings.

NRG Energy Inc. priced an upsized $990 million of 10.5-year paper. The new bonds came too late in the session for any kind of aftermarket, traders said.

There was some trading in recently priced bonds, including Tesoro Logistics LP/Tesoro Logistics Finance Corp., Hub International Ltd., Digicel Group Ltd. and Carrizo Oil &Gas Inc. Those bonds were pretty much a mixed bag on the session, with some up from where they were Friday and others off.

Away from the bonds that priced so far, the forward calendar saw new dollar-denominated deals announced by Iamgold Corp. and Continental Rubber of America Corp.

In the non-dollar sector, Renault SA brought an upsized euro-denominated offering while Cabot Financial Luxembourg SA and Dixons Retail plc were heard to be planning respective pound sterling-denominated deals.

Plains Exploration & Production Co. expects to sell $2 billion of new bonds as part of a $7 billion financing package to fund its acquisition of offshore assets from BP and Shell.

News of that huge debt-financed transaction hammered the company's existing bonds down more than 2 points in busy dealings.

Statistical indicators of junk-market performance turned mixed on the session, after rising Friday.

Seadrill driven by inquiry

The news pace in the high-yield primary market remained brisk as the week got underway.

There were two drive-by issuers Monday, each bringing a single dollar-denominated tranche and raising a total of $1.99 billion.

Seadrill priced a $1 billion issue of unrated, non-callable five-year senior notes at par to yield 5 5/8%, according to a market source.

The yield printed at the tight end of price talk set in the 5¾% area.

The entire deal was done on reverse inquiry, according to a trader from a high-yield mutual fund, who added that the book was full as soon as the deal was announced.

Goldman Sachs ran the books for the debt-refinancing and growth-capital deal.

NRG Energy upsizes

NRG Energy priced an upsized $990 million issue of 10.5-year senior notes (B1/BB-) at par to yield 6 5/8%, at the tight end of the 6 5/8% to 6¾% yield talk.

Deutsche Bank, Bank of America Merrill Lynch, Barclays, Citigroup, Credit Suisse, Goldman Sachs, J.P. Morgan, Morgan Stanley and RBS were the joint bookrunners for the debt-refinancing deal, which was upsized from $900 million.

Renault prices five-year deal

The European market also generated decent news volume Monday.

French car maker Renault priced an upsized €600 million issue of five-year fixed-rate notes (Ba1/BB+) at a 365 basis points spread to mid-swaps, on top of spread talk.

Initial guidance was 375 bps.

Earlier in the European session, the company announced an expected deal size of €500 million.

Citigroup, Mitsubishi UFJ Securities, Natixis and SG CIB managed the sale.

Cabot Financial starts Tuesday

There also were announcements on sterling-denominated deals.

Cabot Financial Luxembourg plans to start a brief roadshow Tuesday for its £265 million offering of seven-year senior secured notes (expected ratings B1/BB).

JP Morgan is the lead left bookrunner for the debt refinancing. Citigroup, Lloyds and RBS are joint bookrunners.

Dixons starts brief roadshow

Dixons Retail started a brief roadshow Monday for its £150 million offering of non-callable five-year guaranteed notes (expected B1).

Barclays, RBS, HSBC, DNB, Citigroup and BNP are the joint bookrunners.

Barclays will bill and deliver.

The Hemel Hempstead, Hertfordshire, England-based European electrical multi-channel retailer plans to use the proceeds to fund the tender offer for up to £50 million notes due 2015 and for general corporate purposes.

Continental plans dollar debut

Continental Rubber of America, a subsidiary of Germany's Continental AG, plans to debut in the dollar-denominated high-yield market with a $500 million offering of seven-year senior notes (expected ratings Ba3/BB-).

A roadshow is scheduled start Tuesday and an investor call is set for Wednesday.

J.P. Morgan, Bank of America Merrill Lynch, Credit Agricole, Deutsch Bank, HSBC and RBS are the joint bookrunners for the debt refinancing.

The issuer, an automotive supplier of electronic systems and components, tires and non-tire rubber products, is incorporated in Delaware.

Iamgold starts roadshow

Monday also brought news of a dollar-denominated deal from Canada.

Iamgold began a roadshow for its debut high-yield market deal.

The Toronto-based gold mining company is selling $500 million of eight-year senior notes.

Citigroup is the left bookrunner. Scotia is the joint bookrunner.

The proceeds will be used for general corporate purposes, including capital expenditures and development.

New SeaDrill strengthens

When SeaDrill's new 5 5/8% notes due 2017 were freed for secondary market dealings, traders saw the Hamilton, Bermuda-based offshore drilling company's quickly shopped mega-deal having moved from its par issue price.

