Ferro, EnergySolutions, Dick Clark sell; PHH ahead; NewPage dives; funds up $583.1 million

By Paul Deckelman and Paul A. Harris

New York, Aug. 5 - A trio of new dollar-denominated deals priced on Thursday as the high-yield primary market continued its busy early-August borrowing binge. EnergySolutions, Inc. came to market with a $300 million issue of eight-year notes, Ferro Corp. priced $250 million of eight-years, while Dick Clark Productions was up on the bandstand with an upsized $165 million issue of five-year secured notes. Traders said the latter bonds were not seen trading around, probably owing to the deal's small and illiquid size, while the EnergySolutions and Ferro paper moved up solidly in the aftermarket.

Junk players in Europe meantime heard that Dutch cable operator UPC Holding BV had priced a quickly appearing euro-denominated issue of 10-year notes.

Back in the dollar-bond market, price talk emerged on prospective new issues from KCA Deutag Drilling Group, Ltd., Foresight Energy, LLC and PHH Corp., with pricing on all three scheduled for Friday's session.

Exide Technologies announced plans for a $675 million two-part offering of senior secured bonds.

Among recently priced bonds, Pride International, Inc.'s split-rated deal continued to attract favorable attention from both junk and high-grade investors.

Away from the new issues, NewPage Corp.'s bonds were seen down between 3 and 4 points in very heavy trading after the Miamisburg, Ohio-based coated-paper company released disappointing second-quarter numbers and disclosed that completion of a big asset sale has been delayed at least into next year by regulatory red tape.

Junk funds gain $583.1 million

And as market dealings were winding down for the session, participants familiar with the Lipper FMI weekly high-yield mutual fund-flow numbers compiled by AMG Data Services of Arcata, Calif. - considered a reliable barometer of overall junk market liquidity trends - said that in the week ended Wednesday, $583.1 million more came into those funds than left them.

It was the fourth sizable inflow in as many weeks, following on the heels of the $976.3 million cash injection seen the previous week, ended July 28. Those inflows, totaling $3.535 billion, according to a Prospect News analysis of the figures provided by market sources - broke a two-week losing streak in late June and early July during which a total of $498.443 million more had left the funds than came into them.

The four big inflows - which also include $700.64 million in the week ended July 21 and a massive $1.25 billion in the week ended July 14 - would seem to have put junk liquidity back on a firmly positive track; after strong gains over the first four months of the year, including one 10-week stretch that saw $4.44 billion of inflows, according to the Prospect News analysis, the weeks that followed saw a more inconsistent pattern, with several weeks of inflows followed by several weeks of outflows.

With the 2010 third quarter now well under way, inflows have now been seen in 20 weeks out of the 31 since the beginning of the year, while there have been 11 outflows.

The inflow in the latest week raised the year-to-date cumulative total for the weekly reporting funds up to around $4.222 billion, according to the analysis of the data, versus the roughly $3.639 billion 2010 net inflow recorded the previous week. The $4.222 billion net inflow is a new peak level for 2010, versus the previous peak level of $4.086 billion recorded in the week ended April 28. The funds hit their biggest year-to-date negative number so far in the week ended June 9, with a cumulative deficit of $475 million.

Any and all cumulative fund-flow totals can include unannounced revisions and adjustments to figures from prior weeks.

EnergySolutions, at the wide end

Three issuers, each bringing a single tranche of notes, raised $709.5 million during the Thursday primary market session.

EnergySolutions priced a $300 million issue of 10¾% eight-year senior unsecured notes (B3/BB-) with EnergySolutions LLC at 98.69 to yield 11%.

The yield printed at the wide end of the 10¾% to 11% price talk.

The deal also underwent covenant changes.

J.P. Morgan Securities Inc., Credit Suisse Securities and Citigroup Global Markets Inc. were the joint bookrunners for the debt refinancing deal.

