Chesapeake, CenturyLink, Sinclair price as calendar builds; Chesapeake 2019s still busiest

By Paul Deckelman and Paul A. Harris

New York, March 18 - Chesapeake Energy Corp., undaunted by last week's setback in the legal battle with its bondholders over the company's efforts to call its 2019 bonds at par, came to market on Monday with a $2.3 billion three-part drive-by bond deal, planning to use at least some of the proceeds to fund its controversial call of those existing bonds as well as tender offers for two others.

The new bonds priced too late in the session for any kind of immediate aftermarket, traders said. Meantime, the 2019s continued to dominate the Junkbondland most-actives list, as had been the case for all of last week.

Another quickly shopped megadeal pricing on Monday came from telecommunications operator CenturyLink, Inc., which did $1 billion of seven-year notes. That issue also priced too late in the day to trade around, although there was some activity in its outstanding 2022 notes.

Sinclair Television Group, Inc. priced $600 million of eight-year notes in a same-day transaction. Like the Chesapeake and CenturyLink deals, traders said that the TV station ownership company's offering priced too late in the session for any real aftermarket activity.

Traders saw a generally easier junk market on Monday, perhaps in tandem with stocks. Equities fell on negative investor reaction to a European Union plan to stabilize the island nation of Cyprus' banks in part by seizing 10% of the value of bank accounts there, which sparked market fears that such asset confiscation could be imposed elsewhere.

They reported that some of the new deals that his priced last week seemed to come off their initial aftermarket highs, including Friday's offerings from Seitel, Inc., MDC Partners, Inc., Sun Products Corp. and McGraw Hill Global Education Holdings LLC.

Away from the deals actually priced, high-yield syndicate sources heard of new dollar-denominated deals being shopped around by Milacron LLC, Exterran Partners, LP, Fidelity & Guaranty Life Holdings, Inc. and KCA Deutag Finance plc, along with non-dollar transactions from Nokia Siemens Networks Finance BV and Takko Holdings GmbH.

Price talk emerged on Watco Cos. LLC's $400 million 10-year deal, which is expected to come to market on Tuesday.

In the secondary realm, statistical market performance measures remained mixed on Monday, though with a somewhat easier bias.

Chesapeake prices $2.3 billion

The March 18 week got off to a roaring start in the primary market as three drive-by issuers brought a combined five tranches of junk and raised a total of $3.9 billion.

Chesapeake Energy priced a $2.3 billion three-part senior notes transaction (Ba3/BB-).

A $500 million tranche of three-year notes priced at par to yield 3¼%. The yield printed at the tight end of the 3¼% to 3½% yield talk.

A $700 million tranche of notes due June 15, 2021 priced at par to yield 5 3/8%, at the tight end of the 5 3/8% to 5½% yield talk.

And a $1.1 billion tranche of 10-year notes priced at par to yield 5¾%, on top of yield talk.

Morgan Stanley & Co. LLC, Credit Suisse Securities (USA) LLC, Citigroup Global Markets Inc., Goldman, Sachs & Co. and Wells Fargo Securities LLC were the joint bookrunners.

Proceeds will be used to purchase the portion of the company's 2013 notes and the 2018 notes that are tendered in the concurrent tender offers and to redeem the 2019 notes at par.

CenturyLink upsizes

CenturyLink priced a massively upsized $1 billion issue of non-callable seven-year senior notes (Ba2/BB/BB+) at par to yield 5 5/8%.

The deal was upsized from $500 million.

The yield printed in the middle of the 5½% to 5¾% yield talk.

Joint physical bookrunner J.P. Morgan Securities LLC will bill and deliver. Barclays was also a joint physical bookrunner. Citigroup and SunTrust Robinson Humphrey were joint bookrunners.

The wireline telecommunications services provider plans to use the proceeds to refinance amounts outstanding under its revolver.

Sinclair at the wide end

Sinclair Television priced a $600 million issue of eight-year senior notes (B1/B) at par to yield 5 3/8%.

