Icahn shops megadeal; Camac, Summit, Fresenius on tap; Hovnanian expected Tuesday; Verso up

By Paul Deckelman and Paul A. Harris

New York, Jan 6 - The high-yield primary sphere shook off the rust on Monday after its extended winter nap and started gearing up for what promises to be a busy new-issuance week with several major deal announcements heard during the session.

The biggest came from Icahn Enterprises LP, the New York-based diversified holding company and investment vehicle for billionaire financier Carl Icahn. It expects to price a $3.5 billion three-part offering later in the week, including stand-alone tranches of three-year and five-year notes and an add-on to its existing 2020 paper.

Deals are also being shopped around for pricing later in the week, one of which is from Summit Materials LLC, a Washington, D.C.-based supplier of building materials like crushed stone, gravel, cement and asphalt, which will do a $210 million add-on to its existing 2020 notes. In Europe, German health care company Fresenius SE & Co. KGaA's financing unit is beginning a roadshow to market a two-part euro-denominated offering of five- and seven-year notes. And, Houston-based oil and gas operator Camac Energy, Inc. was heard to be hitting the road on Tuesday with a $300 million secured deal seen likely to price next week.

But syndicate sources said that Junkbondland could experience its very first pricing of the new year as soon as Tuesday, when homebuilder K. Hovnanian Enterprises, Inc. is expected to bring a $150 million five-year note issue to market.

Traders said the secondary sphere was again quiet, as participants tried to get acclimated after year-end vacations and looked to digest the day's new-deal news. However, volume did pick up from Friday's very low levels, and they saw a generally firmer tone.

Away from the new deals, Verso Paper Corp.'s bonds rose in active trading, aided by the company's twin announcements of plans to acquire sector peer NewPage Holdings Inc. and to begin an exchange offer for two series of its existing notes in connection with that merger.

Chrysler Group LLC's bonds were again busy for a third straight session in the wake of Thursday's announcement that majority owner Fiat SpA will buy out all of the number three U.S. carmaker that it doesn't already own.

Statistical market-performance indicators were higher across the board for a second consecutive session after having been mixed before that.

Icahn brings $3.5 billion

Icahn Enterprises LP and Icahn Enterprises Finance Corp. announced $3.5 billion three-part offering of senior notes (/BBB-/).

The deal, which is being transacted on both the high-yield and high-grade desks, will be comprised of a tranche of three-year non-callable notes and a tranche of five-year notes, which come with 2.5 years of call protection.

In addition, there is an add-on to the 6% notes due Aug. 1, 2020, which become callable on Feb. 1, 2017 at 104.5. The original $500 million issue priced at par on July 29, 2013.

Tranche sizes remain to be announced.

The deal is expected to price on Thursday.

Active bookrunner Citigroup will bill and deliver for the debt refinancing. Credit Suisse and Morgan Stanley are also active bookrunners.

Camac Energy starts Tuesday

In a transaction expected to play to both high-yield and emerging markets audiences, Houston-based Camac Energy plans to start a roadshow on Tuesday in London for its $300 million offering of five-year senior secured notes.

The deal, which is being led by Arctic Securities, is expected to continue being marketed into the Jan. 13 week.

The oil and gas exploration and production company plans to use the proceeds to further develop the Oyo Field located offshore Nigeria in OML Block 120.

Summit to tap 10½% notes

Summit Materials and Summit Finance Corp. plan to price a $210 million add-on to their 10½% senior notes due Jan. 31, 2020 (expected ratings Caa1/B-) before the end of the week.

BofA Merrill Lynch, Citigroup, UBS, Barclays, Credit Suisse, Deutsche Bank and Blackstone are the joint bookrunners.

The Rule 144A and Regulation S with registration rights notes become callable on Jan. 31, 2016 at 105.25.

Proceeds will be used to fund the acquisition of Alleyton and to refinance debt.

The original $250 million issue priced at par in January 2012.

Hovnanian on Tuesday

K. Hovnanian plans to price a $150 million offering of five-year senior notes on Tuesday.

Credit Suisse and JP Morgan are the joint bookrunners.

The Red Bank, N.J.-based homebuilder plans to use the proceeds to refinance its 6 5/8% senior notes due 2015 and for general corporate purposes.

As the 2014 primary market officially got under way, a syndicate source advised after the Monday close, "Expect a bust week."

He said that new issue market activity should be vigorous but not overwhelming.

Fresenius dual-tranche deal

An active week is also expected in the European high-yield primary market.

The year's first euro-denominated deal announcement turned up on Monday.

Fresenius Finance BV plans to start a roadshow on Tuesday in Frankfurt for its €750 million offering of senior notes (expected ratings Ba1/BB+), which is coming in two bullet tranches.

The deal is comprised of a €250 million offering of notes due Feb. 1, 2019 and a €500 million offering of notes due Feb. 1, 2021.

It is expected to price on Thursday.

Joint bookrunner Deutsche Bank will bill and deliver. Barclays, Commerzbank, Credit Agricole, SG and UniCredit are also joint bookrunners

The Bad Homburg, Germany-based provider of dialysis products and services plans to use the proceeds to partially repay or cancel the €1.8 billion senior bridge facility related to Fresenius's acquisition of 43 hospitals from Rhon-Klinikum AG.

Quiet start to week

Although volumes on the Trace bond-tracking service were seen by a trader having risen to better than $1.3 billion by late in the afternoon - up from less than $500 million on Friday - activity was still pretty sparse in the junk market as the first full trading week in the new year opened on Monday.

"Not a lot was going on," another trader said. "It was pretty quiet overall, I think."

He added that "guys were just kind of getting back into the swing of things." For many market participants, it was their first day back in the office since the start of the new year and, for some, their first day there since before Christmas.

