NXP prices upsized megadeal; existing bonds rise; Energy Solutions plans deal; market firmer

By Paul Deckelman and Paul A. Harris

New York, July 13 - NXP BV and NXP Funding LLC priced an upsized $1 billion "drive-by" offering of eight-year senior secured notes on Tuesday. The Dutch semiconductor maker's new issue came to market too late for any kind of secondary trading, but its existing issues were seen up smartly in active trading ahead of that pricing since the company had announced that it would use the proceeds from the new deal to pay existing bond debt.

The new-issue market also saw Energy Solutions, Inc., a Salt Lake City-based provider of services to the nuclear power industry, announce plans for a debt refinancing, which will include an issue of new senior notes as one of its components. However, the size, structure and timing of that bond deal have yet to be determined.

Altegrity, Inc., was heard by primaryside players to be planning a $210 million private placement of five-year mezzanine notes as part of the financing for the Falls Church, Va.-based screening and security services company's previously announced acquisition of Kroll Inc., a New York-based risk consulting company.

Windstream Corp.'s new eight-year notes, which priced on Monday and then moved up slightly in the aftermarket, were seen by traders having firmed a little bit more on Tuesday. However, the company's outstanding bonds were seen lower on the session.

That firming came against the backdrop of a notable upside move for the overall market, borne out anecdotally with higher prices for particular bonds and in improvements in major statistical market measures.

Among specific issues doing better, Skilled Healthcare Group Inc.'s bonds - already recovering from the lows they hit on bad legal news last week - added on another several points on Tuesday, even as its stock moved up as well, much to the puzzlement of junk-market participants.

NXP massively upsized

NXP brought Tuesday's sole deal to the new issue market.

The semiconductor company priced a massively upsized $1 billion issue of eight-year senior secured notes (Caa1/CCC+) at par to yield 9¾%.

The yield printed on top of the price talk.

Credit Suisse ran the books for the quick-to-market deal, which was upsized from $600 million.

Proceeds will be used to reduce existing debt.

Over 150 accounts were in the order book, according to an informed source, who estimated that the deal played to $4 billion to $5 billion of demand.

Triple hooks on both sides

NXP was the first deal with triple C ratings on both sides of the split to clear the primary market since May 4, when Beazer Homes USA, Inc. priced a $300 million issue of eight-year senior notes (Caa2/CCC/) at par to yield 9 1/8%, a market source said.

Credit Suisse also was left bookrunner for that deal. Citigroup was joint bookrunner.

Opportunity's knock

Apart from NXP, the primary market remained quiet on Tuesday, sources said.

High-yield was on fire during the morning before settling into a quieter afternoon, said a trader, who was marking cash bonds half a point to a point higher heading into mid-afternoon.

Higher quality bonds were outperforming the high beta sector of the asset class, the trader remarked.

Even though high-yield has rallied conspicuously over the past two or three sessions, opportunistic issuers looking to refinance debt maturing in the intermediate term continue to bide their time, according to a banker on a high-yield syndicate desk.

The committed financings, mostly having to do with LBOs, acquisitions and sponsor-related activity, will come no matter what, the sellsider said.

One such deal is Interactive Data Corp.'s $700 million offering of eight-year senior notes (Caal/B-) via Barclays Capital Bank of America Merrill Lynch, Credit Suisse and UBS Investment Bank, the official said.

The deal had a roadshow on the U.S. West Coast on Tuesday. An investor call is set for Thursday.

Also in this category, but not yet launched, is Gentiva Health Services Inc.'s $305 million of eight-year senior unsecured notes via Barclays Capital, plus others.

Sources are expecting that deal - the purpose of which is to partially fund the acquisition of Odyssey HealthCare Inc. - to hit the market in the near term.

Also on the list is InVentiv Heath Inc.'s $275 million senior unsecured notes notes deal, which is slated to fund the LBO of the company by Thomas H. Lee Partners LP.

InVentiv launched its $525 million term loan B on Tuesday via Citigroup and Bank of America Merrill Lynch.

However, the price-sensitive, opportunistic issuers, seeking to refinance debt, may require a little more coaxing, sellside sources said on Tuesday.

"These guys have their price bogeys," one banker remarked shortly after the Tuesday close.

"We're not there yet, but I think we're almost there. A few more days of the market rallying like we saw today, and they'll start coming out of the woodwork."

