Community Health, Host Hotels price drive-bys; ATP Oil eroding; ResCap up ahead of coupon

By Paul Deckelman and Paul A. Harris

New York, Nov. 11 - The high-yield market got back to work on Monday following the three-day Veterans Day holiday weekend that saw U.S. bond markets closed on Friday.

While traders said that the secondary market seemed lackadaisical, the primary picked up right where it left off at the end of last week's more than $7 billion pricing binge, bringing another nearly $1.5 billion of new paper to market.

The big deal of the day came from well-known hospital operator Community Health Systems Inc., which priced a quickly shopped $1 billion offering of eight-year notes.

Besides that megadeal, lodging real estate investment trust Host Hotels & Resorts, LP checked in with a $300 million drive-by transaction.

And Carrizo Oil & Gas, Inc. did a $200 million add-on to an existing tranche of bonds that it sold about a year ago.

In the secondary realm, ATP Oil Gas Corp.'s bonds continued to get drilled for a third straight session on Monday, falling into the mid-60s, down another couple of points on the day.

While ATP was sliding, another recently busy distressed name - Residential Capital LLC - was gliding.

The mortgage lender was up on Monday. The company's bonds plummeted last week on market fears that it might be headed for a bankruptcy filing, but then the bonds bounced a little off their bottom later in the week.

Traders noted that Residential Capital has a coupon payment on one of its issues due on Tuesday. Market expectations are that it will indeed pay it.

Community Health leads week

At the outset of what is expected to be a busy week in the primary market, a trio of issuers each brought a single tranche of junk to raise $1.49 billion on Monday.

All three deals were drive-bys.

Community Health Systems priced a $1 billion issue of eight-year senior notes (B3/B) at par to yield 8%.

The yield printed at the wide end of the 7¾% to 8% yield talk.

Credit Suisse, Bank of America Merrill Lynch, Citigroup, J.P. Morgan and Wells Fargo were the joint bookrunners for the debt refinancing.

The company priced at the wide end of "aggressive" price talk, according to a source close to the deal.

Before that, official talk surfaced just after noon ET, the yield was being discussed in a somewhat wider context, the source said, adding that ultimately the 8% print came in the middle of that original yield discussion.

Also, the broader markets were moving against the oversubscribed deal on Monday, with the big stock indexes in the United States finishing in the red and the S&P 500 ending down 1%, the source noted.

Host comes atop talk

Host Hotels & Resorts priced a $300 million issue of non-callable 10-year series Y senior notes (Ba1/BB+/) at par to yield 6% on Monday.

The yield printed on top of price talk. However, that price talk was set at the tight end of initial guidance of 6% to 6¼%, according to a trader at a high-yield mutual fund.

J.P. Morgan, Bank of America Merrill Lynch, Goldman Sachs and Wells Fargo were the joint bookrunners for the debt refinancing.

Carrizo taps 8 5/8% notes

Carrizo Oil & Gas priced a $200 million add-on to its 8 5/8% senior notes due Oct. 15, 2018 (B3/B) at 98.501, resulting in an 8.918% yield to worst.

The reoffer price came in line with the 98.50 price talk.

Credit Suisse, RBC and BNP Paribas were the joint bookrunners for the debt refinancing deal.

The Monday deal originated as an offering of non-fungible notes mirroring the 8 5/8% senior notes due 2018, according to a source close to the transaction.

However, demand for the mirror notes drove pricing to a level at which the new notes could be made fungible with the existing 8 5/8% notes, hence the deal being changed into a conventional add-on.

One force that factored into the pricing was the buyside's desire for fungibility, the source added.

The original $400 million issue priced at 99.302 to yield 8¾% in October 2010. So, Carrizo takes on an additional 17 basis points of interest expense versus the original issue.

Kodiak starts Tuesday

The forward calendar took aboard two new offerings on the first day of what market sources expect to be a busy week in the primary market.

"You saw some good executions on Monday, and successes could bring forward deals that have been waiting on the sidelines," a syndicate banker said.

The dealers also may be feeling as though now is better than later for bringing a deal as the Nov. 23 deadline for recommendations from the so-called Super Committee bears down, the source added, referring to the bipartisan Congressional committee that is convened to address the U.S. budget deficit.

