Parsley, SFX, Seven Generations deals cap $6 billion week; market off from Thursday gains

By Paul Deckelman and Paul A. Harris

New York, Jan. 31 - The high-yield primary sphere closed out a more active week on Friday with three deals pricing to generate over $900 million in total proceeds.

Two out of the three issues came out of the oil and gas sector, with Parsley Energy LLC bringing the big deal of the session, an upsized $400 million offering of eight-year notes as a regularly scheduled forward calendar deal, while Canadian issuer Seven Generations Energy Ltd. drove by with a $300 million add-on to its existing 2020 bonds.

Away from the energy patch, live-event promoter SFX Entertainment, Inc. raised the curtain on an upsized $220 million offering of five-year secured paper, pricing the bonds off the forward calendar.

Traders saw the Parsley deal having firmed smartly from its issue price when the bonds hit the aftermarket, and also saw SFX's new paper notching respectable gains.

Those deals brought issuance of new fully junk-rated, U.S. dollar-denominated paper from domestic or industrialized-country borrowers to $5.9 billion in 14 tranches - well up from the holiday-shortened previous week, ended Jan. 24, during which only $2.86 billion of new junk bonds priced in eight tranches, according to data compiled by Prospect News.

The deals also raised year-to-date new issuance from such borrowers to $22.4 billion in 42 tranches - although that lagged the red-hot year-ago new-issuance pace by nearly 29%, according to the data. Issuance totaled $31.49 billion in 69 tranches by this time last year.

In the secondary market, traders saw a mixed bag of results, as the market weakened somewhat from the strong session seen on Thursday. Accordingly, statistical measures of junk market performance were seen mostly lower, in contrast to Thursday, when they had been higher across the board. Those market gauges were meantime seen mixed versus where they had gone home at the end of last week, after having been lower last week.

Upsized Parsley prices tight

High yield continued to hang in on Friday, despite continued volatility in the stock market, sources said.

Witness Friday's primary market, where three issuers priced single-tranche deals to raise a total of $921 million.

Executions were notable, especially given that of the six credit ratings assigned to Friday's three issues, five were triple Cs, the lone exception being the B- that Standard & Poor's assigned to the $220 million issue of five-year secured paper from SFX Entertainment.

However neither credit quality nor capital markets volatility appeared to do much if anything to hamper Friday's executions, as two issues priced on the tight end of price talk and the other priced on top of talk.

Two of the three deals were upsized.

One came as a drive-by.

In a transaction that had run a roadshow, Parsley Energy priced an upsized $400 million issue of eight-year senior notes (Caa2/CCC+) at par to yield 7½%.

The deal was increased from $325 million and the yield printed at the tight end of the 7½% to 7¾% yield talk.

The deal played to book that contained north of $1 billion in orders, according to a market source.

Credit Suisse and Morgan Stanley were the joint bookrunners for the debt refinancing.

Seven Generations taps 81/4s

In drive-by action, Seven Generations Energy priced a $300 million tack-on to its 8¼% senior notes due May 15, 2020 (Caa1/CCC) at 107 to yield 6.652%.

The reoffer price came on top of price talk.

Credit Suisse and RBC Capital were the joint bookrunners.

The Calgary, Alta.-based energy company plans to use the proceeds to expedite its 2014 capital program and for general corporate purposes.

SFX upsizes, prices tight

As noted above, SFX Entertainment priced an upsized $220 million issue of five-year senior secured second-lien notes (Caa1/B-) at par to yield 9 5/8%.

The deal was increased from $200 million.

The yield printed at the tight end of yield talk in the 9¾% area, and inside of earlier yield guidance of 9¾% to 10%, according to a market source.

Barclays was the lead left bookrunner. Deutsche Bank, Jefferies and UBS were the joint bookrunners.

Proceeds will be used to repay the company's existing $75 million credit facility, as well as to finance the acquisition of a 40% interest in Rock World SA and the remaining 50% equity interest of B2S Holding BV, and for general corporate purposes, including additional acquisitions.

ETFs absorb most of outflow

The notable $909 million outflow from dedicated high-yield funds for the week to Wednesday, reported late Thursday afternoon by Lipper AMG, was mostly sustained by high-yield exchange-traded funds (ETFs), a trader said on Friday.

Throughout the week the ETFs were posting lists of bonds for sale, the trader said, and added that funds focused on short maturity paper were conspicuous among the sellers, while there was less selling seen from ETFs focused on the longer maturities.

