Axle, Rock-Tenn price; $3 billion more slates as post- holiday primary revives; ATP slide deepens

By Paul Deckelman and Paul A. Harris

New York, Sept. 4 - After two weeks of not doing very much of anything, the high-yield primary market came roaring back to life on Tuesday as junk players returned to work following the Labor Day holiday break that marked the end of the traditional late-summer lull.

Activity was brisk right out of box, with new-deal announcements coming left and right - proving wrong those who said that it might take a few days for returning junk participants to ease back into things and get up to speed.

Two dollar-denominated deals came to market: quickly shopped same-day offerings from automotive components maker American Axle Manufacturing, Inc. and a two-part deal from paperboard and packaging maker Rock-Tenn Co. The latter was a split-rated (Ba1/BBB-) $700 million offering, while Axle did $550 million of 10-year notes, which were heard to have firmed modestly when freed for secondary dealings.

Besides the deals that actually priced, there was a torrent of offerings totaling more than $3 billion either announced by the borrowing companies or that surfaced on the radar screens more informally.

Some are expected to price as soon as Wednesday. These include a $250 million secured note offering from Irish packaging maker Smurfit-Kappa Acquisitions, part of a larger two-part deal also including a euro-denominated tranche, and $250 million of paper from pharmaceutical industry services provider Catalent Pharma Solutions, Inc.

Queuing up for likely pricings later in the week were deals from retailer Claire's Stores, Inc., cable movie channel operator Starz LLC and insurance brokerage Hub International Ltd.

Other borrowers coming onto the forward calendar with somewhat more distant timeframes in mind included energy names Tesoro Logistics LP and Hiland Partners, LP and insurance operator CNO Financial Group Inc.

Two quick-to-market non-dollar deals were also heard to have priced: Central European Media Enterprises Ltd.'s euro-denominated add-on offering of four-year notes and mobile phone provider Orange Switzerland SA/AG's Swiss-franc denominated seven-year secured floating-rate notes.

Outside of the new-deal arena, recently bankrupt energy operator ATP Oil & Gas Corp.'s bonds took another pounding, this time on market rumors and news reports that an Israeli court had seized the licenses under which the company was exploring for and drilling for natural gas in the Mediterranean near that country's coastline.

Statistical indicators of junk market performance were seen mixed.

American Axle at tight end

The primary market roared off the starting line as the post-Labor Day week got under way with news circulating on 11 new deals.

American Axle priced the session's sole dollar-denominated transaction, a $550 million issue of 10-year senior notes (B2/B) at par to yield 6 5/8%.

The yield printed at the tight end of price talk set in the 6¾% area.

J.P. Morgan, Bank of America Merrill Lynch, Barclays, Citigroup and RBC were the joint bookrunners for the quick-to-market debt refinancing and general corporate purposes deal.

CETV re-taps 11 5/8% notes

Central European Media Enterprises priced an upsized €104 million add-on to its 11 5/8% senior notes due Sept. 15, 2016 (/CCC+/) at 103.00 to yield 10.686%.

The reoffer price came on top of price talk.

Joint bookrunner BNP Paribas will bill and deliver. JP Morgan was also a joint bookrunner.

The deal was upsized from €50 million.

Proceeds will be used to repay debt.

The original $200 million issue priced at 98.261 to yield 12% in September 2009. A previous €240 million add-on priced at 102.75 to yield 11%, also in September 2009.

Orange Switzerland drives by

Orange Switzerland priced a CHF 180 million issue of senior secured floating-rate notes at par to yield CHF Libor plus 537.5 basis points.

The yield printed at the tight end of price talk set at CHF Libor plus 550 bps.

Global coordinator and joint bookrunner Credit Suisse will bill and deliver. Deutsche Bank was also a global coordinator and joint bookrunner.

UBS, Citigroup, JP Morgan and Morgan Stanley were also joint bookrunners.

The Arcueil, France-based wireless telecommunications company plans to use the proceds to repay its existing term loan A and to repay a share premium.

Demand for the deal was intense, according to a London-based debt capital markets banker, who added that there are issuers in the wings in the European markets.

Smurfit Kappa sets talk

Ireland's Smurfit Kappa set price talk for offerings of six-year senior secured notes (expected ratings Ba2/BB/BB+).

A $250 million tranche is talked to yield 5% to 5¼%, and a €200 million tranche is talked to yield 5¼% to 5½%.

The deal is expected to price on Wednesday morning.

Timing on the deal was moved ahead on Tuesday. When announced, the roadshow was set to run into Thursday.

Global coordinator and joint bookrunner J.P. Morgan will bill and deliver for the dollar-denominated tranche. Citigroup, which is also a global coordinator and joint bookrunner, will bill and deliver for the euro-denominated tranche.

Credit Agricole, Credit Suisse, Deutsche Bank and RBS are joint bookrunners.

At least two additional deals from European issuers are expected to be announced soon, according to a debt capital markets banker in London.

