MetroPCS bonds pop on merger chatter; Sprint declines; Cenveo dips as rating up for review

By Stephanie N. Rotondo and Paul A. Harris

Phoenix, Oct. 2 - The high-yield bond market was on the softer side on Tuesday, coming off of Monday's highs.

One trader noted that there was a "decent-sized seller in the market from some fund" that was unloading product into the marketplace.

Meanwhile, new issues continued to churn out at a rapid pace.

In the secondary, the sector du jour was wireless telecommunications, as T-Mobile was said to be nearing a deal with MetroPCS Communications Inc. The news was generally positive for the space, but it did not do much for Sprint Nextel Corp.

Elsewhere, Cenveo Corp.'s debt dipped as the company's ratings were placed on watch with negative implications.

And, Alpha Natural Resources Corp. remained on the active side, though essentially unchanged on the day. Natural gas prices have been inching up of late, leaving some to wonder if a return to coal usage is in the offing.

Market indicators reverse

The high-yield market turned downward on Tuesday after gaining in the previous session.

The CDX North American Series 19 index dropped to 99¾ bid, par offered. The KDP High Yield Index saw its yield widen to 6.04%, at 74.22. That compared to 74.31, with a 6.04% yield, on Monday.

CHC taps 9¼% notes

The primary market remained busy on Tuesday.

Dollar-denominated issuance came to $2.62 billion, as three issuers brought a combined four tranches.

CHC Helicopter SA priced a $200 million add-on to its 9¼% senior secured notes due Oct. 15, 2020 (B2/B+) at 101.

The reoffer price, which came at the cheap end of the 101 to 101.5 price talk, rendered a 9.03% yield to worst and a 9.071% yield to maturity.

Morgan Stanley, HSBC, RBC and UBS were the joint bookrunners for the quick-to-market debt refinancing deal.

Vanguard prices atop talk

Vanguard Natural Resources, LLC and VNR Finance Corp. priced a $200 million add-on to their 7 7/8% senior notes senior notes due April 1, 2020 (existing ratings Caa1/B-) at par to yield 7 7/8%.

The reoffer price came on top of price talk.

RBC was the left bookrunner for the quick-to-market tap. Citigroup, Credit Agricole, Deutsche Bank, RBS, Wells Fargo, J.P. Morgan and UBS were the joint bookrunners.

The Houston-based oil and gas production and development company plans to use the proceeds to repay revolver debt.

Algeco multi-tranche deal

Algeco Scotsman Global Finance plc priced a multi-currency, multi-tranche high-yield bond deal.

The transaction included an upsized $1.075 billion issue of six-year senior secured notes (B1/B+), which was priced at par to yield 8½%.

The tranche was upsized from $1.04 billion. The yield printed 25 basis points higher than the 8¼% yield talk. That talk had been revised upward from earlier talk of 7¾% to 8%

Algeco Scotsman also priced a €250 million tranche of eight-year senior secured notes (B1/B+) at par to yield 9%, in line with final yield talk, which had the euro-denominated notes coming 50 bps behind the dollar-denominated notes. Earlier yield talk was 8% to 8¼% on the euro-denominated tranche of senior secured notes.

Behind the two secured tranches, the company also priced a slightly downsized $745 million tranche of seven-year senior unsecured notes (B3/B-) at par to yield 10¾%.

The yield printed 25 basis points higher than the 10½% yield talk, which had been revised upward from earlier yield talk of 9¾% to 10%. The tranche size was decreased from $750 million.

A propose euro-denominated tranche of senior unsecured notes was withdrawn from the market.

The deal underwent extensive covenant changes, market sources said.

Deutsche Bank was the left bookrunner.

RBS, Goldman Sachs, Morgan Stanley, Bank of America Merrill Lynch, Barclays, Citigroup, UBS and Wells Fargo were the joint bookrunners.

Proceeds will be used to repay debt and to fund the acquisition of Ausco Modular.

SPCM upsizes

French specialty chemicals manufacturer SPCM SA priced an upsized €300 million issue of 73/4-year senior notes at par to yield 5½%.

The yield printed on top of the yield talk.

BNP Paribas was the left bookrunner for the debt refinancing deal which was upsized from €250 million.

Credit Agricole was the joint bookrunner.

Alta Mesa 9 5/8% notes

Alta Mesa Holdings, LP and Alta Mesa Finance Services Corp. will host an investor call at 11 a.m. ET on Wednesday to discuss a $100 million add-on to the company's 9 5/8% senior notes due Oct. 15, 2018 (expected ratings B3/B).

The deal is set to price on Wednesday afternoon.

Wells Fargo is the left bookrunner for the debt refinancing. Citigroup and Mitsubishi are joint bookrunners.

David's Bridal eight-years

David's Bridal Inc. plans to price $270 million eight-year senior notes before the end of the week.

Morgan Stanley, Bank of America Merrill Lynch, Barclays, Goldman Sachs, Credit Suisse and Deutsche Bank are the joint bookrunners for the LBO deal.

Shelf Drilling placement

In the private placement market, Shelf Drilling International Holdings, Ltd. plans to price a $475 million offering of six-year senior secured notes late in the Oct. 8 week.

