Sally, Northern Oil, Inmet price, Sally trades up; busy Chesapeake firms, ATP slides again

By Paul Deckelman and Paul A. Harris

New York, May 15 - Sally Beauty Holdings LLC came to the high-yield market Tuesday with a quickly-shopped $700 million offer of 10-year notes. When the beauty supplies retailer and wholesale distributor's new bonds hit the secondary market, traders said they firmed nicely.

However, traders said that Northern Oil and Gas, Inc.'s new $300 million offering of eight-year notes initially pushed higher after that upsized deal was freed for aftermarket dealings, but quickly came off those peak levels to end little changed versus its issue price.

Canada's Inmet Mining Corp. priced a sharply upsized $1.5 billion issue of eight-year notes, but that deal appeared too late in the session for aftermarket action.

High-yield syndicate sources meantime heard two prospective issuers - chemical maker Univar Inc. and building materials producer Roofing Supply Group LLC - getting set to begin marketing their respective deals to investors, with pricing of each likely during the week ahead.

Away from the new deals, traders reported a mostly soggy, heavier market, with statistical performance indicators down again, in line with the weakness.

But Monday's busiest name - Chesapeake Energy Corp. - repeated that role on Tuesday, only this time, the big natural gas company's bonds, recently under pressure, were seen moving up from Monday's levels.

That was also the case for Residential Capital LLC's paper, which had fallen by several points Monday in brisk dealings after the mortgage provider filed for Chapter 11.

But there was no such relief in sight for ATP Oil & Gas Corp., which got hammered for a fourth straight session.

Inmet prices at wide end

A busy Wednesday primary market saw three issuers each bring a single-tranche deal to raise a combined total of $2.48 billion.

Inmet Mining priced an upsized $1.5 billion issue of 8¾% eight-year senior notes (B1/B+) at 98.584 to yield 9%.

The yield printed at the wide end of the revised 8¾% to 9% yield talk. Earlier talk was 8¼% to 8½%.

The deal, which was upsized from $1 billion, also underwent covenant changes.

In terms of the covenant changes, investors keyed on language in the original covenant package that would have given subsidiaries of the company the ability to pay a dividend which could impact collateral, according to sources on the buyside and sellside.

As to the hike in price talk, it mostly had to do with the upsizing of the deal to $1.5 billion from $1 billion, according to a syndicate source.

However an investor said that the high yield buyside's historic aversion to capital expenditures deals also pushed the price higher.

The deal played to a well-rounded book, the syndicate source added, meaning that in addition to high-yield accounts there were emerging markets investors in the book.

Inmet has assets in Panama.

J.P. Morgan, which will bill and deliver, and Credit Suisse were the global coordinators and joint bookrunners.

Bank of America Merrill Lynch, Citigroup, Morgan Stanley and RBC were also joint bookrunners.

The Toronto-based, mid-tier global copper and zinc mining company plans to use the proceeds to fund capital expenditures and for general corporate purposes.

Sally sees strong demand

In drive-by action, Sally Holdings LLC and Sally Capital Inc. priced a $700 million issue of 10-year senior notes (Ba3/BB+) at par to yield 5¾%.

The yield printed at the tight end of price talk that had been set in the 5 7/8% area.

"It was a solid deal," said a portfolio manager whose allocation was cut back.

Such cut-backs in allocations were the rule, according to a syndicate source, who added that the deal was five-times oversubscribed.

Bank of America Merrill Lynch, Credit Suisse, Wells Fargo, Deutsche Bank, Goldman Sachs. J.P. Morgan and RBC were the joint bookrunners.

The Denton, Texas-based company plans to use the proceeds to repay in full its senior secured term loan due 2013 and pay down about $90 million of revolver borrowings.

Northern Oil beats talk

Northern Oil and Gas priced an upsized $300 million issue of eight-year senior notes (Caa1/B-) at par to yield 8%.

