McGraw-Hill, Rex Energy lead $1.46 billion day; new Rex gains; Whiting, Kodiak up on M&A deal

By Paul Deckelman and Paul A. Harris

New York, July 14 – Opportunity was the watchword of the day on Monday as a quartet of junk bond issuers each kicked off the new week with a quickly marketed deal, looking to take advantage of favorable issuance conditions to get their same-day fundings done.

High-yield syndicate sources said some $1.46 billion of new dollar-denominated and fully junk-rated paper came to market during the session in four tranches. That followed on the heels of Friday’s $1.21 billion that got done in three tranches.

The big deal of the day was Houston-based energy upstream master limited partnership Memorial Production Partners LP’s $500 million of eight-year notes, co-issued with a subsidiary.

Out of that same sector, Rex Energy Corp., a State College, Pa.-based exploration and production company, did an upsized $325 million of eight-year notes.

Away from energy, McGraw-Hill Global Education Intermediate Holdings, LLC, a New York-based provider of educational materials, brought $400 million of five-year senior PIK toggle notes to market via its parent company and a subsidiary.

And Cardtronics, Inc., a Houston-based global owner of ATM machines, tapped the market for $250 million with an eight-year note issue.

Rex and McGraw-Hill priced their deals early enough in the session for some aftermarket activity. Market participants said the new Rex bonds firmed smartly, gaining as much as a point when they were freed to trade, on heavy volume, while McGraw-Hill’s new issue posted some modest gains and was respectably busy.

Among the later deals, a trader quoted Memorial Production Partners’ issue trading right around its pricing level. No immediate levels were seen in the late-pricing Cardtronics issue.

Away from the new issues, bonds of established energy operators Whiting Petroleum Corp. and Kodiak Oil & Gas Corp. climbed in brisk trading on the news that Whiting will acquire sector peer Kodiak in an all-stock transaction valued at $6 billion, including debt assumption.

Statistical market-performance measures were seen either unchanged or higher, after having been mixed on Friday and either mixed or lower across most of last week.

Memorial Production at a discount

The week got off to a fast start in the dollar-denominated primary market as four issuers brought single-tranche drive-by deals, one of which was upsized.

One deal came at the tight end of price talk. Two came on top of talk, and another came at the wide end.

Memorial Production Partners and Memorial Production Finance Corp. priced a $500 million issue of 6 7/8% eight-year senior notes (Caa1/CCC ) at 98.485 to yield 7 1/8%.

The yield printed at the wide end of yield talk in the 7% area.

Barclays was the lead left bookrunner. J.P. Morgan, Citigroup, BofA Merrill Lynch, MUFG, RBC and Wells Fargo were the joint bookrunners.

Proceeds will be used to repay revolver debt and for general partnership purposes.

McGraw-Hill prices PIK toggles

McGraw-Hill priced a $400 million issue of five-year senior PIK toggle notes (Caa1/B-) at 99 to yield 8.748%.

The notes have an 8½% cash coupon, which steps up by 75 basis points to 9¼% for PIK payments.

The coupon and reoffer price came on top of price talk.

Credit Suisse, Morgan Stanley, Jefferies, UBS, Nomura and BMO were the joint bookrunners for the dividend deal.

REX Energy upsized

Rex Energy priced an upsized $325 million issue of eight-year senior notes (B3/B-) at par to yield 6¼%.

The quick-to-market debt refinancing and general corporate purposes deal was upsized from $250 million.

The yield printed at the tight end of the 6¼% to 6½% yield talk.

RBC was the left bookrunner. KeyBanc, SunTrust and Wells Fargo were the joint bookrunners.

Cardtronics comes atop talk

Cardtronics priced a $250 million issue of eight-year senior notes (Ba3/BB ) at par to yield 5 1/8%.

The yield printed on top of yield talk.

BofA Merrill Lynch, J.P. Morgan and Wells Fargo were joint bookrunners for the deb refinancing and general corporate purposes deal.

Triangle talk 6¾% to 7%

Looking ahead, in a deal expected to price on Tuesday session, Triangle USA Petroleum Corp. talked its $350 million offering of eight-year senior notes (Caa1/CCC ) to yield 6¾% to 7%.

J.P. Morgan, Credit Suisse and BofA Merrill Lynch are the underwriters.

Transworld starts Tuesday

A roadshow is set to start on Tuesday for a $440 million offering of seven-year senior secured notes (/B/) backing the buyout of Transworld Systems Inc. by Platinum Equity.

The roadshow wraps up on July 21, and the deal is expected to price early in the July 21 week.

