Much upsized TXU, KB Home lead new-deal drive, trade higher, Schaeffler up next; ATP slides

By Paul Deckelman and Paul A. Harris

New York, Feb. 1 - The junk bond market opened the second month of the year Wednesday with another busy schedule of pricings, including a quickly shopped and massively upsized offering of 10-year secured notes from Energy Future Intermediate Holding Co. LLC - the Texas utility operator formerly and still more familiarly known as TXU. That $800 million transaction, doubled in size from original plans, traded up more than 1 point when the bonds hit the secondary.

Another good performer was KB Home, which did an upsized, quick-to-market $350 million of eight-year paper. That deal also was heard by traders to have firmed solidly in the secondary market.

Also pricing was a $200 million 5.25-year deal from Aurora USA Oil & Gas Inc., an upsized $300 million deal from Spanish casino company Codere Finance (Luxembourg) SA and a $108 million add-on to its 2019 bonds from ambulance service provider Rural/Metro Corp. Aurora and Codere improved a little in the aftermarket, but there was no sign of Rural/Metro.

Ford Credit Canada Ltd. brought a Canadian dollar denominated five-year deal just a day after its U.S. cousin, Ford Motor Credit Co. LLC drove by with its own mega-deal-sized five-year bond issue. Traders saw busy dealings in the latter notes, just above their par issue price.

And German holding company Franz Haniel & Cie. GmbH sold a tranche of six-year notes.

Another German company, Schaeffler Finance BV, a maker of automotive systems and components, is expected to price a big four-part deal on Thursday, which includes dollar-denominated tranches of five- and seven-year senior secured notes, along with similar euro-denominated bonds.

Trading in the new bonds, or whose which have come in the last few sessions, continued to be the major feature of the Junkbondland secondary realm. Away from the new deals, the secondary was seen mostly higher, including statistical performance indicators.

But ATP Oil & Gas Corp.'s bonds were seen down as much as 4 points in very heavy trading, though nobody saw any fresh negative news out about the energy operator.

Energy Future doubles deal

A hard-rallying high yield primary market saw five issuers bring single-tranche dollar-denominated deals on Wednesday, raising a combined total of $1.72 billion.

Energy Future Intermediate Holding Co. LLC and EFIH Finance Inc. priced a massively upsized $800 million issue of 10-year senior secured second-lien notes (Caa1/CC/B) at 98.535 to yield 12%.

The yield printed on top of price talk. The final amount was twice the originally announced $400 million.

Goldman Sachs, Citigroup, J.P. Morgan, Morgan Stanley and Credit Suisse were the joint bookrunners for the quick-to-market debt refinancing deal.

KB Home upsizes

KB Home priced an upsized $350 million issue of 8% eight-year senior notes (B2/B+/B+) at 98.523 to yield 8¼%.

The deal was launched at 8¼% earlier in Wednesday's session. The amount was increased from $250 million.

Credit Suisse, Barclays and Deutsche Bank were the joint bookrunners for the debt refinancing and general corporate purposes deal.

Codere comes atop talk

Spain's Codere Finance priced an upsized $300 million issue of seven-year senior notes (B2/B) at par to yield 9¼%, on top of the price talk.

The deal was upsized from $250 million.

Joint bookrunner Credit Suisse will bill and deliver. Barclays and Banco Itau were also joint bookrunners.

Codere plans to use the proceeds to acquire an additional 35.8% stake in ICELA from Corporacion Interamericana de Entretenimiento, SAB de CV and for general corporate purposes.

Aurora sells five-year deal

Aurora USA Oil & Gas priced a $200 million issue of 9 7/8% five-year senior notes (Caa1/CCC+) at 98.552 to yield 10¼%, also on top of the price talk.

Credit Suisse and UBS were the joint bookrunners.

The Traverse, Mich.-based independent energy company plans to use the proceeds to fund the development of acreage, for general corporate purposes and to fund acquisitions.

Rural/Metro 'a gift'

Rural/Metro Corp. priced $108 million of notes mirroring its existing 10 1/8% senior notes due July 15, 2019 at 86 to yield 13 1/8%.

