Upsized Energy XXI, CDW deals, Darling price in $1.45 billion session; new Clearwire bonds up

By Paul Deckelman and Paul A. Harris

New York, Dec. 3 - A pair of upsized, late-pricing deals helped to close out another busy week in Junkbondland on Friday, high yield syndicate sources said, with the new issues from Energy XXI Gulf Coast, Inc. and from CDW LLC/CDW Finance Corp. helping to boost the week's tally of new domestic U.S. dollar-denominated bonds to nearly $7 billion - a marked improvement from the less than $2 billion recorded in the previous, holiday shortened week. Some $1.45 billion of this week's tally priced Friday.

Traders said that the $750 million of seven-year notes from Houston-based oil and gas exploration and production operator Energy XXI and Vernon Hills, Ill.-based technology products provider CDW's $450 million of eight-year secured notes came to market too late in the day for any secondary dealings.

However, they did see some trading around in the other dollar deal that priced, a $250 million eight-year issue from Darling International Inc., which was reported to have moved up by around a point after it freed.

And they saw strong gains in Thursday's late-pricing two-part deal from mobile broadband provider Clearwater Communications LLC/Clearwire Finance Inc., with both its add-on to its existing 12% 2015 senior secured notes and its new seven-year senior secureds firming several points.

Away from the new issues, traders saw the overall junk bond market firming for a third consecutive session and noted that various performance indexes all seemed to be pointing higher, as the market bounced back from softness earlier in the week.

A big mover to the upside was El Paso Corp., whose bonds rose across the board on Thursday's announcement by the Houston-based natural gas company of its $800 million cash tender offer for its various series of bonds.

Energy XXI upsizes

In Friday's dollar-denominated primary market three issuers, each bringing a single tranche, priced $1.45 billion of junk.

Energy XXI Gulf Coast priced an upsized $750 million issue of seven-year senior notes (Caa1/B/B) at par to yield 9¼%, 12.5 basis points beyond the wide point of the 9% area price talk. The deal was increased from $700 million.

RBS Securities Inc., UBS Investment Bank and BNP Paribas were the joint bookrunners.

Proceeds, together with a draw on the company's revolver and cash on hand from recent equity offerings, will be used to finance the purchase of shallow-water Gulf of Mexico shelf oil and natural gas interests from ExxonMobil and to repurchase or redeem Energy XXI's 16% second-lien junior secured notes due 2014.

The company wanted to get the deal done at a better rate, but it appears to have been priced correctly, according to a high-yield mutual fund manager who played.

The bookrunner had the new Energy XXI Gulf Cost 9¼% notes due 2017 at trading at 101 3/8 bid, the buy-sider said, speaking 90 minutes after the Friday close.

Away from the bookrunner they were 101½ bid, the source added.

Upsized CDW beats talk

CDW LLC and CDW Finance Corp. priced an upsized $450 million issue of eight-year senior secured notes (B2/B) at par to yield 8%.

The yield printed 37.5 basis points richer than the 8½% area price talk. The size was raised from $300 million.

J.P. Morgan Securities LLC, Deutsche Bank Securities Inc., Barclays Capital Inc. and Morgan Stanley & Co. Inc. were the joint bookrunners for the bank debt refinancing deal.

The deal was well over-subscribed, according to a high-yield investor.

Darling brings $250 million

Elsewhere Darling International priced a $250 million issue of eight-year senior notes (B2/B) at par to yield 8½%, at the tight end of the 8½% to 8¾% price talk.

J.P Morgan Securities LLC and Goldman Sachs & Co. managed the acquisition deal.

The transaction went well, according to the mutual fund manager who spotted the par-pricing notes at 103½ bid.

Quiksilver prices euro deal

Meanwhile in Europe, Boardriders SA, a wholly owned European subsidiary of Quiksilver, Inc., priced a €200 million issue of seven-year senior notes (Ba3/B) at par to yield 8 7/8%, in the middle of the 8¾% to 9% price talk.

Bank of America Merrill Lynch was the left bookrunner. UBS Investment Bank was the joint bookrunner. Bank of America Merrill Lynch will bill and deliver.