BofA Merrill Lynch, Credit Suisse, BMO, Macquarie and Nomura are the joint bookrunners for the deal, which is coming via issuing entity Aston Escrow Corp.

Loxam heads for London

Looking to the European primary market, France-based equipment rental company Loxam SAS plans to start a roadshow on Tuesday in London for a €660 million two-part offering of notes.

The debt refinancing deal includes a €400 million tranche of seven-year senior secured notes and a €260 million tranche of eight-year senior subordinated notes.

Joint bookrunner Deutsche Bank will bill and deliver. BNP Paribas, Credit Suisse, Credit Agricole, Natixis and SG are also joint bookrunners.

Rex rules in aftermarket

When the new Rex Energy 6¼% notes due 2022 were freed for aftermarket dealings, traders saw heavy demand for the new issue, with over $51 million having changed hands, easily the day’s most actively traded purely junk issue. A market source pegged those bonds at 100¾ bid, versus their par issue price earlier in the day.

A second trader saw the notes in a 100 7/8 to 101¼ context, while a third located them at 101 bid, 101¼ offered.

Another who also saw them at 101 bid stated “they traded right to 6%, which certainly makes sense.”

McGraw-Hill moves up

A trader saw McGraw-Hill’s MHGE Parent, LLC/MHGE Parent Finance, Inc. 8½% /9¼% senior PIK toggle notes due 2019 initially trading at 99½ bid, which was “the only trade I saw in them.” However, he later quoted the bonds trading between 99¼ and 99¾, slightly above its 99 issue price.

A second trader quoted the bonds between 98 7/8 and 99 3/8, with over $17 million having traded – busy enough volume to put the bonds high up on the day’s most-actives list in Junkbondland.

A trader quoted Memorial Production Partners’ 6 7/8% notes due 2022at 98 3/8 bid, 98 7/8 offered, in line with its 98.485 issue price.

Traders did not see any immediate aftermarket dealings in the new Cardtronics 5 1/8% notes due 2022, which priced at par.

Paragon pop continues

Going back to the deals that priced on Friday, a trader saw continued firming in the new bonds of Paragon Offshore Ltd., quoting the Houston-based oil drilling services company’s 7¼% notes due 2014 at 101 bid, 101¼ offered.

That was up from the levels in a 100½ to 101 context that were seen on Friday, after the company priced its $1.08 billion two-part issue, including $580 million of the 7¼s and $500 million of 6¾% notes due 2022. Both tranches priced at par after the deal was downsized from an original $1.185 billion.

The trader didn’t see any actual dealings Monday in the 6¾% notes, but said “I assume they’re on top of the others, within 1/8 point.”

Kodiak, Whiting busy on deal

The weekend announcement that exploration and production company Whiting Petroleum will acquire sector peer Kodiak Oil & Gas – already practically its next-door neighbor in downtown Denver – in an all-stock deal valued at some $6 billion caused some activity in the bonds of the two companies on Monday.

The deal includes the assumption by Whiting of Kodiak’s net debt, which stood at $2.2 billion at March 31.

That debt includes Kodiak’s 5½% notes due 2022, which was one of the busiest junk issues Monday, on volume of over $21 million. The bonds moved up to 106 5/8%, a gain of 1 7/8 points from its last previous round-lot price.

The company’s 5½% notes due 2021 were seen up some 3 points on the day at 107¼ bid, although a trader said there was “not a huge amount of volume” in the credit, estimating it at around $8 million.

Whiting’s 5¾% notes due 2021 were seen up by 1 3/8 points on the day at 110 7/8 bid at the close, with over $20 million of the paper having traded.

The 5% notes due 2019 gained 1¾ points to end at 106¾ bid, on volume of over $12 million.

Market indicators get better

Statistical indicators of junk market performance were unchanged to higher across the board on Monday, after having been mixed on Friday.

The KDP High Yield Daily index was steady at 74.62, its Friday closing level. The index had dropped by 8 basis points Friday, its seventh straight downturn. Its yield was likewise unchanged at 5.07%, after having risen by 2 bps Friday, its sixth straight widening.

The Markit CDX Series 22 index gained ¼ of a point on Monday to end at 108¾ bid, 108 13/16 offered. It had lost 1/16 point on Friday, its second straight loss.

The widely followed Merrill Lynch High Yield Master II index posted its second straight gain as it moved higher by 0.057%, on top of Friday’s 0.029% advance, which had been its first improvement after three straight losses.

Monday’s gain lifted its year-to-date return to 5.563% from 5.503% on Friday, although it remained below the 5.751% return recorded last Monday, the peak level for 2014.

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