The reoffer price came at the rich end of the 85 to 86 price talk.

Citigroup, Credit Suisse and RBC were the joint bookrunners.

The mirror notes, which are not fungible with the original $200 million issue that priced at par on June 24, 2011, do however come with the same covenants as those original notes.

Moody's assigned a Caa1 rating to the mirror notes. Standard & Poor's rated the mirror notes at CCC+.

Proceeds will be used to finance the acquisition of Professional Medical Transport and Pacific Bowers, as well as to pay down revolver debt and for general corporate purposes.

The deal was "a gift at 86," according to a fund manager who played.

Initial talk was 90, the manager added, noting that it was a "clubby deal," with three accounts anchoring the book.

"Everybody knew they had to do this deal," the buy-sider said, adding that such circumstances usually allow the buyside to command a princely premium.

Ford Credit in Canada

A day after doing a $1 billion five-year dollar-denominated deal Ford Motor Credit moved north of the 49th Parallel to visit the accounts that play Canadian dollar-denominated deals.

Ford Credit Canada Ltd. priced C$500 million five-year notes (Ba1/BB+/DBRS: BB) at par to yield 4 7/8% on Wednesday.

The notes priced at a spread of 355.2 basis points, in line with guidance of 350 bps to 355 bps area.

RBC was the lead manager. Co-managers were Bank of Nova Scotia, BMO and CIBC.

Franz Haniel inside of talk

In the euro-denominated market, German retailer Franz Haniel priced a €400 million issue of 6¼% six-year fixed-rate notes (Ba1/BB+) at 99.635 to yield 6.325%.

The yield printed 17.5 basis points inside of the tight end of price talk which was set in the 6 5/8% area. The amount was at the low end of the initially announced range of €400 million to €500 million

Deutsche Bank AG, ING and SG CIB managed the quick-to-market deal.

The Duisburg, Germany-based company plans to use the proceeds to refinance debt.

Schaeffler doubles size

Germany's Schaeffler Finance BV doubled the size of its four-part senior secured notes offer to €2 billion equivalent from €1 billion equivalent, and set price talk on Wednesday.

The deal includes dollar- and euro-denominated tranches of non-callable five-year notes.

A $500 million to $800 million tranche of five-year notes is talked to yield 8% to 8¼%. A €500 million to €750 million tranche of five-year notes is talked with a yield in the 8¼% area.

The deal also features dollar- and euro-denominated seven-year notes which come with four years of call protection.

A $500 million to $800 million tranche of seven-year notes is talked to yield 8½% to 8¾%. A €250 million to €500 million tranche of seven-year notes is talked to yield 8¾% to 9%.

The order books for the euro-denominated tranches close at noon London time on Thursday.

The books for dollar tranches close 10 a.m. ET on Thursday.

All four tranches are expected to price on Thursday.

J.P. Morgan, Deutsche Bank, BNP and HSBC are the joint bookrunners.

Headwinds for Samson

Slumping natural gas prices are creating headwinds for Samson Investment Co.'s $2.25 billion two-part offering of senior notes (B1/B), according a high-yield investor who has been looking at the deal, which is expected to price on Friday.

With winter advancing, natural gas prices don't appear to have a lot of room to rally until the 2012-2013 cold season, the buysider remarked, adding that such a protracted timeline for price recovery is generally unpleasing to high yield investors.

No price talk has been released, however discussions are taking place in the neighborhood of 9% to 9½%, the source added.

J.P. Morgan, Bank of America Merrill Lynch, Wells Fargo, BMO, Barclays, Citigroup, Credit Suisse, Mizuho, RBC and Jefferies are the joint bookrunners.

Kansas City Southern appears not to be headed to the junk bond market, after all.

The railroad was expected to fund the $275 million tender offer for its 8% notes due in 2015 in the junk bond market. However it appears to have opted for a loan instead, according to a fund manager who plays both bonds and loans.

Standard & Poor's assigned a BBB- rating to Kansas City Southern Railroad's proposed $275 million senior secured term loan due Jan. 15, 2017, the source said.

