SunCoke Energy, Trader, Capsugel price, North Atlantic on tap; OPTI zooms on Cnooc sale plan

By Paul Deckelman and Paul A. Harris

New York, July 20 - SunCoke Energy, Inc. priced a $400 million offering of eight-year notes in the high-yield market on Wednesday. However, the Lisle, Ill.-based metallurgical coke producer's deal came to market too late in the session for an aftermarket.

Also pricing was a U.S. dollar-denominated deal from Canadian print and online media publisher Trader Corp.; however, there was no aftermarket seen in that upsized $290 million deal either.

In a relatively rare switch from the usual pattern, U.S.-based pharmaceutical issuer Capsugel FinanceCo SCA came in with a euro-denominated eight-year offering - also not seen trading around later.

The syndicate sources said price talk surfaced on tobacco company North Atlantic Trading Co. Inc.'s $285 million two-part secured paper transaction, which is expected to price on Thursday morning.

The forward calendar gained a deal and lost one, as Chicago industrial manufacturer Tempel Steel Co. began shopping around a $130 million five-year deal.

However, Belgian cable operator Coditel Holdings SA postponed its planned €260 million secured bond deal.

The Junkbondland secondary market was seen firm, with gains posted in the major statistical measures.

Among specific names, OPTI Canada, Inc.'s bonds jumped by around a dozen points, on the news that China's Cnooc oil company had agreed to buy the beleaguered Canadian oil-sands energy producer in a $2.1 billion transaction, including assumed debt.

SunCoke prices at the tight end

The high-yield market saw notable executions on Wednesday, as one deal was upsized, one priced inside of price talk and another priced at the tight end of price talk.

The dollar-denominated market saw a pair of issuers raise $688 million, each one pricing a single tranche of notes.

SunCoke Energy sold a $400 million issue of eight-year senior notes (B1/B+) at par to yield 7 5/8%.

The yield printed at the tight end of price talk which had been set in the 7¾% area.

J.P. Morgan, Credit Suisse, Barclays, Citigroup and RBS were the joint bookrunners.

The Lisle, Ill.-based producer of metallurgical coke plans to use the proceeds to repay intercompany debt to Sunoco, Inc. and for general corporate purposes.

Trader upsizes

Trader Corp. priced an upsized $290 million issue of 9 7/8% seven-year senior secured notes (B3/B) at 99.367 to yield 10%.

The deal played to very strong demand, according to an informed source.

The yield printed on top of the price talk and the issue was upsized from $275 million.

A special call provision which would have allowed the issuer to redeem 10% of the notes annually at 103 during the non-call period has been removed.

RBC was the bookrunner for the acquisition financing.

Capsugel prices inside talk

In the euro-denominated market Capsugel priced a €325 million issue of eight-year senior notes (Caa1/B) at par to yield 9 7/8%.

The yield printed 12.5 basis points beneath the low end of the 10% to 10¼% price talk.

Barclays, Deutsche Bank, UBS, Mizuho and KKR Capital Markets were the joint bookrunners for the LBO deal.

In spite of Wednesday's notable executions the new issue market is apt to be a relatively quiet one in the near to intermediate future, syndicate officials warned, citing European credit worries and perceived weakness in the U.S. economy as being among the reasons.

North Atlantic sets talk

Looking ahead to the Thursday session, North Atlantic Trading set price talk for its $285 million two-part offering of senior secured notes on Wednesday.

A $205 million tranche of five-year second-lien notes (B2/B-) is talked with an 11½% coupon at an issue price of 98 to yield in the 12% area.

An $80 million tranche of 5.5-year third-lien notes (Caa2/CCC) is talked with an 11% cash coupon and an 8% PIK coupon at 97 to yield in the 20% area.

Jefferies is the bookrunner for the debt refinancing deal, which is set to price Thursday morning.

Tempel Steel starts roadshow

Jefferies is also the bookrunner for a new deal from Tempel Steel.

The Chicago-based company began a roadshow on Wednesday for its $130 million offering of five-year senior secured notes (expected ratings B3/B).

Proceeds, together with a $30 million equity contribution from shareholders, will be used to refinance the company's existing credit facility.

