Arch Coal drives by, up in aftermarket; Continental, Dick Clark, others slate; Ford firms

By Paul Deckelman and Paul A. Harris

New York, Aug. 2 - Fresh off its busiest-ever July, the high-yield market rolled into August showing no signs of the traditional summer doldrums, as the primary arena saw a busy day of calendar-building and the secondary sphere meantime had a firm tone, with statistical indicators pointing higher.

Arch Coal, Inc. priced an opportunistically timed, quickly shopped $500 million offering of 10-year notes. When the St. Louis-based coal producer's new issue was freed for secondary dealings, traders reported it 1½ to 2 points higher - and the outstanding bonds, which are to be bought back using the proceeds, were also higher.

Price talk emerged on Trilogy International Partners LLC's upcoming $370 million offering of six-year secured notes, with order books on the deal scheduled to close on Tuesday morning.

Besides Arch Coal, which priced just hours after its initial announcement, Continental Airlines, Inc. announced plans for a $750 million issue of five-year secured notes. Syndicate sources heard that the Houston-based air carrier had begun a roadshow slated to run through Thursday.

They also heard that roadshows had begun on prospective deals for Foresight Energy LLC and Dick Clark Productions, which are expected to price later this week, and for Rock Holdings, Inc., which is thought likely to come to market early next week. Evertec, Inc. has heard to be preparing a bond deal in conjunction with bank financing that launches on Thursday.

Among recently priced issues, Ford Motor Credit Co.'s 6 5/8% notes due 2017 were easily the busiest bonds in Junkbondland, with over $50 million traded at higher levels, helped by the news of a two-notch credit upgrade from Standard & Poor's and the announcement that parent Ford Motor Co. had completed its $1.8 billion sale of its Volvo operation to Chinese carmaker Geely, with the U.S. auto company expected to use some of the proceeds to repay debt.

Arch Coal tight to talk

As forecast, the first week of August got off to a rolling start in the primary market.

Although the market heard terms on only one junk issue, the active forward calendar grew conspicuously - mostly with business that is expected to price by the end of the present week.

On Monday, Arch Coal priced a $500 million issue of 10-year senior notes (B1/BB-) at par to yield 7¼%.

The yield printed at the tight end of the 7 3/8% area price talk.

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

The St. Louis-based coal producer will use the proceeds to fund the redemption of $500 million of its 6¾% notes due 2013 and for general corporate purposes.

Allocations were horrible, according to a high-yield mutual fund manager who put in for $20 million of new Arch Coal bonds but received only $12 million.

Discussions on pricing the Arch Coal 7¼% notes due 2020 began in the 7 3/8% to 7½% context, the investor said.

However, crossover accounts were the deal.

Hence, when talk ratcheted down to 7 3/8% area, everybody seemed to stay aboard, the manager said.

The crossover players don't seem as price-sensitive as the pure high-yield accounts, the fund manager asserted.

Merely seeing a seven-handle on a deal creates plenty of excitement for those guys, the junk investor said.

Expedia 10-years

The Monday session actually did see activity from the legitimate crossover space.

Expedia, Inc. sold an upsized $750 million of split-rated 5.95% 10-year senior unsecured notes (Ba1/BBB-/BBB-) on Monday to yield Treasuries plus 300 basis points.

The price talk was in the 312.5 bps area.

The deal was upsized from $500 million.

The notes were priced at 99.893 to yield 5.964%. They were sold off the high-grade syndicate desk, with Bank of America Merrill Lynch and JPMorgan running the books.

Trilogy sets price talk

Looking ahead to the Thursday session, Trilogy International Partners and Trilogy International Finance Inc. talked their $370 million offering of six-year senior secured notes (Caa1/CCC+) with a 10¼% to 10½% yield.

Covenant changes were also introduced to the bonds.

The order books close at 11 a.m. ET on Tuesday.

Goldman Sachs & Co. is the left lead bookrunner.

Proceeds will be used to repay the Bellevue, Wash.-based company's $250 million term loan and to invest in its New Zealand operations.

The drillers

Meanwhile, on the heels of last week's phenomenal blowout from Vantage Drilling Co., whose $1 billion issue of 11½% five-year senior secured first-lien notes (B3/B-/) priced at 96.361 to yield 12½% and played to 234 accounts, which brought orders amounting to $5.5 billion, another driller is in the market to price notes this week.

