Sanchez, Garda deals price as Warren postpones offering; Exide gyrates after bankruptcy filing

By Paul Deckelman and Paul A. Harris

New York, June 10 - Sanchez Energy Corp. and Garda World Security Corp. were heard by high-yield syndicate sources to have kicked off the new week on Monday by successfully coming to market with a pair of deals that generated $452 million of new dollar-denominated, fully junk-rated paper.

Sanchez was heard to have priced an upsized $400 million of new eight-year notes, while Garda did a $50 million add-on to its existing 2017 paper.

The sources also heard that HudBay Minerals Inc. - like Garda, a Canadian company - was also in the market with an add-on deal expected to price on Tuesday.

But the domestic primary market was jarred by the announcement that New York-based energy operator Warren Resources, Inc. has chosen to postpone its planned $200 million bond deal.

European primaryside sources said that French clothing maker SMCP SAS priced a euro-denominated seven-year transaction.

In the secondary market, the new Sanchez bonds were seen wrapped around their issue price.

Traders also saw strong levels in recent new offerings from Jack Cooper Holdings Corp., Approach Resources, Inc. and Regal Entertainment Group, among others.

Away from the new deals, Exide Technologies was clearly the dominant name of the day, with its bonds gyrating wildly and racking up huge volume following the announcement that the maker of automotive and industrial storage batteries had filed for Chapter 11.

Statistical measures of market performance, which had firmed across the board on Friday, reverted to their previous mixed status in Monday's dealings.

Sanchez upsizes

Sanchez Energy priced an upsized $400 million issue of eight-year senior notes (Caa1/CCC+) at par to yield 7¾%.

The deal was upsized from $350 million.

The yield printed at the wide end of the 7½% to 7¾% yield talk.

RBC was the left bookrunner. Credit Suisse was the joint bookrunner.

Proceeds will be used to repay the company's first-lien credit facility that was drawn to fund a portion of the Cotulla acquisition, to repay its second-lien credit facility in full and to fund general corporate purposes, including the pre-funding of capital expenditures.

Garda taps 9¾% notes

Garda World Security priced a $50 million add-on to its 9¾% senior notes due March 15, 2017 (B2/B) at 105.75 to yield 7.942%.

The reoffer price came rich to price talk that was set in the 105.5 area.

BofA Merrill Lynch, RBC and TD were the joint bookrunners for the quick-to-market add-on.

The Toronto-based integrated cash logistics and physical security services firm plans to use the proceeds to repay its revolver and for general corporate purposes.

HudBay pricing Tuesday

Toronto-based HudBay Minerals held an investor call on Monday to discuss a planned $150 million add-on to its 9½% senior notes due Oct. 1, 2020 (B3//).

The deal is set to price on Tuesday.

Jefferies is the bookrunner.

The company plans to use proceeds for general corporate purposes and to fund the development of its Lalor and Reed projects in Manitoba and its Constancia project in Peru.

The Toronto-based integrated mining company priced the original $500 million issue at par on Sept. 6, 2012.

Elsewhere, GFL Environmental Corp. set yield talk on its C$200 million offering of five-year senior notes in the 7½% area.

The deal, via BMO and Scotia, is set to price on Tuesday.

Warren postpones

Warren Resources postponed its planned $200 million offer of eight-year senior notes (Caa1/CCC+).

Last week, yield talk of 8¼% to 8½% circulated in the market.

BMO was the bookrunner.

Proceeds were to be used to repay borrowings under the company's credit facility, for capital expenditures and for other general corporate purposes.

SMCP prices €290 million

The European high-yield primary market generated news on Monday.

France-based apparel-maker SMCP SAS priced a €290 million issue of seven-year senior secured notes (B3/B) at par to yield 8 7/8%.

The yield printed at the wide end of yield talk set in the 8¾% area.

Joint bookrunner Credit Suisse will bill and deliver. Goldman Sachs, KKR and UBS were also joint bookrunners.

Proceeds will be used to fund the acquisition of SMCP by KKR and management.

Two additional European companies are parked on the deal calendar.

France's Barry Callebaut Services NV has been roadshowing $600 million of non-callable 10-year senior notes (confirmed Ba1/expected BB+) in an acquisition financing via Credit Suisse, Goldman Sachs, ING, Jefferies, RBS, Rabobank and UBS.

