Upsized Community Health, B/E Aerospace, Icahn deals price; ATP, Pilgrims Pride slide

By Paul Deckelman and Paul A. Harris

New York, July 9 - After a July Fourth holiday week, which saw just a smidgen of new junk-bond issuance, the high-yield primary market got back on track in a big way Monday, pricing three quickly-shopped, upsized deals totaling some $2.3 billion.

Community Health Systems Inc. brought in the day's biggest deal - a $1.2 billion offering of eight-year notes, the proceeds of which will fund a tender offer for the company's remaining 2015 notes.

B/E Aerospace Inc. priced $800 million of 10-year notes as an add-on to an existing issue sold back in March. The add-on will be used to fund a tender offer for some of its outstanding bonds.

Icahn Enterprises LP came to market with a $300 million add-on to its existing 2018 notes, with proceeds slated for general corporate purposes.

All three new deals were seen firming in the aftermarket.

Away from the new deals, the junk market had a firm day.

However, the most notable activity took place on the downside.

ATP Oil & Gas Corp.'s bonds, and its shares, got hammered, even as the energy operator announced the completion of an overhaul on one of its Gulf of Mexico wells.

Pilgrims Pride Corp. slid in both the junk bond and equity markets on fears that unfavorable weather conditions could hurt supplies of corn - a key staple in the diet of the chickens it raises.

Patriot Coal Corp.'s bonds swooned ahead of the mining company's bankruptcy filing.

Community Health sells notes

The high-yield primary market, which was dormant last week largely because of the July Fourth Independence Day holiday in the United States, awoke Monday to a burst of drive-by activity and a building European calendar.

Two quick-to-market issuers, each bringing a single dollar-denominated tranche, raised $2.02 billion.

Community Health Systems priced an upsized $1.2 billion issue of eight-year senior notes (B3/B/B) at par to yield 7 1/8%.

The yield printed in the middle of the 7% to 7¼% yield talk.

Credit Suisse, Citigroup, Credit Agricole, Goldman Sachs, J.P. Morgan, Bank of America Merrill Lynch, Morgan Stanley, RBC, SunTrust and Wells Fargo were the joint bookrunners for the issue, which was upsized from $1 billion.

The Nashville, Tenn.-based operator of hospitals plans to use the proceeds to refinance its 8 7/8% notes due 2015. The proceeds from the upsizing will be used to pay down its revolver and for general corporate purposes.

B/E Aerospace taps 5¼% notes

B/E Aerospace priced an upsized $800 million add-on to its 5¼% senior notes due April 1, 2022 (Ba2/BB) at 102.

The reoffer price came on top of price talk that firmed from earlier talk of 101.75 to 102.25.

J.P. Morgan, Citigroup, Credit Suisse, Goldman Sachs and UBS were the joint bookrunners for the add-on, which was upsized from $675 million.

The add-on notes are immediately fungible. Initially, the notes were marketed as mirror notes that would not have become fungible until the first coupon payment date.

The proceeds will be used to fund the tender offer for the company's 8½% notes due 2018. The proceeds from the upsizing will be used for general corporate purposes, including acquisitions.

Elsewhere, Nektar Therapeutics, Inc., a biopharmaceutical company based in San Carlos, Calif., priced a dollar-denominated Rule 144A deal Monday, according to an informed source whom declined to disclose the size and terms of the deal.

Cowen Group, which is currently helming a $175 million offering of senior secured notes in the market from zinc producer Horsehead Corp., managed the Nektar deal.

Icahn split-rated deal

In the crossover market, Icahn Enterprises and Icahn Enterprises Finance Corp. priced an upsized, split-rated $300 million add-on to their 8% senior notes due Jan. 15, 2018 (Ba3/BBB-) at 105.5.

The reoffer price, which came on top of price talk, rendered a 6.786% yield to maturity.

The deal played to strong demand from multiple accounts, an informed source said, noting that the deal, which priced at 105.5, was going out 106 bid.

Jefferies was the sole bookrunner for this issue, which was upsized from $200 million and was executed on the high-yield desk.

The proceeds will be used for general corporate purposes.

The original $1.15 billion issue priced at 99.275 to yield 8 1/8% in January 2010.

