HudBay Minerals add-on prices; Emerald, downsized Quicksilver on tap; Exide stays busy

By Paul Deckelman and Paul A. Harris

New York, June 11 - HudBay Minerals Inc. came to market on Tuesday with a $150 million add-on to the Canadian mining company's existing 2020 notes - the sole dollar-denominated, fully junk-rated pricing from a domestic or industrialized-country borrower.

However, high-yield syndicate sources believe that Wednesday will be an interesting day, with Fort Worth-based energy operator Quicksilver Resources Inc. bringing in a $525 million two-part note offering, consisting of floating- and fixed rate notes. Not only was the issue downsized considerably, but the company was forced to do some tinkering with its covenant structure in order to be in a position to get the deal done.

The sources also said that California-based trade-show organizer Emerald Exposition Holdings is expected to price a $200 million issue of eight-year notes.

The forward calendar resumed building in the dollar-denominated segment of the junk market, as consumer brands company Iconix Brand Group, Inc. unveiled plans for a $250 million senior secured notes deal.

In the secondary market, the new HudBay issue was quoted higher than its issue price, while Monday's deals for Sanchez Energy Corp. and Garda World Security Inc. hung around their respective pricing levels.

Away from the new deals, traders said Junkbondland stayed on the downside, with a couple of them suggesting that Friday's solid upturn may have just been a flash in the pan.'

That was borne out by the behavior of statistical indicators of junk market performance, which turned decisively lower across the board after having been mixed on Monday and solidly higher on Friday.

For a second straight session, Exide Technologies was easily the busiest name in the junk space following its Chapter 11 filing, with tens of millions of dollars worth of the battery-maker's bonds trading at lower levels.

HudBay tap comes atop talk

The primary market saw a single dollar-denominated deal go down on Tuesday, as Toronto-based HudBay Minerals priced a $150 million add-on to its 9½% senior notes due Oct. 1, 2020 (B3/B-) at 102 to yield 9.113%.

The reoffer price came on top of price talk.

Jefferies was the bookrunner.

The Toronto-based integrated mining company plans to use proceeds for general corporate purposes and to fund the development of its Lalor and Reed projects in Manitoba and its Constancia project in Peru.

GFL prices C$200 million

In the Canadian dollar-denominated market, GFL Environmental Corp. priced a C$200 million of five-year senior notes (/B+//DBRS: B) at par to yield 7½%.

The yield printed on top of yield talk.

BMO and Scotia were the bookrunners.

The Pickering, Ont.-based environmental services company plans to use the proceeds to repay existing debt, to fund growth initiatives and for general corporate purposes.

Quicksilver downsizes

Looking to the Wednesday session, Quicksilver Resources downsized its two-part offering of notes to $525 million from $875 million, made revisions to the structure of the deal as well as covenant changes and set price talk on Tuesday.

The size and structure of the senior tranche, a $200 million amount of six-year second-lien floating-rate notes (B2/CCC+), were left unchanged.

The floating-rate notes are talked at a 575 basis points spread to Libor, and come with a 1.25% Libor floor. The deal is also talked with three points of original issue discount at 97.

The junior tranche was downsized to $325 million from $675 million. It features eight-year senior notes (Caa2/CCC) talked to yield in the 11¾% area, including three to four points of OID.

In a structural change, the call protection for the notes was from four years to six years, at which time the notes will become callable at 102.

In addition to the downsizing and restructuring, there were covenant changes.

Credit Suisse, Citigroup, Deutsche Bank, J.P. Morgan, TD and UBS are the lead arrangers for the debt refinancing.

Emerald Expo talks notes

Emerald Expo talked its $200 million offering of eight-year senior notes (Caa2/B-) to yield 8½% to 8¾%.

Books are scheduled to close at noon ET on Wednesday, and the deal is set to price thereafter.

Goldman Sachs, BofA Merrill Lynch, Credit Suisse, Morgan Stanley, RBC and UBS are the bookrunners for the acquisition financing.

HudBay quoted higher

In the secondary market, a trader quoted HudBay Minerals' 9½ notes due 2020 bid between 105.8 and 106.65.

That was well up from the 102 mark at which the company's quickly shopped $150 million add-on to the existing notes had priced earlier in the session.

However, two other traders said they had not seen any activity in the mining company's smallish new deal.

Deals trade around issue

A trader said that Sanchez Energy's 7¾% notes due 2021 were trading in a 99 to 99¾ bid context, down a little from the par price at which the Houston-based oil and natural gas exploration and development company had priced its $400 million deal on Monday. The deal was upsized from an originally announced $350 million size.

A second trader saw the bonds little changed on the session, at 99¾ bid, 100¼ offered.

A trader saw Garda World Security's add-on to its 9¾% notes due 2017 at 105½ bid, 106 5/8 offered.

The Montreal-based provider of cash logistics and security guard services had priced its quick-to-market $50 million transaction on Monday at 105¾ to yield 7.942%%.

