Citgo, MDC slate deals, MCE talks; secondary rebounds with stocks, many issues up points

By Paul Deckelman and Paul A. Harris

New York, May 10 - After having been virtually battered into submission at the tail end of last week by investor angst over Greece's fiscal meltdown and the seeming inability of the other European nations to do anything about it, the risk markets like equities and junk bonds came roaring back on Monday buoyed by the news that the European Union and the International Monetary Fund will create a nearly $1 trillion bailout fund to stabilize Greece and other PIIGS countries that run into trouble, while flight-to-safety investments like Treasuries fell.

With Wall Street leading the way and posting its biggest gains in over a year - the Dow industrials zoomed 405 points, the most since March 2009 - junk jumped as well, with statistical indexes that had been taking a drubbing last week seen up sharply and many issues up multiple points in very active dealing - almost an exact mirror image of what had happened on Thursday, especially, and Friday, when the indexes stumbled and many junk bonds tumbled by four, five, even six points or more.

Among the big gainers in Junkbondland, pretty much recouping Thursday's and Friday's losses, were such familiar names as General Motors Corp., Clear Channel Communications, Inc., and Harrah's Operating Co.

In the primary arena, market sources heard Citgo Petroleum Corp. getting ready to launch a $1.5 billion offering of seven- and 10-year bonds as part of a big refinancing transaction by the Houston-based petroleum refiner, which is controlled by Venezuela's state-run oil company.

Also on the new-deal front, MDC Partners, Inc., a Toronto-based marketing communications company, announced a $65 million offering of 2016 notes.

Price talk emerged on MCE Finance Ltd.'s $600 million issue of eight-year notes.

And Chesapeake Energy Corp. announced plans to raise up to $5 billion over the next two years, and use most of that to take out some $3.5 billion of existing senior bond debt.

Deal calendar still in place

The volatility of the week past seemed a distant echo as global capital markets, including high yield, resumed their northward marches on Monday, sources said.

Much if not all of the new issue calendar that carried over from the weekend remains in play, and pretty much on schedule, a syndicate banker said.

No deals priced on Monday, and very little primary market news surfaced, as the dealers took a header.

"People are looking for some stability," said the official, making reference to capital markets volatility that came into play late last week, triggered by the debt crisis in the eurozone.

MDC Partners plans add-on

Monday's session generated a small amount of primary market news.

MDC Partners Inc. plans to price a $65 million add-on to its 11% senior unsecured notes due Nov. 1, 2016 (B2/B+) on Tuesday morning via Goldman Sachs & Co.

The original $225 million issue priced at 95.336 to yield 12% on Oct. 21, 2009

The proceeds from the add-on will be used to repay the outstanding balance under the company's senior secured credit facility, and for general corporate purposes, including acquisitions.

MCE sets price talk

Elsewhere, China's MCE Finance Ltd. talked its $600 million offering of eight-year senior notes (B1/B+) to yield in the 10½% area, at a to-be-determined discount.

In addition to the price talk, the company covenant changes.

Pricing is set for Wednesday morning.

Deutsche Bank Securities, Bank of America Merrill Lynch, RBS Investment Bank, ANZ Investment Bank, Barclays Capital, Citigroup, Commerz, Credit Agricole, NAB Securities and UBS Investment Bank are the joint bookrunners.

Calendar to mid-week

In addition to MDE Partners and MCE Finance, at least three other deals carried over from last week could clear the market by Wednesday's close, sources say.

They include Mylan Inc.'s $1 billion two-part offering of senior notes in seven-year and 10-year tranches, led by Goldman Sachs.

Market watchers also see Kratos Defense & Security Solutions, Inc.'s $200 million offering of seven-year senior secured notes (expected ratings B2/B+), via Jefferies & Co., as early week business.

And England's Towergate Finance plc may be poised to price its £665 million equivalent of high-yield notes in multiple tranches as early as Tuesday, sources say.

The independent insurance broker intends to sell £365 million equivalent of seven-year senior secured notes (B1//BB) and £300 million equivalent of eight-year senior notes (B3//B-), split between dollar- and euro-denominated tranches.

JPMorgan and Credit Suisse have the books.

Waiting for deals

A secondary market trader meantime said that he was "a little surprised that we didn't see a drive-by [deal] today," with the sharp bounce back on improved market feeling. "I bet tomorrow [Tuesday] we will - some good name that was thinking about coming to market."