One trader quoted the bonds at 101½ bid, 102¼ offered while a second pegged the issue up around the 102 bid area.

Yet another trader had them at 102 bid, 102 3/8 offered.

New NRG a no-show

Traders did not see any initial dealings in NRG Energy's offering of 6 5/8% notes due 2023, owing to the relatively late hour at which the Princeton, N.J.-based power-generation company's upsized $990 million deal came to market.

The company's existing 8½% notes due 2019 gained 1 point on the session to end at 109¼ bid, though round-lot volume was only a very light $2 million, a market source said.

Friday deals ease slightly

Among the deals that priced last week, a trader said that Hub International's 8 1/8% notes due 2018 continued to trade well. He pegged the Chicago-based insurance brokerage firm's $740 million issue around in a 1021/4- to 1021/2-bid context, calling that "really unchanged."

However, a trader at another desk saw the bonds at 102 bid, 102½ offered, noting the issue was "a little higher last week."

Yet another trader agreed, seeing the new paper off by about 3/8 point at 102 1/8 bid, 102 5/8 offered.

The bonds priced at par Friday after upsizing from the originally announced $730 million amount and moved up to the 102 context in initial aftermarket dealings.

A trader saw Tesoro Logistics' 5 7/8% notes due 2020 at 102¾ bid, 103¼ offered, calling that about the level at which those bonds moved Friday after the $350 million issue, which were upsized from an originally announced $310 million, priced at par.

A second market source saw the San Antonio, Texas-based energy infrastructure and logistics company's deal trading around Monday at 102½ bid, 103½ offered, calling that down ¼ point on the day.

Last week's deals trade around

Going back a little further among bonds that priced last week, one of the traders saw good price movement in Digicel Group's 8¼% notes due 2020; he quoted the Kingston, Jamaica-based Caribbean cell-phone service provider's $1.5 billion of bonds at 103½ bid, 104 offered.

That was up about ¾ point from where they had traded on Friday, which in turn was well up from the par level at which the deal priced last Wednesday.

The trader also saw Carrizo Oil & Gas' 7½% notes due 2020 at 102 bid, 103 offered, a ½ point improvement from where they were Friday.

The Houston-based energy exploration and production company priced its quick-to-market $300 million deal at par last Wednesday and the bonds were gradually lifted to current levels after that.

Plains gets punished

Apart from the new issues, a trader said that Plains Exploration & Production "was the big one today," quoting the Houston-based E&P company's several issues of bonds down 2 to 3 points across the board on news that it agreed to acquire certain offshore assets from oil majors BP and Shell. It will finance that new deal with $7 billion of new debt, including $2 billion of bonds (see related story elsewhere in this issue).

A second trader said the company's 6 1/8% notes due 2019 lost 2½ points on the day, finishing at 104¼ bid.

He saw its 6¾% notes due 2022 fall 2¾ points on the session to close at 105¾ bid.

About $25 million of each issue changed hands. Counting the company's other issues, about $75 million of Plains paper traded, he said.

A market source at another desk saw $16 million of Plains' 6 5/8% notes due 2021 trading during the session with results the same as across the capital structure - those bonds closed down more than 2¾ points at 105¼ bid.

Indicators turn mixed

Away from the new-deal arena, traders said not much was going on in the junk-bond secondary market Monday.

Statistical indicators of junk-market performance turned mixed after moving solidly higher across the board for a second consecutive session Friday.

The Markit Group CDX North American Series 18 High Yield Index lost 3/16 point to end at 99 13/16 bid, 11 15/16 offered, a sharp comedown from the 15/32 point gain seen Friday.

The KDP High Yield Daily Index rose by 4 basis points Monday to end at 74.35 - given a boost by its 21 bps jump seen Friday.

Its yield, though, rose by 2 bps to 6.06%, after coming in by 5 bps on Friday to 6.04%. Friday's yield was a new low for the year, bypassing the former low of 6.08% set Aug. 8.

And the widely followed Merrill Lynch U.S. High Yield Master II Index meanwhile recorded its 17th consecutive gain Monday, rising by 0.182%, on top of the 0.342% advance Friday.

That lifted its year-to-date return to 11.466% - a new 2012 peak, eclipsing the old mark of 11.264% that was set Friday. The index is now at its highest level since the last session of 2010 when it closed out that year with a 15.19% return.

Its yield-to-worst, meanwhile, stood at 6.524%, down from Friday's 6.568% reading. Monday's yield also was the new low yield for the year versus the previous session's yield.

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