Coditel postpones

Belgian cable operator Coditel postponed its €260 million offering of seven-year senior secured notes (B3/B/B+), an informed source said on Wednesday.

The deal had been talked with an all-in yield in the 10½% area, at a possible discount.

Market sources said that the transaction, which was expected to be completed late last week, had struggled and that the issuer had considered structural changes.

The deal had at least six turns of leverage, which made it a challenge in the present market, sources said.

One structural change that was under consideration, before the deal was pulled, had the bonds downsizing to €200 million, with the remainder of the proceeds reverting to mezzanine financing, according to a sell-side source in Europe.

Morgan Stanley and ING were the bookrunners.

Proceeds were to have been used to finance the acquisition of Belgian and Luxembourg cable assets from France's Numericable.

SunCoke, Trader deals unseen

Due to the relative lateness of the hour at which they hit the tape, traders saw no aftermarket activity in either SunCoke Energy's $400 million of eight-year notes, or Trader Corp.'s upsized $290 million offering of seven-year senior secured notes.

Recent deals hold steady

A market source said that he had not seen any specific levels Wednesday on recent new deals from issuers such as SRA International, Inc., Warner Music Group Corp. unit WMG Acquisition Corp., Level 3 Escrow Inc., Exam Works Group, Inc. and Dynacast International LLC/Dynacast Finance Inc.

He surmised those bonds were trading around the same levels they had occupied on Tuesday - multiple points up from their respective issue prices.

Market indicators stay strong

Away from the new-deal arena, traders saw market statistical indicators, which had firmed on Tuesday, building on that momentum on Wednesday.

A trader saw the CDX North American Series 16 HY Index up by 7/16 of a point on Wednesday to close out at 100¾ bid, 100 7/8 offered, on top of the 9/16 of a point gain notched on Tuesday.

The KDP High Yield Daily Index surged by 13 basis points on Wednesday to finish at 75.43, after having gained 3 bps on Tuesday. Its yield came down by 6 bps to 6.70%, after having come in by 1 bp Tuesday.

The Merrill Lynch High Yield Master II Index finished on the upside for a second straight session on Wednesday, posting a hefty 0.133% gain, on top of Tuesday's 0.032% advance, which followed Monday's 0.05% loss.

That gain lifted its year-date return to 5.848% on Wednesday from Tuesday's close at 5.707%. It was the highest close in nearly seven weeks, since the 5.899% reading recorded on June 2. However, that cumulative return figure still remains below its year-to-date peak level of 6.071%, which was reached back on May 20.

OPTI booms on buyout

Traders said that the only actual news and real activity in the market came from OPTI Canada, whose bondholders opened their fortune cookies on Wednesday and found the message "Your troubled company is going to be bought" - by China National Offshore Oil Corp. That sent the bonds of the beleaguered Calgary, Alta.-based oil-sands energy producer soaring by a dozen points or more.

A trader saw "a gazillion" dollars worth of OPTI Canada bonds trading on the news of the deal, which will see CNOOC pay about $2.1 billion - $34 million to OPTI's shareholders for all of the bankrupt company's equity plus more than $2 billion of assumed debt.

Another trader called it "the hot name of the day, and pegged the 8¼% notes due 2014 at 65 bid, up 11 points, with over $165 million of the bonds traded. He also saw its 7 7/8% notes due 2014 up 12 points on the day at that same 65 level, with $67 million traded.

The first trader, noting that the bonds had recently been on the rise from their lows in the 40s less than a month ago, said "God help any people who were short - very painful for them."

He said that with little else going on, "OPTI kept a lot of people very busy today, as it whooshed up."

News of the deal comes a week after the bankruptcy filing by OPTI, which has been struggling for several years with the consequences of the slower-than-expected ramp-up of bitumen crude oil production at its oil-sands conversion plant in Long Lake, Alta., owned 35% by OPTI and 65% by Nexen Inc.

We are very pleased with this transaction and believe it is in OPTI's best interest," said Chris Slubicki, president and chief executive of OPTI, in a statement. "Cnooc Ltd. is a technically experienced and well-capitalized company that is equipped to support further development at Long Lake and future expansions in the Canadian oil sands."

