Edcon prices; secondary, new issues see softness; Chesapeake gains with earnings; Dynegy dips

By Paul A. Harris and Stephanie N. Rotondo

Portland, Ore., Feb. 22 - South Africa's Edcon Pty. Ltd. priced €317 million and $250 million of seven-year notes in a quiet day for the primary high-yield market.

Nexeo Solutions, LLC released talk for a $200 million offering of seven-year notes, and United Refining Co., Baker & Taylor and Goodrich Petroleum Corp. began roadshows.

The secondary high-yield market was partly soft and partly not on the first trading day back from the long holiday weekend, traders reported.

"It was a little quiet," a trader said. "A lot of people were just watching and even more people were away."

While recent new issues came under pressure, Chesapeake Energy Corp. was one of the day's gainers, leading the oil and gas sector upward. The gains came as the company posted its quarterly earnings, which swung to a profit.

But fellow power producer Dynegy Holdings Inc. didn't fare as well as the market digested a failed takeover bid by billionaire investor Carl Icahn. The company also announced a series of management and board changes.

Elsewhere, Ahern Rentals Inc. experienced a pop, while Clear Channel Communications Inc. took a hit, both on no news.

South African deals

In Tuesday's new issue action, news of South African issuers bringing deals into the Rule 144A junk bond market continued to be heard.

Dry goods retailer Edcon priced €317 million and $250 million of seven-year notes (B2//) at par to yield 9½%, on top of price talk.

Goldman Sachs, Deutsche Bank, Barclays Capital and Morgan Stanley were the bookrunners.

Neither tranche showed a great deal of traction as they broke into the secondary, a market source in the United States said.

Amid an overall weak tone in the market, during the New York session, Edcon's dollar-denominated tranche was trading at 99½ bid, while the euro-denominated tranche was par bid.

Elsewhere, players in the United States who were coming back from the three-day Presidents Day holiday weekend heard that South Africa's Foodcorp Ltd. is roadshowing a €415 million offering of seven-year notes (B2/B-/).

JPMorgan and Barclays are the bookrunners.

Nexeo sets price talk

Looking ahead to Wednesday, Nexeo Solutions talked its $200 million offering of seven-year senior subordinated notes (B3/B-) with an 8½% to 8¾% yield.

Bank of America Merrill Lynch, Citigroup Global Markets Inc. and Barclays Capital are the joint bookrunners for the acquisition deal.

The notes become callable in three years at par plus half the coupon.

United Refining's $350 million

Meanwhile, three prospective issuers stepped forward with deals that will be marketed via investor roadshows.

United Refining began marketing a $350 million offering of seven-year first-priority senior secured notes (/B+/) via bookrunner Credit Suisse Securities.

The Warren. Pa.-based refiner and marketer of petroleum products plans to use the proceeds to fund the tender offer for its 10½% senior notes due 2012.

While it is too early for official price talk, early discussions about the United Refining deal are taking place in the 11½% area, according to a trader from a high-yield mutual fund.

Baker & Taylor hits the road

Baker & Taylor began an investor roadshow on Tuesday for its $240 million offering of five-year senior secured notes.

Jefferies & Co. has the books for the debt-refinancing deal.

Goodrich plans $225 million

Finally, Goodrich Petroleum began a roadshow on Tuesday for its $225 million offering of eight-year senior notes.

JPMorgan, Jefferies, BMO Nesbitt Burns, BNP Paribas, RBC Capital Markets, Wells Fargo Securities and Bank of America Merrill Lynch are the joint bookrunners.

The Houston-based oil and gas company plans to place a portion of the bond proceeds into escrow to be used to redeem $175 million of its 3¼% convertible senior notes due 2026 in December of this year or to repurchase the notes prior to redemption. Any remaining proceeds would be used for general corporate purposes, including funding a portion of 2011 capital expenditures.

Initial discussions on the Goodrich Petroleum deal are taking place in the high 8% context, the trader from the high-yield mutual fund said.

Meanwhile, J. Crew Group, Inc.'s $400 million offering of eight-year senior notes (Caa1/CCC+), which launched Friday, is heard to be going well, the trader said.

Discussions on the acquisition-financing deal, via Goldman Sachs and Bank of America Merrill Lynch, are happening in the low 8% range, the trader said.

The roadshow is expected to continue until the end of the week, with pricing expected on March 2.

Vacations, stale numbers

The remainder of the holiday-shortened week of Feb. 21 could remain comparatively quiet, according to a syndicate official.

That's because potential issuers continue to labor over financial numbers, with fourth-quarter 2010 numbers having gone stale a week ago.

Also, a considerable number of players took advantage of the three-day Presidents Day weekend, tacking on vacation days through the remainder of the post-holiday week, the sellsider added.

Having said so, this syndicate banker is looking for a technology company to show up this week with a drive-by deal.

Also, there is likely to be an announcement of a dividend deal this week, with the bonds being issued at the holding company level, the sellsider said.

Market, new issues decline

Market indicators came in a bit, as traders saw a market that was "soft in spots but not across the board," according to one source.

"The market was a little bit off, but just a little bit," said another source, adding that "we didn't even hit a billion in secondary trading."

The KDP High Yield index reading for Monday was 76.07, with a 6.61% yield. That compared with Friday's level of 76.12, with a 6.60% yield.

