Celanese, upsized DISH drive-bys price while Lee pulls deal; International Coal jumps on buyout

By Paul Deckelman and Paul A. Harris

New York, May 2 - Space was the place for many high-yield market participants on Monday, as a pair of deals in the communications satellite sector were launched into orbit.

In what was easily the biggest deal of the day, DISH DBS Corp. priced a quickly shopped and hugely upsized $2 billion offering of 10-year notes. However, the deal came too late in the day for any secondary dealings in the No. 2 U.S. satellite television service provider's new bonds.

Earlier in the day, Satelites Mexicanos SA de CV came to market with a $325 million offering of six-year senior secured notes. The communications satellite operator's deal, primarily aimed at emerging markets investors, generated some interest among high-yield accounts as well and firmed solidly when it began trading around.

Back on terra firma, chemical producer Celanese Corp. priced a $400 million drive-by tranche of 10-year notes, which gained about a point when they were freed for trade.

The forward calendar grew as Chrysler Group LLC, Harmony Foods Corp. and Woodbine Acquisition Corp. were heard by syndicate sources to be shopping new offerings of senior secured notes.

The sources also heard price talk on Shea Homes LP's eight-year secured notes deal, which could price Tuesday after the order books are closed at midday. And they said that Germany's Heckler & Koch GmbH was hitting the road starting Tuesday to market a two-part offering of dollar- and euro-denominated notes.

While that activity was going on, publisher Lee Enterprises Inc. withdrew its already downsized senior secured bond deal.

In the secondary realm, International Coal Group, Inc.'s bonds jumped on the news that the West Virginia coal producer will be acquired by sector peer Arch Coal Inc.

Statistical performance indicators were mostly firmer.

DISH massively upsizes

The primary market put up $2.7 billion of issuance on Monday - the fifth consecutive session to top the $1 billion mark.

Three issuers brought single-tranche deals. Two of them came as drive-bys.

DISH DBS priced a massively upsized $2 billion issue of 6¾% 10-year senior notes (Ba3/BB-) at 99.093 to yield 6 7/8%.

The yield printed on top of the price talk.

Deutsche Bank Securities ran the books for the quick-to-market generally corporate purposes deal, which was initially upsized to $1.75 billion from $1 billion before being ultimately sized at $2 billion.

Jefferies & Co. was the joint lead manager.

"It was a bridged deal, so most of it was spoken for," said a high-yield mutual fund manager who watched from the sidelines.

The new DISH 6 7/8% notes due 2021 were par bid in the secondary, the source added, up almost a point.

Celanese prices at tight end

Elsewhere, Celanese US Holdings LLC priced a $400 million issue of non-callable 10-year senior notes (expected ratings Ba3/BB-) at par to yield 5 7/8%.

The yield printed at the tight end of price talk, which had been set in the 6% area.

Merrill Lynch, Barclays Capital Inc., Deutsche Bank Securities Inc. HSBC, Morgan Stanley & Co. and RBS Securities Inc. were the joint bookrunners for the quick-to-market debt refinancing deal.

Satmex 9½% notes higher

The only roadshow deal to price on Monday came from Mexico's Satmex.

The issuer priced $325 million of six-year senior secured notes (B3/B/) at par to yield 9½% at the tight end of talk, which was set at 9½% to 9¾%.

Jefferies ran the books.

Proceeds will be used to redeem the company's existing first-lien notes and for other funding needs.

The deal traded smartly higher in the secondary market, according to a buyside source who spotted the 9½% notes due 2017 2½ to 3 points higher in the secondary.

Shea Homes talks $750 million

Shea Homes LP and Shea Homes Funding Corp. talked their $750 million offering of eight-year senior secured notes with a yield in the 8¾% area on Monday.

The books close at noon ET on Tuesday.

Credit Suisse Securities (USA) LLC is the bookrunner

Chrysler kicks off $2.5 bln

Meanwhile the new deal calendar continued to build as Chrysler Group, in conjunction with Corporate Co-Issuer, plans to price $2.5 billion of secured senior notes during the May 16 week.

The notes are being offered with eight-year and 10-year maturities. Tranche sizes remain to be determined.

Merrill Lynch and Goldman Sachs & Co. are the joint physical bookrunners. Citigroup Global Markets and Morgan Stanley & Co. are the passive bookrunners.

Merrill Lynch will bill and deliver.

Proceeds, together with proceeds from $5 billion of new credit facilities and $1.3 billion from Fiat's recently announced exercise of an option to acquire an incremental 16% ownership interest in Chrysler Group, will be used to repay in full Chrysler's loans from the United States and Canadian governments.

The debt and equity transactions are expected to take place concurrently.

