Sterling Resources prices, Rosetta, SoftBank up next; Sprint, DISH stay busy

By Paul Deckelman and Paul A. Harris

New York, April 17 - Activity picked up in the high-yield primary sphere on Wednesday after Tuesday's deadly dull session - but not by very much.

Syndicate sources saw terms emerge on one junk-rated, U.S. dollar-denominated deal from a domestic or industrialized-country borrower price during the day, as Canadian energy operator Sterling Resources Ltd. came to market with a $225 million issue of six-year secured notes. However, those bonds were not seen in any aftermarket trading.

However there were some behind-the scenes developments.

The syndicate sources heard price talk on another energy-sector name - Rosetta Resources Inc., which is doing a $700 million issue of eight-year notes.

There was also talk out on Japanese telecommunications company SoftBank Corp.'s $2 billion equivalent offering of dollar- and euro-denominated paper, which it hopes to use to help fund its proposed acquisition of Sprint Nextel Corp. SoftBank and Rosetta are expected to price on Thursday.

So is a pair of euro-denominated deals on which talk emerged on Wednesday, the sources said - from French food-service company Elior and from Luxembourg-based software provider TeamSystem SpA.

Back in the dollar-market, helicopter services company Erickson Air-Crane Inc. was heard to be hitting the road to market a $400 million secured offering to potential investors.

Away from the new-deal realm, it was another active session for Sprint Nextel's bonds and those of DISH DBS Corp. - which earlier in the week announced its own offer to buy Sprint, looking to thwart the aforementioned SoftBank bid for the Number-Three U.S. wireless carrier.

Traders said that the junk market seemed mostly easier, and statistical indicators of secondary market performance, which had firmed solidly on Tuesday, were ending mostly lower on Wednesday.

SoftBank oversubscribed

During the Wednesday session SoftBank set talk for its proposed two-part $2 billion equivalent non-callable seven-year senior notes offering (confirmed Baa3/expected BB+) at a yield of 4½% to 4¾%.

Books closed Wednesday afternoon for the dollar tranche and are set to close on Thursday morning for the euro tranche, with pricing expected Thursday morning New York time.

Demand for the dollar tranche was at least $3 billion, heading into Wednesday, according to sources.

Deutsche Bank in the left bookrunner for both tranches.

BofA Merrill Lynch, Barclays, Credit Agricole CIB, Mizuho Securities, Morgan Stanley & Co. and Nomura joint bookrunners for the dollar-denominated tranche.

Barclays, Credit Agricole CIB, Mizuho Securities and Nomura are the joint bookrunners for the euro-denominated notes.

Proceeds will be used for Softbank's potential acquisition of Sprint Nextel Corp. and for general corporate purposes, as well as to refinance existing debt.

The deal is going forward in spite of the fact that SoftBank is not the only company bidding for Sprint Nextel, a sellside source said on Wednesday.

Even if SoftBank's $20.1 billion bid is overtaken by the competing bid from Dish Network (DISH recently said its offer would come to $25.5 billion), SoftBank will still take the cash, the source added.

Rosetta talks $700 million

Elsewhere Rosetta Resources talked its $700 million offering of eight-year senior notes (B2//) with a yield in the 5¾% area.

That deal is set to price on Thursday morning.

J.P. Morgan, Morgan Stanley and Wells Fargo are the joint bookrunners.

The Houston-based independent producer and developer of oil and gas properties plans to use the proceeds, together with proceeds from the concurrent equity offering, to fund a portion of its acquisition of Permian Basin assets from Comstock Resources.

Rosetta Resources also intends to use part of the proceeds repay its revolver in its entirety and for general corporate purposes.

Elior upsizes, sets talk

The European high-yield primary market also generated news during the Wednesday session.

France's Elior Finance & Co. SCA upsized its offering of seven-year senior secured notes (expected ratings B3/BB-) to €350 million from €300 million, and talked the notes to yield in the 6¾% area.

Books close at 5 a.m. ET on Thursday, and the deal is set to price after that.

Joint bookrunner JPMorgan will bill and deliver. Credit Agricole, HSBC and Nomura are also joint bookrunners.

The Paris-based contracted food and support services company plans to use the proceeds to repay debt. The additional proceeds from the upsizing will be used to repay bank debt.