And Switzerland's Unilabs SubHolding AB is marketing €685 million of notes in a three-tranche debt refinancing deal being led by JPMorgan, Lloyds, Nordea and SEB. Unilabs could get done on Tuesday, according to a market source.

Last week's selloff in high yield appears to have impacted the European junk market to a lesser extent than it did the market in the United States, where there were reports of some forced selling against the backdrop of an historic $4.6 billion weekly cash outflow from the asset class.

Some European accounts reported flows that were slightly positive, said a London-based debt capital markets banker who was basing the color on conversations with investors in Europe.

One account, whose fund is comprised of 60% retail money, saw a positive flow, the banker said, noting that it was an indication that sentiment in Europe appears more positive that that in the United States.

Conservative or immature

One reason Europe may have enjoyed a softer landing than did its counterpart in the United States may be the relative conservatism of European high-yield investors, sources said on Monday.

A quick look at the numbers bears this out - at least by one obvious measure.

Looking at euro-denominated issuance for the second quarter of 2013 to last Friday's close, 44.5% of it came in the form of secured paper, while only 19.6% of dollar-denominated issuance during that period came in the form of secured notes, according to Prospect News data.

The cautious tendencies of European high-yield investors, which manifest an appetite for secured versus unsecured paper and a reticence to participate in hot market deals, such as PIK toggle dividend-funding transactions, prompt some high-yield players in the United States to characterize the European high yield as "less mature" than its U.S. counterpart. That is, less willing to participate in novel bond structures that its counterpart.

However, European high-yield players tend to hold that this caution is an earmark of conservatism, rather than one of relative immaturity.

Whether conservative or immature, one European sellsider expressed the belief that last week's market disruption notwithstanding, the European junk market appears to be very much open.

"Investors are looking at how things are repricing since the selloff, and they like what the see," the source said.

"It's putting price talk in a zone where it is once again becoming interesting to them."

Sanchez holds near issue

In the secondary market, a trader said he "didn't see much" activity in the new Sanchez Energy 7¾% notes due 2021.

"I can't imagine there was too much trading in them."

He saw the bonds going home wrapped around par after the Houston-based oil and gas exploration and development company's upsized issue had priced at par.

A second trader likewise quoted the new bonds at 99¾ bid, 100¼ offered.

A third trader, however, had not seen any dealings in the new credit late in the afternoon.

Traders did not see any dealings in Garda's 9¾% notes due 2017 after the company priced its add-on.

Jack Cooper moves up

Looking at some of the deals priced last week, a trader saw Jack Cooper Holdings' new 9¼% senior secured second-lien notes due 2020 having firmed solidly on Monday to 102 1/8 bid, 102 5/8 offered.

He saw those bonds on Friday at 101 bid, 101½ offered.

The Kansas City, Mo.-based company, which transports cars and light trucks to new- and used-car showrooms, priced its $225 million issue at par this past Friday. The bonds were initially seen around 100¾ bid on the break, a trader said, before going out around a 101-102 context.

Hot Topic Inc.'s 9¼% senior secured notes due 2021 were quoted Monday in a 101½ to 102 bid context.

The City of Industry, Calif.-based specialty retailer's $355 million issue came to market late Thursday at 98.618 to yield 9½% and got as good as 102 bid when they were freed for aftermarket dealings on Friday.

Some earlier deals improve

Going back a little further, a trader said that Regal Entertainment's 5¾% notes due 2023 gained 1 point on Monday to close at par bid, 100½ offered, up from its recent levels around 99 bid, par offered.

The Knoxville, Tenn.-based movie theater chain operator's $250 million issue had priced at par on May 29 and then stayed at or slightly above issue for the next several sessions, before dipping below par around the middle of last week.

The trader also said that Ultrapetrol (Bahamas) Ltd.'s 8 7/8% first preferred ship mortgage notes due 2021 were up about half a point on Monday, ending at 99½ bid, 100½ offered.

The Nassau, Bahamas-based industrial shipping company priced $200 million of those notes at par on May 30. The notes had initially gotten as good as 101 bid, 101½ offered, before easing back down to a 99 bid context around the middle of last week.

Approach holds gains

A trader said that "the Approach [Resources] bonds traded well," after having moved up on the break when they hit the aftermarket on Friday.

