Upsized Tullow, downsized Garda, United Continental and MEG open November on a busy note

By Paul Deckelman and Paul A. Harris

New York, Nov. 1 - After a fairly busy October - though it was nowhere nearly as active as the record-setting "September to Remember" had been - November also began on a busy note Friday, high-yield syndicate sources said.

They saw four domestic or industrialized-country issuers bring a total of $1.45 billion of new U.S.-dollar-denominated, fully junk-rated paper to market during the session.

Garda World Security Corp and Tullow Oil plc, priced scheduled deals off the forward calendar.

Garda, a Montreal-based security service provider, came to market with a $300 million issue of eight-year notes, after the syndicate sources heard that it had shelved plans to upsize the deal to $425 million.

Tullow, a London-based oil and gas company, brought a $650 million offering of seven-year notes to market, after having upsized that transaction.

There were also a pair of quickly-shopped offerings, as Calgary, Ala.-based oil sands operator MEG Energy Corp. priced a $200 million tap of its existing 2024 notes, and, in the lone deal from a domestic borrower, United Continental Holdings, Inc., the parent of United Airlines, flew in with a $300 million issue of seven-year notes.

Traders said the new United Continental bonds gained little aftermarket altitude, but the Garda notes firmed smartly when they were freed for secondary trading.

In the secondary market, traders saw continued activity in some of the non-new-deal credits that had been particularly active on Thursday, including Energy Future Holding Corp. and NII Holdings Inc.

Tullow upsizes debut deal

A busy Friday in the primary market saw four dollar-denominated tranches from four issuers who raised a combined total of $1.45 billion.

Tullow Oil launched and priced an upsized $650 million issue of seven-year senior notes (B1/BB-) at par to yield 6%.

The deal was increased from $500 million.

The yield printed at the tight end of the 6% to 6¼% revised yield talk. Earlier talk was in the 6% area.

Although Tullow's debut saw healthy or better demand, one New York-based investor lamented the extraction of what appeared to be a good deal of juice as the deal wound its way through the market.

The London-based company, which has operations in Africa, appeared poised to make concessions on several fronts, the investor recounted, noting that in addition to being a first-time issuer and to having emerging markets exposure, the London-based company reports its reserves in a manner not terribly familiar to investors in the United States.

Hence, when the deal hit the market the chatter had it coming with a yield in the sevens, this investor said.

However Tullow's story proved to be easier to like than had been anticipated. And accounts have lots of cash to put to work.

So the juice evaporated, the investor lamented, adding that when talk descended to the mid-to-high sixes he got off the bus.

This investor was deriving some solace watching Tullow's new 6% notes due 2020 hang slightly above the new issue price, late Friday.

The buysider quoted them at par 1/8 bid, par 5/8 offered, and suggested that perhaps they might have performed a little more smartly had some of that juice been left in the deal.

JPMorgan and Deutsche Bank were the global coordinators for Tullow's debt refinancing deal.

BNP Paribas, BofA Merrill Lynch, Barclays, Credit Agricole and Standard Chartered were the joint bookrunners.

Garda downsizes

Elsewhere Friday, Garda World Security priced a downsized $300 million issue of eight-year notes (B3/B-) at par to yield 7¼%.

The bond deal was reduced by the same amount that it had been upsized earlier in the week: $125 million. Garda also downsized its term loan by $25 million, the amount by which it upsized the bank deal earlier in the week.

As a result, the company canceled plans to pay a dividend, which it proposed to do with those proposed-and-then-withdrawn upsize amounts.

The bond priced on top of price talk, according to a buyside source. They came tighter than the 7 3/8% to 7½% guidance that circulated earlier in the week.

BofA Merrill Lynch and RBC were the joint global coordinators and joint bookrunners for the bond deal.

BofA Merrill Lynch was the left bookrunner. RBC, TD and Mizuho Securities were joint bookrunners.

Garda plans to use the proceeds to refinance existing credit facility debt and senior unsecured notes due 2017 and fund the acquisition of G4S Cash Solutions for C$110 million.

United Airlines flys by

United Continental Holdings, Inc., the owner of United Airlines, priced a $300 million issue of non-callable seven-year senior notes (B2/B) at par to yield 6% in a Friday fly-by.

The yield printed on top of yield talk.

Morgan Stanley and Credit Suisse were the joint bookrunners.

The Chicago-based air carrier plans to use the proceeds for general corporate purposes.

MEG Energy taps 7% notes

MEG Energy priced a $200 million add-on to its 7% senior notes due March 31, 2024 (B1/BB) at 101 to yield 6.83%.

The reoffer price came on top of the price talk.

Barclays was the bookrunner.

The Calgary, Alta.-based pure play oil sands company plans to use the proceeds for general corporate purposes including its 2014 capital program.

Nuance sees tight pricing

The Friday session also produced news out of Europe.

Nuance Travel Group priced a €200 million issue of six-year senior secured floating-rate notes (B2/B+) at par to yield three-month Euribor plus 500 basis points.