The CDX North American High Yield index was off just over half a point at 104 1/8 bid, 104 3/8 offered.

Even recent new deals were coming off their highs, traders reported.

A trader saw Burlington Coat Factory Warehouse Corp.'s $450 million issue of 10% notes due 2019 at 102¼ bid, 103¼ offered, up from Thursday's pricing at par but "a little bit softer than the highs they hit that first euphoric day."

Another trader also saw the Burlington bonds falling "a bit" to 102 bid, 102½ offered. "So down about a point," he said.

The first trader also quoted Claire's Stores Inc.'s new $450 million issue of 8 7/8% notes due 2019 at 100½ bid, 101 offered. The bonds were priced at par on Thursday.

The second trader placed Palace Entertainment Inc.'s new $430 million 8 7/8% notes due 2017 - which priced Friday at par - at 102½ bid, 103 offered, down from the highs of 103¼ bid, 103¾ offered.

Chesapeake leads gas sector

Though traders said there was an aura of softness in the market, a trader noted that the oil and gas arena was "better based on what's going on out there" and that Chesapeake Energy was the "leader of the pack."

Overall, he said, the sector closed unchanged to a point better, with Chesapeake closing three-quarters to a full point better. "I think it's a response to what is going on with oil prices based on what's going on in all the hot spots of the world," he said, referring to recent turmoil in the Middle East and North Africa.

He said Chesapeake's most recent issue, the 6 1/8% notes due 2021, inched up nearly a point to 101 bid, 101½ offered.

At another desk, a source deemed the 9½% notes due 2015 almost 2 points stronger at 123½ bid.

On Tuesday, the Oklahoma City-based natural gas producer posted a $180 million net income, or 28 cents per share. That compared to a $524 million loss, or 84 cents per share, for the fourth quarter of 2009. Chesapeake attributed the swing to profit to an increase in its oil production.

The company has agreed to sell over $7.5 billion of assets over the last five months, with the most recent one being announced on Monday. Chesapeake said it would sell its Fayetteville Shale project in Arkansas to BHP Billiton Ltd. for $4.75 billion.

Dynegy softens

Among other power producers, Dynegy debt was unchanged to weaker following news that Icahn's $5.50-per-share takeover bid had failed.

Still, a trader said trading volume was "not as much as you would have thought, and [there was] no major movement."

He saw the 7¾% notes due 2019 at 731/2, which was smack in the middle of recent markets of 73 bid, 74 offered. The 8 3/8% notes due 2016 were "maybe off a half" around 80.

On Monday, the Houston-based company said Icahn's Icahn Enterprises LP had received "an insufficient number of shares" in a tender offer and that the proposed takeover therefore automatically expired as of 5 p.m. ET on Friday.

The company also announced a series of board and executive changes, including Bruce A. Williamson's resignation as president and chief executive officer as well as a director and chairman of the board. Williamson's exit will be effective March 11, and David Biegler will be interim president and CEO while Patricia A. Hammick will be chairman.

"Recognizing the desire of the stockholders to pursue a different path, Dynegy's five remaining directors do not intend to stand for reelection at the company's upcoming annual meeting, anticipated to be held in June 2011," Dynegy said in a statement. One slot will be taken by Seneca Capital, which fought against the Icahn takeover.

Dynegy said it was in talks with Icahn to select a nominee for the board.

But while Seneca might be celebrating a victory - the shareholder had previously fought to shake up company management - not all who follow the name are jubilant.

"As if Dynegy didn't have enough problems, its CEO and CFO resigned in the wake of shareholder rejection of the bid by Icahn Enterprises," wrote Gimme Credit LLC analyst Kim Noland. The looming June departures of the rest of the board "remove significant experience and leave the company's future hazy."

Noland added that the changes could result in a "leadership void for the next four months until the annual meeting."

Ahern notes climb up

A trader said Las Vegas-based Ahern Rentals' 9¼% notes due 2013 were "up a whole lot of points," though there was "nothing new that brought them."

He placed the notes at 45 bid, 46 offered and opined that the gain was due to "just people getting involved, and there's so few people around to do anything, the price just goes up."

Another source, however, saw the bonds trading with a 42 handle.

Clear Channel gets hit

Clear Channel Communications "got beat up a bit," a trader said, though there was no news to cause the decline.

He saw "$20-odd million" of the 11% notes due 2016 trade down to 951/4, which was off "a few points."

Another trader said the San Antonio-based multimedia company's new 9% notes due 2021 - a $1 billion issue that priced at par on Thursday - were "down over a point" at 101¼ bid, 101¾ offered, down from 102½ bid, 103 offered previously.

Blockbuster bonds dip

Blockbuster Inc.'s 9% notes due 2012 were "not off more than a point," according to a trader, on news the company's secured noteholders had made a bid for the bankrupt Dallas-based movie rental chain.

He saw the notes trading at 50 cents, noting that recent trades have been between 50 cents and $1.50.

Blockbuster has reportedly entered into an agreement with Cobalt Video Holdco LLC, an entity comprised of various secured noteholders, including Monarch Alternative Capital LP, Owl Creek Asset Management LP, Stonehill Capital Management LLC and Varde Partners Inc.

The agreement places the sale price at $290 million, but Blockbuster is also seeking to go to auction in hopes of a better bid.

A sale is expected to be completed by April 20.

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