Kratos, Contour, Hellenic cap $10.8 billion week; new Contour, Kratos gain; First Quantum busy

By Paul Deckelman and Paul A. Harris

New York, May 9 - The high-yield primary market closed out the first full trading week in May on a solid note, with some $1.75 billion of new paper seen by syndicate sources as having come to market on Friday, although that was well under the astounding $6.3 billion of new U.S. dollar-denominated, fully junk-rated issues from domestic or industrialized-country borrowers that had priced on Thursday - the second-biggest single-day volume total so far this year, according to data compiled by Prospect News.

The big deal of the day came from San Diego-based high-tech defense contractor Kratos Defense & Security Solutions, Inc. which brought $625 million of five-year secured notes to market. Those bonds priced at a discount to par, but traders saw them having firmed smartly in the aftermarket.

ContourGlobal Power Holdings SA, a New York-based international power-generating company threw the switch on its own $400 million five-year secured offering, and those bonds too were seen solidly better in secondary dealings.

Greek energy refiner Hellenic Petroleum SA did a $400 million two-year unsecured deal.

There was also a pair of relatively smallish drive-by offerings that priced after having been quickly shopped around

The day's deals swelled the week's new-paper total to some $10.8 billion, according to the Prospect News data - up from the $6.28 billion that had priced in 13 tranches last week, ended May 2.

They also lifted year-to-date issuance to just under $121 billion in 232 tranches, running about 4% behind the $126 billion that had priced in 282 tranches by this point on the calendar last year.

Among recently priced deals, traders saw busy action at solidly higher levels Friday for First Quantum Minerals Ltd., whose eight-year note deal had gotten done on Thursday.

Away from the primary sphere, traders saw continued busy dealings in Forest Oil Corp.'s 2019 notes - off the highs they had hit earlier in the week on news the energy operator is to merge with another company, but still holding most of those strong gains.

Statistical market performance indicators rose across the board Friday after having been mixed on Thursday, and were up as well versus where they had closed out the previous week, for a second straight time.

Kratos at a discount

Four issuers completed single-tranche, junk-rated, dollar-denominated high-yield deals on Friday.

Price talk circulated widely on three of the four. Of those, one came inside of talk, one came at the tight end and one came atop talk.

Two of the four were quick-to-market deals. There were no upsizings.

Kratos Defense & Security priced a $625 million issue of 7% five-year first-lien senior secured notes (B3/B) at 98.966 to yield 7¼%.

The yield printed at the tight end of the 7¼% to 7½% yield talk. The price came in line with talk which also specified a slight discount.

SunTrust was the lead bookrunner for the debt refinancing.

ContourGlobal inside talk

ContourGlobal Power priced a $400 million issue of five-year senior secured notes (B3/BB-) at par to yield 7 1/8%.

The yield printed 12.5 basis points inside of the 7¼% to 7½% yield talk.

Timing was moved ahead, as the offer was previously scheduled to be in the market through the weekend.

Goldman Sachs was the bookrunner.

The New York-based operator of power generating stations plans to use the proceeds to repay debt, to fund acquisitions and development projects and for general corporate purposes.

Hiland Partners drive-by

Hiland Partners, LP priced a $225 million issue of eight-year senior notes (B2/B) in a quick-to-market Friday transaction, selling the securities at par to yield 5½%.

BofA Merrill Lynch, Wells Fargo, RBS and US Bancorp were the joint bookrunners.

Comstock taps 7¾% notes

Comstock Resources, Inc. priced a $100 million add-on to its 7¾% senior notes due April 1, 2019 (B3//) at 105.75 to yield 5.325%.

The reoffer price came on top of price talk.

BofA Merrill Lynch and BMO were the joint bookrunners for the quick-to-market debt refinancing deal.

Paroc two-part deal prices

Not long ago the European high-yield primary market could be relied upon to pass Friday sessions in blissful repose.

That is no longer the case.

Friday's news flow from Europe was steady and strong.

Paroc Group OY sold €430 million of six-year senior secured notes (B2/B) in two par-pricing tranches.

Both tranches came at the tight ends of talk.

The deal included a €230 million tranche of fixed-rate notes that came at par to yield 6¼%, at the tight end of the 6¼% to 6½% yield talk.

In addition, Paroc priced a €200 million tranche of floating-rate notes at par to yield three-month Euribor plus 525 basis points, at the tight end of the Euribor plus 525 to 550 bps spread talk.

Goldman Sachs, ING and JPMorgan were joint physical bookrunners for the debt refinancing deal.

Soho House upsizes tap

Soho House priced an upsized £30 million add-on to its 9 1/8% senior secured notes due October 2018 (Caa1/B-) at 104.75 to yield 7.819%.

The deal was increased from £25 million.

The reoffer price came on top of price talk.

Imperial Capital LLC ran the books.

Proceeds will be used to repay debt and for general corporate purposes.

