Upsized Superior Energy prices; Trinseo 'day to day'; secondary slips; MF down again

By Paul Deckelman

New York, Nov. 21 - Superior Energy Services, Inc. came to market on Monday with an upsized quick-to-market $800 million issue of 10-year senior notes.

The oilfield services company's new issue was the only pricing seen during the session - and was the latest in a string of new deals to emerge recently from a resurgent energy sector.

The primary side was otherwise quiet. The only scheduled offering on the forward calendar - Trinseo Materials Operating SCA - was seen by a syndicate source now to be "day to day" with no firm timing.

Among recent offerings, Friday's Kodiak Oil & Gas Corp. eight-year deal was seen by traders to have come down from the peak levels reached on Friday after the energy operator's upsized and quickly shopped deal priced and then firmed smartly when it was freed to trade.

Other recent new deals moved lower, including the big Community Health Systems Inc. eight-year deal, which came to market a week ago.

The easing was in line with a generalized junk retreat as high-yield took its cue from equities, which tumbled as the vaunted congressional supercommittee stumbled, failing to come up with needed voluntary cuts in federal spending by Wednesday's deadline. The result forces mandatory reductions in defense and social spending.

Secondary market indicators lowered across the board.

MF Global Holdings Inc.'s already beleaguered bonds fell further as the amount of money believed to be missing from the failed financial firm's customer accounts swelled to more than $1 billion, double the original estimates.

Superior deal upsizes

The day's sole pricing came from New Orleans-based oilfield services company Superior Energy Services, which came to market with an upsized, quickly shopped $800 million issue of 10-year senior notes ( Ba3/BB+).

High yield syndicate sources said the new bonds priced at par to yield 7 1/8%, slightly wide of the unofficial 7% price talk which had circulated earlier in the day.

The issue - done through Superior's SESI, LLC subsidiary - was upsized from the originally announced $700 million.

It came to market via joint bookrunners J.P. Morgan Securities LLC, Bank of America Merrill Lynch and Wells Fargo Securities LLC. Capital One Southcoast, Inc., RBC Capital Markets Corp. and Scotia Capital (USA) Inc. were joint lead managers on the deal.

Superior plans to use the new-deal proceeds along with cash on hand and term loan and revolving credit borrowings from its senior credit facility, which it intends to amend and restate, to pay for the cash portion of its pending acquisition of Complete Production Services Inc., a smaller, Houston-based oilfield services company.

It will also use some of the funds to repay Complete's $650 million of 8% notes due 2016, to refinance borrowings outstanding under Complete's revolving credit facility, and to pay related fees and expenses.

The deal, announced on Oct. 10, calls for Superior to hand over roughly $2.7 billion in cash and stock for Complete, or about $32.90 per share, broken up into $7 in cash and 0.945 Superior shares for each share of Complete. The deal also includes Superior's assumption and repayment of $650 million of Complete debt, all of it in the outstanding 8% notes.

The new Superior Energy Services bonds came to market way too late for secondary dealings.

Complete bonds hold steady

Complete Production's bonds, meantime were trading on Monday in a 104 to 104¼ context, unchanged from recent levels, with about $3 million of that paper changing hands.

The bonds had jumped to around 104, their anticipated takeout level, on Oct. 11, the first trading day after the announcement of the deal with Superior, which took place on Columbus Day, when the U.S. debt markets were closed.

Before the merger news, those bonds had been trading around par bid.

Energy pricing parade rolls on

Several traders noted the fact that the Superior pricing is only the latest in a series of deals to emerge from the energy sector; last week there were a half-dozen such offerings, dominating that week's new-issuance totals.

For instance, on Friday, Denver-based exploration and production operator Kodiak Oil & Gas Corp. priced a $650 million issue of eight-year notes at par to yield 8 1/8%.

That deal - which, unusually for last week's parade of offerings, came off the forward calendar and priced after a short roadshow, rather than being an opportunistically timed drive-by transaction - was increased in size from the originally announced $550 million.

After pricing at par, those new bonds had shot up to above 102 bid in initial secondary dealings, before settling in around the 102 level.

However, in line with the generalized junk market Monday malaise, they were seen having come off those peaks, and were being quoted around 101 bid, 102 offered on Monday.