The yield printed at the wide end of yield talk that was set in the 5¼% area.

J.P. Morgan Securities LLC, Deutsche Bank Securities Inc. and RBC Capital Markets are the joint bookrunners.

The Hunt Valley, Md.-based television broadcasting company plans to use the proceeds to refinance bank debt.

Watco sets price talk

Looking toward the Tuesday session, Watco Cos. and Watco Finance Corp. set price talk for their proposed $400 million of senior notes due 2023 (B3/CCC+) in the area of 6½%.

Wells Fargo Securities LLC is the left bookrunner, while J.P. Morgan Securities LLC, Barclays, BMO Securities and U.S. Bancorp are joint bookrunners.

KCA Deutag dollar deal

The forward calendar swelled on Monday.

Scotland's KCA Deutag Finance began a roadshow on Monday in the United States for the purposes of marketing its $860 million offering of seven-year senior secured notes (expected ratings B3/B).

It wraps up on Friday and will be followed by a roadshow in Europe scheduled for March 26 and March 27, after which the deal is set to price.

J.P. Morgan Securities LLC, BofA Merrill Lynch, HSBC, Lloyds TSB and Morgan Stanley & Co. are the joint bookrunners.

The Aberdeen Scotland-based oil and gas services company plans to use the proceeds to repay debt.

Milacron starts Tuesday

Milacron and MCRON Finance Corp. plan to start a roadshow on Tuesday for their $465 million offering of eight-year senior notes (Caa1/B-).

The deal is set to price late in the present week.

BofA Merrill Lynch, J.P. Morgan Securities LLC, Barclays, Credit Suisse Securities (USA) LLC and RBC Capital Markets are the joint bookrunners.

KeyBanc Capital Markets and SG CIB are the co-managers.

Proceeds, together with cash on hand, borrowings under the company's term loan and certain equity investments, will be used to fund the Mold-Masters acquisition, repay existing third party debt of Mold-Masters and for general corporate purposes.

Exterran eight-year deal

Exterran Partners and EXLP Finance Corp. plan to price a $300 million offering of eight-year senior notes (expected B2/confirmed B-) late in the present week.

Wells Fargo Securities LLC is the left bookrunner. Credit Agricole CIB, J.P. Morgan Securities LLC, RBC Capital Markets and RBS Securities are the joint bookrunners.

The Houston-based provider of services to the natural gas industry plans to use the proceeds to repay revolver debt.

Fidelity starts roadshow

Fidelity & Guaranty Life began a roadshow on Monday for its $300 million offering of eight-year senior notes.

Jefferies & Co., Credit Suisse Securities (USA) LLC and Macquarie Capital are the joint bookrunners.

The Baltimore-based provider of annuity and life insurance products plans to use the proceeds to fund general corporate purposes and to make a distribution to its sponsor.

Takko two-part deal

The Monday session also saw news in the euro-denominated high-yield primary.

Germany's Takko Holding plans to complete a €625 million three-part notes transaction during the mid-to-late part of the present week.

Takko Luxembourg 2 SCA plans to sell €450 million of six-year senior secured notes in tranches of fixed-rate notes, which come with three years of call protection, and floating-rate notes, which come with one year of call protection. Tranche sizes remain to be determined.

Takko Luxembourg 1 SCA plans to sell €175 million of seven-year senior unsecured notes, which come with three years of call protection.

Global coordinator Deutsche Bank will bill and deliver for the debt refinancing deal. Goldman Sachs and UniCredit are also global coordinators.

Nokia Siemens on Tuesday

Nokia Siemens plans to begin marketing a €600 million two-part offering of senior notes (expected ratings B2/B+) on Tuesday.

Further details on the roadshow, which has stops in Europe and the United States, will be announced.

The debt refinancing deal is expected to come in tranches of five-year notes, which will be non-callable for two years, and seven-year notes, which will be non-callable for three years.