The stakes may not be as high as they were when the Congressional budget ceiling talks stalled earlier this year, and the United States lost its triple-A long-term credit rating from Standard & Poor's, the banker added.

Nevertheless, it might be prudent for issuers to access the market before Super Committee headlines have a chance to create more volatility in markets already considered volatile by the ongoing eurozone sovereign-debt situation.

Kodiak Oil & Gas Corp. rolled out one of two deals that kicked off on Monday.

Kodiak will begin a roadshow on Tuesday for its $550 million offering of eight-year senior notes, which are set to price later in the week.

Credit Suisse, KeyBanc, RBC and Wells Fargo are the joint bookrunners.

The Denver-based energy exploration and development company plans to use the proceeds to fund acquisitions, pay down debt and for general corporate purposes.

Entercom begins roadshow

Entercom Radio, LLC began a roadshow Monday for its $250 million offering of eight-year senior notes (Caa1/B-).

An investor conference call is scheduled to take place at 12:15 p.m. ET on Tuesday.

The deal is set to price late in the week.

Bank of America Merrill Lynch is the left bookrunner. Credit Suisse and Morgan Stanley are the joint bookrunners.

The proceeds, together with borrowings under the company's new $345 million seven-year term loan and $50 million five-year revolver, will be used to repay the existing credit facilities and for general corporate purposes.

$1.95 billion calendar

Entercom and Kodiak climb aboard an active forward calendar that built purposefully toward the $2 billion mark by Monday's close.

In addition to those deals, Pharmaceutical Product Development, Inc. is in the market with a $700 million offering of eight-year senior notes via J.P. Morgan, Credit Suisse, Goldman Sachs and UBS.

Although official price talk had not surfaced by Monday's close, the deal is heard to be going well and is being discussed in a yield context of 10¼% to 10½%, according to a trader from a high-yield mutual fund. He said the deal is expected to price on Wednesday.

Also on the active calendar is Trinseo Materials Operating SCA with a $450 million offering of seven-year senior notes (B3/B+).

Barclays is the left lead bookrunner. Deutsche Bank, BMO, Citigroup and Goldman Sachs are the joint bookrunners.

That deal is heard to be benefiting from a considerable amount of pre-marketing and is being partially driven by reverse inquiry, according to the trader who added that yield conversations have been taking place in the context of the 11½% area.

Although official timing has the Trinseo deal pricing toward the end of the week, timing could be moved forward, the trader added.

Community Health anemic

When the new Community Health Systems' eight-year bonds were freed to trade in the secondary market, they didn't trade that well, a trader declared.

"They stumbled," the trader said, and were going out at 99½ bid, 99¾ offered after having priced earlier at par.

A second trader agreed that the Franklin, Tenn.-based hospital operator's new $1 million drive-by issue didn't do too well.

"There's a lot of bonds still available," the source said, quoting the bonds trading around 99¾ bid and then being left at 99 5/8 bid, 99 7/8 offered.

One of the traders said that Community Health's benchmark 8 7/8% notes due 2015 were little moved on the session, even with the company having brought a big new deal.

However, there was brisk trading in the credit, with nearly $20 million racked up by the time of the closing bell.

Host heads higher

In contrast, the $300 million 10-year deal from Bethesda, Md.-based lodging-industry real estate investment trust, Host Hotels & Resorts, was seen by a trader having pushed up about three-quarters of a point, to 100¾ bid, versus the par level at which the bonds had priced.

Another trader said they did okay, quoting the new bonds at 100¾ bid, 101¼ offered.

Carrizo stays near issue level

A trader said that Carrizo Oil's $200 million add-on to its existing bonds "stayed around that price [981/2] and there was not heavy trading."

"Add-ons tend to trade less," the trader said.

Indicators inconclusive

Away from the new-deal arena, a trader described secondary-market proceedings on the first day back after the Veterans Day holiday weekend as "lackluster."

And that was reflected in the statistical secondary-market performance indicators, which finished last week on the downside and were mixed on Monday.

A trader said the CDX North American series 17 high-yield index gained 5/16 of a point on Monday to end at 91 5/16 bid, 91 9/16 offered, after having fallen by 3/16 of a point on Thursday.

