Upsized Frontier deal prices, rises solidly; new Consol firms smartly; Provident for Monday

By Paul Deckelman

New York, March 26 - The huge new bond deal that will facilitate Frontier Communications Corp.'s pending purchase of a big chunk of Verizon Communications Inc.'s landline phone business priced on Friday, high yield syndicate sources said - putting an emphatic period on a hugely busy week which saw over a dozen new issues come to market, carrying a total face amount well north of $12 billion.

When those new bonds of Verizon affiliate New Communications Holdings Inc. were freed for secondary dealings, traders saw the two shorter tranches gain around 2 points right from the get-go, while the two longer tranches each rose more than a point from their issue price.

Good upside movement in brisk trading was also seen in the new bonds of Consol Energy Inc., which had priced $2.7 billion of seven- and 10-year notes late Thursday.

Strength was likewise seen in the recently priced paper of Lyondell Chemical Co., Lear Corp. and ITC^DeltaCom; each brought new issues to market this past week.

Even after such a big week, the forward calendar is stuffed to the brim with new issues waiting to price; guidance emerged on California financial services provider Provident Funding Associates, LP/PFG Finance Corp.'s upcoming issue of seven-year senior secured notes, which is expected to price on Monday afternoon.

Away from the primary arena, not much was seen going on in the secondary; as has been the case for the whole week, the new deal market, including aftermarket trading of newly priced bonds, overshadowed the established issues.

However, the overall market - as reflected in the behavior of key numerical indexes - continued to push upward.

It's a Frontier Friday

The biggest deal of the day - and indeed, of a week which saw more than $12 billion of new paper price - was the four-part issue from New Communications Holdings Inc. The issuer priced $3.2 billion of new senior notes (Ba2/BB) in a deal connected with a major asset purchase by familiar junk market name Frontier Communications Corp., although the latter entity is technically not the borrower of record.

That deal had been both massively enlarged from its initially announced $2 billion size, and restructured from the original two-part deal to make it a four-part offering, high yield syndicate sources said.

The company priced $500 million of 7 7/8% notes due 2015, $1.1 billion of 8 ¼% notes due 2017, $1.1 billion of 8½% notes due 2020 and $500 million of 8¾% notes due 2022. All four tranches priced at par.

The new bonds priced in line with guidance issued late Thursday, envisioning the 2017 bonds yielding 8¼% while the 10-year issue and the 12-year issue would yield 25 basis points and 50 bps above that, respectively. The five-year tranche, meantime, came right in the middle of guidance projecting a yield between 25 bps and 50 bps tighter than the seven-years.

The deal was brought to market by joint bookrunning managers J.P. Morgan Securities Inc. and Credit Suisse Securities (USA) LLC.

After their Friday afternoon pricing, the bonds broke into the secondary market, and were seen to have quickly moved to levels above 102 bid for the five- and seven-year issues and above 101 bid for the 10- and 12-year paper.

"They did very well," declared a trader, who had seen all four tranches trading up at least in the 101 area before he left, speculating that the shorter pieces would continue to rise, which they did.

Another trader saw the five-year notes trading at 102 5/8 bid, 102 7/8 offered, and the seven-year paper at 102 bid, 102¼ offered, while seeing the 10-year bonds having moved up to 101½ bid, 101¾ offered. The 2022 notes, meantime, were seen straddling 101, quoted at 100 7/8 bid, 101 1/8 offered.

Traders said that the bonds enjoyed a certain cachet just because of the sheer size of the massively upsized offering, and while New Communications Holdings may be a new name in the market, most players are familiar with its partner in the deal, Frontier Communications - the Stamford, Conn.-based telecommunications company formerly known as Citizens Communications Corp.

For the moment, New Communications Holdings is actually a subsidiary of New York-based telecom giant Verizon Communications Inc., which last May agreed to sell its landline business in 14 Western U.S. states - some 4.8 million landlines leased to residential and small business customers - to Frontier in an $8.6 billion deal. New Communications was formed to hold those assets, with the game plan being to ultimately transfer them to Frontier.

In announcing the deal on Wednesday, Frontier said that as part of the complex transaction - which must still be approved by federal authorities as well as utility regulators in those 14 states - the proceeds from Friday's bond deal will be deposited into an escrow account, from which New Communications will then fund a portion of a special cash payment to Verizon in connection with the deal. New Communications will ultimately be merged with and into Frontier, giving the latter company control of the landline assets and operations.

