Regency Energy prices 10.5-year notes, trades up; Resolute Forest, CST, Erickson, Spencer on tap

By Paul Deckelman and Aleesia Forni

New York, April 24 - Regency Energy Partners LP was heard by high-yield syndicate sources to have priced a $600 million offering of 10.5-year notes on Wednesday. The midstream natural gas company's quick-to-market deal firmed solidly when it hit the aftermarket.

It was the only junk-rated, U.S.-dollar-denominated issue from a domestic or industrialized-country issuer to price during the session. French investment company Wendel SA came to market with a two-part euro-denominated transaction, consisting of add-ons to two existing series of notes.

The sources said that new deals hit the forward calendar for likely pricing during Thursday's session from specialty retailer Spencer Spirit Holdings, Inc. and Canadian pulp and paper manufacturer Resolute Forest Products Inc., the company formerly known as AbitibiBowater Inc.

Other deals already on the calendar seen as possible pricings on Thursday include energy retailer CST Brands, Inc. and helicopter lift services provider Erickson Air-Crane Inc.

In the secondary market, Resolute Forest Products' existing 2018 bonds firmed in active trading on news of the company's new issue, with the deal's proceeds to be used to fund a tender offer for the established bonds.

Away from new-deal related credits, SuperValu Inc.'s bonds - and its shares - rose in very active dealings after the supermarket operator reported fourth-quarter earnings, despite a wider loss from a year ago.

Sprint Nextel Corp.'s bonds were busy but ultimately little changed as the wireless operator posted first-quarter results.

Statistical indicators of junk market performance were higher across the board for a second consecutive session Wednesday.

Regency's $600 million

The primary market saw Regency Energy Partners and Regency Energy Finance Corp. price a $600 million issue of 4½% senior notes (B1/BB) due Nov. 1, 2023 at par, or a spread of 280 basis points over Treasuries on Wednesday, according to a market source.

The notes priced at the tight end of talk, which was set at 4½% to 4¾%.

The Rule 144A and Regulation S with registration rights notes will be non-callable.

Proceeds will be used to fund the acquisition of Southern Union Gathering Co.

J.P. Morgan Securities LLC, BofA Merrill Lynch, Barclays, Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC, RBS Securities Inc., UBS Securities LLC, SunTrust Robinson Humphrey Inc. and Wells Fargo Securities LLC were the joint bookrunners.

Dallas-based Regency Energy is involved in the gathering, processing and transportation of natural gas and the transportation and storage of natural gas liquids.

Wendel's two add-ons

The day's second new issue came from Paris-based Wendel, which priced €300 million of add-on notes (BB+) in two parts, according to an informed source.

The company priced a €200 million add-on to its 6¾% notes due April 20, 2018 at 113.292 to yield 3.768%.

The original €300 million issue was sold at 99.324 to yield 6 7/8% on April 11, 2011.

A second tranche was a €100 million tap of the company's 5 7/8% notes due Sept. 17, 2019, which priced at 109.779 to yield 4.098%.

The company priced the original €400 million notes on Sept. 7, 2012 at par.

HSBC Securities, BNP Paribas Securities Corp., CM-CIC, Societe Generale and Natixis were the dealers.

Proceeds will be used for general corporate purposes.

Wendel is a French investment company.

Resolute Forest hits road

Resolute Forest Products began a roadshow on Wednesday ahead of a proposed $600 million offering of 10-year senior notes, according to a market source.

Pricing is expected on Thursday.

The notes will be non-callable for four years and will then be callable at par plus 75% of the coupon.

The notes feature a 101% poison put and an equity clawback of up to 35% for the first three years at par plus the coupon.

BofA Merrill Lynch, Citigroup Global Markets Inc. and BMO Capital Markets Corp. are the joint bookrunners.

Barclays, J.P. Morgan Securities LLC and Wells Fargo Securities LLC are the co-managers.

