Kodiak, Speedy Cash price add-ons; other deals slate; Chesapeake, ResCap bonds big losers

By Paul Deckelman and Paul A. Harris

New York, May 14- Kodiak Oil & Gas Co. and Speedy Cash each priced a smallish - even with upsizing - quickly shopped add-on to their existing bonds Monday, with no aftermarket seen in either deal.

The two add-ons were just the tip of a big primary-sphere iceberg, with a number of other companies announcing plans to do bond deals, including miners Molycorp, Inc. and HudBay Minerals, Inc., metals producer Kaiser Aluminum Corp., oil and gas operator QR Energy, LP, telecommunications provider Consolidated Communications Holdings, Inc. and aircraft leasing company AerCap Aviation Solutions BV.

High-yield syndicate sources also heard that chemical maker Univar Inc. plans to float some new notes as well as do a bank debt deal.

Those sources also heard price talk on two deals that could come to market Tuesday from Northern Oil and Gas, Inc. and Inmet Mining Corp.

But with no new deals of any appreciable size pricing on Monday - and with the deals that priced Friday such as Libbey Glass Inc. and Magnum Hunter Resources trading near the levels they held after pricing, attention turned to the non-new deal secondary, where there was no shortage of news and no shortage of trading, especially in the beleaguered bonds of Chesapeake Energy Corp.

The natural gas company's paper fell in very heavy trading with several issues racking up more than $100 million amid news that Chesapeake took out a $3 billion loan to get over its current rough spot. The bonds fell - although the stock rose - as company executives tried to put the best possible face on recent developments with a special conference call.

Another downsider Monday was Residential Capital LLC, following the not-unexpected news that the troubled mortgage lender entered Chapter 11 in order to restructure its finances.

And yet another loser was offshore energy operator ATP Oil & Gas Corp., whose bonds have been on the slide since the company reported poor quarterly results last week.

But those three losing names were hardly atypical, as junk generally was lower, pulled down in part by yet another stock market fall. Statistical performance measures were seen heading south.

Kodiak tap, a blowout

The May 14 week got underway to a heavy volume of primary-market news.

The dealers rolled out a half-dozen of offerings totaling $2.2 billion, sending the active forward calendar north of the $5 billion mark - most of it set to price before Friday's close.

The Monday session saw two drive-by add-on deals price. Two issuers raised a combined total of $248 million. Both deals were upsized and both were priced on top of price talk.

Kodiak Oil & Gas priced an upsized $150 million add-on to its 8 1/8% senior notes due Dec. 1, 2019 (Caa1/B-) at 104.0, resulting in a 7.234% yield to maturity.

The deal was a blowout, according to a syndicate source, who added that it played to an order book north of $700 million.

RBC was the left bookrunner for the deal, which was upsized from $100 million.

Wells Fargo and Credit Suisse were the joint bookrunners.

The Denver-based energy exploration and development company plans to use the proceeds to refinance existing debt and pre-fund future capital expenditures.

The original $650 million issue priced at par Nov. 18, 2011.

The add-on notes will be immediately fungible with those existing notes.

Speedy Cash taps 10¾% notes

Speedy Cash Intermediate Holdings priced an upsized $90 million add-on to its 10¾% senior secured notes (B3/B) at 101.75, also on top of the price talk.

The pricing renders a 10.351% yield to maturity and a 10.293% yield to worst.

Jefferies and UBS were the joint bookrunners for the add-on, which was upsized from $75 million.

The proceeds will be used for general corporate purposes, including potential acquisitions.

The original $250 million issue priced at par in May 2011.

The add-on notes will be immediately fungible with those existing notes.

AerCap to price midweek

The forward calendar was sent to $5.2 billion by Monday's $2.2 billion of new deal announcements.

Amsterdam-based AerCap Aviation Solutions began a roadshow Monday for its $300 million offering of non-callable five-year notes, which are set to price during the middle part of the week.