The yield printed 12.5 basis points inside of the price talk which was set in the 8¼% area. The amount was increased from $250 million.

RBC was the bookrunner.

The Wayzata, Minn.-based independent oil and gas acquisition, exploration, development and production company plans to use the proceeds to repay revolver debt and for general corporate purposes.

Univar to start roadshow

Volatility emanating from Europe, which has adversely impacted stocks around the world, has thus far left the high-yield primary market more or less unscathed, sources said on Tuesday.

Thus far, they stressed.

The last two fund flows reported by fund-tracker EPFR Global, encompassing last Friday and Monday, were both modestly positive at $100 million for each day, sources said.

With respect to the massive $2.2 billion buildup of the forward calendar which took place on Monday, some market watchers were seeing the glass half full while others were seeing it half empty on Tuesday.

There is more than enough cash to soak up the present calendar, an investor remarked shortly after the market closed.

A sellsider agreed but noted that cash flows appear to be thinning.

Prospects for what lies beyond the present active calendar are less certain, the sellsider warned.

That calendar saw a modest build on Tuesday.

Univar plans to start a roadshow on Wednesday for a $750 million offering of seven-year senior notes.

The deal is expected to price during the middle part of the May 21 week.

Goldman Sachs, Bank of America Merrill Lynch, Morgan Stanley, Wells Fargo and Deutsche Bank are the bookrunners.

Proceeds, along with $750 million of new bank debt, will be used to fund a distribution to shareholders and refinance debt.

Roofing Supply eight-year deal

Roofing Supply Group plans to price a $200 million offering of eight-year senior notes during the May 21 week.

Goldman Sachs, Deutsche Bank, UBS, Credit Suisse and Citigroup are the joint bookrunners for the LBO deal.

Sally is beautiful

When the new Sally Beauty Holdings 5¾% notes due 2022 were freed for secondary market dealings, traders saw the issue move up after pricing at par.

One trader saw those bonds at 100¾ bid, 101¼ offered on the break.

A second saw them initially around 101 bid, 101½ offered, but then saw the new paper get as good as 101½ bid, 102 offered.

No gain for Northern Oil

In contrast, they saw Northern Oil and Gas' 8% notes due 2020 initially do well - but then fall back to trade around issue.

"Right out of the box, they moved up to 101 bid, 102 offered," one of the traders said, "but by the end of the day, ended up at 993/4-1001/4."

He suggested that this may have been because "everything seemed to come in at the end of the day."

At another desk, a trader called the movement in Northern Oil and Gas "interesting."

He said that "it's hard to say - I heard that a lot of accounts passed [on buying it] and then the deal broke, trading up at 1011/4. But I think the bid got whacked all the way back down to the issue price."

He quoted the new notes at 99 7/8 bid, 100 1/8 offered, straddling their par issue price.

The trader said he heard that "they had a big over-subscription for it, but I'm not sure where it came from" - in other words, what kind of accounts bought the deal. "There seemed to be a fair amount of flippers."

He said that the new deal's retreat was "partially due to that [the flippers] and partially it's a soft market - the calendar keeps building and the paper keeps coming, so the market is going to back up anyway.

"It just seemed odd to me that I heard a number of accounts were passing on the deal and it traded up pretty quickly and then back down pretty quickly.

The new deal, yet another trader said, was ending at 99 7/8 bid, 100 1/8 offered, "down a little bit - they were up higher earlier, as a matter of fact, up to 1011/4, but then they came back in."

He agreed with the first trader that: the market got a little sloppy at the end, following stocks, so everything came in a little bit."

Kodiak deal climbs

A trader said that Kodiak Oil & Gas Corp.'s 8 1/8% notes due 2019 "were doing okay," trading in a 104¾ to 105¼ context, "or maybe 104 5/8-105 1/8, where it broke last night," after the Denver-based energy exploration and production company's $150 million add-on to its existing bonds - upsized from an original $100 million - priced at 104 for a yield to worst of 7.234%.

