Lee Enterprises prices to cap quieter $3.6 billion week; Momentive bonds fall, bounce

By Paul Deckelman and Paul A. Harris

New York, March 21 - Lee Enterprises Inc. was heard by syndicate sources to have priced a $400 million regularly scheduled forward calendar offering of eight-year secured notes on Friday.

The Davenport, Iowa-based newspaper publisher's new issue was seen by traders to have firmed smartly when the bonds moved into the aftermarket.

That deal topped off a week which saw $3.6 billion of new U.S. dollar-denominated, fully junk-rated paper from domestic or industrialized-country issuers price in 12 tranches, down from the previous week, ended March 14, during which $5.34 billion of such paper had priced in 16 tranches - which itself was a comedown from the prior week ended March 7, in which $11.75 billion of issuance had gotten done in 21 tranches, making it the busiest week so far this year in the high yield space and the busiest week since last September, according to data compiled by Prospect News.

Friday's lone deal also raised the year-to-date issuance total to $58.12 billion in 124 tranches - although that continued to lag almost 27% behind the primary pace of a year ago, when $79.37 billion had priced in 175 tranches by this point on the calendar, according to the data.

Among recently priced new issues, market sources saw a little bounceback in Walter Energy Inc.'s PIK second-lien notes - which had priced at par on Wednesday but had fallen sharply on Thursday, along with a slide in the Birmingham, Ala.-based metallurgical coal producer's existing bonds and its shares, both triggered by a negative Bank of America report about the overall coal industry.

Away from the new issues, Momentive Performance Materials Inc.'s bonds fell sharply early in the session, before bouncing off their lows to partially recover that lost ground.

Traders cited a renewal of investor speculation that the underperforming Albany, N.Y.-based maker of specialty performance materials for high tech industries might be preparing for a debt restructuring or even a possible bankruptcy filing.

Those Momentive issues dominated the day's junk market Most Actives list.

Statistical market-performance measures turned higher across the board, after having been mixed over the previous two sessions. They were also up from their week-ago levels, after two straight weeks of lower Friday-to-Friday movements.

Lee prices at tight end

The dollar-denominated market saw a single deal price on Friday.

At the conclusion of its roadshow, Lee Enterprises priced a $400 million issue of eight-year first-lien senior secured notes (B2/B-) at par to yield 9½%.

The yield printed at the tight end of the 9½% to 9¾% yield talk.

Earlier guidance was in the high 9% to low 10% yield context, according to an investor who is looking at the deal.

The new notes were trading at 103 bid, 103½ offered going out on Friday, according to a trader who said that investors liked the high coupon.

J.P. Morgan and Deutsche were the joint bookrunners for the debt refinancing deal.

Cabot prices £175 million

The European market saw terms emerge on one sterling-denominated deal and one euro-denominated deal.

Cabot Financial Group Ltd. priced a £175 million issue of seven-year senior secured notes (B2/B+) at par to yield 6½%.

The yield printed at the tight end of the 6½% to 6¾% yield talk.

Joint bookrunner J.P. Morgan will bill and deliver. Deutsche Bank, Lloyds Bank, Royal Bank of Scotland and UBS were also joint bookrunners.

Proceeds will be used to repay bank debt and to help fund the acquisition of Marlin Financial Group Ltd.

Abengoa upsizes

Spanish conglomerate Abengoa Finance SAU priced an upsized €500 million issue of non-callable seven-year senior notes (expected ratings B2/B/B+) at par to yield 6%.

The debt refinancing deal was upsized from €400 million.

The yield printed at the tight end of the 6% to 6¼% yield talk.

Global coordinator and bookrunner HSBC will bill and deliver. Deutsche Bank and Morgan Stanley were also global coordinators and bookrunners. Bankia, Credit Agricole CIB, Natixis, Santander and SG CIB were also bookrunners.

Aldesa roadshow starts Monday

There was also a single roadshow announcement in the European high-yield market on Friday.

Spain's Aldesa Financial Services SA plans to start a roadshow on Monday for a €250 million offering of seven-year senior notes.

The roadshow wraps up on Thursday, and the deal is expected to price after that.

Joint global coordinator JPMorgan will bill and deliver. Santander is also a joint global coordinator. Banco Sabadell, Bankia and CaixaBank are bookrunners.

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

Investors like Lee

In the secondary market, when the new Lee Enterprises 9½% first lien senior secured notes due 2022 were freed for trading, a trader saw the bonds jump to 102 bid from their par issue price.

Other traders saw the newspaper publisher's issue get even better with one quoting them at 102 7/8 bid, 103 1/8 offered going home, and a third pegging the bonds at 103 bid, 103½ offered.

KB Home heavily traded

KB Home's new 4¾% notes due 2019 were seen among the most heavily traded bonds on the session, with over $24 million having changed hands.

A market source saw the Los Angeles-based homebuilder's up 3/8 point on the day at 100 3/8 bid, while another saw them at 100¼ bid, 100¾ offered.

The $400 million issue priced at par on Thursday after upsizing from $350 million.

Walter rebounds, a little

A trader saw Walter Energy's new 11%/12% second-lien senior secured PIK toggle notes due 2020 rebounding from the lows they had hit on Thursday, going home around 941/2, which he called up ½ point on the day.

