B/E Aero, Inergy, Continental drive-bys lead $2.3 billion primary; new deals up in trading

By Paul Deckelman and Paul A. Harris

New York, Sept. 13 - With high-yield primary issuance having already notched a new year-to-date volume record, things in the new-deal arena got even hotter on Monday, pushing further into uncharted territory as five issues collectively valued at some $2.3 billion priced.

Three of them were opportunistically timed drive-by transactions, as borrowers continued to strike while the proverbial iron is hot to take care of their financing needs - an upsized $650 million 10-year deal from B/E Aerospace, Inc., a $600 million issue of eight-year paper from Inergy, LP and Inergy Finance Corp., and an upsized $400 million 101/2-year offering from Continental Resources, Inc.

Two other deals priced off the forward calendar - PolyOne Corp.'s upsized $360 million tranche of 10-year notes and $300 million of 10-years from Chaparral Energy, Inc.

Lest anyone think that intense borrowing barrage has cleaned the high-yield cupboard bare - guess again. While those pricings were going on, new-deal announcements came from Alere, Inc., Brigham Exploration Co. and Huntsman International LLC, while Zayo Group LLC/Zayo Capital Inc. was also heard by syndicate sources to be shopping around an add-on deal. Zayo and Huntsman are expected to price on Tuesday. Alere - which is probably better known to some junk marketers under its former name before a mid-summer switch, Inverness Medical Innovations, Inc. - was heard by the sources to be hitting the road Tuesday with its deal, while Brigham is expected to price some time this week. GenOn Energy, whose $1.4 billion deal has been on investor radar screens for a while, was heard to be beginning a road-show, with the two-part offering slated to price Friday.

Traders said the secondary market was focused almost solely upon the new deals, with all of the day's pricings seen firmer in the aftermarket and Continental Resources, Chaparral and PolyOne doing particularly well.

B/E Aerospace upsizes

The primary market zoomed into action, on Monday, as five issuers, each one bringing a single junk-rated dollar-denominated tranche, raised $2.3 billion.

B/E Aerospace priced an upsized $650 million issue of 6 7/8% 10-year senior notes (Ba3/BB) at 99.104 to yield 7%.

The yield printed on top of price talk. The size was increased from $500 million.

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

Proceeds will be used to fund acquisitions within and complementary to commercial aircraft consumables management segments. B/E said it is currently exploring or participating in discussions about potential acquisitions but presently has no definitive agreements. Any proceeds not used for acquisitions may be used for debt repayment.

The deal was a blowout, according to an informed source, who added that orders began piling in as soon as the deal was announced.

Had B/E Aerospace come a couple of weeks ago, they would have been looking at a yield of 7¼% to 7 3/8%, the source said.

The company's existing outstanding paper traded as high as 109 1/8 bid late last week, the source added.

One theory: Alliant Techsystems Inc. - a useful comparable, according to the source - was in the market with $350 million of 6 7/8% notes due in 2020 (B1/BB-/), which priced at par last week.

"People did not seem to get the kind of allocations to Alliant that they were looking for, which impacted the B/E Aerospace deal," the source remarked.

Inergy drives by with $600 million

Meanwhile Inergy, LP and Inergy Finance Corp. priced a $600 million issue of eight-year senior notes (Ba3/B+) at par to yield 7%.

The yield printed at the tight end of the 7% to 7¼% price talk.

Wells Fargo Securities, Barclays Capital, J.P. Morgan, Bank of America Merrill Lynch and Credit Suisse were the joint bookrunners for the quick-to-market issue.

The Kansas City-based energy infrastructure and distribution company will use the proceeds to fund a portion of its acquisition of Tres Palacios Gas Storage LLC.

Continental Resources upsizes

Continental Resources priced an upsized $400 million issue of 10.5-year senior notes (B1/BB) at par to yield 7 1/8%.

The yield printed at the tight end of the 7 1/8% to 7¼% price talk. The amount was increased from $350 million.

