UPC, Chaparral drive-bys lead primary; Pride up on acquisition, Chesapeake gains on asset sale

By Paul Deckelman and Paul A. Harris

New York, Feb. 7 - UPCB Finance III Ltd. came to market on Monday with a quickly-shopped $1 billion offering of secured notes. That deal from the European broadband and cable operator, was one of several such drive by deals, as issuers opportunistically move quickly to take advantage of favorable primary conditions.

Another such transaction was an upsized $400 million offering of 10-year notes from Oklahoma City-based oil and gas exploration and production company Chaparral Energy, Inc.

And Memphis-based Verso Paper Corp. priced a smallish quick-to-market add-on to its existing bonds.

There was also one deal which priced off the forward calendar, as Ace Cash Express, Inc. brought in a $350 million eight-year secured notes deal.

Apart from deals actually pricing, Clear Channel Communications Inc. announced plans for a $750 million secured notes deal, which helped push the company's existing bonds higher.

High yield syndicate sources meantime heard of prospective deals being shopped around or planned for the future by Venoco, Inc., Provident Funding Associates, LP and Kratos Defense & Security Solutions, Inc.

Price talk emerged on Avaya Inc.'s $1 billion eight-year behemoth, which could price after the order books close on Tuesday morning.

When they were freed for secondary market dealings, the new Chaparral and Ace Cash deals firmed by more than a point. The UPC deal came too late in the day for an aftermarket, and Verso's offering was simply too small. Late Friday's deals from Aleris International, Inc. and Yankee Candle's YCC Holdings LLC both firmed by about 2 points.

Away from the new-deal realm, traders saw upside action in several energy names - Pride International, Inc. rose on news the company is to be acquired, while Chesapeake Energy Corp.'s paper improved on news that company will sell a package of assets.

UPC brings $1 billion

The primary market saw a strong start to the Feb. 7 week, with five issuers each bringing a single tranche of junk raising a combined $1.89 billion.

UPCB Finance III priced a $1 billion issue of 9.5-year senior secured notes (confirmed Ba3/existing B+) at par to yield 6 5/8%.

The yield printed at the wide end of price talk which had been set in the 6½% area.

Bank of America Merrill Lynch was the physical bookrunner for the quick-to-market debt refinancing deal. Citigroup, Credit Suisse, Deutsche Bank Securities, J.P. Morgan Securities LLC, The Royal Bank of Scotland and UBS Investment Bank were the joint bookrunners.

Chaparral upsizes drive-by

Chaparral Energy priced an upsized $400 million issue of 10.5-year senior notes (Caa1/B-) at par to yield 8¼%, on top of the price talk. The amount was increased from $350 million.

Wells Fargo Securities was the left bookrunner for the quick-to-market issue. Credit Suisse, J.P. Morgan Securities LLC, RBC Capital Markets and UBS Investment Bank were the joint bookrunners for the debt refinancing.

More than 100 accounts were in the order book, enabling Chaparral Energy to price its new 8¼% notes due 2021 just 5 basis points wide of the present trading levels for its existing 9 7/8% notes due 2020, a syndicate source said.

"The market is still strong," the official remarked.

ACE Cash on top of talk

Meanwhile ACE Cash Express priced a $350 million issue of eight-year notes (B3/B) at par to yield 11%, on top of the price talk.

Credit Suisse ran the books for the debt refinancing deal.

Delta sells pass-throughs

Delta Air Lines, Inc. priced $100,447,000 of series 2010-1B class B pass-through certificates (Ba3/BB+) at par to yield 6 3/8% and $134,646,000 of series 2010-2B class B pass-through certificates (Ba3/BB) at par to yield 6¾%.

Morgan Stanley & Co. Inc., Deutsche Bank Securities Inc. and Goldman Sachs & Co. were bookrunners for both of the quick-to-market deals, which priced off the investment-grade desk.

Proceeds are being put into escrow to acquire equipment notes issued to pre-fund aircraft purchases.

The securities played to a predominantly high-grade audience, market sources said.

Verso taps 8¾% notes

Finally, Verso Paper Holdings LLC and Verso Paper Inc. priced a $36 million add-on to their 8¾% second priority senior secured notes (B2/B) at 103.25 on Monday.

The pricing resulted in an 8.052% yield to worst.

There was no official price talk.

Credit Suisse, Citigroup, Barclays Capital and Bank of America Merrill Lynch were the joint bookrunners.