The reoffer price came at the rich end of the 99.5 to par price talk. The Euribor spread came at the tight end of the 500 to 525 bps spread talk.

Timing on the debt refinancing deal was moved ahead. The roadshow had been previously expected to carry into the week ahead.

Joint bookrunner Credit Suisse will bill and deliver.

UniCredit, BNP Paribas, UBS and Banca IMI were also joint bookrunners.

Marcolin plans roadshow

Italy's Marcolin SpA plans to roadshow a €200 million offering of six-year senior secured notes during the week ahead.

Joint bookrunner Goldman Sachs will bill and deliver for the acquisition deal. Banca IMI, Natixis, UniCredit and IKB are also joint bookrunners.

Elsewhere, Serbia-based SBB/Telemach Group plans to roadshow a €475 million offering of seven-year senior secured notes through Thursday, in a deal expected to play before both high-yield and emerging markets audiences.

Global coordinator Credit Suisse will bill and deliver. BNP and Citigroup are also global coordinators. ING and KKR are joint bookrunners.

Garda gains, United grounded

In the secondary market, traders said that the new Garda World Security 7¼% notes firmed solidly when they were freed for trading after pricing at par.

One trader quoted the bonds at 101 bid, while a second heard the bonds having gotten as good as 101¼ bid, 101½ offered.

However, the same could not be said for the new United Continental Holdings 6% notes due 2020.

"United came, but they were no great shakes," a trader said, seeing the Chicago-based airline operator's deal "right at par," the same level where the bonds had priced.

A second trader also pegged the bonds right around par, opining that "it didn't seem like that one was going anywhere."

A third trader saw them edge up to 100¼ bid, 100½ offered.

The traders meantime did not see any kind of initial aftermarket activity in the two new deals that came out of the energy sector on Friday - Tullow Oil's upsized 6% notes due 2020, and MEG Energy's 7% add-on notes due 2024.

Pittsburgh Glass still shines

One of the traders said that "there's still a fair amount of demand out there" for Pittsburgh Glass Works LLC's 8% senior secured notes due 2018.

He quoted the bonds at 102 bid, 102½ offered on Friday, calling them up 2½ points on the week from their par issue price.

The automobile windshield manufacturer, based in the eponymous Pennsylvania city, priced its $360 million offering on Tuesday; it quickly rose above the 101 bid level when it was freed for trading, had firmed above 102 bid by Wednesday, and never looked back.

Secondary plays second fiddle

Traders said that away from the new-deal realm there wasn't that much activity going on in the secondary market.

One suggested that among the factor dampening activity was "it was the first day of the new month - and maybe a lot of people still had their Halloween hangovers."

Accuride skids after earnings

However, a few names did stand out.

One trader noted that Accuride Corp.'s 9½% notes due 2018 were spinning their wheels after the Evansville, Ind.-based vehicle components manufacturer reported poor third-quarter earnings.

"The bonds got as low as 101 to 103," he said - "while last week, before earnings, they were around 105-106."

The company reported that its third-quarter sales slid by 17% to $155.3 million, versus the $170 million that analysts had forecast.

While its net loss improved from last year - Accuride managed to cut the red ink by 47% to $8.4 million, or 18 cents per diluted share - it still came in higher than the dime per share loss that Wall Street was expecting.

NII bounces after debacle

A trader said that "NIHD was active again," although it was "not nearly quite as active" as it had been on Thursday, after the Reston, Va.-based provider of wireless service to Latin America reported poor quarterly earnings, causing its bonds to swoon.

In Friday's dealings, "they rebounded a little bit," he said, seeing its 7 5/8% notes due 2021 trading up to around 60 bid, "so they were a little bit better."

On Thursday, those bonds had been among the busiest in the distressed world and the larger junk bond market, falling more than 6 points on the day to close around 59 5/16, on volume of over $39 million, according to another market source.

On Friday, the source said, those notes did push up over the 60 bid mark, only to fall back later on to end at 593/4, which was still up by 7/16, though on volume of only about $4 million, one tenth of Thursday's turnover.

NII's 10% notes due 2016 - which had likewise slid by more than 7 points on Thursday to end at 78 bid, on astounding volume of over $56 million, bounced back on Friday to close at the 79 bid mark - up on the day, though still well below the mid-80s levels at which those bonds had traded before getting cracked on the earnings report. Friday's volume of $11 million, while brisk, was still less than one fifth of what had been traded on Thursday, the market source said.

However, the company's 8 7/8% notes due 2019 failed to share in the comeback. Those bonds had fallen by some 5½ points on Thursday to 63½ bid, although the round-lot volume of over $6 million was well below that of the other issues. On Friday, that paper stayed at or below Thursday's levels all day before finally ending at 63 bid, actually down ½ point, on volume of over $12 million

For the third-quarter ended Sept. 30, NII posted a wider net loss of $299.9 million, or $1.74 per share, versus red ink of $82.4 million, or 48 cents per share, the year before.

