Consolidated Minerals prices secured deal to close out $5.6 billion week; Gymboree gyrates

By Paul Deckelman

New York, May 2 - The high-yield primary closed out a somewhat quieter week on Friday, at least in terms of volume, with a single deal seen pricing. Manganese miner Consolidated Minerals Ltd brought a $400 million offering of secured six-year notes to market, although at a substantial discount to par.

That capped off a week, which saw some $5.59 billion of new dollar-denominated, fully junk-rated paper come to market in 11 tranches, according to data compiled by Prospect News.

That was less than half of the $12.07 billion in nine tranches seen the week ended April 25, although nearly all of that - about $10.65 billion - came from just one super-sized transaction. That issue was the dollar-denominated portions of the $12.05 billion-equivalent seven-tranche, dual-currency behemoth brought to market on April 23 by French cable, broadband and telecommunications operator Numericable Group SA and its Luxembourg-based 40% owner, Altice SA.

The week's deals raised year-to-date junk market issuance to $111.1 billion in 211 tranches, running just slightly behind the $114.4 billion in 252 tranches that had come to market by this time a year ago. Brisk issuance over the past few weeks has pretty much closed what had been a yawning gap of over 20% as recently as just a month ago, according to the data.

While Consolidated Minerals was the only junk issue seen having priced on Friday, additional details emerged on British oil and gas concern Genel Energy plc's $500 million issue of five year notes, which came to market on Thursday.

Primaryside players heard that another U.K.-based company - Scotch energy drilling contractor KCA Deutag - was getting ready to roadshow a planned $375 million issue of seven-year secured paper, which is expected to price later in the month.

Traders said that they saw relatively little activity in recently priced bonds on Friday. Instead, they said that Gymboree Corp.'s bonds remained the most active Junkbondland name, just as it had been on Thursday, when the children's apparel retailer's bonds plunged a dozen points as investors reacted to poor quarter results first reported Wednesday.

However, after two days of blood-letting, Gymboree appeared to bounce back a little.

Statistical indicators of market performance were mixed on the day for a fourth consecutive session. They were up across the board from where they had finished out the previous week - the first higher week after three straight weeks before of having ended mixed.

Consmin comes to market

The day's sole pricing came from Consolidated Minerals, which was heard by market sources to have . priced $400 million of six-year senior secured notes (B3/B+) on Friday.

The notes - carrying an 8% coupon - priced at 97.684 to yield 8½%.

While that was well wide of original pre-deal market price talk envisioning an 8¼% yield with an original-issuer discount of about 1%, it was right in line with revised talk, issued later in the session before the actual pricing, calling for an 8½% yield and an OID of 2.25 points.

Deutsche Bank AG, London Branch was the bookrunner on the deal, which was announced on April 23 and marketed to investors via a roadshow that began last Thursday in London and then moved on to the United States earlier this week.

Consolidated Minerals - a supplier of manganese ore and other steel-making commodities based in St. Helier on the British crown dependency of Jersey in the Channel Islands and with mining operations in Australia and Ghana - estimates that the bond sale will yield gross proceeds of almost $391 million and net proceeds of some $383 million.

The issuer plans to use $250 million of the proceeds to repay loans from a related party entity that is wholly owned by Consmin's ultimate controlling shareholder and will use $118 million of the proceeds to partially repay its outstanding 8 7/8%senior secured notes due 2016, with the remainder of the '16 notes to be repaid from cash on hand.

Remaining bond-sale proceeds will be carried as cash on the balance sheet and used for general corporate purposes.

Genel Energy details emerge

Consolidated Minerals was the day's only actual pricing, but additional details emerged on Thursday's pricing of British oil and natural gas concern Genel Energy's upsized $500 million of five-year notes.

Syndicate sources said that the issuer of record for the bond deal, which is unrated by any of the major agencies, is the company's General Energy Finance Ltd. subsidiary. Genel Energy plc and Genel Energy Holding Co. Ltd. are the guarantors of the issue, which ranks parri passu with the company's existing senior unsecured debt.

The 7½% coupon bonds priced at par to yield 7½%. They will mature on May 14. 2019.

The offering was increased from the originally announced $400 million in order to meet brisk investor demand, the company said.

As previously reported, the deal, which was first announced last Friday, came to market after an investor roadshow process. It is expected to settle on May 14, with the first coupon payable on Nov. 14.

The London-based oil and natural gas exploration and production company, which operates in the Middle East and Africa, claiming to be the largest independent oil producer in the Kurdistan Region of Iraq, plans to use the net proceeds of the offering towards a combination of field development costs as well as general corporate purposes and general working capital.

DNB Markets and Pareto Securities were joint lead managers and bookrunners for the offering.