In addition to the rating, which appeared late Wednesday, the dealers have been coy when quizzed about how the railroad planned to fund the tender.

J.P. Morgan, the dealer-manager for the tender, will likely lead the loan, the investor said.

New deals dominate secondary

A trader said that trading in newly priced paper was the main focus in the secondary market on Wednesday.

"It's all new deals," he said. "It seems like everybody's waiting for a deal to price, and then you have this window of an hour [after the pricing] where all anyone is doing is adding, buying, or flipping the new issue.

"And then they all crawl back in their caves until the same thing happens tomorrow."

Upsized TXU trades up

The biggest deal of the day was seen having moved up from its issue price, with a trader quoting Energy Future Intermediate's 10-year second-lien notes at 99 5/8 bid, par offered, up from the 98.535 level at which the company and EFIH Finance Inc., another unit of Energy Future Holdings Corp. - the old TXU Corp. - had priced those bonds.

He said that after the $800 million offering, doubled in size from the originally shopped $400 million, priced, "they traded at par a few times, and then at 993/4, before kind of settling in to a little bit under par."

A second trader said that he "didn't see TXU do much of anything," staying around the par level.

A market source saw the existing paper of Dallas-based parent company Energy Future Holdings better on the day, with its 6.55% bonds due 2034 gaining 1¾ points on the session to end at 46¾ bid, while another TXU subsidiary, Texas Competitive Electric Holdings Co.'s 10¼% notes due 2015, traded at 30½ bid, up ¼ point. Nearly $18 million of those bonds traded, putting the issue on the junk most-actives list.

KB Home climbs

A trader saw KB Home's new eight-year notes trading up to 99¾ bid, 100½ offered.

A second trader originally saw that upsized $350 million issue at 99¾ bid, 100¾ offered, then they moved up to par bid, 100¾ offered - well above the 98.523 level at which the Los Angeles-based home builder priced, after having been upsized from the originally announced $250 million size.

Aurora quietly up a little

There was little trading seen in the new Aurora USA Oil & Gas notes due 2017.

Two separate traders said that all they had seen on the Traverse, Mich.-based energy company's $200 million issue was a 99 bid, up a little from the 98.552 level where those bonds had priced earlier in the session.

Cordere seen firmer

The new seven-year bonds priced by Cordere Finance (Luxembourg), a unit of Spanish gaming company Cordere, were seen by a trader having moved up a little to 100½ bid, 101 offered after pricing at par.

He later saw those bonds up a little at 100¼ bid, 100 3/8 offered.

Rural/Metro a no-show

Several traders said they saw no trace of the new Rural/Metro 2019 add-on bonds, $108 million of which priced at a deeply-discounted 86.

The Scottsdale, Ariz.-based ambulance and private fire protection services provider's bonds had been upsized from an original $95 million.

Ford trades a little higher

Looking at the deals which came to market during Tuesday's session, a trader said that Ford Motor Credit's 4¼% notes due 2017 had moved up slightly from the levels they held at the end of trading Tuesday.

He saw the $1 billion offering from the automotive finance arm of Dearborn, Mich.-based car- making giant Ford Motor Co. get as good as 100 5/8 bid before backing down to 100¼ bid, 100½ offered.

A second trader said that the new Ford Credit issue was "maybe the busiest bond today" on some 91 trades recorded on the Trace system. He too saw the notes at 100¼ bid, 100½ offered.

That was up slightly from the 100 1/8 bid, 100 3/8 offered level seen in Tuesday's aftermarket, after the issue had priced at par.

Ford Credit's 7% notes due 2013 meantime firmed by 1¼ points to 108½ bid.

Other Tuesday deals seen

Among the other deals that priced on Tuesday, a trader said that Mediacom Communications Corp.'s new 7¼% notes due 2022 were trading Wednesday at 100¼ bid, 100 5/8 offered.

That was in a little bit from the 100¾ bid, 101¼ level at which the Middletown, N.Y.-based cable and broadband operator's quickly-shopped $250 million deal - upsized from $200 million originally - traded in the aftermarket following their pricing at par.

A second trader saw them Wednesday at 100½ bid.

