Pricing parade pauses, though Hecla on tap; calendar builds actively; recent deals steady

By Paul Deckelman and Paul A. Harris

New York, April 8 - Pricing activity in the high-yield space ground to a halt on Monday, with market participants seeing no new dollar-denominated, fully junk-rated issues getting done by domestic or industrialized-company borrowers.

The sole pricing that anyone noted was a $900 million two-part offering from pharmaceutical concern Mallinckrodt International Finance SA, although that transaction was split-rated and priced off the investment-grade desks.

But there was considerable primaryside activity bubbling just beneath the surface.

Syndicate sources said price talk emerged on silver producer Hecla Mining Co.'s $400 million eight-year issue, which is expected to come to market on Tuesday.

They also heard talk out on chemical fertilizer manufacturer Rentech Nitrogen Partners, LP's $320 million offering of eight-year secured notes, which is also seen as a likely Tuesday pricing.

Beyond those deals and others that were already in the market, the junk bond forward calendar grew substantially on Monday, with more than half a dozen deals, collectively worth over $4 billion, either formally announced or surfacing quietly on the radar.

The biggest new transaction is coming from Japanese telecommunications company SoftBank Corp., which plans to sell $2 billion equivalent of dollar- and euro-denominated bonds. The syndicate sources said that it will start marketing its offering to potential buyers via a roadshow that starts Tuesday.

Also heard hitting the road were Australia's BlueScope Steel Ltd., shopping $300 million of five-year notes, and internet infrastructure company VeriSign, Inc., with $600 million of 10-year paper. Both of those deals are expected to price late this week.

So will offerings from auto filters supplier Affinia Group Inc., energy operators Athlon Holdings LP and Memorial Production Partners LP and construction equipment provider NES Rental Holdings, Inc.

In the secondary market, traders saw recently priced deals, such as Friday's CrownRock, LP eight-year offering, mostly little changed from the gains the bonds accumulated in initial aftermarket dealings.

Away from the new deals, J.C. Penney Co. Inc.'s bonds were seen firming, even as embattled CEO Ron Johnson was being shown the door,and other news developments were being reported.

Statistical market performance measures were seen mostly better.

Mallinckrodt from high grade

Although the primary market generated a heavy flow of news on Monday, no straight-out junk deals were priced, sources said.

Mallinckrodt priced a $900 million two-part non-callable senior notes transaction (Ba2/expected BBB-), which was executed on the investment-grade desk.

The deal included a $300 million tranche of 3½% five-year notes, which priced at a 280 basis points spread to Treasuries.

The five-year notes, which priced on top of spread talk, came at a reoffer rice of 99.981 to yield 3.504%.

Mallinckrodt also priced a $600 million tranche of 4¾% 10-year notes, which priced at a 305 bps spread to Treasuries.

The 10-year notes, which also priced on top of spread talk, came at a reoffer price of 99.684 to yield 4.79%.

J.P. Morgan, Goldman Sachs, Citigroup and Deutsche Bank were the leads.

Elsewhere in the crossover space, VeriSign began a roadshow on Monday for its $600 million offering of split-rated 10-year senior notes (expected ratings Baa3/BB), which are set to price late this week.

J.P. Morgan and BofA Merrill Lynch are the joint bookrunners.

SoftBank's $2 billion

Although no junk priced, the active forward calendar saw a large buildup during the session.

Japan's SoftBank plans to start a global roadshow on Tuesday for its $2 billion equivalent offering of non-callable seven-year senior notes.

The deal includes a dollar-denominated tranche and a euro-denominated tranche.

Deutsche Bank is the left bookrunner for both tranches.

Right bookrunners for the dollar denominated tranche include BofA Merrill Lynch, Barclays, Credit Agricole, Mizuho, Morgan Stanley and Nomura.

Right bookrunners for the euro-denominated notes included Barclays, Credit Agricole, Mizuho and Nomura.

Proceeds will be used to help fund the acquisition of Sprint Nextel Corp. and for general corporate purposes, as well as to refinance existing debt.

Athlon eight-year notes

Athlon Holdings and Athlon Finance Corp. plan to price a $400 million offering of eight-year senior notes (expected ratings Caa1/CCC+) late this week.

Joint physical bookrunner BofA Merrill Lynch will bill and deliver. Wells Fargo is also a joint physical bookrunner.

Credit Agricole, Credit Suisse, RBC and UBS are joint bookrunners.

Proceeds will be used to repay a portion of the company's outstanding debt, fund a return of capital to its shareholders and for general partnership purposes.