Hellenic Petroleum prices

Hellenic Petroleum priced a $400 million issue of non-rated two-year senior notes at par to yield 4 5/8%.

The yield printed at the tight end of yield talk in the 4¾% area.

BNP Paribas, Credit Suisse, Eurobank and HSBC were the bookrunners.

The Greece-based refiner plans to use the proceeds to refinance debt and for general corporate purposes.

Glasstank starts roadshow

There was more high-yield news out of Greece on Friday.

Glasstank BV began a European roadshow on Friday for a €180 million offering of five-year senior secured notes (Caa1//) via Citigroup.

The Rotterdam, Netherlands-based glass container and tableware company plans to use the proceeds to refinance debt and for general corporate purposes.

Glasstank operates as Yioula Glass in Greece and the Balkans.

Johnston plans £220 million

Johnston Press plc plans to price a £220 million offering of five-year senior secured notes (B3//) during the week ahead.

Initial guidance has the notes pricing at a discount to yield 8¾% to 9%, according to a market source.

JPMorgan, Credit Suisse and Lloyds are managing the sale.

Proceeds will be used to refinance debt and service pension obligations.

Kratos issue improves

When the new Kratos 7% first-lien senior secured notes were freed for secondary dealings, traders saw the defense contractor's new paper having firmed solidly from their discounted 98.966 pricing level.

One trader saw the bonds moving around in a par to 101 context, while two others saw them even better than that. One pegged the new bonds trading between 100¾ and 1011/4, while a second saw them at 100¾ to 1011/2.

ContourGlobal climbs

A trader quoted ContourGlobal's new 7 1/8% senior secured notes due 2019 at 101 3/8 to 10 7/8.

That was up from the par level at which the global power producer's $400 million deal had priced.

Hiland trades higher

Among the drive-by deals, Hiland Partners' 5½% notes due 2022 were seen at 101 bid, 101½ offered, a market source said - well up from the midstream energy partnership's par pricing level.

From that same energy sector, oil and gas exploration and production company Comstock Resources' 7¾% add-on notes due 2019 firmed to a 106 to 106½ context, after pricing at 105.75.

First Quantum a busy name

Among the deals that priced on Thursday, Canadian copper mining concern First Quantum Minerals' 7¼% notes due 2022 was one of the busiest issues of the day in Junkbondland; a market source saw over $21 million of those new bonds having changed hands, going out up ¾ point on the day at 102½ bid, up ¾ point.

The company had priced its $850 million offering at par, after upsizing the transaction from an originally planned $650 million.

The bonds firmed smartly to around the 102 level when they were freed for initial aftermarket dealings on Thursday, and added to those gains on Friday, another market participant said.

Ortho trades off

The same could not be said for another deal that had priced on Thursday and had then moved up solidly in the aftermarket - Ortho-Clinical Diagnostics, Inc.'s 6 5/8% notes due 2022.

The Raritan, N.J.-based medical device manufacturer had priced $1.3 billion of those notes at par, after the issue was upsized from an originally announced $1.15 billion, and the bonds had firmed to levels as high as 101½ bid, 102 offered.

But on Friday, traders saw those bonds having slid from those highs. One saw them at 100½ bid, 100¾ offered.

A second quoted the bonds going home at 100 3/8 bid, 100 7/8 offered; he called that down more than 1 full point on the session.

Recent Clear Channel calmer

Going back a little further, a trader said that Clear Channel Communications Inc.'s bonds "have been pretty active, but they were on the quieter side today."

He said the company's new 10% notes due 2018 "have been down, but they've kind of rebounded a little bit."

The San Antonio-based diversified media company sold $850 million of those notes last week via its CCU Escrow Corp. subsidiary, pricing those bonds at par in a quick-to-market deal on April 28 after the offering was more than doubled in size from an originally announced $400 million.

Despite a hefty 10% coupon, the issue never caught fire in the aftermarket and within a few days, had fallen as low as 95¾ bid.

However, on Friday, the notes were ending trading somewhere between 97 and 971/2, which the trader called about unchanged on the day.

Forest Oil still busy

Away from the dominant new-deal segment of the market, a trader said that Forest Oil's 7¼% notes due 2019 were "right up around 99½ to par," with over $20 million traded, "so they're holding."

He noted that earlier in the week, the bonds had languished in the high 80s, after having been beaten down to those levels from around par on poor fourth-quarter earnings they reported at the end of February.

The Denver-based oil and gas exploration company's bonds had zoomed from those lows up to above par on Tuesday after the company announced that it will merge with the more financially stable Sabine Oil & Gas Co. LLC in an all-stock deal. Although formally described as a merger of equals, the transaction is essentially an acquisition, as Sabine shareholders will own about three-quarters of the combined company and Forest holders one-quarter.

Volume was huge following the announcement, with over $154 million of the 7¼% notes changing hands, and over $106 million of the 7½% notes due 2020, which soared from about 88 bid to around the 104 bid mark.

Although both bonds subsequently eased from their post-news highs, they were still seen holding on to the vast bulk of those robust gains.

