Forest Oil prices add-on deal; ResCap gains on swap offer consent news; American Axle up on labor pact

By Paul Deckelman and Paul A. Harris

New York, May 19 - Forest Oil Corp. came to market Monday with a quickly-shopped add-on offering to its 7¼% notes due 2019. Traders said that caused the outstanding notes to trade down about a point from the levels they had held late last week. The new deal came way too late in the day for any kind of meaningful aftermarket action.

Also in the primary sphere, well-known high yield issuers Chesapeake Energy Corp. and EchoStar - more properly, DISH Network Corp. - were heard by syndicate sources to be shopping new deals around, as was Symbion Health Ltd.

Traders said the new Hovnanian Enterprises Inc. bonds, which priced just below par on Friday and then firmed smartly in initial aftermarket dealings, continued to hold those gains on Monday, while the company's established notes also continued to trade firmly.

Residential Capital LLC's bonds were seen up around 2 to 3 points across the board, buoyed by the Minneapolis-based mortgage lenders' weekend announcement that it had received the requisite number of consents to proposed indenture changes from the holders of its bonds being taken out via a recently announced debt-for-debt exchange offer.

Another weekend announcement seen driving bond prices came from American Axle & Manufacturing Holdings, which said it had reached an agreement with the United Auto Workers union aimed at settling the lengthy UAW strike against the Detroit-based automotive components manufacturer, which has also caused output disruptions for the company's biggest customer, General Motors Corp. However, while the Axle bonds were quoted at higher levels, not much real trading was seen having taken place.

A high yield syndicate official marked the broad market firmer on the day just before the close.

Forest prices

The primary market saw one issue price, an a.m.-to-p.m. drive-by deal from an oil and gas exploration and production company.

Forest Oil sold a $250 million add-on to its 7¼% senior notes due June 15, 2019 (B1/existing BB-) at 100.25 to yield 7.216%.

The tap was priced on top of the 100.25 area price talk.

Banc of America Securities LLC was the lead bookrunner and BNP Paribas, Credit Suisse, Deutsche Bank Securities, J.P. Morgan Securities Inc. joint bookrunners for the debt refinancing deal.

Chesapeake $800 million for Tuesday

Nor was that all of the quick-to-market news from the energy sector, from which approximately one-third of 2008 issuance to date has emanated, according to sources.

Chesapeake Energy will host a 10:30 a.m. ET Tuesday conference call for its $800 million offering of senior notes due Dec. 15, 2018.

The deal is expected to price on Tuesday afternoon.

Credit Suisse, Banc of America Securities LLC, Lehman Brothers, Deutsche Bank Securities and RBS Greenwich Capital are joint bookrunners for the debt refinancing and general corporate purposes deal.

Symbion toggle notes

Elsewhere on Monday, Symbion Inc. began a brief roadshow for its $179.84 million offering of 11% senior PIK toggle notes due Aug. 1, 2015 (Caa1/CCC+).

The notes are expected to price on Thursday.

Merrill Lynch & Co. and Banc of America Securities LLC are joint bookrunners for the bridge refinancing deal.

More drive-by deals expected

Market sources professed expectations that the remainder of the May 19 week could see more drive-by activity, some of it from the energy sectors.

Sources said that JP Morgan is expected to roll out "deals" plural on Tuesday. However as Prospect News was going to press no names were available.

Also market sources said that a deal from EchoStar Corp., $500 million of seven-year notes via Credit Suisse, is expected to be announced on Tuesday.

Forest existings dip

The new Forest add-on bonds came too late in the session for any kind of meaningful aftermarket activity - but traders saw the company's established 7¼% notes due 2019 as having retreated to around the 100.25 level at which the add-ons priced.

A trader said that the bonds had been trading at around 101.5 bid, 101.75 offered on Friday, although trading was light; there had been more substantial trading around that level on Thursday.

On Monday, he saw the bonds moving in a context of 100.5-101. "They traded as high as 101 - most trades were at 100.75 to 101." But then the bonds "started to drift down toward the end of the day, and were kind of offered there [at 101] after a while." He pegged them going home at 100.5 bid, 101, which he called down a point on the day.

Hovnanian hangs in

A trader said the new Hovnanian 11½% senior secured second-lien notes due 2013 - which had priced at 99.064 on Friday but which then rose handsomely to close at levels around or above 103 later in the session - "kind of hung in there" in that same 103-103.25 range all day, although he did not know how active the bonds were, compared with Friday's brisk aftermarket dealings. "They held in there most of the day," he said.

At another desk, a trader saw the issue at 103.125 bid, 103.75 offered.

Among the Red Bank, N.J.-based homebuilder's established bonds, he saw the company's 6 3/8% notes due 2014 at 71, up ½ point, although previous trades were all odd-lot trades that don't give much of a basis for comparison, he said. He saw Hovnanian's 6½% notes due 2014 at 72.5 bid, versus a range of 71.75-73 on Friday, "so they traded right in the context of Friday's range."

He also saw the company's 8 5/8% notes due 2017 at 79.5 bid, unchanged versus Friday.

Another trader meantime called the 6 3/8s and its 6¼% notes due 2016 up a point at 71 bid.

Among other recently priced issues, a trader said that there was "nothing really new" in Nortek Inc.'s 10% notes due 2013, $750 million of which priced a week ago at 98.957; he saw the Providence, R.I.-based building materials maker's new deal at 99 bid, 99.75 offered, just slightly above their issue price. "There was not a lot of follow-through on that," he declared.