A previous $300 million add-on priced at 103.50 to yield 7.36% in November 2010. More recently, a $500 million add-on priced at 102.50 to yield 7.475% on Jan. 6, 2012. Most recently a $200 million add-on priced at 103.50 to yield 7.263% on Jan. 27, 2012.

Monday's transaction left the total issue size at $2.45 billion.

Stork begins roadshow

The European primary market saw a trio of prospective issuers venture forth Monday.

Stork Technical Services Holdco BV, based in the Netherlands, began a roadshow Monday in Europe for its €315 million offering of seven-year senior secured notes (confirmed B3/expected B-).

The European roadshow wraps up Thursday. A roadshow in the United States begins Friday and is scheduled to conclude July 17.

Joint bookrunner Goldman Sachs will bill and deliver for the debt-refinancing deal. Jefferies also is a joint bookrunner.

Klockner, via Jefferies

Germany's Klockner Penteplast began a roadshow Monday in Frankfurt for its €255 million offering of five-year senior secured second priority notes (expected ratings Caa1/CCC).

The roadshow moves to London on Tuesday. Presentations in London and Paris are scheduled Wednesday, and in Amsterdam and Edinburgh on Thursday.

Subsequent roadshow stops, including a roadshow in the United States, hinge upon how rapidly the book builds, sources said.

Hence, the deal could price during the present week or carry over into the July 16 week.

Jefferies & Co. has the books for the debt-refinancing deal, marking the second time that Jefferies has been left bookrunner on a euro-denominated deal. In late October 2010, Jefferies led a deal for Siemens Enterprise Communications, which priced a €200 million issue of 10¾% senior secured notes due 2015.

Monday was a high profile day for Jefferies' European high-yield operation.

As mentioned above, Jefferies also is the right bookrunner on the Stork deal.

Sunrise bring CHF 870 million

Turning to the Swiss franc market, Swiss telecommunications firm Sunrise Communications International SA will start a roadshow Tuesday for CHF 870 million equivalent of senior secured notes in four tranches of Swiss franc- and euro-denominated notes, all maturing in 2017 (expected ratings Ba3/BB-/BB).

The deal includes a tranche of new Swiss franc-denominated fixed rate notes, and tranches of Swiss franc-denominated and euro-denominated floating-rate notes.

In addition to the new notes, Sunrise Communications plans to do an add-on to its existing euro-denominated 7% senior secured fixed-rate notes due Dec. 31, 2017. The original €371 million issue priced at par in October 2010.

Global coordinator and bookrunning manager Deutsche Bank will bill and deliver. BNP and UBS also are bookrunning managers.

The Zurich-based company plans to use the proceeds, along with CHF 200 million of cash on its balance sheet, to repay bank debt.

The European market might see even more activity later in the week, according to a banker there.

Issuers have been apprehensive about rates, fearing that the credit of the euro zone might prompt the buyside to attempt to extract hefty new issue premiums. But, lately they have become somewhat more confident, syndicate sources said Monday.

There is certainly cash to put to work, especially for the right names, one banker remarked.

Community Health climbs

When the new Community Health Systems 7 1/8% notes due 2020 were freed for aftermarket dealings, a trader saw the company's new issue trading in a 101- to 1011/2-context "right out of the gate," after the upsized $1.2 billion drive by deal priced at par. It was increased from an originally announced $1 billion.

Two other traders saw the bonds trading around the 1013/4- to 102-level.

One of them had been under the impression that Community Health, like Icahn Enterprises and B/E Aerospace, would do its new deal as an add-on as well, to its 8% notes due 2019. "But I guess not," the trader said.

B/E Aero gains altitude

A trader quoted B/E Aerospace's add-on to its 5¼% notes due 2022 at 103 bid - up from the 102 market where the company priced its $800 million deal.

That quick-to-market deal was upsized from an originally announced $675 million.

Icahn Enterprises improves

One of the traders also saw Icahn Enterprises' $300 million add-on to its 8% notes due 2018 as moving up to 106½ bid, 106¾ offered.

That followed the company's pricing of a quickly-shopped deal, which was upsized from an originally announced $200 million, at 105.5.