However, at another shop, a trader declared that "investors are still very concerned, and they're going to need a couple of more days to see what's happening" before they are willing to step in and buy a new deal.

"I think if they came with a deal and tried to market it, they would have had a tough time today, if someone tried to take advantage of the enthusiastic market."

Looking over the early-morning news that Citgo will bring a $1.5 billion deal, the first trader mused that "I'm not sure what kind of reception PDVSA [Petroleos de Venezuela, SA, the state-run oil company that controls Citgo] gets in this market," although he noted that given where its outstanding bonds are trading, "somebody's got to buy it at 15% or 16%."

Recent ATP bonds recover a little

A trader saw ATP Oil & Gas Corp.'s recently priced 11 7/8% second-lien senior secured notes due 2015 as having firmed to around 93½ bid. 94½ offered - up from their opening levels Monday morning around 92 bid, 94 offered, and well up from Friday's close at 90½ bid, 92 offered.

The Houston-based energy exploration and production company's bonds had been hammered all the way down to around the 90 bid level last week from the 99.531 level at which that $1.5 billion offering had priced to yield 12% back on April 19. That was the day before the Deepwater Horizon disaster in the Gulf of Mexico which left 11 workers dead following the oil drilling rig's explosion, and a gigantic oil slick in the Gulf, threatening marine wildlife and area beaches, as well as disrupting energy operations in the Gulf by companies such as ATP. The company's bonds had been particularly hard hit last week after the oil spill was found to be much larger and more dangerous than originally estimated, and resistant to various methods tried so far to contain it.

The bonds were seen having risen on Monday in line with the overall three to four point rise in junk prices, rather than on any good news from the Gulf on efforts to stop the spill, since those efforts have so far not borne fruit.

The trader meantime saw no dealings Monday in Mariner Energy Inc.'s bonds; the Houston-based E&P company, which also has Gulf of Mexico operations, is in the process of being acquired by Apache Corp.

Its 11¾% notes due 2016 were seen continuing to cling to the 125-126 level to which they had risen on the recent news of the Apache transaction. He also said that its 8% notes due 2017 likewise "didn't trade today," holding to the 107 5/8 bid level at which they had ended on Friday, although that was down from the 110 level hit earlier in the week.

He projected that the Mariner acquisition by Apache "probably isn't going to fall out of bed," even with the continued bad news coming out of the Gulf.

He meantime saw Apache's New York Stock Exchange-traded shares, which had recently been trading as high as $110 thanks to the pending Mariner deal, only to plunge as low as the $93 region in the wake of the oil rig disaster, once again back up to about $98.25 on Monday.

"They erased Thursday and Friday's losses - but they're not back up to the peak of two weeks ago," he said.

New AK Steel strengthens

Back among the recently priced deals, a trader said that AK Steel Corp.'s 7 5/8% notes due 2020 were "back over par," after having dropped into the mid to high 90s on the market retreat last week. He quoted them on Monday at 100½ bid, 101½ offered.

The West Chester, Ohio-based steel producer's $400 million offering had priced at par on April 27.

Market indicators bounce back

Among bonds not connected with the new deal market, a trader saw the CDX Series 14 index end up a whopping 3 points on Monday at 97½ bid, 98 offered, after having dropped by ¼ point on Friday, and having plunged by 3 points on Thursday, in line with the junk market's overall stock-induced slide that afternoon.

The KDP High Yield Daily Index continued its recent volatile path, quoted up some 58 basis points Monday to 71.35. Last week, the market gauge had, in quick succession, lost 20 bps last Tuesday, 62 bps last Wednesday, 91 bps on Thursday and 61 bps on Friday. The index's yield meantime tightened by 19 bps to end at 8.41% on Monday - this after having widened by 18 bps on Friday , and after having gapped out by 34 bps on Thursday and by 22 bps on Wednesday.

Advancing issues broke a four-session losing streak on Monday, jumping ahead of decliners by a better than seven-to-five ratio.

Overall market activity, represented by dollar-volume levels, slid by around 25% on Monday from the levels seen the previous session.

A trader said "it's like a whole market psychology sentiment thing going on." He said that on Thursday and Friday "everyone was nervous and today the world is better. " He agreed with the suggestion that there's nothing like a $1 trillion equivalent bailout "to make everybody feel better."

