Upsized Lyondell mega-deal prices, jumps; Plains, Overseas Shipholding price; Frontier slates

By Paul Deckelman

New York, March 24 - Lyondell Chemical Co.'s upsized $2.75 billion offering of dollar- and euro-denominated bonds priced on Wednesday - with the euro portion of the deal blowing right through price talk. Traders said the new deal was very well received in the secondary market, immediately jumping more than 2 points in busy trading and then staying up there.

Also seen pricing Wednesday, said high yield syndicate sources, were offerings from Plains Exploration & Production Co. and from Overseas Shipholding Inc., although those deals came to market too late for secondary trading.

Tuesday's two-part offering of eight- and 10-year notes from Lear Corp., which priced too late that day for any kind of aftermarket, made up for it on Wednesday, as traders saw the automotive parts company's new bonds firm solidly once they began trading.

Apart from issues which have actually priced, the junk primary sector saw new deals slate from Magnachip Semiconductor, from Maxim Crane Works LP and from Europe's ISS Holding A/S.

Frontier Communications Corp. announced plans for a Verizon Communications Inc. unit that is to be merged into Frontier to sell $2 billion of seven- and 10-year notes, with the proceeds to facilitate Frontier's previously announced pending acquisition of many operations from Verizon.

Secondary market activity was muted, as new deals and their aftermarket trading, remained the focus of most market participants.

Lyondell leads the way

By far the biggest name of the day also had the biggest deal, as Lyondell Chemical Co. priced an upsized $2.75 billion equivalent offering of dollar- and euro-denominated 7.5-year senior secured notes (Ba3), with both tranches pricing at par to yield 8%.

Houston-based Lyondell priced $2.25 billion of dollar denominated 8% notes, as well as €375 million of the euro-denominated 8% paper.

The dollar portion came at the tight end of price talk which had circulated in the market Tuesday looking for a yield between 8% and 8¼%, while the euro portion did even better than that, pricing completely inside of its price talk of 8 1/8% to 8 3/8%. Talk for both tranches had also projected a price discount of as much as 1 point, but such a concession proved to be unnecessary.

The deal upsized from the $2.25 billion originally shopped around the market. The bond offering had first surfaced back on March 11, when Lyondell's parent company, Netherlands-based polymer, petrochemicals and fuels producer LyondellBasell Industries, unveiled plans for $3.25 billion of first-priority debt financing to enable the company to emerge from bankruptcy.

The bond deal portion of the financing was heard by the sources on Tuesday to have been upsized by $500 million, from its original size of $2.25 billion to $2.75 billion. At the same time, sources in the bank debt market heard that the company had halved what was originally to be $1 billion of term loan B financing, cutting it down to down to $500 million, keeping the deal's overall size at $3.25 billion.

Bank of America Merrill Lynch, UBS Securities LLC, Barclays Capital Inc., Citigroup Global Markets, Inc., Credit Suisse Securities (USA) LLC, Deutsche Bank Securities, Inc., JP Morgan Securities Inc., Morgan Stanley & Co. Inc. and Wells Fargo Securities, LLC were the joint bookrunners for the deal.

The market loves Lyondell

The new bonds were well-received in the secondary market, jumping in initial aftermarket action.

A trader said that the new bonds "up a nice 2½ points" to around the 102 3/8 bid, 102½ level, versus the bonds' par issue price.

He said that the company's new paper roared higher "right out of the box - it just opened at 102¼ bid. So that's a nice 2-plus return on your money."

He said that Lyondell absolutely grabbed the spotlight, making it difficult for anything else to get done. After Lyondell did price and trade as well as it did, "that was pretty much it today. We were all waiting for [Lyondell] to pop up."

Lyondell, another trader said, "was the big one" of the day, "with a lot of bonds trading in that 1021/2-102 5/8 area.

Plains joins pricing parade

Away from dominant name of the day, Lyondell, another Houston company, Plains Exploration & Production, priced $300 million of 10-year senior unsecured notes (B1/BB-) at par on Wednesday to yield 7 5/8%, high yield syndicate sources said. The deal came at the tight end of price talk envisioning a yield between 7 5/8% and 7¾%.

The quickly-shopped offering was announced in the morning and had priced in the afternoon. The bonds were sold via an underwritten public offering. J.P. Morgan, Barclays Capital, BMO Capital Markets Corp., Bank of America Merrill Lynch, Citigroup, and Wells Fargo were the bookrunners on the deal.

The independent oil and gas exploration and production company plans to use the new deal proceeds to repay indebtedness under its senior revolving credit facility and for general corporate purposes.

The bonds appeared too late in the session for meaningful aftermarket activity.

Overseas Shipholding comes aboard

Another deal pricing too late for any kind of trading was Overseas Shipholding Group, Inc.'s $300 million of eight-year senior notes, which were yielding 8 3/8%.

High yield syndicate sources said the bonds came right in the middle of pre-deal price talk projecting a yield between 8¼% and 8½%. The 8 1/8% coupon bonds priced at 98.563. The deal priced too late for aftermarket activity.

