Atlas Resource brings small add-on; calendar builds; Albertsons downsizes megadeal; J.C. Penney pops

By Paul Deckelman and Paul A. Harris

New York, Oct. 6 – High-yield primary activity increased a little on Monday, syndicate sources said, with the pricing of one smallish drive-by deal from energy exploration and production company Atlas Resource Partners, LP. The upsized $75 million add-on to existing 2021 notes was brought to market by a pair of financing subsidiaries.

That stood in contrast to Friday, when there were no pricings of any dollar-denominated, fully junk-rated paper from domestic or industrialized-country issuers.

Besides the one pricing, market participants said that the junk calendar was building, with new deals formally announced or surfacing from Jefferies Finance LLC, chemical maker Eco Services Operations LLC, and energy names Natural Resource Partners LP and BPZ Resources Inc.

Among offerings already in the market, supermarket operator Albertsons Holdings LLC downsized its planned eight-year secured megadeal, while maritime cargo and tanker company DryShips Inc. is upsizing its three-year issue.

Among recently priced issues, there was continued brisk activity in Alcoa, T-Mobile USA Inc. and Zebra Technologies Corp.

J.C. Penney & Co.’s paper, including the deal it brought to market in early September, was seen higher ahead of the company’s presentation to analysts this week at its newly opened Brooklyn store.

But another retailer – RadioShack Corp. – was in retreat from the highs it hit at the end of last week on news of new financing.

Statistical indicators of junk market performance turned mixed on Monday after having been higher across the board on Friday for a third time in four sessions.

Atlas upsized and rich

Although high-yield primary market news volume was steady throughout the Monday session, only one deal priced.

Atlas Energy Holdings Operating Co., LLC and Atlas Resource Finance Corp. priced an upsized $75 million add-on to their 9¼% senior notes due Aug. 15, 2021 (Caa1/B-) at 100.50 to yield 9¼%.

The issue was upsized from $50 million.

The reoffer price came at the rich end of the 100.25 to 100.5 price talk.

Heading into the transaction, the existing 9¼% notes were trading in the context of 102 5/8 bid, 103 offered. The company made a concession to the market with Monday's add-on, sources said.

Wells Fargo was the left bookrunner for the quick-to-market acquisition financing deal. J.P. Morgan and RBC were the joint bookrunners.

Busier ahead...maybe

Pending market conditions, the remaining four sessions of the present week ought to be busier than the new issue market was last week, as it sat most of that time period marooned by volatility, a debt capital markets banker said on Monday.

“There is a bunch of stuff teed up if the market is supportive,” the banker remarked.

On Tuesday, look for a familiar name from the health care space to show up with benchmark deal that will be led by BofA Merrill Lynch, the source added.

Jefferies launches $400 million

Jefferies Finance scheduled an investor conference call at 11 a.m. ET on Tuesday to discuss a proposed $400 million offering of 6.5-year senior notes.

The general corporate purposes deal is set to price on Wednesday.

Jefferies is the bookrunner for the Rule 144A only offer.

Eco Services starts roadshow

Eco Services began a roadshow on Monday for its $200 million offering of eight-year senior notes (Caa1/CCC+), a deal that is expected to price late this week.

Credit Suisse, Jefferies and Citigroup are the joint bookrunners.

Proceeds, in addition to a $500 million term loan and an equity contribution from private equity sponsor CCMP Capital Advisors, will be used to fund the purchase of Solvay SA's sulfuric acid business for $890 million.

Natural Resource Partners tap

Natural Resource Partners scheduled a conference call with investors at 12:30 p.m. ET on Tuesday to discuss a proposed $125 million add-on to the Natural Resource Partners LP and NRP Finance Corp. 9 1/8% senior notes due Oct. 1, 2018 (expected ratings B3/B).

The deal is expected to price on Friday morning.

Wells Fargo is the left bookrunner. Citigroup Global Markets is the joint bookrunner.

The Houston-based master limited partnership plans to use the proceeds to fund a portion of its pending acquisition of non-operated working interest in oil and gas assets in the Williston basin in North Dakota.

