Michael Foods, upsized Case New Holland price, trade up, CKE slates; energy names gyrate

By Paul Deckelman and Paul Harris

New York, June 22 - Case New Holland, Inc. bulldozed its way into the high yield market on Tuesday with a sharply upsized $1.5 billion issue of 71/2-year notes - the first mega-deal seen in Junkbondland since Mylan Inc.'s two-part note offering back in early May and the biggest single-tranche dollar deal since ATP Oil & Gas Corp.'s similarly sized issue more than two months ago. The new bonds pushed upward when they hit the aftermarket.

Also pricing Tuesday was Michael Foods Group, Inc.'s $430 million offering of eight-year notes; those bonds were heard by traders to have firmed smartly when they were freed for trading.

Out of Europe came word of pricings for euro-denominated issues from French chemical manufacturer SPCM SA and from German building products maker HeidelburgCement AG, the latter deal upsized.

High yield syndicate sources heard that CKE Restaurants, Inc. is finally moving on a $600 million secured notes deal which has been on the forward calendar horizon since April; the Carpinteria, Calif.-based fast-food chain operator is scheduled to launch its deal via a Wednesday morning investor call, with pricing expected sometime next week.

Among recently priced offerings, traders saw gains in the $500 million seven-year deal which Capella Healthcare, Inc. successfully revived and brought to market on Monday.

Away from the new-deal arena, energy names like ATP, BP Capital Markets plc, Transocean Inc. and the newly junked Anadarko Petroleum Corp. were active, jumping around amid news of a federal court stay of the government's deepwater drilling moratorium and a promised government appeal of that ruling, although traders said they mostly ended little changed, with the legal news having not much real impact overall.

Rite Aid Corp.'s bonds retreated ahead of Wednesday's release of first-quarter numbers by the big drugstore chain operator.

Biggest day since May

The primary market cranked out $1.93 billion and €840 million face amount of new high-yield issuance on Tuesday.

It was the biggest day by dollar amount in nearly six weeks; the last day to see a greater amount of issuance was May 12.

Also, the executions were notable. Two of Tuesday's four deals were upsized, one of them massively. Three of the four priced at the tight ends of the respective price talk. The other priced on top of talk.

"What you saw was a lot of pent-up demand," a high yield mutual fund portfolio manager said.

That demand was triggered by how well equities performed last week, the manager said.

"Also, the tone of the high-yield market has been very constructive over the past week or so," the investor said.

"The Lipper index has been up every day since June 10, by 10 bps to 20 bps per day. [Monday] it was up 50 bps."

Case New Holland massively upsizes

Case New Holland priced a hugely upsized $1.5 billion issue of 7 7/8% seven-year senior notes (Ba3/BB+) at 99.32 to yield 8%.

The yield printed on top of the price talk and the amount was increased from $1 billion..

Credit Suisse, UBS Investment Bank and Goldman Sachs & Co. were joint bookrunners.

Proceeds will be used to finance the call of the company's 7 1/8% senior notes due 2014 at 103.563 and to repay Fiat intercompany debt.

The investor heard that the deal had played to $3.5 billion of orders, and said that the new bonds were going out at 100½ bid, 100¾ offered, trading above the issue price even with the upsize.

Of the $1.5 billion that the company sold, $400 million to $500 million went to people who were having their existing bonds taken out, the buy-sider reckoned.

A possible core holding

Seeing Tuesday's Case New Holland transaction taking shape, this investor took the occasion to get into some of the company's 7¼% notes due 2016, in anticipation of the new deal pricing well and trading up.

"It's a rebound story - in construction and agriculture," said the buy-sider, who added that there is a view out there that within a couple of years the company could be investment grade.

"The bet is that at some point it will be hard to source paper in this name.

"I think it's going to be a core holding for a lot of people."

It seemed to this investor, based on questions put to the company during the call, that high-grade accounts, especially insurance companies, took an interest in the Case New Holland deal.

"There was a lot of interest in the Fiat relationship, and how it will take shape after the spinoff.

"Fiat seems to be breaking itself into an industrial side and an automotive side, which might result in better execution, because it's a lot cleaner to look at.

"People seemed to be looking further up the road, trying to figure out what the biggest impediment to the company receiving investment-grade ratings might be."

Michael Foods tight to talk

Meanwhile, Michael Foods priced a $430 million issue of eight-year senior unsecured notes (Caa1/B-) at par to yield 9¾% on Tuesday.

The yield printed at the tight end of the 9¾% to 10% price talk.

Goldman Sachs & Co. was the left lead bookrunner. Bank of America Merrill Lynch and Barclays Capital Inc. were the joint bookrunners.

