New NXP bonds shoot up in trading; Cedar Fair to revive deal; Skilled Healthcare, oil names off

By Paul Deckelman and Paul A. Harris

New York, July 14 - NXP BV and NXP Funding LLC's new eight-year secured notes were seen by traders on Wednesday to have risen handsomely from the par level at which the Dutch semiconductor company's upsized megadeal had priced during Tuesday's session.

The company's existing bonds meantime also continued to firm, helped by investor response to the company's plans to use the new-deal proceeds to redeem a portion of those outstanding notes.

Also in the primary arena, high-yield syndicate sources were hearing that amusement park operator Cedar Fair LP would soon revive its planned offering of 10-year notes. That deal, originally planned at $500 million, was marketed to potential investors back in late May, but has been languishing in limbo on the forward calendar ever since, as the borrowers waited for the right market conditions.

In the secondary sphere, traders saw a decline in the recently rebounding bonds of companies connected with the Gulf of Mexico oil spill disaster, such as BP plc and Anadarko Petroleum Corp., which were probably not helped by the slow pace in testing the 75-ton cap, which BP hopes to put on its ruptured undersea well.

ATP Oil & Gas Corp., whose bonds have been hammered down since the accident on investor worries about the government's deepwater drilling ban in the Gulf, had its bonds seen steady on the day.

Skilled Healthcare Group Inc.'s bonds - which had been rebounding over the last few sessions from the drubbing they took last week right after a California jury rendered a huge damage award against the company in a class-action suit - finally turned back downward ahead of the punitive damages phase of the case, which could potentially swell the overall damages by additional hundreds of millions of dollars.

Primary stays quiet

The primary market remained becalmed on Wednesday, sources said.

Neither a deal was priced nor was any announced.

However, the market continued to buzz about Tuesday's massively upsized NXP BV issue of $1 billion of 9¾% senior secured notes due 2018 (Caa1/CCC+), which priced at par. The deal was raised from $600 million.

The Credit Suisse-led deal, which was the first to feature triple C ratings on both sides of the split since early May, played to $4 billion to $5 billion of demand in an order book into which more than 150 accounts had piled, sources said.

The notes were trading at 102¾ bid late Wednesday morning, according to a sellside source.

The NXP execution seems to demonstrate that the primary market is open, sources said on Wednesday.

Several dealers polled by Prospect News on Wednesday, however, said that the remainder of the July 12 week could pass with few, if any, new deal announcements.

Watch for Cedar Fair

One prospective issuer that does appear headed back into a friendlier new issue market is Cedar Fair, which is set to bring back a debt refinancing junk bond deal that has been sidelined for six weeks over interest rates, market sources say.

The deal that resurfaces, though, is apt to be downsized by $200 million to $300 million, with the proceeds shifting to the bank loan.

The Sandusky, Ohio-based amusement park company did a roadshow for a $500 million offering of 10-year senior unsecured notes (B2/B-) in mid-May.

Investors and the company were about 50 basis points apart at the end of the roadshow, according to a high-yield mutual fund manager who had been in the deal by dint of reverse inquiry.

Now the resized Cedar Fair bond and bank deals appear headed back to market.

J.P. Morgan, Wells Fargo Securities and UBS Investment Bank are the joint bookrunners for the Cedar Fair bond deal.

Deals in the market

Nearer at hand are three deals that are expected to price before Friday's close.

In the dollar-denominated junk market, Calumet Specialty Products Partners, LP and Calumet Finance Corp. are roadshowing their $450 million offering of 10-year senior unsecured notes.

That roadshow concludes on Friday.

J.P. Morgan and Bank of America Merrill Lynch are the joint bookrunners.

Proceeds will be used to repay the Indianapolis-based specialty hydrocarbon products producer's senior secured term loan and to repay a portion of its revolving credit facility.

Meanwhile, Spain's Inaer Aviation is expected to wrap up the roadshow on Monday for its €470 million offering of seven-year senior secured notes (B2/B) on Thursday.

JPMorgan, Barclays Capital, BNP Paribas, KKR Capital Markets and Banco Santander are the underwriters.

Proceeds will be used to refinance debt, to fund Kohlberg Kravis Roberts & Co.'s 49.9% stake in Inaer and for general corporate purposes.

And, Care UK Health & Social Care plc will also conclude the roadshow for its £250 million offering of seven-year senior secured notes (B2) on Thursday, sources say.