Citigroup is the left bookrunner. UBS is the joint bookrunner.

The integrated aviation company plans to use the proceeds to acquire, invest in, finance or refinance aircraft assets; and for other general corporate purposes, which will include the repayment of the company's E note facilities.

Molycorp starts roadshow

Molycorp began a roadshow for its $650 million offering of eight-year senior secured notes.

The deal is set to price late in the present week.

Morgan Stanley and Credit Suisse are the joint bookrunners.

The Greenwood Village, Colo.-based company plans to use the proceeds to finance a portion of the cash purchase price of the Neo Materials acquisition.

Show begins for Consolidated

Consolidated Communications Finance started a roadshow for its $350 million offering of eight-year senior notes.

The deal is set to price late in the present week.

Morgan Stanley has the books.

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

QR Energy kicks off roadshow

QR Energy and QRE Finance Corp. started a roadshow for a $300 million offering of eight-year senior notes (Caa1/).

An investor call is set for noon ET on Tuesday.

The roadshow wraps up Friday.

Citigroup is the left bookrunner. Barclays, Credit Agricole, RBC, RBS and Wells Fargo are the joint bookrunners.

The Houston-based master limited partnership plans to use the proceeds to repay debt under its revolver.

Kaiser roadshow starts

Kaiser Aluminum began a roadshow for its $200 million offering of eight-year senior notes (expected ratings Ba3/BB-).

The deal, which is being led by JP Morgan, is expected to price Friday.

The Foothill Ranch, Calif., producer of semi-fabricated specialty aluminum products plans to use the proceeds for general corporate purposes.

HudBay roadshow through Friday

Toronto-based HudBay Minerals will conduct a roadshow through Friday for its $400 million offering of eight-year senior notes (expected ratings B3/B) via sole bookrunner Bank of America Merrill Lynch

The integrated mining company plans to use the proceeds for general corporate purposes, as well as for development projects in Manitoba and, if approved, the development of the Constancia project.

Talking the deals

Dealers also set price talk on a pair of deals set to price Tuesday.

Inmet Mining massively upsized its offering of eight-year senior notes (B1/B+) to $1.5 billion from $1 billion and set yield talk at 8¼% to 8½%.

Global coordinator J.P. Morgan will bill and deliver. Credit Suisse also is a global coordinator.

Bank of America Merrill Lynch, Citigroup, Morgan Stanley and RBC are joint bookrunners.

And Northern Oil and Gas talked its $250 million offering of eight-year senior notes (Caa1/B) with a yield in the 8¼% area.

RBC has the books.

Two deals, too small

In the secondary market, a trader who was asked about the day's two new issues from Kodiak Oil & Gas and Speedy Cash flatly declared "skip 'em."

He said that even with the upsizing both offerings experienced, Kodiak's $150 million add on to its 8 1/8% notes due 2019 and Speedy Cash's addition to its 10 ¾% notes due 2018 were too small to matter.

Friday deals are steady

Among the deals that came to market Friday, a trader said, "Libbey [Glass Inc] held in."

He said the Toledo, Ohio-based glassware maker's 6 7/8% senior secured notes due 2020 really didn't move much.

He said his shop traded "a bunch of them today" in a 101 3/8 to 101 5/8 context, which he said was pretty much unchanged from where the bonds went home Friday after the $450 million deal priced at par.

Another trader said Libbey's bonds were trading between 101¼ and 1013/4.

"They were down a little bit," that trader said. "At one point, they were trading at 1011/2, 101 3/8 and then they moved back up."

"If you had to price them somewhere," he said 101½ was a likely level.

The trader also saw Magnum Hunter Resources' 9¾% notes due 2020 in early-morning dealings between 99 and 1001/4.

"They may have been cheaper" as the day wore on and junk prices were pushed lower. "But I just didn't see anything after they opened this morning on that," the trader said.