Fort Worth, Texas-based Athlon, an entity formed by the former executives of Encore Acquisition Co. in August 2010, is an independent exploration and production company focused on the acquisition, development and exploitation of unconventional oil and liquids-rich natural gas reserves in the Permian basin.

BlueScope returns

Australia's BlueScope Steel Ltd. and BlueScope Steel Finance began a roadshow on Monday in New York for their $300 million offering of five-year senior notes (expected ratings Ba3/BB).

The deal, which is the same size as the one that the company pulled last November due to market conditions, is expected to price late in the present week.

Credit Suisse is the bookrunner for the general corporate purposes deal.

Memorial Production via Wells

Memorial Production Partners plans to price a $300 million offering of eight-year senior notes late this week.

Wells Fargo is the left bookrunner.

J.P. Morgan, Barclays, BofA Merrill Lynch, Citigroup and RBC are the joint bookrunners.

Proceeds will be used to repay revolver debt.

NES Rentals secured deal

NES Rentals plans to price a $275 million offering of five-year senior secured second-lien notes (Caa2/CCC+) by the end of the present week.

Deutsche Bank and Wells Fargo are the joint bookrunners.

The Chicago-based construction equipment rental company plans to use the proceeds to refinance its 12¼% second-lien senior secured notes due April 2015 .

Affinia $250 million

Affinia Group plans to price a $250 million offering of eight-year senior notes (expected ratings Caa2/B-) late this week.

J.P. Morgan, BofA Merrill Lynch, Barclays and Deutsche Bank are the joint bookrunners.

Proceeds will be used to redeem the company's existing notes and preferred shares, as well as to partially redeem its seller note and to make a distribution to its shareholders.

Talking the deals

At Monday's close, a pair of deals, having run their respective roadshows, had been teed up as Tuesday transactions.

Hecla Mining talked its $400 million offering of eight-year senior notes (B2//) to yield 6 7/8% to 7 1/8%.

BofA Merrill Lynch and Scotia are the joint bookrunners.

And Rentech Nitrogen Partners and Rentech Nitrogen Finance Corp. talked their $320 million offering of eight-year senior secured notes (B1/B) to yield 6½% to 6¾%.

Credit Suisse, BMO, Morgan Stanley and RBC are the joint bookrunners.

A 'flat day'

In the secondary market, a trader characterized Monday's session as "kind of flat on the day. There were no new deals, and volumes were nothing extraordinary - kind of light to average."

Among recently priced new issues, he said, "everything seemed to be pretty much flat, maybe plus or minus a steenth," or 1/16 of a point.

For instance, he said that at his shop, CrownRock LP's 7 1/8% notes due 2021 were being traded around 101 1/8 to 101 3/8 - about the level at which the Midland, Texas-based energy company's $400 million issue went home on Friday.

The company had priced those bonds earlier Friday at par after upsizing its deal from the original $350 million size.

At another desk, a trader pegged Bonanza Creek Energy, Inc.'s 6¾% notes due 2021 at 102¾ bid, 103¼ offered, which was up slightly on the session.

The Denver-based oil and natural gas exploration and production company had priced $300 million of the notes at par on Thursday, and they had moved above the 102 market when they began trading on Friday.

The trader also saw CNH Capital LLC's 3 5/8% notes due 2018 at 101¼ bid, 101¾ offered, up a quarter-point on the day, making up for the slight loss seen during Friday's trading.

The company - a subsidiary of Burr Ridge, Ill.-based construction and agricultural heavy equipment manufacturer CNH Global NV - had priced $600 million of the notes at par on Wednesday after that quick-to-market transaction had been upsized from an originally announced $500 million. The new bonds began trading at 101 later that same session and stayed up there for the rest of last week, and beyond.

Limited upside left?

Among other recent issues, a trader saw H.J. Heinz Co.'s 4¼% second-lien senior secured notes due 2020 "still just draped around par."

The Pittsburgh-based manufacturer of its iconic "57 varieties" of such consumer food staples as canned beans, ketchup and pickles had priced its $3.1 billion of those bonds at par on March 22, after having radically upsized the megadeal from an originally announced $2.1 billion.

When those bonds reached the aftermarket, they hovered around their par issue price.

Another trader, noting the lack of much movement in such issues, opined: "With the equity markets sort of gyrating at or near their highs, the market having a kind of toppy feel, it's kind of hard - especially when rates were backing up - for that stuff in the 4% to 5% coupon range to look at it as having a lot of upside."

However, he suggested, "If rates go lower because equities are cheapening up, and spreads widen out, you might actually see a bid for that kind of paper. But I don't see it having a ton of upside because rates are so low.

"I know we say that every time this happens, but we're getting closer to zero."

