Chesapeake, Ally mega-deals price, Rite Aid, Building Materials, too; Diamond Resources awaits

By Paul Deckelman and Paul A. Harris

New York, Aug. 9 - The pace was fast, furious and decidedly un-summerlike in the high-yield primary market on Monday, as new deals were being announced - or even pricing - left and right.

Nearly $5 billion of new junk priced during the session, led by Chesapeake Energy Corp.'s $2 billion, two-part behemoth, consisting of eight- and 10-year bonds. The natural gas producer's deal was upsized from the originally expected $1.6 billion. The new bonds traded around their par issue price.

Meanwhile, Ally Financial Inc. (formerly GMAC) swooped in with a $1.75 billion drive-by offering of 10-year notes. The auto-loan provider's new bonds likewise seemed parked around issue after they were freed to trade.

Also doing quickly shopped deals were Wayne, N.J.-based roofing products maker Building Materials Corp. of America, which priced an upsized $450 million of eight-year notes that came too late for the aftermarket, and Rite Aid Corp., which did $650 million of eight-year secured notes. The latter's new bonds firmed only marginally - but its existing paper saw nice gains, apparently helped by the news of a larger debt recapitalization.

New deals were being announced by issuers, such as PetroQuest Energy Inc., Graham Packaging Co. Inc., Tembec Inc. and Targa Resources Partners LP, with primaryside sources believing Targa, and possibly Tembec, could price on Tuesday, as could an offering from Diamond Resorts Corp.

New Enterprise Stone & Lime Co. Inc. and MultiPlan Inc. were also heard to be in the market with deals.

While all of those deals were joining the forward calendar, sources said that energy drilling company Turbo Beta plc/KCA Deutag scotched its planned $500 million bond offering.

New-deal doings dominated the day, traders said, with not much otherwise happening in the secondary arena.

Chesapeake transaction

The Aug. 9 week roared off the starting line, with four issuers raising a combined $4.828 billion in five tranches.

Chesapeake Energy priced an upsized $2 billion two-part senior notes transaction (Ba3/BB).

The deal included a $1.4 billion tranche of 10-year notes that priced at par to yield 6 5/8%. The yield printed at the tight end of the 6 5/8% to 6¾% price talk.

Chesapeake Energy also priced a $600 million tranche of eight-year notes, which priced at par to yield 6 7/8%. The eight-year notes came at the wide end of price talk that had them coming 1/8% to ¼% higher than the 10-year notes.

Credit Suisse, Bank of America Merrill Lynch, Barclays Capital, Morgan Stanley and Wells Fargo Securities were the joint bookrunners for the quick-to-market deal, which was upsized from $1.6 billion.

The Oklahoma City-based natural gas company will use the proceeds to help fund tender offers for its 7% senior notes due 2014, its 6 5/8% senior notes due 2016 and its 6¼% senior notes due 2018.

The deal was multiple-times oversubscribed, sources said.

A lot of accounts being taken out of Chesapeake Energy paper via the tender offers were keen to roll into new paper, one debt capital markets banker said.

The new Chesapeake Energy 6 7/8% notes due 2020 came at a 30 basis points concession to the company's existing paper, a syndicate source said.

Ally off high-grade desk

Also doing a Monday drive-by was Ally Financial, formerly known as GMAC, Inc.

The automotive lender priced a $1.75 billion issue of 7½% 10-year senior notes (B3/B/B) at 99.116 to yield 7 5/8%, on top of price talk.

Citigroup, Bank of America Merrill Lynch, Goldman Sachs & Co. and RBS Securities were the joint bookrunners for the deal, which was priced off of the investment grade desk.

The final book contained in excess of $4 billion of orders, according to a high-grade trader, who added that the company had options to do a smaller deal at a tighter price.

The size of $1.75 billion was larger than the bookrunners were anticipating. They were looking more at the $1 billion to $1.5 billion range, the trader said.

"There are some issuers that are out there to 'take every penny off the table,' but they were more cautious on this one," the trader said, adding that the sale was executed "high-grade style" and done off the high-grade desk because there is an ongoing relationship with the issuer there.