Bank of America Merrill Lynch, JP Morgan and RBS Securities were the joint bookrunners for the quick-to-market deal.

Proceeds will be used to repay amounts outstanding under the company's revolving credit facility and to pre-fund a portion of its accelerated capital program.

PolyOne prices tight to talk

In a deal that was carried over the weekend, PolyOne priced an upsized $360 million issue of 10-year senior notes (Ba3/B+) at par to yield 7 3/8%.

The yield printed at the tight end of the 7½% area price talk. The size was raised from the initial $320 million.

Bank of America Merrill Lynch, Morgan Stanley and Wells Fargo Securities were joint bookrunners.

Proceeds will be used to tender for the company's 8?% senior notes due 2012 and for general corporate purposes.

Chaparral on the tight end

Another deal which carried over the weekend was Chaparral Energy's $300 million issue of 9 7/8% 10-year senior notes (Caa1/B+), which priced on Monday at 97.672 to yield 10¼%.

The yield printed at the tight end of the 10¼% to 10½% price talk.

JP Morgan, Credit Suisse, RBC Capital Markets and UBS Investment Bank were the joint bookrunners.

Proceeds will be used to repay the Oklahoma City-based oil and gas company's revolving credit facility and for general corporate purposes.

GenOn kicks off $1.4 billion

The Sept. 13 week, which got off to a roaring start on Monday, may be headed north of the $20 billion mark, pending market conditions, sources said.

The dealers had visibility on "several" $1 billion-plus offerings which could start hitting the market as early as Tuesday.

One mitigating factor is the Credit Suisse High Yield Conference, which gets underway on Wednesday in Miami, and is expected to draw more than 800 market participants, a syndicate source said.

One billion-plus offer did roll out during the week's opening session.

GenOn Energy plans to roadshow its $1.4 billion two-part senior notes offer through the remainder of the present week, and price the deal on Friday.

The deal is broken into tranches of eight- and 10-year notes, with tranche sizes to be determined.

JP Morgan, Credit Suisse, Deutsche Bank, Goldman Sachs & Co. and Morgan Stanley are managing the sale.

Proceeds will be used to refinance debt at Mirant Corp. and at RRI Energy Inc., in connection with the merger of Mirant and RRI into GenOn.

Huntsman for Tuesday

Nearer at hand, Huntsman International LLC talked a $350 million offering of 10.5-year senior subordinated notes (expected ratings B3/CCC+) with an 8¾% area yield.

The deal is expected to price on Tuesday.

Goldman Sachs & Co. is the left lead bookrunner for the debt refinancing deal. Bank of America Merrill Lynch, Barclays Capital, Citigroup, Credit Suisse, HSBC and JP Morgan are the joint bookrunners.

Zayo to add on

Elsewhere, Zayo Group, LLC and Zayo Capital, Inc. plan to price a $100 million add-on to their 10¼% first-lien senior secured notes due March 15, 2017 (expected ratings B2/B-) on Tuesday.

Morgan Stanley, RBC Capital Markets and SunTrust Robinson Humphrey are the joint bookrunners.

Proceeds, as well as a $35 million draw on an equity commitment from the shareholders of the ultimate parent, CII, will be used to fund the acquisition of American Fiber Systems and for general corporate purposes.

The original $250 million issue priced at 98.779 to yield 10½%, on March 5, 2010.

Alere roadshow starts Tuesday

Looking further into the week, Alere will kick off a brief roadshow on Tuesday for its $350 million offering of eight-year senior subordinated notes (expected ratings B3/B-).

The roadshow wraps up on Wednesday.

The deal is expected to price on Thursday via Jefferies & Co., Goldman Sachs & Co. and Citigroup.

Proceeds will be used for working capital and for general corporate purposes.

Brigham to bring $250 million

Meanwhile, Brigham Exploration is expected to sell $250 million of eight-year senior notes during the present week.

Credit Suisse and Bank of America Merrill Lynch are the joint bookrunners.