BPZ’s $150 million deal

BPZ Resources is in the market with a $150 million offering of senior secured notes due 2019.

The deal is expected to price late this week.

Seaport Global, an investment bank formed by the combination of Seaport Group LLC and Global Hunter Securities LLC, is the bookrunner.

The Houston-based company plans to use the proceeds to repay its 6.5% convertible senior notes due March 1, 2015 and for general corporate purposes, including planned capital expenditures for field development and drilling in 2014 and 2015 as well as infrastructure.

BPZ Resources is an independent oil and gas exploration and production company with operations in Peru and Ecuador.

Albertsons downsizes bonds

Albertsons Holdings downsized its offering of eight-year second-lien senior secured notes (B2/CCC+) by $250 million, to $1,375,000,000 from $1,625,000,000, and shifted the proceeds to a proposed $250 million tack-on term loan B4.

The roadshow for the notes offer is scheduled to wrap up on Tuesday.

BofA Merrill Lynch, Citigroup, Credit Suisse, Morgan Stanley, Barclays and Deutsche Bank are joint bookrunners.

Proceeds will be used to help fund the acquisition of Pleasanton, Calif.-based food and drug retailer Safeway, Inc.

DryShips upsizes

Athens-based DryShips upsized its offering of three-year notes to $700 million from $500 million.

The company will apply the proceeds, including the additional proceeds resulting from the upsizing, to the refinancing of its 5% convertible senior notes due Dec. 1, 2014, taking down the entire issue.

Sterne Agee has the books.

New Atlas notes unseen

In the secondary arena, traders said they had not seen any aftermarket activity in the new Atlas Energy Holdings add-on 9¼% notes due 2021 due to the small size of the Philadelphia-based oil and gas exploration and production company’s transaction.

Halyard holds most gains

A trader saw Halyard Health Inc.’s 6¼% notes due 2022 at 101¾ bid, 102¼ offered.

That was down about ¼ of a point from the levels at which the bonds had been seen on Friday, when they improved by about ¾ of a point to the 102 mark.

But it was still well up from the par level at which the Alpharetta, Ga.-based producer of surgical and infection prevention products and medical devices priced its $250 million deal, which will help to finance Halyard’s spinoff from health and hygiene consumer products company Kimberley-Clark Corp.

The financing also includes $640 million of bank debt.

The spin-off transaction is expected to close by the end of this month.

Recent deals busy

Although traders did not see much overall activity in Monday’s market – several remarked how quiet things were – there still was some brisk trading in recently priced offerings.

There was continued activity in last Tuesday’s megadeal from Zebra Technologies, with one participant quoting those 7¼% notes due 2022 as getting as good as 104 bid, up ½ of a point, on volume of over $13 million.

The Lincolnshire, Ill.-based printing technologies company priced $1.05 billion of the notes at par after the deal was downsized from the originally planned $1.25 billion.

The new bonds quickly moved up to the 102 bid area when they were freed for the aftermarket, remaining there ever since.

T-Mobile USA’s 6 3/8% notes due 2025 were 1/8 of a point better, at 101¾ bid, on volume of over $16 million.

The Bellevue, Wash.-based No. 4 U.S. wireless carrier priced $1.7 billion of those notes at par on Sept. 3, along with $1.3 billion of 6% notes due 2023, which also hit the tape at par.

That two-part megadeal had been upsized to a total of $3 billion from an originally announced $2 billion total.

A trader said that Aecom Technology Corp.’s new bonds “moved up,” with its 5 7/8% notes due 2024 seen at 102¾ bid, 103¾ offered , a gain of 1¼ points from their Friday levels.

The San Francisco-based provider of engineering, construction and technical services priced $800 million of those notes, as well as $800 million of 5¾% notes due 2022, both at par on Sept. 17.