The KDP High Yield Daily index eased by 3 basis points Monday to go home at 72.25, after having eased by 4 basis points on Thursday.

Its yield edged up by 1 bp to 7.51%, after having risen by 3 bps on Thursday.

ATP attrition continues

Among specific high-yield issues, Monday was another tough session for ATP Oil & Gas, whose 11 7/8% second-lien notes due 2015, which were recently trading as high as the mid-80s, fell several more points to a 65 to 66 context from the higher 60s, where they were at the end of last week.

"So they're down a couple more [points] on the day, on good volume," a trader said, seeing them as the No. 1 junk-bond volume leader on Trace.

While the official volume figure was $28 million, he said it could actually be higher, like $35 million or $40 million. When Trace indicates a trade of more than $1 million, it "could be a million or could be $2 million," he said.

"When things go down, they usually don't trade in $10 million or $15 million blocks. They're usually $2 million to $3 million," he added. "But it's still really good volume."

"The big name [of the day] again was ATP," declared a second trader, who saw the bonds continuing to erode, as they've been doing pretty much each session since the release of the company's third-quarter earnings and company guidance. ATP also acknowledged that it will produce less oil and gas going forward, raising some investor qualms about the company's ability to service its debt in 2012.

Production problems are the root of the slide. "With that big coupon, trading in the 60s - that's scary," the trader said.

The bonds remain active, another trader said, seeing them down about 4 points to the 65 to 66 level.

He also noted that "their stock got hit pretty good," continuing a losing streak that began last week after the earnings news.

The Nasdaq-traded shares were down by 18% at one point, before ending the day down 97 cents, or 14.37%, to close at $5.78. Volume of 8.4 million shares was more than four times the norm.

ResCap rallies before coupon

A trader said that he saw some ResCap action, quoting the Minneapolis-based mortgage lender's 9 5/8% notes due 2015 going home at 60 bid, 61 offered, which he said was up 1 point, on "a sociable amount of trading."

All of the day's trades "took place right in that range," the trader said.

Another trader, in noting those 9 5/8s trading at higher levels, pointed out that "they've got a coupon due [Tuesday], so they rallied a little bit, in front of that coupon," back up to the 60 level.

"They got to be in the low- to mid-50s last week" on the news that ResCap had hired Centerview Partners LLC to advise a restructuring of its finances, leading some investors to fret that a bankruptcy filing was likely in the cards.

"But they kind of bounced back from those levels," the trader said.

Yet another trader noted that the 9 5/8s plunged more than 23 points, down into the mid-50s from about 80 previously on the Centerview story.

"This market has not much forgiveness," the trader said, referring to any perceived bad news.

ResCap originally sold more than $4 billion of those 9 5/8% bonds in June of 2008, but took out some $1.89 billion of the issue in an exchange offer later that year after the company and its parent, then known as GMAC LLC, ran into financial trouble during the Wall Street meltdown.

GMAC, now known as Ally Financial Inc., drastically reduced its own debt and the debt of ResCap by giving holders of existing bonds a combination of new secured bonds and cash.

That left roughly $2.12 billion of the 9 5/8s still outstanding, meaning a $110 million coupon payment is due Tuesday.

MF Global retreat rolls on

A trader said that MF Global' 6¼% notes due 2016 were down about another 2 points on the session, finishing at 31½ bid, 32½ offered, on "decent volume."

He said that all of the bankrupt New York-based futures and commodities brokerage company's paper had converged at about the same level since its recent Chapter 11 filing - the 9% notes due 2038 and the two convertible issues, the 1 7/8% notes due 2016 and the 3 3/8% notes due 2018.

"But, the 61/4s were the most active," the trader said.

A market source saw more than $16 million of the bonds changing hands.

While they dropped at one point to levels as low as just over 25, those were small trades and not considered representative.

The market source quoted the bonds going home at 32½ bid, down 2 points on the day.

Back in late October, that paper was still trading in the middle 60s, about twice of what it is trading at now.

But that was before the company, headed by former Goldman Sachs chairman and ex-New Jersey governor Jon Corzine, was revealed to be in big trouble because of heavy leverage and large bets placed on sovereign debt of troubled European countries like Greece.

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