TeamSystem talks €300 million

Titan Luxco 2 Sarl which will be transformed into TeamSystem SpA, talked its €300 million offering of seven-year senior secured notes (expected ratings B2/B) with a yield in the 7½% area.

The roadshow is set to wrap up on Thursday and the deal is expected to price after that.

Joint global coordinator and joint bookrunner JPMorgan will bill and deliver. SG CIB, UniCredit and HSBC are also joint global coordinators and joint bookrunners. Natixis, IKB and Banca IMI are also joint bookrunners.

The Rule 144A and Regulation S for life notes come with three years of call protection.

Proceeds will be used to repay debt.

Erickson plans secured notes

Erickson Air-Crane plans to conduct a roadshow for its $400 million offering of seven-year second priority senior secured notes through April 24 and price the notes after the conclusion.

Deutsche Bank is the left bookrunner. Wells Fargo is the joint bookrunner.

The Portland, Ore.-based provider of helicopter lift services plans to use the proceeds to fund the acquisitions of Evergreen Helicopters, Inc. and Air Amazonia, and to refinance debt.

Sterling prices $225 million

Sterling Resources has priced a $225 million issue of 9% six-year senior secured notes at par, according to an informed source.

The notes, which are subject to a program of amortization commencing after 18 months, have an all-in yield of 10.4%.

Pareto Securities was the sole manager and bookrunner.

Of the proceeds, $140 million will be used to fully prepay the company's senior secured credit facility. Proceeds will also go toward funding ongoing development costs of the Breagh field, including development of the eastern portion of the field (phase 2), as well as to prefund the first interest payment on the notes, due in October 2013, and for general corporate purposes.

Sterling Resources is an oil and gas company based in Calgary, Alta.

Junk follows stocks lower

In the secondary market, a trader said that "overall, we were down pretty good - about a quarter-point, solid."

He said that apart from a few specific names which saw some volume based on news developments, such as Sprint Nextel and DISH, for instance, or J.C. Penney Co. Inc., "it was a quiet day in the junk world. I guess with equities down, the secondary was down" by ¼ point.

Stocks retreated amid disappointing results by companies such as Bank of America Corp. and Textron, while Caterpillar Inc. suffered an analyst's downgrade. The bad news about component issues B of A and Cat helped to push the bellwether Dow Jones Industrial Average down by 138.19 points, or 0.94%, to 14,618.59, with broader indexes such as the Standard & Poor's 500 and the Nasdaq composite off even more on a percentage basis.

Back in Junkbondland, he said, investors seemed cautious, with many choosing to sit the session out; many, he said, were waiting patiently for the primary to heat up again.

"There's a lot of money just sitting on the sidelines, and it's still new-issue dominated," he opined.

"People are just waiting to sop up these new issues," when they come.

Sterling seen a no-show

However, the one new primary name of the day, from Sterling Resources, never made it to the aftermarket on Wednesday, with several traders indicating that they had not seen any traces of the Calgary, Alta.-based oil and gas company's $225 million deal once it had priced.

Pinnacle off its peak

A trader said that Pinnacle Foods Finance LLC's 4 7/8% notes due 2021 had come down from the highs that those bonds had hit on Tuesday, when they began trading in the secondary market.

He quoted them on Wednesday at 100¾ bid, 101¾ offered in early trading.

"It's pretty wide - but that's what it is," he declared.

A second trader, though, continued to peg the bonds around the same 101 5/8 bid level that they had occupied on Tuesday.

Pinnacle - a Mountain Lakes, N.J.-based producer of various major brand-name frozen- and packaged-foods, including such familiar consumer favorites as Birds Eye frozen vegetables, Mrs. Paul's frozen fish sticks, Duncan Hines cake mixes and Vlasic pickles - had priced its quick-to-market offering at par on Monday after downsizing the deal to $350 million from an originally announced $400 million.

However, it hit the tape too late in the afternoon Monday for any meaningful aftermarket dealings and did not begin trading till Tuesday morning, when it moved above the 101 bid mark.

Nice move for NES

Elsewhere among the recently priced issues, a trader quoted NES Rentals Holdings Inc.'s 7 7/8% senior secured second-lien notes due 2018 at 101 bid, 101 7/8 offered.

That was well up from the levels around par bid, 101¼ offered seen earlier in the week.

NES, a Chicago-based construction and industrial equipment rental company, had priced its $300 million issue at par on Friday, after having increased the deal from its original $275 million size.