Harmony Foods roadshow

Harmony Foods began a roadshow on Monday for its $105 million offering of five-year senior secured notes.

Imperial Capital is the bookrunner for the Rule 144A and Regulation S for life offer.

Proceeds will be used to refinance existing debt and to fund a distribution to equity holders.

Heckler & Kock two-parter

Finally from Europe, Heckler & Koch will begin a roadshow on Tuesday for its €290 million-equivalent offerings of seven-year senior secured notes (Caa1//).

The notes, which will be offered in dollars and euros, are in the market via bookrunner Citigroup Global Markets.

Proceeds will be used to refinance existing operating company and holding company debt.

Lee Enterprises withdraws

Lee Enterprises announced in a Monday press release that as a result of market conditions, it has decided not to proceed with plans to sell $680 million of first-priority lien senior secured notes due in 2017, $375 million of second-priority lien senior secured notes due in 2018 and up to 8,928,175 shares of Lee common stock.

The Davenport, Iowa newspaper publisher's deal, which had been in the market via joint bookrunners Credit Suisse (USA) Securities LLC and Deutsche Bank Securities Inc., underwent several structural changes during the course of marketing.

The most recent announced structure set the offering at $680 million of first-lien notes and $375 million of second-lien loans with warrants for 2.5% of the company's common shares.

Celanese issue improves

When the new Celanese 10-year notes were freed for secondary market dealings, a trader there saw those bonds break around 100½ bid, 101 offered versus their par issue price and then firm to 100¾ bid, 101¼ offered.

A second trader, meantime, saw the Dallas-based chemical company's new notes as good as 100 7/8 bid, 101 3/8 offered.

Satmex in orbit

Traders said that communications satellite operator Satelites de Mexico's six-year senior secured bonds gained altitude and attracted some junk market interest after the nominally emerging markets issue priced.

One quoted the new bonds at 102 5/8 bid, well up from their par issue price, while a second declared that "it priced and traded well," rising to 102½ bid, 103 offered.

Yet another trader was a little more conservative in his estimation, pegging the bonds at 102 3/8 bid, 102 5/8 offered.

The day's other satellite-oriented sale, from Englewood, Colo.-based TV service provider DISH DBS Corp., appeared too late in the day for any aftermarket dealings.

iPayment eases a little

Among the deals priced during Friday's session, traders said that iPayment Inc.'s 10¼% notes due 2018 came in a little from elevated levels, which the Nashville-based credit- and debit-card transaction processor's new issue had been trading at after it priced on Friday.

Two traders separately quoted the bonds Monday at 101½ bid, 102½ offered. That was down from the heights of 102 1/8 bid, 102 5/8 offered at which they had traded late Friday after the $400 million offering - upsized from $375 million originally - had priced at par.

The traders also said that they saw no trading on Monday in the other half of that two-part deal: the $125 million of 15% senior payment-in-kind notes issued by iPayment's corporate parent, iPayment Holdings Inc. That tranche of bonds - downsized from the originally shopped $150 million, even as the other piece of the deal was upsized - had priced at par and then got as good as 103½ bid in the aftermarket before settling at 103¼ bid, 103 3/8 offered. The PIK notes were sold in the form of units, along with warrants to buy the company's stock.

Among the other deals priced during Friday's $1.46 billion primary session, a trader saw Cumulus Media Inc.'s 7¾% notes due 2019 at 100¾ bid, 102 offered.

The Atlanta-based radio broadcaster priced its $610 million issue on Friday at par, and the bonds had firmed after that to 101 bid, 102 offered.

Traders did not detect any activity in Knoxville, Tenn.-based coal producer Xinergy Corp. The company priced $200 million of 9¼% senior secured notes due 2019 on Friday afternoon at par, and the bonds were heard to have improved to 102¼ bid, 102½ offered later that same session.

Ford, Felcor fail to rise

Going a little bit further back last week, a trader said that the Ford Motor Credit Co. 5% notes due 2018 were trading right at the par level, pretty much living up to market expectations.

"Basically, I think the whole issue is for sale at 100 1/8 if it ever trades up," he said, "since everybody got stuffed with that."

The auto-loan financing arm of No. 2 U.S. carmaker Ford Motor Co. priced the $1.25 billion drive-by deal last Thursday at par, and the bonds struggled all the rest of the week to get back to the issue price. While price talk on the deal had originally been in a range of 5 1/8% to 5¼%, it gradually came down, first to 5 1/8% and then to an even 5%, with traders and other market participants saying that the issuer and its underwriters had "jammed down" the deal on the buyers and had left no money on the table for them.

Another trader meantime said that FelCor Escrow Holdings, LLC/FelCor Lodging LP's 6¾% senior secured notes due 2019 were trading on Monday at 99½ bid, par offered.

