SunCoke prices; Essar, Forestar join calendar; new Clear Channel toils; TXU busy after filing

By Paul Deckelman

New York, April 29 - The high-yield primary arena saw a reduced volume of activity on Tuesday, with just one U.S. dollar-denominated, junk-rated deal worth $250 million having priced during the session. That was in contrast to Monday, when three issuers had brought a total of $1.9 billion to market.

SunCoke Energy Partners LP, a manufacturer of the coke fuel used in steel production, priced a $250 million add-on to its existing 7 3/8% senior notes due 2020 after a short roadshow. The notes were later quoted having moved up from their issue price.

The day's only other pricing took place in the European market, where French hospital operator Holding Medi-Partenaires SAS brought a €110 million add-on to its existing 7% senior secured notes due 2020.

High-yield syndicate sources said that two other prospective new deals made their way onto the forward calendar.

Essar Steel Minnesota LLC began a roadshow for a $450 million offering of seven-year senior secured notes.

And Forestar Group, Inc., a real estate, energy and natural resources company, was heard getting ready to hit the road on Wednesday to market its $250 million issue of eight-year senior secured notes, which is expected to price early next week.

Among the deals that had priced on Monday, traders said that Clear Channel Communications Inc.'s big new tranche of 7.75-year notes, which priced on Monday night, way too late for any kind of aftermarket dealings at that time, struggled when they began trading on Tuesday morning.

But they said that the day's other two deals - from Service Corp. International and France's CGG SA - added to the modest gains they had notched in initial aftermarket activity on Monday.

Away from the newly priced deals, traders saw another mostly dull session. Among the more active names, though, were the various bonds of Energy Future Holdings Corp., after the Texas utility operator and merchant power producer formerly and more familiarly known as TXU Corp. filed for Chapter 11 protection - a sad epilogue to the story behind the once-high-flying company's leveraged buyout deal, still holding the record as the biggest LBO ever.

Statistical market performance indicators were trending lower after having been higher across the board on Monday.

SunCoke seniors price

The day's only dollar-denominated pricing came from SunCoke Energy Partners, LP, a Lisle, Ill.-based manufacturer of the coke used in the blast furnace production of steel. Along with its wholly-owned SunCoke Energy Partners Finance Corp. subsidiary, it priced a $250 million add-on (B1/B+) to the company's existing 7 3/8% senior unsecured notes due Feb. 1, 2020.

High-yield syndicate sources said that the bonds priced at 105.25, in line with pre-deal market price talk of an issue price in the 105 area, plus or minus ½ point. The yield to worst was 6.077%, while the yield to maturity was 6.267%.

The pricing generated proceeds of some $263.125 million.

The deal was announced on Monday and priced after a short roadshow marketing campaign that included investor lunches on Monday in New York and Tuesday in Boston.

It was brought to market via joint bookrunners Citigroup Global Markets Inc., Barclays Capital Inc., Credit Suisse Securities (USA) LLC, J.P. Morgan Securities LLC and RBC Capital Markets Corp.

BofA Merrill Lynch, RBS Securities Inc. and Wells Fargo Securities LLC acted as co-managers on the deal.

The add-on brings the outstanding amount of the 7 3/8% notes to $400 million; SunCoke sold $150 million of the bonds last year, pricing them at par on Jan. 17, 2013. The original bonds priced at a spread of 609 basis points over comparable Treasuries, versus the add-on's spread-to-worst of 433 bps.

SunCoke plans to use a portion of the net proceeds from the offering to fund the cash consideration for its acquisition of an additional 33% ownership interest in each of its Haverhill and Middletown cokemaking facilities and to repay certain debt assumed as part of that transaction from its sponsor, SunCoke Energy, Inc., the parent company of SunCoke Energy Partners' general partner. On Friday, SunCoke Energy Partners announced plans for a cash tender offer for up to $160 million of its $400 million of outstanding 7 5/8% senior notes due 2019.

Medi-Partenaires' euro deal

The day's only other pricing came out of Europe, where French hospital operator Holding Medi-Partenaires priced a €110 million add-on (B2/B) to its existing 7% senior secured notes due May 15, 2020.

High-yield syndicate sources said the add-on priced at 105.25, plus accrued interest from Nov. 15, 2013, generating a yield to maturity of 5.95%.

The actual issuer is Financiere Medicis Lux SA; the notes are to eventually be exchanged for an equal principal amount of notes issued by Medi-Partenaires.

The deal came to market via sole global coordinator Credit Suisse, which will handle billing and delivery, as well as joint bookrunners Commerzbank Capital Markets Corp., Credit Agricole and Goldman Sachs & Co.

