Upsized Teekay closes out busy primary week, moves up; activity tapers before holiday break

By Paul Deckelman and Paul A. Harris

New York, Jan. 15 - Teekay Corp. priced an upsized offering of 10-year notes on Friday to close out an extremely busy week which saw more than $9 billion of new bonds pricing.

When the Bermuda-based tanker company's new bonds were freed for secondary dealings, they were seen having moved up on the session.

Several other new or recently priced bonds were also seen trading at higher levels, notably Ford Motor Credit Co.'s add-on issue of 10-year notes, which priced on Thursday. Brocade Communications Systems Inc.'s two-part deal, which priced on Wednesday, continued to trade at solidly firmer levels. However, Hexion U.S. Finance Corp.'s new $1 billion issue of senior secured bonds, which priced on Thursday, were seen having initially firmed when freed for secondary dealings, only to "give it all back," in the words of one trader, ending little changed on the day.

Icahn Enterprises LP/Icahn Enterprises Finance Corp.'s mammoth $2 billion issue meantime retreated from the levels it held on Thursday, putting the New York-based holding company's new bonds still further down from the levels at which they had priced on Tuesday.

New York-based Equinox Holdings, Inc. announced plans for an offering of six-year secured notes. Syndicate sources later heard that the new bonds are likely to price in the upcoming week.

Traders saw only muted dealings in the non-new-deal secondary market.

And they said that overall market activity rapidly dwindled in the afternoon, ahead of the three-day Martin Luther King Day holiday break, which will see U.S. financial markets shuttered on Monday.

Teekay beats talk

During Friday's comparatively quiet primary market session Teekay Corp. priced an upsized $450 million issue of 8½% 10-year senior notes (B1/BB) at 99.181 to yield 8 5/8%, capping a week that saw high-yield issuers raise nearly $6.75 billion in 18 dollar-denominated tranches.

The Teekay deal priced 12.5 basis points richer than the 8¾% to 9% price talk.

JPMorgan, Citigroup and Deutsche Bank Securities were joint bookrunners. BNP Paribas, DnB, ING and Scotia Capital were co-managers.

Proceeds will be used to fund a tender offer for the Hamilton, Bermuda-based tanker company's 8 7/8% notes due 2011.

Equinox to bring $400 million

There were a couple of new deal announcements on Friday.

Equinox Holdings, Inc. will host at 11 a.m. ET investor call on Tuesday for its $400 million offering of six-year second-lien senior secured notes.

The deal is set to price during the week ahead.

Morgan Stanley and Citadel Securities are joint bookrunners for the debt refinancing deal from the New York City-based exercise and fitness company.

Kerling plans €785 million

Meanwhile Kerling plc will run roadshows in Europe and the United States in the week ahead for its €785 million offering of seven-year senior secured notes (B3).

Barclays Capital and Bank of America Merrill Lynch are joint bookrunners.

Proceeds will be used to finance the acquisition of Ineos ChlorVinyls, as well as to refinance debt related to the acquisition of Norsk Hydro's polymer business, and to refinance Ineos ChlorVinyl's debt.

Kerling, the renamed parent of Ineos Norway, is a U.K.-based chemical company.

The week ahead

Syndicate bankers look for the primary market's pace to remain vigorous, during the week ahead.

In addition to the above-mentioned Equinox and Kerling offers, deals that have already been announced as business to be transacted prior to the Jan. 22 close include:

• Vanguard Health Holding Co. II, LLC and Vanguard Holding Co. II, Inc.'s $1 billion 10-year senior notes offer via Bank of America Merrill Lynch, Barclays Capital Inc., Citigroup Global Markets Inc., Deutsche Bank Securities Inc., Goldman Sachs & Co. and Morgan Stanley;

• Fage USA Dairy Industry, Inc. and Fage Dairy Industry SA's $150 million 10-year senior notes due 2020 (B-) via Citigroup;

• MU Finance plc (Manchester United)'s expected £500 million equivalent seven-year senior secured notes, led by JPMorgan, Bank of America Merrill Lynch, Deutsche Bank Securities, Goldman Sachs & Co. and RBS Securities; and

• China's Evergrande Real Estate Group Ltd., with a dollar-denominated offering of senior notes, via Bank of America Merrill Lynch, Goldman Sachs & Co. (Asia) and BOC International.

New Teeky bonds trade higher

When the new Teekay 8½% notes due 2020 were freed for secondary market dealings, a trader saw the tanker fleet company's issue get as good as 102 1/8 bid - well up from the 99.181 level at which they had priced.

However, he said that as the day wore on - and market participants remembered or realized that they were looking at a three-day break, including Monday's legal holiday - "we started losing people early. So it traded a few times at 102 1/8," before coming down from that peak level. He said the bonds were going home at 101¾ bid, 102¼ offered.

Thursday's Ford Credit firms up

A trader saw "some pretty good activity" in the new Ford Motor Credit 8 1/8% notes due 2010 at bid levels between 100¾ and 101 during the afternoon, versus the par-101 context in which the bonds were seen trading on Thursday, and "now they're kind of moving their way up," he said.

