Revived Unilabs prices, TitleMax slates, Quiksilver builds; energy sector firm, but not Talos

By Paul Deckelman and Paul A. Harris

New York, July 10 - The high-yield primary market saw one new pricing on Wednesday as Swiss clinical testing company Unilabs brought back a €685 million three-part offering that it had shopped around last month before postponing the transaction due to market conditions.

The dollar-denominated market meantime saw its eighth consecutive session without a pricing, although there were a few hopeful signs of a coming market revival.

TitleMax, Inc., which loans money to consumers secured by their auto titles, was heard by syndicate sources to be looking to borrow some money itself - $500 million, also secured - with the deal to be launched via a Thursday conference call.

The sources also heard that investors were lining up to play in Quiksilver, Inc.'s $500 million two-part offering, which could price later this week. The maker of surfing gear, beachwear and other outdoor sports apparel and accessories is shopping equally sized tranches of senior secured and unsecured notes.

In the secondary market, traders saw another firm session, although one called the buying "selective."

He noted that energy issues were doing especially well, boosted by recently stronger crude oil prices, including recent new deals that have come out of the sector such as Hercules Offshore Inc. and Gibson Energy Inc.

Away from the new issues, established energy credits were also on the upside, including Endeavour International Corp., whose executives gave an operational update on Wednesday; its several bond issues were solidly higher across the board.

But Talos Energy LLC's bonds, while also up on the day, were still down from their recent levels, gyrating around after the company announced that it was moving to cap a leaking abandoned well off the coast of Louisiana.

Apart from the energy operators, Health Management Associates Inc.'s bonds were up by several points, helped by market speculation that the hospital company could become an acquisition target.

Overall, statistical market performance indicators were higher for a second consecutive session.

Unilabs' successful return

The European high-yield market generated most of Wednesday's primary market news.

Switzerland-based Unilabs made a successful return to the new issue market, completing a €685 million three-part note transaction that it withdrew a month ago due to market conditions.

Unilabs SubHolding AB priced two tranches of senior secured notes (B3/B).

A €355 million tranche of 8½% notes priced at 98.025 to yield 9%. The yield printed on top of talk.

A €130 million tranche of three-month Euribor plus 725 basis points notes priced at 99. The spread and reoffer price both came on top of talk.

The senior secured portions of the deal saw €30 million shifted to the floating-rate tranche from the fixed-rate tranche relative to the sizes that were circulated along with price talk earlier on Wednesday.

Meanwhile, Unilabs MidHolding AB priced a €200 million tranche of second-lien PIK toggle notes due Jan. 15, 2019 (Caa2/CCC+) at par to yield 12%. The notes come with a 12% cash coupon and a 13% PIK coupon.

J.P. Morgan, Lloyds, Nordea and SEB were the joint bookrunners for the debt refinancing.

VUE talks two-part deal

London-based cinema chain operator VUE Entertainment set price talk and approximate tranche sizes for its £550 million equivalent two-part offering of senior secured notes due 2020.

A £200 million minimum tranche of fixed-rate notes, which comes with three years of call protection, is talked to yield 8% to 8¼%.

Meanwhile, a £200 million equivalent minimum tranche of euro-denominated floating-rate notes, which comes with one year of call protection, is talked at a 525 to 550 bps spread to Euribor, at a discount to par of 50 to 75 cents.

Goldman Sachs and Morgan Stanley are joint global coordinators and joint bookrunners for the LBO financing. Lloyds is also a joint bookrunner.

Single B credit ratings are expected to be assigned to the notes.

Although European high-yield news volume has been conspicuously robust thus far in July, don't look for it to continue that way for much longer, a debt capital markets banker advised.

Market opportunities notwithstanding, European players may be counted upon to escape their offices for August vacations, the source added.

Dollar deals on tap

Although the dollar-denominated market has yet to see its first post-Independence Day deal price, that should change before the end of the week, sources say.

At least two transactions are on tap to price before the Friday close.

As reported, order books are building for Quiksilver.'s $500 million two-part senior notes offer, a trader said on Wednesday morning.

A $250 million tranche of five-year senior secured notes is already oversubscribed, with the book size at $300 million, the source said, adding that the secured tranche is whispered at 8¼% to 8½%.

The book for the Huntington Beach, Calif.-based outdoor sports lifestyle company's $250 million tranche of senior unsecured notes was half filled on Wednesday morning, the trader said, adding that the unsecured tranche is whispered with a yield in the 10½% area.

BofA Merrill Lynch is the left bookrunner for the debt refinancing. Morgan Stanley and Wells Fargo are the joint bookrunners.

Also on tap to price before the end of the week is the RKI Exploration & Production, LLC $350 million offering of eight-year senior notes (B3/B-).

As with Quicksilver, official price talk has yet to surface on RKI's offer.

However, the debt refinancing deal is being discussed in a low 8% yield context, a trader said late Wednesday afternoon.

Citigroup, JPMorgan and UBS are the joint bookrunners.

TitleMax's $500 million deal

Also on Wednesday there was an announcement of a dollar-denominated deal that is set to price during the week ahead.

TitleMax plans to hold a conference call with investors on Thursday to discuss a proposed $500 million offering of five-year senior secured notes (B3/B+).

A roadshow for the deal is set to run through the week ahead.

