MarkWest, Florida East Coast drive-bys, PlyGem pace $1.5 billion day; await Venoco, Energy XXI

By Paul Deckelman and Paul A. Harris

New York, Feb. 9 - With all of the really supersized deals having come to market during Tuesday's session, which saw a trio of billion dollar-plus behemoths price, the high-yield primary arena went back to doing things the hard way Wednesday - pricing a series of smaller offerings that totaled up to a respectable $1.5 billion.

The biggest deal of the day was building products manufacturer PlyGem Industries, Inc.'s $800 million offering of seven-year senior secured notes, which priced a day after the deal showed up on the radar screen.

Moving even more quickly was a pair of same-day "drive-by" deals - $300 million of 101/2-year notes from natural gas company MarkWest Energy Partners, LP, and $130 million of payment-in-kind toggle notes from freight railroad operator Florida East Coast Holdings Corp.

Off the forward calendar, Australian mining concern Midwest Vanadium Pty., Ltd. weighed in with a $335 million tranche of seven-year secured notes late in the day.

There was also a pricing out of Europe, early in the session, from Belgian broadband and cable company Telenet NV, which brought a euro-denominated offering of 10-year secured paper.

In the aftermarket, PlyGem's new notes firmed nicely, while MarkWest stayed around issue. Florida East Coast and Midwest Vanadium arrived too late in the day for any dealings.

Price talk emerged on deals being marketed by Venoco, Inc. and American Commercial Lines, Inc., which are seen as possibilities for pricing Thursday.

Energy XXI Gulf Coast, Inc. announced a new eight-year deal and is also seen coming to market on Thursday.

Canadian forest products company Kruger, Inc. was heard to be shopping around a Canadian dollar-denominated deal.

Secondary dealers meantime saw trading in newly priced bonds dominating their market almost to the exclusion of everything else. Statistical indicators were mixed.

Ply Gem prices $800 million

The Wednesday primary market saw four issuers, each one bringing a single, dollar-denominated tranche of junk raise a combined $1.56 billion.

Signs of a red hot primary market remained in full view as news surfaced on two PIK toggle note deals.

And issuers refinancing debt continued to see dramatic interest savings on Wednesday.

The most dramatic example of lower borrowing costs came in the form of Ply Gem Industries' $800 million issue of seven-year senior secured notes (Caa1/B-) which priced at par to yield 8¼%.

The yield printed on top of the price talk.

Credit Suisse and UBS Investment Bank were the joint bookrunners for the quick-to-market issue.

The deal came 25 basis points inside of one high-yield account's reverse inquiry level. That buy-sider spoke of "reversing" the deal - i.e. suggesting the company issue notes - at 8½%.

Ply Gem is using the proceeds to redeem its 11¾% senior secured notes due 2014.

Hence, with Wednesday's print the Cary, N.C.-based building products company realized a whopping 3½% of interest savings relative to the paper it is taking out with the new proceeds.

MarkWest drives by

MarkWest Energy Partners also realized dramatic interest savings with its quick-to-market Wednesday refinancing deal.

The Denver-based energy company priced a $300 million issue of 10.5-year senior notes (B1/BB-) at par to yield 6½%, on top of the price talk.

Barclays Capital ran the books.

The company plans to use the proceeds to fund a tender for its 8½% notes due 2016 and a partial tender for its 8¾% notes due 2018, and for general corporate purposes.

Hence MarkWest saw 2% of interest savings with respect to the 2016 notes, and a 2¼% savings relative to the 2018 notes.

Deal meets little resistance

The 6½% print for MarkWest did not appreciably thin the crowd of investors playing the deal on Wednesday, an informed source said.

The dealers made it clear from the outset how pricing would shake out, the source added.

A few accounts did head for the exits but the deal could easily have been upsized, the sell-sider added.

There was a significant "roll" factor at play, meaning some investors who were being taken out of the 8½% and 8¾% notes were keen to maintain exposure to a "well known high-yield name," the source said.

However, there was also new money in the deal.

Australia's Midwest Vanadium

Australia's Midwest Vanadium priced a $335 million issue of seven-year senior secured first-lien notes (B3/B-) at par to yield 11½%, at the tight end of the 11½% to 11¾% price talk.

J.P. Morgan Securities LLC ran the books.

Proceeds will be used to refinance debt, as well as to fund capital expenditures and for general corporate purposes.

Florida East Coast's PIK deal

As to signs of a hot market: how about a PIK toggle note issued by a holding company for the purposes of funding a dividend, done as a drive-by!

