Drive-by Plains mega-deal, American Greetings, Atlas Pipeline price; ATP, MF Global gain

By Paul Deckelman and Paul A. Harris

New York, Nov. 16 - The high-yield primary arena remained a busy place on Wednesday as almost $1.4 billion of new paper came to market, all of it in the form of opportunistically timed, quickly-marketed transactions.

The day's big deal came from independent oil and natural gas operator Plains Exploration & Production Co., which massively upsized its previously announced 10.25-year issue to $1 billion.

Also out of the energy sector, Atlas Pipeline Partners, LP brought in an upsized $150 million of seven-year notes as an add-on to an original deal that priced in 2008.

Card maker American Greetings Corp. priced $225 million of 10-year notes.

The latter's company's bonds showed some modest improvement when they were freed for secondary dealings, while Atlas hung around its issue price. The Plains Exploration mega-deal came to market too late in the day for a meaningful aftermarket.

Swift Energy Co.'s new 10.5-year issue, which priced Tuesday, lost ground on Wednesday versus its issue price.

However, the new eight-year bonds from Pharmaceutical Product Development Inc., which came too late in the day on Tuesday for any real trading, firmed modestly on Wednesday.

In a relatively quiet secondary market, ATP Oil & Gas Corp.'s bonds broke out of their recent slump and moved up on Wednesday. Troubled MF Global Holdings, Inc. was also quoted higher Wednesday.

Plains doubles size

The primary market saw more drive-by action on Wednesday, with two of the session's issuers doing a.m.-to-p.m. drive-bys, and the third issuer abandoning a planned roadshow, essentially turning its deal into a Tuesday-Wednesday drive-by.

The three issuers, each of which brought a single tranche, raised $1.375 billion.

Plains Exploration & Production priced a massively upsized $1 billion issue of senior notes due Feb. 1, 2022 (B1/BB) at par to yield 6¾%.

The yield printed on top of price talk which surfaced when the deal was doubled in size from $500 million. Prior to upsizing the original $500 million offering had been talked at 6 5/8% to 6¾%.

J.P. Morgan, Barclays, BMO, Citigroup, RBC and Wells Fargo were the joint bookrunners for the debt refinancing and general corporate purposes deal.

A big book, but limping

The order book for the Plains Exploration deal was sized at about $3 billion, according to an asset manager who played.

The bonds were "limping out" at par 1/8 bid, par ¼ offered, the buy-sider remarked, and added that it was an interesting trade in which to be involved because as the Plains deal was doubling in size the stock market was swooping toward a close that saw the Dow Jones Industrial Average close 1.6% lower on the day.

"The Dow dropped 150 points in the last hour when the news got around that Moody's had downgraded some German banks," the manager said.

"Just when you think things are going pretty good, there's Europe again."

The late drop in equities took the junk bond market along for the ride down, the buy-sider added, noting that the CDX 17 HY index, which had traded flat throughout most of the Wednesday session, ended down 5/8 point.

American Greetings moves up

American Greetings priced a $225 million issue of 10-year senior notes (Ba2/BB+/) at par to yield 7 3/8%, at the tight end of the 7½% area price talk.

Timing was moved ahead. The deal was launched on Tuesday and expected to be in the market for two to three days.

The asset manager, who said he prefers to send greetings over the internet, declined to be involved but remarked that in the present volatility it would be crazy to wait around to price the deal if there was a full order book.

J.P. Morgan and Bank of America Merrill Lynch were the joint bookrunners for the American Greetings debt refinancing deal.

Atlas Pipeline upsizes

Atlas Pipeline priced an upsized $150 million add-on to its 8¾% senior notes due June 15, 2018 (B3/B) at 103.50 resulting in a 7.821% yield-to-worst.

The reoffer price came at the rich end of the 103.25 to 103.5 price talk. The amount was increased from $125 million.

Wells Fargo was the left bookrunner for the quick-to-market add-on. Bank of America Merrill Lynch was the joint bookrunner.

Proceeds will be used to repay debt and for general corporate purposes.

The original $250 million issue price at par in June 2008, so Atlas Pipeline realized 93 basis points of interest savings with Wednesday's add-on, versus the 8¾% yield printed on the original notes.

Looking for Ford

Wednesday's three quick-to-market transactions comprised the day's only primary market news.

There was no word on a trio of deals, totaling $1.25 billion, left to price before the end of the week.

However the market continued to buzz with the expectation that Ford Motor Credit Co. LLC will show up on Monday with a benchmark-sized three-tranche deal. Morgan Stanley is expected to lead the transaction which will be managed on the high-grade desk.

Among those who had wind of the deal by Wednesday's close was a high yield portfolio manager who noted that the company's 5% senior notes due 2018 were trading at par.

