NewPage knocked lower as CEO quits; junk firm overall in line with equities, primary quiet

By Paul Deckelman and Paul A. Harris

New York, June 15 - The abrupt resignation of NewPage Corp.'s only recently appointed president and chief executive officer, E. Thomas Curley, sent the Miamisburg, Ohio-based coated paper manufacturer's bonds skittering several points lower, with traders seeing very active dealings in the name.

Away from NewPage, traders saw a decidedly firm tone as junk bonds, taking their cue from the surge in the equity markets, extended with more conviction the modest gains seen in Monday's trading.

The recently volatile energy names seemed quieter on Tuesday, with ATP Oil & Gas Corp.'s bonds seen firming a little to around the 70 area, well up from their recent lows in the lower 60s.

Among recently priced issues, TransUnion Corp.'s bonds continue to shine, with traders seeing the Chicago-based consumer credit reporting company's new deal firming further, now trading several points over its par issue price.

Primary market activity was virtually non-existent. There were no new deal announcements, or price talk emerging. The one domestic new deal that is being shopped around for a possible pricing this week, for TitleMax, remains on the road through Thursday. Out of Europe came word that French distillery operator Remy Cointreau SA will meet with potential investors on Wednesday in Paris, and a bond deal could come out of that.

Market indicators keep gaining

Back among bonds not related to the new deal realm, a trader saw the CDX North American HY Series 14 Index up a full point on Tuesday to finish at 95 3/8 bid, 95 7/8 offered, after having risen by 5/8 point on Monday.

The KDP High Yield Daily Index, meantime, jumped by 45 basis points on Tuesday to end at 69.90, after having gained 12 bps on Monday. Its yield narrowed by 16 bps, to 8.88%, after having come in by 4 bps on Monday.

Advancing issues topped decliners for a third straight session Tuesday, holding an eight-to-five edge for a second consecutive day

Overall market activity, represented by dollar-volume levels, zoomed by 47% on Tuesday, after having risen by around 21% on Monday from the previous session's pace.

A trader said that "if you take NewPage out of the scenario," Junkbondland had a pretty good day.

"The breadth and strength of the market were pretty nice to see," he said. "There's lots of stuff that's up well over a point. I would say certainly on average, the market's got to be up [at least] a half, and [the ratio of] winners to losers is probably 40, or 50 to 1. So it's definitely a legitimate, broad kind of a rally."

The trader said that such an advance "makes perfect sense," because "the fear of owning credit was probably a little overdone, and we're so far off the highs of April that this can probably last a couple of days longer, certainly; it can hold for a while."

He said that "as people started to catch on to that, all of a sudden, you didn't want to be short so much and it sort of becomes self-fulfilling.

He added that he's "optimistic, for another day or two."

Another trader said: "it's been sort of creeping better, in sympathy with the equity markets."

Equities were proving to be a strong prop under the junk market on Tuesday, with the bellwether Dow Jones Industrial Average climbing 213.88 points, or 2.10%, to end at 10,404.77. Other, broader stock index had even better gains, with the Standard & Poor's 500 index up by 2.35% on the day and the Nasdaq composite index up 2.76%.

The second trader said: "The calendar has been pretty light, so it hasn't really spurred a lot of trading away from large, big-cap names."

He estimated that "depending where you looked, you were up anywhere from a half point to a point today."

Not just the big guys

The first trader further said that there were "lots of different bonds trading, as opposed to huge amounts" in just a couple of names.

While he did see "some big trades" in Ford Motor Credit Co.'s 7½% notes due 2012, and Energy Future Holdings Corp.'s 10 7/8% notes due 2017, and in Dish Network Corp.'s paper, he also saw "tons of $2 million to $5 million [trades] of 400 or 500 different issues.

"To me, it was a pretty broad-based move."

The Ford Credit 71/2s were seen having moved up to about 102½ bid on Tuesday from 101 5/8 on Monday, on strong volume of more than $23 million traded, a market source said, while the TXU '17s firmed to about the 76½ level, on nearly $20 million traded.

Tommy, we hardly knew ye

First he was in - and now he's out

Just four months after he arrived in Miamisburg, Ohio, to take the reins of NewPage Corp., North America's largest coated-paper producer, E. Thomas Curley abruptly resigned on Tuesday as president and chief executive officer of the company. The company offered little additional information about the move, and surprised junk market players took the company's bonds down by several points in heavy trading in response.

A market source said that NewPage's most busily traded issue, its 11 3/8% first-lien senior secured notes due 2014, "went on a wild ride," seeing the bonds having fallen nearly 2 points on the day to 91½ bid, completely obliterating some gains which had been seen in the credit on Monday, before the news of the executive shakeup, which saw two other senior executives, Mark A. Suwyn, the chairman, and Michael Edicola, NewPage's vice president, human resources, also heading out the door.

A trader at another shop quoted those '14s as having fallen as low as 90 bid before going home Tuesday at 92 bid, which he called a 1½ point loss. He saw the company's 10% second-lien senior secured notes due 2012 fall as low as 51 bid from prior levels around 54, before going out at 52 bid, 53 offered, also down about 1½ points.

"An awful lot traded," he said. "That was clearly the highlight."

"Obviously, by far, NewPage was the most active junk name," another trader said. "Over $100 million traded, almost all of that in the 11 3/8s, and all were down by several points."