Another official from a different syndicate said that the May-June sell-off in high yield may have cured prospective debt refinancers of complacency.

"The market rallied earlier in the year, and some people hung back, thinking that they would get even better executions if they simply waited.

"Then we saw a sell-off, and new issue premiums gapped out.

"So now issuers might be inclined to keep a closer eye on the open window," he added.

New NXP comes too late

The new NXP 9¾% senior secured notes due 2018 priced too late in the session for any kind of aftermarket dealings, junk players said.

However, they saw busy dealings in the Dutch semiconductor company's existing notes, which rose solidly in response to the company's statement when it announced its new deal that it would use the proceeds to repay certain of its existing notes "through redemption calls, open market purchases, privately negotiated transactions, tender offers or some combination thereof," subject to market conditions.

A trader said that NXP's 7 7/8% senior secured notes due 2014 was its most active issue and was one of the day's most active credits in Junkbondland. He saw the notes going out around the 100¼ bid, 100½ offered level, well up from Monday's close of just over 97 bid, He added that the $900 million-plus issue is relatively short in duration and thus likely to be taken out with the deal proceeds.

He also saw "a bunch of trades" taking place in NXP's 9½% notes due 2015, seeing them get as high as 92 bid from prior levels around 871/2, "so I guess whatever they're doing with this deal, it's good for the other bonds."

At another desk, a market source saw the 7 7/8s come off their highs for the session above par and end just under par, still up some 2½ points on the day on volume approaching $50 million.

The source saw the 91/2s at 92 bid, up 4½ points on the day, with around $30 million of the bonds changing hands.

Meanwhile, he quoted NXP's senior secured floating-rate notes due 2013 as having gained 4 points to end at 92 bid. Volume picked up during the afternoon hours, finally reaching nearly $40 million.

New Windstream notes firming

Among recently priced bonds, a trader saw Windstream Corp.'s new 8 1/8% notes due 2018 trading at 100¼ bid, 100½ offered.

Another trader saw those bonds at 100¼ bid, 100¾ offered.

The Little Rock, Ark.-based telecommunications company had priced that $400 million issue of the notes on Monday at 99.24 to yield 8¼%, and they had firmed initially to around the par bid level.

But while the new notes were modestly firmer, Windstream's existing 8 1/8% notes due 2013 were seen down 1½ points on the session to 104 bid.

Market indicators head higher

Among established issues having no new-deal connections, a trader saw the CDX North American HY Series 14 Index jump by a full point on Tuesday to end at 97 3/8 bid, 97 5/8 offered, after having lost ¼ of a point on Monday.

The KDP High Yield Daily index meantime shot up by 34 basis points on Tuesday to end at 71.41, after having risen by 7 bps on Monday. Its yield narrowed by 12 bps to 8.37% on Tuesday, after having come in by 3 bps on Monday.

Advancing issues led decliners for a seventh consecutive session on Tuesday - their bulge widening to about a two-to-one ratio versus Monday's six-to-five margin.

Overall activity, represented by dollar-volume levels, zoomed by two-thirds on Tuesday after having risen by 11% on Monday.

A trader said that some credits were "a little boring - but there's some activity."

Levi's better following numbers

A trader said that though Levi Strauss & Co.'s 7 5/8% notes due 2020 firmed after the iconic San Francisco-based blue-jeans maker reported second-quarter results, even that data tells a mostly negative story.

He quoted the bonds at 100½ bid after the results came out, "and then they got to be two-sided" and traded around that 100½ bid level. Before the results, he said that the bonds had been around 99½ bid, 100½ offered.

Levi's said that in the fiscal second quarter ended May 30, it had a $14 million net loss, widening from $4 million of red ink a year earlier. However, revenue rose 8% year over year to $977 million.

Silled Healthcare continues to surprise

Skilled Healthcare's 11% notes due 2014 were seen having firmed another roughly 4 points on Tuesday to the 83 level, although trading was light with just several big-block transactions totaling about $3 million or $4 million.

"That's all you're going to see trading on that," said a trader, who quoted the bonds as having risen to 83½ bid with "just a trade or two."

"It's a small deal" at just $129 million, "and there are probably one or two people looking at it, and that's it. People don't spend a lot of time on it because if you do the work on it, what are you going to buy? It's fine if you're an individual and you want to buy $1 million worth of something, but as for an institution, it doesn't do anything for folks. But, it's in the news," the trader added.