"It's kind of hard to get worked up about five-handle paper," the buy-sider lamented.

Moderating flows

Record-breaking infusions of cash into the high-yield asset class are yesterday's story, according to market sources on both the buy-side and sell-side who say that flows remain generally positive, but have moderated significantly during the past week.

Hence the fund flow numbers which are expected to be reported by EPFR Global and Lipper-AMG on Thursday should be noticeably lower than last week's numbers. To recap, Lipper AMG reported a $1.1 billion inflow for the week to the Nov. 10 close; EPFR reported a $1.07 billion inflow.

The stream of cash into high yield should slow even further during the interval between Thanksgiving and the new year, sources say.

Junk benchmarks have come off its recent highs, according to one investor who spotted the year-to-date return of the Lipper High Yield index at 1½% on Wednesday, well off from the 2.51% that was posted on Nov. 2, but still far above the negative 4.84% posted on Oct. 4.

"In the past three weeks we've seen north of $20 billion of issuance," the investor reflected, late Wednesday.

"That's enough, and maybe more than enough, to sop up the cash that's out there."

The market may have peaked on Nov. 4, the day that Sprint Nextel Corp. priced a massively upsized $4 billion two-part deal - just two days after the Lipper index hit its recent high of 2.51%, the investor added.

New issues take center stage

A trader said that Wednesday's market was "clearly focused on the new issues," pretty much to the exclusion of everything else."

He saw Cleveland-based greeting-card manufacturer American Greetings' new 10-year issue at 100¼ bid, 100¾ offered.

A second trader located those bonds at 100 3/8 bid, 100 7/8 offered.

That was up from the par level where the quick-to-market deal priced earlier in the session.

A trader said that Atlas Pipeline Partners' new seven-year notes held right around their 103.5 issue price.

The day's big deal, Plains Exploration & Production Co's $1 billion deal, came too late in the day for any aftermarket.

However, the Houston-based energy operator's existing 7% notes due 2017 gained about 1 1/8 points on the session to end at 104.5.

Its 7¾% notes due 2015 likewise firmed to around the 104 level.

Tuesday deals mixed

Traders saw Tuesday's new deal from Jaguar Holdings, LLC and Jaguar Merger Sub, Inc. - the official issuers of Pharmaceutical Product Development's $575 million offering of 9½% notes due 2019, as having moved up a little from their par level where those bonds had priced.

The Wilmington, N.C.-based provider of product development and management services to the pharmaceutical industry had downsized its forward calendar offering from an originally shopped $700 million.

One trader pegged the new notes at 100½ bid, 100 7/8 offered, while a second located them between 100 5/8 and 100 7/8.

While those bonds were modestly climbing, Tuesday's $250 million offering from Houston-based oil and gas operator Swift Energy was trading below issue on Wednesday.

Those quickly-shopped 7 1/8% notes due 2022 had come to market at 99.156 to yield 8%, and had traded around 99 bid, 99½ offered when they were freed.

In Wednesday's action, a trader quoted the bonds at 98¼ bid, 98¾ offered, while a second had them at 98¾ bid, 99 offered.

No activity was seen during either session in Pioneer Drilling Co.'s $175 million of 9 7/8% notes due 2018.

The San Antonio, Tex.-based provider of contract drilling services to the oil and natural gas industry had priced its drive-by deal - upsized from an originally announced $150 million - as an add-on to its original $250 million issue that had priced in March of 2010.

The new bonds priced at 101 to yield 9.579%, versus the 10.677% yield on the original tranche of bonds.

Indicators under pressure

Away from the new-deal arena, a trader said that Wednesday was "kind of a crappy day."

A second trader said that even with Thanksgiving still more than week away, "the market, except for a few flurries here and there, is settling into a pre-vacation mood."

He suggested that activity would further wind down, with many market participants likely to take off part, or even all of next week, which will see U.S. bond markets closed on Thursday and operating on a very truncated, half-day schedule next Friday.

The statistical secondary market performance indicators, which had been down on Tuesday, stayed that way on Wednesday.

A trader said the CDX North American series 17 High Yield index was down 7/16 point Wednesday to close at 90½ bid, 90¾ offered, after having been down by 3/8 point Tuesday.

The KDP High Yield Daily index eased by 2 basis points Wednesday to 72.06, after having dropped by 17 bps on Tuesday.

Its yield was unchanged at 7.56% Wednesday, after having risen by 5 bps on Tuesday.

And the widely followed Merrill Lynch High Yield Master II Index lost 0.114% on Wednesday, on top of its 0.231% retreat on Tuesday.

Wednesday's loss left the index's year-to-date return at 2.84%, versus Tuesday's 2.958%.

