Alcoa, Post active, softer; Momentive remains under pressure post-filing; Caesars mixed

By Stephanie N. Rotondo

Phoenix, April 15 - The high-yield bond market was slipping in Tuesday trading.

The primary market was also on the quiet side, as the Passover holiday put the pipeline on hold. With it being a short holiday week - the markets are closed Friday - it is expected that things will get even more muted.

Alcoa Inc. paper was "pretty active," one trader said. Last week, Fitch Ratings dropped the aluminum maker to junk, following the company's first-quarter results.

"People think they are going to get downgraded totally," the trader said.

Post Holdings Inc. was also busy, and lower, as investors digest chatter that the company is looking to buy Michael Foods for $2.5 billion.

In even lower-grade names, Momentive Performance Materials Inc. remained actively traded. The company filed for bankruptcy protections on Sunday and is expected to launch a $570 million debtor-in-possession facility on Thursday.

Caesars Entertainment Corp. debt was trading in mixed fashion during the day's session.

A trader saw the 12¾% notes due 2018 falling a deuce, while the 10% notes due 2018 lost a point. But the 10¾% notes due 2016 inched up a point, and the new $675 million of 9 3/8% second-priority senior secured notes due 2022 from Caesars Growth Properties LLC were also ticking higher.

Market indicators were mixed on Tuesday.

Florida East Coast upsizes

Florida East Coast Holdings Corp. and Florida East Coast Industries, LLC priced Tuesday's sole dollar-denominated deal, an upsized $1.15 billion two-part notes transaction.

The deal included an upsized $875 million tranche of five-year senior secured notes (B3/B), which priced at par to yield 6¾%. The tranche was upsized from $850 million. The yield printed on top of yield talk.

In addition, the company priced an upsized $275 million tranche of six-year senior unsecured notes (Caa3/CCC) at par to yield 9¾%. The unsecured notes tranche was upsized from $250 million. The yield printed at the wide end of the 9½% to 9¾% yield talk.

Morgan Stanley & Co. LLC and J.P. Morgan Securities LLC were the joint bookrunners for the deal, the overall size of which was increased from $1.1 billion.

There were also covenant changes.

The Jacksonville, Fla.-based freight rail system plans to use the proceeds to finance the concurrent tender offers for its 8 1/8% senior secured notes due 2017 and its 10½%/11¼% senior PIK toggle notes due 2017 and for general corporate purposes.

Rice Energy upsizes

Rice Energy Inc. upsized its offering of eight-year senior notes (B3/CCC+) to $900 million from $750 million, and talked the notes to yield 6¼% to 6½%.

Books close at 1 p.m. ET on Wednesday, and the deal is set to price thereafter.

Barclays is the lead left bookrunner for the Rule 144A and Regulation S with registration rights offering. Wells Fargo Securities LLC, Goldman Sachs & Co., Citigroup Global Markets Inc. and RBC Capital Markets are the joint bookrunners. BMO Capital Markets Corp. is the senior co-manager. Comerica Securities and Fifth Third Securities Inc. are the co-managers.

The notes are callable after three years at par plus 75% of the coupon.

The notes rank pari passu in right of payment to all existing and future senior debt, are senior to any subordinated debt and feature customary high-yield covenants.

The Canonsburg, Pa.-based oil and gas exploration and production company plans to use the proceeds to repay its second-lien term loan and for general corporate purposes, including capital expenditures.

Endeavor to tap 7% notes

Endeavor Energy Resources, LP and EER Finance, Inc. plan to participate in an investor conference call at 10:30 a.m. ET on Wednesday to discuss a $100 million tack-on to their 7% senior notes due Aug. 15, 2021.

The deal is set to price on Wednesday afternoon.

Credit Suisse Securities (USA) LLC, BofA Merrill Lynch, Wells Fargo Securities, Credit Agricole CIB, Mitsubishi UFJ, US Bancorp and RBS Securities are the joint bookrunners.

The Rule 144A and Regulation S for life notes become callable on Aug. 15, 2016 at 1051/4.

Proceeds will be used to repay the company's revolver, fund development of acreage and for general corporate purposes.

The prospective issuer is a Midland, Texas-based oil and gas exploration and production company.

The original $250 million priced at par in August 2013.

The add-on notes will be immediately fungible with the original notes.

SGD comes inside of talk

The news volume in the European market remains strong.

On Tuesday, SGD Group SAS (France) priced an upsized €350 million issue of five-year senior secured notes (/B/B) at par to yield 5 5/8%.

The deal was upsized from €335 million.

The yield printed 12.5 basis points below the tight end of the 5¾% to 6% yield talk.

Joint global coordinator JPMorgan will bill and deliver. Credit Suisse was also a joint global coordinator. BNP Paribas was the joint bookrunner.

Proceeds will be used to refinance debt.

The issuer is a Puteaux, France-based manufacturer of molded glass packaging for the pharmaceutical industry.

Eden Springs atop talk

Eden Springs priced a €210 million issue of five-year senior secured floating-rate notes (B2/B) at par to yield three-month Euribor plus 550 bps.

The spread came on top of spread talk.

Joint global coordinator Credit Suisse will bill and deliver. Jefferies, Rabobank and UBS are also joint global coordinators.