Scotland's KCA Deutag, issuing via Turbo Beta plc, expects to price $500 million of eight-year senior unsecured notes (Caa2/CCC) before the end of the week via Goldman Sachs.

Noting that it's a "triple-hook" deal, with triple C ratings on both sides of the split, and an unsecured deal - whereas the Vantage bonds were secured - a trader from a high-yield mutual fund said that the deal is being whispered around 13%.

The U.S. roadshow wraps up on Thursday.

Despite the presence of other triple-hook deals on the active calendar, such as Trilogy, the high-yield primary market is not as friendly as it once was for low-rated deals, the trader said.

Investors are not quick to jump into low-rated deals, the trader remarked.

"People still want to put cash to work in the quality credits," the source remarked.

Continental kicks off $750 million

Meanwhile, an active forward calendar that contained $2.8 billion at Friday's close jumped to more than $4 billion on Monday.

Continental Airlines began a roadshow on Monday for its $750 million offering of five-year senior secured notes (Ba2/BB-).

The roadshow wraps up on Thursday.

JP Morgan, Credit Suisse and Morgan Stanley are joint bookrunners for the debt refinancing and general corporate purposes deal.

Foresight Energy roadshow

Elsewhere, Foresight Energy began a roadshow on Monday for its $400 million offering of seven-year senior unsecured notes (expected ratings Caa1/B-).

The roadshow wraps up on Thursday, and the deal is expected to price on Friday.

Citigroup, Morgan Stanley, UBS Investment Bank and Credit Agricole CIB are the joint bookrunners for the debt refinancing.

From elsewhere in the renewable energy space, Aventine Renewable Energy Holdings, Inc. announced on Monday that it intends to transact a $50 million add-on to its 13% senior secured notes due March 15, 2015.

"Certain significant investors of the company have agreed to purchase any unsubscribed-for notes up to an aggregate principal amount of $50 million, subject to certain conditions," the company stated in the release.

The notes will be offered exclusively under Rule 501 of Regulation D and Rule 144A.

Proceeds will be used to replenish funds previously used to construct or acquire equipment and real estate pledged to secure the notes.

The replenished funds may be used to acquire additional equipment and real estate or for other general corporate purposes, or deposited at closing with the collateral agent pending use to construct or acquire equipment and real estate pledged to secure the notes.

The original $105 million issue priced at par in March.

Rock Holdings starts Tuesday

Rock Holdings, Inc., the parent of Quicken Loans and Title Source, plans to start a roadshow on Tuesday for its $300 million offering of five-year senior secured notes.

The deal is expected to price early in the week ahead.

Credit Suisse and JPMorgan are joint bookrunners for the dividend and general corporate purposes deal.

Dick Clark Productions

Meanwhile, DCP LLC and DCP Corp., financing units of Dick Clark Productions, began a roadshow on Monday for their $150 million offering of five-year senior secured first-lien notes.

The deal is expected to price before the end of the present week.

Bank of America Merrill Lynch has the books.

Proceeds, along with cash on hand, will be used to repay the company's senior secured credit facility and to fund a distribution to the parent, CPIH, LLC.

Arch Coal climbs in aftermarket

When the new Arch Coal 7¼% notes due 2020 were freed for secondary dealings, a trader quoted the bonds at 101 3/8 bid, 101 7/8 offered. Several other traders later all quoted the new bonds going out at 101 ½ bid, 102 offered - well up from the par issue price at which the company brought the paper to market earlier in the session.

A trader meantime said that between $6 million and $7 million of the company's existing Arch Western Finance 6¾% notes due 2013 traded, moving up about ¾ point to 101¼ bid. In announcing its plans for the bond sale on Monday morning, Arch said that it would use the new-deal proceeds to repurchase or redeem $500 million of the outstanding $950 million of the 6¾% notes.

Ford firm on upgrade, Volvo news

Among recently priced issues, Ford Motor Credit's 6 5/8% notes due 2017 were seen "fairly active today," a trader said with no little understatement. With over $55 million recorded in round-lot dealings, the bond was probably the busiest junk issue, given a boost by positive news on both the ratings agency and the asset-sale fronts.

The trader saw the bonds up ¾ of a point on the session, to go out at 100 1/8 bid.