Not much 'new money'

Looking over the day's trio of new deals, a trader calculated that despite its great size, the Community Health deal "is only about $300 million of new money," by which he meant money over and above the amount that would be used to take out the company's remaining $934 million of 8 7/8% notes due 2015 via a tender offer announced last week.

He also noted that most of the proceeds from the B/E Aerospace deal also will be used to take out existing bonds - $600 million of 8½% notes due 2018, leaving just $200 million over from that.

The $300 million of Icahn Enterprises bonds are not being used to specifically take out any other debt.

"All of that would have been new cash into the company were they not spending it on tenders," the trader said.

"I'm assuming that most people [who hold the existing Community Health 2015 bonds], with an 8 7/8% coupon right now, if given half a choice, would like to be taken out of that at whatever premium they're being taken out at and they'd like a new bond with a 7 1/8% coupon at par to replace it. So they're getting an approximate market-level coupon," the trader said.

However, he said that with the average high-yield coupon these days at about 7.30%, the new coupon is actually a little through the index - so it's no real bargain.

The trader also said that he was already told by several informed sources in the marketplace that there are going to be some other deals announced this week.

"So I would expect some more drive-bys and we'll see what happens with the deals on the calendar - they're not the most appetizing," he said.

Window of opportunity

A second trader agreed that the market will likely see more of the kind of opportunistically timed, quickly marketed deals that popped up in Monday's session, given the approaching "dog days of summer," which traditionally mark the end of new-deal issuance until after Labor Day.

Reflecting on his own experience with another shop, he said "I tried to do a deal heading into the Labor Day weekend - and it was a nightmare. You don't want to do that!"

"A lot of guys are saying that if you're going to get something done, you'd better get it done by the first week in August," he said.

"Generally it's slow anyway in the summer, unless something in the marketplace causes a big opportunity for people to access funds," he said. But that would be unlikely to happen, the trader added.

Market measures move up

Away from the new-deal arena, statistical market performance measures were up across the board Monday, after it was mixed Friday for a second consecutive session.

A trader saw the Markit Group CDX North American Series 18 High Yield Index up by 1/4-point Monday to end at 96 7/16 bid, 96 11/16 offered, after it was down by 9/16 point Friday, its second consecutive loss.

The KDP High Yield Daily Index scored its eighth consecutive gain Monday, gaining 4 basis points to end at 73.63, after rising by 1 bp Friday. Its yield came in by 8 bps Monday to end at 6.43%, after narrowing by 2 bps Friday.

And the widely followed Merrill Lynch U.S. High Yield Master II Index was up for a 10th straight session Monday, registering a 0.064% gain for a second straight session. That lifted its year-to-date return to 7.711% up from Friday's 7.643% reading.

Monday's finish also set a new 2012 high for the index, eclipsing the old mark set just Friday. The index is thus at its highest point since the end of 2010, when it returned 15.19%.

Hunt and peck day

A trader characterized Monday's session as "one of those hunt-and-peck days."

He said there were some bid-wanted lists floating around.

"It seemed like a couple of funds had some accounts re-allocate assets or go to another manager, because you had those funky bid-wanted lists with anywhere from 20 to 50 names on them," he said.

"The sizes were like 30 [million] of this, 100 of this, 300 of this. So it looks like an asset re-allocation," the trader said.

ATP trades down

Among specific names, a trader noted that ATP Oil & Gas' 11 7/8% second-lien senior secured notes due 2015 "traded down today," seeing the Houston-based offshore energy exploration and production company's bonds declining to 46½ bid, after trading around 48 in the morning.

Another market source pegged those bonds at 47, calling them down 1 point on the day.

At yet another desk, a source said that more than $12 million of the bonds traded in round-lot transactions, putting it among Junkbondland's more active issues on the session. He said the bonds went out at 461/2, down from Friday's late level in size trading of 48.

The first trader said the bonds traded down despite the fact that the company announced seemingly positive news about one of its Gulf of Mexico wells.

The company said that it had completed the workover - an expensive and lengthy maintenance procedure - on its A-2 well in the Mirage Field sector of its Telemark Hub project in the Mississippi Canyon region of the gulf, off the coast of Louisiana. The well was shut down for repairs in late February after it began to rapidly get plugged up with sand, necessitating the well base to be cleaned out and measures taken to prevent a recurrence.

