Apex, WEX, DigitalGlobe price to cap $5.6 billion week; Nortel busy as mediation flounders

By Paul Deckelman and Paul A. Harris

New York, Jan. 25 - The high-yield primary sphere saw a trio of deals worth $1.45 billion price on Friday.

Apex Tool Group, LLC came to market with a $450 million issue of eight-year bonds. The new paper was heard to have climbed by more than 3 points when it moved into the aftermarket.

They also said that satellite image company DigitalGlobe, Inc. upsized an eight-year transaction to $600 million. Those bonds also were solidly higher in trading.

And WEX Inc., a provider of corporate card payment solutions, came to market with an upsized $400 million of 10-year notes, which firmed modestly in the aftermarket.

Those deals closed out a holiday-shortened week which saw $5.6 billion of new fully junk-rated, dollar-denominated paper from domestic or developed country issuers - well down from the $9.2 billion that priced the previous week, ended Jan. 18, according to data compiled by Prospect News.

Besides the dollar deals that priced, a pair of Spanish borrowers - conglomerate Abengoa Finance SAU and pulp producer and energy generator ENCE Energia y Cellulosa SA - each priced €250 million, in sales of five- and seven-year notes, respectively.

Away from the deals that actually priced, Scandinavian iron ore miner Northland Resources SA announced plans for a $125 million add-on to its existing bonds, while Canadian environmental services concern Tervita Corp. was getting ready to launch a $1.05 billion secured bond offering. Price talk emerged on domestic energy company Sabine Pass Liquefaction LLC's $1 billion secured deal, which is expected to price on Monday.

While new issues continued to dominate the junk secondary market, the established bonds of Nortel Networks Corp. were among the most actively traded credits, largely retreating as mediation efforts aimed at dividing up the liquidating company's assets failed to make headway.

Secondary activity was otherwise thin, as accounts hung onto their bonds. Statistical measures of market performance were better on the day and on the week as well.

DigitalGlobe upsizes

Three issuers came into the dollar-denominated primary market on Friday. Each brought a single tranche of bonds for a combined total of $1.45 billion.

All three deals priced at the tight end of price talk, which was no surprise whatsoever to a trader from a high-yield mutual fund.

Deals are all pricing on the screws, the trader remarked, matter of factly, just before the Friday close.

Those priced correctly are trading up 3 points in the secondary market, the source added.

Among the offerings making up the day's business, DigitalGlobe priced an upsized $600 million issue of eight-year senior notes (B1/BB) at par to yield 5¼% on Friday.

The yield printed at the tight end of price talk that had been set in the 5 3/8% area. The amount was increased from $500 million.

Morgan Stanley, J.P. Morgan, Mitsubishi and Citigroup were the joint bookrunners for the acquisition and related-debt refinancing deal.

Apex a blowout

Apex Tool Group priced a $450 million issue of eight-year senior notes (B3/B-) at par to yield 7%, at the tight end of the 7% to 7¼% yield talk.

The deal was a blowout, market sources said.

The bonds were heading out on Friday at 103½ bid, a trader said.

Goldman Sachs, Barclays, Morgan Stanley, RBC, Citigroup and Deutsche Bank were the joint bookrunners for the LBO deal.

WEX at the tight end

WEX priced an upsized $400 million issue of 10-year senior notes (Ba3/BB) at par to yield 4¾%, at the tight end of the 4¾% to 5% yield talk.

The amount was raised from $350 million.

Wells Fargo was the left bookrunner for the debt refinancing deal. Bank of America Merrill Lynch, SunTrust and RBS were the joint bookrunners.

Abengoa sells five-year notes

In the euro-denominated high-yield market, a pair of Spanish corporations each completed a €250 million deal on Friday.

Seville-based conglomerate Abengoa priced a €250 million issue of five year unsecured notes (B1/B+) at par to yield 8 7/8%.

The yield priced at the tight end of the 8 7/8% to 9% yield talk.

HSBC, Credit Suisse, Merrill Lynch, Bankia, Santander and SG were the joint bookrunners for the debt refinancing.

Also Madrid-based pulp producer ENCE Energia y Celulosa priced a €250 million issue of seven-year senior secured notes (B1/BB) at par to yield 7¼%, on top of yield talk.

