Windstream, WPX Energy, upsized Peabody deals price; Lyondell up; Dynegy drops pre-Chapter 11

By Paul Deckelman and Paul A. Harris

New York, Nov. 7 - Building on the solid momentum seen at the end of last week, the high-yield primary sphere kept rolling out the big, quickly shopped deals on Monday, with a total of more than $5 billion of new paper coming to market by the time the dust settled.

That deluge of new paper came on top of the $5.9 billion priced on Friday on the way to racking up a nearly $10 billion week, the busiest week seen since late July.

Telecommunications provider Windstream Corp. kicked things off with an opportunistically timed, quickly priced $500 million tranche of 10.5-year notes. That was followed by natural gas and oil company WPX Energy Inc.'s $1.5 billion two-part drive-by offering of 5.25- and 10.25-year notes.

Coal mine operator Peabody Energy Corp. put the cap on the day's proceedings with an upsized $3.1 billion of seven- and 10-year bonds. Although the deal had been carried on the forward calendar for a while, participants did not anticipate seeing it on Monday.

Windstream's new bonds initially popped but then fell back to around their issue price, while the day's other two deals came too late for any kind of real aftermarket.

Among Friday's big deals, LyondellBasell Industries NV was seen by traders to have firmed smartly, while Sprint Nextel Corp. gained about 1 point.

Away from the new-deal arena, Sprint's existing bonds were active at mixed levels. Dynegy Holdings LLC's bonds were quoted lower - though volume was limited - as investors correctly anticipated Monday night's Chapter 11 filing by the troubled power producer.

Peabody leads primary

For the second consecutive session, the primary market churned out a daily issuance total north of $5 billion on Monday.

Three issuers raised $5.1 billion with a combined five tranches of junk.

The session's biggest issuer in terms of dollar amount was Peabody Energy, which priced a massively upsized $3.1 billion two-part senior notes transaction (Ba1/BB+/).

The deal, which was upsized from $2.75 billion, included a $1.6 billion issue of seven-year notes that priced at par to yield 6%.

The yield printed on top of the price talk.

In addition, Peabody priced a $1.5 billion issuer of 10-year notes at par to yield 6¼%. The 10-year notes priced at the tight end of price talk, which had them coming 25 basis points to 37.5 bps behind the seven-year notes.

Bank of America Merrill Lynch, Morgan Stanley, UBS, Citigroup, HSBC and RBS were the joint bookrunners for the quick-to-market issue.

The proceeds, along with cash on hand and a new term loan, will be used to fund the acquisition of Macarthur Coal Ltd.

WPX prices two-part deal

WPX Energy priced $1.5 billion of senior notes (Ba1///) in two tranches.

The deal included a $400 million tranche of 5¼% five-year notes, which priced at par to yield 5.247%. Price talk was in the 5¼% area.

WPX also priced $1.1 billion of 6% 10-year notes at par to yield 5.997%. Price talk was in the 6% area.

Citigroup, Barclays and J.P. Morgan were the active bookrunners.

About $1 billion of the proceeds will be distributed to Williams Cos. as part of restructuring transactions, with the remainder to be used for general corporate purposes.

Windstream on top of talk

Windstream priced a $500 million issue of 10.5-year senior notes (Ba3//BB+) at par to yield 7½%.

The yield printed on top of the price talk.

J.P. Morgan, BNP Paribas, Citigroup, RBC, RBS and Wells Fargo were the joint bookrunners for the debt refinancing.

HMA sets price talk

Looking to the Tuesday session, Health Management Associates, Inc. talked its $1 billion offering of eight-year senior notes (B3/B-/) with a yield in the 7½% area.

The deal is set to price on Tuesday afternoon.

Deutsche Bank, Wells Fargo, Barclays, Citigroup, SunTrust, RBS, J.P. Morgan and Morgan Stanley are the joint bookrunners.

Green Field Energy notes

The Monday session also saw the announcement of a brief roadshow.

Green Field Energy Services, Inc. is in the market with a $250 million offering of units via manager Jefferies.

The brief roadshow wraps up on Wednesday.

