Petrohawk, Stone Energy lead pricing parade; Six Flags falls on warning, ratings moves

By Paul Deckelman

New York, June 23 - The last day of the week was the second full day of summer - but you'd never know it from watching the high-yield primary market, which chugged along at a brisk pace Friday pricing a full four deals - two for energy operators Petrohawk Energy Corp. and Stone Energy Corp. a third for bookseller Baker & Taylor Inc., plus a euro-denominated deals for French chemical company SNF SA.

Besides the pricings, details emerged on an upcoming offering for yet another oil and gas exploration and production company - Denver-based MarkWest Energy Partners LP, which hits the road Monday with a $200 million deal expected to price later in the week.

In the secondary market, the day was a scary ride through the House Of Horrors for bondholders of Six Flags Inc. after the theme park operator cautioned that it would have difficulty reaching its prior outlook for adjusted EBITDA and warned that it could be in violation of some of its bank credit agreement covenants - which in turn brought negative feedback from both Standard & Poor's and Moody's Investors Service.

Energy seemed to be where things were happening Friday in the primary market, with the biggest pricing of the day coming toward the end of the session, as Houston-based oil and gas operator Petrohawk priced $650 million of new seven-year senior notes.

The company priced it sale of 9 1/8% bonds at a discount of 98.735 to yield 9 3/8%, syndicate sources said. That yield was equivalent to a spread of 415 basis points over Treasuries.

The notes have a long first coupon, with the initial pay date set for Jan. 15, 2007.

The Rule 144A deal priced via an underwriting syndicate led by joint bookrunners Credit Suisse, Banc of America Securities, JP Morgan and BNP Paribas.

Petrohawk expects to use the new-deal proceeds to help fund its acquisition of KCS Energy Inc. and to refinance existing debt.

It was a rough week for the holders of KCS's 7¼% notes due 2012. They dropped to around the 94 bid area from prior levels at 99 once it became apparent that the company does not interpret the coming merger with Petrohawk as a "change of control" event that would trigger a tender offer for those bond at 101.

Stone Energy sells $225 million

The other pricing to come out of the oil and gas sector Friday was Stone Energy's pricing of $225 million of eight-year floating-rate notes. Those bonds came with a coupon of Libor plus 275 basis points and priced at 99.75. The deal was brought to market by bookrunner Banc of America Securities.

Proceeds of the deal will be used to fund the Lafayette, La.-based independent oil and gas exploration and production company's purchase of Gulf of Mexico energy assets, announced earlier in the week.

The notes will be immediately callable at par, syndicate sources said, and the indenture contains a provision for a one-time 100 basis-point coupon step-up 12 months from issuance.

Should there be a change of control event, the notes will be mandatorily redeemable at par plus accrued interest within 30 days - and that could happen fairly soon, as Stone Energy - which was recently entertaining competing takeover offers from Energy Partners Ltd. and Plains Exploration and Production Co. - elected Thursday to terminate its previously agreed-to deal with Plains Exploration in order to accept Energy Partners' higher offer, which totals $2.2 billion, including debt assumption. Energy Partners will pay $51 in cash or stock, at the election of the shareholder, for each share of Stone Energy, a buyout price that values Stone's equity at $1.4 billion. Energy Partners plans to refinance roughly $800 million of Stone's debt.

MarkWest to start marketing

In that same suddenly busy sector, MarkWest Energy Partners, LP was heard by syndicate sources Friday to be getting ready to shop its $200 million offering of 10-year senior notes to prospective investors on a roadshow that starts Monday, with pricing expected to take place toward the end of the week.

The notes will be sold by the company and its co-issuer, MarkWest Energy Finance Corp., in a Rule 144A transaction, with registration rights, and under Regulation S. The notes will be non-callable for the first five years.

The deal will be brought to market via joint book-running managers RBC Capital Markets, JP Morgan, and Wachovia Securities.

The Denver-based natural gas gathering and transmission company said in a Thursday filing with the Securities and Exchange Commission that the notes would be sold in conjunction with the sale of 3 million common units.