Citigroup, Royal Bank of Scotland, BNP Paribas, HSBC and ING are the joint bookrunners for the LBO deal.

Apart from Calumet, Inaer and Care UK, only one other deal was in the market at Wednesday's close, according to sources.

Interactive Data Corp. is on the road with a $700 million offering of eight-year senior notes (Caa1/B-) via Barclays Capital, Bank of America Merrill Lynch, Credit Suisse and UBS Investment Bank.

The roadshow wraps up on July 20.

Proceeds will be used to help fund the $3.4 billion leveraged buyout of the company by Silver Lake and Warburg Pincus for $33.86 in cash per share.

Unlike the above-mentioned Cedar Fair deal, in which a company backed away from a turbulent market because of escalating rates, Interactive Data Corp. is a committed financing and must come to market, conditions notwithstanding, sources say.

New NXP notes do nicely...

A trader said that NXP's new 9¾% senior secured notes due 2018 "had a nice 3 points-plus pop," with the new issue seen trading at levels between 103¼ and 1033/4, although he added that the activity in the new mega-deal took place early on, and "then it just kind of died out" later in the day.

The company had priced $1 billion of the bonds, upsized from the originally announced $600 million, in a drive-by issue on Tuesday, although they came to market too late in that session for any kind of aftermarket.

Another trader quoted the bonds in a 102 7/8-103 7/8 context.

...while the old ones aren't too shabby either

The company's existing paper, meanwhile - which had firmed smartly on Tuesday on news of the new deal, since NXP plans to use the proceeds to redeem a portion of its more than $3 billion in outstanding bonds - mostly continued to gain on Wednesday.

A trader saw the company's 7 7/8% senior secured notes due 2014, which had risen about 2½ points on Tuesday in heavy dealings of almost $50 million, roughly unchanged on Wednesday, trading around 99½ bid, 100½ offered.

Another market participant also saw the bonds unchanged, but pegged them at 100¼ bid.

The first trader saw its 9½% notes due 2015, which on Tuesday had gained more than 4 points, on nearly $30 million traded, up another 2 points on Wednesday, quoting them at 92½ bid, 93½ offered. A market source at another desk saw the latter bonds 1½ points better at 93½ bid.

NXP's floating-rate notes due 2013, which on Tuesday had tacked on 4 points on heavy volume of almost $40 million, were seen Wednesday up about ¾ point on the day at 92¾ bid, 93¾ offered.

A trader noted that just "four or five weeks ago, when the whole market was selling off, that particular name would sometimes have $5 million traded in the morning into, say a 94 bid, and then the next trade would be another $5 million at 93. It was like somebody was pounding those things down on a good amount of volume trading."

He remarked upon the "the point gap" which had taken the high-tech company's bonds swiftly and markedly lower during Junkbondland's mid-June selloff. "The day before, they were trading at 98, then they dropped down to a 94 trade, then 93, 92, 91. Whenever there was a bid, somebody was hitting it."

That deterioration had come against the backdrop of pretty much the whole of the junk market getting clobbered. "The whole market got a pretty good jolt" at that time, he said, "but that [name] wasn't riding a local - it was taking an express downtown."

New Windstream holds above par

A trader saw Windstream Corp.'s recently priced 8 1/8% notes due 2018 trading in a par to 100½ range for "most of the day- then later in the day," the bonds were lifted to about the 100½ bid level, "so there's still some good buying interest in that name."

Another trader also saw the new bonds trading around par-1001/2.

Windstream, a Little Rock, Ark.-based telecommunications company, priced its $400 million drive-by offering on Monday at 99.248 to yield 8¼%. The new bonds were seen to have moved up slightly to a par bid, 100¼ offered area in Monday's aftermarket action, and then to around 100½ on Tuesday.

Market indicators turn mixed

Among established issues having no new-deal connections, a trader saw the CDX North American HY Series 14 Index Jump lose 5/8 point on Wednesday to end at 96 5/8 bid, 97 1/8 offered, after having jumped by a full point on Tuesday.

The KDP High Yield Daily index meantime rose by 9 basis points on Wednesday to end at 71.50, after having shot up by 34 bps on Tuesday. Its yield came in by 4 bps on Wednesday, after having narrowed by 12 bps on Tuesday.

Advancing issues led decliners for an eighth consecutive session on Wednesday, although their advantage was cut to around a seven-to-five margin from Tuesday's roughly two-to-one ratio.