Initially those deals were expected to be announced late this week or early next week, the source added.

However, with Smurfit Kappa moving timing ahead on its deal, the two deals in the wings could announce sooner than previously anticipated.

Catalent moves up timing

Catalent Pharma also moved timing ahead on its deal on Tuesday, transforming a deal that was initially planned to run a brief roadshow into an overnight drive-by.

The company plans to price a $250 million offering of six-year senior notes (expected ratings Caa1/B-) on Wednesday afternoon.

Price talk will be announced on Wednesday morning.

Timing on the deal was moved ahead. It was originally expected to price on Friday.

An investor call was held on Tuesday.

Morgan Stanley, Deutsche Bank, Goldman Sachs, Jefferies and J.P. Morgan are the joint bookrunners for the debt refinancing deal.

Tesoro starts Wednesday

Tesoro Logistics LP and Tesoro Logistics Finance Corp. plan to start a roadshow on Wednesday for their $310 million offering of eight-year senior notes (expected ratings B1/BB-).

An investor call is also set to take place at noon ET on Wednesday.

Wells Fargo is the left bookrunner for the debt refinancing deal. Barclays and Citigroup are the joint bookrunners.

Hub Integrated sets call

Hub International scheduled an investor conference call at 10 a.m. ET on Wednesday for its $730 million offering of six-year senior notes.

An investor group lunch is set for Wednesday.

The deal is expected to price on Friday.

Morgan Stanley, Bank of America Merrill Lynch and RBC are the joint bookrunners for the debt refinancing and general corporate purposes deal.

Starz unveils debut issue

Starz, LLC and Starz Finance Corp. set a Wednesday investor call for their debut high-yield issue, a $500 million offering of seven-year senior notes (Ba2/BB).

The debt refinancing deal is set to price this week.

Joint physical bookrunner SunTrust will bill and deliver. Bank of America Merrill Lynch and Barclays are also joint physical bookrunners.

Hiland brings eight-year deal

Hiland Partners, LP and Hiland Partners Finance Corp. plan to price a $350 million offering of eight-year senior notes during the Sept. 10 week.

Bank of America Merrill Lynch, Wells Fargo and RBS are the joint bookrunners.

The Enid, Okla., provider of natural gas gathering and processing services plans to use the proceeds, along with recent equity contributions, to pay down its revolver.

New Axle bonds improve

Traders said that the only dollar-denominated junk issue pricing on Tuesday was American Axle's $550 million of 6 5/8% notes due 2022, and that quick-to-market deal priced at par.

One trader saw the Detroit-based automotive drive train components manufacturer's new bonds trading at 100½ bid, 100 5/8 offered. At one point, he saw the bonds locked at 100 5/8.

A second trader who pegged the bonds in a 1001/2-to-100¾ context also saw "a lot of trading" right around the 100 5/8 level.

A trader at another shop had the bonds going home at 100½ bid, 101 offered.

No activity was reported in Rock-Tenn's split-rated offering of 7.5-year and 10.5-year bonds, owing to the lateness of the hour at which the Norcross, Ga.-based packaging company's deal came to market.

'Lackluster day'

A trader said that American Axle's deal was "pretty much it" in terms of major news in the market, seeing everything else as "just small pieces here and there, trading on stuff."

A second trader agreed that, away from that pricing, Tuesday was "a rather lackluster day, with not that much going on." He did, however, note that "the market is gearing up here a little bit - we've got a lot coming" in terms of new deals, judging from the more than $3 billion of prospective new junk that made its way onto the forward calendar on Tuesday.

He characterized Junkbondland at present as a "cautiously optimistic environment."

DaVita gains continue

Among recently priced issues, the trader saw DaVita Inc.'s 5¾% notes due 2022 moving around in a 104 3/8-to-100¾ bid range.

The Denver-based kidney-health care company did a $1.25 billion drive-by deal on Aug. 14, pricing the bonds at par after upsizing the issue from the originally announced $1 billion, and it quickly moved above 101 bid when freed for aftermarket dealings, continuing to steadily add to those gains.

Last week, DaVita was about the only recent deal seen trading in any kind of size - in the $6 million to $7 million area during several sessions, relatively brisk volume for an otherwise pretty dull week.

"People just love that credit, I've got to tell you," he enthused.

While seeing the bonds mostly in the same 104ish area to which they had climbed by the end of last week, he did see them offered during the day at 105 and saw at least one trade of $1 million at 105½ bid, although he was not certain "whether they could hold that level."

Still, he said, "they're holding in really well, no matter what."

A second trader also saw the DaVita bonds get as good as 105½ bid during the day's trading, which he called up 1 point on the day, although he noted that it was "only about $6 million trading today."

Investors getting Sirius

The first trader also saw "a lot of Sirius [XM Radio Inc.] was trading," referring to the New York-based satellite radio broadcaster's 5¼% notes due 2022.