He said, "Flow-wise, it was pretty quiet. We really got very little accomplished today."

The trader detected no real pattern to the market, characterizing it is "pretty one-off" - mostly a transaction here and there in a specific name but no overriding theme.

"We had a couple of 'offer-wanteds' from [exchange-traded fund]-type guys looking for paper - but it seems like it was a pretty quiet day overall, with not a lot of conviction one way or the other."

The market "opened up with a firmer tone - but then, like we've seen the last four days, it kind of drifts lower as the day goes on."

With nothing having priced yet, he predicted, "we'll kind of wait till the end of the week" to get a better picture of what's going on.

A second trader agreed that things were "pretty quiet today. Everybody was just trying to get a feel for what's going on in the marketplace. It's all a work in progress."

He projected that "it'll pick up as the week continues" as the new-deal calendar takes shape.

In the meantime, he declared that Monday's market "was definitely higher," by around ¼ of a point to 3/8 of a point.

"Everybody got back in and put some cash back to work."

However, he said, "nothing in particular really stood out. We were trading a couple million of everything, more or less across the board - just generic stuff."

One of the traders noted the announcement of the giant-sized deal from Icahn Enterprises, adding that "there's going to be more to come - $9 billion of so for this month. So there's going to be quite a bit of new issuance."

Existing Icahn bonds ease

Among specific issues, a market source said that Icahn Enterprises' existing 6% notes due 2020 were down about ¾ of a point on the session, quoting them at 103 bid.

He also saw Hertz Corp.'s 7½% notes due 2018 off by around ½ of a point at 107¾ bid. The company's paper had traded fairly actively on Friday on news reports indicating that billionaire Icahn had taken a stake of between 30 and 40 million shares in its Parsippany, N.J.-based corporate parent, Hertz Global Holdings, the world's largest vehicle rental company.

Verso very busy

One of the busiest names in the junk market on Monday was Memphis, Tenn.-based Verso Paper, which announced that it has agreed to acquire rival specialty paper manufacturer NewPage Holdings in a transaction valued at $1.4 billion and will, at the same time, begin an exchange offer for two of its own existing series of notes.

Verso's 11 34% notes due 2019 were seen by a market source to have improved by 1¼ points on the session, to 107¾ bid, on volume of more than $20 million, putting the credit high up on the most-actives list.

The company's 8¾% notes due 2019 were almost as busy, pushing up to 44½ bid - a jump of nearly 10 points from their most recent previous round-lot level, back in mid-December. Volume was over $16 million.

Verso will acquire Miamisburg, Ohio-based NewPage for total cash and debt consideration of $900 million, consisting of $250 million in cash, most of which will be paid to the stockholders as a special dividend prior to closing and the remainder of which will be paid at closing, and $650 million of new Verso first lien notes to be issued at closing.

NewPage's equity holders also will receive shares of Verso common stock representing 20% of the company's outstanding shares, subject to potential adjustment up to 25% under certain circumstances.

Verso also plans to refinance NewPage's $500 million term loan and will conduct exchange offers and consent solicitations for its own outstanding fixed-rate second-lien notes and subordinated notes. The closing of the NewPage acquisition is conditioned upon the consummation of the exchange offers.

Chrysler motors higher

Elsewhere, a trader said that Chrysler Group's recently busy bonds were "obviously up ¼ of a point or so," pegging the carmaker's 8% notes due 2019 in a context of 110½ to 111, while seeing its 8¼% notes due 2021 trading between 114¼ and 114 5/8.

At another desk, a trader said that the 2021s were going out around 114 7/16, calling that up 9/16 on the day, with over $12 million traded.

He saw the 2019s finishing a little over 111 bid, calling that up 5/16 of a point on the day, with over $3 million having changed hands.

Chrysler's bonds, particularly the 8¼% notes, have been among the most active junk issues over the past three sessions, with trading getting a jump-start from news that that its majority owner, Italian carmaker Fiat, will buy out all of Auburn Hills, Mich.-based Chrysler that it doesn't already own.

Chrysler is currently owned 58.54% by Fiat, which bought its controlling stake in the then-troubled Chrysler in 2009 as it languished in bankruptcy.

The European car manufacturer will acquire the remaining 41.46% stake it does not currently own from the United Auto Workers union VEBA retirement trust for a total of $4.35 billion in cash, after which the two carmakers will be fully merged, creating the world's seventh-largest automaker.

Market indicators improve

Overall, statistical junk-market performance indicators were higher across the board for a second consecutive session on Monday. They had turned higher on Friday after having been mixed on Thursday.

The Markit Series 21 CDX North American High Yield index gained 3/32 of a point on Monday to close at 108 5/16 bid, 108 7/16 offered, its second straight advance after having risen by 1/16 of a point on Friday.

The KDP High Yield Daily index was up by 2 basis points Monday to 74.54, its third improvement in a row. On Friday, it had gained 8 bps. Its yield was unchanged at 5.59%, after having come in over the previous two sessions, including Friday's 2 bps narrowing.

And the widely followed Merrill Lynch High Yield Master II index continued to roll along on Monday, notching its 11th consecutive gain, a winning streak that dates to Dec. 19. It was up by 0.159%, on top of Friday's 0.054% advance.

The latest gain lifted its year-to-date return to 0.33%, its second straight new peak level for 2014, passing the previous mark of 0.171%, set on Friday.

Last Tuesday, the index had closed out 2013 with a final cumulative return for the year of 7.419% - less than half of the robust 15.583% return at which the index had finished 2012.

The index's yield to worst and its spread to worst each recorded their second straight new tight levels for the year, at 5.594% and 415 bps over comparable Treasuries, respectively.

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