Exide is active

Away from the new deals, a trader said, "The only thing that we noticed that was kind of active" was Exide Technologies' 8 5/8% notes due 2018. He located the bonds around a 74¾ to 75 context.

On Friday, he said, the Milton, Ga.-based automotive and industrial storage battery maker's bonds had gotten as good as 80 to 81, "bouncing all over the place."

Before that, he said, the bonds had been in the low 70s.

A market source at another desk said that Exide was probably the most active Junkbondland name on Monday, with over $16 million having traded on a strictly round-lot basis, as well as numerous other odd-lot dealings.

That, however, paled in comparison with the more than $40 million that changed hands on Friday. He saw the bonds open at 77½ bid, but then drop around 2 points on the session.

On Thursday, it had been reported that Exide hired restructuring advisors Lazard Ltd. and law firm Akin Gump Strauss Hauer & Feld LLP. Exide followed that up with a press release that confirmed the hiring of Lazard, but not the law firm.

Also in the press release were cash flow and liquidity figures.

"The company expects that fiscal 2013 fourth-quarter free cash flow will be about $50 million, exceeding prior guidance of $30 million, with total liquidity at March 31, 2013 of greater than $230 million," Exide said in the release.

On the back of that, the bonds rallied in Friday trading.

Another trader opined that Monday's dip could have been due to short covering. But he also noted that there is a looming maturity and wondered why the company included the cash flow and liquidity figures in the release.

He speculated that the numbers could be a way to throw people off and that Exide might be struggling to figure out what to do with the Sept. 18 maturity.

"The banks probably wouldn't let them draw down to pay it off," he said.

Penney bonds pop

Elsewhere, J.C. Penney securities were rising on Monday, even as the company headed back to court to battle over Martha Stewart with Macy's.

A trader called the 7.95% notes due 2017 up nearly a point at 95 7/8, while the 5.65% notes due 2020 were "relatively unchanged" at 81. He also saw the 7 1/8% notes due 2023 "up a couple points" at 97, the 6 3/8% notes due 2036 better by almost a point at 76 and the 7.4% notes due 2037 higher by over a point at 801/2.

Another trader said the debt was "generically better by 1 to 2 points," seeing the 5.65% notes going out at "plus or minus 83" and the 7.4% notes at 80 bid, 81 offered.

However, another market source deemed the 5.65% notes off almost a point at 81 bid.

The Plano, Texas-based retailer's New York Stock Exchange-traded shares were up 42 cents, or 2.72%, to $15.87.

Around midday, speculation was that the stock firmed because certain private equity firms - such as Apollo Global Management LLC and Leonard Green & Partners LP - were considering a buyout of the company.

However, after the bell, news came out that CEO Ron Johnson had been ousted and replaced with Michael Ullman III, for whom Johnson had originally taken over.

Johnson was hired in 2011 and was tasked with turning the company around.

Most of his ideas, especially getting rid of sales and coupons, were met with disdain by consumers and the turnaround effort failed to succeed. In late February, J.C. Penney reported a fourth-quarter net loss of $552 million, or $2.51 per share and a full year net loss of $985 million, or $4.49 per share.

Same-store sales for all of 2012 declined by over 25%.

With Johnson's ouster, Penney announced late Monday that it had rehired his immediate predecessor, former CEO Ullman, to revive the company.

However, there may be more turmoil ahead, as the company's biggest shareholder, hedge fund manager William Ackman, had been a fierce critic of Ullman's performance during his first time around - from 2005 to 2011 - calling the company "chronically mismanaged" during that time.

Market indicators turn firmer

Overall, statistical junk performance indicators were firmer on Monday after having turned mixed with a lower bias on Friday.

The Markit Series 20 CDX North American High Yield index gained 13/32 of a point, its third consecutive gain, and finished at 103 5/8 bid, 103 7/8 offered. On Friday, it had been up by 1/16 of a point.

The KDP High Yield Daily index, meanwhile, rose by 2 basis points to close at 75.63, after having lost 1 bp on Friday. Its yield declined by 1 bp on Monday to 5.48%.

On Friday, it had been unchanged, snapping a streak of three straight sessions before that on the decline.

The widely followed Merrill Lynch High Yield Master II Index bounced back on Monday from Friday's loss, improving by 0.085%. Friday's 0.077% downturn had snapped a string of six straight sessions on the upside.

Monday's gain lifted its year-to-date return to 3.101%, a new peak level for the year. That was up from 3.014% on Friday and from the previous high point for the year - 3.064% - recorded last Thursday.

Stephanie N. Rotondo contributed to this review

© 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.