Another notable energy-sector deal from last week was the $1 billion drive-by from Houston-based Plains Exploration & Production Co., which priced last Wednesday at par to yield 6¾%

But while the Kodak deal climbed after its pricing, Plains - which had been upsized from an originally announced $500 million - struggled right out of the gate; the 10.25-year bonds did not trade after their pricing late Wednesday and then spent Thursday and Friday trading just under issue, around 99 5/8 bid, 100 1/8 offered.

On Monday, they remained around that level, quoted by a market source around 99¾ bid, on volume of more than $6 million, making the issue one of the more active junk names on the session.

Besides those two energy deals from last week, other pricings coming out of the sector included Houston-based Swift Energy Co., an exploration and production operator, which did $250 million of 7 7/8% notes due 2022, pricing the bonds on Tuesday at 99.156 to yield 8%. After initially trading around the 99 level, the new deal retreated to a 98-99 context, and went home on Friday at 98¾ bid, 993/4.

There were also the $150 million of 8¾% notes due 2018 from Atlas Pipeline Partners, LP, which had priced on Wednesday as an add-on to the company's original $250 million tranche from June 2008. The Moon Township, Pa.-based natural gas processing and transportation company's issue, which was upsized from the originally announced $125 million, had priced at 103.5 to yield 7.821%. On Thursday, a trader said, the bonds had traded up from their issue level to around 104 1/8 bid, but they were not seen after that.

Houston-based exploration and production company Carrizo Oil & Gas, Inc. priced $200 million of 8 5/8% notes due 2018, last Monday as a quick-to-market add-on to its existing $400 million of those bonds; those bonds priced at 98.5 to yield 8.918%, but saw little aftermarket dealings.

San Antonio, Tex.-based energy contract driller Pioneer Drilling Co. priced a $175 million add-on to its 9 7/8% notes due 2018 last Tuesday, upsized from an original $150 million; the bonds priced at 101 to yield 9.579%, but were not seen trading around after that.

Quiet primary expected

A trader said that he "knew that [Superior] was coming" with a new deal, in view of last week's statement from the company's chief executive officer, David Dunlap, who said Superior was planning to go to market with a bond issuance before the close of the Complete acquisition "to pay for some of the cash portion of this transaction."

However, that being said, he added that he was "surprised that that they would pick a day like today to price it," given the general quiet in the market ahead of Thursday's Thanksgiving Day holiday break and the overall bearish tone on the day - but he suggested "maybe they have a [order] book built, they've got longer-term buyers, so it's not a problem."

Overall, he said "it's a pretty slow day, and it's probably going to be a pretty slow week."

Trinseo 'day to day'

Against that kind of a backdrop, a primary market source said that the only deal on this week's forward calendar - a $450 million six-year offering from Trinseo Materials Operating - "has gone day to day."

He said that at this point, "the timing of the deal is TBD - to be determined."

Trinseo - a Berwyn, Pa.-based chemical company that will shortly change its name from the current Styron LLC - began floating the deal around earlier in the month, planning to use the proceeds to repay existing term-loan debt and for general corporate purposes.

It was originally supposed to be a seven-year bond, but was restructured to shorten its maturity.

It marketed the deal to investors via a roadshow last week, and price talk emerged on the offering, envisioning a yield of 12¼%, including 3 points of original issue discount.

New deals pushed around

Traders noted that some of the recent new deals were weak in Monday's secondary trading.

Besides the 1 point drop in the previously very robust Kodiak Oil & Gas issue, as noted, they pointed out that Entercom Radio LLC's 10½% notes due 2019 struggled to get above its 98.672 issue price.

The Bala Cynwyd, Pa.-based radio broadcaster had priced its $220 million forward calendar issue - downsized from an original $250 million - on Friday, to yield 10¾%.

The bonds came too late in the day for any Friday activity, and they did not generate much trading on Monday either. One trader saw them offered at 99½ - but another had them offered at 99, and a third set the offering level at 98½ - below their issue price - with no bids seen.

"I saw no bids - they were 981/2, and looking," he said, "and not a lot traded."

Going back a little further, the trader said that other recent deals were also showing signs of fatigue, among them Community Health Systems' $1 billion offering from last Monday.

The Franklin, Tenn.-based hospital operator's mega-deal came to market at par - but on Monday, he said, the bonds were being offered at 97.

Another name from out of that same healthcare sector which he saw under pressure on Monday was Kinetic Concepts Inc.'s $1.75 billion issue of 10½% second lien senior secured notes due 2018.