Proceeds from the Rule 144A and Regulation S with registration rights transaction will be used to redeem the company's existing senior secured notes due 2018 and for general corporate purposes.

CST sets talk

In other forward-calendar news, CST Brands set talk for its proposed $550 million note offering due 2023 at 5¼%, according to a market source.

Books closes Wednesday at 4 p.m. ET, and pricing is expected early Thursday.

Credit Suisse Securities (USA) LLC, J.P. Morgan Securities LLC, Wells Fargo Securities LLC, Mitsubishi UFJ Securities, RBC Capital Markets and RBS Securities Inc. are the joint bookrunners for the Rule 144A and Regulation S with registration rights offering.

The notes come with five years of call protection and feature a three-year 35% equity clawback and a 101% poison put.

Proceeds will be used to fund a distribution to Valero Energy Corp. as part of the tax-free spinoff of Valero's retail business that will create CST Brands.

The prospective issuer is a San Antonio-based independent North American retailer of transportation fuels and convenience merchandise.

SSH eyes $160 million

SSH Holdings, Inc. (Spencer Spirit) is also planning to price an offering on Thursday following Wednesday's investor call, according to a market source.

The company is set to sell a $160 million issue of senior PIK toggle notes due 2018.

The notes will be non-callable for one year, then callable at 102, 101 and par after that.

Proceeds from the Rule 144A and Regulation S for life deal will be used to repurchase shares from stockholders and pay the related fees and expenses of this offering.

Wells Fargo Securities LLC and Credit Suisse Securities (USA) LLC are the bookrunners on the deal.

Spencer Spirit operates a mall-based specialty retailer and is based in Egg Harbor Township, N.J.

Regency notes on the rise

When Regency Energy Partners' 4½% notes due 2023 were freed for secondary dealings, a trader quoted the Dallas-based natural gas and natural gas liquids midstream company's new paper at 100¼ bid on the break.

Later on in the session, a trader at another shop saw them trading at 101½ to 102 bid and, after that, in a 101¾ to 102 context.

"That's amazing," he marveled, "because it's a 4½% coupon," considered stingy by traditional junk market standards.

However, with so many recent high-yield deals coming with coupons below 5% - and some even coming in below 4% - low coupons would seem to be becoming the new norm.

He agreed that this would likely be "the new normal for a little while - until everybody gets burned again, and [the market] creates a lot of bad deals and bad companies and bad capital structures," which would force future issuers after that to have to pay more generous yields to get their deals done.

"It's deja vu."

Another trader also pegged the new Regency Energy Partners bonds at 101¾ bid, 102 offered going home

Schaeffler firms slightly

Looking at the deals priced on Tuesday, a trader saw Schaeffler Finance BV's 4¾% senior secured notes due 2021 bid during the morning at 1001/2.

Another trader said the bonds were "wrapped around 101." He said the bonds had gotten as good as a 1011/4-to-101½ context, but then settled in around that 101 level. He said typical markets later on were 1003/4-to-1011/4.

The company - a subsidiary of German ball-bearing manufacturer Schaeffler AG - had priced $850 million of those notes at par in a quick-to-market deal on Tuesday, part of a larger €1.2 billion dual-currency transaction that also included €600 million of 4¼% senior secured notes due 2018.

The new dollar bonds had traded late Tuesday at bid levels between 100 3/8 and 100 7/8.

Realogy remains around issue

In morning trading on Wednesday, Realogy Group LLC's 3 3/8% notes due 2016 were being quoted in a 100¼ to 100½ context, around where the Parsippany, N.J.-based real estate and relocation services provider's upsized $500 million deal had closed out on Tuesday.

"There were better sellers around," one trader said.

Another trader quoted the new bonds around 100 3/8 bid, on "no volume to speak of."

No one saw any markets during the afternoon.

Realogy, along with Sunshine Group (Florida) Ltd Corp., had priced the quickly shopped bonds at par late Tuesday after the deal was upsized from an originally announced $450 million. They traded slightly higher in initial aftermarket action late Tuesday.