The deal had surfaced in the European debt markets on Monday and priced after a short roadshow that included a group meeting on Monday in Paris and a lunch on Tuesday in London.

The add-on deal priced exactly one year to the day after the original €385 million of those notes came to market on April 29, 2013, pricing at par following a short roadshow.

The add-on bonds priced at a spread over their reference security of 516 bps, versus the 633 bps spread for the original notes.

The notes are part of the financing for the acquisition of Medi-Partenaires by Bridgepoint Capital, a London-based private equity firm, which plans to merge it with another health-care company in its portfolio, Medipole Sud Sante. The proposed merger would create the second-largest private hospital operator in France with a network of 60 facilities and 8,500 employees, generating estimated pro forma combined revenues of about €830 million.

Once that that acquisition deal closes, the temporary notes will be automatically exchanged for the Medi-Partenaires notes under the indenture governing the latter's existing 7% notes.

Should that acquisition not take place by Dec. 31, the temporary notes will be subject to special mandatory redemption requirements.

Essar, Forestar hit the road

While those two deals were pricing, primaryside participants saw a pair of prospective new deals emerge.

Syndicate sources said that Essar Steel Minnesota LLC was heard to be beginning a roadshow on Tuesday for its planned offering of $450 million of seven-year senior secured notes.

That deal will be brought to market via joint bookrunners Credit Suisse, Morgan Stanley & Co. Inc. and Jefferies & Co.

The company - an iron ore producer in northern Minnesota, part of the India-based Essar Group conglomerate - plans to use the net proceeds from the offering to complete construction on its facility and begin commercial operations.

Also hitting the road, but on Wednesday, will be Forestar Group Inc., which is marketing a $250 million offering of senior secured notes due 2022.

The sources said that the deal will be brought to market via joint bookrunners Goldman Sachs, KeyBanc Capital Markets Inc. and JPMorgan.

The roadshow is scheduled to run through next Tuesday, May 6. It will start in New York on Wednesday, move on to Boston on Thursday and then move on to Chicago and West Coast stops.

One of the sources said the company is scheduled to report quarterly numbers, and the deal is likely to price next week following those reports.

The offering is expected to carry a B2 rating from Moody's Investors Service and a BB- rating from Standard & Poor's and will be issued through the company's wholly owned Forestar (USA) Real Estate Group Inc. subsidiary.

Forestar is an Austin, Texas-based real estate and oil and natural gas company; a third segment (Natural Resources) has interests in timberlands, wood fiber and water holdings. The company plans to use the net proceeds from the bond sale to repay the term loan portion of its senior secured credit facility, with the remaining proceeds slated for general corporate purposes, including investments in strategic growth opportunities.

SunCoke shines in secondary

When the new SunCoke Energy Partners notes were freed for aftermarket activity, a trader had seen an indication that the bonds were in a 106 ½ to 107 ½ context.

That was up from the 105¼ level at which the notes had come to market.

Two other traders, however, had not seen any initial dealings in SunCoke.

Clear Channel can't climb

Traders said that the new Clear Channel Communications 10% notes due 2018 "were struggling a little bit," as one put it, seeing those bonds trading in a 99½ to 99¾ context, versus their par issue price.

A second trader also quoted the bonds below par at that level - and a third was even more bearish on the new deal, pegging the notes as low as a 98 5/8 to 98 7/8 range.

The San Antonio-based diversified media and entertainment company had priced $850 million of those notes - sharply upsized from an originally announced $400 million - late Monday night via its CCU Escrow Corp. subsidiary, well after most junk participants had long since gone home.

A market source meantime saw the company's established 12% notes due 2021 down 7/8 point on the day, at 103 bid.

He also saw its 7 5/8% notes due 2020 off about 5/8 point at 107 5/8 bid.

Service Corp., CGG trade up

Monday's other two pricings seemed to be hot, even if Clear Channel was not.

A trader said that Service Corp. International's 5 3/8% notes due 2024 got as good as 101 bid, 101 3/8 offered, which he called a 3/8 point gain on the day.

A second saw those bonds at 100½ bid, 101 offered, calling them up from Monday's aftermarket levels around 100¼ to 1001/2.

The Houston-based death-care giant's quick-to-market $550 million offering had priced at par earlier Monday.

Traders also saw better levels for CGG's 6 7/8% notes due 2022. A trader quoted the bonds at 100¾ bid, 101 offered on Tuesday, up 3/8 point on the day, although another locating the bonds at 100 5/8 bid, 101 1/8 offered, said that was only up about 1/16 point or so.