The Houston-based independent oil and natural gas exploration and production company priced its $450 million deal on Friday at 98.646 to yield 10%. When the bonds were freed for aftermarket activity, they pushed up to 99½ on the break and then got as good as 100¼ bid, 100¾ offered, traders said.

Nobody saw any activity Monday in Penn Virginia Resource Partners, LP/Penn Virginia Resource Finance Corp.'s 8 3/8% notes due 2020.

The Radnor, Pa., coal and natural gas midstream company priced its $600 million offering - upsized from an originally announced $450 million - on Friday at par. A trader said the new issue "was hugging 101" on Friday afternoon, but was not seen Monday.

Ford Motor Credit Co. LLC's 2¾% notes due 2015 were quoted as high as 101 bid Monday, although a market source said that was due to some smallish odd-lot trades late in the session.

Earlier, it traded in round lots around par, right around where the bonds finished up on Friday. Round-lot volume was about $7 million, or half the day's total.

The Dearborn, Mich., loan financing arm of automotive giant Ford Motor Co. priced its quick-to-market $1.25 billion deal Wednesday at par; its 2¾% yield was the lowest on record for a mostly junk-rated (Ba1/BB+/BBB-) deal. Traders said it attracted scant attention due to the sparse coupon, with most of the buying coming from high-grade accounts.

Market moves lower

Away from trading in the new issues, traders said the junk bond market was generally lower pretty much across the board with issues on the downside outnumbering those showing gains.

Junk was seen following the lead of equities, which tumbled amid renewed fears about the European debt crisis and a slowdown in economic powerhouse China's demand for goods and services, combined with the hangover from Friday's surprising news of a $2 billion loss at banking giant JP Morgan.

The bellwether Dow Jones Industrial Average swooned by 125.25 points, or 0.98%, to end at 12,695.25. Broader indices like the Standard & Poor's 500 and the Nasdaq Composite each were off more than 1% on the day.

Back in Junkbondland, a trader said, "It seemed like a lot of stuff was on sale today." That was in sharp contrast with recent complaints by market participants that there was little paper available.

It was the first time in a while that the trader said he saw such an environment.

"It was kind of interesting. There was paper that folks wanted to buy and they were actually able to go out and buy it today, as opposed to the last few months when everything was bid for and you couldn't find anything for sale," the trader said.

"Today, you actually could say there are bonds offered. They're a quarter-point or a half-point cheaper than last week. And certain accounts were happy to add to certain positions."

Market measures on the slide

Statistical indicators of market performance were in the red for a second consecutive session Monday.

A trader saw the Markit Group CDX North American Series 18 High Yield Index drop by more than a full point, to end at 93 5/8 bid, 93 7/8 offered, on top of Friday's loss of nearly a half-point. It was the seventh loss in the past eight sessions for the index.

The KDP High Yield Daily Index meanwhile plunged by 23 basis points on Monday to close at 73.83. It was its second straight loss, following Friday's 7 bps drop. Its yield ballooned upward by some 20 bps Monday to 6.57% after having come in by 5 bps on Friday, even though paradoxically, the index reading itself, which usually moves inversely to the yield figure, also was lower.

And the widely followed Merrill Lynch U.S. High Yield Master II Index declined Monday by 0.201% after barely notching its second straight gain Friday, when it edged up by 0.003%.

The retreat left its year-to-date return at 6.548% on Monday, down from Friday's 6.762% and well down from the peak level for 2012 so far, 6.80%, which was set last Monday.

Chesapeake churns anew

Among specific names, a trader said the largest activity today was in Chesapeake, which "was getting crushed again."

"Portfolio managers were talking about whether they should get out of it at 7%. Well, now it's trading at 8½%, so go figure," the trader said.

He quoted the Oklahoma City-based natural gas company's short-dated paper -7 5/8% notes coming due in July of next year - as trading right at par. While there was some trading around 101, he said that was just a small piece.

More typical were the company's longer-dated issues, which were seen down by at least a point and in some cases, by several points, across the board.