Proceeds will be used to help finance the leveraged buyout of the company by GS Capital Partners from Thomas H. Lee Partners LP.

The order book was seven- to 10-times oversubscribed, the high yield mutual fund manager estimated.

The bonds finished the day at 102¼ bid, 103 offered, after trading as high as 102¾ bid, 103½ offered prior to the stock market's broad retreat Tuesday afternoon.

Played bridge, but cut back anyway

The fund manager participated in the bridge loan backing the bond deal, hoping that doing so would result in a more favorable allocation of the new Michael Foods 9¾% notes due 2018.

However, the allocation came up "severely" short of the level of the investor's bridge participation.

"We still did okay," said the buy-sider, who got $8 million of a $20 million order.

"Had we just come into the deal today, we would have gotten much less."

HeidelbergCement upsizes

Meanwhile, the European market continued to generate news on Tuesday.

HeidelbergCement priced an upsized €650 million issue of 6¾% 5.5-year notes (B1/BB-BB-) at 99.44 to yield 6 7/8%.

The yield printed at the tight end of the 7% area price talk. The size was increased from €500 million.

Bank of America Merrill Lynch was the left lead bookrunner for the quick-to-market, Regulation S deal. BayernLB, Handelsbanken, Morgan Stanley, Nordea, Raiffeisen Zentralbank Österreich and SEB Merchant Banking were the joint bookrunners.

The German building materials company will use the proceeds to optimize its maturity profile.

The deal went very well, according to a syndicate source, who added that there was understandably a great deal of demand on the part of German investors.

Since the beginning of the present week, the European high yield primary has been notably active, the banker agreed.

A window is open, and people are trying to get through it, the source added, but remarked that macroeconomic news, political news and the stock markets are apt to influence just how long that window might remain open.

However for the time being, the European primary market could continue to generate a decent volume of news, the source said.

SPCM tight to talk

Also in Europe, French chemical manufacturer SPCM SA priced a €190 million issue of seven-year notes (expected ratings B3/BB-) at par to yield 8¼%.

The yield printed at the tight end of the 8 3/8% area price talk.

Credit Agricole CIB and BNP Paribas were joint bookrunners.

Proceeds will be used to refinance debt. The company is also concurrently tendering for its existing 8¼% notes due 2013.

Owing to the straightforward nature of the bonds, the fact that the company is known to the high-yield investor community, and the fact that a lot of people were being taken out of the company's existing paper and wanted to roll into new bonds, SPCM was a pretty easy deal, a syndicate source said.

Along with last week's euro denominated deal from Remy Cointreau, which also fit the description, above, SPCM is exactly the kind of deal needed to regenerate activity in the European primary market after about six weeks of dormancy, the debt capital markets banker asserted.

Europcar begins roadshow

Meanwhile, EC Finance plc, a financing unit of France's Europcar, began a roadshow on Tuesday for a €250 million offering of seven-year senior secured notes (expected ratings B2/B+).

The roadshow wraps up on Thursday.

JP Morgan and Deutsche Bank Securities and the physical bookrunners. Credit Agricole CIB and SG CIB are the joint bookrunners.

Proceeds will be used to repay bank debt.

Europcar is one of two rental car companies in the euro-junk market, presently.

Also on the road is Hertz Holdings Netherlands BV, with a €275 million offering of five-year senior unsecured notes (B1/B).

That roadshow wraps up on Friday.

Barclays Capital and JPMorgan are the physical bookrunners. BNP Paribas, Credit Agricole CIB and Natixis Bleichroeder are the joint bookrunners.

CKE Restaurants to sell $600 million

Finally, CKE Restaurants will host an investor call at 11 a.m. ET on Wednesday for a $600 million offering of eight-year senior secured second-lien notes (B2/B).

That deal is set to price during the week ahead.

Morgan Stanley, Citigroup and RBC Capital Markets are the joint bookrunners.

Proceeds will be used to help fund the buyout of the company by Apollo Global Management, and to repay all balances under the existing credit facility.

Cash position: Good news/bad news

A high-yield mutual fund manager is looking for Lipper-AMG to report a positive weekly funds flows number on Thursday, and added that the buy-side is getting in cash, and people are feeling the need to invest.

That, coupled with a considerable amount of high-yield interest among crossover accounts, ought to serve to stoke the primary market, the investor said.

On the other hand, July 1 coupon payments are traditionally light, which will serve to moderate the amount of cash that the buy-side needs to put to work.

"The July 1 coupon is usually the worst one of the year because no one issues on July 1," the investor said.