Market indicators up again

Back among the established issues not having any new-deal links, a trader said, the widely followed CDX junk bond performance index was up ¼ point to 98½ bid, 99 offered. The KDP High Yield Daily Index rose by 14 bps to 76.67, while its spread tightened by 4 bps to 9.02%.

In the broader market, advancing issues led decliners by a five-to-four margin. Activity, represented by dollar volume levels, rose nearly 7% from Friday's pace.

A trader said that while the market "has been firm all day, it hasn't been very inspiring."

He continued that "most of the trades seemed to be on the right [i.e. up] side, I think - but nothing got carried away with itself. You've had a decent [new deal] calendar come" - and he said he had heard that a few new drive-by deals could pop up - "so it looks like money is getting spent on the calendar; unless there's something coming out on the earnings front of the deal front, there's not a reason to take the secondary market up too high."

Another trader opined that the junk secondary "seemed dead. It was like the Friday before a three-day weekend," which the market will actually see at the tail end of this week ahead of the Memorial Day break. "I thought that at least today and [Tuesday] there would be activity."

ResCap rises on consent news

A trader saw Residential Capital's bonds better in the wake of the consent news about its current exchange offer; he quoted the company's 6 3/8% notes due 2010 up 3 points from Friday at 55.5 bid, and also saw its 6½% notes due 2013 up 3 to 3½ points on the day at 52.5 bid, 53.5 offered.

Another trader also saw the 61/2s finishing at 52.5 bid, actually a point off their high print at 53.5, but still up some 3 points from Friday's close at 49.5 bid. The 6 3/8s, he said, got as high as 56 during the session before coming off slightly to close at 55.5, versus the 50-53 context at which the bonds had traded on Friday.

A trader called ResCap 8 1/8% notes slated to come due this November up 2 points on the day at 85 bid, 86 offered, although he said the bonds had bounced off their day's lows around 81.5 before finishing up. He saw the 6 7/8% notes due 2015 unchanged at 49.5 bid, 50.5 offered.

At another desk, a trader saw its 61/2s up 1½ points on the session at 51, while ResCap parent GMAC LLC's 8% bonds due 2031 were also 1½ points better at 79.5. Another market source called ResCap's 8 7/8% notes due 2015 up a point at 52 bid, while seeing GMAC's 6 7/8% notes due 2012 more than 2 points better at 84.

The ResCap bonds gyrated in fairly active trading - many of the transactions round lots - aided by the company announcement that it had received the necessary consents from its note holders to allow it to go through with its previously announced plan to exchange new, higher-coupon bonds for existing paper as a means of extending its maturities and forestalling the need to pay off those bonds any time soon (see related story elsewhere in this issue). While some bondholders had grumbled at the terms of the exchange - they might get as little as 77 cents on the dollar by exchanging their bonds after the early participation deadline, which the company has now extended to Wednesday from this past Friday, a trader said that it looks like the majority of the bondholders had opted to participate and get "at least something" for their bonds rather than taking their chances with a bankruptcy proceeding - ResCap's possible next step should the bond exchange fail - and maybe get little or nothing.

American Axle not very active

A trader said that American Axle's bonds "were pretty quiet," considering that the company had some positive news to announce, in the form of the agreement with the UAW aimed at ending a strike which has disrupted production there since late February.

"They should be better - but I didn't see them." He quoted Axle's 7 7/78% notes due 2017 around 91.25 bid, 91.625 offered, but said there had been "not much trading" in the issue.

At another desk, a trader said that the American Axle bonds were a point higher at 91 bid, 93 offered. Another market source saw them get as good as 93 bid before dropping back to close at about 91.625, up maybe ½ point on the session, although those later dealings involved relatively small odd-lot transactions.

The company announced Saturday that it had reached agreement with the union, which said that its various locals would hold ratification votes this week and urged members to okay the deal. About 3,650 union members would be covered by the pact, which lowers wages for both new hires and current employees but forestalls some threatened plant closings and offers some established workers buyouts of as much as $140,000, largely funded by GM, which is eager to end the strike and get back to full truck and SUV production.

GM's own benchmark 8 3/8% bonds due 2033 were seen by a trader up a point at 75.5 bid, 76.5 offered.

Harrah's heads higher; Grande is grand

Elsewhere, a trader said that Harrah's Entertainment Inc.'s 10¾% notes due 2016 "were trading again today," as they had on Friday; "there seemed to be a fair amount of trades" in the Las Vegas-based gaming giant's paper, especially around the 88.5 bid, 88.75 offered level, which was up a little from Friday's quotes around 87.5-88.

Grande Communications Holdings Inc.'s 14% notes due 2011 were being quoted as high as the 104 level, up about 5 points from recent trades, although there was no fresh news seen out on the San Marcos, Tex.-based telecommunications and cable TV operator that might explain the sudden interest in the credit.

A trader saw Countrywide Financial Corp.'s 6¼% notes due 2016 up a point at 80.5 bid, 82.5 offered, perhaps getting a boost from sector peer ResCap. Another trader saw the Calabasas, Calif.-based mortgage provider's issue unchanged at 79 bid, 81 offered while its 3¼% notes scheduled to come due on Wednesday were at 98.5 bid, 99.5 offered, "or 99 bid, par offered, depending on whom you speak to."

A trader saw Six Flags Inc.'s 9¾% notes due 2013 down ½ point at 65 bid, 66.5 offered.

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