Upsized Level 3, CGG drive by, bigger Exopack also prices; market awaits GM, Oil States, WCA

By Paul Deckelman and Paul A. Harris

New York, May 25 - Ultra-familiar junk bond name Level 3 Communications Inc. came to market Wednesday with an upsized $600 million same-day drive-by offering. Traders saw the telecommunications company's new deal having firmed slightly when it hit the aftermarket.

High-yield syndicate sources said several other issuers also upsized their deals before pricing them, including packaging materials maker Exopack Holding Corp., which bumped its seven-year note issue up a little to $235 million, and French energy industry seismic data provider CGG Veritas, which raised its quickly-shopped 10-year bond deal to $650 million.

Another oilfield services company, though, Canada's Flint Energy Services Ltd., downsized its eight-year issue to C$175 million.

The syndicate sources heard price talk emerge on several issues which are expected to come to market on Thursday, including General Motors Finance Corp.'s $500 million of seven-year notes; oilfield services operator Oil States International, Inc.'s $600 million of eight-year paper and WCA Waste Disposal Corp.'s $175 million of eight-years.

Talk was also out on a pair of dollar-denominated deals from European issuers seen likely to price on Thursday - Germany's International Automotive Components Group's $300 million secured notes transaction and U.K.-based global mining concern Vedanta Resources plc's benchmark-sized offering of five- and 10-year notes.

And market sources speculated that it may be back to the ol' drawing board for Integra Telecom Holdings, Inc., whose $260 million tranche of five-year notes is reported to be meeting only the most tepid of investor response on its roadshow.

In a similar vein, secondary traders meanwhile said that most of the new or recently priced deals seem to be generating just a lackluster reaction among junk players in the aftermarket, with nothing really exciting anyone's imagination and breaking away from the pack.

France's CGG upsizes

Trailing the week's first two sessions, both of which saw dollar-denominated issuance of less than $1 billion, primary market activity intensified on Wednesday.

Three issuers, each bringing a single tranche, raised a combined $1.46 billion.

Executions tended to be choppy, as has been the case throughout the week, a debt capital markets banker commented.

Two of Wednesday's three tranches came at the wide end of price talk while the third came on top of talk.

Compagnie Generale de Geophysique Veritas priced an upsized $650 million issue of 6½% 10-year senior notes (Ba3/BB-) at 96.446 to yield 7%.

The yield printed 12.5 bps beyond the wide end of the 6¾% area yield talk. The reoffer price came cheap to the discount talk of 1 to 2 points. The amount was increased from $600 million.

Credit Suisse Securities (USA) LLC, BNP Paribas Securities Corp. and Bank of America Merrill Lynch were the joint bookrunners for the quick-to-market debt refinancing deal.

Level 3 drives by

Level 3 Escrow Inc. priced an upsized $600 million issue of 8 1/8% eight-year senior notes (Caa1/CCC) at 99.264 to yield 8¼%, on top of price talk. Level 3 increased the offering from $500 million.

Citigroup Global Markets Inc. was the left bookrunner for the quick-to-market issue. Bank of America Merrill Lynch, Deutsche Bank Securities Inc., Morgan Stanley & Co. Inc. and Credit Suisse Securities (USA) LLC were joint bookrunners.

Proceeds will be used to reduce an outstanding bridge loan obtained for the acquisition of Global Crossing and to refinance Global Crossing debt.

Exopack prices $235 million

Meanwhile, in the only deal to price on Thursday following an investor roadshow, Exopack Holding priced an upsized $235 million issue of seven-year senior notes (Caa1/CCC+) at par to yield 10%.

The yield printed at the wide end of the 9¾% to 10% price talk.

The deal was led by joint bookrunners Goldman Sachs & Co. and Bank of America Merrill Lynch.

Proceeds, along with proceeds from the downsized $350 million bank loan, will be used to fund a tender offer for the company's 11¼% senior notes due 2014 and to pay a dividend to stockholders.

The bond offering was upsized from $225 million. The company's bank loan was downsized to $350 million from $400 million. With the $40 million overall decrease in the debt financing, the dividend will also be downsized by $40 million.

Flint prices C$175 million

Meanwhile the Canadian high-yield market saw a single deal price on Thursday.

Flint Energy Services priced a downsized C$175 million issue of 7½% eight-year senior notes (B2/BB-) at 99.00 to yield 7.669%.

The yield printed 16.9 basis points beyond the wide end of the 7¼% to 7½% price talk. The size was cut from C$200 million.

Credit Suisse Securities (Canada), Inc. and BMO Nesbitt Burns Inc. were the joint bookrunners.