Avaya sets price talk

Looking ahead to the Tuesday session, Avaya talked its $1.009 billion offering of eight-year senior secured notes (B1//) to price at par with a 7% to 7¼% yield.

Morgan Stanley & Co. Inc., UBS Investment Bank, Citigroup Global Markets Inc., Goldman Sachs & Co. and J.P. Morgan Securities LLC are the joint bookrunners.

Clear Channel sets roadshow

The forward calendar continued to build during Monday's session.

Clear Channel Communications will begin a roadshow on Wednesday for a $750 million offering of 10-year priority guarantee notes.

Goldman Sachs & Co., Citigroup, Credit Suisse, Deutsche Bank, Morgan Stanley, RBS Securities and Wells Fargo Securities will manage the deal.

The San Antonio-based media and entertainment company plans to use the proceeds, together with cash on hand, to repay $500 million of bank debt and to repay at maturity its $250 million of 6¼% senior notes due 2011.

Proceeds will also be used to pay fees and expenses in connection with concurrent amendments to its senior secured credit facilities and its receivables-based credit facility, the receipt of which is a condition to completion of the notes offering.

Venoco plans $500 million

Meanwhile Venoco plans to price a $500 million offering of eight-year senior notes this week.

Bank of America Merrill Lynch and BMO Nesbitt Burns are the joint bookrunners.

The Denver-based energy company plans to use the proceeds to repay its second-lien term loan and to pay costs associated with settling related interest rate swap contracts.

Provident starts Tuesday

Elsewhere Provident Funding Associates will conduct a Tuesday through Thursday investor roadshow for a $200 million offering of eight-year senior notes (expected ratings B2/B).

J.P. Morgan Securities LLC will run the books.

Proceeds will be used to retain mortgage servicing rights on newly originated loans, acquire mortgage servicing rights from third parties and for general corporate purposes.

Country Garden to offer notes

Finally, Chinese property developer Country Garden Holdings Co. Ltd. will begin a roadshow on Wednesday for a dollar-denominated issue of seven-year notes (Ba3/BB-).

Goldman Sachs, JPMorgan and Deutsche Bank are leading the deal.

Proceeds will be used to fund existing and new property projects, including construction costs and land premiums, as well as for general corporate purposes.

ACE is the place

When the new ACE Cash Express eight-year secured notes were freed for secondary activity, a trader said that the Irving, Tex.-based financial services provider's bonds had moved up to bid levels between 101 and 101½ "for a while - but then they were slowly creeping up," to end around 101½ bid, up from their par issue price earlier in the session.

A second trader saw the bonds trading at 101½ bid, 102 offered, while yet another said they traded at 101½ bid, 102½ offered.

Chaparral up in aftermarket

A trader said that Chaparral Energy's new 101/2-year bonds broke at 100½ bid, up from their par issue price.

Later on, the Oklahoma City-based oil and gas exploration and production company's quick-to-market issue was quoted by several traders around 101 bid, 101½ offered.

UPC, Verso are no-shows

UPCB Finance's $1 billion drive-by offering of 91/2-year secured notes came to market too late in the session to allow for any kind of aftermarket.

And while Verso Paper's new tranche of 8¾% notes due 2019 priced in plenty of time, market participants said its small size precluded any real trading.

Late Friday deals moving up

Two deals which came to market late in the day on Friday and which thus did not get a chance to trade around after pricing, began trading on Monday, and each left a big impression on traders.

They saw Aleris International, Inc.'s 7 5/8% notes due 2018 trade up to 101 7/8 bid, 102 1/8 offered on Monday.

That was well up from the par level at which the Beechwood, Ohio-based aluminum company's $500 million issue had priced earlier Friday.

And they saw YCC Holdings, LLC/Yankee Candle Finance, Inc.'s offering of 10¼% notes due 2016 with an 11% PIK provision move up to a similar level "straddling 102," a trader said - well up from the 98 level where the South Deerfield, Mass.-based scented candle maker had earlier priced its $315 million offering - upsized from $300 million originally - to yield 10.775% on a cash-pay basis or 11.525% on a PIK basis.

GMX Resources rally continues

A trader said that one of Friday's other deals, GMX Resources Inc., was continuing to move solidly higher on Monday, adding on to the aftermarket gains notched right after pricing.