The Lafayette, La.-based energy services company is offering 250,000 units consisting of $1,000 principal five-year senior secured notes and a warrant to purchase shares of common stock.

The company plans to use the proceeds to fund capital expenditures, refinance existing debt, repay the Shell prepayment and for general corporate purposes.

New Windstream circulates

When Windstream's new 10.5-year notes were freed for secondary dealings, a trader said that the Little Rock, Ark.-based company's paper "shot up out of the box," quickly moving up 1 point from issue to 101 bid. But, just as quickly, it came back down. The trader saw the bonds go out at par bid, unchanged on the day.

A second trader said that the par bid got hit, leaving the bonds offered at par.

On the news of the new deal, Windstream's 8 1/8% notes due 2018 ended just below 107 bid, down three-quarters of a point, on volume of about $6 million.

Its 7 7/8% notes due 2017 retreated by 1 1/8 points to 107 3/8 on volume of about $4 million.

Windstream's 8 5/8% notes due 2016, which will be taken out using a portion of the deal's proceeds, were not seen trading on Monday. They most recently traded last week around the 104 bid mark.

Energy deals come too late

Traders said that WPX Energy's $2 billion two-part megadeal and Peabody Energy's $3.1 billion two-part behemoth came to market too late in the session for any meaningful secondary dealings.

LyondellBasell bonds better

Among the deals that came to market on Friday, a trader said that Dutch chemicals manufacturer LyondellBasell's new 6% notes due 2021 did very well.

He quoted the $1 billion drive-by offering, which had only firmed slightly from its par issue price to about 100½ in Friday's initial aftermarket, as having shot up to 102¾ bid, 103 offered in Monday's dealings.

That was "a heck of a move for a [bond with a ]6½% coupon," the trader said.

A second trader also saw those bonds up in nosebleed territory, at 102¾ bid, 103 1/8 offered.

Tenet trades steadily

In contrast, one of the traders said that Tenet Healthcare Corp.'s new 6¼% senior secured notes due 2018 "held in," staying around the same 100¼ bid, 100½ offered range that the Dallas-based hospital operator's quickly-shopped $900 million issue traded at on Friday, after having priced at par. The notes were upsized from an originally announced $750 million.

"They didn't do poorly," the trader continued, "but they also didn't rise."

A second trader also saw the new Tenet paper in that 100¼ to 100½ range.

New Sprint runs up

Friday's big deal - Sprint Nextel's new 9% notes due 2018 - was seen by traders having moved solidly upward in Monday's market. One trader said they were very active.

"They were on everybody's run," he said.

Those bonds went out quoted at 101 bid, 101½ offered, while its new 11½% notes due 2021 were at 101½ bid, 102 offered.

The Overland Park, Kan.-based wireless carrier's $3 billion tranche of the 2018 bonds and $1 billion of 2021 bonds both priced at par on Friday, after having been greatly upsized. The 2018s were upsized from an original size range of between $2 billion and $2.5 billion and the 2021s were up from the originally planned $500 million.

Among its existing paper, which fell on Friday on apparent investor dismay over the company's adding such a large amount of leverage, a trader saw the 6% notes due 2016 closing down 1 point, at 86½ bid, 87¼ offered, on a lot of volume.

A market source at another desk, though, quoted those bonds up 1 point at 89¼ bid on heavy trading on more than $25 million, making it one of the busiest junk issues of the day.

And that source also saw Sprint's 8 3/8% notes due 2017 up 1¾ points, getting as good as 94¼ bid with a busy $20 million having changed hands.

Sprint unit, Sprint Capital Corp.'s 6.9% notes due 2019, on the other hand, traded as high as 85, but were quoted late in the day at 81 5/8 bid, down more than 1 point on the day on volume of more than $15 million.

A trader also saw Sprint's majority-owned Clearwire Corp. unit's 12% subordinated notes due 2017 at 58-61, which he called up 1 point. The Kirkland, Wash.-based broadband network provider's two issues of 12% notes due 2015 ended at 84-86, where they were earlier in the morning.

"So for the most part," he opined, "they're pretty much unchanged. They were quoted all day long - but how much they traded, I don't know."