"The transaction strengthens our Canadian presence in the oil sands business," added Yang Hua, chief executive of Cnooc. "We believe that upside potential of the assets will facilitate local energy supply and our production growth in the long term."

OPTI's board of directors has already unanimously approved the sale.

Energy names seen firmer

The OPTI Canada deal helped give a bid to other energy names, although a market source pointed out that that could just be a byproduct of the generally firmer junk market overall.

A trader said that Petrohawk Energy Corp. - whose bonds likewise jumped last week on the news that Australian mining concern BHP Billiton, Ltd. plans to buy the Houston-based oil and gas exploration and production company in a transaction valued at $15 billion, including debt assumption - was still trading "right around the takeout level, or where the stuff has been the last couple of days."

That meant that Hawk's 6¼% notes due 2019 were around 116 bid, 117 offered. The company's 7¼% notes due 2018 were trading at 117 bid, although he said that this was about unchanged from Friday's levels. Those bonds had been at the par level and the 104 level, respectively, pre-news.

Chesapeake Energy Corp.'s 6 1/8% notes due 2021 were up ¾ point on Wednesday, trading at 103 7/8 bid.

Then the rest of the Oklahoma City-based natural gas producer's paper was up between 1/8 and ¼ point, on "not really heavy volume."

Kodak steady on patent news

Away from the energy sphere, Eastman Kodak Co. paper was unchanged to a tad firmer as the company said it was "exploring strategic alternatives related to its digital imaging patent portfolios, a move reflecting the current heightened market demand for intellectual property."

The 7¾% notes due 2013 inched up ½ point to 83½ bid, one market source said. Another saw the 9¾% notes due 2018 steady at 851/2.

The patent portfolio in play includes over 1,100 patents, about 10% of Kodak's total portfolio. The Rochester, N.Y.-based photographic products and digital imaging technology company said it hired Lazard LLC to assist in the process.

"Given recent trends in the marketplace for intellectual property, we believe the time is right to explore smart, opportunistic alternatives for our digital imaging patent portfolios," said Laura G. Quatela, general counsel, in a press release. "This effort reaffirms our commitment to the three pillars of our intellectual property strategy - design freedom, access to new markets and partnerships, and cash generation.

Kodak also noted that it will "continue to pursue its successful patent licensing program as well as all litigation related to its digital imaging technology."

No move for Nortel

Speaking of patents, a trader said that Nortel Networks Corp. - whose bonds rose solidly on Tuesday on the news that Canadian regulators will not challenge the bankrupt communications technology company's $4.5 billion sale of its valuable portfolio of high-tech patents - were at 113 bid, 113½ offered, which he called unchanged on the session, in "some trading."

Dynegy stops the bleeding

A trader saw Dynegy Inc.'s bonds "tick up at the end of the day" and end up about 2 points on the session, bringing to a halt the headlong slide seen recently in the Houston-based power generating company's paper following its announcement of plans for a new $1.7 billion credit facility, which would be senior to the bonds.

He saw its 7½% notes due 2015 at 76 bid, 77 offered, while its widely watched 7¾% notes due 2019 were "up a couple of points" in a 70-71 context.

"That's a real move for them," he opined.

Open or closed?

A trader said that apart from the activity in OPTI Canada - easily the day's busiest name, by several magnitudes - Wednesday's session was "a little blah."

Commenting on the dearth of pricing activity during the regular market hours - the two dollar deals that priced, from SunCoke Energy and Trader Corp., came way too late in the session for any secondary dealings - a trader lamented that "we thought something might be getting priced, but we haven't seen it."

The trader elaborated on the notion that while high yield traditionally pretty much closes down for the summer at some point, this point - with only a month gone since the start of the season - is way too early to close, with a number of deals still sitting on the forward calendar, waiting to go.

"To tell you the truth, I don't think the market ever opened for the summer," he said. "You'll have an occasional fairly active day" - last Thursday's $2 billion-plus session, which saw pricings from Warner, Level 3, ExamWorks and several others comes to mind - "but most of the time - nothing."

He likened the uneven pace of activity to "a gas station out in the desert, where nothing goes on until a car drives by - once every two days.

"So we're just sitting out here in the dust, with the mosquitoes going in the bug zapper, watching the trains go by."

Stephanie N. Rotondo contributed to this report

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