Halcon, Ashtead deals price to close $4.3 billion week; market rises on Europe debt news

By Paul Deckelman and Paul A. Harris

New York, June 29 - The junk-bond market closed out the month of June, the second quarter and the first half of 2012, with a bang in both the primary and the secondary spheres.

In the new-deal arena, two issues worth a combined $1.24 billion priced: an upsized $750 million issue of eight-year notes from Halcon Resources Corp.; and a $500 million issue of 10-year secured notes from Ashtead Group plc.

Those deals brought the week's new-issuance total up to around $4.3 billion of dollar-denominated, purely junk-rated paper in 12 tranches, which was up from the roughly $3.4 billion in nine tranches that priced last week ended June 22, according to data compiled by Prospect News.

It was the third straight week in which new issuance increased from the week before, breaking a previous four-week losing streak.

However, on a year-to date basis, 2012's issuance - so far totaling nearly $155.4 billion in 331 tranches - was running about 18% behind year-earlier levels.

Secondary market traders reported that both Halcon and Ashtead's new deals firmed when they hit the aftermarket. One particular standout performer was the new Ceridian Corp. deal, which priced too late in Thursday's session for any kind of aftermarket. It jumped by several points Friday.

Traders said that junk paper was solidly on the upside, undoubtedly helped by news that European leaders reached an agreement to stabilize the region's banks.

One notable name was Navistar International Corp., whose bonds and shares firmed on rumors that the troubled diesel maker is considering an arrangement that may help it get around problems with some of its engines.

Statistical indicators of market performance were higher on both the session and when compared to levels of a week ago.

Halcon upsizes

In the dollar-denominated high-yield market, two issuers each brought a single-tranche, raising a total of $1.24 billion

Halcon Resources priced an upsized $750 million issue of 9¾% eight-year senior notes (B3/CCC+) at 98.646 to yield 10%.

The yield printed on top of price talk that was revised from earlier talk in the 9% area.

The deal needed the extra juice in order to get done, sources said, regarding the hike in yield talk.

However once talk moved substantially north, investors piled in, causing the order book to end up three-times oversubscribed, a syndicate source added.

Barclays, Goldman Sachs, J.P. Morgan, Wells Fargo, BMO and RBC were the joint bookrunners.

The proceeds also will be used to acquire other potential properties and for general corporate purposes.

Ashtead at the tight end

England-based Ashtead Group priced a $500 million issue of 10-year second priority senior secured notes (B2/B+) at par to yield 6½%.

The yield printed at the tight end of the 6½% to 6¾% yield talk.

Deutsche Bank, Citigroup, J.P. Morgan, Barclays, HSBC, Lloyds, Mitsubishi, RBS, UBS and Wells Fargo were the joint bookrunners for the quick-to-market debt-refinancing deal.

Schaeffler drives by

Schaeffler Finance BV priced an upsized €300 million issue of 6¾% five-year secured notes (B1/B) at 98.98 to yield 7%.

The issue was upsized from €200 million and the yield printed on top of yield talk.

Although there were institutional investors in the deal, there was a strong retail component, with Ashtead offering the bonds for sale to its own employees, sources said.

Global coordinator Deutsche Bank will bill and deliver.

Barclays, BayernLB and Citigroup were the joint bookrunners.

The proceeds will be used to repay bank debt.

The issuer is a Herzogenaurach, Germany-based supplier of components and systems for the automotive industry and a variety of industrial sectors.

Quiet week ahead

The July 2 week, encompassing the July 4 Independence Day holiday in the United States, figures to be a quiet one, sources say.

With the holiday falling on Wednesday, it makes stretching the holiday into a weekend somewhat awkward. But a lot of folks are going to give it a try, they added, noting that people tend to be eyeing Thursday and Friday as possible days off, rather than the two days preceding the holiday.

Dealers will be focused on completing the Coeur d'Alene Mines Corp. $350 million offering of eight-year senior notes (B3/BB-), which were marketed during the last week in June and talked with a yield in the 8½% area.

The deal, via left bookrunner Barclays and joint bookrunner Wells Fargo, is possible Monday business, an informed source said on Friday.

Halcon moves higher

When Halcon Resources' new 9¾% notes due 2020 were freed for secondary dealings, a trader saw the Houston-based oil and gas exploration and production company's new bonds, which came to market at a discounted 98.98, moving up to 100½ bid, 101 offered.

He said Halcon's top leaders "have a good track record - they're the old Petrohawk gang that bought Ram Energy."

He said that market familiarity and confidence in the executives explained, at least in part, why the company was able to upsize the issue to $750 million from an originally announced $500 million.

Indeed, Halcon's chairman and chief executive officer, Floyd C. Wilson, its president, Steven W. Herod, its chief financial officer, Mark J. Mize, and its executive vice president and general counsel, David S. Elkouri, all occupied senior management positions at the former Petrohawk Energy Corp., guiding the growth of that Houston-based energy company until its successful sale last year to Australian mining and energy giant BHP Billiton in a $15 billion deal.

They then went on to form Halcon, which acquired the former Ram Energy Resources Inc. in a $550 million recapitalization transaction that closed in February.

Ashtead improves

The day's other deal, British equipment rental company Ashtead Group's $500 million of 6½% second-priority senior secured notes due 2022, was seen moving up to 101¼ bid, 101¾ offered when the bonds began trading around.

That quick-to-market deal priced at par earlier in the session.