Michael Foods firms in secondary

When the new Michael Foods 9¾% notes due 2018 were freed for secondary dealings, a trader saw them almost immediately move up to 102¾ bid, 103 offered on the break, versus their par issue price.

"They traded around the 102¾ level most of the day," a second trader said. "It got quiet for a while there - they traded pretty actively in the first few minutes after the deal came, and then they just kind of died, around 1023/4-103. He said most of the trades he had seen took place at 1023/4, although the final trades of the afternoon were going off around 102½ bid, 103.

Another trader said the bonds "had a nice pop to them" at 102¾ bid, 103 offered.

Making the case for Case New Holland

A trader said that Case New Holland's new 7 7/8% notes due in December 2017 "moved up a little bit" to par bid, 100½ offered versus the 99.32 level at which the massive issue had priced and from the 99¾ bid, 100¼ level where they initially traded.

"They must have traded between the par and 100¼ level," he said, "and now, there a little bit better going out," around the 100½ level, "so they did OK."

The bonds, said a second trader "were trading nicely" at 1001/2-1003/4.

A healthy Capella Healthcare

A trader said that Capella Healthcare's new 9¼% notes due 2017 "did well," although he said that the Nashville-based healthcare services provider's bonds "look like they kind of quieted down" following the initial trading flurry.

The company priced its $500 million of new notes on Monday at 98.74 to yield 9½%. He saw the bonds trading on Tuesday morning around 99 7/8, "so even though the equity market weakened, they were up about a point first thing this morning."

By the end of the day, he saw the bonds having firmed still further to 100½ bid, 101 offered. "They did well," he said.

A trader saw the bonds left bid at 100 5/8.

He said overall, the three new deals were "doing surprisingly well. That's a good sign for the market."

Market indicators turn mixed

Back among bonds not related to the new-deal realm, a trader saw the CDX North American HY Series 14 Index up tumble by 1¼ points on Tuesday to 95¾ bid, 96¾ offered, after having held steady on Monday.

The KDP High Yield Daily Index, meantime, fell by 15 basis points on Tuesday to end at 71.07, after having gained 37 bps on Monday. Its yield rose by 5 bps, to 8.50%, after having tightened by 11 bps on Monday.

Advancing issues beat decliners Tuesday for an eighth consecutive session, holding about a seven-to-six edge.

Overall market activity, represented by dollar-volume levels, zoomed by 54% on Tuesday over the previous session's pace.

A trader said that "the market was down pretty hard," attributing the slide in the CDX , for instance, to the stock market selloff, which continued for a second day, with the bellwether Dow Jones Industrial Average dropping by 148.89 points, or 1.43%, on Tuesday, to 10, 293.52, with broader market measures like the Standard & Poor's 500 and the Nasdaq composite, also showing declines of 1.61% and 1.19%, respectively.

"The equity market was hit pretty hard when housing came in lower than people thought," as the National Association of Realtors reported that existing-home sales fell 2.2% percent in May - surprising Wall Streeters who thought that those sales would get a lift from a federal homebuyer tax credit.

"People began worrying that housing," which had appeared to be recovering from the lows it hit in 2008 and early 2009, "might see a double-dip decline, and some of that fear moved over to the junk market."

Energy names active as court rules

As they have been for many weeks in the wake of the Deepwater Horizon drilling-rig disaster in the Gulf of Mexico, energy names were again active, including a flurry of activity following the news that a federal district court in New Orleans, acting on a motion brought by several oil-service industry companies, ruled that the federal government had erred in imposing a broad six-month moratorium on any deepwater drilling in the Gulf. The ban imposed by the Department of the Interior halted approval of any new permits for deepwater projects and suspended current drilling on 33 exploratory wells.

But U.S. District Judge Martin L.C. Feldman overturned the ban, said that the Obama administration had trivialized the economic impact of the moratorium. The government, he wrote in his decision, "simply cannot justify the immeasurable effect on the plaintiffs, the local economy, the Gulf region, and the critical present-day aspect of the availability of domestic energy in this country."

The judge further noted that an accident at one drilling rig should not necessarily imply that all of the other rigs are equally unsafe - a key oil industry argument in opposing the drilling ban. He asked rhetorically: "Are all airplanes a danger because one was? All oil tankers like Exxon Valdez? All trains? All mines? That sort of thinking seems heavy-handed, and rather overbearing."