The Paris-based provider of seismic and geophysical advisory services to the oil and natural gas industry had priced its quickly shopped $500 million issue at par on Monday, with one trader seeing the bonds having gained about ½ point in the initial aftermarket dealings, and another seeing a gain of nearly 1 point.

Another quiet day

Traders said that the junk market generally seemed to be stuck in a rut on Tuesday, or, as one of them put it, "in one of those funky trends," with not much overall activity recorded.

Among the factors seen as a drag on the overall activity levels was the continued absence of many portfolio managers and other senior investment executives attending the Milken Institute's annual conference being held this week in Los Angeles, continued market wariness over what kind of statement may come out of the Federal Open Market Committee meeting when it wraps up on Wednesday - financial markets are generally expecting a continuation of recent Fed action to taper off its qualitative easing program by buying less Treasury and mortgage-backed paper than it did the month before - and even what a trader called "the whole NBA soap opera," with the basketball league's commissioner slapping a lifetime ban on the owner of the Los Angeles Clippers for the latter's allegedly racist comments.

"That was the hot topic of conversation around the water cooler," he said of the latter situation, providing one more excuse for people not to trade any bonds.

Another trader opined that "it seems like everybody's chasing after the same bonds. There doesn't seem to be a lot of flow, one way or the other."

He suggested that "a lot of these new deals have just kind of settled in, and there doesn't seem to be a tremendous amount of trading.

"There were a couple of small trades, but nothing really significant here today."

TXU trades around

One exception to that general rule was the bonds of Energy Future Holdings, following its Chapter 11 filing.

The filing had been expected for months, as the company has been struggling under a mountain of debt due to its $45 billion 2007 leveraged buyout - the biggest-ever LBO.

The imminence of the filing grew when the company missed a coupon payment on its Texas Competitive Electric Holdings Co. LLC 15% notes due 2021 in April. The Dallas-based power producer had until May 1 to make a move before being considered in default.

On the news, the bonds were holding in, and even managed to put on a little bit.

"A lot of guys were scrambling around for that stuff," a trader said. He saw the 15% notes holding steady at 241/2, though the unit's 10¼% notes due 2015 inched up half a point to 6.

The trader also saw the parent company's 11¼% notes due 2017 staying around 102, as the 10% notes due 2020 linked to Energy Future Intermediate Holding Co. LLC rose a quarter-point to 1061/2.

And, the legacy TXU Corp. 6½% notes due 2024 jumped 4 points to 37, he said, though on just a few trades.

At another desk, a trader pegged the 10% notes at 1061/2.

Another market source deemed the15% notes unchanged at 24¼ bid, 24½ offered.

Energy Future has been working with creditors for months to develop a plan that would not only speed along the bankruptcy process - given how large the debt structure is - but would also help the company avoid a large tax bill. Part of the plan will spin-off the unregulated unit - which lenders will take ownership of in exchange for forgiving debt - allowing the parent company to avoid the tax liability.

However, that part of the plan is conditioned upon approval from the Internal Revenue Service.

Bondholders will then receive majority ownership in the Energy Future that remains post-spin-off. They will also receive some cash.

The company hopes to complete the bankruptcy process within 11 months.

Indicators mixed to lower

Statistical junk performance indicators were trending lower for most of the day on Tuesday after having turned higher across the board on Monday to buck a recently negative trend.

The Markit Series 22 CDX North American High Yield index dipped by 3/32 point to end at 106 7/8 bid, 106 15/16 offered, after having gained 5/32 point on Monday. On Friday, it had lost 9/32 point, its third consecutive setback.

The KDP High Yield Daily index lost 1 bp to finish at 74.94, after having gained 3 bps on Monday. On Friday, it had dropped by 4 bps, its fourth loss in five sessions.

Its yield was unchanged at 5.2%, after having come in by 1 bp on Monday and having risen by 2 bps on Friday.

However, after the market closed, the widely followed Merrill Lynch High Yield Master II index was reported to have risen by 0.041% on Tuesday, its second straight gain, following Monday's 0.034% advance. Those gains stood in contrast to Friday, when it dipped by 0.008%, suffering its first loss after four consecutive gains.

Tuesday's gain raised the index's year-to-date return to 3.623%, its second consecutive new peak level for the year, surpassing the previous high of 3.581%, seen on Monday.

The index's yield also dropped to a new low for the year of 5.172%. The previous low yield was 5.179%, on April 24.

Stephanie N Rotondo contributed to this report.

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