Consolidated Communications, NGPL price, move up; coal names get crushed, Ford up on upgrade

By Paul Deckelman and Paul A. Harris

New York, May 22 - Consolidated Communications Holdings Inc. and NGPL PipeCo LLC were heard by high-yield syndicate sources to have come to market with a pair of new deals on Tuesday, the first pricings of the week.

Consolidated, a telecommunications provider, brought a downsized $300 million offering of eight-year notes, while NGPL, a natural gas midstream company, priced a $550 million tranche of seven-year secured paper.

Both new deals were heard to have firmed solidly after pricing.

The primary sphere was otherwise quiet, the only news being that Pennsylvania casino operator Rivers Pittsburgh Borrower LP will shop a $300 million secured deal around for likely pricing next week

Apart from the new deals, another gaming name - Caesars Entertainment Corp. - was seen higher in brisk trading, though there was no news out about the company.

Caesars was one of just many bonds were seen better on Tuesday as Junkbondland seemed to at least partially bounce back from the drubbing it's recently been taking. Statistical performance indicators broke out of a long slump.

But not everyone was riding high; investor worries about whether Patriot Coal Corp. will be able to refinance debt coming due next year hammered the energy company's bonds and shares down, along with the securities of such sector peers as Arch Coal Inc. following along on generalized investor angst over the industry's troubles.

Back on the upside, Ford Motor Co.'s bonds got a jump-start on the news that Moody's Investors Service had lifted the automotive giant's ratings out of the junk category - the second major ratings industry to do so.

Primary sees two deals

The primary market saw two issuers each bring a single-tranche deal, raising a total of $748 million between them on Tuesday.

NGPL PipeCo priced a $550 million issue of seven-year senior secured notes (Ba3/B+/BB-) at par to yield 9 5/8%.

The yield printed in the middle of the 9½% to 9¾% yield talk.

Barclays was the lead left bookrunner for the debt refinancing. Credit Suisse and RBC were the joint bookrunners.

Consolidated Communications cut

Consolidated Communications Finance Co. priced a downsized $300 million issue of 10 7/8% eight-year senior notes (B3/B-) at 99.345 to yield 11%.

The yield printed at the wide end of the 10¾% to 11% yield talk. The amount was reduced from a planned $350 million.

Morgan Stanley ran the books.

In addition to the downsizing, the debt incurrence covenant was modified, decreasing the ratio to 4.25 times EBITDA from 4.5 times.

The Mattoon, Ill.-based communications company plans to use the proceeds to finance its acquisition of SureWest Communications and to refinance SureWest debt.

"It's now finally a buyer's market," one investor commented, and added that the deal, which came with an 11% yield, was probably oversubscribed, given that it launched into the market with a yield in the low-to-mid 8% range.

Perhaps the concession which Consolidated Communications paid to the lately volatile market conditions in high yield was as much as 275 basis points, the investor admitted.

On the surface that hardly seems fair because the market itself has only backed up by 60 basis points, the buysider reasoned.

"But how do I know that I won't wake up tomorrow to more bad news out of Greece, and we won't widen some more?" the investor asked.

The buysider walked away from the deal pleased, saw the new Consolidated Communications 10 7/8% notes trading at par ½ bid versus the 99.345 reoffer price, and said "Sometimes you just have to back the truck up and buy some of this stuff.

Rivers Casino plans notes

Rivers Pittsburgh Borrower LP, a special purpose vehicle of Rivers Casino Pittsburgh, began a roadshow on Tuesday for a $300 million offering of seven-year senior secured second-lien notes (/B/).

The deal is set to price in the middle or late part of the post-Memorial Day week.

Goldman Sachs is the left bookrunner for the debt refinancing deal. Credit Agricole and Wells Fargo are the joint bookrunners.

Misys loan draws junk buyers

High yield investors make up a substantial portion of the audience for Misys plc's planned $615 million seven-year second-lien loan, according to buyside and sellside sources.

The LBO deal, which launched Tuesday, is talked with a 12% yield, including a discount, and is expected to price on Thursday.

Bank of America Merrill Lynch is the left lead bookrunner for the second-lien loan. Credit Suisse, Jefferies and Deutsche Bank are joint bookrunners.

The loan becomes callable after three years at par plus 75% of the coupon.

The structure is similar to that of a high-yield bond, and the deal comes with standard incurrence-based high-yield covenants, according to a syndicate source.

However the deal is governed by a credit agreement as opposed to high-yield indentures, the source added.

PipeCo pops, Consolidated climbs

When the day's new bonds were freed for secondary market activity, a trader said the Consolidated Communications and NGPL PipeCo new deals "both did well."

He saw NGPL's 9 5/8% senior secured notes due 2019 push up to 102 bid, 102½ offered, after the natural gas midstream company's $550 million issue had earlier priced at par.

A second trader saw the new bonds at 102¼ bid, "and looking," i.e. for offerings.

Yet another trader did see some two-sided markets, pegging the bonds as high as 102¾ bid, 103¼ offered going home.