In response, the White House said that Feldman's decision would be appealed, saying that to allow deepwater drilling in the absence of definitive information about what caused the Deepwater Horizon explosion and the resulting blowout at a BP/Anadarko-owned well that has caused massive environmental damage "does not make sense." Interior secretary Kenneth Salazar said that his department would shortly issue a new drilling moratorium order that would that would eliminate any doubt it was needed and appropriate.

Up - and then down - for ATP

A trader said that it was "kind of weird - ATP's stock ran up around 70 cents as soon as [news of Feldman's ruling] came out, and as soon as they said they were appealing it, they went down 70 cents, and ended up down on the day."

He said he "did not see a whole lot" of action in the company's 11 7/8% second-lien senior secured notes due 2015.

"After the news, they were offered up a point or two, but then they settled back down right away." He saw a peak level of 73¼ bid, 74, and then afterward they were at 72¼ bid, "so I never saw them run up. They were kind of unchanged" versus Monday's levels. "I think the appeal took a lot of wind out of everybody's sails."

At another desk, a trader said that ATP "went on a wild ride today," quoting the Houston-based energy exploration and production company's 11 7/8% second-lien senior secured notes due 2015 as having started the day around the same 72-73½ bid level those bonds had held for the past few sessions, and then pushing up to "74ish, 75ish" kind of levels, before moving back down to pretty much where they had started, and then ending the day around 73 bid.

The first trader also said he really did not see much trading in the bonds of maritime oil service companies like Hornbeck Offshore Services, Inc., the lead plaintiff in challenging the federal drilling ban. The Covington, La.-based company's 6 1/8% notes due 2014 were at 88-88¼ bid before the news, which he called up a point from last week's levels. "I would think they would do better."

At another desk, those Hornbeck bonds were seen going home as much as 3 or 4 points better, around a 91-92 context - but only on several smallish odd-lot trades that are probably not representative. Several round-lot trades went off at around the 88 bid level, up about ½ to ¾ point on the day, although these took place in the morning, before the news of the ruling came out.

Among other related energy names, a trader said that Deepwater Horizon owner Transocean's paper was "still in the 90s."

A second noted that the Swiss rig owner's shares popped to around the $55 level after news of Feldman's ruling, but then sank back down to about the $52 and change mark, unchanged, on the appeal news. Its 6.80% bonds due 2038 traded in a 903/4-91¼ context before the news, got as good as 92, but ended about unchanged at 911/2.

But a source at an energy-oriented buyside shop meanwhile dismissed the impact of the legal news coming out of Washington and New Orleans. "I think there was short-covering in names like ATP at first," he said, "but basically the names came back down to close unchanged."

The court ruling, he said "was a non-event, in my opinion." He continued that "it was a given that the feds would appeal - and that they will win - so the notion that equities like Hornbeck fell back down because of the 'news' of the appeal is, in my opinion, incorrect."

Also in energy, a trader said that a 91-94 context covers most of the ruptured well majority owner BP's shorter paper, like its bonds coming due in 2011, 2012 and 2013, while its somewhat longer issues, like the 2014s and 2015s, were holding around 83-84.

"There's always activity in that name, those are such big issues," he said.

A trader said that Anadarko Petroleum's bonds remained "pretty active" in the wake of Friday's downgrade of the Woodlands, Tex.-based oil operator to junk bond status by Moody's Investors Service, in view of its 25% ownership of the ruptured well and possible legal liabilities. He saw its 6.95% notes due 2019 anchored "right around 90, on a lot of activity."

He said the company's bonds "started to drift down [Monday]. This is not new. The downgrade wasn't exactly a big deal. They were already going down because of what's going on."

He saw its 6.35% bonds due 2036 trading around 83-84, while on the short end, Anadarko's 7 5/8% notes due 2014 were ending in a 97-98 context, on "good volume, but that's pretty much where they ended [Monday]."

He said that the real activity had been on Monday, the first full trading day after Friday's downgrade, with the bonds just continuing to circulate around those levels on Tuesday. Its 2013 bonds, for instance, were within ½ point of the 97-97½ area seen on Monday,

"There was more trading activity, while the levels were unchanged to slightly lower."

Rite Aid in retreat

A trader saw Camp Hill, Pa.-based drugstore chain operator Rite Aid's bonds fall ahead of its scheduled release of first-quarter numbers on Wednesday morning.

He pegged its 9½% notes due 2017 at 79¾ bid, 80 offered, down from Monday's highs at 82 bid, "so they're down a point to two points. Somebody knows something - or thinks they know."

Another market source saw those bonds down a deuce at an even 79. The company's 8 5/8% notes due 2015 were off 1½ points at 82 bid, although at another shop, those same bonds were quoted at 811/2, down more than 2 points on the day.

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