Upsized American Energy and Light Tower deals price, firm up; Rockwood rise continues

By Paul Deckelman and Paul A. Harris

New York, July 16 – The high-yield market saw nearly $2 billion of new junk paper pricing during Wednesday’s session, with most of it coming from one giant-sized deal.

American Energy-Permian Basin, LLC – an affiliate of former Chesapeake Energy Corp. chief executive officer Aubrey McClendon’s new American Energy Partners, LP start-up – brought to market an upsized $1.6 billion three-part issue consisting of fixed- and floating-rate notes. Traders quoted all of the tranches firmer in the aftermarket.

The day also saw oilfield equipment and services provider Light Tower Rentals, Inc. price an upsized $330 million five-year secured offering; that paper, too, showed strength when it was freed to trade.

There was some fairly active trading in Tuesday’s deal from Triangle USA Petroleum Corp., with those new eight-year notes retreating from the highs they hit in initial aftermarket activity.

That was likewise the case with Friday’s 10-year offering from Paragon Offshore Ltd.

Away from the new and recent deals, Rockwood Specialties Group Inc.’s bonds continued to firm – though on considerably less volume than recorded during Tuesday’s session – in response to the news that the specialty chemicals maker has agreed to be acquired.

Statistical indicators of market performance turned mixed on Wednesday after having been seen lower across the board Tuesday.

American Energy upsizes

Two issuers brought a total of four tranches to raise a combined total of $1.93 billion during the Wednesday primary market session.

American Energy – Permian Basin launched and priced an upsized $1.6 billion three-part senior notes transaction (Caa1/CCC+).

A $350 million tranche of three-month Euribor plus 650 basis points five-year notes priced at 99. The spread and reoffer price came on top of price talk.

A $650 million tranche of 7 1/8% 6.25-year fixed-rate notes priced at par to yield 7.113%. The yield printed slightly inside of yield talk in the 7¼% area.

A $600 million issue of 7 3/8% 7.25-year fixed-rate notes priced at par to yield 7.363%. The yield came in line with yield talk in the 7½% area.

The overall size of the three-part transaction is increased from $1.4 billion.

Goldman Sachs was the sole bookrunner.

The Oklahoma City-based company plans to use the proceeds as part of the financing for the proposed acquisition of Permian Basin business and assets of Enduring Resources II, LLC as well as for general corporate purposes. The additional proceeds resulting from the $200 million upsizing of the transaction will be used to eliminate a previously anticipated $129 million draw on the company's revolver and for general corporate purposes.

Light Tower upsized

Light Tower Rentals priced an upsized $330 million issue of five-year senior secured notes (B2/B) at par to yield 8 1/8%.

The deal was upsized from $300 million.

The yield printed on top of yield talk and in the middle of the 8% to 8¼% initial guidance, according to a trader.

Jefferies was the left bookrunner. RBC was the joint bookrunner.

The Odessa, Texas-based provider of oilfield equipment and services plans to use the proceeds to refinance debt and fund a distribution.

Talking the deals

Price talk surfaced on a pair of deals set to price Thursday.

Deutsche Bank is the left bookrunner for both of them.

Ocean Rig UDW Inc. talked its $500 million issue of eight-year senior secured notes (B2/B+) to yield in the 6¼% area.

Joint bookrunner Deutsche Bank is the left joint global coordinator. Credit Suisse is also a joint global coordinator and joint bookrunner. ABN Amro is also a joint bookrunner.

QTS Realty Trust, Inc. talked its $250 million offering of eight-year senior notes (B2/B+) to yield in the 6% area.

Deutsche Bank is the left bookrunner. BofA Merrill Lynch, KeyBank, Goldman Sachs, Jefferies, J.P. Morgan and Morgan Stanley are the joint bookrunners.

Adler Pelzer starts roadshow

In the euro-denominated primary market, a roadshow started on Wednesday for the HP Pelzer Holding GmbH €230 million offering of seven-year senior secured notes.

Joint bookrunner JPMorgan will bill and deliver. UniCredit is also a joint bookrunner.

Proceeds will be used to refinance debt, for general corporate purposes and to fund the purchase of Adler SpA's foreign subsidiaries.

Milan-based Adler acquired HP Pelzer in 2013.

The company manufactures acoustic and thermal components and systems for the automotive sector.

Perpetual Energy C$100 million

In the Canadian dollar-denominated primary market, Perpetual Energy Inc. plans to sell C$100 million of five-year senior notes (expected Caa1/confirmed CCC+) before the end of the week.

Scotia, BMO and CIBC are the joint bookrunners.

The Calgary, Alberta-based natural gas producer plans to use the proceeds for general corporate purposes and to redeem its 7¼% convertible debentures due Jan. 31, 2015.

