Aperam, Crestwood price to cap off $10 billion week; new NII bonds jump in busy trading

By Paul Deckelman

New York, Mar. 25 - European steelmaker Aperam and Texas natural gas operator Crestwood Midstream Partners LP were heard by high-yield syndicate sources to have successfully priced deals Friday, capping off the busiest week in at least a month for the junk market.

Aperam brought a $500 million two-part offering to market, split between five-year and seven-year bonds. Meanwhile, Crestwood came in with a $200 million tranche of eight-year paper. The new bonds were heard to have firmed modestly when they hit the aftermarket.

Those deals pushed the new-issuance needle past the $10 billion mark for the week, more than triple the previous week's output. The week's tally was helped by big deals for issuers like Intelsat Jackson Holdings SA and Limited Brands, Inc. each of which priced mega-deal sized offerings.

In Friday's trading, probably the major name activity-wise was NII Holdings Inc.'s new $750 million issue of 10-year notes, which had priced late in the day on Thursday, but jumped by several points when it hit the aftermarket.

Another Thursday deal, for coal producer James River, continued to trade multiple points above the par level where those bonds had priced.

Away from the new-deal arena, the secondary market's performance, as measured by various statistical indexes, was seen as mixed.

DirectBuy Holdings, the week's volatile disaster area, continued to firm off its lows.

And Eastman Kodak Co.'s bonds rose, anticipating what ultimately turned out to be a favorable ruling in the photography giant's ongoing patent-infringement suit against the makers of the popular Blackberry and iPhone devices.

Aperam appears

After Thursday's busy session, which saw some $2 billion of new dollar-denominated paper price, along with euro- and sterling-denominated deals, the primaryside ratcheted down the activity level on Friday, as only two deals, collectively worth $700 million, came to market.

The larger of the two came from European steelmaker Aperam, which was heard by syndicate sources to have priced a $500 million two-part offering of senior unsecured notes (B1/BB).

The company priced $250 million senior notes due 2016 at par to yield 7 3/8%, in the middle of pre-deal market price talk envisioning a yield between 7¼% and 7½%.

It also brought to market a $250 million tranche of senior notes due 2018 at par to yield 7¾%, in line with Thursday's price talk of a yield in the 7¾% area.

Citigroup Global Markets Inc., Credit Agricole Securities (USA) Inc., Goldman Sachs & Co. and ING Financial Markets LLC ran the books on the deal, which priced after a short roadshow to major U.S. business centers.

Aperam - a Luxembourg-based stainless steel producer spun off from international steel giant ArcelorMittal earlier this year - plans to use the deal proceeds, along with cash on hand, to repay outstanding amounts under its bridge facility with its former corporate parent.

Crestwood comes to market

The day's other offering came from Crestwood Midstream Partners LP, which along with its subsidiary Crestwood Midstream Finance Corp. priced a $200 million issue of eight-year senior notes (B3/B-) on Friday.

The Houston-based natural gas company's bonds priced at par to yield 7¾%, in line with price talk which had circulated in the market on Thursday.

The deal was announced on Monday and then was shopped around to potential investors via a short roadshow.

UBS Securities LLC, BNP Paribas Securities Corp., RBC Capital Markets LLC, and RBS Securities Inc. were the joint bookrunners on the offering.

Crestwood plans to use the proceeds from the offering to help finance its recently announced acquisition of midstream assets in the Fayetteville Shale and the Granite Wash plays from Frontier Gas Services for about $338 million, as well as fees and expenses associated with the transaction.

A $10 billion week

Those two deals rounded out a week which saw slightly north of $10 billion of new paper price, in contrast to the week before, ended March 18, when the new-deal tally was $3.023 billion, the second- slowest of 2011.

The week saw gigantic pricings from Luxembourg-based communications satellite operator Intelsat, which priced a $2.65 billion two-part offering of eight-year and 10-year bonds on Tuesday, the same day that Columbus, Ohio-based specialty retailer Limited Brands Inc. did an upsized $1 billion of 10-year paper.

There was also a mega-deal-sized transaction from New York-based commercial lender CIT Group, Inc., which priced a $2 billion offering of three-year and seven-year securities on Wednesday.

There were also notable deals out of the energy sector, from Houston issuers like Copano Energy LLC, and Plains Exploration and Production Co. Copano priced $360 million of 10-year notes during Tuesday's hectic $4 billion session, while Plains on Thursday doubled the size of its originally announced deal to $600 million. Also pricing Thursday was Richmond, Va.-based coal producer James' River's $275 million issue of eight-year notes.

Crestwood, Aperam trade up

When Crestwood Midstream's new issue was freed for secondary dealings, a trader saw the bonds at 100 3/8 bid, 100 5/8 offered.

"They were slightly north of par," another trader observed.

A trader saw Aperam's new 7¾% notes bid at 100½ around midday, versus their par issue price.