The Dearborn, Mich.-based automotive funding arm of Number-Two domestic carmaker Ford Motor Co. had priced $500 million of the notes - upsized from the originally shopped $250 million - on Thursday at par, as an add-on to the $750 million of identical notes which Ford Credit had sold last month, making the combined issue size now $1.25 billion.

Hexion higher, then not

Thursday's $1 billion deal for Columbus, Ohio-based specialty chemicals producer Hexion came too late in the session for any meaningful aftermarket activity that day - although one trader did see those 8 7/8% senior secured notes due 2018 having gotten as good as 100¾ bid, up from the 99.296 level at which the issue had priced a little while earlier to yield 9%. However, he saw the bonds as having come down from their peak levels, to close at 99½ bid, 100½ offered.

In Friday's dealings, a trader said that although "last night, the bonds broke as good as 100 5/8 bid, 100 7/8 offered, then they gave it all back."

He saw the paper trading at 99¼ bid, 99¾ offered - just a little bit above issue.

A second trader pegged those bonds at 99 3/8 bid, 99¾ offered.

Brocade remains well bid

A trader said that Brocade Communications' new two-part bond issue continued to trade well above the levels at which the San Jose, Calif.-based networking solutions company's $600 million two-part senior secured notes deal had priced on Wednesday.

Joking that the split-rated deal - rated at Ba2 by Moody?s Investors' service and BBB- by Standard & Poor's - was "too high quality for my blood," he quoted its $300 million of 6 5/8% notes due 2017 at 101¼ bid, 101¾ offered, well up from the 99.239 level at which those notes had priced late Wednesday to yield 6¾%.

He meantime also saw its $300 million of new 6 7/8% notes due 2020 at 102 bid, 102½ offered, also well up from their Wednesday pricing point of 99.114, which yielded 7%.

The bonds were said to have attracted interest from both high-yield accounts and high-grade investors.

Another trader, however, said that he had not seen "a single thing" Friday in the Brocade bonds

Icahn the 'dog of the week'

Any hopes on the part of market participants that the big Icahn Enterprises two-part mega-deal might finally get out its own way and actually trade at or even above issue were dashed on Friday, when the bonds retreated from the somewhat better levels they had staked out on Thursday.

A trader saw billionaire investor Carl C. Icahn?s New York-based holding company's $850 million of 7¾% notes due 2016 trading Friday at 98¼ bid, 98¾ offered, while its $1.5 billion of 8% notes due 2018 were at 97¾ id, 98¼ offered.

The new 2016 bonds had priced on Tuesday at 99.411 to yield 7 7/8%, while the 2018 paper priced at 99.275 to yield 8 1/8%. However, when the new bonds broke into secondary, they were quoted trading around 97¾ bid for the six-years and 97½ bid for the eight-years, ultimately ending that first session at 98½ bid, 98 7/8 offered for the sixes and 98 bid, 98½ offered for the eights. They continued to struggle all week - although at one point, a trader suggested that the bonds were "slowly swimming to the surface," posting modest gains from previous levels and thus might be able to get back above issue by Friday, which did not happen.

Another trader, thus, declared that the much-ballyhooed, but ultimately disappointing Icahn offering was definitely the "dog of the week."

Market indicators move lower

Among established bonds, a trader saw the CDX Series 13 index down 3/8 point for a second straight session on Friday, ending at 99¾ bid, 100¼ offered. The index thus gave up ground during the week to end below its closing level the previous Friday, Jan. 8, of 100 3/8 bid, 100 7/8 offered.

The KDP High Yield Daily Index meanwhile lost 16 basis points on Friday to 72.03, after having eased by 2 bps on Thursday. Its yield widened by 7 bps to 7.86%, after having edged up by 1 bp the previous session. At the end of the prior week, the index stood at 72.10, with a 7.81% yield.

Advancing issues led decliners for a third straight session on Friday, but only by less than two dozen issues out of the more than 1,300 tracked.

Overall market activity, as measured by dollar volume levels, fell 26% from Thursday's pace.

A trader characterized Friday's secondary market as "a little weaker."

Another said it was "pretty much dead. There were a few little things here and there, but after the morning rush, it's really started to quiet down," especially, he noted, "as people realized or remembered that we were going into a three-day weekend."

After that, he said, there was trading in a few things - maybe $1 million or $2 million - but it was "nothing stellar."

Friday's session was curious in that while it preceded a Monday legal holiday, officially, it was just another day for junk marketeers, at least according to the Securities Industry and Financial Markets Association. The bond market industry group last year decreed that the traditional abbreviated session preceding certain holidays, including Martin Luther King Day and next month's Presidents' Day observances, would be abolished.

However. the trader said, "maybe you can take the early close away from the bond market - but you can't take it out of the bond market. Once you hit around noon time in New York, everything stopped," and people began leaving in droves after that as activity dwindled.

"It's hard to break good traditions," the trader said, "and the early close before a three-day weekend is definitely a good tradition."

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