The Huntington Beach, Calif.-based lifestyle apparel company plans to use the proceeds to refinance its existing European term loans.

The week ahead

One other deal, Citadel Broadcasting Corp.'s downsized $400 million offer, had been expected Friday but was pushed into the week ahead, market sources said.

In any case, the week ahead is expected to be a busy one in the primary market.

JP Morgan, in an effort to pull away from the pack in terms of league table credit, is expected to roll out four or five deals, including one megadeal, according to market sources.

One deal expected to pop onto the screen in the Dec. 6 week is Del Monte Foods Co.'s $1.6 billion senior notes which are part of an LBO financing that also includes a $3 billion senior secured credit facility.

JPMorgan, Barclays, Morgan Stanley, Bank of America and KKR Capital Markets are leading the financing.

Cambium postpones

Finally, Cambium Learning Group, Inc. postponed its $175 million offering of six-year senior secured notes on Friday.

The company will continue to monitor market dynamics and all sources of capital to opportunistically minimize the company's cost of capital over time, the release stated, and added that Cambium may elect to undertake an offering of senior notes at a later date if the market becomes more favorable.

Barclays Capital Inc. and BMO Nesbitt Burns were the joint bookrunners.

Cambium Learning is a Dallas-based education services provider focused on at-risk and special needs students.

Darling does better

A trader said that Darling International's new 10-year notes pushed up to 101 bid, 102 offered - better by a point from the par level at which the Irving, Tex.-based provider of rendering and recycling services to the food production industry had priced its deal earlier in the session.

He said that activity in the credit - not exactly a household name in the junk precincts - was "mostly a rollover" involving holders of the company's bridge loan. He said he had heard that "most of the bridge loan buyers bought the deal."

Clearwater climbs smartly

A trader saw both halves of Clearwater Communications' new $675 million two-part offering go up nicely from the respective levels at which the Kirkland, Wash.-based mobile broadband Sprint Nextel Corp. unit's rapidly-marketed deal had priced late Thursday.

He saw its $175 million of add-on 12% first-priority senior secured notes due 2015 rise to 108 bid, 109 offered, before finally finishing at 107¼ bid, 108 offered, versus the 105.182 level at which the add-on had priced on Thursday to yield 10 3/8%.

Meanwhile, he saw its $500 million of new 12% second-lien senior secured notes due 2017 get as good as 103¼ bid, 103¾ offered, well up from Thursday's par pricing level, before going out just a little under that peak, at 103 bid, 103½ offered.

That deal came to market too late in the day Thursday for any meaningful aftermarket.

Parent Sprint Nextel - whose bonds had risen over the previous two sessions after the Clearwire deal first surfaced in the market on investor belief that Clearwire's ability to tap the capital markets makes it less of a potential burden on Overland Park, Kan.-based wireless operator Sprint - finally gave back a little of those gains, as its 6 7/8% notes due 2013eased by around ¼ point to 100 3/8 bid.

TransDigm trades up again

Going back a little earlier in the week, a trader saw Cleveland-based aircraft systems maker TransDigm Inc.'s $1.55 billion behemoth of an offering of 7¾% notes due 2018 continuing to firm modestly, quoting the mega-deal at 100 7/8 bid, 101¼ offered.

That deal - which had been nearly doubled in size from the $780 million originally announced - priced at par on Wednesday but immediately after that struggled to stay above water, with one trader on Wednesday declaring that they "couldn't get out of their own way." After easing initially on Thursday to levels under par, traders saw the deal then get its act together and firm up later in the day, to closing levels around 100½ bid, 100¾ offered.

AMC bonds hold gains

Another Wednesday deal which was seen trading around on Friday was AMC Entertainment Inc., whose quickly-shopped $600 million offering of 9¾% senior subordinated notes due 2020 had priced at par that session and then moved into the aftermarket on Thursday, getting as good as 101¾ bid, 102 offered.

On Friday, a trader said, the Kansas City, Mo.-based movie theater operator's new issue moved up still further, to 102½ bid, 103½ offered.