Rite Aid on top of talk

Rite Aid also brought a Monday drive-by.

The Camp Hill, Pa.-based drugstore chain priced a $650 million issue of 10-year senior secured first-lien notes (confirmed B3/expected B+) at par to yield 8%, on top of the price talk.

Citigroup, Bank of America Merrill Lynch, Wells Fargo Securities and Credit Suisse were the joint bookrunners for the quick-to-market debt refinancing deal.

Building Materials upsizes

Building Materials Corp. of America priced an upsized $450 million issue of 6 7/8% eight-year senior notes (B1/BB+) at 98.493 to yield 7 1/8%, also on top of price talk.

Deutsche Bank Securities, Citigroup and Bank of America Merrill Lynch were the joint bookrunners for the quick-to-market deal, which was upsized from $350 million.

The Wayne, N.J.-based roofing company will use the proceeds to repay its second-lien term loan due in 2014.

Crossover deals

The crossover space, meanwhile, saw $2.3 billion price, on Monday.

Anadarko Petroleum Corp. priced an upsized $2 billion of seven-year notes (Ba1/BBB-/BBB-) at par to yield 6 3/8%, at the tight end of the 6½% area price talk.

The debt refinancing and general corporate purposes deal, via active bookrunners J.P. Morgan Securities Inc. and Barclays Capital Inc., was upsized from $1.5 billion.

Elsewhere, Developers Diversified Realty Corp. priced an upsized $300 million of 7 7/8% 10-year senior unsecured notes (Baa3/BB/BB) at 99.139 to yield 8%.

J.P. Morgan Securities Inc. and Wells Fargo Securities ran the books for the debt refinancing.

Meanwhile, International Lease Finance Corp. is planning to price $2.5 billion of split-rated senior secured first-lien notes (Ba3/BBB-/BBB-) in three tranches on Wednesday.

The deal features $900 million of four-year notes, $800 million of six-year notes and $800 million of eight-year notes.

Bank of America Merrill Lynch, Citigroup Global Markets Inc. and J.P. Morgan Securities Inc. are the bookrunners for the debt refinancing.

Diamond Resorts sets talk

Looking ahead to a Tuesday session, which could be even busier than Monday's, sources say, Diamond Resorts talked its $425 million issue of eight-year senior secured notes with an 11¾% to 12% yield.

The Las Vegas-based timeshare and vacation ownership company also modified the bond covenants.

The order books close at 2:30 p.m. ET on Tuesday, with the deal set to price thereafter.

Credit Suisse, Bank of America Merrill Lynch and Guggenheim Securities are the joint bookrunners for the debt refinancing deal.

Targa for Tuesday

Elsewhere, Targa Resources Partners Ltd. and Targa Resources Partners Finance Corp. will host a 10:30 a.m. ET investor call on Tuesday for their $250 million offering of eight-year senior notes (expected ratings B2/B+).

The deal is anticipated to price on Tuesday afternoon.

Bank of America Merrill Lynch, Deutsche Bank Securities, JP Morgan and Wells Fargo Securities are joint bookrunners.

Proceeds will be used to pay down bank debt and for general partnership purposes, which may include redeeming or repurchasing some of the partnership's outstanding notes, as well as for working capital and acquisitions.

The calendar builds

Elsewhere, Tembec Industries will host a 10 a.m. ET investor call on Tuesday for its $250 million offering of eight-year senior secured notes.

Bank of America Merrill Lynch and Credit Suisse are joint bookrunners for the debt refinancing deal.

Meanwhile, New Enterprise Stone & Lime will host an investor call on Tuesday for its $250 million offering of eight-year senior notes.

The deal is set to price on Thursday.

Bank of America Merrill Lynch has the books for the debt refinancing transaction.

And PetroQuest Energy began a brief roadshow on Monday for its $150 million offering of seven-year senior unsecured notes (existing ratings Caa1/B).

The roadshow wraps up on Wednesday. The deal is expected to price on Thursday.

JPMorgan has the books for the deal to fund the tender for PetroQuest's 10 3/8% senior notes due 2012.