Walter had priced $350 million of the notes at par late Wednesday as part of an upsized $550 million two-part drive-by new issue; when the bonds began trading on Thursday, traders saw them nosedive all the way down to the 94 bid level before bottoming out down there.

The trader meanwhile saw the other half of that new deal - the $200 million the 9½% add-on senior secured bonds due 2019 - firm to between 102 and 102½ bid. Those bonds had priced at 101.5 on Wednesday to yield 9.147%, after the tranche was upsized from an originally announced $100 million. While the PIK notes were getting killed, the add-ons held their own Thursday, staying around the 101½ bid mark.

And he saw the company's unsecured 8½% notes due 2021 "move back up to 65," from prior levels around or below 64; they had fallen about 4 or 5 points on Thursday, along with the PIK paper. Over $10 million of those 8½% notes changed hands on Friday.

Trying to figure out what went so wrong with the PIK issue, the trader said "I don't know if [investors] just took it because they wanted to play in the 91/2, and then puked them [the PIK] notes back up - but it was certainly mis-priced" by coming at par.

A second trader, though, said the PIKs continued to trade "down in the 93-94 area."

Momentive moves lower

Away from the new deals, a trader said that Momentive "bonds were active, and originally traded down a bunch."

He cited renewed speculation among investors that the company may be planning to enter into a restructuring process - or perhaps even file for bankruptcy - sometime soon. Such speculation has been mentioned from time to time in the market over the last few weeks, occasionally given new life by news stories, although so far the company has given no official hint of any such developments.

He said there was another such story in the market on Friday, "and that was what caused some reaction."

He saw the company's 11½% notes due 2016 get as low as the mid-20s, before coming off their lows to settle around 30.

"They were still down a few points at the end of the day," he noted.

"Everything else was kind of unchanged."

He saw the company's 9% notes due 2021 trading down as well, falling into the high 70s before coming back to end around 83 bid.

"So they really kind of snapped back from those initial down trades."

And he said the company's first-lien 10% notes due 2020 "actually finished higher on the day," around 106½ bid, and its 8 7/8% first-liens due in 2020 were also up.

Momentive "got banged up a bunch" a second trader said, noting that "there's noise out there about restructuring and filing."

Such speculation is nothing new - he pointed to news out a month ago that Momentive's creditors were already preparing for such an eventuality, with the holders of its $635 million of 9% second-lien notes due 2021 retaining Houlihan Lokey as restructuring advisors and Milbank, Tweed, Hadley & McCloy LLP as legal counsel.

A market source said that Momentive's bonds were the most actively traded issues in an otherwise relatively sleepy Friday session in Junkbondland , with the 111/2s having racked up over $34 million of volume heading into the close. He quoted those bonds nearly 5 points lower on the session at 29¾ bid.

Momentive's 9% notes meantime ended about ¾ point lower at 82½ bid, he said, with over $24 million of those bonds having changed hands.

Among the first-lien bonds, he saw the 8 7/8s gain ¾ point to end at the 107 level, on turnover of more than $20 million, while the 10s closed up 1 point at 1061/2, with over $10 million having traded.

Global Geophysical partly recovers

A trader said that Global Geophysical's bonds were trading in the 56 to 57 area, with about $3 million or $4 million changing hands.

He said there was "a lot of odd-lot buying and selling" going on, and here and there, a large-sized trade.

With the bonds having traded in size as high as 573/4, before going out around 57½ - a trader said "they had a pretty good week" - considering they had bounced back from lows around 50 earlier in the week.

There were numerous odd-lot trades happening in a 56 to 58 bid context - up from 50 bid but well below the levels around 76 at which the bonds traded before the company made its announcement about having to restate several years of past results.

Global Geophysical said on Tuesday that its financial reports for each of the fiscal years ended Dec. 31, 2012, 2011, 2010 and 2009 and for the first, second and third quarters of 2013 "should no longer be relied upon because of accounting errors resulting from material weaknesses in the company's internal controls."

Market indicators move up

Statistical junk performance indicators were on the rise on Friday, after having been mixed for the previous two sessions. Those indicators had also been higher across the board on Monday and Tuesday, when they broke out of a recent slump.

And they were up from where they had finished the previous week, on Friday March 14. That followed two previous weeks of downside movement in the market gauges.

The Markit Series 21 CDX North American High Yield Index edged up by 1/32 point on Friday to end at 107¾ bid, 107 7/8 offered, on top of Thursday's 5/16 point gain.

The KDP High Yield Daily Index was up by 7 basis points to end at 74.82 on Friday, after sliding by 13 bps on Thursday.

Its yield, meanwhile, came in by 1 bp to go home at 5.27%, versus Thursday's 4 bps rise.

Those levels compared favorably with the previous Friday's 74.73 index reading and 5.29% yield.

The widely followed Merrill Lynch High Yield Master II Index gained 0.103%, bouncing back from Thursday's loss of 0.158%.

The gain raised its year-to-date return to 2.675%, up from Thursday's 2.569%, although it remained below the 2.812% reading seen on March 5, its 2014 peak level.

The index was up by 0.262% on the week, its first weekly gains after two weeks of declines. The previous Friday, it had lost 0.159% on the week, with the year to date return finishing at 2.407%.

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