The Preverenges, Switzerland-based company plans to use the proceeds to refinance debt and repay a shareholder loan.

Eden Springs is a provider of water and coffee solutions in Europe and Israel.

Piaggio price talk

Piaggio & Co. SpA talked its €200 million offering of seven-year notes (expected ratings Ba3/BB-) to yield in the 4¾% area.

The talk comes in at the tight end of the 4¾% to 5% early guidance.

The deal is set to price on Wednesday.

Banca Imi, BNP Paribas, BofA Merrill Lynch, Mediobanca, UniCredit and HSBC are the joint bookrunners for the Regulation S only offering.

The Pontedera, Italy-based company is a maker of two-wheeled motor vehicles and compact commercial vehicles. The company plans to use the proceeds to refinance its notes due in 2016.

TeamSystem to tap 7 3/8% notes

TeamSystem SpA talked is €130 million add-on to its 7 3/8% senior secured notes due May 15, 2020 (expected ratings B2/B-) in the 105½ area on Tuesday.

The deal is expected to price on Wednesday.

Global coordinator JPMorgan will bill and deliver for the Rule 144A and Regulation S for life deal. HSBC, UBS and UniCredit are joint bookrunners.

The notes become callable after May 15, 2016 at 103.688.

The Luxembourg-based software company plans to use the proceeds to finance the acquisition of 24Ore Software and for general corporate purposes.

The original €300 million priced at par in April 2013.

Market readings mixed

Market indicators were mixed on Tuesday.

The KDP High Yield index reading fell to 75, with a 5.2% yield. That compared to Monday's reading of 75.03, with a 5.21% yield.

Monday's level was in line with Friday's.

As for the CDX North American High Yield index, it was holding steady at 106 11/16 bid, 106 13/16 offered, according to a market source.

Alcoa bonds heavy

Alcoa's debt was dipping Tuesday, and a trader speculated it was because investors are fearing a round of downgrades.

The 6.15% notes due 2020 were deemed down 1½ points at 109 by the trader. He also called the 5.87% notes due 2022 off that much at 1053/4.

The 6¾% notes due 2018 dipped just half a point to 1133/4, he said.

Another market source pegged the 2020 paper at around 108 and the 2018 notes with a 113 handle.

Last week, Fitch Ratings dropped its rating on the company to BB+ from BBB-, one notch below investment grade. Moody's Investors Service also has a junk rating on the company, and Standard & Poor's rates the company at BBB-, its lowest investment-grade level.

Alcoa reported earnings last week as well, ahead of Fitch's rating change. The company posted revenues of $5.5 billion, better than what analysts were expecting, but still a 2% decline year over year.

The company is currently struggling in an environment of aluminum oversupply.

Post declines

Post Holdings is said to be considering making a $2.5 billion play for Michael Foods.

That news may not be sitting too well with investors, as the company's bonds dipped on Tuesday.

A trader said the 7 3/8% notes due 2022 fell a point to 107.

Another source placed the notes at 1071/2.

Michael Foods is said to be looking at competing bids from Post and Tyson Foods. For its part, Post has been on an acquisition roll, most recently purchasing the Power Bar and Musashi brands from Nestle.

However, the company's first-quarter earnings were weighed down by the string of acquisitions, posting a $2.4 million loss. Net sales, however, were up 25% at $297 million.

Momentive remains weak

Momentive Performance Materials' bonds were lower again on Tuesday, following the company's bankruptcy filing on Sunday.

A trader said the 9% second-priority senior secured notes due 2021 were "down a couple points" at 76, while the 11½% notes due 2016 held in around 281/2.

Both of those issues are trading flat, or without accrued interest.

However, the 8 7/8% first-priority senior secured notes due 2020 - an issue that is not trading flat - were fairly steady at 1081/2.

"They're the better ones," the trader said. "They're off just a little."

A second market source placed the 9% notes around 75 5/8.

With assets of $2.69 billion and debt of $4.17 billion, the specialty chemicals manufacturer has not posted a profit since its 2006 leveraged buyout by Apollo Global Management LLC.

The debt incurred in the LBO made the company especially susceptible to market fluctuations.

The company hopes to eliminate as much as $3 billion in debt via the bankruptcy court.

Albany, N.Y.-based Momentive is scheduled to launch a $570 million DIP facility on Thursday. J.P. Morgan Securities LLC is the lead arranger.

Caesars mixed

Caesars Entertainment debt was trading in mixed fashion during the day's session.

A trader saw the 12¾% notes due 2018 falling a deuce to 511/4, while the 10% notes due 2018 lost a point to 45. But the 10¾% notes due 2016 inched up a point to 881/4.

Another source saw the new issue at 99¾ bid, 100 1/8 offered.

As for the new $675 million of 9 3/8% second-priority senior secured notes due 2022 from Caesars Growth Properties, they were ticking higher in a par ¼ to par ½ context.

The new issue priced Monday. Proceeds will be used by the unit to purchase four properties from the operating company.

Walter to idle mines

Walter Energy Inc.'s 9 7/8% notes due 2020 moved up, even as the company said it was idling its British Columbia mines.

A trader called the issue up 2 points at 671/2.

Due to the idling, Walter is expecting to temporarily layoff about 695 employees. It is expected that second-quarter earnings will reflect a $7 million severance charge due to the closure.

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