Finally, MPH Merger Sub Corp., which will be merged with and into Multiplan, began a roadshow on Monday for its $675 million offering of eight-year senior unsecured notes (Caa1/CCC+).

The roadshow wraps up on Thursday. The deal is expected to price either on Thursday or Friday.

Bank of America Merrill Lynch, Credit Suisse and Barclays Capital are the joint bookrunners for the LBO deal.

'Feeding frenzy'

A trader characterized Monday's session as "just a new-issue feeding frenzy. It's just unbelievable. I've never seen anything like it - especially for August."

At another desk, a trader observed that "there were lots of announcements."

A trader noted: "There was almost $7 billion of new issues today." He included in his count some $2 billion of new paper from Anadarko Petroleum and $300 million from Developers Diversified Realty, both issues split-rated and coming off investment-grade desks but likely to attract some junk interest.

He said that because of that heavy supply glut, "nothing is trading up! There's no one left to buy anything."

New Ally bonds hang around issue...

As an example, he initially said that he heard the new Ally Financial 7½% notes due 2020 "trading sideways" after having priced at 99.116.

A little later on in the session, he quoted the Detroit-based auto-loan and mortgage finance company's new deal at 99 1/8 bid, 99 5/8 offered and said the bonds "were trading into 99 bids."

A second trader saw the new Ally notes at 99 bid, 99½ offered, while another had them going home at 99¼ bid, 99¾ offered.

Ally's existing 6 7/8% notes due 2011 and those due 2012 were a shade above 103 bid, up about a point on fairly brisk dealings. Its 5 3/8% notes due 2011, on the other hand, were down slightly more than a point at 100 5/8 bid.

...as do Chesapeake's

A trader said that the new Chesapeake Energy 6 5/8% notes due 2020 were "tied up" at par bid, 100¼ offered versus the par level at which they had priced.

He saw no signs of the Oklahoma City-based natural gas company's 6 7/8% notes due 2018 trading in the aftermarket.

New Rite Aid rises slightly...

A trader saw Rite Aid's new 8% senior secured notes due 2020 trading at 100¼ bid, 100¾ offered, up slightly from their par issue price.

A second saw the new bonds at that same level.

At another desk, a trader pegged the new Rite Aid notes at par bid, 100 5/8 offered on the break. Later on, he said that a 100¼ bid got hit.

... while existing RADs rally

As for the company's existing paper, a trader said that Rite Aid "had a really active day," a trader said, spurred by its new deal and the news of its plans to refinance its revolving credit facility.

He cited "pages and pages" of messages regarding the Camp Hill, Pa.-based drugstore chain operator, adding, "It looks like they were very active across the [capital] structure."

Another trader said that the existing bonds had "been kind of active," seeing the busiest issue, the 9½% notes due 2017, up 1¾ points at 83 bid.

He saw Rite Aid's 9½% notes due 2017 gain 3/8 of a point to close at 92 5/8, while its 8 5/8% notes due 2015 were up 1¼ point at 84¾ bid.

At another desk, a market source pegged the 91/2s at 83 bid - but called them up more than a point on the day.

Recent deals little moved

Traders saw recent new deals pretty much unchanged on Monday from where they had been on Friday, with that session's big primary winner PHH Corp.'s 9¼% notes due 2016 at 102½ bid, 103¼ offered.

The Mount Laurel, N.J.-based provider of mortgage loans and vehicle fleet services priced its $350 million issue, upsized from the originally planned $250 million, at par on Friday, and it was quoted going home later that session with the bonds trading slightly north of 102 bid.

But he said he saw only "very thin volume" on last week's deals.

Another deal which came last week and did quite well in the aftermarket back then was Ferro Corp.'s $250 million of 7 7/8% notes due 2018. The Cleveland-based industrial materials company priced its deal on Thursday at par, and it moved right up to above the 102 market in brisk aftermarket trading.

Now, on much reduced volume, a trader said that the bonds remained at 102½ bid, 103¼ offered.

Foresight Energy LLC's 9 5/8% notes due 2017 were trading at 99½ bid, a trader said, versus the 99.374 level at which the Palm Beach Gardens, Fla.-based coal mine operator's $400 million issue had priced on Friday to yield 9¾%.

