Bombardier, Exterran Partners drive by; talk heard on Lonestar; new Jones Energy stays strong

By Paul Deckelman

New York, 31 - The high-yield primary sphere closed out the month of and the calendar first quarter with a pair of quick-to-market pricings on Monday, syndicate sources said.

Canadian aircraft and railroad equipment producer Bombardier Inc. flew in with a $1.8 billion two-part issue of senior notes, consisting of $600 million of five-year paper and $1.2 billion of 8.5-year notes.

Exterran Partners LP, a Houston-based provider of natural gas contract operations services, did an upsized, quickly shopped $350 million offering of 8.5-year notes.

Both of those deals priced late in the session and neither was seen initially trading around in the aftermarket.

However, Bombardier's existing notes were seen having moved lower.

Primaryside players were also looking forward to Tuesday, when Lonestar Resources America, Inc. is expected to price a $200 million issue of five-year notes. Price talk on that deal circulated in the market on Monday.

Among recently priced issues, Nielsen Finance LLC's eight-year notes were quoted slightly above the par level at which the consumer research and television ratings priced its $750 million drive-by offering on Friday.

But Thursday's upsized $500 million regularly scheduled forward-calendar offering of eight-year notes by Jones Energy Holdings LLC continued to trade at a hefty gain above their issue price.

Overall, though, traders said the day's activity level was lackluster, blaming the usual back-to-work Monday lassitude as well as the end of the month and the quarter, sidelining any accounts that had already closed their books on both periods.

Statistical market performance measures were quietly mixed, after having firmed on Friday.

Bombardier two-parter

The big deal of the nearly $2.15 billion session was Bombardier's quick-to-market $1.8 billion two-part offering (Ba3/BB-/BB-), high-yield syndicate sources said.

The transaction consisted of $600 million of five-year senior notes that priced at par to yield 4¾% and $1.2 billion of 8.5-year senior notes that also priced at par, to yield 6%.

Price talk on the five-year tranche had envisioned a yield between 4¾% and 4 7/8%, while price talk on the 8.5-year bonds was in the 6 1/8% area.

Bookrunners on the deal were BofA Merrill Lynch, Barclays Capital Inc., Citigroup Global Markets Inc., Commerz Markets LLC, Credit Agricole Securities (USA) Inc., Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., J.P. Morgan Securities LLC, Morgan Stanley & Co. Inc., National Bank of Canada Financial Inc. and UBS Securities LLC.

Bombardier, a Montreal-based manufacturer of aircraft, railroad equipment and other transportation equipment, plans to use the net proceeds of the deal to call its existing €785 million of 7¼% notes due 2016 for redemption and to repay upon their maturity its $162 million of 6.30% notes that are scheduled to come due on May 1. The remainder of the proceeds will go for general corporate purposes.

Exterran upsizes offering

Exterran Partners and its EXLP Finance Corp. funding subsidiary were responsible for the day's other pricing - an upsized $350 million of 8.5-yearsenior notes (B1/B), the sources said.

That deal was increased from the originally announced $300 million.

Wells Fargo Securities LLC, Credit Agricole Securities (USA) Inc., RBS Securities Inc., BofA Merrill Lynch, J.P. Morgan, RBC Capital Markets Corp. and Goldman Sachs & Co. were the bookrunners on the quickly shopped deal.

BBVA Securities Inc., Capital One Securities, Inc., SMBC Nikko Securities America, Inc., BB&T Capital Markets, Citigroup, Mitsubishi UFJ Securities (USA) Inc., Regions Securities LLC and Scotia Capital (USA) Inc. were co-managers.

Exterran plans to use about $201.1 million the expected net proceeds from the offering to fund a portion of the purchase price of its pending $360 million acquisition of natural gas compression assets from Chesapeake Energy Corp. subsidiary MidCon Compression, LLC and for the repayment of borrowings outstanding under its revolving credit facility.

The bonds carry a special mandatory redemption provision - the proceeds from the deal will be placed in escrow pending the anticipated completion of the MidCon transaction.

However, if that acquisition is not completed by July 7, or should the related purchase agreement between the two companies be terminated before the transaction is completed, the escrowed funds will be applied to the mandatory redemption of all of the notes at par plus accrued and unpaid interest.