ResoluteForest moves up

Elsewhere, the news that Resolute Forest Products was shopping its proposed new deal around to prospective investors sent the Montreal-based pulp and paper manufacturer's existing 10¼% senior secured notes due 2018 higher, since the company - the former AbitibiBowater - plans to use the deal proceeds to finance a separately announced tender offer for those bonds.

A market source said the bonds moved up 1¾ points to close at 117 bid.

A second source saw the existing bonds finishing just a shade under 117, calling it a gain of 1 21/32 points. Round-lot volume was more than $11 million, locating the issue high up on the Junkbondland most-actives list.

SuperValu surges

Away from the new issues, SuperValu's 8% notes due 2016 were probably the most heavily traded purely junk issue of the day, with over $33 million of those notes having changed hands by the close.

After a slow start, the bonds caught fire around midday, and finished at 108½ bid, up 2 points on the day.

SuperValu's New York Stock-traded shares, meanwhile, jumped 65 cents, or 12.13%, to end at $6.01. Equity volume of 23.5 million was more than 3 times the usual turnover.

The bonds and shares rose even as the Eden Prairie, Minn.-based supermarket operator reported a wider loss during its fiscal fourth quarter.

SuperValu posted a net loss of $1.41 billion, or $6.65 per share, for the fiscal quarter ended Feb. 23 - far wider than its year-earlier red ink of $424 million, or $2 per share.

Excluding one-time items, the company had an adjusted loss from continuing operations of 14 cents per share versus year-ago earnings of 2 cents per share and analysts expectations of 9 cents a share in earnings this time around.

Total revenue slipped 2% to $3.89 billion from $3.98 billion - well under the $5.18 billion the analysts had projected.

Despite the disappointing numbers, investors were said to be more optimistic about the company's future, following the recent sale of five of its supermarket chains - Albertson's, Jewel-Osco, Acme, Shaw's and Star Market.

That transaction was not a part of the most recent quarter, as it did not close until after the quarter had ended. Analysts said that the smaller, leaner company that remains after that quarter had ended has more cash from the sale and should require less capital investment.

Sprint little changed

Also on the earnings front, Sprint Nextel's bonds, and those of its Sprint Capital Corp. subsidiary, were busy on Wednesday as the Overland Park, Kans.-based wireless carrier reported first-quarter financial results. They were, however, little changed.

Sprint Nextel's 6% notes due 2022 were seen up 1/8 of a point at 104 3/8 bid, on volume of over $10 million, while its Sprint Capital 6 7/8% notes due 2028 were down 1/8 of a point at 103 bid, with over 411 million of the notes having changed hands.

Market indicators stay strong

Overall, statistical junk performance indicators were higher across the board for a second straight session on Wednesday.

The Markit Series 20 CDX North American High Yield index rose by 7/32 of a point on Wednesday - its fourth consecutive gain - to finish at 104 7/8 bid, 105 offered. On Tuesday, the index gained 9/32 of a point.

The KDP High Yield Daily index, meanwhile, jumped by 9 basis points to close at 75.79, its second straight rise. On Tuesday, it had moved up by 7 bps. Its yield contracted by 8 bps, falling to 5.34%, its second straight decline.

And the widely followed Merrill Lynch High Yield Master II index notched its fifth consecutive advance on Wednesday, gaining 0.159%, on top of Tuesday's rise of 0.175%.

That lifted its year-to-date return to 4.079% on Wednesday - its third consecutive new peak level for the year and the first time in 2013 that the index has been above the psychologically potent 4% mark. On Tuesday, it had finished at 3.913%, the previous high point for the year.

The index's yield to worst declined to 5.369% on Wednesday, a fourth consecutive all-time low. It was down from the previous low mark of 5.433% on Tuesday. The spread to worst narrowed to 467 bps over comparable Treasuries - a new tight spread for the year - from 472 bps on Tuesday, the previous tight level for 2013.

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