"Foresight kind of struggled" ever since it priced, another trader opined, "trading right at, or below, issue."

Market indicators mostly firmer

Away from the new-deal sector, a trader saw the CDX North American HY Series 14 index up ½ a point on Monday to end at 98 3/8 bid, 98¾ offered, after having fallen ¼ of a point in each of the prior two sessions.

The KDP High Yield Daily index meantime fell by 5 basis points on Monday to 72.43, after having eased by 1 bp on Friday. Its yield was 2 bps higher on Monday, at 8.10%, on top of the 1 bp gain seen Friday.

The Merrill Lynch High Yield Master II index continued to hit new highs for the year on Monday when it rose 0.144% to end at a year-to-date return of 9.085%, a new 2010 peak level, eclipsing the previous mark of 8.928% seen on Friday.

Advancing issues led decliners for a 26th consecutive session on Friday, although their winning margin dwindled to just a couple dozen issues out of the nearly 1,400 tracked versus Friday's roughly five-to-four advantage.

Overall activity, represented by dollar-volume levels, rose by 39% on Monday, after having plunged by 40% on Friday.

A trader said that despite the apparent rise in numerical volume, "it was really quiet in the secondary" apart from the activity in recent new issues or in existing bonds linked to new issues, such as the Rite Aid complex.

A second trader said: "There was credit news out. It seemed like there was a lot of selective activity."

Clear Channel goes cash-pay

A trader said that Clear Channel Communications Inc.'s 10¾% notes due 2016 ended around 78 bid, 80 offered, which he said is where those bonds already were - but he saw the 11% guaranteed senior toggle notes due 2016 rise to 75½ bid, 77½ offered versus 73 bid, 74 offered earlier in the session.

He noted that "the 11s are going cash-pay" rather than paying their interest "in kind" - i.e., with additional notes - citing that change for the probable reason for the jump in the bonds.

"They were lower this morning, and now that they're cash-pay, call them up 3 points. Cash-pay makes a difference, obviously."

He said that there had been "some trading" in the San Antonio, Tex.-based media company's issue - "not a huge amount, but some."

ATP steady at lower levels

A trader said that ATP Oil & Gas Corp.'s 11 7/8% second-lien senior secured notes due 2015, which fell about 3 points on Friday to the 78 level, "didn't seem like they were that active."

He saw the bonds opening at 79¼ bid, 80¼ offered and saw them going out at that level after "hanging out" between 78 bid and 80 bid "all day long."

"There was some trading in it," he said, "but it was in that same range all day."

The bonds slid on Friday after the Houston-based independent energy exploration and production company posted a much wider than expected second-quarter loss. Among the items hurting results were the suspension of its deepwater drilling operations in the Gulf of Mexico, where it has the bulk of its reserves, under the tough government deepwater drilling moratorium in the wake of the BP oil well disaster there.

NewPage pushes slightly higher

A trader said that NewPage Corp.'s 11 3/8% senior secured notes due 2014 were trading at 88 bid, 89 offered, which he called up ½ a point to 1 point on the day, though on "not a lot of activity - but it definitely moved a bit." He said that the bonds had started the day around 87 bid, 88 offered.

The Miamisburg Ohio-based coated-paper manufacturer's bonds had slid into the upper 80s from prior levels in the 90s last Thursday, after the company reported worse second-quarter numbers than many in the market were anticipating.

At the time, the company also revealed that a $70 million asset sale that was originally expected to close later this year has run into regulatory delays and will not close before sometime next year at the earliest.

Autos seen firmer

A trader said that General Motors Corp.'s benchmark 8 3/8% bonds due 2033 "seemed to be a little higher" at 35½ bid, 36½ offered, which he estimated at "maybe a point higher," while GM domestic arch-rival Ford Motor Co.'s 7.45% bonds due 2031 were at 97 bid, 97½ offered, which he called unchanged on the session, with "a decent amount of trading" going on.

At another desk, a trader called GM's benchmark issue up ½ a point at 35½ bid, 36 offered and saw the Ford long bonds unchanged at 97 bid, 98 offered.

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