The San Antonio, Tex.-based medical technology company's bonds - upsized from $1.65 billion - came to market on Oct. 25 at 98.198 to yield 10 7/8%, and then in the days that followed, traded as high as around the 102 area. But on Monday, the trader said, they were offered at 96, "so you're clearly seeing some of these more recent deals from the last couple of weeks under pressure."

Market measures slide again

Away from the new deals, statistical secondary market performance indicators were off for a fifth consecutive session on Monday.

A trader said the CDX North American series 17 High Yield index dropped by 1 1/16 points on Monday to end at 88 3/16 bid, 89 1/16 offered, after having been pretty much unchanged on Friday.

The KDP High Yield Daily index dropped by 45 basis points on Monday to close at 72.27, after having fallen 12 bps on Friday.

Its yield ballooned upward by 12 bps to 7.78%, after rising 5 bps on Friday.

And the widely followed Merrill Lynch High Yield Master II Index lost 0.497% on Monday, on top of the 0.212% retreat on Friday. It was the fifth consecutive downturn for the index.

That loss left the index's year-to-date return at 1.913% - the first time it has been below the psychologically potent 2% mark since exactly a month ago, Oct. 21, when it stood at 1.886%. On Friday, the index had closed at 2.422%.

The cumulative return remains well below its high-water mark for the year of 6.362%, which was set on July 26 but is still well up from its 2011 low-point, a 3.998% deficit recorded Oct. 4.

Traders noted that junk seemed to be taking a cue from stocks which got hammered after the official announcement from the congressional supercommittee that it would not be able to come up with the requisite $1.2 trillion of federal budget cuts by the Wednesday deadline.

The bellwether Dow Jones Industrial Average plunged 248.85 points or 2.11%, to close at 11,547.31. The S&P 500 and Nasdaq indexes were down by 1.86% and 1.92% respectively.

A trader - noting the havoc in the financial markets over the last two weeks from the U.S. supercommittee's inability to accomplish its task and the continued problems going on in the euro zone - remarked that "we've had two weeks of governments showing how incompetent they are. There is nothing to inspire [investor] confidence on the political side of the equation."

MF Holdings mauled again

Among specific names, a trader said that MF Global Holdings was down another 4 points on the session on the news that as much as $1.2 billion of client money may be missing - twice the original figure of around $600 million that seems to have gone AWOL at the bankrupt New York-based broker dealer firm formerly run by the ex-chairman of Goldman Sachs and ex-governor of New Jersey, Jon Corzine, who resigned last week.

He said that the company's 6¼% notes due 2016 got as low as 28 bid, but the final trades of the day were in the 31½ area, which is still down about 3½ to 4 points from where the bonds finished on Friday.

He said that MF began falling "as soon as the news hit" about the additional missing funds.

Harrah's gets hit

A trader said that the market generally was weaker, with "the high-beta names down 1 or 2 points, and the more regular names off about a ½ point to 1 point."

Another said that Monday was "a normal down-day debacle," especially among "the more volatile names."

For instance, he saw Caesars s Entertainment Corp.'s 10% notes due 2018 - issued under the Las Vegas-based gaming giant's former name, Harrah's Entertainment, fall to 62 bid from Friday's levels around 64.

Another market source who saw the Harrah's bonds at that same 62 level, calling them down 2½ points from their levels late last week, said the bonds were the busiest Junkbondland issue on Monday, with over $27 million having changed hands.

ATP Oil improves

A trader said that ATP Oil & Gas Corp.'s 11 7/8% second-lien senior secured notes due 2015 "actually traded back up" on Monday, going from 63½ earlier in the day up to 65 1/8.

He saw no news out on the Houston-based energy exploration and production company that might explain its movements.

"They opened up down, but then around 12:30 [p.m. ET] they began trading back up again," he said.

A market source saw more than $10 million of the bonds traded, putting ATP up near the top of the junk market most-actives list.

Clearwire climbs a little

A trader said that Clearwire Corp.'s 12% notes due 2015 - which on Friday had traded in a 73½ to 76½ range, gyrating on investor fears the Kirkland, Wash.-based broadband provider might not make scheduled Dec. 1 interest payments on its various bond issues totaling $237 million, before finally going out at 75 bid - rose to 76¼ on Monday, and were left bid, with no offerings, he added.

"So they're up a little."

He noted that some people in the market believe that "this is just a ploy to force [54% owner] Sprint [Nextel Corp.] to do some more business with them."

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