Proceeds will be used to refinance bank debt and for general corporate purposes.

Busy Thursday on tap

Dealers set the stage for a busy Thursday session, setting price talk on most of the deals that remain on the calendar as pre-Memorial Day business.

Oil States International talked its $600 million offering of eight-year senior notes (Ba3/BB) with a yield in the 6½% area.

Credit Suisse Securities (USA) LLC, RBC Capital Markets and Wells Fargo Securities LLC are the joint bookrunners.

Meanwhile General Motors Finance Corp. talked its $500 million offering of non-callable seven-year senior notes (B1/B/BB-) with a 6½% to 6¾% yield.

J.P. Morgan Securities LLC and Deutsche Bank Securities Inc. are the joint physical bookrunners.

Germany's International Automotive Components Group talked its $300 million offering of seven-year senior secured notes (B3/B/) with a yield in the 9% area.

The deal also underwent a structural change that saw the removal of a special 10% annual call at 103 during the non-call period.

The deal continues to feature a standard call structure in which the notes become callable at a to-be-determined premium in four years.

Deutsche Bank Securities Inc., Bank of America Merrill Lynch and J.P. Morgan Securities LLC are leading the offering.

Finally, WCA Waste Corp. talked its $175 million offering of eight-year senior notes (B3/B-/) with a 7½% to 7¾% yield.

Credit Suisse Securities (USA) LLC is the bookrunner.

All four deals are slated as Thursday transactions.

New deals tepid in secondary

When the newly priced bond issues were freed for secondary dealings, traders saw a generally lukewarm response on the part of junk investors.

"It doesn't look like there's been a lot of robust trading in the things that have come," one of them opined.

"Oh, it was just another exciting day," a second trader added.

Level 3 a little improved

Level 3 Communications' quick-to-market eight-year issue was seen having edged up when it was freed for aftermarket dealings.

When the issue first broke, a trader heard the new bonds offered as high as 1003/4, though with no bids seen on that.

He cautioned that although that might imply that an actual market in the new bonds might be somewhere north of par - up from 99.264 at their pricing - "sometimes the first wise guy throws out something stupid" for an offering.

Shortly after that, he quoted the new bonds offered at 1001/2, but still with no bid seen.

But another trader late in the day pegged the Broomfield, Colo.-based telecommunications and internet network operator's going home at 99 5/8 bid, 100 1/8 offered.

Existing Level 3s ease

News that Level 3 was in the market with a big new bond deal caused some trading in the company's existing paper, mostly to the downside.

A trader saw its 10% notes due 2018 down about a point, trading at 108, although he said that the company's 9¼% notes due 2014 were pretty much unchanged, trading at 103 1/8 bid.

However, a market source at another desk indicated those 91/4s were off by between ¼ and ½ point at 103¼ bid.

A second source quoted them at 103 bid, saying that was down about 3/16 point on the session.

CGG Veritas very restrained

Another of the day's news deals which only moved up very modestly when freed for secondary activity, was French energy industry seismic services provider CGG Veritas' upsized $650 million of 10-year bonds.

One of the traders said he had only seen one real market in the new bonds, at 96 5/8 bid, 97¼ offered, "up a tad" from the issue price of 96.446, " but there was no follow-up." A second trader also quoted the new bonds at that level.

At another desk, a trader said the bonds were closing at 96¾ bid, 97¼ offered.

Exopack improves post-pricing

A trader said that Exopack's $235 million offering of seven-year notes - marginally upsized from the originally shopped $225 million - opened up after being freed at 100½ bid, 101½ offered, and then was "a tiny bit tighter on each side."

Sure enough, a trader at another shop estimated the new bonds' level at 100¾ bid, 101¼ offered.

A third trader later on in the day located the Spartanburg, S.C.-based paper and plastic flexible packaging products manufacturer's new issue at 100½ bid, 101 offered, versus a par issue price.

Flint an aftermarket no-show

Traders meantime did not see any domestic-market dealings in the new Flint Energy Services Canadian-dollar denominated eight-year bonds, which priced at 99.

The Calgary, Alta.-based oilfield services operator had downsized its deal to C$175 million from the originally announced C$200 million.

Tuesday deals a little firmer

A trader said not much was meantime going on in the bond issues which had priced on Tuesday in terms of much activity, although levels were a touch better.

For instance, he saw Forbes Energy Services Ltd.'s $280 million of 9% notes due 2019 at par bid, 100½ offered, after having seen the Alice Springs, Tex.-based oilfield services company's deal having traded at 100¼ on Tuesday, "trading into a par bid a couple of times."

A second trader saw the Forbes bonds Wednesday at 100 1/8 bid, 100¼ offered.

