Alpha Natural mega-deal, Cricket, upsized Concho price; market awaits giant Chrysler deal

By Paul Deckelman and Paul A. Harris

New York, May 18 - High yield new-deal activity declined notably on Wednesday from the torrid pace seen Tuesday, one of the busiest new-issuance days of the year so far. Even so, a more-than-respectable $2.9 billion face amount of new bonds priced.

The big deal of the day was Alpha Natural Resources, Inc.'s $1.5 billion two-part offering of eight-year and 10-year notes. However, the Virginia-based coal mining company's deal - being done in support of Alpha's pending acquisition of in-state rival Massey Energy Co. - came too late in the day for an aftermarket to be seen.

Also pricing too late in the day for any trading - and out of the energy sphere, to boot - was Midland, Tex.-based oil and gas operator Concho Resources, Inc., which drove by with an upsized offering of 101/2-year notes, pricing at par.

The one deal which did price in time for some aftermarket activity was wireless phone service provider Cricket Communications, Inc., whose $400 million add-on offering of secured notes priced a little below par, but then traded up from there.

The forward calendar grew with the addition of pending deals from natural gas operator Eagle Rock Energy Partners LP and British retailer House of Fraser, the latter a sterling-denominated senior secured issue. Both deals were heard headed off on roadshows.

Price talk emerged on offerings from U.S. gaming concern El Dorado Resorts LLC and Australian wood plantation operator TFS Corp., with Thursday pricings seen possible for both.

Junk players meantime awaited Chrysler Group LLC's offering of senior secured eight- and 10-year notes, which has been upsized to an enormous $3.5 billion, with a Thursday pricing scheduled However, there was some market rumblings that investors were grumbling about the likely terms of the deal following Tuesday's release of price talk.

EchoStar Corp.'s upsized $2 billion two-part offering, which priced too late on Tuesday for trading, was heard to have firmed smartly in Wednesday's aftermarket. On the other hand, Petrohawk Energy Corp.'s $600 million offering, which also only began trading on Wednesday, was little changed on the day.

Alpha prices $1.5 billion

The primary market churned out another $2.9 billion on Wednesday, as four issuers completed a combined five dollar-denominated tranches.

Some hiccuping has been heard in the new issue market, sources said on Wednesday.

Whereas a week ago the vast majority of recent issues were trading at or above their respective issue prices, performance has slipped a little, a debt capital markets banker said.

As a consequence the buy-side has begun to push back.

In Wednesday's action, Alpha Natural Resources priced $1.5 billion of senior notes (Ba3/BB) in two tranches.

The Abingdon, Va.-based coal producer sold an $800 million tranche of eight-year notes at par to yield 6%. The yield printed on top of the price talk

The company also priced a $700 million tranche of 10-year notes at par to yield 6¼%. The 10-year notes also priced on top of price talk which had them coming 25 basis points behind the eight-year notes.

Morgan Stanley & Co. Inc. and Citigroup Global Markets Inc. were the joint bookrunners.

Proceeds will be used to finance a portion of the acquisition of Massey Energy Co., including the repayment of some outstanding Massey Energy debt.

The book was considerably oversubscribed, sources said.

However despite a high level of demand, pricing held at the middle of talk, an investor on the East Coast pointed out.

Concho drives by

Concho Resources priced an upsized $600 million issue of 10.5-year senior notes (B3/BB) at par to yield 6½%.

The yield printed at the wide end of price talk, which had been set in the 6 3/8% area.

Bank of America Merrill Lynch, J.P Morgan Securities LLC and Wells Fargo Securities, LLC were the joint bookrunners for the quick-to-market debt refinancing deal.

Cricket taps 7¾% notes

Cricket Communications priced a $400 million add-on to its 7¾% senior secured notes due Oct. 15, 2020 (B3/CCC+) at 99.193 to yield 7 7/8% on Wednesday, according to an informed source.

The add-on had been talked with a 7¾% to 8% yield, and hence priced in the middle of price talk.

Goldman Sachs & Co. was the left lead bookrunner for the quick-to-market deal. Morgan Stanley & Co. Inc. and Deutsche Bank Securities Inc. were the joint bookrunners.

Proceeds will be used for general corporate purposes, including the company's accelerated LTE network build out.

The original $1.2 billion issue priced at 98.323 to yield 8% on Nov. 5, 2010.

China Shanshui prices

China Shanshui Cement Group Ltd. priced a $400 million issue of five-year senior notes at par to yield 8½%.