He saw those bonds "hanging right in there" in a 100 1/8-to-100¼ range, "but a lot of bonds traded."

Sirius priced that quick-to-market $400 million offering at par on Aug. 8. The bonds were originally little moved when they hit the aftermarket, but then were quoted in the days that followed as having hit peak levels north of 101 before coming back in and stabilizing at a little above par.

A second trader saw them mostly unchanged over the past few sessions, quoted at bid levels between par and 1001/2.

Indicators turn mixed

Away from the new-deal arena, statistical indicators of junk market performance turned mixed on Tuesday after having firmed across the board on Friday.

The Markit Group CDX North American Series 18 High Yield Index gained 1/8 point on Tuesday to end at 98¼ bid, 98½ offered, its second consecutive gain; on Friday, it had pushed up by 3/8 point.

But the lately choppy KDP High Yield Daily Index eased by 2 basis points on Tuesday to finish at 73.89. On Friday, it had risen by 2 bps. Its yield was rose by 2 bps to 6.19%, after having come in by 1 bp on Friday.

However, the widely followed Merrill Lynch U.S. High Yield Master II Index has been anything but choppy of late, extending a long string of recent gains.

Although U.S. debt markets were officially closed on Monday for the Labor Day holiday break, Merrill Lynch continued to tabulate the index based on what little was going on in the market, reporting that it moved up by 0.064% on the day to a year-to-date return of 10.514%, versus Friday's 10.444%, while its yield to worst came in slightly to 6.758%.

On Monday, the index notched its 13th consecutive gain, rising by 0.049%, which lifted its year-to-date return to 10.568%. This marked a new 2012 peak, eclipsing the pace that had been set just the day before. The index is now at its highest level since the last session of 2010, when it closed out that year with a 15.19% return.

The yield to worst, meanwhile, stood at 6.738%, down from Monday's reading, and from Friday's, but still above the low yield for the year - 6.678%, set last Thursday.

More angst for ATP

Among specific non-new-deal issues, ATP Oil's battered 11 7/8% second-lien senior secured notes due 2015 were once again at the top of the junk market most-actives list, as they have been on most days since the troubled Houston-based offshore energy operator's Aug. 17 Chapter 11 filing.

A market source said that more than $40 million of those bonds had changed hands by mid-afternoon, far outpacing the next busiest issues.

A trader said he saw "a lot" of the bonds trading in a 233/4-to-24 context, although earlier he did see the bonds get as low as a 23 3/8-to-23¾ range, which he called "the lowest ever."

He said: "I don't know how much more [down] it can go, but maybe it's reached its [stabilization] point here."

A second trader saw the bonds last down 2¾ points on the day, trading at 23¾ bid.

A third trader said the issue was "down a bunch," trading in a "231/2-ish zip code," while at another desk, a trader pegged the bonds in a 24-24½ context.

"The reality is, nobody knows anything," he said, noting that rumors had been swirling in the name, which he guessed had caused the downturn.

For many investors, ATP is a name in which "you sell now and ask questions later," he said.

The rumors were in regards to the company's offshore drilling licenses in Israel, where ATP has been operating over the past few months in the Mediterranean Sea, hoping to diversify away from being solely dependent on its main operations in the Gulf of Mexico.

The chatter was that the permits had been seized by an Israeli court. This proved to be true, though with a caveat.

A published report said that the Tel Aviv District Court seized ATP's rights in the Shimshon and Daniel offshore licenses - an unexpected action, which could delay development of the Shimshon natural gas field.

Observers said the delays could set development plans back by as much as two years.

Complicating matters is the fact that the licenses for the Shimshon and Daniel exploration areas were held by a subsidiary, ATP East Med Number BV. That unit was not included on the list of assets when the Houston-based company filed for bankruptcy protections.

The parent ATP only owns 5% of the stake, with the subsidiary owning 35% and the Israel-based Isramco Ltd. holding the remaining 60%.

Legal technicalities aside, with the licenses pulled and possibly delayed for another two years, ATP will still realize very little value from those operations. The company had planned to sell some of its Israeli rights, while keeping a portion of them.

Valeant very quiet

Word came from the Canadian high-yield market that Valeant Pharmaceuticals' bonds stayed flat in secondary trading on Tuesday following the company's announcement it will acquire Medicis Pharmaceutical Corp. for $44 a share in cash in a deal valued at $2.6 billion.

The Mississauga, Ont.-based specialty pharmaceutical company plans to sell new bonds to finance the deal.

Valeant's 7¼% notes due 2022 traded unchanged on the day at 103¾ bid, 104¾ offered, a trader said.

Valeant sold $550 million of the notes on March 3, 2011 at 98.125 to yield 7½%, as part of a two-tranche offering that also included $950 million of 6½% notes due 2016, which priced at par.

"Looks like it was all unchanged," the trader said of the company's outstanding paper.

Stephanie N. Rotondo and Cristal Cody contributed to this report

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