Joint bookrunner Deutsche Bank will bill and deliver for the debt refinancing deal. BBVA, Banesto, Bankia, Barclays and Citigroup were also joint bookrunners.

Meanwhile England's Kelda Finance (No.3) plc (Yorkshire Water) plans to start a roadshow on Monday for a £155 million offering of non-callable seven-year guaranteed secured medium term notes (expected ratings /BB-/BB+).

Joint physical bookrunner Barclays will bill and deliver. Royal Bank of Scotland is also a joint physical bookrunner. CBA, HSBC, Lloyds and Santander are joint bookrunners.

Proceeds from the Regulation S deal will be used to refinance debt.

Tervita to bring $1.05 billion

Although details likely won't surface until Monday, look for Tervita to launch a $1.05 billion offering of senior secured notes during the week ahead, an informed source said on Friday.

RBC Capital Markets Corp. will be the left bookrunner. It will be RBC's second biggest left books deal ever (the biggest was the LINN Energy, LLC and LINN Energy Finance Corp. $1.3 billion issue of 8 5/8% senior notes due in April 2020, which priced at 97.552 to yield 9% in late March 2010).

The Tervita deal is part of the company's plan to repay all outstanding debt under its existing senior secured credit facility.

Earlier in the week Tervita launched a proposed $500 million first-lien secured term loan B, via RBC, Goldman Sachs, Deutsche Bank and TD.

Sabine Pass sets price talk

Heading into the January-February crossover week, market-watchers are looking for new issue activity to be somewhat slower than that of the week just concluded.

The active forward calendar features $2.9 billion of announced business.

The week could see $5 billion, according to a trader who had canvassed the sales forces of the big dealers.

On Friday Sabine Pass Liquefaction, LLC, a subsidiary of Cheniere Energy Partners, LP, talked a $1 billion offering of non-callable eight-year senior secured notes (Ba3/BB+) with a yield in the 5 5/8% area.

The deal, which is being led by Morgan Stanley, Credit Suisse, RBC, Deutsche Bank, SG, Standard Chartered, HSBC, J.P. Morgan, Mitsubishi and Credit Agricole, is set to price on Monday.

Day's new deals trade up

When Apex Tool's 7% notes due 2021 were freed for secondary dealings, a trader saw the Sparks, Md.-based tool producer's new deal having shot up to 103½ bid, 103¾ offered.

A second trader at another shop also pegged the bonds at that level, well up from their par issue price.

DigitalGlobe's 5¼% notes due 2021 were seen by a trader to have moved up to 101½ bid, 102 offered, after having priced at par.

A second trader saw the Longmont, Colo.-based satellite imagery services company's $600 million offering at 101¾ bid, 102 offered, up from par level at which it had priced.

WEX's 4¾% notes due 2023 did not do as well when those bonds were freed to trade; a market source quoted the new issue from the South Portland, Me.-based provider of corporate card payment solutions as having traded into a 100¾ bid, leaving the bonds at 100½ bid, 100¾ offered. The issue had priced at par.

One of the traders, commenting on the gains notched by the day's new issues, said that "they're in good shape - what can I say? The markets have been fairly decent."

The new issues, he said, "continue to dominate. I am sure that everybody and anybody is going to continue to keep coming, at these low [interest] rates. I would, and you would. It's like refinancing your house if you can."

The steady drumbeat of new issues - most of which have been funding the repurchase or other repayment of existing debt - "has been building up [the issuers'] balance sheets, and saving them so much money."

Jaguar holds gains

Jaguar Land Rover Automotive plc's 5 5/8% notes due 2023 were seen by a trader on Friday at 102 bid, 103¼ offered, still pretty much holding most of the gains that the British luxury carmaker's $500 million drive-by deal had notched on Thursday when those bonds began to trade around. They had gotten as good as 103 bid, 103½ offered at that time.

That was well up from the par level at which the bonds had priced late in the day on Wednesday, after having been upsized from an originally planned $400 million.

Denbury drops off

In contrast to the generally strong showing of the week's new deals, a trader said that Denbury Resources Inc.'s 4 5/8% senior subordinated notes due 2023 "got weaker this morning," trading at 100¼ bid, 100 3/8 offered, and by the end of the day, had come in further still, ending trading in a par to 100¼ bid context.

That was in from the highs around 100¾ bid that he saw the issue hit after it priced at par on Tuesday.