The Austin, Tex.-based oil and gas exploration company plans to use the proceeds to refinance its existing 9 5/8% senior notes due 2014.

Market focused on primary

While traders in the secondary market said there were some dealings in established issues going on Monday, "it is definitely much more focused on new issues," as one put it, "and rightfully so."

"Every new issue in the world came today," said a trader who watched the day's primaryside tally go above the $2 billion mark.

"The bulk of trading is focused on the new issues."

Another trader asserted that "it seemed like there was a new one pumping out every half hour or so." He said that there was "some stuff" from the traditional secondary market trading, but "most of the stuff, at least for the last couple of hours, has just been these new-issues."

Continental climbs in aftermarket

Perhaps the standout performer among Monday's new deals in the aftermarket was Continental Resources. A trader saw the Enid, Okla.-based oil and gas exploration and production company's 7 1/8% notes due 2021 going home at 102½ bid, 102¾ offered, well up from the par issue price where the upsized deal had come to market earlier in the day.

Another trader pegged the bonds at "at least" 102 3/8 bid, 102 5/8 offered, while a third saw them at a somewhat wider 102¼ bid, 103 offered.

Chaparral, Inergy trade up

Out of that same energy patch, Oklahoma City-based oil and gas operator Chaparral Energy's 9 7/8% notes due 2020 were seen by a trader going out at 99 bid, 99½ offered - but since the bonds had priced at 97.672, the only one of the day's offerings to come to market at a significant discount to par - "it was actually OK," he said, adding that the new deals "all were pretty much up one to two points."

At another shop, a trader saw those bonds get even better, firming to 99½ bid, par offered.

Kansas City, Mo.-based propane distributor and natural gas operator Inergy's new 7% notes due 2018 firmed to 101 bid, 101½ offered from their par issue price, several traders said.

EXCO extra busy

Also among the newly priced energy credits, traders noted heavy volume in EXCO Resources Inc.'s 7½% notes due 2018, some $750 million of which priced late Friday but "did not really trade around" during that session, one said.

The Dallas-based E&P company's bonds more than made up for that on Monday. One trader saw between $200 million and $300 million of the new issue having changed hands on Monday estimating them up between ½ and ¾ point from the 98.53 level at which the bonds had priced to yield 7¾%.

A second trader termed the new bonds "the clear volume leader," while seeing them hanging in around issue at 98½ bid, 98 7/8 offered.

A third trader, quoting the new bonds at 98¾ bid, 99 offered, suggested that "that one didn't rally that much on a relative basis to everything else."

At another desk, a market participant said that "an awful lot of bonds traded today" right around 99 bid, although he saw the bonds last at 98¾ bid, 99¼ offered.

PolyOne pops in secondary

Away from the energy names, a trader said that Cleveland-based chemical concern PolyOne's upsized $360 million offering of 7 3/8% notes due 2020 were "fairly active" on the break and "shot right up" to around the 102 level.

Those bonds came off from that peak a little, with a trader seeing them going out at 101¾ bid, 102¼ offered.

"They were wrapped around 102," a second trader declared, while a third quoted the issue trading around 102.

B/E Aerospace gains altitude

A trader said that Wellington, Fla.-based aircraft interiors company B/E Aerospace's 6 7/8% notes due 2020 traded up to 101 1/8 bid, 101¾ offered after the upsized $650 million issue priced at 99.104.

Another trader saw the new bonds at 101 bid, 101½ offered.

Analyst Evan Mann of the Gimme Credit independent fixed-income research service said in an afternoon note that despite problems in the airline industry which it services, the company "has maintained strong credit ratios." He said that B/E has "adequate liquidity, remains a free cash flow generator and has no debt maturities until 2014."

He predicted that "even with flat EBITDA, as free cash flow improves in 2010, credit measures will strengthen further."

Market indicators push upward

Away from the new-deal world, a trader saw the CDX North American HY Series 14 index gain 1/8 point on Monday to end at 97 7/8 bid, 98 1/8 offered, after having held steady on Friday.