American Energy-Permian pops

In the secondary market, traders saw the new American Energy-Permian Basin bonds having firmed solidly when they were freed to trade.

One pegged both the 7 1/8% notes due 2020 and the 7 3/8% notes due 2021 in the 101 to 101¼ bid level, well up from their respective par issue prices.

He also saw the floating-rate notes due 2019 in a 99 3/8-to-99 7/8 bid context, up from their issue price at 99.

A second trader saw slightly more conservative gains, with the 7 1/8% notes at 100 7/8 bid on volume of some $13 million and the 7 3/8% paper at 100¾ bid, with over 420 million having changed hands, putting both issues high up on the day’s Most Actives list.

Light Tower trades up

The new Light Tower Rentals 8 1/8% senior secured notes due 2019, which priced earlier in the session at par, were seen having done well in the aftermarket, a trader said. He located the bonds at 101¾ bid, 102½ offered.

Recent bonds mixed

Among other recently priced issues, Wednesday’s deal from Triangle USA Petroleum was seen having come off a little from the strong aftermarket levels above 101 bid at which the Denver-based energy operator’s upsized $450 million issue had traded after pricing at par.

One trader saw the bonds on Wednesday down ¼ point at 100¾ bid, 101 1/8 offered, while a second saw them at 100¾ bid, 101¼ offered.

But Wednesday’s $300 million of 7½% senior secured notes due 2021 from Coos Bay, Ore.-based lumber company Northwest Hardwoods, Inc. was seen by a trader on Wednesday at 101½ bid, 102½ offered, up about 1 point from Wednesday’s aftermarket levels.

Going back a little further, a market source saw Paragon Offshore Ltd.’s new 7¼% notes due 2024 down ¾ point on the day at 99½ bid on volume of better than $17 million. The Houston-based offshore drilling company’s $580 million of bonds, which priced on Friday at par, had firmed in initial aftermarket dealings and had gotten as good as a 101 to 101¼ context by Monday.

Rockwood rise continues

Away from the new deals, Rockwood Specialties Group’s 4 5/8% notes due 2020 continued to firm, riding the momentum from the big surge seen on Tuesday in response to the news that the Princeton, N.J.-based specialty chemicals manufacturer had agreed to be acquired by sector peer Albermarle Corp. for $6.2 billion, with the buyer guaranteeing Rockwood’s debt.

The Rockwood bonds gained 3/8 point to end at 105¾ bid with over $10 million traded.

On Tuesday, the bonds had jumped by 2 points to close at 105 3/8 bid on volume of more than $71 million, making it easily the most active credit in Junkbondland on Tuesday.

Moody’s Investors Service, which already rates Rockwood at Ba1, put the company under review for a ratings upgrade.

AAR gains altitude

Elsewhere, AAR Corp.’s 7¼% notes due 2022 were seen having gained about ¼ point on the session to end at 110 bid on volume of over $3 million.

The Wood Dale, Ill.-based provider of products and services to the commercial aviation industry, the U.S. military and various other governmental customers, both in the United States and abroad, reported better fiscal fourth-quarter earnings. Although sales fell from year-ago totals and were also below analysts’ estimates, the company showed solid earnings gains versus a year ago.

Its executives also noted on their conference call with analysts following release of the results that the company had continued to de-lever, cutting net debt by $89 million year-over-year, bringing its debt-to-EBITDA leverage ratio down to what its CEO called an “appealing” 2.3 times, within the company’s previously announced target range (see related story elsewhere in this issue).

Market indicators turn mixed

Statistical indicators of junk market performance turned mixed on Wednesday after having fallen across the board on Tuesday. Before that, they had been unchanged-to-higher on Monday and mixed on Friday.

The KDP High Yield Daily index suffered its second straight loss on Wednesday, slipping by 6 bps to end at 74.44, on top of Tuesday’s 12-bps plunge. The index had been unchanged on Monday and, before that, had fallen over seven consecutive sessions.

Its yield rose by 2 bps to 5.08%, although it had actually come in by 1 bp on Tuesday, even though it would normally rise as the overall index falls.

The Markit CDX Series 22 index edged up by 1/32 point on Wednesday to end at 108 19/32 bid, 108 5/8 offered. On Tuesday, it had lost 7/32 point, part of the recently choppy pattern of alternating gains and declines.

The widely followed Merrill Lynch High Yield Master II index was down for a second successive session, retreating by 0.092% on Wednesday on top of Tuesday’s 0.113% downturn, which had broken a two-session winning streak before that.

Wednesday’s loss dropped its year-to-date return to 5.346% from 5.444% on Tuesday. It also remained well down from the 5.751% return recorded last Monday, the peak level for 2014.

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