Forbes, Eagle Rock price, edge up; market awaits CGG-Veritas, Exopack; El Paso up on split plan

By Paul Deckelman and Paul A. Harris

New York, May 24 - The high-yield primary market's relatively modest activity level continued on Tuesday. Just two dollar-denominated offerings were heard by syndicate sources to have priced during the session: natural gas operator Eagle Rock Energy Partners LP's $300 million of eight-year notes and oilfield services provider Forbes Energy Services Ltd.'s upsized $280 million eight-year deal. Traders said both of those new issues were a little higher when they went to the not terribly busy aftermarket.

The forward calendar meantime built. Another energy-oriented company, France's CGG-Veritas, which provides seismic data services and equipment to the oil and gas industry, launched a $600 million 10-year debt-refinancing deal. The quickly shopped offering is expected to price during Wednesday's session.

So is packaging products maker Exopack Holding Corp. - the lone non-energy deal generating any kind of primaryside news on Tuesday. Price talk emerged on its upsized $235 million of seven-year notes.

Back in the energy sphere, talk also came out on Flint Energy Services Ltd., a Canadian oilfield services company shopping a C$200 million eight-year deal around.

And the syndicate sources said that Gulf Offshore Logistics, LLC, which provides marine transportation and other services to the Gulf of Mexico's energy operators, had restructured its $110 million offering of five-year secured paper, dividing it into fixed- and floating-rate tranches. Price talk was out on the deal, which should price before the end of the week.

Besides being where most of the new-issue market action was, energy was also the straw stirring the drink in the secondary market, where Houston-based natural gas operator El Paso Corp.'s several issues of bonds shot up on the news that it plans to split into two publicly traded companies, separating its exploration and production business from its pipeline operations.

Eagle Rock prices $300 million

Heading into the holidays, and against a backdrop of weakness in the stock market, recent high-yield primary market activity has been comparatively subdued, at least when compared to the torrid pace of activity seen through the first half of May.

Two dollar-denominated deals, the proceeds of which totaled $578 million, priced on Tuesday.

Eagle Rock Energy Partners and Eagle Rock Energy Finance Corp. priced a $300 million issue of 8 3/8% eight-year senior notes (B3/B-) at 99.279 to yield 8½%.

The yield printed at the wide end of the 8¼% to 8½% price talk.

Wells Fargo Securities LLC was the left bookrunner. Bank of America Merrill Lynch, BNP Paribas Securities Corp. and RBS Securities Inc. were 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.

The deal appeared to go OK, a high-yield mutual fund manager said, spotting the bonds at 99 7/8 bid, 100 1/8 offered, versus the 99.279 issue price.

"The flip-to-premium is out of the market," the investor commented, clarifying that deals are no longer benefiting from a two-point pop on the break.

Forbes upsizes

Elsewhere on Tuesday, Forbes Energy Services priced an upsized $280 million issue of eight-year senior notes (Caa1/B-) at par to yield 9%, on top of price talk.

Jefferies & Co., Inc. ran the books for the deal, which was upsized from $255 million.

The Alice, Texas-based oilfield services provider plans to use the proceeds to repay existing debt, including its 11% senior secured notes due 2015, and for general corporate purposes.

The additional $25 million of proceeds resulting from the upsizing will also be used for general corporate purposes.

The deal was said to be three times oversubscribed, the mutual fund manager commented.

"It must have gone into some loose hands," the manager added, noting that the bonds did not take the skyward trajectory characteristic of a deal that oversubscribed.

The par-pricing bonds were par bid to 100¼ offered, the buysider said.

Rexel prices at talk

In European high yield, French electrical equipment company Rexel SA priced a €500 million issue of 7% seven-year senior notes (Ba3/BB-/BB-) at 99.993 to yield 7% on Tuesday.

The yield printed on top of the price talk.

BNP Paribas, HSBC and SG CIB were the joint global coordinators and joint bookrunners. Credit Agricole CIB, ING and Natixis Bleichroeder were also joint bookrunners.

The Paris-based company plans to use the proceeds to enhance its financial flexibility and extend its debt-maturity profile.

Exopack sets price talk

Exopack Holding talked its upsized $235 million offering of seven-year senior notes (Caa1/CCC+) with a 9¾% to 10% yield.

The deal, which is being led by joint bookrunners Goldman Sachs & Co. and Bank of America Merrill Lynch, is set to price on Wednesday.

Proceeds, along with proceeds from a downsized $350 million bank loan, will be used to fund the tender offer for the company's 11¼% senior notes due 2014 and to pay a dividend to stockholders.

The bond offering was upsized from $225 million. The company's bank loan was downsized from $400 million. With the $40 million overall decrease in the debt financing, the dividend will also be downsized by $40 million.