"I don't know why the thing's not up," he exclaimed, "I think it came at the tight end of talk, and the damn thing's still below par."

The Irving. Tex.-based lodging industry real estate investment trust priced its $525 million of the bonds - upsized from the originally announced $500 million - last Tuesday at par, and the issue had firmed slightly after that, rising to 100½ bid, 100¾ offered later in the week.

'Huge month' coming up

The trader meantime said that he had heard that May "is going to be a huge month for new issues, a humongous month."

"We are," he said, "going to see a big, big calendar."

Secondary indicators stronger

Away from the new issue realm, a trader saw the CDX North American Series 16 HY index up by one-eighth of a point on Monday to end at 103 3/16 bid, 103 5/16 offered on top of Friday's three-sixteenths of a point gain.

The KDP High Yield Daily Index meantime gained 10 basis points on Monday to end at 76.19, after having risen by 9 bps on Friday. Its yield came in by 4 bps on Monday to 6.43% on top of Friday's 3 bps tightening.

The Merrill Lynch High Yield Master II Index rose for a ninth consecutive session on Monday, by 0.114% to build on Friday's 0.139% gain. That lifted its year-to-date return to 5.602%, a new peak level for the year, from 5.45% on Friday, the previous zenith.

Advancing issues beat decliners for a fourth straight session on Monday, by a little less than the six-to-five margin that had been seen in both Thursday's and Friday's dealings.

Overall market activity, as measured by dollar-volume levels, rose by 5% on Monday after having slid nearly 28% on Friday.

A trader characterized Monday's session as "very slow and situational."

A second said that "it looked like everybody was still just watching the [Osama] bin Laden news."

Bin Laden death a dud

At another desk, a trader said that the electrifying weekend news that U.S. forces had finally caught up with the wanted terrorist and that he had been killed in a gun battle was the subject of "idle conversation," but while it was "good to see everybody in a good mood today" based on that weekend news, it really wasn't any kind of bracing tonic sending people buying.

In the equity markets, too, the bin Laden bounce didn't last very long. A morning advance faded, leaving stocks finishing the day lower, with the bellwether Dow Jones Industrial average ending off 3.18 points, or 0.02% on the day, at 12,807.36 and other, broader indices also slightly lower on the day.

Back in Junkbondland, he said that trading actually "seemed like it was last week, sort of, with not a lot of volume in the first part of the day. People are sitting on cash, reaching and buying.

"It's going to be a long summer," he added.

However, given the cheerier mood evident following the Al Qaeda leader's demise, he opined, "Hopefully this bin Laden thing will spark something. I'm not sure what, but hopefully, it's something."

International Coal is cooking

Among specific issues, a trader declared that International Coal Group, Inc's 9 1/8% notes due 2018 "was the big mover" on the day, rising some 7 points to the 121 level on the news that the company has agreed to be acquired by sector peer Arch Coal Inc.

At another desk, a market source saw the bonds up 8 points on the day at 121 ½ bid.

International Coal's New York Stock Exchange shares meantime zoomed by $3.40 to end at $14.43 per share. Volume of 170 million shares was 17 times the norm.

St. Louis-based Arch will acquire Scott Depot, W. Va.-based International for $14.60 per share in an all-cash transaction valued at $3.4 billion.

Arch plans on getting a new $1.5 billion revolving credit facility and debt securities to help finance the transaction.

TXU trades around

Elsewhere, a trader said that the Texas utility company formerly known as TXU Corp. "always has something going on" in terms of trading activity, seeing its Energy Future Holdings Corp. 6½% notes due 2024 trading around the 54 bid area and 10 7/8% notes due 2017 in a 94- 94½ context. The company's Texas Competitive Electric Holdings Corp 10¼% notes due 2015 were seen at 64½ bid, with all of the bonds going out around the same levels at which they had opened.

"So they haven't moved much in price," he said. He saw "a small amount of trading" in the 6½% notes and "a moderate amount" of the 101/4s changing hands. However, he declared that there was "no real activity" in the 10 7/8s.

That was in marked contrast to Friday, when the Dallas-based utility and merchant power operator's bonds were among the most actively traded junk issues.

A trader said that the continued demand for the various TXU bonds is an indicator to him that investors are apparently not concerned over a legal fight pitting the company against one of its debt holders, Aurelius Capital Management LP, which claimed that an intra-company loan between TCEH and EFHC violated the terms of its lending agreement, putting the utility operator in default. Last month, EFHC extended the maturities on more than $17.8 billion of loans and amended the terms of the instruments in an effort to address the concerns raised by the dissident hedge fund.

With that having been done, the threat of an event of default has receded, so "it's not affecting the bonds today as we speak," the trader declared.

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