He saw the Oklahoma City-based oil and gas company's $200 million of 11 3/8% notes due 2019 trading Monday at 99 bid, 99¾ offered. That was up from the 98¼ bid level seen in trading late Friday, and up further still from the 96.833 level at which the bonds priced early Friday to yield 12%

Another energy deal which priced on Friday - New Orleans and Houston-based E&P operator Energy Partners Ltd.'s 8¼% notes due 2018 - was seen on Monday in two-sided trading around 100¾ bid, 101¼ offered, versus the 101 bid seen on Friday, though with no offerings, following the $210 million deal's pricing at par earlier that session.

Clear Channel up on new deal

A trader said that Clear Channel Communications, Inc. "looks like the bonds of the day," helped by the announcement from the San Antonio, Tex.-based media company that it plans to sell $750 million of secured 10-year notes, using the proceeds to pay back $500 million of bank debt and to redeem at their maturity its $250 million of 6¼% notes coming due in mid-March.

He saw the company's existing paper up about 1¼ points, pretty much across the board, with "a lot of activity in the whole name."

He quoted the company's 10¾% notes due 2016 up between 1 and 1¼ points, at the par level, while its 11% notes due 2016 were a point better at 98¾ bid and its 7¼% notes due 2027 gained 1½ points to end at 63 bid.

"They were all up, and on good volume," he declared.

"There was volume in everything," he added, "a lot of activity in that name."

He also said that he had heard market scuttlebutt that the upcoming Clear Channel issue "will end up bigger" than the announced $750 million, "so that chatter pushed [the existing] Clear Channels."

A second trader said that the existing Clear Channel bonds "have been creeping up over the last few days in anticipation of this, and actually, they reported numbers after the close that were very strong - but I think what people were more focused on is their new-deal announcement."

He saw the company's bonds were up another 1 to 2 points in general, although "some of the bonds that don't actually trade every day were up a few points."

At another desk, a market source quoted Clear Channel's 5½% notes due 2016 up 2½ points at 78 bid, while seeing the 103/4s a point better at par.

Secondary opens week strongly

Away from the new-deal world, a trader saw the CDX North American Series 15 HY index up by 9/16 point on Monday, ending at 104 5/8 bid, 105¼ offered, after having closed about unchanged on Friday.

The KDP High Yield Daily index meantime jumped 32 basis points on Monday to finish at 75.89, after having gained 3 bps on Friday for a second consecutive session. Its yield tightened by 14 bps Monday to 6.70%, after having come in by 3 bps on Friday.

The Merrill Lynch High Yield Master II index racked up yet another gain on Monday - its 12th in a row - as it rose by 0.207%, on top of a 0.134% advance seen Friday.

That lifted the index's year-to-date return to 2.78% on Monday - yet another new peak level for the year so far. It had closed on Friday at 2.567%, the previous 2011 high point.

Advancing issues led decliners for a 12th straight session on Monday, by about the same seven-to-five margin seen on Friday.

Overall activity, represented by dollar-volume levels, fell by 24% on Monday, on top of Friday's 10% decline from the previous session's level.

Pride pops on buyout news

Among specific names, a trader said the day's major mover was probably Pride International, whose bonds and shares got a big boost from the news that competitor Ensco plc has agreed to buy its rival in a $7.3 billion deal that will create the world's second-largest offshore drilling company.

He saw Pride's 6 7/8% notes due 2020 up about 5 points on the day at 114½ bid, while its 7 7/8% bonds due 2040 rose 4 points on the day to 1171/2.

Another market source saw the Pride 6 7/8s up 4¾ points at 1141/2.

A junk trader noted that at some shops, Pride trades off the investment-grade desks, owing to the Houston-based offshore drilling company's popularity as a "crossover" credit for high-grade players dipping down into Junkbondland to pick up a little yield.

Pride's New York Stock Exchange-traded shares meantime zoomed as much as 18.3% at one point during the day before going home at the close up by $5.41, or 15.73%, at $39.80. Volume of 32 million shares was 13 times the norm.

Chesapeake a champ

Also in that busy energy sector, Oklahoma City-based oil and gas operator Chesapeake Energy's bonds were solidly higher on the news that the company - as part of a previously announced effort to bring down its debt levels - will sell assets that it expects to generate some $5 billion for the company's coffers, to go to debt paydown.

A trader said that Chesapeake's 9½% notes due 2015 rose 3½ points to 120¾ bid, while its 6 5/8% notes due 2020 were up ½ point at 104 bid.

A second trader saw the company's bonds up between 1 and 2 points on the day.

A market source elsewhere saw the 91/2s up 3¾ points at just under 121 bid.