At another desk, a trader saw the bonds at 99 7/8 bid, 100 1/8 offered.

The new Ford Credit paper was up from the around 99 1/8 levels at which the bonds had gone home on Friday. The $1.25 billion issue by the company - the in-house auto loan agency for Ford Motor Co. - had originally priced on Wednesday at 98.485 to yield 6.90% and then had moved up on Thursday and Friday.

A trader said that the second-busiest Ford issue was the company's 7% notes due 2013, which he said was up ¾ of a point to 104¾ bid, with over $25 million traded.

After those two, though, he said, "The rest of Ford was just small pieces trading."

Among them, a trader said, was the benchmark 7.45% bonds due 2031, although another said that those long bonds showed a good 1¼% rise to 98 bid, 98½ offered.

The Ford bonds, old and new, traded higher as investors digested the news that Standard & Poor's had upped both Ford Credit and its corporate parent's credit ratings by two notches, to B+ from B- previously. S&P also raised the rating on Ford's senior secured debt issues to BB from B- previously and revised the recovery rating to 1 from 3, indicating an expectation of 90% to 100% recovery in a default.

And the agency also raised the rating on Ford's unsecured debt to B from CCC previously and revised the recovery rating to 5 from 6, indicating an expectation of 10% to 30% recovery in a default. The outlook is positive - meaning at least a one-in-three chance that S&P could raise Ford's corporate credit rating again in the next 12 months.

The agency noted that its upgrade "reflects a reassessment of Ford's business risk profile to weak from vulnerable."

Besides the favorable ratings news, Ford announced that it had completed the $1.8 billion sale of its money-losing Volvo operation to Chinese automaker Geely, which on Monday issued a $200 million note to Ford on top of a $1.3 billion cash payment. Certain adjustments to the price will be made before the deal closes sometime in the current third quarter. Ford said in a regulatory filing on Monday that it plans to use $300 million of the proceeds to repay outstanding term loan borrowings.

Mylan holds most gains

A trader said that Mylan Inc.'s new $300 million add-on Friday to the $700 million of 7 7/8% notes due 2020, which it sold back in mid-May, was trading on Monday at 106½ bid, 107½ offered - around the levels where those bonds had traded on Friday after pricing at 105½ bid.

He meantime saw the Pittsburgh-based specialty pharmaceutical company's 7 5/8% notes due 2017 at 105½ bid, 106½ offered, down a little from 106¼ bid, 107¼ offered on Friday.

Range holds at higher levels

A trader said that Range Resources Corp.'s 6¾% senior subordinated notes due 2020 were trading at 101¼ bid, 101¾ offered - up from the par level at which the Fort Worth, Tex.-based natural gas exploration and production company had priced its $500 million of the bonds - upsized from the originally announced $350 million - on Thursday.

He said the bonds received a boost from speculation in some sectors of the financial press that the company "could be a takeover target."

Market indicators head north

Away from the new-deal sector, a trader saw the CDX North American HY Series 14 index up by ¾ of a point on Monday to end at 98½ bid, 98¾ offered, after having eased by 1/8 of a point on Friday.

The KDP High Yield Daily index meantime gained 18 basis points on Monday to 72.47, after having fallen by 12 bps on Friday. Its yield declined by 6 bps on Monday to 8.06%, after having risen by 5 bps on Friday.

The Merrill Lynch High Yield Master II index showed a year-to-date gain of 8.488% on Monday - a new peak level for the year, eclipsing the previous mark of 8.37% seen on Friday.

Advancing issues led decliners for a 21st consecutive session on Monday, while their winning margin widened to around seven to -five from Friday's narrow edge of just a couple of dozen issues out of the nearly 1,400 tracked.

Overall activity, represented by dollar-volume levels, rose by 20% on Monday, after having plunged by 40% on Friday.

A trader said that the junk market "had a stronger feel to it," with a lot of people "sitting on cash." But he added that "folks are just not selling stuff."

Overall, he said that the junk market had "the feeling of a typical August Monday."

At another desk, a trader said: "The market had a good tone. That's the story."

A&P advances after coupon payment

Among specific issues, a trader said that bonds of the Great Atlantic & Pacific Tea Co. were "feeling a little bit better," especially after the company made a scheduled coupon payment on one series of its bonds.

