Lyondell up on tender; Kodak seeks rescue, bonds jump; McJunkin pops on numbers; Huber prices

By Paul A. Harris and Stephanie N. Rotondo

Portland, Ore., Oct. 21 – The high-yield market finished out the week strong, traders reported, despite a subdued feeling.

“Somebody said ‘Did they call an early close and not tell us?’” quipped one trader. “That’s what it seemed like.”

Still, he remarked that there was “a very firm tone to the market.”

Meanwhile the week’s one and only issuer, JM Huber Corp., brought a $225 million issue of senior notes to market.

Lyondell Chemical Co., the wholly-owned subsidiary of LyondellBasell Industries, saw its bonds heading higher on news the company had launched a tender offer for some of its debt. The bonds were among the day’s top trading securities, according to traders.

Eastman Kodak Co. was also on the rise, extending gains that began at the start of the week all the way into Friday’s session. The debt was further boosted Friday on reports that the company was in talks with hedge funds to provide rescue financing.

Meanwhile, McJunkin Red Man Holding Corp. notes pushed up about 5 points on the day, following the release on Thursday of preliminary quarterly numbers.

Among market mainstays, Caesars Entertainment Corp. paper earned a couple points, though on no news.

Huber prices $225 million

One issuer – week’s sole issuer, as it happens – raised $223.5 million in the Friday primary market.

JM Huber priced a $225 million issue of 9 7/8% eight-year senior notes (B2/BB-/) at 99.323 to yield 10%.

The yield printed 12.5 basis points beyond the wide end of price talk, which had been set in the 9¾% area.

Bank of America Merrill Lynch, Citigroup and Wells Fargo were the joint bookrunners.

The Edison, N.J.-based supplier of engineered materials plans to use the proceeds to repay its outstanding revolver borrowings, with remaining proceeds to be used for general corporate purposes and to enhance liquidity in order to repay its notes, which mature in October 2012.

With Huber being the week’s lone deal, 2011 issuance notches up by a hair: $217.9 billion in 488 junk-rated, dollar-denominated tranches.

The week ahead

High-yield market players continue to keep an eye on Kinetic Concepts Inc.’s planned $1.65 billion equivalent of 7.5-year second-lien senior secured notes (B3/B), to be offered in dollar and euro denominations.

Earlier in the week there was a buzz in the market that Kinetic might price by the Friday close, even though the original timing on the deal set the pricing for the Oct. 24 week.

No price talk circulated on Friday. However discussion have taken place in the context of 10½% to 11%, according to a mutual fund manager who plays both junk bonds and leveraged loans.

The buy-side would like to see a higher rate on the deal, the investor said.

However that is something of a problem because the bridge loan backing the bonds is capped at 10½%, the source added.

The market could catch up to the deal, however, the buy-sider said.

That’s because high-yield funds, both in the United States and beyond, saw record inflows for the week to Wednesday, Oct. 19.

As reported earlier, global high-yield funds saw their biggest ever weekly inflow of cash: $3.16 billion, according to EPFR Global.

By another measure, high-yield mutual funds saw $2.275 billion of cash come in, according to a debt capital markets banker who was citing a weekly report by Lipper-AMG.

That was the biggest inflow since August 2003, the banker added.

Hence the buy-side is believed to be flush with inflows as well as coupon payments, with a very thin calendar and no expectation that the calendar will see a meaningful build-up anytime soon, the mutual fund manager said on Friday.

With the present volatility, the dealers are reluctant to bring offerings only to see those offerings face headwinds created by global financial news.

Firmness remains in market

Market indicators remained positive as the week came to a close. The KDP High Yield index rose to 72.22, yielding 7.78%, from Thursday’s reading of 71.64, with a 7.98% yield.

The CDX North America Series 17 High Yield index meantime gained ¾ point to 91¼ bid, 91½ offered.

Market “go-go” names such as HCA Corp. were benefitting from the general strength. One trader said the hospital operator’s 8% notes due 2013 increased to 103¼, while another said the issue was up 1¼ points to 103¼.

Community Health Systems Inc.’s 8 7/8% notes due 2015 were also better, though not as much as HCA. A trader said the issue added ½ point to 102 1/8 bid, 102 5/8 offered.

Ford Motor Co.’s 7% notes due 2031 meantime ended unchanged at 117 bid, 118 offered.

Lyondell tenders, notes climb

Lyondell Chemical announced a partial tender offer for $1.47 billion of its 8% senior secured dollar notes due 2017 and 8% senior secured euro notes due 2017 and up to $1.32 billion of its 11% senior secured dollar notes due 2018.

The company is also soliciting consents from registered holders to amend some terms of the notes and the indentures governing the notes to release some of the collateral securing the notes and modify other provisions relating to restrictive covenants.

The news resulted in gains for the company’s debt, which began trading at or near the tender price.

A trader called both the 11% notes and 8% notes up “a couple points,” the 11% notes at 112 bid, 112¼ offered versus 110½ bid, 111½ offered previously. The 8% notes meantime traded up to 113½.