Jefferies and Morgan Stanley are the joint bookrunners for the debt refinancing deal.

Selective buying

In the secondary market, a trader said volume levels were "ludicrous," while a second trader called Wednesday "a brutally quiet day."

"You try to find things to hang your hat on," he said.

"It feels like the 'dog days' of summer are here," he added.

"The day was a complete waste of a clean shirt."

The first trader said that against that backdrop of light overall activity, "the bias in high yield is to buy selectively."

"You go item by item."

Energy names excel

But one area that he did see higher pretty much across the board was energy, "with what's going on with oil prices these days" in the wake of continued fears of Mideast turmoil following the military-backed ouster of Egypt's former leadership.

For example, the trader saw Hercules Offshore's 8¾% notes due 2021 "at least" at 102¾ bid, 103¼ offered, well above the 3 par price at which the Houston-based provider of maritime services to the offshore energy industry had priced its $400 million offering on June 28.

A second trader pegged the bonds at 102 bid, 103 offered, calling them up a ½ point on the day.

The first trader also saw Gibson Energy's 6¾% notes due 2021 trading at 100½ bid, 101½ offered. That was up from the 98.476 price at which the Calgary, Alta.-based exploration and production company's $500 million issue had priced on June 25, yielding 7%.

At another desk, the bonds were seen up ½ point at 100¼ bid, 100¾ offered.

Endeavour up all around

Among the established energy credits, Endeavour International's three series of bonds were all seen solidly higher Wednesday after an upbeat conference call during which the Houston-based oil and gas exploration and production company's executives reported on its operational performance and the status of an ongoing strategic review. There was little to report on the review, only that it was still going on. As to performance, the execs said production would be temporarily halted on one of Endeavour's North Sea wells, Rochelle, to allow for maintenance improvements, but continued progress was being made on its other wells, Alba and Bacchus.

Investors apparently liked what they heard, because Endeavour's 12% first-priority senior secured notes due March 2018 rose nearly 4 points on the day, to 100½ bid, on brisk volume of over $10 million.

Its 12% second-priority senior secured notes due in June 2018, which had last traded around 77 bid in late June, opened well down from there, around 73, but by the time the close rolled around, they had pushed back up to around 80 bid, on volume of $7 million.

And the company's 5½% convertible notes due 2016, which had been trading around 60 bid, jumped to 69 by the day's end, on over $6 million of turnover.

Endeavour's New York Stock Exchange-traded shares rose 29 cents, or 7.06%, to finish at $4.40 on volume of 1.9 million, or about four times the norm.

Talos trades on well woes

However, the energy patch was not without its problems. A trader said that Talos Energy's 9¾% notes due 2018 were gyrating around on Tuesday and again on Wednesday, as the Houston-based oil and natural gas exploration and production company sought to contain leakage from an inactive well in the Gulf of Mexico about 75 miles off the Louisiana coast.

He said that the notes had traded in a mid-90s context several days ago, at bid levels between 94 and 96, but then fell to around an 89 to 90 area Tuesday. On Wednesday, he said, the bonds opened at 89 bid, 91 offered, moved up during the day to around 90 to 91, and were going out around 92 to 94 bid.

He said that because the notes are a 144A issue, it's difficult to get a handle on exactly how much traded, but he commented "I saw trades all day long, which tells me that a lot of size traded." He estimated volume in a $25 million to $30 million context.

Those bond movements were going on against the backdrop of the company's efforts to contain leakage coming from an old well.

Talos announced in a statement Tuesday that during operations by its Energy Resources Technology GOM subsidiary to permanently plug and abandon a non-producing well about 74 miles southwest of Port Fourchon, La., saltwater containing a small amount of gas and light condensate began to flow to the surface and around the wellhead.

Talos said it notified the Coast Guard and other authorities, shut down two nearby producing wells and is bringing in a commercial well-control company to close off the leak.

The company said that it expected to have the old well shut within a 24-hour period. It is expected that mud will be pumped into the old well to stop the small flow of gas and liquid, and crews were reported to be still working on the well as of Wednesday evening.

Health Management trades up

Outside the energy sphere, Health Management Associates' 7 3/8% notes due 2020 rose to 114 bid, from prior levels in a 109 to 110 context. Volume was over $7 million.

The bonds were seen getting a boost from published reports that the Naples, Fla.-based hospital operator could be an acquisition target of a larger industry player, such as Community Health Systems Inc.

Market indicators better

Statistical junk market performance indicators were mostly higher for a second straight session on Wednesday.

The Markit Series 20 CDX North American High Yield index was unchanged at 104 1/32 bid, 104 9/32 offered, after having risen by 3/8 point on Tuesday, its second straight gain.

However, the KDP High Yield Daily index rose by 10 bps for a second straight session on Wednesday to finish at an even 73.00.

Its yield was meantime 3 bps lower, at 6.37%, its second straight narrowing. On Tuesday, it had declined by 4 bps.

And the widely followed Merrill Lynch High Yield Master II index saw a second straight gain on Wednesday as it rose by 0.156%, on top of Tuesday's 0.275% advance.

That gain raised the index's year-to-date return to 1.856% from Tuesday's finish at 1.697%. The cumulative return also remained well up from its recently established low point for the year of 0.384%, set on June 25, though well below its 2013 peak level of 5.835%, recorded on May 9.

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