Proceeds from the sale of the bonds and the equity units will be used to repay outstanding credit facility borrowings incurred in connection with the company's recent acquisitions.

Baker & Taylor downsized

Apart from the energy sector, Baker & Taylor, a Charlotte, N.C.-based book and media distribution company, priced a sharply downsized offering of seven-year senior secured notes.

The issue was cut down to $165 million from $170 million previously, and was priced at par to yield 11½%. The deal was brought to market by Credit Suisse, Goldman Sachs and UBS Investment Bank. Proceeds will be used to fund the company's acquisition by private equity firm Castle Harlan.

SNF €140 million wide of talk

Two euro-denominated deals priced on Friday as well. One was French chemical manufacturer SNF SA's €140 million offering of euro-denominated seven-year senior notes, which priced at par to yield 8¼% - missing pre-deal market price talk envisioning a yield of around 8%, syndicate sources said.

Even so, demand for the issue appeared to be brisk, the sources said, noting that the deal's book was more than two times covered, with long-only asset managers the biggest buyers.

The sources further said that the long-only status of most buyers meant that there was almost no trading in the new bonds on the break - but it was quoted in the Street in a 100.25-100.5 context.

The pricing Friday followed a four-day roadshow. The deal - officially issued through the company's S.P.C.M. SA subsidiary, was brought to market via book-running manager Calyon Securities and joint lead manager Banc of America Securities.

And there was also a split-rated deal for U.S. biotech concern Millipore Corp. The transaction, carrying split ratings, is expected to mostly interest high-grade crossover players looking to grab some yield from a semi-junk deal.

Millipore sold €250 million of 10-year 5 7/8% notes (Ba2/BBB-), pricing them at 99.611 for a spread of 200 basis points over Treasuries.

Stone, Petrohawk firm in trading

The euro-denominated notes did not show up in secondary dealings, traders said, but some of the other newbies did. A trader saw the new Stone Energy notes little changed from issue at par bid, 100.25 offered, while Petrohawk's new notes were likewise not far removed from their below-par issue price, trading a little higher at 98.875 bid, 99.125 offered. The new Baker and Taylor bonds priced too late in the session for any kind of aftermarket activity.

Six Flags drops on earnings warning

One of the big stories in the secondary sphere was Six Flags, whose bonds "got murdered" a trader said, quoting its 9 5/8% notes due 2014 plunged four points to finish at 90 bid, 91 offered.

A source at another desk saw those bonds down about three points on the day at 90 7/8, while its 9¾% notes due 2013 were likewise off a trey, at 91.5. Six Flags' New York Stock Exchange-traded shares plummeted $1.90 (25.50%) to $5.55, on heavy volume of 16.9 million shares, about nine times the norm.

The carnage was sparked when company executives said on a conference call after the market closed on Thursday that Six Flags no longer expects to meet its earnings guidance and that revenue and attendance were lower.

The company also warned that it may be in violation of some bank covenants. That prompted both Standard & Poor's and Moody's to lower their respective outlooks for the amusement park operator on Friday. S&P cut its outlook on Six Flags to negative from stable, citing the weak attendance, higher than expected operating costs and a tight "cushion of compliance" with its debt agreements.

Moody's meantime downgraded the speculative grade liquidity rating of Six Flags to SGL-4 from SGL-2 based on the risk the company will fail to meet its credit obligations.

CEO Marc Shapiro also said on the conference call that the company would explore selling six properties, including one of its flagship locations, the Magic Mountain park near Los Angeles.

Kerr-McGee gains on sale to Anadarko

On the upside, a trader said, Kerr McGee Corp. bonds were better on the news that the company is to be bought by Anadarko Petroleum. He saw Kerr-McGee's 6.95% notes due 2024 at 98.5 bid, 99.5 offered, a three point gain on the day.

Anadarko announced early Friday that it had agreed to acquire Kerr-McGee and also Western Gas Resources, Inc. in separate all-cash transactions totaling $21.1 billion, plus the assumption of $2.2 billion of debt. It will pay $16.4 billion for Kerr-McGee and assume $1.6 billion of net debt and other liabilities.

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