The deal - upsized from the originally announced $255 million - priced at par on Tuesday and then trading in a 100¼ to 100½ context in its initial aftermarket activity.

Eagle Rock Energy Partners LP/Eagle Rock Energy Finance Corp.'s 8 3/8% notes due 2019 were seen by a trader at 99¾ bid during the morning, and he later saw a two-sided market or two at 99¾ bid, 100¼ offered, up from the 99.279 level at which the Houston-based natural gas company's $300 million deal had priced on Tuesday to yield 8½%.

A second trader saw the bonds on Wednesday at 99¾ bid, 100 1/8 offered.

Traders meantime reported seeing no dealings on Wednesday in Regency Energy Partners LP/Regency Energy Finance's 6½% notes due 2021. The Dallas-based midstream natural gas operator had priced its quickly-shopped $500 million issue on Monday at par; the new bonds had traded late Monday at 100 3/8 bid, 100 5/8 offered, and then firmed a little to 100½ bid, 101 offered on Tuesday in fairly brisk trading for a generally lackluster session.

But "it's been radio silence since then, a market participant said.

New issues not world-beaters

In contrast to the kind of movement which the junk market sometimes sees when there is an exciting new-issue calendar and many, if not most of the deals that price then proceeds to firm smartly when they are freed for secondary dealings, a trader said Wednesday that Junkbondland seems decidedly cool to much of the new-paper - even nominally exciting big deals.

With junk seemingly taking its cues from recently soggy stocks - Wall Street turned higher on Wednesday after two straight sessions on the downside - "the equity markets have been wishy-washy.

"Our market's got so much coming in the way of new product that if you don't like the price, don't chase the bonds. So there's nothing really moving up at all."

For examples, he said that JBS USA, LLC's downsized offering of 7¼% notes due 2021 "is sort of languishing around issue, maybe even a little lower than issue."

He saw the Greely, Colo.-based meat processing company's deal - downsized from the originally shopped $1 billion - at 97¾ bid, 98¼ offered.

The bonds had priced late Friday at 98.26 to yield 7½%, and then began trading on Monday up a little from issue, at 98½ bid, 98¾ offered, before settling in at lower levels by mid-week.

He also said that Chrysler Group LLC's $3.5 billion behemoth of a bond deal was also trading below issue, with the Auburn Hills, Mich.-based Number-Three U.S. carmaker's $1.5 billion of 8% senior secured notes due 2019 trading at 99¼ bid, 99¾ offered and its $1.7 billion of 8¼% senior secured notes due 2021 at 99 3/8 bid, both below the par levels at which the respective tranches priced last Thursday, and as well below the slightly above-par levels at which the new bonds had traded on Friday.

Market measures mostly easier

Traders said that although the new deals really weren't going anywhere, they still pretty much dominated dealings on the secondary side on Wednesday.

Away from the new issues, statistical measures of market performance were mostly lower .

A trader saw the CDX North American Series 16 HY index up 1/8 point, ending at 102 bid, 102 1/8 offered, after having edged up by 1/16 point on Tuesday.

However, the KDP High Yield Daily Index meantime dropped by 10 basis points Tuesday to close at 75.95, after having risen by 2 basis points on Tuesday. Its yield moved up by 4 bps, to 6.49%, after having come in by that same amount on Tuesday.

And the Merrill Lynch High Yield Master II Index posted its third straight downturn with a 0.084% loss - the exact same size downturn seen during Monday's session, with Tuesday's 0.007% easing sandwiched in between.

That left its year-to-date return at 5.883%, down from Tuesday's 5.973% reading, and down as well from Friday's 6.071%, the Index's peak level for 2011 so far.

Paper names bouncing around

Among specific non-new-deal issues, a trader said that NewPage Corp,'s 10% notes due 2012 "were the ones trading," one of the busier issues on the day.

He saw the Miamisburg, Ohio-based coated-paper manufacturer's bonds trading in a 42-43 context. He said there was "a decent amount of trades - not as much as [Tuesday], but still pretty active. With final trades around 421/2-43, he called the issue down ½ point on the session.

He said that NewPage's 11 3/8% first lien senior secured notes due 2014 "fared better today," seeing those bonds around 96 bid, 96½ offered, which he called pretty much unchanged, on "not much volume - they were very inactive, actually."

At another desk, the 10% notes were seen down 1 point on the day at 42½ bid, with nearly $10 million of the notes having changed hands - not quite enough to put at the top of the most actives list, which continues to be mostly dominated by split-rated deals or unusually structured long bank issues attracting "crossover" buying from high-grade accounts, but still enough to get them on the list, a little further down.

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