Murray, Vector price add-ons; Paramount upsizes; TransDigm ahead; Baldor up on buyout news

By Paul Deckelman and Paul A. Harris

New York, Nov. 30 - High-yield primary-side activity picked up from Monday's slow pace, syndicate sources said on Tuesday, with the pricing of two dollar-denominated junk issues, both of them add-ons to existing credits.

Pepper Pike, Ohio-based coal operator Murray Energy Corp. came to market with a restructured $150 million tranche of 10¼% notes due 2015.

Miami-based tobacco holding company Vector Group Ltd. meantime priced a quickly shopped, upsized $90 million addition to its 11% secured notes due 2015.

In the Canadian dollar market, Calgary, Alta.-based energy exploration and production player Paramount Resources Ltd. weighed in with an upsized seven-year deal.

The forward calendar grew as new deals were announced from Energy XXI Gulf Coast Inc., CNO Financial Group, Inc. and Novelis Inc., while even without the benefit of a formal announcement, syndicate sources heard Swift Transportation Corp., Bumble Bee Foods LP and Puget Energy Inc. shopping deals.

The latter company's $350 million of 10-year paper is expected to price on Wednesday, as is TransDigm, Inc.'s $1.55 billion of eight-year notes, on which price talk emerged Tuesday.

Away from the new deal market, high yield remained softer pretty much across the board.

But Baldor Electric Co.'s bonds firmed by several points on the news that the maker of electric motors has agreed to be acquired by Swiss sector peer ABB Ltd.

Bonds of the "old" General Motors Corp. meantime were busily traded, despite a lack of fresh news about either that bankrupt company or its "new" successor that emerged from reorganization, General Motors Co.

Murray Energy taps 10¼% notes

The dollar-denominated junk primary market saw $240 million face amount of issuance on Tuesday as two issuers brought add-on deals.

Both were led by Jefferies & Co.

Murray Energy priced a $150 million add-on to its 10¼% senior notes due Oct. 15, 2015 (B3/B) at 103 to yield 9.461%.

The reoffer price came on top of the price talk.

Jefferies and Goldman Sachs & Co. were the joint bookrunners for the restructured deal, which originally came to market on Nov. 16 as a $150 million offering of new seven-year senior notes.

The privately owned coal company will use the proceeds for general corporate purposes, including the expansion of production capacity and preparation plant processing capacity at some mining complexes.

Vector Group, atop talk

Tapping its 11% notes for a third time, Vector Group priced a $90 million add-on to its senior secured notes due Aug. 15, 2015 at 103, resulting in a yield of 10.172% on Tuesday.

The reoffer price came on top of price talk.

Jefferies ran the books for the quick-to-market general corporate purposes deal, which was upsized from $75 million.

Vector Group priced the original $165 million issue at par on Aug. 8, 2007. It priced an $85 million add-on at 94 to yield 12.453% on Aug. 27, 2009 and a $75 million add-on at 101 to yield 10.47% on April 16, 2010.

Tuesday's $90 million add-on takes the total issue size to $415 million.

Paramount Resources upsizes

Meanwhile in Canada, Paramount Resources priced an upsized C$300 million issue of seven-year senior notes (Caa2/B+/) at par to yield 8¼%.

The deal, which was upsized from C$250 million, came on top of price talk.

Scotia Capital Inc. and BMO Nesbitt Burns Inc. were the bookrunners for the debt-refinancing and general corporate purposes deal.

TransDigm talks $1.55 billion

Looking ahead to the Wednesday session, TransDigm is poised to price a quick-to-market $1.55 billion offering of eight-year senior subordinated notes (B3/B-), which are talked with a 7½% area yield.

The deal was upsized late Tuesday night from $780 million.

UBS Investment Bank is the left lead bookrunner. Credit Suisse, Barclays Capital and Morgan Stanley are joint bookrunners.

Proceeds will be used to help fund the acquisition of McKechnie Aerospace Holdings, Inc., to fund a tender offer for TransDigm's 7¾% senior subordinated notes due 2014 and to repay bank debt, with any excess cash to be added to the balance sheet.

Puget Energy for Wednesday

Elsewhere, Puget Energy's $350 million offering of 10-year senior secured notes (Ba2/BB+) is Wednesday business, according to market sources, who added that the deal was initially expected to price Tuesday.

Guidance is 6% to 6¼%, according to a mutual fund manager, who added that guidance was revised lower from earlier discussions in the 6¾% area.

Bank of America Merrill Lynch, Barclays Capital and J.P. Morgan Securities LLC are leading the debt-refinancing deal.

Energy XXI brief roadshow

Energy XXI Gulf Coast will conduct a brief investor roadshow though Thursday for its $700 million offering of seven-year senior notes.

RBS Securities, UBS Investment Bank and BNP Paribas are the joint bookrunners.