The parent company of AMC rival National Amusements Theaters, Norwood, Mass.-based NAI Entertainment Holdings LLC (National Amusements, Inc.) also did a junk deal this week, pricing $400 million 8¼% senior secured notes due 2017 at par on Thursday. After that, those bonds shot upward, trading up by as much as 3½ points before coming a little off those peak levels to close the session at 102 bid, 103 offered.

While the trader did see those robust gains on Thursday, he did not see any activity in the bonds on Friday, surmising that they continued to hold most or all of the gains with which they had finished Thursday's session.

Secondary indicators remain firm

Away from the new-deal realm, a trader saw the CDX North American Series 15 HY index essentially unchanged on the day Friday at 100¾ bid, 101¼ offered, after the index had jumped by 1 1/8 points on Thursday to finish above par for the first times since Nov. 22. Aided by big gains on both Wednesday and Thursday, the index also finished solidly above the 98¾ bid, 99¼ offered level at which it had ended the previous Friday, Nov.26.

The KDP High Yield Daily index meantime rose by 14 basis points on Friday to close at 73.72, after having zoomed by 19 bps for a second straight session on Thursday. Its yield declined by 4 bps on Friday to 7.48%, after having come in by 6 bps on Thursday. The index improved on the week from the previous Friday's 73.54 reading while its yield fell from 7.51% a week earlier.

The Merrill Lynch High Yield Master II index rose by 0.147% on Friday after having gained 0.226% on Thursday, which pushed its year-to-date return up to 13.814% from Thursday's 13.647%. On the week, the index rose 0.185%, topping the previous Friday's 13.604% - the first time in four weeks the index has risen from the prior Friday's level, although it remains still down considerably from the 2010 peak level of 15.602% recorded on Nov. 9.

Advancing issues topped decliners for a third consecutive session on Friday, although their winning margin declined to less than six to five from Thursday's roughly seven-to-six advantage.

Overall activity, represented by dollar-volume levels, fell by 27% on Friday after having retreated 10% on Thursday from the previous session's levels.

A trader said that Friday's market was "a little bit better, somewhere in the ¼ to ½ [point] range overall."

He said that "it was a little quieter today than [Thursday], which was a little more active."

He added that "when we came in this morning, the employment numbers looked kind of ugly" - the Labor Department reported that the nation's unemployment rate moved up to 9.8% in November, after three straight months at 9.6%. Meantime, non-farm payrolls showed a gain of 39,000 jobs - well below the 172,000-jobs spurt recorded in October and not even close to the 150,000 jobs which Wall Street economists on average had been predicting.

"It looked like we were going straight south."

However, after the Institute for Supply Management reported that service industries expanded in November at the fastest pace in six months, "that looked pretty good, and the things [in the junk market] moved back up."

He saw the new issues as once again probably the busiest credits in junk on Friday, with AMC the clear leader in market activity.

El Paso gains on tender offer

Among specific issues, energy operator El Paso Corp.'s bonds were seen solidly higher on Friday, helped by the company's announcement Thursday night that it had begun a tender offer for $800 million of its $1.6 billion of outstanding bonds.

That pushed the natural gas company's 6 7/8% notes due 2014 up 1½ points to 108 bid, while its 8¼% notes due 2016 jumped by as much as 8 points, market sources said, to around the 117 level.

The tender offer is scheduled to expire on Dec. 30.

Realogy rally continues

Realogy Corp.'s bonds "jumped on that [debt exchange] deal they're doing," a trader said, quoting the Parsippany, N.J.-based real estate company's 10½% notes due 2014 trading around 95 bid early in the day and ending around 94½ bid, 95 offered, which he called up ½ point. That gain followed multiple-point gains in all of the company's bonds seen on Wednesday and Thursday. He said there "really was not much volume today" in the bonds, "they were just quoted higher."

He said that the company's other issues, like the 11%/11¾% toggle notes due 2015 and the 12 3/8% notes due 2015 "were up as well," although he said the 101/2s were "as representative as any of them."

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