Florida East Coast Holdings priced a $130 million issue of 6.5-year senior PIK toggle notes (Caa3/CCC) on Wednesday.

The notes, which priced at 98.25, have a cash coupon of 10½% and a PIK coupon of 11¼%.

Both the cash and the PIK coupons came on top of the respective coupon talk. The reoffer price came at the rich end of the 98 to 98.25 price talk.

Bank of America Merrill Lynch ran the books.

The Jacksonville, Fla.-based freight railroad company will use the proceeds to fund a distribution to its shareholders.

The deal comes three week after Florida East Coast Railway Corp., the operating company, priced a $475 million issue of senior secured notes due Feb. 1, 2017 (B3/B/) at par to yield 8 1/8%.

Proceeds from that deal were to be used to repay existing debt and for general corporate purposes.

American Commercial plans PIK toggle notes

Another PIK toggle deal is on deck for Thursday

ACL I Corp., the parent of American Commercial Lines Inc., talked its $225 million offering of five-year senior PIK toggle notes (/CCC+/) with an 11¼% area yield including 1 to 2 points of original issue discount on Wednesday.

Bank of America Merrill Lynch, UBS Investment Bank and Wells Fargo Securities are the joint bookrunners.

The Jeffersonville, Ind.-based shipping and transportation services provider plans to use the proceeds to fund a special dividend to redeem equity advanced in connection with the acquisition of American Commercial Lines by affiliates of Platinum Equity LLC.

Meanwhile, Venoco talked its $500 million offering of eight-year senior notes (Caa1/B) with an 8¾% to 9% yield on Wednesday.

Bank of America Merrill Lynch and BMO Nesbitt Burns are the joint bookrunners.

And Energy XXI Gulf Coast plans to price a $250 million offering of eight-year senior notes on Thursday, via RBS Securities.

Proceeds will be used to redeem the company's 10% senior notes due 2013 and to repay outstanding debt under its revolving credit facility.

Telenet drive by

Finally, in Wednesday's European primary market Belgium's Telenet NV priced a €300 million issue of 10-year senior secured notes (expected Ba3) at par to yield 6 5/8%.

The yield printed on top of the price talk.

Credit Suisse, J.P. Morgan Securities LLC, Bank of America Merrill Lynch, BNP Paribas, Royal Bank of Scotland and SG CIB were the joint bookrunners for the debt refinancing deal.

Ply Gem pops in aftermarket

When PlyGem Industries' seven-year secured notes were freed for aftermarket activity, a trader said that the Cary, N.C.-based building products company's new paper pushed up to 101½ bid, 102 offered "right out of the box."

The offering had priced earlier in the session at par.

New MarkWest marks time...

On the other hand, traders saw no real gains in MarkWest Energy's 101/2-year notes. The Denver-based natural gas company's quick-to-market bonds had priced at par - and there they stayed in the aftermarket, with several traders quoting the new issue at par bid, 100½ offered.

"The markets were bracketing par," one of them said.

...but tender bonds better

While the new MarkWest bonds weren't going anywhere, the same could not be said for the company's 8½% notes due 2016, which are to be taken out via a tender offer funded with the proceeds from the new deal.

Two market sources saw those bonds having gained 1¼ points to end at 107½ bid - just north of the total consideration for those bonds under the tender offer, equivalent to a 107.25 price, for those bondholders tendering their notes before the tender offer's consent deadline at 5 p.m. ET on Feb. 23.

The offer for the $275 million of bonds expires on March 9.

Florida, Midwest are no-shows

The Florida East Coast Holdings Corp. and Midwest Vanadium deals were heard to have priced too late in the session to have any Wednesday trading, market participants said.

Chesapeake goes nowhere

Among the bonds which came to market on Tuesday, a trader said that Chesapeake Energy Corp.'s new 6 1/8% notes due 2021 "were stuck at par all day - they were like a par lock most of the day."

A second trader saw the bonds straddling issue at 99 7/8 bid, 100 1/8 offered.

Another had them late in the session at par bid, 100¼ offered

The Oklahoma City-based natural gas company had priced its quickly-shopped $1 billion offering on Tuesday at par.

The first trader said that Chesapeake was one of the day's volume leaders in Junkbondland, with the new bonds clearly the most active of the company's credits.

Existing Chesapeakes easier

He said that Chesapeake's existing bonds - which had firmed solidly over the previous two sessions on the company's announcement that it would look to sell a basketful of natural gas assets and ownership stakes in other companies to raise $5 billion in order to pay down debt - "looked like they were ¼ point off their highs. They hit a couple of the higher bids today, but weren't particularly active."