Proceeds, together with a draw on the company's revolver and cash on hand from recent equity offerings, will be used to finance the purchase of some shallow-water Gulf of Mexico shelf oil and natural gas interests from Exxon Mobil Corp. and to repurchase or redeem its 16% second-lien junior secured notes due 2014.

Bumble Bee for Monday

Bumble Bee Foods plans to price a $605 million offering of seven-year senior secured notes on Monday.

JPMorgan, Wells Fargo Securities, Barclays Capital and Jefferies are the joint bookrunners.

The notes, which will be issued via Bumble Bee Acquisition Corp., are expected to garner mid-single B credit ratings.

Proceeds will be used to help fund the leveraged buyout of the company by Lion Capital LLP from Centre Partners Management LLC.

Full roadshow for Swift

Swift plans to price a $490 million offering of eight-year senior second-priority notes during the Dec. 13 week following a full roadshow.

Bank of America Merrill Lynch, Morgan Stanley, Wells Fargo Securities, Citigroup, Deutsche Bank Securities and UBS Investment Bank are the joint bookrunners.

The Phoenix-based transportation services company plans to use the proceeds to refinance its existing bank debt as well as its senior secured floating-rate notes and senior secured fixed-rate notes.

The European winter

With just $240 million of week-to-date issuance heading into Wednesday, the November/December crossover week is off to a somewhat anemic start, sources said.

Since the Oct. 4 week, the primary market has churned out a weekly average of $8.2 billion, according to Prospect News data.

Hence, a lot of wood indeed remains to be chopped to push the present week's total to that robust average.

One problem: Outflows. The high-yield mutual funds sustained their second consecutive outflow during the most recent week, which ended Nov. 24.

Although it was a meager $87 million outflow, according to Lipper-AMG, it followed the previous week's much more substantial $723 million outflow.

One fund manager was looking for a much more substantial drain than the negative $87 million that Lipper-AMG reported for the most recent period.

That's because during the most recent five-day reporting period, Nov. 18 to 24, this investor's fund saw three days of outflows - the first time the majority of the five days of any reporting period have been negative since May, the buysider said.

In addition to outflows, the volatility rocking the global capital markets is making itself felt in high yield, sources said.

Talk of a contagion of sovereign credit difficulties trailing the European central bank's recent bailout of Ireland has everyone's attention right now, a debt capital markets banker said on Tuesday.

People seem to be waiting for some clarity on European sovereign debt, the source added.

And if outflows and a possible contagion of credit difficulties in the euro zone weren't enough, some of the recent deals have not held in well, sources said.

The new HCA Holdings, Inc. 7¾% senior notes due May 15, 2021, which priced at par on Nov. 10 in a $1.53 billion issue (Caa1/B-/CC), were 97¾ bid on Tuesday, according to a buyside source.

"Ouch!" the investor commented.

Given these circumstances, rate-sensitive issuers that had planned to come during the run-up to 2011 may now be looking to their Christmas shopping, syndicate officials said.

Drive-by deals that might have come on Monday or Tuesday were put on hold, sellside sources said.

"We had a deal all teed up, with documents and the Bloomberg scans and everything," one syndicate source said. "We were ready to go. But the time just was not right."

New add-ons not seen

Traders said they saw no aftermarket activity Tuesday in either Murray Energy's restructured five-year add-on notes or in Vector Group's upsized drive-by add-on offering of five-year notes.

Secondary indicators easier

Away from the new-deal realm, a trader saw the CDX North American Series 15 HY index fall back by 3/16 point on Tuesday to end at 98½ bid, 98¾ offered after having eased by 1/8 point on Monday.

The KDP High Yield Daily index meantime declined by 14 basis points on Tuesday to finish at 73.20 after dropping by 20 bps on Monday. Its yield rose by 3 bps to 7.63% following Monday's 9-bps gain.

Advancing issues trailed decliners for a second consecutive session on Tuesday and by around the same nearly eight-to-five margin seen on Monday.

Overall activity, represented by dollar-volume levels, rose by 47% on Tuesday after having zoomed some 16-fold on Monday from the truly anemic levels seen during Friday's abbreviated and sparsely populated post-holiday session.

Tuesday was "a little bit of a boring day," a trader said, "but things started to pick up around midway through."

A second trader, though, said that things were fairly active at his shop and that it was "the first time in like eight or nine months that I really felt there was weakness across the board." He said it was "not a lot," but enough to take the overall junk market down about ¼ point.

He said it wasn't just "one-off go-go names - the market felt a little heavy across the board."

He saw "some go-go names trading, very spotty, with no huge volume out there, but enough to keep everyone busy."