Friday deals not seen

Going back a little further, a trader said that he had not seen any trace of activity in the deals priced on Friday, encountering no levels on either Kansas City, Mo.-based vehicle transportation contractor Jack Cooper Holdings Corp.'s $225 million of 9¼% senior secured second-lien notes due 2020 or on Burlington, Mass.-based domestic and global power provider InterGen NV's $750 million of 7% senior secured notes due 2023.

n Monday, the Cooper bonds had been quoted at 100¼ bid, 100½ offered, well up from their 98.23 pricing level, yielding 7¼%, while the Cooper bonds had been seen having improved to 102 1/8 bid, 102 5/8 offered.

As for SemGroup Corp.'s 7½% notes due 2021, a trader said that he saw the company's deal on Monday at 102½ bid, 103½ offered, but he had not seen it further on Tuesday.

He estimated that the bonds might be down around a half-point from Monday's closing levels, in line with the whole market's easier tone.

The Tulsa, Okla.-based provider of transportation, distribution and marketing services to petroleum industry producers and refiners had priced its $300 million of the notes at par on Friday, after having downsized the deal from an originally announced $350 million.

The bonds quickly moved into the aftermarket, getting up to around a 101½ to 102 when they were freed to trade.

Also among the recently priced issues, a trader saw Hot Topic Inc.'s 9¼% senior secured notes due 2021off slightly at 101 3/8 bid, 102¼ offered. The bonds had been quoted Monday in a 101½ to 102 bid context.

The City of Industry, Calif.-based specialty retailer's $355 million issue came to market late Thursday at 98.618 to yield 9½% and got as good as 102 bid when they were freed for aftermarket dealings on Friday.

Approach Resources, Inc.'s 7% notes due 2021 were being quoted on Tuesday at a wide 101½ to 103½ context, off a little on the bid side.

The Fort Worth, Texas-based oil and gas exploration and production company's $250 million deal priced at par late Thursday and began trading on Friday. They had moved up to around 1021/2-103¼ on Monday.

Exide stays busy post-filing

Among specific non-new-deal credits, a trader said that Exide Technologies' 8 5/8% notes due 2018 were the busiest junk bond name for a second consecutive session following the company's bankruptcy filing.

A market source said that over $90 million of the notes had changed hands on Tuesday, trading between a high of a little over 58 and a low of around 54, before finishing the day around 56½ bid, down 1½ points on the day.

On Monday, the source saw over $72 million of the bonds traded on a round-lot basis alone, the most in Junkbondland, with probably an equal amount traded in smaller, odd-lot transactions.

The bonds were seen going home down a half-point on the session, at 58 bid - but not before gyrating wildly between lows below 50 bid and highs above 61 at various points during the day.

The Milton, Ga.-based automotive and industrial storage battery maker sought protection from its bondholders and other creditors via a Chapter 11 filing with the U.S. Bankruptcy Court in Wilmington, Del.

The company was motivated in large part by a looming $31 million interest payment due on Aug. 1 on the straight junk bonds and the Sept. 18 maturity of its nearly $52 million 2.37% convertible notes.

The filing was, in essence, a "Chapter 22" filing, since it was Exide's second trip in bankruptcy reorganization in recent years; it had originally filed for protection back in 2002, emerging in 2004.

Generally negative tone

Overall, a trader said, "the market continues to trade down today," seeing the junk precincts generically about a half-point weaker on average, with bigger losses in some spots.

Asked whether Friday's strong upturn in the junk market was a fluke, he replied, "it sure looks that way."

Bond buybacks coming?

A trader opined, "If the markets keep drifting [lower] the way they are right now, you're going to see potentially a lot of corporate buybacks, because a lot of these companies are really flush with cash. For the first time, they may be looking to redeem some paper if stuff goes down 2 or 3 points."

He said they would not be doing this by announcing tender offers or calling bonds, which would send the price of the debt back up. They instead would be buying back their bonds quietly in relatively small open-market or privately negotiated transactions.

"I think that some of your firms that specialize in doing corporate [bond] buybacks [on behalf of issuers] are salivating right now," he declared.

Market indicators head south

Statistical junk performance indicators turned lower across the board on Tuesday, reverting to the form they held a week ago. In the interim, they had been mixed on Thursday, solidly higher all around on Friday and mixed again on Monday.

The Markit Series 20 CDX North American High Yield index dropped by 7/16 of a point on Tuesday - its second consecutive loss - to close at 102 13/16 bid, 102 7/8 offered. On Monday, it had slid by 15/16 of a point.

The KDP High Yield Daily index posted its first loss after two consecutive gains, plunging by 52 basis points on Tuesday to end at 74.08, in contrast with Monday's 1 bps gain and Friday's 29 bps jump. Its yield ballooned outward by 19 bps on Tuesday, to 5.94%, after having come in each of the prior two sessions, including Monday, when it eased by 1 bp.

And the widely followed Merrill Lynch High Yield Master II index suffered its second consecutive loss on Tuesday, as it fell by 0.691%, on top of Monday's 0.049% loss.

Tuesday's downturn cut its year-to-date return to 2.648%, down from 3.362% on Monday. It was the lowest 2013 cumulative return since March 15, when the figure stood at 2.575%.

The index's yield to worst rose on Tuesday to 6.257%, a new high for the year, surpassing the old mark of 6.16%, which had been set last Thursday.

Its spread to worst over Treasuries widened to 514 bps from Monday's 493 bps. Tuesday's spread matched last Thursday's as the new wide point for the year so far.

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