Micron starts roadshow Monday

Micron Technology, Inc. has planned a group luncheon in New York for investors, as well as an investor conference call, both scheduled to get underway at 12:30 p.m. ET on Monday.

The Boise, Idaho-based semiconductor manufacturer is offering $500 million of eight-year senior notes, which come with three years of call protection.

The deal is set to price during the middle part of the week ahead.

Morgan Stanley, Credit Suisse and Goldman Sachs are the joint bookrunners for the deal. Proceeds will be used to take out the company's 1 7/8% convertible senior notes due 2014.

The week ahead

The opening week of February will get underway with business scheduled in the dollar- and euro-denominated markets.

In addition to the above-mentioned Micron Technology deal, Chrysler Group LLC will begin roadshowing $2.7 billion of senior secured notes in two tranches on Monday.

The deal, led by bookrunners BofA Merrill Lynch, J.P. Morgan, Barclays, Citigroup, Goldman Sachs, Morgan Stanley and UBS, is set to price on Wednesday.

Lansing Trade Group is roadshowing a $175 million offering of seven-year senior notes (/B+/) via Macquarie, in a deal expected to price during the middle part of the week.

Also Diamond Foods Inc. is expected to roll out its $230 million offer of five-year senior notes (Caa2/CCC+), via Credit Suisse, in the week ahead, according to a market source.

Meanwhile in the euro-denominated primary market, Safari Holding Verwaltungs GmbH is expected to price its €265 million offering of six-year senior secured floating-rate notes (B2/B) via Jefferies and Credit Suisse in the early part of the week.

Day's deals seen better

In the secondary market, traders said that the day's two stand-alone deals, for Parsley Energy and SFX Entertainment, were quoted firmer after their respective pricings.

A trader saw Midland, Tex.-based exploration and production company Parsley Energy's 7½% notes due 2022 trading in a 102 to 102 1/8 bid range, well up from their par issue price.

And he said that New York-based live-event and concert impresario SFX Entertainment's 9 5/8% senior secured second-lien notes due 2019, which came to market later in the day than the Parsley deal, were being quoted around 101 bid, 102 offered.

There was no immediate aftermarket activity seen in the Seven Generations Energy add-on deal.

Recent deals mixed

Away from Friday's new issues, traders saw mixed trading in the new paper that priced earlier in the week, a change from Thursday's stronger session when it had been up pretty much across the board.

One saw Ardagh Group's two new issues both trading better, quoting its 6¼% notes due 2019 at 100 7/8 bid, 101 3/8 offered, a gain of 1/8 point on the day and its new 6¾% notes due 2021 at 100 3/8 bid, 100 7/8 offered, calling that a ¼ point rise.

Through its Ardagh Packaging Finance plc and Ardagh Holdings USA Inc. funding subsidiaries, the Dublin, Ireland-based glass and metal beverage, food and consumer products packaging company priced $830 million of bonds in a two-part offering on Wednesday - $415 million each of the 61/4s and 63/4s, both of which came at par.

A trader saw Radio One Inc.'s 9¼% senior subordinated notes due 2020 trading at 102 3/8 bid, 102 7/8 offered, pegging those bonds ¼ point higher on the day, on top of the 7/8 point gain notched in Thursday's dealings.

The Silver Spring, Md.-based broadcaster and diversified media company priced $335 million of the notes at par on Wednesday, and they were seen having firmed smartly in initial aftermarket dealings.

However, a trader saw Westmoreland Coal Co.'s 10¾% senior secured notes due 2018 off by 1/8 point at 108½ bid, 109 offered. But that was still well up from the 106.875 level at which the Englewood, Colo.-based thermal coal producer and power generation company priced its $425 million of the notes as an add-on to its existing paper on Wednesday, yielding 6.975%, after the deal was upsized from an originally announced $400 million.

Dollar drops sharply

Away from the new deals, DFC Global Corp.'s junk bonds and its two convertible bond issues traded down in active dealings, in line with a 29% slide in its shares, after the financial services provider posted a disappointing earnings miss and lowered guidance for fiscal 2014 earnings.

A trader saw Dollar's 10 3/8% notes due 2016 having slid by 5 points to close at 98 bid, with over $9 million of the bonds having changed hands.

A second trader saw the bonds down 5¼ points on the day around that same 98 bid level.

The Dollar 3.25% convertibles due 2017, which priced in April 2012, tumbled more than 10 points to about 78.

The Dollar 3% convertibles due 2028 dropped to about 91 offered from about 95.