The yield printed on top of price talk that had been downwardly revised from earlier talk of 8¼% to 8¾%, according to a market source.

Barclays Capital, Credit Suisse, Deutsche Bank and Standard Chartered Bank were the bookrunners.

Proceeds will be used to refinance debt, to expand production capacity, for acquisitions and for general corporate purposes.

Conversations on Chrysler

Thursday is expected to be another big day in the primary market, sources say.

Chrysler Group LLC is expected to price its upsized $3.5 billion bond deal.

On Tuesday the car-maker shifted $1 billion away from its bank loan, upsizing the bonds from $2.5 billion.

Also on Tuesday, price talk surfaced on the two-part offering of secured senior notes (B2/B). A tranche of eight-year notes is talked with a 7¾% to 8% yield, while the 10-year tranche is talked to come with a yield that is 25 basis points higher than the yield that is printed on the eight-year notes.

However pricing on the Chrysler bonds may be in motion, market sources say.

Given the size of the combined offering, and the fact that trading levels on some recent issues have slipped, investors are looking for more yield from Chrysler.

Although no official word surfaced during the Wednesday session, both tranches are being discussed with eight-handle yields, sources say.

Bank of America Merrill Lynch and Goldman Sachs & Co. are the joint physical bookrunners.

Talking the deals

Elsewhere, Eldorado Resorts LLC and Eldorado Capital Corp. talked a $180 million offering of eight-year senior secured notes (B2/B+) with an 8½% to 8¾% yield on Wednesday.

Bank of America Merrill Lynch has the books.

And Australia's TFS Corp. firmed price talk on its $175 million offering of seven-year senior secured notes (B3/B/) in the 11¾% area.

Earlier guidance came at 10% to 10¾%.

A Thursday pricing is possible, the source added.

Global Hunter Securities, Clarkson Capital Markets and Knight Securities are leading the deal.

Eagle Rock starts roadshow

Eagle Rock Energy Partners began a roadshow on Wednesday for a $300 million offering of eight-year senior notes (/B-/).

The bonds, which are coming via special purpose vehicle Eagle Rock Energy Finance Corp., are set to price during the week ahead.

Wells Fargo Securities LLC is the left bookrunner. Bank of America Merrill Lynch, BNP Paribas and RBS Securities Inc. are the joint bookrunners.

The Houston-based natural gas company plans to use the proceeds to repay revolver borrowings and debt assumed in the Crow Creek acquisition, and for general corporate purposes.

House of Fraser for Thursday

Finally, English department store group House of Fraser will begin a brief roadshow on Thursday in London for a £250 million offering of seven-year senior secured notes (expected ratings B2/B+).

Barclays and Deutsche Bank AG are global coordinators and joint bookrunners. HSBC and Lloyds TSB are joint bookrunners.

The London-based company plans to use the proceeds to refinance bank debt and for general corporate purposes.

Leap jumps, then off highs

When Cricket Communications' new add-on bonds to its 2020 issue were freed for secondary dealings, a trader saw the notes get as good as 101 bid, a nearly 2 point gain from the 99.193 level at which the San Diego-based wireless telecommunications company, a unit of Leap Wireless International, Inc., priced its $400 million deal.

But later on in the session, he said, "Leap was way off its highs," seeing the bonds having come down to par bid, 100¼ offered, though that was still up almost a point. "They just kept getting weaker."

Another trader saw the bonds going out at 100¼ bid, 100½ offered.

As noted, the new Alpha Natural Resources and Concho Resources deals priced too late for any kind of an aftermarket Wednesday.

EchoStar trades excellently

A trader said that EchoStar's big two-part $2 billion deal from Tuesday "was the name that moved up the most."

He said the Englewood, Colo.-based communications satellite operator and set-top satellite TV receiver company's $900 million issue of 7 5/8% notes due 2021 "did very well," pushing up to 102¾ bid, 103 offered from their par issue price Tuesday, when the deal came to market too late to trade.

On the other hand, he said that he had not seen any real trading in the other half of that big deal, the $1.1 billion of 6½% notes due 2019.

"Believe it or not, they haven't even been quoting them. The only one that was really traded was the 7 5/8s, I don't know why."

If there was any trading in the eight-year piece, he estimated that it would be around 101 3/8 bid, 101 7/8 offered, around a point below the 10-years.

A second trader also saw the new EchoStars "doing pretty well," quoting the 6½% notes at 101 5/8 bid, 101 7/8 offered, while seeing the 7 5/8s going home at 102½ bid, 103 offered.