Ferro - big roll factor

Elsewhere on Thursday, Ferro priced a $250 million issue of eight-year senior notes (B2/B/) at par to yield 7 7/8%.

The yield printed at the tight end of the 8% area price talk.

Credit Suisse, JPMorgan, Bank of America Merrill Lynch and Citigroup were the joint bookrunners.

Proceeds will be used to fund the purchase of 6½% convertible senior notes due 2013 through a tender offer and to repay a portion of the remaining $181 million term loan and revolver under its existing credit facility, or a portion of any new facility.

The market buzz held that allocations were a nightmare since the convertibles holders basically got to roll their interest over.

One trader heard that less than $100 million of new money made its way into the deal.

A syndicate source confirmed the "nightmare" allocations cover but was of the belief that the new money put to work in the $250 million deal was somewhat greater than $100 million.

Participation came from across the spectrum, including equity funds, the syndicate source added.

Dick Clark, club style

Meanwhile DCP LLC and DCP Corp., subsidiaries of Dick Clark Productions, priced an upsized $165 million issue of 10¾% five-year senior secured notes (B2/B+) at 99.055 to yield 11%.

There was not official price talk, according to a source close to the deal.

Because of its relatively small size, the deal was transacted as more or less a club-style play, the source added.

Bank of America Merrill Lynch had the books for the deal, which was upsized from $150 million.

Proceeds, along with cash on hand, will be used to repay the company's senior secured credit facility and to fund a distribution to the parent, CPIH, LLC.

UPC prices atop talk

From Europe, UPC priced a €640 million issue of 10-year senior notes (B2/B-) at par to yield 8 3/8%, on Thursday, according to an informed source.

The yield printed on top of the price talk.

Credit Suisse and Morgan Stanley & Co. Inc. were the joint bookrunners for the quick-to-market deal.

Proceeds will be used to refinance debt.

UPC is possibly the last euro-denominated junk deal of the summer, according to a senior debt capital markets banker who was not in the deal.

However, the source added, the euro-denominated pipeline expected to come after Labor Day is formidable.

KCA Deutag sets talk

One European issuer remains in the market with a dollar-denominated deal.

Turbo Beta plc, the owner of Scotland-based oil and gas services company KCA Deutag Drilling, talked its $500 million offering of eight-year senior unsecured notes (Caa2/CCC) with a 13½% area yield on Thursday.

The deal is expected to price on Friday.

Goldman, Sachs & Co. is the global coordinator. HSBC, Lloyds TSB and Royal Bank of Scotland are the joint bookrunners.

Proceeds, together with an equity injection from shareholders, will be used to refinance mezzanine debt.

Foresight talks seven-year deal

Also on the calendar as Friday's business is Foresight Energy.

The coal producer talked its $400 million offering of seven-year senior unsecured notes (Caa1/B-) to yield in the 9½% area on Thursday.

Pricing is expected mid-morning on Friday.

Citigroup, Morgan Stanley, UBS Investment Bank and Credit Agricole CIB are the joint bookrunners for the debt-refinancing deal.

PHH talk emerges

Elsewhere, PHH also talked its $250 million offering of 5.5-year senior notes (current Ba2/confirmed BB+) with a 9½% area yield.

The books close at 10 a.m. ET on Friday, and the deal is set to price on Friday afternoon.

Bank of America Merrill Lynch, Citigroup, JPMorgan and RBS Securities Inc. are the joint bookrunners for the debt-refinancing deal.

Exide's $675 million two-parter

Meanwhile, the forward calendar took aboard one new deal expected to price before Labor Day.

Exide Technologies announced a $675 million two-part offering of senior secured notes in a Thursday press release.

The deal features tranches of five-year notes, which come with three years of call protection, and seven-year notes, which come with four years of call protection, according to a market source.

Tranche sizes are to be determined.

Morgan Stanley, Deutsche Bank Securities and Wells Fargo Securities will lead the deal.