Another trader said the debt was “up a bit and pretty active on the tender.” He saw the 8% notes up 3 points at 113½ and the 11% notes around 112.

A third trader called the 8% notes up 3¼ points on “pretty good volume” at 113½.

Lyondell is a chemical company based in Rotterdam, the Netherlands.

Kodak outlook improving

Kodak’s notes got a boost Friday on reports the company was in talks with two hedge funds to provide rescue financing.

A trader pegged the 7¼% notes due 2013 around 46. Another trader echoed that level, calling it up 3½ points.

The second trader also saw the 9¾% notes due 2018 at 73¾, up ¼ point.

Still, he noted that trading in the credit was not all that active.

At a third desk, the 7¼% notes were deemed up as much as 4 points at 47 bid.

The Rochester, N.Y.-based company’s debt began trading up Monday on word it had licensed its laser-projection patents to Imax Corp. News of the potential rescue package only served to increase investor confidence that the company would be able to increase its royalty revenue and thus narrow a cash shortfall.

News reports indicated that Kodak was talking to Cerberus Capital and Silverlight to provide up to $900 million in temporary financing.

Also, late Thursday it was reported that Kodak’s patent fight against Apple Inc. and Research in Motion Ltd. might not be concluded by the end of October as previously hoped. Earlier in the week, the U.S. International Trade Commission delayed ruling on the matter for another two months, allowing more time for the case to be assigned to a new judge.

McJunkin up on numbers

A trader said McJunkin Red Man’s 9½% notes due 2016 popped up 5½ points to end around 102.

The gains came after the company released estimated results for the third quarter on Thursday.

For the three months, the Houston-based company expects to post sales of $1.35 billion to $1.37 billion, up from $1.03 billion in the same quarter of 2010. The company said the increase was due to “strengthening in McJunkin’s upstream and midstream end markets, which have been driven largely by improved activity levels in the oil and natural gas shale regions and improvements in the overall business environment,” according to a press release.

Net income is estimated between $19.4 million and $23.4 million. That compared to a net loss of $10.5 million the year before and income of $4.7 million in the second quarter of 2011.

As of Sept. 30, total long-term debt stood at $1.51 billion, up from $1.36 billion on Dec. 31, 2010. Liquidity was about 4584 million, up from $531 million in December.

The backlog remained over $900 million.

McJunkin is a provider of pipe, valves and fittings and related products and services to the energy and industrial sectors.

Caesars’ bonds win

Caesars Entertainment’s 10% notes due 2018 began to trade actively again after taking a bit of breather at midweek.

“They weren’t all that active in the street, but the dealer community is trading a ton of them,” a trader said.

He called the bonds up about 2 points around 72.

Another trader said the issue was “up a couple points, straddling 73.”

A third trader deemed the notes 2½ points better around 72.

There was no fresh news out on the Las Vegas-based casino operator.

Dynegy exchange extended again

Dynegy Inc. paper was unchanged to better on the day, depending upon whom you asked.

One trader called the 8 3/8% notes due 2016 unchanged at 67½ and pegged the 7½% notes due 2015 at 69 5/8.

Another trader called the bonds up 1½ to 2 points on the day, the 8 3/8% notes at 67½ and the 7½% notes around 70.

The Houston-based power producer extended its $1.25 billion exchange offer for a second time on Friday, as the distressed swap has garnered significantly less than the company’s goal.

Dynegy had first extended the deadline on Oct. 13 to Oct. 20. At that time, holders had tendered $100.5 million of the sought notes, or about 8% of the total amount.

Late Thursday, the company issued a statement after the new deadline had passed, saying that only $90.8 million of the bonds had been validly tendered.

The new deadline is Oct. 27.

“Dynegy extended its exchange offer but it didn’t do much good,” wrote Gimme Credit LLC analyst Kim Noland in a report released Friday. “The deal has become even less popular with bondholders as fewer of them tendered as of Oct. 20 than had tendered previously.”

Noland added that it is believed bondholders are in negotiations with the company to sweeten the terms of the exchange.

“A default and bankruptcy likely would wipe out shareholder value so the architects of the distressed debt exchange (activist shareholders and their advisors) will be worse off if the exchange offer fails,” she wrote. “We don’t think the bondholders have much downside if the deal fails.”

Broad market ends strong

Elsewhere in the market, a trader said Clear Channel Communications Inc.’s 11% notes due 2016 were “definitely better,” moving up to 63 from 58 bid, 59 offered previously.

“So that’s having a nice day,” he said.

He also saw the 9% notes due 2021 up 3 points around 85.

“The whole market was strong,” he said. “A lot of things were having a good day.”

Another trader said Cemex SAB de CV’s 9½% notes due 2016 moved up 3 points to 85½.

That trader also saw Intelsat Corp.’s 11¼% notes due 2017 improving a deuce to 97¼.

On the downside were SLM Corp.’s 5% notes due 2013. A trader pegged the note at 99 7/8, down nearly a point.

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