The KDP High Yield Daily index meantime rose by 22 basis points on Monday to finish at 72.52, on top of the 10 bp advance seen on Friday. Its yield plunged by 13 bps, to 7.92% after having declined by 6 bps on Friday.

The Merrill Lynch High Yield Master II index rose by 0.347% on Monday, after having improved by 0.229% on Friday. It continued to push to successive new year-to-date 2010 peak levels, ending the day at 10.179% - the first time this year the index has topped the psychologically significant 10% mark. That eclipsed the previous high-water mark for the year of 9.798%, set on Friday.

Advancing issues led decliners for an eighth consecutive session on Monday, as their advantage widened to almost eight-to-five from about a seven-to-five margin on Friday.

Overall activity, represented by dollar-volume levels, fell by 6% on Monday from Friday's session, when volume had slid by 26% versus Thursday.

Traders acknowledged that new deals were the main focus in Monday's secondary dealings - but one opined that "it's still hard to find offerings, so if you have any kind of reasonable offering in the secondary, it gets a very good look and probably gets traded.

"If you could find offerings on something, it pretty much went up - the market was definitely firm."

He declared that "retailers had a really strong day." In particular, he said that Bon-Ton Stores, Inc.'s 10¼% notes due 2014 had moved up to 94½ bid, 95½ offered; the York, Pa.-based department store operator's bonds had been trading down at bid levels around 91 or 92 at the beginning of the month after the company reported poor sale-store sales numbers, a key retailing industry metric, for August. But all was apparently forgiven Monday, as the trader saw "pretty heavy volume and some good-sized trading" at higher levels in the credit.

ATP quoted better

ATP Oil & Gas Corp.'s 11 7/8% second-line senior secured notes due 2015 "seemed to be a little higher today," a trader said, quoting the Houston-based energy exploration and production company's bonds ending up 1 point on the day at 83 bid, 84 offered.

He said "there wasn't a whole lot else" going on, either in the energy space, apart from the new issues.

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Broader market mostly quiet

Elsewhere, NewPage Corp.'s 11 3/8% notes due 2014 were trading in a bid range all session between 90 and 92, and were ending around 90 bid, 91 offered, which he called up 1 point, on "decent volume" in the Miamisburg, Ohio-based coated -paper manufacturer's bonds.

Among the financials, a trader said that Nuveen Investments Inc.'s 10½% notes due 2015 were unchanged, or "maybe up ½ a point" on the day at 98 bid, 99 offered.

A trader said that CIT Group Inc.'s bonds "all moved up, they're all feeling better," quoting the New York-based commercial lender's five series of 7% notes trading between 96 bid and par. "The longer you go, it's a point down," with the 7% notes due 2013 at par, the 2014 notes at 99 bid, the 2015s at 98 bid, the 2016s at 97 bid and the longest issue, the 2017s, at 96 bid.

"So the name is up, holding its own. It's done well."

A trader saw Ford Motor Co.'s 7.45% bonds due 2031 finishing a point better at 99 bid, while estimating that Ford domestic arch-rival General Motors Corp.'s 8 3/8% bonds due 2033 "seemed like they hung right around 31-32 all day," ending at 31½ bid on "decent volume," which he called pretty much unchanged.

At another desk, a trader agreed that the GM benchmarks were unchanged, though at 30½ bid, 31½ offered, while seeing the Ford long bonds up 1 point on the session at 99½ bid, 100½ offered.

From deep in distressed-bond territory, a trader said that Blockbuster Inc.'s 11 3/8% senior secured notes due 2014 were at 53 bid, which he said was not far removed from Friday's closing levels around 53 bid, 54 offered.

He said the Dallas-based movie-rental company's notes were trading flat, "of course," after the latest missed bond coupon payment, on its 9% notes due 2012 - skipped in order to comply with the terms of the company's forbearance agreement with most of its senior bondholders - and on investor expectations of a possible bankruptcy filing soon.

-Stephanie N. Rotondo contributed to this report

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