"So that's still at a premium to where they priced it. It's hanging in okay."

There was no sign of any dealings in Monday's other deal - also a quickly-shopped add-on offering, from Wichita, Kan.-based alternative financial services provider Speedy Cash. That company priced a $90 million tranche of 10¾% notes due 2018 at 101.75% for a yield to worst of 10.293%, after upsizing it from an originally planned $75 million.

Friday deals trade around

Among the deals which came to market on Friday, a trader said that Penn Virginia Resource Partners, LP/Penn Virginia Resource Finance Corp.'s 8 3/8% notes due 2020 - which had not been seen in the aftermarket on Monday - were trading on Tuesday at 100¾ bid, 101 offered.

That is about the level at which the Radnor, Pa.-based coal and natural gas midstream company's $600 million offering had traded on Friday afternoon.

That deal - upsized from an originally announced $450 million - had priced earlier Friday at par.

A trader said that Libbey Glass Inc.'s 6 7/8% senior secured notes due 2020 "got a little weaker," quoting the Toledo, Ohio-based glassware maker's $450 million deal at 100¾ bid, 101 offered.

That transaction priced Friday at par, and then the bonds had moved up in the aftermarket to 101 5/8 bid, 101 7/8 offered.

They were still trading in that same neighborhood on Monday, a trader said, before easing a little Tuesday.

However, a second trader on Tuesday saw the bonds at 101 bid, 101 3/8 offered - down from the peak levels, but still "hanging in" above the 101 mark.

There was no activity seen on Tuesday in Friday's other issue, Magnum Hunter Resources' 9¾% notes due 2020.

The Houston-based independent oil and natural gas exploration and production company priced its $450 million deal on Friday at 98.646 to yield 10%. When the bonds were freed for aftermarket activity, they pushed up to 99½ on the break, and then got as good as 100¼ bid, 100¾ offered, traders said.

They were quoted Tuesday between 99 and 1001/4.

Market moves lower

A trader said that overall, "the market is slipping. You've got a combination of a heavy calendar, a heavy equity market and all of this noise overseas in Europe just weighing on the market a little bit.

"I think in a more normal market, it might have weighed a little more heavily."

He said that looking at the calendar, "you've still got a bunch of stuff on the slate to come, I think in the best case, the market's got to back up a little bit to accommodate it, and if nothing bad happens, stuff that got cheap will probably drift back up again.

"If the market blows up, you'll have all of that weird stuff going on - this trades down, that trades up. Who knows?"

But for now, he said, "it's all a little bit softer."

Market signposts still softer

Statistical indicators of market performance were in the red for a third consecutive session on Tuesday.

A trader saw the Markit Group CDX North American Series 18 High Yield Index drop by nearly 5/8 point on Tuesday to end at 93 bid, 93¼ offered, after having cascaded down more than 1 full point on Monday. It was the third consecutive loss and the eighth loss in the past nine sessions for the index.

The KDP High Yield Daily Index meanwhile dropped by 12 basis points Tuesday to close at 73.71, after having plunged by 23 bps on Monday. It was its third straight loss. Its yield rose by 2 bps, to 6.59%, after having ballooned upward by some 20 bps Monday.

And the widely followed Merrill Lynch U.S. High Yield Master II Index declined on Tuesday by 0.12%, its second straight retreat, including Monday's 0.201% easing.

Tuesday's downturn left its year-to-date return at 6.421%, down from Monday's 6.548%, and well down from the peak level for 2012 so far, 6.80%, set last Monday.

Chesapeake churns higher

Among specific issues, traders saw a rebound in the recently badly battered bonds of Chesapeake Energy Corp.

One said that "today's action was all about the calendar and Chesapeake."

He estimated that the Oklahoma City-based Number-2 U.S. natural gas producer's short-end bonds were up about a point and the longer end by 2 or 3 points.