"They may be a little sensitive to Treasuries," he theorized in trying to explain the relative lack of secondary strength the issue has shown versus some of the other recent new deals. He said it appeared that Denbury was the only real laggard among the most recent crop of new deals - all the more puzzling, he said, because Denbury "is a great company, a really great name."

Another trader had seen the Plano, Texas-based oil and natural gas exploration and production company's upsized $1.2 billion issue trading at 100½ bid, 101 offered, before they started to come down from those highs. The quick-to-market deal had been upsized from an originally announced $800 million.

While there was only short-lived price appreciation, there was no shortage of activity in the credit, which was easily the most actively traded Junkbondland name of the week.

Over $45 million had changed hands just in round-lot dealings alone on Tuesday, and as impressive as that was, the volume jumped to around $150 million on Wednesday.

On Thursday, it dwindled to around $14 million, not counting odd-lots, but was still among the most active issues on the day.

But finally on Friday, the frenetic activity in the new credit waned, with only about $3 million to $4 million seen trading.

Euro issues push up

Among euro-denominated deals which have come to market this week, "the market has generally been pretty active for most of the week, focusing on prospects," a high-yield bond source said Friday of secondary trading in that sphere.

Odigeo rises

Spain-based online travel services provider Odigeo's €325 million issue of 7½% senior secured notes due Aug. 1, 2018 edged up to 100½ in trading, a source said on Friday.

The issuing entity, Geo Debt Finance SCA, a special-purpose vehicle of the Barcelona-based company, sold the 5.5-year notes at par on Wednesday.

Smurfit Kappa better

Smurfit Kappa Acquisitions' euro denominated 4 1/8% senior secured notes due Jan. 30, 2020 traded higher at 993/4, a source said on Friday.

The notes were quoted on Thursday at 95 5/8 bid, 99 1/8 offered after pricing at par in a €400 offering on Wednesday.

The paper-based packaging manufacturer is based in Dublin, Ireland.

Nortel gyrates as talks fail

Away from the new-deal world, a trader said that the junk bond secondary market "was thin. Accounts still have cash, but they don't want to sell anything," preferring to hang on to their relatively higher coupon established bonds.

However, there was some notable activity in Nortel Networks' paper. Late Thursday it was learned that Nortel's mediation between bondholders and retirees had failed to provide an agreement on how to split $9 billion in assets. Come Friday, the bonds were actively moving around, as the market pondered what was next in the company's already four-year long bankruptcy case.

A trader called Nortel's 10¾% notes due 2016 and 10 1/8% notes due 2013 down 5 points on Friday, following news out Thursday regarding that failed mediation attempt.

The trader pegged the notes around 112.

But another trader said the debt had managed to push up a few points. The bonds had dropped to 110½ bid, 111 offered late Thursday, he said, and were going out Friday at 112½ bid, 113.

A market source said the 2016s were among the busiest junk bonds of the day, with over $35 million having changed hands around the 112 level by mid-afternoon.

Nortel has been laboring in bankruptcy for the last four years and its third and most recent mediation attempt failed to produce a liquidation settlement regarding the remaining $9 billion in assets. The mediation included bondholders and company retirees from the United States, Canada and the United Kingdom.

The Toronto-based former tech giant filed for bankruptcy in 2009 and has since been in process of winding down.

Market measures stay strong

Statistical junk market performance indicators were higher on both the session and the week on Friday.

The Markit Series 19 CDX North American High Yield index gained ¼ point on Friday to end at 102 15/16 bid, 103 1/6 offered, after having lost 1/16 point Thursday.

It was up from 102 17/32 bid, 102 23/32 offered at the close the previous Friday, Jan. 18.

The KDP High Yield Daily Index gained 9 basis points for a second straight session to end at 76.23, its fifth straight gain. That was up from 75.90 the previous Friday.

Its yield came in for a third straight session, narrowing by 3 bps to 5.38%, versus 5.46% a week earlier.

And the widely followed Merrill Lynch U.S. High Yield Master II Index was up for an eighth straight session on Friday, gaining 0.068%, after rising 0.092% Thursday.

That lifted its year-to-date return to 1.97%, a new peak level for the year so far, eclipsing the old mark, 1.90%, which had been notched on Thursday.

It was up by 0.424% on the week, its 10th consecutive weekly gain.

Cristal Cody and Stephanie N. Rotondo contributed to this review

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