The deal will be marketed alongside a $75 million 5.5-year term loan.

Jefferies is the placement agent for the notes and the arranger for the loan.

The notes, which are formatted as a Regulation D private placement, come with 2.5 years of call protection.

Proceeds, along with $645 million of equity, will be used to finance the acquisition of 38 drilling rigs from Transocean Inc. for $1.05 billion.

MetroPCS boosted by merger

MetroPCS debt was "up a bunch" Tuesday following news the company was nearing a deal with Deutsche Telekom's T-Mobile.

A trader saw the 6 5/8% notes due 2020 moving up 4 to 5 points, ending around 109½ bid, 110 offered. The 7 7/8% notes due 2018 were "only up a couple points" to 110 bid, 110½ offered.

Another trader called the 6 5/8% notes up 3½ points around 109.

The news was generally positive for the wireless sector at large. Leap Wireless International Inc.'s Cricket Communications Inc.-linked 7¾% notes due 2020 gained over a point to close around 991/2, according to a trader.

Another trader echoed that level, calling it up a point.

Sprint Nextel bonds, however, were not reaping the benefits.

A trader said Sprint bonds were "all off" a quarter to three-quarters of a point. He pegged the 6.9% notes due 2019 at 103 7/8, down from 104½ previously. The 6 7/8% notes due 2028 fell to 92¼ and the 6% notes due 2016 were off half a point at 103.

The 7 3/8% notes due 2015 were meantime unchanged at par 1/2.

Another market source deemed the 6% notes down nearly a point to 103½ bid.

The market seemed to have an overall negative view of what a T-Mobile/MetroPCS merger would do for Sprint. Sprint has recently been touted as being in a prime position to start looking for merger opportunities with smaller carriers such as MetroPCS and Leap. But T-Mobile is also looking for the same opportunities.

However, a T-Mobile/MetroPCS combination could also bring positive effects for Sprint. One market watcher compared the proposed takeover to Sprint's own merger with Nextel in 2005, which has played a large role in keeping Sprint down.

If T-Mobile and MetroPCS are unable to effectively synergize with each other, it could be a drag on the company, which then might result in customer turnover toward Sprint.

T-Mobile executives are expected to meet at the Bonn, Germany headquarters on Wednesday to finalize its proposal.

Cenveo slips on review

Cenveo, a Stamford, Conn.-based manager and distributor of print and related offerings, saw its debt dip on Tuesday as Standard & Poor's said it had placed the company's ratings on CreditWatch.

One market source called the issue down half a point, trading around 85. Another also said the paper was half a point weaker, but at 86 bid.

S&P based its action on the belief that Cenveo will face liquidity challenges in the near term, especially ahead of a nearly $100 million maturity of its 7 7/8% notes coming due in mid-2013.

Alpha Natural goes up

Alpha Natural's "bellweather" 6% notes due 2019 was on the active side Tuesday, with at least $13 million of the bonds changing hands, a trader said.

But he called the paper unchanged at 84 1/2.

Another market source saw the 6 ¼% notes due 2021 rising a bit to 84 bid.

There was no fresh news out on the coal producer, but rising natural gas prices could be a positive for the sector as a whole. The typically cheaper natural gas has taken market share away from the coal arena of late, so a significant price increase could help boost demand for coal.

PDVSA loses grip

A trader said bonds of Petróleos de Venezuela SA remained liquid Tuesday as an election in Venezuela nears.

About $70 million of the 9¾% notes due 2035 changed hands, he said, seeing the issue fall a point to 843/4. The 8½% notes due 2017 were down over 1½ points at 89 3/8, on about $40 million traded.

Another "$20-odd million" of the 9% notes due 2021 turned over, down over a point to 843/4.

A regime change in the country - currently headed by Hugo Chavez - could mean big changes for PDVSA, which is responsible for propping up many of the country's social programs. The opposition, however, wants to take the political aspect of the company out of the equation and also intends to attempt to rework supply contracts with allies such as China.

Last year, PDVSA exported about half of its crude oil out of the country. In many cases, the oil was paid for not in cash, but with goods or services. Combined with the company's social program responsibilities, this has been a drain on cash flow.

Fortescue climbing higher

A trader said Fortescue Metals Group Ltd.'s 8¼% notes due 2019 were up a point, trading in a 98-98½ context.

"They are out in the market right now with their new $4.5 billion loan," the trader noted.

Fortescue is an Australian iron ore mining company.

Kodak paper eases

Eastman Kodak Co.'s bonds weakened during the day's session, according to traders.

The company is currently in bankruptcy and has been selling of assets in order to exit Chapter 11 protections.

A trader said the 9¾% second-lien notes due 2018 fell to 62 bid, 63 offered.

Another market source saw the 7¼% notes due 2013 dropping a point to 11½ bid.

Because it is in bankruptcy, Kodak is required to file monthly operating reports. August's report showed that the company had burned through about $92 million in cash, up from the average burn of about $70 million per month.

The company had $345.8 million in cash and equivalents as of the end of August.

Kodak is based in Rochester, N.Y.

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