He saw the 6 5/8% notes due 2020 traded around 104 3/8, which he called about unchanged to perhaps down 1/8.

The 6½% notes due 2017 were at 105¼ bid, down about ¼ from late Tuesday, while its 7¼% notes due 2018 retreated by around ¾ point to 108 bid, but he noted that "there weren't a lot of round-lot trades" in that issue.

Chesapeake's 9½% notes due 2015, which had pushed up about 1½ points in active trading on Tuesday, were down around ¼ point Wednesday at 122.

Avaya trades under issue

Avaya Corp.'s new 7% notes due 2019 were seen trading all day below the par level where the Basking Ridge, N.J.-based communications systems maker had priced its $1.01 billion of new paper on Tuesday.

A trader quoted them in a 991/2-99¾ context. "They hit a [9]9¾ bid in the morning a couple of times, then got to be 991/2-3/4, and it looks like that's the way they are."

Ally shows improvement

The third of Tuesday's trio of mega-deals, Ally Financial Inc.'s three-year notes, "actually traded up," a trader said, adding that "it's a short piece of paper" that would make holders comfortable with the credit, the Detroit-based automotive and residential lender and bank operator formerly known as GMAC.

Ally priced a quickly-shopped and massively upsized $2.25 billion two-part deal on Tuesday, split into $1 billion of 4½% notes due 2014, and a second tranche of $1.25 billion of floating-rate paper due 2014 that was added to the deal. Both tranches came to market at par.

However, only the fixed-rate piece was seen trading around on Wednesday.

The trader saw the 41/2s - which had traded late Tuesday around 100¼ bid, 100 5/8 offered - get as high as 100¾ bid, 101 offered in Wednesday's dealings, before the bonds came off that peak to finish around 100 5/8 bid, 100 7/8 offered, "so they were up 1/8 or ¼ from the close [Tuesday]."

A second trader saw the new Ally bonds going home at 100¾ bid, 101¼ offered.

A market source elsewhere saw Ally's existing 6 7/8% notes slated to mature this September down ½ point at 102¼ bid, while at another desk, the bonds were seen up ¼ point, at just under 103.

Recent Ford offering off

Among issues from a little further back, a trader said that Ford Motor Credit Co. LLC's 5¾% notes due 2021had slipped into reverse, off ½ point on the day to 99½ bid, 99¾ offered.

The automotive loan financing arm of Dearborn Mich.-based automotive giant Ford Motor Co. had priced $1.25 billion of the notes at par in a drive-by deal on Feb. 2.

Elsewhere in the autosphere Wednesday, a trader saw parent Ford's 7.45% bonds due 2031 lose a full point to end at 108¾ bid, 109¾ offered.

He meantime saw the 8 3/8% benchmark bonds due 2033 of Motors Liquidation Co. - the "old" General Motors Corp. before its 2009 bankruptcy reorganization and name change to Motors Liquidation - down ½ point at 36¼ bid, 37¼ offered.

But another trader said the GM bonds "seemed to be feeling pretty good today," quoting them trading at 36 to 361/4, on "decent amount of size - sociable size, not really active, but holding in [that] range."

Clear Channel gives up gains

A trader said that Clear Channel Communications Inc.'s bonds "have been bouncing around - but they gave up some of their points" racked up since the San Antonio, Tex.-based media company's announcement Monday that it plans to sell $750 million of new 10-year secured notes, with the proceeds slated for debt repayment, including the company's 6¼% notes coming due on March 15.

The company was heard to have hit the road on Wednesday to begin marketing the new deal, with pricing seen sometime next week.

Back among the existing Clear Channel bonds, the trader said the company's 10¾% notes due 2016 were going home "down a bit" after trading in a range of around 96-97. He said the bonds had "touched par" on Tuesday, but were down 3 points to around 97¼ bid Wednesday on "a lot of trading - there's a lot of trading when they're down a lot of points."

He saw Clear Channel's 11% PIK toggle notes due 2016 ending at 96 bid, 96½ offered, which he said was "the same thing - down 2½ points, on a lotta volume."

A market source at another desk saw the 103/4s down 3¼ points on the day, pegging the bonds at 96¾ bid, while also seeing the 11s down 2½ points at 96.