"So that was a good one," the trader said. If an investor had the Forest paper in his portfolio at the beginning of the week, "You're a happy guy at the end of the week."

Molycorp continues retreat

Elsewhere, a trader said that Molycorp Inc.'s 10% notes due 2020 "were down a bit [Thursday], trading down to around 93½ bid, after the company reported numbers. Over $21 million had changed hands.

On Friday, he said, "it was down a little more, post the numbers," going out at 92 bid, on volume of over $9 million.

The bonds had begun the week at 97¾ bid - but began sliding around mid-week after the miner of rare-earth minerals posted disappoint quarterly numbers.

The Greenwood Village, Colo.-based mining company reported a wider first-quarter loss on Wednesday. It adjusted earnings estimates by 5 cents and missed on revenue. It lost $86 million, or 40 cents per share, compared to a loss of $38.2 million, or 27 cents a share, in the year-earlier period.

Revenue fell 18.5% to $118.5 million, short of expectations for $144.48 million in revenue.

The company said that the decrease in revenue was largely driven by shifting product mix with higher sales volumes from its chemicals and oxides segment, offset by softened pricing for rare earths and magnetic powders, and lower sales volumes in its resources segment.

Caesars a little less active

Caesars Entertainment Corp.'s bonds have recently been busy, with several of its various issues at or near the top of the Most Actives list but on Friday a trader said that he "didn't see too much in the name."

He did acknowledge that about $28 million of its 11¼% notes due 2017 had traded, adding "but that one always does have good volume."

The notes were trading between 90 and 91, with a quote of 90 bid being up ½ point.

He said that in contrast, the company's 10% notes due 2018 saw "not much activity, just a couple million of those," trading around 44 bid., which he said was pretty much unchanged versus Thursday's close.

"So the 111/4s seemed to be where all of the activity was, that I saw."

Another trader saw the company's 8½% notes due 2020 trading at bid levels around 77, calling that pretty much unchanged.

He saw the 10% notes "a little lower again," around 43½ to 441/2.

Yet another market source saw the 8½% paper down ¼ point at 78 bid, with over $13 million having traded.

He said that the 111/4s were up 5/8 point at 90¼ bid, seeing over $27 million having changed hands.

The volume figures stood in stark contrast to the more than $92 million of the 11¼% notes, $87 million of the 10% notes and $57 million of the 8½% notes that had traded around on Wednesday after the recapitalization plan was announced. Over $39 million of Caesars' 9% notes due 2020 had also traded at mid-week.

Caesars' investors meanwhile continued to mull over the Las Vegas-based gaming giant's recapitalization plan.

Under the plan that unveiled late in the session on Tuesday, its Caesars Entertainment Operating Co. subsidiary sold a 5% equity stake to institutional investors. The "opco" will also secure a new $1.75 billion first-lien term loan, which will be used to redeem 2015 maturities and to repay existing bank debt.

To that end, the company also announced a tender offer for the 5 5/8% and 10% notes due 2015.

As for the equity sale, in doing so the parent company released its guarantee of the opco bonds. That means that bondholders can no longer place a claim against the parent company's assets in the event of a restructuring. It could also give them less bargaining power in a restructuring.

Bondholders are already decrying the company's sale of four properties to its Caesars Growth Partners affiliate - another important feature of the recapitalization plan - alleging that it is a fraudulent transfer that strips assets from the opco.

The bondholders also claim that the opco is insolvent.

Indicators up on day, week

Statistical junk performance indicators improved on Friday after having turned mixed on Thursday -which followed another session on Wednesday when the market signposts were higher across the board.

For a second straight Friday, they were also up all around versus the levels at which they had ended the previous week.

The Markit Series 22 CDX North American High Yield Index gained 1/32 point on Friday, its third consecutive advance, to 107 bid, 107 1/16 offered. It had also been up by 1/32 point on Thursday.

The index was also up from 106 7/8 bid, 106 15/16 offered, where it had finished out the previous week, ended Friday May 2. It had been higher on the week at that time.

The KDP High Yield Daily Index posted its first gain on Friday after one loss edging up by 1 basis point to end at 74.99. On Thursday, it had lost 4 bps.

Its yield narrowed for a fourth straight session, coming in by 3 bps to end at 5.12%. On Thursday, it had declined by 1 bp.

Those levels compared favorably with the week-earlier 74.94 index reading and 5.18% yield, which, in turn, had also been better than the previous week's.

The widely followed Merrill Lynch High Yield Master II Index rose for a 10th session in a row on Friday, gaining 0.029%. On Thursday, it had been up by 0.095%.

Friday's gain raised the index's year-to-date return to 4.097% - its 10th consecutive new peak level for 2014 so far. The prior high point had been Thursday's 4.067%.

For the week, the index was up by 0.282% - its eighth consecutive weekly gain. Last week, it had risen by 0.249%, lifting its year-to-date return to 3.804%.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.