Flint Energy talks

Turning to the Canadian junk market, Flint Energy Services talked its C$200 million offering of eight-year senior notes (B2/BB-) with a 7¼% to 7½% yield.

That deal is also set to price on Wednesday.

Credit Suisse Securities (USA) LLC and BMO Capital Markets are the joint bookrunners.

CGG-Veritas plans $600 million

French geophysical services company CGG-Veritas plans to price a $600 million issue of 10-year senior notes on Wednesday.

Credit Suisse Securities, BNP Paribas and Bank of America Merrill Lynch are the joint bookrunners.

The Paris-based company plans to use the proceeds to refinance its term loans and senior notes due 2015.

Gulf Offshore restructures

Finally, Gulf Offshore Logistics restructured its $110 million five-year senior secured notes offering and set price talk.

A $75 million offering of first-lien floating-rate notes is talked at Libor plus 750 basis points with a 2% Libor floor. The first-lien notes are expected to be discounted to a reoffer price of 99.

Meanwhile, a $35 million tranche of second-lien fixed-rate notes is talked with a 12¼% coupon at about 99 to yield 12½%.

The deal, which was previously structured as a single fixed-rate tranche of five-year senior secured notes, is expected to price before the end of the week.

Global Hunter Securities and Knight Capital are leading the deal.

Proceeds will be used to repay debt and for general corporate purposes.

New deals rise slightly

When Forbes Energy Services' new eight-year notes were freed for secondary market dealings, a trader saw those bonds trading at 100¼ bid, 100½ offered, versus the par level at which the oilfield service company's upsized $280 million deal had priced earlier in the session.

A second trader saw those new bonds successively trading into 100½ and 100¼ bids before finally going out at par bid, 100½ offered.

A trader said that the new Eagle Rock Energy Partners eight-year deal was trading around par bid, 100½ offered. At one point, the offer level got as high as 1003/4, though no bids were seen up there.

"I'm not really sure how well it went," he said.

Another trader pegged them going out at 99 7/8 bid, 100 3/8 offered, in a little from earlier levels but still up modestly from the 99.279 point at which the Houston-based natural gas company's $300 million deal had priced late in the session.

Regency bonds busy

Another new credit from that same sector, Regency Energy Partners LP/Regency Energy Finance Corp.'s 6½% notes due 2021, were "trading fairly briskly earlier," a trader said, seeing the bonds last traded at 100¼ bid.

The Dallas-based midstream natural gas company had priced $500 million of those notes at par on Monday in a same-day drive-by transaction, and the new bonds were seen in Monday's aftermarket at 100 3/8 bid, 100 5/8 offered.

While a second trader saw them at that same level on Tuesday, at another shop, a trader had them going out at 100½ bid, 101 offered.

Norcraft trades below issue

A trader said that Norcraft Finance Corp.'s $60 million add-on offering to its existing $180 million of 10½% second-lien senior secured notes due 2015 were trading at 103½ bid, 104 offered on Tuesday.

The Eagan, Minn.-based kitchen and bathroom cabinetmaker's quick-to-market deal had priced at 104 on Monday to yield 9.897%.

Chrysler still stuck

Chrysler Group LLC/CG Co-Issuer Inc.'s full-size two-part senior secured notes that came to market Thursday were seen this week continuing to struggle just to stay around the par level at which the Auburn Hills, Mich.-based No. 3 domestic automaker's mega-deal had priced.

"There was not a lot of love for that one," a trader said, "not a lot of love at all."

The company had priced $3.2 billion of new paper - first shopped around as a $2.5 billion offering, then massively upsized to $3.5 billion, only to be trimmed down to its eventual size at pricing, consisting of $1.5 billion of 8% secured notes due 2019 and $1.7 billion of 8¼% secured notes due 2021.

After pricing at par too late in Thursday's session to trade, they moved up solidly in Friday's dealings - to 100½ bid, 100¾ offered on the eight-years and 100¾ bid, 101 offered on the 10-years - only to slip back to around or even a little below the par bid level in Monday's action and to stay parked there on Tuesday.

All tuckered out

A trader theorized that "the high-yield market feels tired," perhaps in an exhausted state after the frantic pace set last week when well more than the $12 billion of new paper, including Chrysler's behemoth of a bond offering, came clattering down the chute, making it one of the busiest primary weeks this year or perhaps ever. Many of those deals came in rapid-fire fashion on top of another, particularly in the latter part of the trading sessions.

"Exactly," he said to the suggestion that with so much paper to be absorbed, investors were just trying to digest it all and were meantime hanging back to see where the market goes next, especially in view of sogginess in the equity markets; stocks slid badly on Monday and were down again, albeit more moderately, on Tuesday.

"I'm not quite sure where [the junk market] goes next," he declared.

Overall, he said, "if you take out [the new] Regency and El Paso" as well as such split-rated names that largely appeal to crossover players as San Francisco-based apparel retailer Gap Inc. and Houston-based energy operator Anadarko Petroleum Corp. "there was no volume in anything."