The first trader also saw Consolidated Communications' 10 7/8% notes due 2020 at 100½ bid, 101 offered, noting that it was a good rise of more than a point from the discounted 99.345 level at which that $400 million deal - downsized from an originally announced $350 million - had priced.

At another desk, a trader saw the telecom company's new deal ending at 100½ bid, 101½ offered.

Recent deals hold small gains

Among other recently priced issues, a trader saw Molycorp Inc.'s 10% notes due 2020 at 100½ bid, 101¼ offered on Tuesday, up slightly from the 100¼ bid, 100½ level at which the bonds had traded on Monday.

The Greenwood Village, Colo.-based rare-earth miner's $600 million offering had priced at par on Friday.

The trader saw Kaiser Aluminum Corp.'s 8¼% notes due 2020 at 100¾ bid, 101¼ offered, about the same neighborhood they inhabited on Monday.

That was up from the par level at which the Foothill Ranch, Calif.-based aluminum products producer's $225 million offering had priced on Friday, after having been upsized from an originally announced $200 million.

Stamford, Conn.-based telecommunications company Frontier Communications Corp.'s 9¼% notes due 2021 were likewise seen little changed from Monday, hanging in around 101 to 1011/4.

That level represented an improvement over where they had finished up last week. The quickly-shopped deal had priced at par very late in the day on Thursday, and then was seen by traders to have moved up to the 100¼ bid, 101 offered area on Friday, before continuing to rise Monday.

Its existing 8¾% notes due 2022 were meantime being quoted up more than 1¾ points on the session, at just over par.

Momentive Performance Materials Inc.'s 10% senior secured notes 1.5-lien notes due 2020 were seen straddling par on Tuesday, a trader locating them at 99¾ bid, 100¼ offered.

That was up a little from the 99 to 100 bid range that the $250 million offering had traded in on Monday.

Momentive, a Columbus, Ohio-based specialty chemicals and materials maker, had priced its bonds at par on Thursday, after downsizing the deal to $250 million from the $450 million originally shopped around the market. Before it priced, the deal had been heard by syndicate sources to have been upsized to $500 million at one point, only to be radically reduced in order to get done.

After pricing, the bonds had traded on Thursday a little below their issue price, had actually moved up to 100 bid, 100 3/8 offered on Friday, only to drop back from those peaks on Monday.

A trader said that Momentive's existing 9% notes due 2021 were trading at 76½ bid, 77½ offered on Tuesday, calling that up perhaps ¾ point.

But he said that "there was only very small volume, call it four trades," in the bonds, "so there's not a whole lot to talk about."

Starting last Wednesday, those bonds had slid down to the mid-70s over several sessions, bottoming around 75 bid in Monday's dealings, versus prior levels around 83 bid that they held before the news hit the market that Momentive would do its new deal, which ranks senior to the existing bonds in the company's capital structure.

Market moves up

Away from the new-deal realm, a trader opined that "the market definitely had a firmer tone to it today."

He said: "It was firmer across the board in the morning," though by late afternoon, "the market definitely drifted a little bit to the south in the past hour or so, but on lighter volume."

Market indicators get better

Away from the new deals, statistical indicators of market performance were seen having improved on the session across the board Tuesday for the first time in more than a week breaking out of their recent rut; they had been mostly lower for a number of successive days, and were mixed, but with a lower bias, on Monday.

The Markit Group CDX North American Series 18 High Yield Index edged up 1/8 point Tuesday to close at 93 3/16 bid, 93 7/16 offered, after having zoomed by 1 3/8 point on Monday to break a six-session losing streak.

The KDP High Yield Daily Index meanwhile rose by 19 basis points Tuesday to close at 73.51 - its first advance after seven straight sessions on the downside, including Monday, when it nosedived by 34 bps. Its yield came in by 4 bps, to 7.05%, after having risen by 11 bps on Monday.

And the widely followed Merrill Lynch U.S. High Yield Master II Index snapped a six-session slide, moving up on Tuesday by 0.222%, versus Monday's 0.318% retreat.

The gain got its year-to-date return back in the black, lifting that figure to 5.006 %on Tuesday, from Monday's close at 4.774%. That finish had been the first time the index ended a session below 5% on a year-to-date basis since April 13, when it closed at 4.942%, and was the lowest level seen since April 11, when it ended at 4.665%.

However, even with Tuesday's small gain, the year-to-date reading remains well down from the peak level for 2012 so far, 6.80%, set on May 7.

Caesars seen better

Among specific names, a trader said that Caesars Entertainment's 10% notes due 2011 finished at 68½ bid, 68¾ offered, which he called unchanged on the day, though with over $20 million of the Las Vegas-based casino giant's paper changing hands, making it one of the busiest junk issues this session.

Another market source, though, said the bonds were up as much as 2 points on the day around the 68ish level.

At another shop, the Caesars 12¾% notes due 2018 were seen up some 2¼ points, going home at 79 bid.

Autos cruise higher

A trader said that "is nice to see Ford finally getting upgraded by Moody's," noting that the Dearborn, Mich.-based automotive giant's bonds were better on the day in response. The ratings agency raised Ford's bonds to Baa3, joining Fitch Ratings, which recently elevated them to BBB-. Only Standard & Poor's still considers Ford junk rated, at BB+.