ATP said that initial test flow rates for the newly restored well are at 4,000 barrels of oil equivalent per day, 90% comprised of oil, which is considered the more valuable commodity in the U.S. petroleum industry, and the remaining 10% natural gas, considered less valuable.

The well will be connected by pipes to the company's ATP Titan floating drilling and production platform and is expected to produce usable energy at a rate of 4,000 to 5,000 barrels of oil equivalent per day.

ATP has a 100% working interest in the newly restored well, meaning it is the sole owner and operator.

The trader said that "4,000 barrels per day doesn't sound terrible to me - but maybe they were looking for more."

In fact, during the company's fiscal fourth-quarter conference call in March, company chairman T. Paul Buhlmahn told analysts that when the company took the well offline, it was producing in a range of 2,000 to 3,000 barrels of oil equivalent a day range and predicted that when the well was restored to service, it might produce 5,000 to 7,000 barrels of oil equivalent rate.

Wall Street appeared disappointed with ATP's announcement. Its Nasdaq-traded shares fell by 23 cents, or 6.25%, to $3.45, on volume of 2.8 million, or about 1 1/3 times the usual turnover.

Pilgrim's Pride on the slide

But the biggest mover on the day in terms of volume was Pilgrim's Pride's 7 7/8% notes due 2018; more than $29 million of those bonds changed hands in round-lot trading, tops in the junk world Monday.

The bonds finished on Friday at 100¼ bid and opened Monday at an even par, but then nosedived to levels as low as 94 15/16, before coming off that low to end at 95¾ bid, still down more than 4 points on the day.

A trader said he had not seen any fresh negative news out about the Pittsburg, Texas-based chicken producer, but he noted that the company's New York Stock Exchange-traded shares fell 54 cents, or 8.04%, to $6.18, on volume of 1.6 million, which is twice the norm.

Another loser out of that same food-production sector was Smithfield Foods Inc.'s 7¾% notes due 2017, which lost nearly a point from Friday's close to end at 111 1/8 bid, on volume of more than $7 million.

The Smithfield, Va.-based meat processor's NYSE-traded shares also dropped 93 cents, or 4.63%, to end at $19.15 on volume of 4 million, almost twice the usual daily handle.

Those shares and bonds fell after BMO Capital Markets downgraded Smithfield and poultry producer Tyson Foods to "market perform" from "outperform" previously, warning that those food firms would likely be hurt by rising corn costs due to hot, dry recent weather in much of the grain-growing regions of the United States, which threatens the overall size of the crop, possibly pushing corn prices higher. That would hurt firms like Smithfield, Tyson and Pilgrim's Pride, which use corn as the primary feedstock for the birds or animals they raise.

The price per bushel for corn closed at $7.30 Monday - up 33% since June 21, when it closed at $5.50.

Patriot paper plummets

The biggest plunge, in terms of prices, was in Patriot Coal, whose bonds were buried in a cave-in in anticipation of the late-afternoon announcement that the St. Louis- based coal producer had sought Chapter 11 protection in a filing with the U.S. Bankruptcy Court in Manhattan.

Ahead of that filing, a trader saw its 8¼% notes due 2018 at 33 bid, 33½ offered, down from 38 bid, 42 offered last week.

Another market source pegged the issue at 32½ bid, down nearly 10 points from Friday levels.

Yet another saw the bonds going out at 34 bid, an eight-point retreat, on volume of more than $22 million.

The company's NYSE-traded stock also took a massive beating, falling $1.58, or 72.1%, to 61 cents, on volume of 38 million shares, almost four times the usual turnover.

After the close, Patriot announced the filing and said that it secured $802 million in DIP financing.

Falling demand has hurt the company, which lost more than $7 billion in value this year, due in part to production cutbacks. New environmental regulations also burdened Patriot and its peers as consumers seek cleaner forms of energy.

The company has been working with creditors since May to come up with a restructuring plan and had hired Blackstone Group LP to facilitate negotiations. A proposal was not settled on, however.

Stephanie N. Rotondo contributed to this report

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