He said that the Fort Worth, Texas-based oil and gas exploration and production company's 7% notes due 2021 "have stayed up around the 102½ to 103½ level. It doesn't look like there's been a lot of action, but they've been sort of stuck around 1021/2-103¼ for the last two days."

That $250 million deal priced at par late Thursday and began trading on Friday.

Elsewhere in the energy sphere, he said that he "has been watching" SM Energy Co.'s 5% notes due 2024 since the Denver-based E&P company's quickly shopped $500 million issue came to market at par back on May 15, after having been upsized from an originally announced $400 million.

"It was one of the ones that got dinged up, along with all of the other low-coupon names, but not for any credit reason," he said, when yields on Treasury issues began rising and their prices falling from around mid-May onward on investor fears that the Federal Reserve might soon end its expansive bond-buying policy that has kept ample liquidity in the system and has held interest rates around historic lows.

He said that there were a few such energy names in that group besides SM Energy, including Oklahoma City-based Continental Resources Inc., which priced a massively upsized $1.5 billion quick-to-market issue of non-callable 10-year senior notes at par to yield 4½% back on April 2, and Denver-based natural gas midstream company MarkWest Energy Partners, LP, whose $1 billion drive-by issue of non-callable 10.5-year senior notes priced at par to yield 4½% back on Jan. 7.

"They were among a handful of [energy-sector] names whose 4%- and low 5%-area coupons really got dinged," estimating "about six or seven names in the energy space that fit that description."

SM Energy, he said, "has been a better name than most, I would say."

He said that on Friday, the group "was up, on average, about half- to three-quarters of a point. Friday was a good day for those deals. Today was [...] nah, not a lot of volume and mixed at best."

SM Energy's recent bonds were quoted at 100½ bid.

Market indicators turn mixed

Away from the new-deal realm, statistical junk performance indicators turned mixed on Monday, after having shown across the board improvement on Friday. Before that, though, they had been mixed on Thursday and had fallen all around over the previous four sessions.

The Markit Series 20 CDX North American High Yield index stumbled on Monday, after having been on the upside the previous two sessions. It fell by 15/16 of a point as it ended at 103¼ bid, 103 5/16 offered. On Friday, the index had risen by 7/16 of a points, its second consecutive gain.

However, the KDP High Yield Daily index posted its second consecutive gain as it edged up by 1 basis point on Monday to end at 74.60. On Friday, the index had jumped by 29 bps as it broke a 10-session skid that had gone back to May 23. Its yield eased by 1 bp on Monday to close at 5.75%, its second consecutive narrowing.

On Friday, it had declined by 10 bps, coming in for the first time after 10 consecutive sessions in which it had risen.

But the widely followed Merrill Lynch High Yield Master II index was back on the downside on Monday, losing 0.049%, in contrast to Friday's 0.499% rise, which had been its first gain after eight straight losses going back trio late May.

That loss cut its year-to-date return to 3.362%, down from Friday's 3.413%, although it remained above its recent low of 2.899%, set on Thursday - the first time that the cumulative return figure had fallen below 3% since April 1.

Exide active after Chapter 11

Among specific non-new-deal credits, a trader said that "everyone seemed to be focused today" on Exide Technologies' 8 5/8% notes due 2018, in the wake of the company's Chapter 11 filing with the U.S. Bankruptcy Court in Wilmington, Del.

A market source said that over $72 million of the bonds changed hands on a round-lot basis alone, the most in Junkbondland, with probably an equal amount traded in smaller, odd-lot transactions.

The bonds were seen going home down a half-point on the session, at 58 bid, but not before gyrating wildly between lows below 50 bid and highs above 61 at various points during the day.

The Milton, Ga.-based automotive and industrial storage battery maker's Nasdaq-traded penny-stock shares were also extremely busy, with some 23.9 million traded, more than seven-times the usual volume.

The stock fell by as much as 7 cents, or 35% , during intra-day trading, but went home down just 3.42%, or a little less than a cent, priced between 19 and 20 cents.

The company filed for protection from its bondholders and other creditors in the face of a looming $31 million interest payment due on Aug. 1 on those bonds and the Sept. 18 maturity of its nearly $52 million of 2.37% convertible notes.

The "Chapter 22" filing was Exide's second trip in bankruptcy reorganization in recent years; it had originally filed for protection back in 2002, emerging in 2004.

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