A second trader said that the company's benchmark 7.45% bonds due 2031 had firmed smartly on news of the upgrade, quoting them at 128 bid, 129 offered and calling that a rise of as much as 6 points from recent levels.

Yet another trader saw Ford's 8.29% bonds due 2032 at 129½ bid.

"The short end stayed the same. It was a little better further out on the curve," he said, seeing the 2031 bonds having moved up to 128 bid and looking for offers, while the 8% notes due 2016 "are 117¼ bid, looking."

The trader also saw sector peer Chrysler LLC going along with Ford for an upside ride; he said that the Auburn Hills, Mich.-based Number-Three U.S. car producer's paper "was active today."

He said its 8¼% notes due 2021 "were very well bid-for," seeing those bonds trading up at 100¼ bid, which he called a ½ point gain.

ATP Oil gets drilled

On the downside, a trader sarcastically called ATP Oil & Gas Corp. "the winner today - going straight down, which I saw all day."

He said that the Houston-based offshore energy exploration and production company's 11 7/8% senior secured second-lien notes due 2015 were down about 4 or 5 points," and they were very active today."

He said the bonds were finishing in a 53 to 53½ context.

He said there was "huge volume" in the credit - by one estimate, as much as $60 million changing hands.

Another trader called the credit "a falling knife."

There was no fresh news out on the company that might explain the sharp pullback on heavy trading. Its bonds have been steadily falling over the past two weeks, ever since the company released quarterly earnings and operational and financial projections the market found disappointing.

The bonds had been trading around in the mid-70s before the earnings came out after the close on May 9.

Coal-sector carnage

An even bigger loser was Patriot Coal paper, which "went on a wild ride," a trader said, quoting the St. Louis-based coal operator's 8¼% notes due 2018 as having nosedived 14 points, ending around a 47 to 49 context, with over $25 million changing hands.

The company's bonds and its shares swooned on investor fears that Patriot might not be able to line up financing it needs to pay off a loan due next year.

A second trader said that "Patriot Coal was the big story - they got hammered." He saw the 81/4s trading below 50, ending in a wide 47-50 context.

He said that "James River [Coal Co.] was down, other coal names were down as well," investors worried about the viability of the whole sector; Patriot, James River and other sector peers like Arch Coal Inc. and Peabody Energy Corp. have been hurt by a falloff in the domestic use of coal as unusually low natural gas prices have caused gas to displace coal in many regions as the inexpensive fuel of choice.

The coal companies have pinned their hopes on making up for the lost domestic sales with orders from overseas, particularly the heretofore booming BRIC economies, including China and India, but a recent slowing of the Chinese economy has endangered that strategy.

Yet another trader saw the Patriot 8¼% notes due 2018 down 18 points, quoting them at 48 bid, 49 offered, and saw Richmond, Va.-based James River's 7 7/8% bonds due 2019 at 53-54, down 10 points.

Even the somewhat better-situated coal-sector names were being punished on Thursday, with St.-Louis-based Arch Coal's 8¾% notes due 2016 off 1½ points to end at 98¾ bid. Bristol, Va.-based producer Alpha Natural Resources Inc.'s 6¼% notes due 2021 lost a point on the day to end at 89¼ bid.

"Obviously, the coal sector is not the place you want to be caught with your pants down" the trader counseled.

Away from purely junk bonds, the first trader said that Patriot's 3¼% convertible notes due 2013 plunged to 50-53, which he called down 25 to 30 points. "It's a convert, so it's following the stock, which got crushed - it lost over a third of its value," he said.

Patriot's New York Stock Exchange -traded shares fell as much as 59% in intra-day dealings before ending the day down $1.18, or 35.12%, at $2.18; volume of 86 million shares was almost 12 times the norm.

Kodak gyrates

Away from energy names, a trader said that Eastman Kodak Co. "went on a ride," with the bankrupt Rochester, N.Y.-based photographic products and digital imaging technology company's bonds "bouncing off the bottom" after they got hammered down on Monday on news of a setback in Kodak's legal war with smartphone makers Apple Inc. and Research in Motion Ltd.

He saw the company's 9¾% second-lien notes finishing at 70 bid, 71 offered, calling that up around 3 points from the upper-60s levels to which they had plummeted on Monday, when they were down a dozen points on the legal news.

He said that its 7¼% notes due 2013 were in the mid-teens, finishing at 15 bid, up from lows around 11; on Monday, they had lost anywhere from 7 to 10 points.

The Kodak paper got hammered on Monday on the news that it had lost a preliminary round its patent case against Apple, the maker of the popular iPhones, and Research in Motion, which makes the Blackberry phones. Kodak had accused the two phone makers of poaching its patents for the camera applications in those devices, and is demanding billions of dollars in compensation. An administrative judge of the U.S. government's International Trade Commission denied Kodak's request, saying the patents were invalid, a ruling Kodak disagrees with and plans to appeal to the full ITC when it meets in September.

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