"They bounced around and traded up today," another trader said, quoting the company's 7 5/8% notes due 2013 up by perhaps ¼ point at 100½ bid.

Those bonds were one of the most heavily traded issues on Tuesday in Junkbondland, with over $53 million having changed hands.

The trader saw Chesapeake's 6.775% notes due 2019 at 93½ bid, calling that up a point on the session.

A market source at another desk estimated the bonds up as much as 1½ points on the day, ending at 94 bid, after having gotten as good as 941/2, a 2-point intraday gain. Over $58 million of the '19s traded, topping the high-yield most-actives list.

A trader saw Chesapeake's 6 1/8% at 91¼ bid, up ¾ point, with over $33 million of those bonds moved.

Chesapeake's 9½% notes due 2015 gained 1 3/8 points, closing at 104 1/8 bid, after having gotten as high as above the 105 mark. Some $27 million of those bonds changed hands, although was something of a letdown after Monday, when volume rocketed up to $118 million, tops in the high-yield world.

Chesapeake's 6 5/8% notes due 2020 gained 1½ points to end at 93½ bid on volume of over $43 million -pretty busy, but still much calmer than Monday, when over $105 million of those bonds traded.

The bonds had fallen Monday amid investor uncertainty about the company's plans for continuing its ambitious slate of asset sales needed to provide liquidity. Company executives sought to allay market fears with a conference call on which they said liquidity would remain solid, especially with a new $3 billion term loan. That loan was upsized to $4 billion on Tuesday, was priced and began trading in the bank loan market.

ResCap rebounds

As was the case on Monday, Chesapeake's bonds dominated the most-actives list; one of the few non-Chesapeake credits in the Top Ten was Residential Capital LLC's 9 5/8% notes due 2015, which had fallen badly on Monday following the news of the Minneapolis-based mortgage lender's bankruptcy filing. The securities were off about 4 or 5 points that session.

ResCap regained some of that lost ground on Tuesday, with a trader calling the bonds 21/2-point gainers, up to the 96½ level.

However, later in the session, another trader said the bonds were up by perhaps 1 point, pegging them at 95 bid. Over $50 million of those bonds changed hands on Tuesday, one of the day's most active junk issues.

While ResCap's bonds were rising, those of its corporate parent, Detroit-based automotive lender and bank operator Ally Financial Inc. were headed in the opposite direction, though on far less volume.

A market source saw Ally's 8% notes due 2031 down ¾ point at 116½ bid, on volume of $10 million.

At another desk, the bonds were quoted at 117 bid, down 2 points on the day.

Ally executives held a conference call on Tuesday in which they explained the company's support for its star-crossed unit's bankruptcy filing, and outlined the expected benefits of ResCap's expected sale of much of its mortgage business and Ally's own planned sale of its non-U.S. operations (see related story elsewhere in this issue).

ATP remains awful

For a fourth straight session, ATP Oil & Gas' bonds were both big traders and big losers, high up on the most actives list even as the Houston-based offshore energy exploration and production operator's 11 7/8% senior secured second-lien notes due 2015 continued to move lower, price-wise.

A trader saw those bonds fall to 61 7/8 bid, well down from levels above 64 at which the bonds had finally finished on Monday, after being battered over the previous several sessions on disappointing earnings. Over $34 million of the bonds were seen having traded.

"They're down again," another trader said, noting that the bonds had traded over the past week in a 60 to 75 range, but now, after four days of earnings-related carnage "they're awfully close to 60."

The bonds have backtracked since the company released its first quarter results after the financial markets closed last Wednesday, followed by a Thursday conference call.

In the latest period, ended March 31, ATP recorded a net loss attributable to common shareholders of $145.1 million or $2.83 per basic and diluted share - wider than the $119.5 million or $2.34 per basic and diluted share of red ink seen a year ago, in the 2011 first quarter.

Revenue of $146.6 million fell well short, by $32 million, of Wall Street expectations.

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