The Milton, Ga.-based stored electrical-energy solutions company will use the proceeds to repay bank debt, to fund the redemption of its 10½% senior notes due 2013, to provide working capital and for general corporate purposes.

Counting down

The window for launching roadshow deals will not remain open too much longer, sellside sources said on Thursday.

The run-up to the Labor Day weekend, Sept. 4 to Sept. 6, provides issuers with perhaps one more week to begin a roadshow for deals intended to price before Labor Day, the traditional summer/fall boundary, a debt capital markets banker said.

After Thursday's close, 20 full sessions remained. However, volume during the Aug. 30 week is expected to be extremely thin, as is the ranks of investors on hand to buy any new bonds.

You could launch a deal up until the end of the week ahead, the banker said.

"However, we aren't likely to launch anything later than next Wednesday [Aug. 11]," the source added.

Ferro firms fiercely

A trader said that new issues were the dominant feature of the day. He saw the new Ferro 7 7/8% notes due 2018 trading solidly higher than their par issue price, noting that when they broke, "a lot of trading" was taking place at bid levels between 102½ and 103.

Another trader saw those bonds at 102½ bid, 103½ offered.

Energy Solutions does excellently

A trader saw the new EnergySolutions 10¾% notes due 2018 trading as well as par bid, 100½ offered - well up from the 98.69 level where that $300 million deal priced earlier in the day.

At another desk, a trader saw the bonds having risen to 99 7/8 bid, 100 3/8 offered.

Borgata deal a winning hand

A trader saw the new Marina District Finance Co., Inc. bonds issued by the Boyd Gaming Corp.-MGM Resorts International joint venture that owns Atlantic City's glitzy Borgata resort "up quite substantially," trading Thursday around the 101 bid area.

The gaming operator priced $400 million of 9½% senior secured notes due 2015 and $400 million of 9 7/78% senior secured notes due 2018 on Wednesday, the 91/2s at 98.943 to yield 9¾% and the 9 7/8s at 99.315 to yield 10%.

At another desk, a trader saw the 91/2s at 101 bid, 101 3/8 offered.

A trader saw the 9 7/8s having risen to 101 1/8 bid, 101 5/8 offered.

Continental reaches for the skies

A trader saw Continental Airlines Inc.'s new 6¾% senior secured first-lien notes due 2015 trading during the morning at par bid, 100½ offered.

Another one saw the bonds at par bid, 100¼ offered, well up from the 98.938 level at which the Houston-based air carrier priced those bonds on Wednesday to yield 7%

"I expect this one to be moving," he said. "It was a pretty good deal."

Pride trades proudly

A trader said Thursday that Pride International's new split-rated bonds (Ba1/BBB-/BB+) "continue to be on fire," quoting its 6 7/8% notes due 2020 as having moved up to 104½ bid, 105 offered - up from 103 bid, 103 3/8 offered on Wednesday and Tuesday's closing level around 102 bid. The issue, which priced off the investment-grade desks, was said to be attracting considerable interest from both traditional high-grade accounts as well as junk bond participants.

The Houston-based offshore energy drilling company's $900 million issue priced at par earlier Tuesday, along with a $300 million offering of 7 7/8% notes due 2040. The latter bonds had also firmed smartly in the aftermarket late Tuesday and on Wednesday, moving up to the 103¼ bid level, but a trader said Thursday that he had not seen those bonds trading.

Market indicators mixed

Away from the new-deal sector, a trader saw the CDX North American HY Series 14 index down ¼ point on Thursday at 98 3/8 bid, 98 5/8 offered after having been up 1/8 point on Wednesday.

The KDP High Yield Daily index meantime fell by 3 basis points on Thursday to end at 72.49 after having risen by 6 bps on Wednesday. Its yield was unchanged Thursday at 8.07% after having moved up 1 bp on Wednesday.

The Merrill Lynch High Yield Master II index continued to hit new highs for the year on Thursday, when it showed a year-to-date gain of 8.868% - a new peak level for the year, eclipsing the previous mark of 8.799% seen on Wednesday.