Ignoring the loads of odd-lot trades on the Trace system, he said that late in the day, the new 7 3/8% notes were being offered at 1021/4. He said the longer 7¾% notes at 100½ bid.

"I never saw a two-sided market in either," he said.

New NII bonds notably better

Among the recently priced issues, a trader said that "the big mover of the day" in Junkbondland was NII Holdings' 7 5/8% notes due 2021, quoting the bonds as trading in a context of 102 to 102¼ late in the day, well up from the par level at which the Reston, Va.-based provider of cellular service to some Latin American nations priced its $750 million issue, which had been upsized from the originally announced $500 million.

He said that the bonds of the former Nextel International - the global wireless business of formerly independent wireless operator Nextel, before its acquisition by Sprint to form Sprint Nextel - were "the most active issue, by far, with a lot of trades."

Another said that the new bonds from "were straddling 102."

James River jumps

But the big gainer over the past two days was James River Coal's 7 7/8% notes due 2019, which priced at par on Thursday, moved up to initial levels above 102 and on Friday continued to gain.

"They did okay," a trader opined, quoting the paper going out around 103¼ bid, 103¾ offered, adding that this was "despite the fact that they're mostly steam coal," considered a lesser, less lucrative coal grade than the grades of coal used in metals production. "There's just a tremendous affinity for coal these days," he added.

Plains slightly better

A trader said that the new Plains Exploration and Production's 6 5/8% senior notes due 2021 "didn't run up a lot, but it was up, seeing the $600 million bond deal at 100 3/8 bid, 100 5/8 offered, versus Thursday's issue price at par.

A trader called them the second-most-active issue on the day.

A trader said that that "with the volatility in the market last week," ended March 18, new-deal volume was now "coming back with full force."

Secondary indicators firmer

Away from the new-deal world, a trader saw the CDX North American Series 15 HY index down 3/16 point on Friday to end at 103¼ bid, 103¾ offered. The index had been up ½ point on Thursday.

It closed the week thus up from 102 7/8 bid, 103 1/8 offered.

The KDP High Yield Daily Index meantime rose by 3 basis points on Friday to end at 75.66, after having gained 5 bps on Thursday. Its yield came in by 1 bp to 6.73% after having narrowed by 2 bps Thursday.

The index thus ends the week up slightly from the previous week's reading of 75.59, with a yield of 6.78%.

The Merrill Lynch High Yield Master II index rose for an eighth consecutive session on Friday, by 0.019%, on top of Thursday's 0.032% gain. That lifted its year-to-date return to 3.697% from Thursday's 3.677%, although it remained below its 2011 peak level of 3.73%, set on Mar. 9.

DirectBuy bonds rallying

Among specific names in the non-new-deal arena,. DirectBuy Holdings' 12% notes due 2017 traded "a little bit better," a trader said.

He pegged the notes at 76 bid, 77 offered.

A second trader noted that the company's bonds "came back [Thursday]" from their historical recent lows - down into the 50s earlier this week, versus the lower 90s pre-news. He saw the bonds quoted this morning at 76½ bid, 80 offered.

At another desk, a trader quoted the bonds at 77 bid, 78 offered, though he noted they had hit a low around 74.

"The pattern is, wherever it starts, it ends somewhere else," he said, referring to the gyrations seen in the debt since the company said its chief financial officer was leaving.

The Merrillville, Ind.-based company had held a bondholder call on Tuesday. During the call, the company reportedly not only disclosed a decline in new memberships, but also said that its CFO, Mark Boggess, was resigning.

The call "reportedly went poorly, with disclosures including weak membership sales, a lower club count and the resignation of the CFO helping pull bonds down sharply," a Knight Capital Group Inc. analyst said in a recent research report.

But the credit has provided an interesting drama for distressed buyers, as the bonds have fallen about 23% since they were issued in February.

Even then, the bonds were priced at a discount, at 97.

Kodak inches up

A trader said Eastman Kodak paper was "probably a little better," seeing the 7¼% notes due 2013 "straddling 99."

But another trader deemed the debt essentially unchanged, around par.

On Friday, the Rochester, N.Y.-based company said that its patent fight with Apple Inc. and Research in Motion Ltd. could provide more than $1 billion in revenue from royalty payments.

After the markets had closed, Kodak received good news in its long-running patent battle with Apple and RIM, as the federal government's International Trade Commission said it would reinstate Kodak's case against iPhone maker Apple and Blackberry maker RIM

A lower court had previously said that Apple's iPhone and RIM's BlackBerry do not violate any patents. Kodak is alleging that both companies infringed on their image preview patent.

The company has already won lawsuits against Samsung Electronics Co. and LG Electronics Inc. for infringing on the same patents. Those suits garnered a total of $964 million in royalty payments.

-Stephanie N. Rotondo contributed to this report

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