Its operating revenue fell 22% to $1.1 billion.

Those results fell far short of Wall Street's expectations of a loss in the area of $1.17 per share on revenue of about $1.23 billion.

NII reported that it had net subscriber losses of 178,400 during the quarter - and warned that further subscriber losses are expected for the current fourth quarter.

NII said that its full-year adjusted operating income was likely to come in about $200 million below previous forecasts of $600 million to $650 million.

The company attributed its wider loss and subscriber losses to its attempts to upgrade its network to 4G. In doing so, NII was unable to migrate some of its Sprint Corp.'s iDEN network customers, which caused some of those customers to defect.

Interest payment boosts TXU

A trader said that TXU's paper was active, continuing to gain on the news that the Dallas-based electric utility operator and merchant power generating company - now known as Energy Future Holdings Corp. - was going to make a $270 million interest payment due on Friday, rather than file for bankruptcy.

He saw its 10% notes due 2020, issued by its Energy Future Intermediate Holding Co. unit, steady around the 105 area, helped by the news of the interest payment.

He saw the company's secured 11½% notes due 2020 trading around 73 bid, while its Texas Competitive Electric Holdings Co. 15% notes due 2021 were active around the 30½ bid level.

A second trader quoted the 15% notes "in the 30s," seeing the final trades of the day around 30¼ bid, which he called up 1 point from Thursday's level.

Earlier in the week, "those bonds had been trading down around 25 or 26 - so they're up by a couple" of points. He saw about $12 million traded.

He pegged the 10% notes somewhere between 104¼ and 1051/4, while the11½% notes were "actively traded," finishing "up a little" around 73 bid, 74 offered.

Its 11¼ bid notes due 2018 were about unchanged on the day at the 69 to 71 bid level.

The company's bonds had been among the most traded in Junkbondland on Thursday, given a big boost by the news that the company would not default on the $270 million Nov. 1 interest payment.

A market source saw that over $32 million of the 10% notes had traded on Thursday, finishing up by 1¼ points at 1051/4. On Friday, he said, over $8 million of the bonds had traded, although he saw the issue down 3/8 point at 104 7/8 bid.

He said that the 15% notes had risen by 2 5/8 points on Thursday, with over $45 million of the bonds changing hands. On Friday, he said the bonds rose by 1 point to 30¼ bid, though on still-brisk volume of $12 million.

Penney up on forecast

Elsewhere, a trader saw J.C. Penney Co., Inc.'s notes at better levels after a Wall Street advisory firm issued improved sales guidance for the underperforming Plano, Texas-based department store retailer.

He said that its 6 7/8% notes due 2015 had traded up to the 87 bid level, while its 5¾% notes due 2018 had risen to 781/2.

He saw Penney's 5.65% notes due 2020 "up another point," to around the 76 bid level.

At another desk, those bonds were quoted up maybe ¼ point on the day at 75¾ bid. The 53/4s were seen having risen by as much as 2¼ points to go home at 78½ bid - but traders there said the 6 7/8% notes were quoted down about 7/8 point at just over 85 bid.

Penney's New York Stock Exchange-traded shares meantime jumped by 64 cents on the session, or 8.53%, to end at $8.14. Volume of 56 million shares was 40% above the norm.

The shares, and the bonds as well, got a boost after ITG Investment Research lifted its sales forecast for the department store chain, citing "improving sales trends" in five of the last seven weeks.

It now forecasts that comparable-store sales by stores open at least one year - the retailing industry's key measure of operating performance - will only be down by 4% from a year earlier during the third quarter, rather than its earlier forecast of a 6% drop.

Market signs stay mixed

Overall, statistical junk-market performance indicators were mixed for a third consecutive session on Friday, the fourth mixed day in the last five sessions.

The indicators were meantime mixed versus the previous Friday for a second straight week.

The Markit Series 21 CDX North American High Yield Index dropped by 3/16 point on Friday to end at 106 3/8 bid, 106 7/16 offered. It had edged up by 1/32 on Thursday.

It was meanwhile down from the 106 29/32 bid, 106 31/32 level at which it had ended the previous week, ended Friday, Oct.25.

The KDP High Yield Daily Index suffered its second straight loss as it lost 1 basis point to end at 74.60, after having fallen by 3 bps Thursday to break a two-session winning streak.

Its yield was unchanged at 5.65%, after having pushed up by 1 bp on Thursday.

However, those levels compared favorably with the 74.49 index reading and 5.69% yield seen the previous Friday.

The widely followed Merrill Lynch High Yield Master II Index was on the upside for a 17th consecutive session on Friday with a 0.008% gain. That followed Thursday's 0.009% improvement.

The latest gain lifted its year-to-date return to 6.347%, its ninth straight new high point for 2013 so far. On Thursday, it had firmed to 6.339%, the previous peak level for 2013.

For the week, the index was up by 0.258%, its fifth consecutive weekly gain.

Last week, it rose by 0.53%, with the year-to-date return at 6.073%.

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