Consol climbs

Traders also saw very good activity in the new bonds of Consol Energy, following the pricing of that $2.75 billion deal from the Canonsburg, Pa.-based natural gas and energy company late in the day on Thursday - too late for any aftermarket dealings then.

On Friday, a trader saw the company's $1.5 billion of 8% notes due 2017 jump to 102¼ bid, 102¾ offered, well up from their par issue price, while seeing its $1.25 billion of 8¼% notes due 2020 - which had also priced at par - also in that context north of 102.

New deals generally firm

The trader saw another deal which had priced on Thursday - ITC^DeltaCom Inc.'s $325 million offering of six-year first-lien senior secured notes - doing well in the secondary. The Huntsville, Ala-based telecom company's 10½% first-lien senior secured notes due 2016 had priced at 97.857 to yield 11%, and subsequently rose to 99 3/8 bid, 99 7/8 offered.

On Friday, he said, he had not seen the bonds doing very much, but they were holding their own and keeping the robust gains already notched.

The deal was the same one which the company had pulled from the market just six weeks earlier due to then-unfavorable market conditions, but revived in a quickly-shopped offering on Thursday, this time to considerably more success.

One of the traders said that much of the market's focus was still on the huge deal earlier in the week from Houston-based chemical producer Lyondell. It priced an upsized $2.75 billion equivalent offering of dollar- and euro-denominated 7.5-year senior secured notes on Wednesday, with both tranches pricing at par to yield 8%.

Once those bonds had priced, they had quickly shot up to above 102 bid "right out of the box," a trader said, and they had continued to press upward in Thursday's session, moving north of the 103 mark, a level that the bonds still held on Friday.

"I think once the flippers got out of that thing," the trader said, "it was going to trade up well. Everybody and their mother is in that."

He saw the bonds at 103 1/8 bid, 103 3/8 offered.

Coffeyville cools off

However, the trader said, not everyone was racking up sizable gains in robust volume. For instance, he said that he had not seen anything going on with the new Coffeyville Resources, LLC/Coffeyville Finance Inc. two-part deal, consisting of five- and seven-year senior secured notes.

The Sugar Land, Tex.-based diversified energy company had priced $275 million of 9% first-lien notes due 2015 at 99.511 to yield 9 1/8%, and $225 million of 10 7/8% second-lien notes due 2017 at 98.811 to yield 11 1/8%,.

While the bonds had initially firmed a little in Thursday aftermarket dealings, the trader said Friday that he didn't see too many of the new bonds trading around. He said the last levels he had seen on the second-lien paper was at 98 bid to 98¾ offered, "so that one didn't trade as well as the others."

El Paso Pipeline a no-show

A trader said he had seen no traces of Thursday's deal for El Paso Pipeline Partners Operating LLC. The issuer had brought $425 million of 10-year senior notes at par to yield 6½%.

Nothing was trading in the Houston-based natural gas pipeline company's name, the trader noted.

Secondary trading in the issue, he said, would likely be "Monday's business."

Provident price talk

Also slated for pricing Monday is Provident Funding Associates, LP and PFG Finance Corp.'s $400 million offering of seven-year secured notes (Ba3/B+).

Price talk emerged on the deal Friday, projecting a yield between 10% and 10¼%.

Junk market primaryside sources said that the order books on the deal will close at 10 a.m. ET on Monday, with the actual pricing expected to take place that afternoon. The deal, which surfaced in the market this past Monday, was exhibited to investors via a week-long roadshow slated to wrap this Monday, to be followed by the pricing.

J.P. Morgan Securities Inc. is running the books on the deal.

Provident Funding, a Burlingame, Calif.-based private, independent mortgage company that originates and services residential mortgage loans, plans to use the deal proceeds to repay term loan debt and for general corporate purposes.

Market indicators little changed

Among bonds not connected with the new-deal market, a trader saw the CDX Series 13 index off unchanged on the session, pegging it at 99¾ bid, 100¼ offered. It had been up 1/8 point on Thursday. The index thus ends the week above the 99 1/8 bid, 99 3/8 offered level seen at the close of the previous week, on Friday March 19.

The KDP High Yield Daily Index meantime rose by 156 basis points Friday to 72.10, while its yield tightened by 5 bps to end at 7.82%. That compares favorably with the previous week's closing levels - 71.94 on the index and 7.86% on the yield.

Advancing issues held a led over decliners Friday for a fourth consecutive session, enjoying a better-than seven-to-six bulge.

Overall in the secondary, though, "the market's been slow all week," a trader said. "Everything has been new issues."

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