Helix prices upsized $550 million deal; Quebecor, Tropicana up again; ResCap lower

By Paul Deckelman and Andrea Heisinger

New York, Dec. 18 - Helix Energy Solutions Inc. was heard by high yield syndicate sources Tuesday to have priced an upsized $550 million issue of eight-year bonds; the pricing of the last scheduled deal on the forward calendar likely rings down the curtain on primary market issuance for 2007, barring any opportunistically marketed quickie deals that may pop up in what is expected to be a nearly deserted primary from now through the end of the year.

In the secondary market, traders said not too much was going on, with a lot of denizens there just going through the motions of squaring their books and getting their ducks in order ahead of the end of the year. One of the few features seen was Quebecor World Inc.'s bonds, seen having firmed up from the low levels they hit last week when the Montreal-based commercial printer announced the failure of its efforts to sell its European operations - a planned sale that was to have given the company a hefty cash wad for debt repayment.

There was further upside movement in Tropicana Entertainment LLC's bonds, which are bouncing back from the lows which they too hit last week after New Jersey state gaming regulators denied the company's application to renew the license of its Atlantic City casino and instead ordered a trustee to take control of the property and sell it to someone else.

On the downside, Residential Capital LLC's bonds were seen down several points amid continued investor angst over the big mortgage lender's prospects. That went hand in hand with a new government report showing housing starts down in November from year-ago levels - while permits for future starts were way off, potentially bad news for builders like Hovnanian Enterprises Inc.

Helix's $550 million

Helix's, an offshore oil and gas facility company, priced an upsized $550 million in 9½% eight-year senior notes at par to yield 9½%.

It was launched at $500 million.

The issue came at the wide end of price talk that came out Monday at 9¼% to 9½%.

Market sources said it wasn't all that surprising to see the deal price where it did, since it was within guidance.

Banc of America Securities LLC ran the books for the Rule 144A offering.

The deal had earlier been restructured, with a tranche of floaters due 2014 eliminated.

That was about the extent of high-yield action for the day, and could be it for the rest of the year sources said.

"It's pretty slow," a market source said.

"It's starting to look like there might not be much more this year."

Another source also predicted a quiet end to the year.

"Everybody's getting their vacations out of the way before the end of the year, so we're probably not going to see anything. I think it will be pretty quiet."

Indexes show lackluster session

Back among the established issues, a trader saw the widely followed CDX junk bond performance index up 1/8 point on the day at 95 5/8 bid, 95 7/8 offered, while the KDP High Yield Daily Index declined to 0.06 to 77.79. Its yield rose 1 basis point to 8.69%. In the broader market, declining issues again led advancers by a nearly two-to-one margin. Overall market volume was up 29% from Monday's levels.

"The market was a little bit better for the day," a trader said, "but there was not much going on. I think a lot of guys are closing down for the year."

He said that the Helix Energy deal was the only big thing going on in the market.

"It sounded like there was some ambivalence about it [on the part of potential buyers], but it sounded like they were going to get it done." When the somewhat upsized deal did in fact price late in the session, it was too late for any kind of aftermarket activity.

Quebecor coming back

A trader said that the Quebecor bonds, "which had been beaten up, they rallied 3 or 4 points today."

He said there was "no real reason for that - I think they just got oversold."

He saw the company's 8¾% notes due 2016 at 76.5 bid, 77.5 offered and its 9¾% notes due 2015 at 79 bid, 80 offered.

A market source saw its widely traded 6 1/8% notes due 2013 get as high as 83 bid, 84 offered before going home at 80 bid, up from at the 78-79 context in which the bonds had traded on Monday.

A market source at another desk saw its 4 7/8% notes due 2008 firming to 92 bid.

The Quebecor bonds had fallen sharply - with the 6 1/8s plunging into the mid-70s from prior levels at or above 80 - when the company announced its decision last week to not go continue with its previously announced initiative to sell its European operations to Netherlands-based RSDB Group for the equivalent of $341 million in cash, stock and debt, once the prospective buyers' shareholders turned thumbs-down on the deal. The cash portion of the deal, totaling about $213 million, would have been used by Quebecor to pay down its debt. Quebecor would have also received a $50 million 8-year note repayable from 2011 to 2015, as well as approximately 1.4 million new shares of RSQ - the newly-merged company that would have been created by the combination of Quebecor Europe and RSDB - representing a fully diluted 29.9% of its share capital post-closing. RSDB was also to have assumed the Quebecor European unit's pension, legal, and other liabilities.

Following the rebuff by RSDB's stockholders, Quebecor said that it "will continue to actively explore its strategic options for its European operations, including consolidation opportunities and other initiatives to enhance value." It further said in its statement that it is "currently evaluating and implementing a variety of options that should compensate for the sale proceeds that will no longer be realized as a result of this transaction not proceeding, including the implementation of new accounts receivable financing programs in Europe," and said that management, the board of directors and Quebecor's independent financial advisor "continue to actively explore and evaluate financing and other alternatives to further strengthen the company's balance sheet and liquidity."