A trader saw Univision Communications Inc.'s 6 7/8% add-on notes due 2019 at 99¾ bid, 100 offered.

The Los Angeles-based Spanish-language TV broadcaster's $600 million offering - upsized from $400 million originally shopped - had priced on Tuesday at 99.251 to yield 7.006%.

However, a second trader saw no trace of either Univision or Tuesday's other Spanish-language media deal - Spanish Broadcasting System Inc.'s 12½% first-lien senior secured notes due 2017. The Coconut Grove, Fla.-based Hispanic radio station operator's $275 million issue had priced at 97 to yield 13.332%, and then had moved up in the aftermarket to par bid, 101 offered.

Yet another trader said he had seen those bonds at 100½ late in the day on Tuesday - but did not see them on Wednesday.

A trader pronounced Dutch cable operator UPCB Finance VI Ltd.'s 6 7/8% senior secured notes due 2022 "a lock" at 101 1/8 on Wednesday, although a second did not see the deal trading around.

The unit of Englewood, Colo.-based media conglomerate Liberty Global Inc. had priced its quickly shopped $750 million deal at par on Tuesday, with the new bonds trading up to 100 5/8 bid, 100 7/8 offered in the secondary.

Post, JBS hold gains

Going back a bit further, a trader saw that Post Holdings Inc.'s well-received 7 3/8% notes due 2022 remained popular with investors several days after the St. Louis-based breakfast cereal maker had priced its $775 million deal.

He saw the bonds at 104 1/8 bid, 104 3/8 offered late Tuesday.

Those bonds had priced at par on Friday, then zoomed to 103 5/8 bid, 103 7/8 offered in the aftermarket, continuing to add marginally to those hefty initial gains in trading so far this week.

And he saw JBS USA LLC's 8 ¼% notes due 2020 at 101 bid.

The Greeley, Colo.-based unit of Brazilian meat-processing giant JBS SA priced its $700 million offering, upsized from $400 million originally, at 98.569 last Wednesday to yield 8½%.

Those bonds had moved up to 100¼ bid, 100¾ offered when they were freed to trade, then had moved up to the 101 level by Friday, and have stayed there since then.

ATP bonds battered

Away from the new-issue world, a trader said that the big news was a slide in ATP Oil & Gas Corp.'s 11 7/8% second-lien notes due 2015. He saw them down at least 2 or 3 points, around the 61 bid level, though he saw no fresh negative news on the Houston-based offshore energy exploration and production company.

He surmised that ATP was off in response to continued weak energy prices.

"Their stock was down a lot," he noted - those Nasdaq-traded shares were in fact 66 cents in the red, or 9.37% on the day, at $6.38, on volume of 6.2 million shares, almost triple the norm.

A market source at another desk also saw the bonds at 61, calling that a 4 point slide. He said that over $57 million of ATP bonds had traded, making it the busiest junk issue of the day by far.

Also in the energy sphere, Chesapeake Energy Corp.'s bonds were in retreat, as "gas prices got crushed," a trader said. The Oklahoma City-based natural gas operator's 6 1/8% notes due 2021 were down more than a point, finishing just below 99 bid, on volume of over $37 million.

Market indicators up

Energy aside, statistical measures of junk market performance, which were lower on Monday and mixed on Tuesday, were back in the black on Wednesday.

A trader saw the CDX North American Series 17 High Yield index up by ¼ point for a second straight session on Wednesday, finishing at 97 3/8 bid, 97 5/8 offered.

The KDP High Yield Daily Index gained 16 basis points Wednesday to close at 73.91, after losing 3 bps on Tuesday, while its yield declined by 7 bps to 6.80%, after having increased by 2 bps Tuesday.

And the widely-followed Merrill Lynch High Yield Master II Index was up by 0.17% on Wednesday, its second straight gain, on top of the 0.121% rise seen on Tuesday. On Monday, the index had posted its first decline in 11 consecutive sessions.

The latest gain lifted its year-to-date return to 3.078% - a new peak level for 2012 so far, and the first time that it has moved above the 3% mark. It was up from the previous peak level of 2.903%, seen on Tuesday.

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