Ceridian, Consolidated climb

Ceridian's $720 million issue of 8 7/8% senior secured notes due 2019 was seen by a trader as getting as good as 104 bid during morning dealings.

He later saw those bonds come back in a little, to 103½ bid, "and then they kind of died there."

Ceridian, a Minneapolis-based business services company, came to market at par Thursday, but too late to trade that afternoon.

The trader saw Thursday's other deal from Consolidated Container Co. LLC, an Atlanta-based manufacturer of plastic bottles and other rigid containers, firming on the day.

It priced $250 million of 10 1/8% senior notes due 2020 at par Thursday. The bonds moved up above the 101 bid level initially, and up to the 102-103 area by Friday.

Dollar General doing well

Going back to the deals that priced a little earlier in the week, a trader said that Dollar General Corp.'s $500 million quick-to-market offering of 4 1/8% senior notes due 2017, which priced at par Wednesday, moved up to 101¾ bid Friday.

The Goodlettsville, Tenn.-based discount retail operator's bonds that were upsized from $450 million originally moved above the 101 mark in initial aftermarket dealings and stayed there, going out Thursday at 101¼ bid, 101½ offered.

The trader noted that the new bonds only rose by a quarter-point. "I guess with that [low] coupon, it wasn't going to go up," he said.

But a second trader, looking at the new bonds from a high-grade "crossover" perspective, said the issue did better. "It's up from par and a narrower spread, too - 35 to 40.6 basis points over comparable Treasuries," the trader said.

"I do see a clear market there," he added.

Europe boosts market

A trader said the recent junk new deals and most everything else were up "on the backs of the European settlement."

At a summit of European leaders earlier this week, news reports were that embattled Italy and Spain will have an easier time qualifying for aid than Greece, Portugal and Ireland did. The European Stability Mechanism - the permanent bailout fund - goes into operation July 1.

That gave financial markets around the world a boost on the assumption that the new bailout mechanism should lessen investor uncertainty.

U.S. stocks soared to their best session in more than six months with the bellwether Dow Jones Industrial Average zooming by 277.83 points, or 2.20%, to close out the week, the month, the quarter and the first half at 12,880.09. The Standard & Poor's 500 was up by 2.49% and the Nasdaq leaped an even 3%.

Market indicators head north

Junk followed suit, taking its cue from the explosive upturn in equities on the good news that came out of Europe. Statistical market performance measures, which turned mixed Thursday after being on the upside Wednesday, continued their recent pattern of choppy action and moved solidly higher Friday.

A trader saw the Markit Group CDX North American Series 18 High Yield Index jump by 1 5/16 points on Friday to close out the week at 96 3/8 bid, 96 9/16 offered, after finishing down 1/8 point Thursday.

It also was a sharp gain from the 95½ bid, 95¾ level at which the index closed out the previous week June 22.

The KDP High Yield Daily Index recorded its third straight gain Friday, rising by 18 basis points to 73.20, on top of the 7 bps gain Thursday. Its yield tightened by 10 basis points, to 6.65%, after coming in by 2 bps Thursday.

Those levels were a definite improvement from the week-earlier reading of 73.01 and yield of 6.77%.

And the widely followed Merrill Lynch U.S. High Yield Master II Index notched its fourth consecutive gain. It rose by 0.356% on Friday, after advancing by 0.105% on Thursday.

Friday's advance lifted its year-to-date return to 7.053%, up from 6.673% on Thursday.

For the week, the index rose by 0.586%, its fourth straight weekly gain. It closed out the previous week at 6.429%, a 0.988% gain in the week ended June 22.

Friday's finish set a new 2012 high for the index, eclipsing the old mark of 6.80% set May 7. The index is thus at its highest point since the end of 2010, when it returned nearly 15%.

Navistar gains on rumor

Among specific non-new deal names, a trader said that Navistar International's 8¼% notes due 2021 were all over the place, seeing the bonds gyrating between a low of 94½ bid and a high of 96¼ bid. Noting that the bonds went home Thursday in a 92 to 92 3.4 context, he declared that they were up anywhere between 1 and 3 points on the day.

A second trader said Navistar's bonds were "up a good bit" by the day's close, even after trading "all over the place."

He pegged the 8¼% notes in a 95 to 96 context, up from opening levels around 93.

Yet another market source saw the paper opening at 94 bid, 94½ offered, hit a high of 95 bid, 96 offered and then come in to trade with a 93 handle late in the day.

One of the traders noted that the company's stock was "up a bunch," gaining $2.81, or 10.99%, to close at $28.37.

He speculated that the gains in both the equity and the bonds were because of a rumor circulating about an addition to its engine offerings.

Navistar is said to be considering adding engines made by competitor Cummins Inc. to sell alongside its MaxxForce engines. The trucks are expected to be available sometime in 2013.

The Lisle, Ill.-based company has been struggling to overcome issues with its 13-liter truck engine. The issues have presented an obstacle in getting the engines certified in the U.S. and have not been as easy to fix as previously believed.

Because of those problems, Navistar lowered its full-year profit forecast to a range of break-even to $2 a share, excluding some costs, earlier this month. That compared to a February forecast that put 2012 profit at as much as $5.75 a share.

A federal court recently ruled that the Environmental Protection Agency acted wrongly in allowing Navistar to sell trucks with the non-compliant engines after paying a $1,900 fine per truck.

Stephanie N. Rotondo and Cristal Cody contributed to this report

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