One of the traders noted that Curley had only come aboard as CEO in mid-February of this year to replace another abruptly departing CEO, Richard D. Willet, Jr. - who somewhat mysteriously resigned Jan. 18. As was the case with Curley's departure, Willet's resignation also generated little or no explanation from the company, causing its bonds to slide on that occasion. The trader opined that it looked to him like "they shot the guy after just four months."

Besides announcing the resignations of Curley and the other two executives, NewPage said that Robert L. Nardelli would take over as non-executive chairman to lead the company during its search for a successor to Curley. Nardelli - formerly the CEO of Chrysler LLC and before that, Home Depot - is currently the CEO of Cerberus Operating and Advisory Co., an affiliate of NewPage's controlling stockholder, Cerberus Capital Management, LP.

Nardelli, on a morning conference call, indicated that there were no conflicts between Curley and the company's Cerberus-dominated board of directors, instead merely asserting that "there was mutual agreement, after a relatively short period of time, that a change would be appropriate." (See related story elsewhere in this issue).

More upside to ATP

A trader saw ATP Oil & Gas Corp.'s 11 7/8% second-lien senior secured notes due 2015 "definitely staying active" during Tuesday's session, estimating that between $390 million and $40 million of the bonds changed hands.

He quoted them as "going up and down around 70," with "about 90%" of the day's dealings in the Houston-based oil and gas exploration and production company's bonds taking place in a narrow 691/2-70½ context.

The bonds had fallen as low as the lower 60s last week, from prior levels in the low 70s, on investor angst about the likely impact that the government's restrictions on deepwater oil drilling in the Gulf of Mexico in the wake of the April 20 Deepwater Horizon oil rig disaster there will have on companies such as ATP, which have the bulk of their reserves there.

However, over the last several sessions, the bonds had moved back up to around the 70 level.

But the trader noted that "they came [to market] close to par six weeks ago," right around the time of the oil rig accident which started the incredible oil leak that has so fouled the Gulf. After that, "it's been brutalized" in tumbling down to current levels.

He said that "the biggest issue is, nobody is completely sure where it shakes out."

He proclaimed that in his opinion, "the only thing I know for sure is that 70 is the wrong price - there's not going to be an in-between here. It's either fine, in which case it will migrate right back up into the high 90s, or else, it's toast," and will fall down to around half of what it still is now.

"For sure, this is the wrong price, and I think that's why it's been so active. Fortunately this is one where there is no clear-cut consensus, so it's actually been tradable, which is nice."

New TransUnion trades up, again

Among recently priced issues, a trader said that TransUnion Corp.'s 11 3/8% notes due 2018 "were still moving up," quoting the bonds at 102½ bid, 103½ offered.

"The deal was definitely well received," he declared.

The company - one of the "Big Three" of the consumer-credit reporting industry - priced its $645 million offering at par on Thursday. The new bonds shot up to 101¼ bid, 102 offered in initial aftermarket dealings later that same session, and continued to firm on Friday, heard going home at 101½ bid, 102¼ offered.

The bonds then resumed that firming trend during Monday's session, and then again on Tuesday.

Remy Cointreau sets investor meeting

The high-yield primary market maintained its wary pace Tuesday, with no new issues pricing.

However, the market learned that French spirits distiller and marketer Remy Cointreau SA will host a meeting with bond investors on Wednesday in Paris.

Credit Suisse and Credit Agricole Corporate and Investment Bank will lead the meeting, and will serve as joint bookrunners, should a bond deal ensue.

No use of proceeds was specified, should Remy Cointreau elect to go ahead with a borrowing. However, the company's outstanding 5.2% notes mature on Jan. 15, 2012. Of the original €200 million issue, €192 million remains outstanding, according to a market source.

The company is rated Ba3/BB- at the level of those 5.2% notes, the source added.

The speculative-grade ratings of the company's existing bonds notwithstanding, Remy Cointreau's deal, should it go forward, is apt to come in a high grade-style execution, according to a market source based in the United States.

Biding time

Meanwhile, the dollar-denominated high-yield primary market remained silent on Tuesday.

There are issues prepped and ready, the dealers say.

However, later may be better than sooner, one investment banker advised.

Given recent capital markets volatility, junk has backed up, and potential bond buyers are demanding hefty concessions in the form of high interest rates.

Not everyone can wait

For those contemplating an opportunistic debt refinancing, biding time in order to allow capital markets volatility to further subside, spreads to come back in a little and positive high-yield fund flows to hopefully resume seems like a sensible strategy, a debt capital markets banker said.

However, not everyone can wait -for "Goldilocks effect" to resurface, the source added.

A case in point is the Michael Foods Inc. LBO, sources say.

The debt financing for GS Capital Partners' acquisition of the company from Thomas H. Lee Partners LP. is a committed financing.

It is expected to include $430 million of senior unsecured notes.

On Tuesday Michael Foods Inc. talked its $790 million term loan at Libor plus 450 basis points to 475 bps with a 1.75% Libor floor and an original issue discount of 98.

Bank of America, Goldman Sachs and Barclays are the lead banks on the loan, with Bank of America the left lead.

Meanwhile, the $1.4 billion leveraged buyout of Vertafore Inc. by TPG Capital is expected to feature high-yield bonds.

That deal is also believed to belong in the "sooner than later" camp, sources say.

However a source close to the financing said that the structure remains to be determined.

Credit Suisse will lead the financing, among a syndicate of banks that will also include Bank of America Merrill Lynch and Barclays Capital, the source added.

The acquisition is expected to close in the third quarter, subject to customary regulatory approvals.

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