Joint global coordinator and joint bookrunner J.P. Morgan will bill and deliver. Credit Suisse is also a joint global coordinator and joint bookrunner. Barclays, BofA Merrill Lynch, Citigroup, Nordea, RBS and SG CIB are also joint bookrunners.

Ziggo meeting investors

Dutch cable operator Ziggo has mandated Goldman Sachs and J.P. Morgan to lead meetings with of European fixed-income investors.

Meetings were set to commence on Monday afternoon in Amsterdam.

The non-deal roadshow continues on Tuesday in London, then moves to Paris on Wednesday morning and to Frankfurt on Wednesday afternoon.

A benchmark offering of euro-denominated secured debt could follow, subject to market conditions.

New Chesapeakes too late

While junk market secondary players spent much of the day waiting for Chesapeake Energy's big new three-part deal, by the time it finally appeared, a trader said, "most people went home," so he saw no initial aftermarket trading in the Oklahoma City-based natural gas operator's blockbuster deal.

Another trader, who also had not seen the issue price by fairly late in the afternoon, predicted that once it did come to market, "there's going to be people trading that name," given its generous liquidity.

Existing Chesapeake busy

While the new Chesapeake behemoth was an aftermarket no-show, the same certainly could not be said of the company's existing debt, particularly its 6.775% notes due 2019, which have been the focus of an intense legal skirmish over the past 10 days between the company, the Bank of New York Mellon Trust Corp., which is the trustee for the $1.3 billion issue, and groups of bondholders.

They have been battling over the company's plans to try and call those notes at par plus accrued interest, with Chesapeake insisting that its Friday announcement of the upcoming redemption at that price was totally proper under terms of the bonds' indenture.

The trustee and the bondholders, though, say that Chesapeake blew it in terms of giving sufficient advance notice to the holders so that it could complete that redemption - not just announce it - during a special early-redemption period that expired on Friday.

Chesapeake plans to use some of the proceeds from its new deal to fund that redemption, assuming the courts ultimately allow it to take place.

"The '19s are still in flux - what's going to happen with those," a trader said.

"Chesapeake is going to try to call them, BONY is going to say no. It's still the most actively traded bond in the high-yield world. It was a little heavier today, probably down a half point from where it closed last week."

He recounted that the bonds had been "very volatile when the judge [who has been presiding over the case] was coming out with all of those headlines" late Thursday afternoon, outlining his complex decision nixing Chesapeake's request for a preliminary injunction declaring that its position was right. At the same time, the judge left the door open for the company to pursue the bond call while a final decision on the legality of that step wends its way through the courts over the next several months.

He noted that, especially on Friday, as investors tried to figure out what the ruling meant, the 6.775s "traded in a three-point range in a 10-minute period" between bid levels of 105 and 108.

"Everything's down," a second trader said, seeing the 6.775% notes ending at 104½ bid, 105 offered, about a half-point down from its Friday closing level around 105.

He also saw its 6 7/8% notes due 2018 at 107½ bid, 107¾ offered, also down about a half-point. Chesapeake will tender for those bonds and for its 7 5/8% notes slated to come due on July 15 of this year, using some of the remaining proceeds from the bond deal. Those 13s, he said, had eased to 102 bid, 102¼ offered.

At another shop, a market source saw the 6.775s ease by 3/8 of a point on Monday, to a closing bid level of 104 5/8, on top of the more than 2-point fall he had seen on Friday.

He saw round-lot volume of over $47 million on Monday - only around half of Friday's turnover, but still the most by far of any junk issue. He noted that the real volume level was probably well above that if all of the numerous smaller odd-lot trades were also factored in.

He also saw the 6 7/8% 2018 notes ease by about a quarter-point to just over the 107½ bid level on volume of over $11 million.

But there was relatively little activity - and none of it in round-lots - for the 7 5/8% July 15 bonds, which lost around a point, though only on scattered off-lot dealings, to end at 101¼ bid.

The two bonds for which there is a tender offer were but a sideshow, with the main focus on the 6.775s, especially after Friday's announcement calling the bonds anyway despite Chesapeake having lost in its bid for a preliminary injunction backing its tender plan.