KCA Deutag hitting the road

That same U.K. energy sector was the source of the only other nugget of news coming out of the primary arena on Friday, as Scotch energy drilling contractor KCA Deutag Alpha Ltd. was heard to be planning to sell $375 million of seven-year senior secured notes. The notes are part of a $750 million financing package that also includes a bank loan launched this week.

High-yield syndicate sources said that the notes will be brought to market around the middle of the month via joint bookrunners J.P. Morgan Securities LLC, Goldman Sachs & Co., HSBC Securities (USA) Inc. and Lloyds Securities Inc.

The deal will be marketed to investors via a roadshow that will get under way this coming Monday, with pricing expected the following week around May 13.

They are expected to carry a B3 rating from Moody's Investors Service and a B rating from Standard & Poor's.

KCA Deutag is selling the bonds as part of a financing effort that also includes a new six-year secured term loan (B3) that launched at a bank meeting on Monday.

Proceeds from the loan and the upcoming bond financing will be used to refinance existing bank debt and to add a small amount of cash to the balance sheet.

KCA Deutag was last in the bond market exactly one year ago, when its KCA Deutag Finance plc subsidiary sold $500 million of 9 7/8% senior secured notes due 2018. That scheduled forward-calendar deal priced at 96 on May 2, 2013 via another company subsidiary, Globe Luxembourg SCA, yielding 10.681%.

New deals little traded

After the Consolidated Mining issue had priced, a trader said he did not see it hit the aftermarket.

At another desk, those new bonds were seen, with the trader quoting them as trading in a 98-to-98½ context, up a little from the heavily discounted 97.684 level at which the issue had priced.

A trader saw the new 6% notes due 2024 that Sirius XM Radio Inc. had priced on Thursday, trading between 100½ and 101½ "all over the place," finally quoting the New York-based satellite radio broadcaster's bonds around 101 to 101 1/8. But he said that the last trade in them that he had seen had been around noon ET, several hours earlier.

"It's just a quiet day - pretty boring," he opined.

Another trader said that there was little going on among the recently priced issues, including such names as LifePoint Hospitals, Inc., Constellium NV and SunCoke Energy Partners LP because "there were not too many sellers of anything around."

Gymboree bonds gyrate

A trader said that by far the most interesting story of the day was Gymboree's 9 1/8% notes due 2018, which was the most active issue for a second straight session.

Over $19 million of the bonds traded on Friday, on top of the $34 million that had traded on Thursday.

But unlike Wednesday, when the bonds had fallen 6 points after the San Francisco-based children's apparel retailer reported poor fourth-quarter numbers, and Thursday, when they had plunged an additional 10 to 12 points, bottoming at around 63 bid, the bonds appeared to have found their bottom on Friday and were even a little bit better A market source saw them up by 1 full point, going home at 64 bid.

A trader suggested that much of the carnage had been due to the fact that "guys were disappointed with their conference call" after the results came out "and with management's approach on the conference call."

He said that while the company does have a fair amount of leverage - debt is about five times adjusted trailing 12-month EBITDA - "they also have no debt maturities coming due till 2018," giving management some time to try and turn things around without having to worry about any looming debt obligations.

"If they right the ship," he concluded, "it will be fine."

Indicators up on week

Statistical junk performance indicators remained mixed on Friday for a fourth consecutive session.

However, they were higher across the board from versus the levels at which they had ended the previous week. That had followed three straight weeks of mixed showings.

The Markit Series 22 CDX North American High Yield index lost 1/32 of a point on Friday, its second consecutive setback, ending at 106 7/8 bid, 106 15/16. It had been down by 3/32 of a point on Thursday.

But the index was up from 106¾ bid, 106 7/8 offered, where it had finished out the week ended April 25. It had been lower on the week at that time.

The KDP High Yield Daily index posted its first gain on Friday after three straight losses, rising by 5 basis points to end at 74.94. On Thursday, it had eased by 1 bp. Its yield narrowed for a second straight session, coming in by 1 bp to end at 5.18%. On Thursday, it had declined by 2 bps.

Those levels compared favorably with the week-earlier 74.92 index reading and 5.21% yield. Those levels had been lower than the previous week's.

The widely followed Merrill Lynch High Yield Master II index rose for a fifth session in a row on Friday, gaining 0.045%. On Thursday, it had been up by a nearly identical 0.046%.

Friday's gain raised the index's year-to-date return to 3.804%, marking its fifth consecutive new peak level for 2014 so far. The prior high point had been Thursday's 3.757%.

For the week, the index was up by 0.249% for its seventh consecutive weekly gain. Last week, it had risen by 0.198%, lifting its year-to-date return to 3.546%.

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