A second trader said that "generally speaking, the high-beta names that got beat up on Thursday and Friday are back to probably [early] Thursday levels, but not quite to the levels before that and, the more stable, on-the-run stuff has come about back the same way, but not nearly as volatile."

At another desk, a trader estimated that "the higher-quality names were up 2 points, while the more distressed higher-beta names were up by 5 points - and that will characterize the entire market."

GM gyrates at higher levels

A trader said that General Motors Corp.'s paper "saw an awful lot of volume," quoting its benchmark 8 3/8% bonds due 2033 up 2 points at 34 bid, 34½ offered. "They bounced around, on a lot of volume," he said.

He meantime saw GM domestic arch-rival Ford Motor Co.'s 7.45% bonds due 2031 move up to 90 bid, 92 offered, up 2 to 3 points, though on "not a lot of volume" . The bonds were "more quoted up than traded up."

A second trader saw Detroit-based top carmaker GM's benchmark issue 2 points better on the session at 34 bid, 35 offered, while the long bonds of Dearborn, Mich.-based Ford, the Number-Two U.S. automotive producer, were ahead by 4 points at 91 bid, 93 offered.

Yet another trader quoted the GM benchmark bonds as having firmed to 35 bid in brisk trading, up some 2½ points on the day.

Also in the automotive parking lot, a trader saw Visteon Corp.'s 7% notes due 2014 "up a couple of points" around 110, though on "virtually no volume," while seeing its 8¼% 2010 notes in a 112-113 context, ending at 113, but again, in "no volume."

He opined that the bonds were being quoted higher by 4 or 5 points, but said "it's the same 4 or 5 points that everything [in the market] is up by," so therefore, the news that the bankrupt Van Buren Township, Mich.-based automotive components manufacturer had adopted a bondholder-backed reorganization plan, announced late Friday, "did not do anything for them. There was no activity."

Clear Channel climbs

A trader said that Clear Channel Communications Inc.'s 10¾% notes due 2016 were off by 5 points on Thursday and Friday and now "they're back."

He saw the San Antonio, Tex.-based media company's bonds having finished trading on Thursday down around 76 bid, and eroded further to 75 on Friday, but were wrapping up in Monday at highs around 81-811/2, "so it's been pretty volatile."

A market source pegged the 10¾% bonds at 80½ bid,

Another trader said that the company's bonds were up 6 points across the board.

Community Health's condition improves

A trader said that something "more stable," like Community Health Systems Inc.'s 8 7/8% notes due 2018, which on Friday had traded down to lows of about 101-1011/2, traded around the 103-103½ area on Monday.

CIT bonds firm up

A trader said that CIT Corp.'s bonds "moved back up a couple [of points], with the "whole curve" trading between 95 for the short bonds and 90 for the longer paper. He saw the 7% notes due 2013 going out around 94 bid, while the 7% notes due 2017 were at 91, both a little lower than where they began (93-93½ for the '17s, and above 95 for the 13s) but "still , a couple of points higher than they were last week."

But another market source quoted the New York-based commercial lender's '17 notes down ¼ point on the day at 91½ bid, in busy dealings.

Paper and packaging are popping

A trader said that Smurfit Stone Container Corp. "had a big day, with an awful lot of trading."

He quoted its 8% notes due 2017 at 94, ending up about 4 points from Friday on "decent volume." He said that it was "the same with the short stuff," such as the several issues of 2012 bonds, but there was more activity in the 2017 notes.

Another trader saw the Chicago-based paperboard packaging company's 8¼% notes due 2012 and its 8s due 2017 as having traded as high as 97 during the session before dropping back to 93½ -- still up some 3 points on the session.

In that same paper sector, a trader saw NewPage Corp.'s 10% notes due 2012 up 7 points on the session, quoting the Miamisburg, Ohio-based company's bonds going to 65 bid from previous levels around 58.

Blockbuster blips around

A trader saw Blockbuster Inc.'s 11¾% notes due 2014 seeming "pretty active," trading between its day's highs in a 69-781 context early in the session, up as much as 4 points, and hovering between 68 and 69 for much of the day, before heading back down to trade in a 66-68 range and end around 67 bid, "still up 2½ points on the day, but off its highs."

Harrah's moves higher

A trader said Harrah's Operating Co.'s 10% notes due 2018 were going out at 83 bid, 84 offered, calling that up 3 points on the session.

He said that "it seemed like there was a bunch of activity" in the Las Vegas-based casino giant's bonds.

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