Lonestar deal on tap

That same energy sector was the source of the day's only other real piece of news, as price talk of 8¾% was heard on Lonestar Resources America's pending $200 million offering of five-year senior notes.

The syndicate sources said that the deal's order books are scheduled to close at 9:30 a.m. ET on Tuesday, with pricing expected thereafter.

Jefferies LLC is the bookrunner on the deal, while GMP Capital Inc. is the co-manager.

Lonestar Resources, a Fort Worth, Texas-based independent oil and natural gas production and development company operating in the Eagle Ford Shale geological formation in southern Texas, plans to use the proceeds from the deal to refinance debt.

Day's deals a no-show

Both the Bombardier and the Exterran deals priced too late in the session for any kind of aftermarket, traders said.

However, they did see Bombardier's existing 6 1/8% notes due 2023 drop by nearly 1½ points to end just above the 101 bid level. Volume was more than $5 million.

Recent deals little traded

Going back to the new issues that priced last week, a trader said that Nielsen Finance LLC/Nielsen Finance Co.'s 5% notes due 2022 were trading in a narrow 100¼ to 100 3/8 bid market, "so that one hasn't really done anything."

The company - an arm of New York and Netherlands-based consumer research and television ratings company Nielsen Holdings NV - priced a quickly shopped $750 million of those bonds at par on Friday, too late for any kind of aftermarket.

A second trader said that the Nielsen bonds were in a 100¼ to 100½ bid context.

He saw no activity at all in Friday's other pricing - the $75 million add-on that New York-based advertising and marketing firm MDC Partners Inc. tacked onto its existing $660 million of 6¾% notes due 2020. That deal priced at 105.25 to yield 5.276%.

The one recent deal that was seen trading around at notably better levels was Jones Energy Holdings' 6¾% notes due 2022, with two traders seeing the bonds right at the 102 bid level, "so that one continues to trade well," one of them said.

The Austin, Texas-based independent oil and gas exploration and production company priced its deal at par after the regularly scheduled forward calendar offering was upsized to $500 million from $300 million originally.

A quiet start to the week

Other than that, one of the traders said, "there was nothing too exciting going on this month's end.

"There was nothing jumping out here."

Overall, a second trader said that things "were on the quiet side" on Monday. He said one of the reasons was that "people were waiting around to see what would happen on these [two new deals]."

He called the general market tone "good."

"I think that [Federal Reserve Chairperson Janet] Yellen's comments boosted the stock market, and the 10-year [Treasury bond] rallied from a 2.74% [yield] to 2.71% and even the longer stuff improved a little bit," he pointed out.

Yellen, in a Chicago speech on Monday, tried to reassure the financial markets that the Fed is not going to do anything to boost interest rates any time soon, noting the continued weakness of the labor market and other facets of the economy.

That was something of a pullback from what commentators had described as the "hawkish" tone of her remarks earlier this month, when she indicated that the Fed would probably have completed its winding down of quantitative easing by about September and that interest rates would probably start to rise about six months after that. The prediction surprised most people in the financial markets, who had anticipated that interest rates would begin to rise considerably after that.

Although the market tone seemed firm in the wake of the Fed boss' more accommodative stance, the trader said there were "pretty light flows today.

"It was just a typical Monday - pretty quiet."

Market indicators mixed

Statistical junk performance indicators were turned mixed on Monday, after they had been higher across the board on Friday.

The Markit Series 22 CDX North American High Yield index gained¼ of a point for a second consecutive session to end at 107 7/16 bid, 107 11/16 offered.

However, the KDP High Yield Daily index lost 2 basis points to close at 74.89, after having risen by 5 bps on Friday. Its yield, though, came in by 1 bp, to 5.23%, after having been unchanged on both Thursday and Friday.

But the widely followed Merrill Lynch High Yield Master II index moved up by 0.101% on Monday, on top of Friday's 0.038% gain.

Monday's advance lifted its year-to-date return to 2.997% - a new peak level for the year so far - up from 2.893% on Friday, the former peak level for 2014 so far.

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