The trader also saw Athlon Holdings LP's 7 3/8% notes due 2021 at 100¾ bid, 101 3/8 offered on Wednesday. The Fort Worth, Texas-based independent oil and natural gas exploration and production company had priced its $500 million deal at par on Friday, after upsizing it from $400 million originally.

The bonds had been quoted at 101 bid late Friday, and then at 100 7/8 bid, 101½ offered on Monday.

However, while seeing some levels in Athlon, the trader saw no markets in the other energy-sector deal that had gotten done on Friday - Houston-based Memorial Production Partners LP's 7 5/8% notes due 2021.

That $300 million tranche had priced at a sizable discount to par, at 98.521, yielding 7 7/8%, and had jumped to 101½ bid, 101¾ offered in initial aftermarket dealings. Earlier this week, they were still holding much of those gains, hanging in around 100½ bid, 101¼ offered.

Sprint stays active

Away from the new-deal world, Sprint Nextel's bonds remained very busy for a third consecutive session following Monday's announcement from satellite television broadcaster DISH Network Corp. that it desired to acquire Sprint in a $25 billion stock and cash deal.

A trader pegged the Overland Park, Kan.-based Number-Three U.S. wireless carrier's 6% notes due 2022 at 102 7/8 bid, calling that about a 1 point "bounce" from the levels those bonds held on Tuesday, on very heavy volume.

A market source at another desk agreed with that assessment of the activity level on those bonds, noting that over $38 million of the bonds had changed hands during the day, occupying the top slot on the junk bond most-actives list.

But he was far more conservative in estimating the gain, seeing the bonds going home at 103 bid, but calling that only a 1/8 point gain.

Those bonds remain well below their Friday close at 105½ bid, which occurred before the DISH announcement.

A trader said that subsidiary Sprint Capital Corp.'s 8¾% bonds due 2032 were also among the day's busiest, seeing more than $20 million of that paper having traded. He saw the bonds at about the 118 3/8 bid level.

A second trader estimated the day's volume in that issue at over $22 million, but said that the bonds had tumbled by 3 3/8 points during the session, closing at 115 bid. Before the takeover news surfaced, those bonds were trading as high as 123 bid.

Would-be Sprint purchaser DISH's 7 7/8% notes due 2019 were Englewood, Colo.-based DISH's most widely traded credit on Wednesday, calling the bonds down ¼ point at 113¼ bid.

But another trader actually saw those bonds doing better, quoting them up 3/8 point on the day to finish at 113 5/8 bid. Over $13 million of those bonds traded.

United Rentals retreats

Elsewhere, United Rentals Inc.'s bonds were lower across the board, as investors digested the first-quarter results that the Greenwich, Conn.-based construction and industrial equipment manufacturer had reported late Tuesday.

Its 6 1/8% notes due 2023 lost 5/16 point to end at 106 7/8 bid, a market source said, on volume of over $12 million.

Its 8 3/8% notes due 2020 were unchanged at 112¼ bid, with over $10 million having traded.

The company reported adjusted earnings of 19 cents per share on revenues of $1.1 billion - missing Wall Street projections of nearly 50 cents per share of earnings and $1.11 billion revenues.

On its conference call Wednesday, company executives noted strong free cash flow and reiterated previous expectations that leverage would fall to 3 times debt versus EBITDA by year's end (see related story elsewhere in this issue).

Market indicators retreat

Overall, statistical junk performance indicators were mostly lower on Wednesday, versus their higher move across the board on Tuesday.

The Markit Series 20 CDX North American High Yield Index lost 13/32 point on Wednesday to close at 104 1/16 bid, 104 3/32 offered. On Tuesday, it had gained 23/32 point.

The KDP High Yield Daily Index, meanwhile, eased by 2 basis points on Wednesday to finish at 75.67, versus its unchanged reading on Tuesday.

However, its yield, which had also been unchanged on Tuesday, came in by 1 bp on Wednesday to 5.43%.

The widely followed Merrill Lynch High Yield Master II index - which fell on Monday but then improved on Tuesday - remained choppy, easing by 0.057% on Wednesday, versus Tuesday's 0.005% rise.

That latest loss left its year-to-date return at 3.558%, down from 3.617% on Tuesday. Those levels were meantime down from the peak level for the year so far of 3.71%, which was recorded last Friday.

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