A market source pegged the bonds up 4¼ points on the day at 83 bid. The bonds - which had traded as high as 104 earlier in the month - plunged down to around 70 bid last week on an unfavorable verdict in a big class-action suit against the company.

Skilled Healthcare's New York Stock Exchange-traded shares meantime rose another 18 cents, or 7.79%, to $2.49 apiece, but they remain well under the $6.22 level the shares held before last week's bad news caused those shares to tank on Wednesday, losing 76% of their value immediately afterward.

A trader said: "I don't get that," regarding the recent firming in the Foothill Ranch, Calif.-based nursing home operator's bonds and shares from the lows they hit around mid-week last week after a California jury last Wednesday socked the company with a massive $671 million damage claim in a class-action lawsuit, with the possibility of further punitive damages when that phase of the legal proceedings gets under way later this week.

The discrepancy between the huge size of the damage award and the relatively paltry liquidity - under $100 million - led some analysts and other observers to warn that the company could be forced into bankruptcy since it doesn't have the money to pay such a huge judgment and probably can't even post the bond needed to pursue an appeal.

"Maybe somebody looked at the lawsuit and maybe there's a way around it," he said, agreeing with the suggestions being bandied about in the financial media that perhaps a settlement for a much more affordable figure could be reached, or maybe the judge in the case might set aside the massive damage award an impose a more reasonable figure, since "the last thing California needs is for these guys to go belly-up and put a lot of people out of work if that were to happen because of a bankruptcy."

Gulf of Mexico oil names continue rise

A trader saw ATP Oil & Gas Corp.'s 11 7/8% second-lien senior secured notes trading around the 72 bid, 73 offered area, which was pretty much where they had been on Monday. He saw the bonds get as good as around 74, but then trade most of the day around 72 bid, 73 offered on "decent volume."

While the Houston-based energy exploration and production operator's paper hung in around the same levels, other Gulf of Mexico oil names firmed, continuing to come back from the lower levels they hit in the wake of the April 20th blowout of a BP plc undersea well following the sinking of the Deepwater Horizon drilling rig. Those names were helped by news that the beleaguered British oil giant may finally have come up with an effective way of capping the leaking well.

He saw BP's paper up around a point as trading began, ending up about ½ a point, with the 5¼% notes due 2013 finishing around 98 bid, 98½ offered, while its 4¾% notes due 2019 remained around 93 bid, "probably up from [Monday] with a lot of activity in the name today."

Meantime, Anadarko Petroleum Corp.'s bonds also firmed, with the 5.95% notes due 2016 up ½ a point, trading between 95 and 95½ bid, while its 6.2% bonds due 2040 were at 86 bid, 87 offered, up a point, "so they've done well. Along with the nice equity market, it's nice to see that helping out."

Anadarko owns a 25% stake in the ruptured well.

Another trader said that "all of the Gulf of Mexico stuff was up again today." Besides the likes of BP and Anadarko, "the oddity was RIG [Transocean Inc.] because the stock was down while the bonds were up, but then the bonds faded towards the end of the day."

He saw the Deepwater Horizon owner's 5¼% notes due 2013 trading as high as 99 early on and then finish the day at 98, which he called "kind of unchanged from [Monday], or maybe up 1/8."

CIT trades up

A trader said that CIT Group Inc. was "feeling better in the longer end," with the 7% notes due 2016 and the 7% notes due 2017 each up about 1 point to 1½ points around a 94ish level.

The short bonds, like the 7% notes due 2013, were "quoted a little better" around the 98 level, perhaps up ½ a point, but "there was not as much activity - the activity was in the long ones, the '16s and the '17s, a lot of volume."

Auto names cruise

A trader said that General Motors Corp.'s bonds and those of its domestic arch-rival, Ford Motor Co., were each up about 1 point to 1½ points.

He saw Ford's 7.45% bonds due 2031 "up a couple" of points to a 94 bid, 95ish offered context. He said there was "not a lot of trading, but definitely up higher."

He meantime saw the GM benchmark 8 3/8% bonds due 2033 around "32 and change," up a point on "decent volume."

At another shop, a trader said that the GM benchmarks were up ¾ of a point at 32¼ bid, 32¾ offered, while the Ford long bonds rose a point to 95 bid, 96 offered.

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