No pop for Petrohawk

Tuesday's other deal that came too late in the day for aftermarket dealings, Petrohawk Energy's drive-by offering of $600 million 6¼% notes due 2019, was seen little changed during Wednesday's session from the par level at which the Houston-based oil and natural gas exploration and production company priced its bonds.

A trader Wednesday said the bonds traded in a locked market at 99 7/8, before finally going out in a tight 99 7/8 to par context.

Longview holds gains

Among the other deals which had priced on Tuesday and which then traded around, a trader said that Longview Fibre Paper & Packaging, Inc.'s 8% senior secured notes due 2016 - which had firmed smartly after the $450 million deal priced at 99.49 to yield 8 1/8% - pretty much hung on to its gains.

The Longview, Wash.-corrugated packaging maker's bonds traded up to 101¾ bid on Wednesday, which left them at 101 5/8 bid, 101 7/8 offered - about the aftermarket level those bonds had reached on Tuesday.

Amkor little changed

Also hanging in around prior closing levels were Amkor Technology Inc.'s 6 5/8% notes due 2021. One of the trader saw those bonds trade up to par and then go out at 99 7/8 bid, 100 1/8 offered; on Tuesday, the Chandler, Ariz.-based provider of semiconductor manufacturing, testing and packaging services had priced its quickly-shopped $400 million issue at par, and the bonds went home straddling that point, at 99¾ bid, 100¼ offered.

Linn Energy holds steady

A trader saw Linn Energy, LLC's 6½% notes due 2019 at 100 1/8 bid, 100¼ offered, but said that "those bonds were not moving anywhere."

Linn, a Houston-based exploration and production company, priced $750 million of those bonds in a quick-to-market deal more than a week ago, on May 10, at 99.232 to yield 6 5/8%. The bonds had moved up to a little bit over par by the end of that session and had stayed there ever since.

Limited looks good

As has been the case over the past few sessions, the continued heavy flow of new deals pretty much sucked all of the air out of the secondary market, pushing aside the established issues in favor of trading in the new paper.

However, a trader said that here and there, "the [non-new-deal] secondary was a little lively."

Case in point, he said was Limited Brands, Inc., whose bonds firmed after the Columbus, Ohio-based retailer reported favorable quarterly numbers.

"Everybody's looking as we speak at Limited, with their earnings out. Their bonds were strong all day."

"The stock is at its top, and earnings looked really decent, so the long bonds keep moving up."

He saw the company's 6.95% bonds due 2033 start the session trading around 92 bid, 92¼ offered, but then rise to 94 bid on the strength of those numbers.

He estimated that across its capital structure, the company's bonds "were easily up a solid ½ point, across the board."

Limited earned $165.2 million, or 50 cents per share, for the fiscal first quarter ended April 30 - a 47% jump from $112.5 million, or 34 cents per share, a year earlier.

Excluding one-time items, Limited earned 40 cents per share, versus 25 cents per share last year and around a penny or two per share better than Wall Street was expecting.

North American knocked lower

On the downside, North American Energy Partners Inc.'s bonds dropped 5 points after the Alberta-based provider of heavy construction, mining and pipeline services in Canada announced that profit will fall C$30 million to C$34 million due to a write-down of C$40 million to C$45 million for the fiscal year ended March 31 from a contract with subsidiary oil company Canadian Natural Resources Ltd.

Its 9 1/8% debentures due 2017 fell 5 points to 102 bid, 104 offered, a market source said Wednesday afternoon.

"There's lots of selling in that bond. There's no buyers," the source said. "It's really slid."

Indicators turn mixed

Overall, away from the new issues, statistical measures of market performance turned mixed on Wednesday.

A trader saw the CDX North American Series 16 HY index up 1/8 point on Wednesday at 102 7/16 bid, 102 9/16 offered, after having fallen by ¼ point on the day on Tuesday for a second consecutive session.

The KDP High Yield Daily Index was meantime unchanged on Wednesday at 76.18, after having dropped by 7 basis points on Tuesday. Its yield likewise held steady at 6.43%, after having risen by 2 bps on Tuesday for a second straight session.

But the Merrill Lynch High Yield Master II Index continued to lag, falling for a second straight session. The Index lost 0.029% on Wednesday, on top of the 0.01% retreat on Tuesday.

That left its year-to-date return at 6.007% on Wednesday, down from 6.038% at the close Tuesday and off from 6.048% on Monday, its peak level for 2011 so far.

Cristal Cody contributed to this report

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.