Dollar's Nasdaq-traded shares plunged, closing at their lows for the day, at $7.52, which represented a drop of $3.05, or 29%.

"It missed pretty big, and guided lower," a Connecticut-based trader said of the company's results and why the 3.25% bonds tumbled.

A second trading source said that the bonds "came in for sure, with obvious widening of the credit. There are issues there with the credit."

Both traders said the Berwyn, Pa.-based financial services company was a primary focus of the convertibles market on Friday.

"That's definitely the big name of the day," one trader said.

The company, which provides financial services to unbanked and under-banked consumers, reported net income excluding items of 6 cents per share, which was down from 46 cents a year earlier.

Revenue fell 10.4% to $262.3 million for the latest quarter, compared to the year earlier period.

Looking ahead, the company lowered its EBITDA guidance to $170 million to $200 million from $200 million to $240 million.

Operating earnings were revised lower to 35 cents per share to 80 cents per share, from 65 cents per share to $1.27 per share for fiscal 2014.

The company cited a decrease in commodity gold prices, regulatory transition issues in the United Kingdom and increasing weakness in the Canadian dollar for its weak performance.

Coal still in spotlight

Elsewhere in the secondary realm, recently busy coal operators continued to trade around on Friday.

Walter Energy, Inc.'s 9½% notes due 2019 were trading at 101½ bid, 102¼ offered, which a trader said "looks like it was up a little bit from [Thursday]."

He said that he didn't really see much dealing in Walter's 9 7/8% notes due 2020, noting only one size trade. He called the bonds up ½ point at 76 bid, versus levels around 75½ to 76 on Thursday.

"The others were quoted a little higher but I didn't see any action" in the 91/2s.

The Birmingham, Ala.-based metallurgical coal producer's bonds have slid into the mid-70s from recent highs about a week ago in the 83 to 84 bid context, in line with weaker prices of metallurgical coal, which is used in the production of steel and other metals. Those prices, which had already been considered low at $132 per ton, have now slid to $125 per ton, and some analysts think they could come down even further. Wells Fargo Securities and Citigroup were among the financial firms expressing concerns over Walter's perceived weakness.

The trader saw St. Louis-based sector peer Arch Coal Inc.'s 7% notes due 2019 down ½ point to 77¾ bid "on a handful of trades."

Alpha Natural Resources Inc.'s 6¼% notes due 2021 were up ¼ point to 82 bid, though on just a single sizable trade. He said that the Bristol, Va.-based coal producer's bonds "don't seem able to get out of their own way."

Retailers in retreat

In the retailing space, a trader saw "a bunch of trades" in Bon-Ton Department Stores' 8% notes due 2021 "first thing in the morning."

He saw those bonds finishing at 97¼ bid, which he said was only down about ¼ point from Thursday's levels, "but on some decent volume from then on," estimating more than a dozen round-lot trades.

Another trader said $13 million.

Fellow retailer J.C. Penney Co. Inc.'s 6 7/8% notes due 2015 were off by almost ½ point to around the 88 bid, level, on over a dozen trades, a market participant said.

At another desk, the troubled Plano, Texas-based department store chain owner's 5.65% notes due 2020 were being quoted down ¾ point at 71¼ bid.

Its 5¾% notes due 2018 lost 1 1/8 points to finish at 72½ bid.

Also in the retailing world, Wayne, N.J.-based toy, game and children's products chain operator Toys 'R' Us, Inc.'s 7 3/8% notes due 2018 were seen down ½ point at 75¾ bid.

Market a little softer

Overall, a trader said, "the market opened up and looked like it was going to be weaker,", and ended up unchanged to "maybe a touch softer," in contrast with Thursday's gain.

Market indicators easier

Statistical junk-market performance indicators turned lower on Friday, after having been higher across the board on Thursday. They were mixed versus where they had closed out the previous week on Friday, Jan. 24.

The Markit Series 21 CDX North American High Yield Index eased by 1/16 point on Friday to end at 106 3/8 bid, 106 7/16 offered, after having risen by 7/32 point on Thursday.

However, it was slightly higher week-over-week, versus the previous Friday's close at 106 11/32 bid, 106 13/32 offered.

The KDP High Yield Daily Index dipped by 2 basis points Friday to end at 74.48, after having gained 5 bps on Thursday.

Its yield rose by 1 bp to 5.58%, after having declined by 3 bps on Thursday.

Those levels compared unfavorably with the 74.77 index level and 5.47% yield seen at the close of trading the previous Friday.

Rebecca Melvin contributed to this review

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