The bonds priced after a short roadshow that began on Monday, when the deal was announced. Citigroup, Morgan Stanley and HSBC Securities (USA) Inc. were bookrunners.

Overseas Shipholding, a New York-based bulk shipping company which primarily transports crude oil and petroleum products, plans to use the deal proceeds to reduce borrowing on its unsecured revolving credit facility debt.

Forward calendar filling up

While lots of paper priced, there seemed to be a never-ending stream of replacement issues, as the forward calendar continued to grow.

Maxim Crane Works was heard by high yield syndicate sources on Wednesday to be shopping a $250 million issue of five-year senior secured second-lien notes (Caa1/B) around to potential investors via a roadshow. They said the marketing campaign would begin Thursday and run through next Wednesday, March 31, with pricing seen after that.

J.P. Morgan, Morgan Stanley and Wells Fargo Securities, LLC will be the joint bookrunners on the deal.

Maxim Crane, a Pittsburgh-based company that sells and rents construction and industrial cranes and aerial equipment, plans to use the proceeds from the deal to repay an asset-backed loan and to fund an equity dividend.

MagnaChip Semiconductor SA and MagnaChip Semiconductor Finance Corp. plan to sell $250 million of eight-year senior notes (B2/B+) , high yield syndicate sources said on Wednesday. They heard that the company was beginning a roadshow on Thursday to market the deal to potential investors, although information on further timing for the deal was not immediately available.

The offering will be brought to market via joint bookrunners Goldman Sachs & Co., Barclays Capital, Inc., Deutsche Bank Securities, Inc. and Morgan Stanley & Co. Inc.

MagnaChip, a Seoul, South Korea-based maker of computer chips used in cellular phones and other electronic products, plans to use the deal's proceeds to fund a distribution to shareholders, repay credit facility debt and for working capital.

Frontier touts Verizon unit deal

The biggest prospective offering weighed in at $2 billion, with Frontier Communications Corp. saying that New Communications Holdings Inc. plans to sell that much of seven- and 10-year senior notes this week, with pricing expected Friday. The deal was being marketed to investors via a short roadshow that began Wednesday and which will continue through Friday. Proceeds from the deal will be used to facilitate a major asset purchase by Frontier, a Stamford, Conn.-based telecommunications provider formerly known as Citizens Communications Corp.

In a news release, Frontier explained that New Communications is a subsidiary of New York-based telecommunications giant Verizon Inc., which agreed last May to sell its landline business in 14 states -- 4.8 million landlines leased to residential and small business customers - to Frontier in a complex $8.6 billion deal, which must still be approved by federal authorities as well as utility regulators in those states.

New Communications was formed for the purpose of holding those Verizon assets. Frontier said that the proceeds from the bond offering will be deposited into an escrow account, from which New Communications will then fund a portion of a special cash payment to Verizon in connection with the deal. New Communications will be spun off to Verizon's shareholders and subsequently merged with and into Frontier, giving the latter company control of the landline assets and operations.

The deal will be run by joint bookrunning managers J.P. Morgan and Credit Suisse Securities.

Lear takes a leap

Away from Wednesday's new deal activity, a trader said that Lear Corp.'s new seven- and 10 year notes - which came to market too late on Tuesday for any kind of aftermarket doings - both traded up to about 101 - well up from the levels just above 99 at which the $700 million deal had priced on Tuesday.

The Southfield, Mich. -based automotive parts and components supplier's 7 7/8% notes due 2018 and the 8 1/8% notes due 2020 were both pegged around the 101 level, versus 99.276 and 99.164, respectively at which each of the $350 million tranches had priced. "It looks like that was where we saw most of the action today - but that was the first couple of hours this morning."

GMAC little moved

The trader said that GMAC Inc.'s new 8% notes due 2020 were quoted higher, but on little activity, noting that he had seen an early 100¼ trade, "but I never saw the other side. It was kinda quiet."

On Tuesday, the Detroit-based automotive and residential lender priced a $400 million add-on to the $1.5 billion of similar paper which had priced just two weeks before, on March 10. The add-on meantime priced at 99.153 to yield 8 1/8%

Market indicators little changed

Among bonds not connected with the new-deal market, a trader saw the CDX Series 13 index off ¼ point on Wednesday at 99 5/8 bid, 99 7/8 offered. He had seen the index gain ½ point on Tuesday.

The KDP High Yield Daily Index meantime rose by 1 basis point Wednesday to 71.96, after having gained 8 bps on Tuesday. Its yield tightened by 1 bp to 7.85%, after narrowing by 4 bps the previous session.

Advancing issues retook the lead from decliners Wednesday for a second straight session, though again by only a relative handful out of more than 1,500 issues tracked.

GM posts gains

Away from new deals, a trader saw General Motors Corp.'s benchmark 8 3/8% notes due 2033 up 1 1/8 points to 36 5/8 - 37 1/8. Another trader said GM was up "on some pretty good size."

Rival Ford Motor Co.'s 7.45% notes due 2031 were unchanged at 92½ bid, 93½ offered.

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