Chesapeake's NYSE-traded shares gained as much as 7%, before closing at $31.27, up $1.21, or 4.03% on the day. Volume of 30.4 million shares was 2½ times the usual turnover.

Chesapeake says the natural gas properties it is selling are located in the Fayetteville Shale, a natural gas field in central Arkansas.

It also plans to sell its 25.8% stake in FracTech Holdings LLC and its 20% holding in Chaparral Energy Inc.

U.S. Oncology theory emerges

A market source on Monday was quoting U.S. Oncology's 9 1/8% notes due 2017 at 120¼ bid, calling them down ¼ point from Friday's closing levels - and those levels, in turn were down a good 3 to 4 points in very busy dealings of over $40 million from around the mid-120s level where the Woodlands, Tex.-based healthcare company's issue was trading earlier last week.

There was still no fresh news seen out on the company that might explain the slide in those bonds, which have been called for redemption on Feb. 16. Just before the deal under which San Francisco-based investment-grade healthcare company McKesson Corp. had acquired U.S. Oncology closed, on Dec. 30, the latter company issued a call for the 9 1/8% bonds, its 10¾% senior subordinated notes due 2014, as well as its senior unsecured floating-rate toggle notes due 2012. The 103/4s will be redeemed on Feb. 17, while the PIK toggle notes were redeemed on Jan. 31.

McKesson and U.S. Oncology said at that time that the redemption price for the 9 1/8% notes will be set just before the redemption. That call price will be set via a formula involving a make-whole call at 50 basis points over the yield of a comparable Treasury issue.

However, a trader said on Monday that he had heard that the company "is trying to take bonds out below what people anticipated would be the right tender price."

He said that there is "language in their indenture which is not typical for a make-whole premium. So I think there's going to be a little bit of a fight as to what's in the indenture, versus what the market convention is."

He said that his shop had heard from people in the market that there is some confusion over which Treasury issue would be used for a call, resulting in a possibly lower price. "I don't know whether it was just a mess-up in the indenture, or whatever - but it's definitely not the market convention."

OPTI off a little

A trader saw OPTI Canada Inc.'s 8¼% notes due 2014 trading in a 53-54 context on Monday. "At one point, it was 541/2-55," he suggested, later coming off that peak area to finish down ½ to ¾ point from the levels seen on Friday.

During Friday's session, the Calgary, Alta.-based oil-sands energy company's paper had continued to firm for a second day the lows in the upper 40s to which it had been battered down earlier in the week on indications that its search for a strategic investor or for a buyer for assets or even the whole company had not made much progress so far.

The trader quoted the bonds as having started out on Monday around 54 bid and finishing ¾ point lower around 531/4.

But he said that there was "not a lot of volume - it was slow [activity] in that," quite unlike last week, when the OPTI bonds were briskly traded, with several hundred million dollars of its 81/4s and 7 7/8% notes due 2014 heard to have changed hands during one mid-week session.

"There was not much volume at all."

Another trader saw OPTI's 81/4s at 53¼ bid, down 1¼ points.

Kodak steady to higher

Eastman Kodak Co.'s 7¾% notes due 2013 were seen by a trader finishing on Monday around 96-97, on not much activity. He said that was about where he had seen the bonds ending on Friday, after they had risen from levels in the lower 90s earlier in the week on investor optimism that the Rochester, N.Y.-based photographic products company will prevail in its ongoing legal action against several cellphone makers whom Kodak has accused of pirating its digital-image technology.

He meantime saw Kodak's 7% notes due 2017 trading in an 88 to 89 context, calling that up 1 point.

Autos are improved

A trader said that the 8 3/8% benchmark bonds due 2033 of Motors Liquidation Co. - which had been issued by the "old" General Motors before its 2009 bankruptcy reorganization and name change to Motors Liquidation - were trading around 36 bid, 36½ offered on Monday, on "not a lot of volume - it was a pretty quiet day in that name."

A second trader saw the GM benchmarks up ½ point on the day at 36¼ bid, 37¼ offered.

He also saw GM domestic arch-rival Ford Motor Co. Inc.'s 7.45% bonds due 2031 unchanged at 109¼ bid, 110¼ offered.

However, a market source at another desk observed those Ford long bonds up 1¼ points at just under 110 bid, while pegging the Number-Two U.S. carmaker's Ford Motor Credit Co. 7% notes due 2013 at a shade under 108, down 1 point on the session.

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