For instance, he said its 9½ notes due 2015 were down a point on the day, last trading at 1021/2, while its 6 5/8% notes due 2020 were down a deuce, last trading at 91¾ bid with more than $100 million of each bond changing hands Monday, easily topping the junk market's most-actives list.

A market source at another desk said that more than $118 million of the 9½% notes traded and more than $105 million of the 6 5/8s.

Chesapeake's 6.775% notes due 2019 were off by three-quarters of a point, at 921/2, on volume of more than $65 million.

"The rest of the issues are down around a point," the first trader said.

Its 7 5/8% notes due 2013 eased to about 101¾ on volume of more than $35 million while its 6 1/8% notes due 2021 retreated to 90 bid on turnover of about $32 million.

Another trader said some of Chesapeake's bonds, like the 6 5/8s, "were up a point from their earlier lows, but still down a couple of points on the day."

"They were by far the most actively traded name," the trader said.

Loan raises concern

Despite Chesapeake's efforts to explain recent news, some new concerns for debtholders have been raised.

For instance, Alex Diaz-Matos, an analyst at Covenant Review LLC, told Prospect News on Monday that even though the new $3 billion loan is unsecured, nothing would prevent Chesapeake from entering into a secured loan at some point, adding another layer of debt senior to its existing bonds.

"Even though Chesapeake is a high-yield company, they use investment grade-style covenants for their bonds that have remained outstanding. Even worse than that, the [bond] covenants have a loophole that allows any credit facility to be secured, while not also securing those bonds."

He said, "There certainly is the potential that in the future, secured bank loans could come in ahead of those rather substantial bonds."

He said the company's loans - including its new term loan - have much better covenant protection than the bonds.

The Covenant Review is an independent New York-based agency that reviews the bond covenants of newly issued bonds, or those of existing bonds from companies involved in special situations, such as Chesapeake.

The review has had "a lot of client interest in the name and a lot of concern with the fact that, at least on the bond side, the covenants don't give them the type of protection that they would like from a company in Chesapeake's situation," the trader said.

ResCap retreats

A trader said activity in the high-yield secondary market Monday was all Chesapeake, ResCap and ATP Oil & Gas.

For Res Cap, he said the troubled residential lender's 9 5/8% secured notes due 2015 were off about 4 points to about the 93 bid level, following the company's Chapter 11 filing with the U.S. Bankruptcy Court in New York.

A market source said that more than $27 million of those bonds traded, making it one of the most active junk issues, although well below the trading volumes in Chesapeake.

Res Cap's other bonds - its unsecured issues, such as its 8½% notes due 2013 - all were trading around the 30 mark, which was down 5 points from recent levels.

However, a trader said that most of the activity was in the senior bonds; he saw just one trade all day in one of the junior issues.

ATP off again

The third member of the trio of actively traded issues moving points lower on Monday was ATP Oil & Gas, which fell for a third straight session Monday.

The company's 11 7/8% senior secured second-line notes due 2015 lost another 3½ points, a trader said, pegging the notes around a 63-64 context.

More than $43 million of those bonds changed hands Monday - the only non-Chesapeake issue to make it into the Top Five volume leaders.

The bonds slid to current levels from their levels of a week ago in the low- to mid-70s.

As was the case on both Thursday and Friday, the bonds were lower in the wake of the disappointing quarterly numbers that ATP posted.

ATP released its first-quarter results after the financial markets closed last Wednesday, followed by a Thursday conference call.

In the latest period, ended March 31, the company recorded a net loss attributable to common shareholders of $145.1 million or $2.83 per basic and diluted share, wider than the $119.5 million or $2.34 per basic and diluted share of red ink seen a year ago in the 2011 first quarter.

Revenue of $146.6 million fell $32 million short of Wall Street expectations. Even the company's chairman and chief executive officer T. Paul Buhlman opened his conference call presentation by stating that the company was not pleased with those first-quarter results.

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