Gap's 5.95% notes due 2021, trading at 97 7/8 bid, and Anadarko's 6 3/8% notes due 2017, trading above the 113 level, were right around the top of the Junkbondland most-actives list on Tuesday on volume of over $39 million and $33 million, respectively.

Market measures turn mixed

Statistical measures of market performance pointed to a mixed performance. A trader saw the CDX North American Series 16 High Yield index up by one-sixteenth of a point on Tuesday to end at 101 7/8 bid, 102 offered after having fallen by seven-sixteenths of a point on Monday.

The KDP High Yield Daily index meantime rose by 2 bps on Tuesday to close at 76.05 after having slid by 13 bps on Monday. Its yield came in by 4 bps to 6.45% after having risen by 5 bps on Monday.

However, the Merrill Lynch High Yield Master II index retreated for a second straight day, giving up 0.007% on top of Monday's loss of 0.084%. That left its year-to-date return at 5.973% on Tuesday, down from Monday's 5.981% reading and down as well from Friday's 6.071%, the peak level for 2011 so far.

El Paso pops on split plan

Among specific names, traders noted a solid rise in El Paso's bonds on the news that the Houston-based natural gas company will divide itself in two, separating its exploration and production business from its pipeline operations and creating two new publicly traded companies.

A trader said that he saw El Paso's 7% notes due 2017 get as good as 116 bid, "or even higher," calling it a 2-point gain on the session.

At another desk, those bonds were also seen at 116, although a source there said that was a 4-point gain.

El Paso's 6½% notes due 2020 firmed to above 112, a gain of better than 4 points on the session, while its affiliate El Paso Pipeline Partners, LP's 7½% notes due 2040 zoomed to 121½ bid, up nearly 2 points.

Another trader saw the company's 7¾% notes due 2032 jump to 120 bid, 121 offered from pre-news levels at 114 ½ bid, 115½ offered, while its 7¼% notes due 2018 pushed up to 115 5/8 bid, 116 1/8 offered from Monday's levels at 113½ bid, 114¼ offered.

Gymboree gyrates

Elsewhere, a trader noted that Gymboree Corp.'s 9 1/8% notes due 2018 were "down by a couple of points from last week," seeing the San Francisco-based children's apparel retailer's bonds at bid levels around 93 versus markets in the 96 bid, 97 offered area last week.

There was no fresh news out on the company, which last week filed a registration statement with the Securities and Exchange Commission indicating that it at some point plans to offer to exchange new notes registered with the SEC but otherwise having identical terms for the $400 million of unregistered Rule 144A notes that it sold in November.

Horizon higher as stock soars

From deep in the distressed-debt precincts came word that Horizon Lines Inc.'s 4¼% notes due 2012 "went up a bit" in Tuesday's dealings, according to a trader, apparently going along for the ride as the Charlotte, N.C.-based cargo container shipping company's New York Stock Exchange-traded shares zoomed in active trading.

He saw the bonds up 1½ points to go out to around the 861/2-87 area on "not a lot of volume, but nevertheless, it moved up." He didn't see any news out on the company but observed that "it's such a small issue" - something like $300 million is outstanding - that even small trades could move the issue up notably. "I just saw it flash up."

Meanwhile, on the equity side of the fence, the company's shares jumped by 32 cents, or 35.56%, on the day to end at $1.22. Volume of 4.2 million shares was nearly double the usual turnover.

The company had no fresh news out, but bullish investors were speculating on a variety of possible causes for the big bounce in the recently hard-hit stock from arcane technical indicators to rumors that the big Black Rock hedge fund - which with its affiliates had owned more than 5% of the shares as of its last filing on March 31 but which had lately reportedly been selling them - was done selling, taking off the downside pressure that had been holding the price down.

They also speculated on a short squeeze after so many people had hammered the issue down, while others noted that Standard & Poor's last week put out a research report on the Horizon equity predicting a 12-month target price of $2.50 per share, or about twice where the shares ended up on Tuesday, based on its expectations of improved shipping volumes as the U.S. economy strengthens, better capacity utilization and lower interest costs due to recent debt paydowns by the company.

S&P also noted the recent settlement of a Justice Department investigation into the company's pricing practices and the subsequent reduction in its original fine by two-thirds to $15 million from $45 million, which the agency said "should give HRZ more liquidity and flexibility to restructure its debt, in our view."

Skeptics meantime were busy on investment-oriented internet bulletin boards calling the move up a temporary "dead-cat bounce." They pointed to a new Zachs Investment Research report published Monday indicating that Horizon's 98.85% ratio of debt-to-capital was the highest among its peers. The bears derided the for-now-jubilant longs as "suckers" and "bagholders" being set up as the victims of a crafty pump-and-dump scheme.

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