And the trader noted that “CalRes is doing well,” referring to the $5 billion three-part issue from Los Angeles-based energy exploration and production company California Resources Corp. That big deal came to market on Sept. 11, with $1 billion of 5% notes due 2020, $1.75 billion of 5½% notes due 2021 and $2.25 billion of 6% notes due 2024 all pricing at par.

Those bonds moved up, then came back in a little, but the trader said on Monday that they were “off from where they traded, but still hanging in well above their deal price.”

He said there was “active trading” in the new CalRes credits, adding. “The fact that it is a very liquid $5 billion deal doesn’t hurt.”

J.C. Penney paper pops

Another trader noted that J.C. Penney’s recent new deal “was straddling par,” trading in a 99½ to 100½ context.

The Plano, Texas-based department store operator’s $400 million of 8 1/8% notes due 2019 had priced at par on Sept. 10, after the issue was upsized from an originally announced $350 million.

While it had initially surged above the 101 level in the aftermarket, it quickly came back in to trade around par, but had fallen as low as 97 bid on an intraday basis by last Wednesday, ultimately closing at 98 and staying down there for a while.

But on Monday, he said, the notes “had come back quite a bit, had come back nicely.”

A second market source saw them ending at 99½ bid, calling that up 1 point from last week’s round-lot levels, on volume of over $5 million.

He also saw the company’s established 5.65% notes due 2020 gain 1½ points on Monday to end at 86¾ bid, on volume of over $7 million.

Company executives are scheduled to meet with analysts on Wednesday at its big, glitzy new store in Brooklyn, its first in the heavily populated New York City borough. They are expected to further outline Penney’s plans to improve its modest profitability, including closing a number of smaller, older and unprofitable stores elsewhere.

RadioShack retreats

But things were going less well for another Texas-based retailer that is trying to get back in the black by also closing underperforming locations.

On Friday, RadioShack’s 6¾% notes due 2019 had jumped as high as 45 bid intraday from its previous levels around 36, before coming a little off those highs to end at 41¾, still a hefty gain of nearly 6 points.

The bonds surged after the Fort Worth-based electronics store chain operator announced an agreement with hedge fund Standard General – its biggest shareholder with a nearly 10% stake in the company – to refinance its existing $535 million revolving credit line.

The deal gives RadioShack immediate access to $120 million of additional liquidity heading into the all-important year-end shopping season, the key time in the retailing industry.

However, some analysts were not impressed, saying the company still has major issues to face and predicting that the new lifeline will only buy it a limited amount of breathing space.

That skepticism may have been a factor on Monday, when the bonds dropped back to around the 38 bid level going home, although volume was light, with only $2 million of large-block trades.

Indicators turn mixed

A trader said that overall, “there was bid to our market this morning, with things up about ¼ of a point, until equities pulled back, which caused our market to be around unchanged.”

Statistical indicators of junk market performance moved into mixed territory on Monday, after having been higher across the board on Friday for the third time in four sessions.

The KDP High Yield Daily index posted its second consecutive gain on Monday, jumping by 25 basis points to end at 72.49. That was on top of the 28-bps surge seen on Friday.

The yield declined for a fifth straight session, falling by 8 bps to 5.52%, after having come in by 10 bps on Friday.

However, the Markit CDX Series 22 index eased by ¼ of a point on Monday to end at 106 27/32 bid, 106 7/8 offered. That snapped a four-session winning streak, including Friday, when the index gained 13/16 of a point.

The Merrill Lynch High Yield Master II index, though, notched its fifth rise in a row, advancing by 0.287%, on top of Friday’s 0.342% improvement.

That lifted its year-to-date return to 4.458% from 4.159% on Friday. But the cumulative return remained well down from its peak level of the year so far, 5.847%, set on Sept. 1, when the index was published even though the junk market was essentially closed due to the Labor Day holiday break.

According to the Finra-Bloomberg Active U.S. High Yield index, Monday’s junk market volume was $3.318 billion, down from $3.619 billion on Friday.

The index closed with a total return of 316.65, its fifth straight gain, versus Friday’s 315.76 reading. Its yield came in on Monday to 5.89% from 5.95% on Friday.

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