The defeated deal represented the second straight failed effort to improve the company's finances; last month, Quebecor World withdrew a refinancing plan under which it would have offered C$250 million of stock and $500 million of debt.

Tropicana bonds continue to firm

A trader saw Tropicana's 9 5/8% notes due 2014 at 67 bid, 68 offered versus a 64 bid, 65 offered context on Monday, saying the bonds got a boost , "up a couple of points today, because they paid their coupon," which came due Dec. 15, "and so that gives them some room to maneuver. The thought is that they'll probably sell some assets and pay off the [senior debt] holders."

He said he wasn't really certain of what the outcome would be for subordinated debt holders, such as the holders of the bonds; "that remains to be seen - but people took some comfort in the fact that they did pay their coupon and that they're going to try to turn things around."

At another desk, a trader also saw the bonds at the 67 bid, 68 offered level, while another market source saw the Tropicana bonds get as good as 69, before coming off that peak to end up more than 1¼ points at 67.5.

The embattled gaming company - stung by the New Jersey Casino Control Commission's overwhelming vote last week to strip the company of its gaming license and order the casino sold to someone else - recouped some of its cachet in the eyes of bondholders by making the Dec. 15 payment on the bonds. It also said that it would sell casino properties in Indian and Mississippi, in addition to the sale of the Atlantic City resort - with proceeds going to repay bank debt.

ResCap in retreat

Elsewhere, Residential Capital's bonds were lower - a trader saw its 8% notes due 2013 fall to 65 bid, 67 offered from 69 bid, 71 offered.

Another source saw ResCap's 8 3/8% notes due 2015 lower by 3 points at 66 bid.

Its 6 7/8% notes due 2015 and its floating-rate notes due 2009 were among the more actively traded bonds of the session, with the '15s nosediving late in the day to 65 bid, down 2½ to 3 points, and the floaters down more than a point at 74.5.

ResCap parent GMAC LLC's 8% notes due 2031 were seen by a trader to be unchanged at 84 bid, 85 offered, while another source saw the bonds to be up a point at 85.375 bid. Its 6 7/8% notes due 2012 dipped ¼ point to 85.

In the absence of fresh concrete news about the problem-plagued Minneapolis-based mortgage giant, a trader suggested the fall might be at least partially driven by ResCap's prominent inclusion in a widely circulated Bloomberg News article on rising default rates - which are foretold by ratings agency downgrades. The report, titled "Defaults to quadruple as more companies cut to junk," cited ResCap as one of 32 companies that were downgraded to junk by Moody's Investors Service this year. In fact, the piece noted that ResCap, "with $16.6 billion of debt, was the largest fallen angel in the U.S. this year." It further went on to outline how ResCap was downgraded by Moody's not once, but twice this year - the first time, in August, to Ba1, on concerns about its ability to raise capital, a downgrade which cost ResCap its prized investment-grade rating. The second downgrade was a two-notch fall to Ba3, after it reported a $2.3 billion third-quarter loss last month.

Builders pushed around by numbers

The homebuilder sector - reliant upon the continued access to affordable credit for homebuyers - has been suffering along with the mortgage names like ResCap, and Tuesday was no exception, especially after the government reported that housing starts fell 3.7% in November to a 1.187 million-unit annual pace. But the more damaging number was in permits for future housing starts, which slid to a 1.152 million annual pace - the lowest level in 14 years - a sign economists say means that actual starts are likely to fall further.

That took a toll on homebuilder credits like Hovnanian's 8 7/8% notes due 2012, which fell as low as 60 bid from opening levels around 66, before coming off that low and going home still down more than 2 points on the day, in busy trading, below 64.

But another trader said that from where he sat, homebuilder bonds "seemed like they were a little bit better. Bids are kind of filtering in for some of the better names, like KB Home and Hovnanian."

Among other homebuilder names, it was a pretty mixed bag.

A trader saw Beazer Homes USA Inc.'s 8 5/8% notes due 2011 down ½ point at 78 bid, 80 offered. He saw Standard Pacific Corp.'s 7% notes due 2014 up 1½ points at 68.5 bid, 70.5 offered, while Tousa Inc.'s 8¼% notes due 2011 firmed 1½ points to 42.25 bid, 44.25 offered. WCI Communities Inc.'s 9 1/8% notes due 2012 were ½ point better at 53.5 bid, 55.5 offered.

At another desk,, a market source saw the Beazer 6 7/8% notes due 2015 up 1½ points to 74.5, but saw Tousa's 9% notes due 2010 a point lower at the 40 level. The latter company reached agreement with its lenders to extend till February their waiver of Tousa's having to be in compliance with its lending facility covenants - but the required budget will prevent the company from making a January bond interest payment.

Outside of those specific areas, not much was going on. Overall, a trader said, "there's not very much to talk about. A lot of people are kind of calling it a year."

Stephanie N. Rotondo contributed to this report

© 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.