Drive-bys still drive market

Monday's big deals from Peabody, WPX and Windstream were all quick-to-market deals, although some kind of offering from Peabody had been expected for a while as part of its acquisition of MacArthur Coal. Nonetheless, the deal was announced in the morning and priced by the afternoon.

In that regard, it was right in line with recent activity patterns in the junk market, which have leaned heavily toward the quickly-appearing drive-by deals.

Friday's offerings from Sprint, Tenet and LyondellBasell also fit that category, as did the rest of the deals from earlier last week.

A trader reasoned that "a lot of issues are being done that way."

"Do you [as an investor] really need to go somewhere and look at a whole PowerPoint presentation, when you can just listen in to a conference call and the deal can get done at once?"

He said borrowers are taking advantage of the revived, and suddenly hot, new-deal market, which after weeks and weeks of limited activity, roared back to life with $6.9 billion of new paper priced in the week ended Oct. 21 and nearly $9.9 billion of issuance last week.

Given that market conditions seemingly could change on a dime with bad economic news or additional negative developments in Europe, investors are "pricing when they can, not when they want to," the trader said.

Indicators little changed

A trader said that away from the new-deal arena, statistical secondary market performance indicators, which had been mixed on Friday, stayed in a narrow range on Monday.

A trader said the CDX North American series 17 High Yield index was about unchanged on Monday at 93 1/16 bid, 93 5/16 offered after having lost 5/8 of a point on Friday.

The KDP High Yield Daily index eased by 3 basis points on Monday to 73.05 after having inched up by 1 bp on Friday. Its yield was about unchanged for a second straight session at 7.25%.

And the Merrill Lynch U.S. High Yield Master II index lost 0.011% on Monday, which was its first loss after three straight sessions of gains, including Friday's 0.076% advance.

The loss moved the index's year-to-date return down to 3.906% from Friday's 3.917%.

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

In the meantime, stocks were down most of the day, but rallied near the end of trading to close modestly higher after a key European central banker, Juergen Stark, said the continent's long-running debt crisis could be resolved within a year or two.

The bellwether Dow Jones Industrial Average, which fell by 61.23 points on Friday, ended Monday up 85.15 points, or 0.71%, at 12,068.39.

The Standard & Poor's 500 index rose by 0.63% on the day, while the Nasdaq Composite index gained 0.34%.

Dynegy down ahead of filing

A trader said that Dynegy Holdings' debt was "topical, on talk they may file" for bankruptcy, which actually did come to pass late on Monday night.

A second trader said that there was "not a huge amount of trading" in its paper, although he saw its 7 1/8% notes due 2018 down 2½ points, trading at 64½ bid.

Yet another trader also cited market scuttlebutt that the Houston-based power generating company might be heading toward a bankruptcy filing, following the abject failure of its effort to get rid of up to $1.25 billion face amount of its more than $3 billion of bond debt via an exchange offer.

That offer, having drawn little or no response from more than 97% of the bondholders, was formally withdrawn on Friday.

Sure enough, parent Dynegy Inc. announced that it had reached an agreement with a group of investors holding more than $1.4 billion of the Dynegy Holdings senior notes, "regarding a framework for the consensual restructuring of over $4 billion of obligations owed by [Dynegy Holdings]."

The company said that Dynegy Holdings and four of its wholly owned subsidiaries - Dynegy Northeast Generation, Inc., Hudson Power, LLC, Dynegy Danskammer, LLC and Dynegy Roseton, LLC, filed voluntary Chapter 11 petitions with the U.S. Bankruptcy Court in Poughkeepsie, N.Y., "in order to implement the agreement and to address the burdensome lease obligations at Roseton and Danskammer."

The company said that if the restructuring support agreement by the bondholders is successfully implemented, "it will significantly reduce the amount of debt on the company's consolidated balance sheet."

Hours before that announcement, a trader saw Dynegy's 7¾% notes due 2019 quoted a point lower at 65 bid, 67 offered.

Its 7½% notes due 2015 were quoted around 7072, but on not much trading.

He said that he "didn't see a lot of quotes in their bonds."

But he did see "a lot of CDS" traded, referring to the credit-default swaps contracts bondholders buy to protect themselves against a possible event of default.

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