MarkWest drives by with $1 billion deal, moves up; Energy Solutions gains on acquisition news

By Paul Deckelman and Paul A. Harris

New York, Jan. 7- The high-yield primary sphere began the first full trading week of 2013 with its first megadeal-sized offering on Monday, as MarkWest Energy Partners, LP brought a quickly shopped $1 billion of 10-year bonds to market.

Despite a relatively stingy coupon in the below 5% range, the oil and gas operator's new deal attracted considerable investor interest, with over $100 million of the notes changing hands after the bonds were freed to trade. The new bonds were seen by traders to have firmed solidly from their issue price.

Last week's deal from Crown Holdings, Inc. - Junkbondland's first pricing of the year - was seen pretty much holding onto the gains it had notched in the aftermarket.

Away from the deals actually priced, high-yield syndicate sources said that telecommunications clearinghouse operator NeuStar, Inc. has begun a roadshow for a $300 million offering of 10-year notes, while ice cream maker Wells Enterprises Inc. and energy operator Rockies Express Pipeline LLC will both hit the road at mid-week. All of those deals are tentatively scheduled to price later this week.

Flash Dutch 2 and U.S. Coatings Acquisition Inc. will begin a roadshow in Europe this week and in the United States next week for their $1.4 billion-equivalent two-part transaction, the proceeds of which will be used to fund the acquisition of chemical giant DuPont's industrial and vehicle coatings division.

Apart from the new-issue world, traders saw sharp gains in Energy Solutions Inc.'s bonds on the news that the company, which provides varied services to the nuclear power industry, has agreed to be acquired.

Also on the M&A front, there was continued activity in Supervalu, Inc.'s bonds, spurred by Friday's news reports that the supermarket operator was nearing a deal to sell some assets to Cerberus Capital Management LP.

Statistical indicators of junk market performance were firmer across the board.

MarkWest Energy prices

MarkWest Energy Partners and MarkWest Energy Finance Corp. brought the only deal that priced on Monday - a quick-to-market $1 billion issue of non-callable 10.5-year senior notes (Ba3/BB/BB). They priced at par to yield 4½%.

The yield printed at the tight end of the 4½% to 4 5/8% yield talk.

Barclays was the left bookrunner.

Bank of America Merrill Lynch, , Citigroup, Goldman Sachs, J.P. Morgan, Morgan Stanley, Natixis, RBC, SunTrust, UBS, U.S. Bancorp and Wells Fargo were the joint bookrunners.

Proceeds will be used for general partnership purposes, including capital expenditures and refinancing debt, which may include a make-whole call of the company's outstanding senior notes due 2018 and equity claw redemptions for a portion of its outstanding notes due 2021 and 2022.

In the crossover market, M.D.C. Holdings, Inc. priced $250 million of split-rated 30-year senior notes (Baa3/BB+/BBB-) at par to yield 6%, via Citigroup.

DuPont announces roadshow

Although Monday's MarkWest deal was only the second junk issue to price thus far in 2013, the new issue tumblers will soon begin rolling.

The forward calendar saw a vigorous buildup.

DuPont Performance Coatings announced an international roadshow on Monday for $1.4 billion-equivalent of high yield notes.

The roadshow is set to run during the present week in Europe and during the Jan. 14 week in the United States.

The deal includes a €230 million offering of eight-year senior secured notes and a $1.1 billion offering of 8.25-year senior unsecured notes.

Credit Suisse, Deutsche Bank, Citigroup, Barclays, UBS, Morgan Stanley, Jefferies and SMBC are the joint bookrunners.

Proceeds will be used to help fund Carlyle Group's acquisition of DuPont's performance coatings business.

Rockies Express Pipeline

Rockies Express Pipeline plans to hold an investor conference call on Wednesday for its $525 million offering of non-callable six-year senior notes (expected ratings Ba2/BB).

The deal is set to price late in the present week.

Merrill Lynch, Barclays and Credit Suisse are the joint bookrunners.

The Houston-based natural gas pipeline operator plans to use the proceeds to finance the redemption of its 6¼% notes due 2013 and for general corporate purposes.

NeuStar starts roadshow

NeuStar began a roadshow on Monday for its $300 million offering of 10-year senior notes (expected ratings Ba3/B+).

The deal is set to price midweek to later in the week.

J.P. Morgan, Morgan Stanley and RBC are the joint bookrunners for the debt refinancing deal.

Wells Enterprises deal

Wells Enterprises plans to host and investor luncheon and an investor conference call on Wednesday for its $235 million offering of seven-year senior secured notes, expected to price early in the Jan. 14 week.

BMO and Wells Fargo are the joint bookrunners.

The Le Mars, Iowa-based ice cream maker plans to use the proceeds to refinance debt, as well as to fund a dividend and for general corporate purposes including capital expenditures.

Fresenius starts Tuesday

DuPont was not the only prospective issuer to roll out a euro-denominated tranche on Monday.

Fresenius Finance BV plans to start a roadshow on Tuesday in Frankfurt, Germany, for its €500 million offering of non-callable 7.5-year senior notes (expected ratings Ba1/BB+).

Joint lead manager Deutsche Bank will bill and deliver for the debt refinancing deal. JPMorgan, SG CIB, Credit Suisse and UniCredit are also joint lead managers.

New Mark West notes move up

When MarkWest Energy Partners' new 4½% notes due 2023 were freed for secondary dealings, a trader said that the oil and gas company's deal "traded up about a point-ish" after pricing earlier in the session at par.