He quoted the 11 3/8% senior secured notes due 2015 at 70 bid, 71 offered, up about ½ a point to 1 point from their Friday levels, after the company "made the coupon payment due today, so that's good."

"You don't know when a company reports bad numbers what it's going to do, so it's significant when they pay the coupon. It's a big deal."

On July 23, the Montvale, N.J.-based operator of the iconic A&P supermarket chain and several other store brands, like PathMark and Waldbaum's, reported poor quarterly numbers, causing its bonds and shares to get crushed.

A&P reported a net loss of $122.6 million, or $4.83 per share in the fiscal first-quarter ended June 19, on revenue of $2.54 billion -- far worse than its year-ago results of a net loss of $65.2 million, or $3.64 per share, on sales of $2.79 billion. Wall Street meantime had been shocked out of its socks since analysts had been only expecting a loss of about 70 cents per share on revenue of $2.6 billion.

The company compounded the investor angst and uncertainty by announcing the sudden ouster of its chief executive officer only six months into his tenure. However, after a big initial slide, the paper was coming back over several sessions last week.

The trader also saw the company's 6¾% convertible notes due 2012 "slightly better" at around 55½ bid, 56 offered versus levels around 54½ on Friday.

"There was some volume - but not a lot."

MGM slightly firm pre-numbers

MGM Resorts International - also known as MGM Mirage - saw its debt heading up "maybe a point, maybe half a point" during Monday's session, a trader said.

The trader pegged the 7½% notes due 2016 at 851/4, a level echoed at another desk as well.

The second trader also saw the 6 5/8% notes due 2015 closing around 84 5/8. However, he said both issues were "kind of right where they have been."

Yet another source placed the 6 5/8% notes at 85 bid, up a point.

The Las Vegas-based casino operator will announce its second-quarter results on Tuesday. It was heard that analysts are expecting a loss of 24 cents per share on sales of $1.5 billion. Last quarter, MGM reported a loss of 31 cents per share, though analysts had been expecting just 26 cents per share.

Boyd knows when to fold 'em

Elsewhere in that same sector - and from deep in the distressed-debt precincts -- a trader said that Station Casinos, Inc.'s bonds remain in the low single digits, quoting them Monday bid in a 2-4 range.

"That's where the quotes were today," although he added, "That doesn't mean much at all."

He said that some "small pieces" traded around the 2-2½ bid level.

Another market source said that Station's 6% notes due 2012 gyrated in a bid range between about 2 on the low side and nearly 7 on the high side before going out around 21/4, down nearly 3 points on the session.

On Friday, a market source had seen those bonds go out around 4 bid, down more than a full point on the day, apparently pushed lower on the news that rival Las Vegas-based locals casino operator Boyd Gaming, considered a possible bidder for Station's assets, has elected to fold its hand and walk away from the game.

Boyd - which like Station operates several moderate-sized downtown Las Vegas casinos that primarily target local visitors and smaller players - had been pursuing Station for about a year and a half, making several offers to buy its rival both before and after Station filed for bankruptcy a year ago. The most recent was in December, when it offered $2.45 billion in cash and assumed debt for all of Station Casinos, only to be again rebuffed.

Boyd had been considered a possibly buyer of Station's local casino assets under the bankruptcy court auction process, but said Friday that the court-approved process was unfair to non-insider bidders such as itself and that it made no sense to pursue a transaction under those conditions.

The plan before the court calls for many of Station's properties to be sold at auction without player databases, information technology and other operating tools considered essential for casinos, with those assets to remain with the company. Boyd also objected to bid requirements that included the buyers having to pay for leased land - a condition it said did not apply to insider bidders, like the current owners - as well as Station's right to hire away key executives or other employees from the hired properties after their sale.

Boyd's withdrawal clears the way for the Station's current owners, the founding Fertitta family and Colony Capital LLC, to retain control of Station. Bids on its assets were due Monday, with Colony and the Fertittas expected to open the bidding with and offer of $772 million of new equity.

Elsewhere in the sector, Harrah's 5 5/8% notes due 2015 rose 1 point while the 5 5/8% notes due 2015 rose ¼ of a point to around the 71 level. Pinnacle Entertainment Inc.'s 8 5/8% notes due 2017 were quoted 1½ points higher at 106 bid.

Stephanie N. Rotondo contributed to this report.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.