The cumulative return remains below its high-water market for the year of 6.362%, which was set on July 26 but is still well up from its 2011 low-point, a 3.998% deficit recorded Oct. 4.

ATP turns around

Among specific names, a trader said ATP Oil & Gas' 11 7/8% second-lien senior secured notes due 2015 were "up a couple points after getting slaughtered in the past few sessions."

He pegged the Houston-based energy exploration and production company's issue around 66 bid.

MF Global goes up

Another recently beleaguered credit is MF Global Holdings. The failed New York-based commodities and futures brokerage's customers are awaiting a bankruptcy judge's decision Thursday to find out if they will recover up to $520 million in cash from the company.

A trader said he saw the firm's 6¼% notes due 2016 rising 3 points on the day, but he was not sure if it was due to the news or not.

He pegged the issue around "37-ish."

A second trader, though, saw the bonds get as good as 40 bid.

The trustee overseeing the liquidation of the broker-dealer operations has asked the judge overseeing the bankruptcy case to release the funds to between 15,000 and 21,000 commodities customers who held cash in their accounts. Regulators have called for increased oversight on how the money is distributed.

Additionally, regulators are still searching for about $600 million in missing funds.

Sino-Forest swings wildly

Elsewhere, a trader quoted Sino Forest Corp.'s 10¼% notes due 2014 at 53 bid, calling the bonds down 9 points on the session.

"They've been in the news, he said, "kind of just headlines."

He said that in the current environment, "when bad news comes out about a company, it doesn't just trade down a couple of points, it trades off a cliff."

He likened it to "someone who gets mono [i.e. mononucleosis] - no one wants to go near them for a while."

However, another trader did not see those kinds of gyrations in the troubled Canadian-Chinese timber company's paper - he said the 101/4s started the day around a 56-58 context, and then retreated around a point, to 55-57. He also saw its 6¼% notes due 2017 down ½ to 1 point at 47 bid, 48½ offered.

At another desk, a market source said the bonds' gyrations took place against the backdrop of a report issued on Tuesday, when most of the action in Sino-Forest took place - Wednesday was just a mopping up session, he said.

On Tuesday, an independent committee empanelled earlier this year delivered its preliminary report. The committee was set up after Sino-Forest was rocked by scathing accusations from Hong Kong-based investment firm Muddy Waters LLC that the timber plantation company was little more than a "Ponzi scheme" and "a near total fraud." However its report essentially exonerated Sino-Forest of those serious charges, although it did find some problems.

News that the report had debunked the most serious Muddy Waters accusations caused the 101/4s and the 61/4s, which both had previously been trading in a 31-32 range, to shoot right up at the open on Tuesday, both to around the 60 level, about double their previous quotes. The 101/4s went home Tuesday trading around 62 bid, while the 61/4s fell from its early peaks to end at 50 bid, both on volume of about $14 million.

With investors having had a chance to read about the report more thoroughly, including the problems uncovered, both bonds fell back a little on Wednesday, though in much less-busy trading, with the 101/4s ending the day down 9 points at around 53, but with a last round-lot trade a bit higher, at 57, while the 61/4s retreated to around 47 bid, with about $4 million having changed hands.

Both issues actually were trading on Wednesday at the respective levels around where most of Tuesday's activity had taken place before those prices were lifted late in the session Tuesday.

While the report appeared to largely discredit the spectacular allegations of fraud raised by Muddy Waters CEO Carson Block - who rejected the independent report as a whitewash - it did find some potentially serious problems with the company, including missing or even possibly falsified records, and the absence of an internal audit function. It also noted that some executives had been uncooperative, and, according to published reports, found that some employees had formed unusually and possibly suspiciously close relationships with suppliers and customer intermediaries, including, in one case, shared access to bank accounts.

Canadian authorities meantime continue to investigate the Toronto-based company.

Res Cap rise continues

A trader said that Residential Capital LLC's 9 5/8% notes due 2015 were up 1½ points on the day, quoting the Minneapolis-based residential lender's bonds going home around 64 bid.

However, another trader saw the bonds steady at 61 bid, 62 offered, on "just a few trades, no big deal."

Another market source said that the bonds had gotten as good as 64 during the session, up from Tuesday's close around 62½ bid, but then fell back later on to finish the day actually down about a point at 611/2.

The bonds had risen over the past several sessions on investor expectations that ResCap - whose debt got hammered last week on investor fears that corporate parent Ally Financial might stop supporting the money-losing ResCap and let it go bankrupt - would make the scheduled coupon payment due Tuesday on the roughly $2 billion of outstanding 9 5/8s.

There was no firm news that the $110 million payment had been made - but a market participant said that probably it was, since the bonds would have fallen out of bed if it hadn't been.

Stephanie N. Rotondo contributed to this report

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