Advancing issues led decliners for a 24th consecutive session on Thursday, although their winning margin narrowed to around six-to-five from Wednesday's seven-to-five advantage.

Overall activity, represented by dollar-volume levels, fell by 13% on Thursday after having risen by 12% on Wednesday.

A trader said that "the market felt really, really firm today."

Everything, he said, "had a lot better tone."

He said that the continued inflows were buoying the market.

"Everything is well bid-for," another trader opined. "If there's a half-way decent offer out there, folks will buy it."

He said that a broad range of bonds are "up a point or two in the last day or so."

Ford short bonds popular

The first trader saw considerable activity in Ford Motor Co.'s 7.8% notes due 2012, which he said were "very active" up around the 106 1/8 bid area, where he saw about $10 million of the bonds trade at "a nice yield" of 3¾%.

He meantime saw the No. 2 U.S. carmaker's 9 7/8% notes at 105½ bid, 106 offered, noting that "Ford's whole structure seemed better."

NewPage knocked around

NewPage's bonds "went on a ride" to the downside on Thursday, a trader said, hurt by poor quarterly numbers and revelations that a much-anticipated asset sale will now not be completed until next year at the earliest.

"NewPage seemed to be the big name of the day," he proclaimed.

He saw the company's 11 3/8% senior secured notes due 2014 finishing up around 87 bid, 88 offered, down from the 92 bid level seen at the start of the day.

At another desk, a trader saw those bonds dip to levels as low as 85-and-change before finally going out quoted around 88¼ - still down some 3½ points on the session. The trader noted that volume approached the $100 million mark, making the NewPage 2014s easily the most actively traded issue.

NewPage's 10% senior secured notes due 2012 got hammered down even harder, losing about 8 points to end around 47, although on considerably less volume than the 11 3/8s.

NewPage, a Miamisburg, Ohio-based maker of coated papers, went on the slide after reporting poor second-quarter results. It posted a net loss of $174 million, little changed from $175 million the previous quarter but far worse than its year-earlier red ink of $6 million - even though sales in the latest quarter shot up to $890 million, up 9% from $817 million the previous quarter and up 21% year-over-year from $736 million. Adjusted EBITDA of $10 million for the quarter was $5 million less than the first quarter's $15 million and well below the year-earlier figure of $149 million.

Market thrown for a loop

An analyst who follows NewPage said, "The main takeaways from the call were that people were looking for a sequential improvement in the results, and they didn't get it, and now one of the asset sales is delayed, and that introduces uncertainty."

NewPage is in the process of selling power generation assets in Port Hawkesbury, N.S., for C$80 million, with closing expected in the fourth quarter, and has also agreed to sell some hydroelectric assets in Wisconsin for about $70 million. While the company had previously predicted a fourth-quarter closing for the Wisconsin transaction as well, NewPage for the first time disclosed on its conference call Thursday and in its 10-Q filing with the Securities and Exchange Commission that the sale is no longer expected to be completed this year.

However, the company professed to have no concerns about liquidity (see related story elsewhere in this issue).

The analyst said that the Port Hawkesbury sale is supposed to close in the second half of this year, "and which is consistent, that's fine, what we expected - but we expected both of them would happen by the end of the second half. Now $70 million of that is being pushed out, to a date that's unknown, because of a regulatory process that we don't know about."

He said that the "sometime next year" estimate given by company executives on the conference call could mean that the deal won't close until the end of 2011, and the company might run out liquidity. "And what does this 'regulatory process' mean? Does it mean that it may not go through? Or is it just paperwork? Or is there some issue that no one knows. There's uncertainty - uncertainty about the timing of the closing, and there's uncertainty regarding what this regulatory process means."

The analyst was not terribly impressed by assertions on the conference call by the company's recently appointed president and chief executive officer, George F. Martin, and its chief financial officer, David J. Prystash, that recently announced price increases would aid NewPage's finances.