He saw a low tick around 100¾ bid, then saw the bonds going out in a 101 3/8-to-101¾ bid context., although most of the day's activity took place between 101 and 1011/4.

He saw heavy dealings of over $100 million in the new credit.

A second trader said that the new MarkWest bonds "did very well," seeing them around 101½ bid, 102 offered late in the session. He added that it "wouldn't surprise him" if volume was heavy, since "pretty much every [large] new deal" sees brisk activity.

Among the company's existing bonds, some of which are being tendered for using the proceeds from the new deal, the first trader said that "a small amount" of the 6½% notes due 2021 traded around 108½ bid, 109 offered, although he didn't see any dealings in the other bonds involved in the tender: the 8¾% notes due 2018 and the 6¼% notes due 2022.

Crown bonds hold gains

A trader saw the new Crown Holdings bonds that priced on Thursday - also 4½% notes due 2023 - continuing to hold above the 101 bid mark, thus keeping most of the gains that paper had notched in initial aftermarket dealings on Thursday and follow-up activity on Friday.

He saw the bonds at "a 101¼ lock all day; it traded into the bid or offering, lifted sporadically."

He said that all the trades he saw were at 101¼ bid, "a tad off the high where they broke and kind of in line with what you're seeing on the MarkWest."

Crown, a Philadelphia-based maker of beverage cans and other consumer packaging products, priced $800 million of the bonds - upsized from an initially shopped $500 million - at par on Thursday in a quick-to-market transaction via its Crown Americas LLC and Crown Americas Capital Corp. IV subsidiaries.

The bonds were initially quoted at 101 bid when they were freed, although another trader saw them get as good as 101 5/8 bid, 102 offered. They dropped back to a little above 101 in Friday's dealings.

Less busy than expected

One of the traders said that although there had been expectations last week that activity would pick up radically this week now that the New Year's holiday is history, "accounts came in and probably everybody came in this week looking forward to some more action than we've gotten."

"So far, you've gotten just this [MarkWest] deal and so, if you're a seller, you're not going to hit a bid at the moment because you're not getting anything to replace it with. And if you're a buyer, you're hoping to draw someone in cheap enough to do a trade with, or just get an offering to work with.

"So it's a very much slower day than I expected," the trader added.

Energy Solutions jumps

Away from the new-deal arena, a trader said that one of the big names of the session was Energy Solutions, whose 10¾% notes due 2018 zoomed by about 7 points on the news that the Salt Lake City-based company is to be acquired by a subsidiary of Energy Capital Partners II, LLC in a transaction with an enterprise value of $1.1 billion.

He saw the bonds push up to 102 bid, 103 offered.

A second trader pegged the bonds at 103 bid, going home, a gain of 7½ points on the day. The company's New York Stock Exchange traded shares were up 29 cents, or 8.43%, to end at $3.73. Volume of 13.2 million shares was about 13 times the norm.

Under the terms of the agreement, shareholders of Energy Solutions, which provides a range of services to the nuclear power industry, including decommissioning, site closure and nuclear waste transportation and storage, will receive $3.75 in cash for each share of common stock, representing a premium of about 20% over the average closing share price of Energy Solutions' common stock for the 30 days ended this past Friday.

Supervalu strong on Cerberus talk

Also among the credits with merger and acquisition news attached to them, Supervalu continued to move up, at least marginally, in the wake of news that came out on Friday regarding the Eden Prairie, Minn.-based supermarket operator's attempts to sell itself or parts of itself.

One trader pegged its 8% notes due 2016 at 97½ bid, 98 offered. Another trader called the 2016 maturity up a touch, also at 97½ bid, 98 offered.

The second trader also saw the 7½% notes due 2014 closing around 99.

"I think you would have already seen some of the uptick in pricing if you had stuck around late Friday," he said, remarking that Monday's gains were not all that sizable.

Yet another trader agreed that there was "not a ton" of trading going on in the company's bonds on Monday. He said the notes were "off their highs" reached on Friday.

He saw the 8s at 97¾ bid and the 71/2s at 991/4, but called those levels down 1/8 of a point.

"Generally, it wasn't very active today, not a big follow-through day," he said.

On Friday, news reports said that Supervalu and Cerberus were nearing a deal through which Supervalu would sell certain parts of itself to Cerberus.

Cerberus was also considering taking an equity stake of up to $500 million in what remained of the struggling company.

Supervalu is scheduled to release quarterly results on Thursday.

Market signs remain strong

Statistical junk market performance indicators were higher across the board for a second consecutive session on Monday.

The Markit Series 19 CDX North American High Yield index gained 1/16 of a point for a second straight session on Monday to finish at 102 7/16 bid, 102 9/16 offered.

The KDP High Yield Daily Index rose for a fifth consecutive session on Monday, gaining 7 basis points for a third straight time to end at 75.79. Its yield came in by 3 bps, to 5.55%, for its fourth straight decline. On Friday, it had narrowed by 1 bp.

And the widely followed Merrill Lynch U.S. High Yield Master II Index posted its fifth straight gain on Monday, rising by 0.166% on top of Friday's 0.075% advance.

That lifted its year-to-date return to 0.872%, a new peak level for the year so far, from 0.704% on Friday.

The index's yield to worst continued to decline on Monday, coming in to 5.873% from Friday's 5.891%, while its spread to worst versus the comparable Treasury issues tightened to 495 bps from 497 bps the day before.

Stephanie N. Rotondo contributed to this report

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