Indicators turn mixed

Away from the new-deal universe, a trader saw the CDX North American Series 15 HY index down ¼ point on Wednesday to end at 104 3/8 bid, 104 5/8 offered, after having been pretty much unchanged on Tuesday.

The KDP High Yield Daily index meantime fell by 10 basis points on Wednesday to close at 75.92, after having risen by 13 bps on Tuesday. Its yield rose by 5 bps to 6.70%, after having come in by that same amount on Tuesday.

But the Merrill Lynch High Yield Master II index was again on the upside on Wednesday, for a 14th consecutive day, as it rose by 0.026%, on top of the 0.10% gain seen Tuesday.

That lifted the index's year-to-date return to 2.909% on Wednesday - yet another new peak level for the year so far. It had closed on Tuesday at 2.882%, the previous 2011 high point.

Advancing issues led decliners for a 14th straight session on Wednesday - but only by a literal handful of issues out of the more than 1,4000 which had traded, in contrast to the seven-to-five margin seen over the previous three sessions.

Overall activity, represented by dollar-volume levels, fell by 4% on Wednesday, after having risen by 32% on Tuesday from the previous session's level.

Traders said that most of the day's activity took place in the new or recently priced bonds.

A trader said that apart from a few situations that stood out, like the slightly firmer tone in the new Ally Financial paper, "the rest of the stuff looked like it was feeling weaker all day. It certainly widened out on spread," in line with firmer Treasuries, helped by a positive 10-year note auction, which caused the yield on the 10-year paper to narrow by 9 bps, to 3.64%.

Overall, though, he opined "it looks like a dull day.

"There was not much exciting going on out there. Generally, we were softer in sympathy with the equity market. Spreads widened out a little bit on some stuff, particularly the richer stuff, which got a little cheaper."

Paper stands pat

Among specific issues, a trader said that paper names "have been sort of blah."

He quoted Catalyst Paper Corp.'s 11% senior secured notes due 2016 trading at 104 bid, "up a little bit," but saw the Richmond, B.C.-based papermaker's 7 3/8% notes due 2014 remaining around 88 bid, on "not much activity."

He said that sector peer NewPage Corp.'s 11 3/8% senior secured notes due 2014 "holding their own" around 101 bid, around where the Miamisburg, Ohio-based coated-paper manufacturer's bonds have been recently.

Market awaits OPTI numbers

OPTI Canada Inc.'s 8¼% notes due 2014 "were holding their own," a trader said, seeing those bonds at bid levels between 53 and 53½ with "some trading," but unchanged levels.

However, with the troubled Calgary, Alta.-based oil-sands energy company scheduled to report its fourth-quarter and year-end financial results on Thursday, followed by a conference call with company executives, OPTI's already beaten-down equity fell sharply again on the Toronto Stock Exchange; its shares lost 4 cents (Canadian), or 10.61%, to end at 30 cents per share (Canadian).

Nexen, Inc. - which owns 65% of the Long Lake, Alta. joint-venture project that OPTI owns the remaining 35% of, has also scheduled a Thursday conference call to give an operations update on the project, which has been slower than expected in ramping up to its target levels for converting bitumen found in the oil sands into usable crude oil.

Harry and David higher

Also from down in distressed-debt territory, a trader said that Harry & David Operating's 9% notes due 2013 had moved up to the upper 30s, getting to bid levels in the 39-40 area, "up a bit from prior levels," in the mid-30s, "so call 'em up a couple of points."

He noted that the Medford, Ore.-based specialty retailer's $175 million credit is "a thin issue, with not a lot of trading - it's not like it's a big thing, just the last thing I saw."

At another desk, the bonds were quoted at 40½ bid, up some 2½ points on the session.

The bonds rose following Tuesday's release by the company of its results for the fiscal second-quarter ended Dec. 25.

Those results were no big surprise to the market, having already been released in preliminary form in mid-January. The company warned at that time that it would fall out of compliance with its credit-facility covenants, would need to raise new capital and restructure its debt in order to continue operating and had hired advisors to explore possible recapitalization moves - causing the bonds to tumble into the 30s from pre-news levels in the 60s.

An improved A&P

A trader said that Great Atlantic & Pacific Tea Co.'s 11 3/8% senior secured notes due 2015 were doing better on Wednesday, seeing those bonds at 94 bid, 95 offered, up about a point on the day.

He said that the bankrupt Montvale, N.J.-based supermarket operator's busted convertible issues - its 5 1/8% notes coming due on June 15 and its 6¾% notes due 2012 - were also up a point, at 35 bid, 36 offered. There was no fresh news out about the company.

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