"All of this price increase stuff - we [the analyst community] have heard it" by reading paper industry trade publications. "They said it when they lost their management [replacing then CEO E. Thomas Curley back in June] - they said these are the price increases, so we've heard it all."

The only remotely new information, he said, was the failure to post sequential gains and the disclosure that the Wisconsin asset sale isn't going to be completed any time this year.

He said that was why the company's bonds - which already started heading down after NewPage's press release detailing its results hit the news wires before the financial markets opened - "are declining a little further today, after the call, when they dropped another 2 points."

That, he intoned "is what happens when you miss your numbers." He noted that he really wasn't expecting very much from NewPage but added that he had not been entertaining much in the way of expectations for NewPage sector peer Catalyst Paper Corp., which also reported second-quarter numbers several days ago, "but at least they improved sequentially" from the prior quarter. "I don't think anyone's model [for NewPage] had the second quarter down versus first quarter."

Liquidity down

The analyst said that NewPage's lower liquidity at the end of the quarter - $120 million of combined cash and revolver availability, versus $247 million of liquidity at the end of the first quarter and $288 million in the second quarter of 2009 - is nothing abnormal and is partly seasonal since paper companies frequently expand their borrowing in the second quarter to build inventory and get ready for the third quarter, which is traditionally the strongest quarter of the year for them. "I think most people would describe it as more working capital."

He said that NewPage "has got enough liquidity to run through the third quarter, even if it sucks," and then presumably can expect to receive the proceeds from the Port Hawkesbury sale. However, he said after that, the big question is whether the company would be able to "keep chugging along" until next year's third quarter, when it would get most of its revenues and do most of its cash flow generation, "when in reality, the capital structure won't support it?"

The analyst reiterated "keep in mind that this was not the make-or-break quarter - the third quarter is." He said that people "could brush off the second quarter results and say 'oh, it's the third quarter that matters,' and they would be absolutely right."

However, he cautioned, "at the end of the day, they missed their numbers."

ATP Oil continues rise ...

Elsewhere, a trader said that "one of the really popular names, real heavy volume," was ATP Oil & Gas Corp., whose 11 7/8% second-lien senior secured notes due 2015 started the day at 81 bid, moved up to 83¼ bid, 83½ offered and then came back down to around the 82 bid level.

"There was a lot of volume, on the way up and down."

He did not see any specific news out about the Houston-based energy exploration and production company that might explain the rise, although he noted that "obviously, the fact that some of the problems were solved" in the Gulf of Mexico - between BP plc finally moving to permanently cap the blown-out undersea well that's been leaking oil into the gulf since April and new data showing the majority of the spilled oil has evaporated or has been dispersed naturally by petroleum-eating microbes indigenous to the gulf - are certainly brightening sector sentiment.

Another trader called the bonds "up pretty substantially at 82½ bid, 83½ offered.

... but Trico trades downward

However, out of that same energy sector, the first trader also saw Trico Marine Services Inc.'s bonds "on a wild ride. They were all over the place," after the troubled Woodlands, Texas-based oilfield services firm warned that it may need to seek bankruptcy protection.

He saw the company's 11 7/8% senior secured notes due 2014 fall to a wide 86 bid, 90 offered level, well down from 95 bid at the start of the day, which was down 1 point from where they had finished on Wednesday. "Those were active names today," he said.

He also saw the company's 8 1/8% notes due 2013 well down from prior levels in the mid-40s. At one point, he said, the bonds were down as much as 18 points on the day, at the 25 bid, 28 offered level, and he saw them going home around that 25 level.

"Their 8-K came out and obviously did not say anything good - it had to be really ugly."

Besides warning that it may have to file for Chapter 11 - even if currently ongoing talks to restructure its debt are successful - Trico also cautioned that it may violate its financial covenants due to poor second-quarter results.

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