"Guys have sort of made their bets on that one, I think," the first trader said. "Chesapeake is trying to take 'em out at par, and it's going to be up to the judge as to whether that is going to."

Existing CenturyLink trades

Away from the Chesapeake capital structure, several traders said that CenturyLink's new 5 5/8% notes due 2020 appeared too late in the session for any kind of trading.

However, they did see the Monroe, La.-based telecommunications company's outstanding 5.8% notes due 2022 down about a half-point on the day at 101 3/8 bid. Over $12 million of that paper traded on a round-lot basis, with a nearly equal amount also traded in smaller odd-lot transactions, a market source said.

However, there was very little activity in the company's 7.65% bonds due 2042, with only about $2 million of round-lot trading going on, though were still a lot of smaller transactions.

The bonds actually firmed by 1/8 of a point, going home a little above 96¼ bid.

Last week's deals step back

Traders noted that the deals that came to market last week were for the most part trading at easier levels Monday, in line with the overall softer tone in the junk world.

For instance, a trader said that "volumes were definitely lighter today," along with those easier levels.

He saw the bid side down about a half-point for two energy-related deals that had priced on Thursday: from Houston-based exploration and production company Aurora USA Oil & Gas Inc. and from Covington, Las.-based marine oilfield services provider Hornbeck Offshore Services, Inc.

"I think [that easiness] kept the trading volumes low. I think guys didn't want to sell the Hornbeck much below par," where that $450 million issue of 5% notes due 2021 had come to market. After pricing, they had traded a little higher, in a 1001/4-to100½ context, but on Monday were being quoted around 99 5/8 bid, 100 1/8 offered.

On the Aurora 7½% notes due 2020, an upsized $300 million of which had priced at par, "I think guys were still looking for the 102 level, and it just wasn't there today," the trader said.

Those bonds had gotten as good as a 102-to-102½ bid context on the break after Thursday's pricing, but were being quoted Monday at 101½ bid, 102¼ offered.

Among the deals that came to market on Friday, a trader saw Seitel's 9½% notes due 2019 at 101½ bid, 102 offered, down a point from the levels those bonds had hit after the Houston-based provider of seismic services to the energy industry had priced its $250 million issue at par.

He saw McGraw-Hill Global Education Holdings' 9¾% first-lien senior secured notes due 2021 at 99 5/8 bid, 100 1/8 offered, down about 3/8 of a point from the aftermarket levels it held after the New York-based digital learning company's downsized $800 million deal had had priced - though still up a little from that 98.637 pricing level, which yielded 10%.

And he saw Sun Products' 7¾% notes due 2021 at 101 3/8 bid, 101 7/8 offered on Monday, down a half-point from where he had seen those bonds on Friday, when the Wilton, Conn.-based maker of detergents and other household consumer products had priced its $575 million deal at par and the bonds had firmed smartly in the aftermarket.

Market indicators mixed

Overall, statistical junk performance indicators were mixed on Monday for a second consecutive session, although they generally reflected the broad market's easier tone.

The Markit Series 19 CDX North American High Yield index fell by 7/32 of a point on Monday to end at 14 3/16 bid, 104 5/16 offered, its second consecutive loss. On Friday, it had retreated by 3/16 of a point, breaking a two-session winning streak.

The KDP High Yield Daily index, though, scored its third straight gain on Monday as it improved by 2 basis points to close at 75.66, after having gained 2 bps on Friday. Its yield eased by 1 bp for a second straight session, ending at 5.49% for its third straight decline.

But the widely followed Merrill Lynch High Yield Master II index's 13-session winning streak, which had started back on Feb. 27 and continued through Friday, came to an end on Monday as the market measure came down by 0.008%. On Friday, it had risen by 0.084%.

That setback left its year-to-date return at 2.653%, down a little from Friday's 2.661%, which had been the index's ninth consecutive new peak level for 2013 so far.

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