Baldor gets buyout boost

Among specific issues, Baldor Electric, a Fort Smith, Ark.-based maker of industrial electric motors and power transmission equipment, was seen up multiple points on the news that larger European rival ABB has agreed to acquire Baldor for $63.50 per share, or $3.1 billion total. ABB additionally would assume $1.1 billion of Baldor's net debt.

That pushed Baldor's bonds up in busy trading. A market source saw the company's 8 5/8% notes due 2017 rise more than 6 points early in the session before finally finishing up more than 5 points at 111½ bid. More than $11 million of the notes were seen having traded in round-lot transactions - the first trading activity in Baldor in nearly a week.

A second trader saw "better-quality accounts bidding the bonds up."

He added that "it just goes to show you that people aren't messing around in this marketplace - if they want something, they'll pay a premium for it." He saw the bonds up 3 or 4 points on the session.

At another shop, a trader said that he saw "some decent-sized trading," although he pegged the bonds up about 2½ points on the day as they finished at 111 5/8 bid.

Baldor's New York Stock Exchange-traded shares meantime soared $18.20 on the day, or 40.35%, to end at $63.31, just a little below ABB's offer. Volume of 40.2 million shares was more than 36 times the norm.

U.S. Oncology up from lows

A trader saw U.S. Oncology Inc.'s 9 1/8% notes due 2017 up a little on Tuesday from the lows at which they had ended on Monday, when those bonds were seen having fallen around 4 or 5 points on no real news.

He quoted those bonds at 120 bid, improved from Monday's closing levels around 119 bid, 120 offered.

Those bonds had gotten up to around the 124 level by last week, having been steadily firming ever since the Nov. 1 announcement that the Woodlands, Texas-based provider of medications and services to cancer centers around the United States had agreed to be acquired by investment-grade health-care provider McKesson Corp. for $560 million, with debt assumption bringing the total value of the deal to $2.16 billion.

U.S. Oncology's floating-rate notes were meantime seen trading up around 100 1/8, not too much changed from the par level at which the trader said they "always have been trading" at, "give or take 1/8 point."

And its 10½% notes due 2014 ended the day at 104 bid, down 1/8 on the day.

Sprint running in place

Overland Park, Kan.-based wireless telecom operator Sprint Nextel Corp. and its Sprint Capital Corp. financing arm's bonds, which had been Junkbondland's busiest issues on Monday, were trading around again on Tuesday, although at reduced volume levels from Monday's pace.

A trader saw parent Sprint's 7 3/8% notes due 2015 down 1/8 point at 961/2, while its 8¾% notes due 2032 were "pretty active," seen up ½ point at 98¾ bid. Its 6 7/8% notes due 2013 eased by 1/8 bid to 99 7/8%.

At another desk, the latter bonds were quoted actually up ½ point at par bid.

Sprint Capital's 6 7/8% bonds due 2028 gained 1 5/8 point to finish just above 85 bid.

'Old' GM bonds busy, better

Traders saw active dealings in Motors Liquidation Co.'s 8 3/8% bonds due 2033 - the benchmark bonds issued by the "old" General Motors Corp., which reorganized via bankruptcy last year, separating the profitable car-production operations that became the "new" GM, General Motors Co., from the debt, other liabilities, unprofitable operations and unwanted assets that stayed at the renamed "old" company and that will be disposed of at fire-sale prices by the courts.

One trader said that over $40 million of the bonds had traded by mid-afternoon, far more than the next most active issue.

By the end of the day, another trader said that at least $49 million of the bonds had changed hands, and probably more than that, since the Trace system counts any transaction over $1 million simply as "$1 million-plus," whether it's $1,001,000, $2 million or $10 million.

A trader saw the benchmark bonds at 32 bid, which he called up a point on the day on "a lot of volume.

"That was a lively one today."

A second trader also saw the bonds at 32, up ½ point. But at another desk, a trader said that they were unchanged at 31 bid, 32 offered.

The company's 7 1/8% notes due 2013 gained 1 point to end at 31 5/16.

Meanwhile, Motors Liquidation's Pink Sheets-traded shares jumped by 2 cents, or 27.33%, on the day to 10 cents per share on volume of 10 million, about twice the norm.

There was no specific news seen out on either GM or Motors Liquidation that might explain the activity. While the bondholders and other creditors of the pre-bankruptcy GM stand to receive 10% of the new company's recently issued shares in exchange for their claims - and the "old" GM also holds warrants to buy even more of the "new" GM's shares, potentially increasing the creditors' take - the Motors Liquidation penny shares will not be converted into GM shares and are considered essentially worthless. Speculators are flipping in and out of the Motors Liquidation shares, gambling on realizing the kind of big percentage gains seen Tuesday but taking a chance of being left holding the bag when the shares are finally canceled.

GM domestic arch-rival Ford Motor Co.'s 7.45% bonds due 2031 were down ½ point at 106 bid, 107 offered, a trader said.

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