Overall activity, represented by dollar-volume levels, declined by 1% on Wednesday, after having zoomed by two-thirds on Tuesday from the prior session's anemic levels.

Skilled Healthcare surge curtailed

Among specific issues, a trader saw Skilled Healthcare Group Inc.'s 11% notes due 2014 down 3½ points on the session from Tuesday's levels, to close at 79½ bid, versus around 83 on Tuesday, thus bringing to a halt the recent firming trend in the Foothill Ranch, Calif.-based nursing home operator's bonds, although he noted that it was "just one or two trades."

He also pointed out that the company "has a bond payment [due] tomorrow [Thursday], I don't know if they're going to make it or not. Maybe they are." That coupon payment comes to about $7.12 million - more than the roughly $2 million of cash and available cash equivalents which the company was carrying on its balance sheet as of the end of the most recent quarter, although it also has most of its $100 million revolving credit line undrawn..

Another trader who also saw the 3 to 4 point drop noted that the issue is relatively small as far as junk bonds go at just $129.4 million.

"When you have these deals that are small in size but have a little bit of extra yield, and the s-t hits the fan, you can't get out of these because nobody cares to do any work on them because there's just not enough paper to buy to make it worth their time.

"You've got these portfolio managers who say 'I'm getting 50 basis points more because of these small deals,' but when the cycle ends and these things crap out, those guys get canned because they can't get out of these positions. You see it happen every couple of years, because nobody seems to learn."

Noting that the bonds had traded as high as 104 back on July 1 - several days before a California jury hearing a big class-action lawsuit against the company alleging that it understaffed its facilities awarded the plaintiffs in the case a whopping $671 million in statutory and compensatory damages (and the jury could still sock the company with millions more in punitive damages) - he said that "it was one of those things that as long as nobody wanted to sell, everything was great. Then, when someone wants to sell, they can't get out and things crater" - the bonds traded as low as the high 60s the day after the verdict.

"They're all sophisticated accounts, but the guys who have been around [say] that if it's under a certain amount, they're just not touching it - liquidity is king."

Hearing starts Thursday

Skilled Healthcare's New York Stock Exchange-traded shares, which have been more or less moving in tandem with the bonds - they initially plunged after the July 7 verdict but then had been rising over several sessions after that on hopes that a more affordable settlement might be reached between the parties or that the judge in the case might slash the huge damage award down to more reasonable levels - fell 24 cents, or 9.64%, on Wednesday to $2.25. The several prior days of stock gains had still left the shares well below the $6.22 mark it held before last week's verdict and big damage award.

Investors were split on Wednesday on whether the company would be forced into bankruptcy after being further socked with punitive damages, with that phase of the trial slated to open on Thursday, or whether a settlement might be reached at a more affordable level.

A poster on a financially-oriented internet bulletin board who felt that the latter scenario is more likely opined that the lawyers for the two sides would probably cook up a tentative settlement calling for payment of perhaps $20 million over four years. He deduced that a settlement was likely from the fact that Wednesday's equity volume of about 918,000 shares was somewhat less than the usual daily turnover of about 1.18 million, asking rhetorically "don't you think the money managers who own 84% of this company would have all sold today, had they not already been informed of the tentative settlement?"

A second bull agreed that the huge judgment "is exorbitantly out of proportion with 'the crime' and both sides know it. [The] Stock is still in a big-time oversold condition and price reflects worse [sic] case scenario already built in."

But another investor took a decidedly opposite viewpoint, predicting a final verdict, followed eventually by bankruptcy. He said "look for some hefty punitive damages [at Thursday's hearing] to tack on to the statutory damages and restitution. [The] Defendants are not going to or be able to settle for $50-100 million or more and this firm would be a great feast in bankruptcy. Plenty of value there for everyone, including the unsecured creditors."

The investor further claimed that there was ample evidence of company wrongdoing in the 250,000 pages of internal company documents that the plaintiff attorneys used to make their case, and said that with that amount of overwhelming evidence, it would be "crazy" to project "the judge to overturn a three-plus month trial or slap the firm with a minor fine."

Oil names slip mostly lower

Elsewhere, a trader said that "some of the oils were down" but ATP Oil & Gas Corp.'s 11 7/8% second-lien senior secured notes due 2015 "held their ground pretty good today," remaining within a 711/2-72 context pretty much all day, essentially unchanged.

A second trader saw the bonds trade down into a 72¼ bid and were left offered, while at another shop the bonds were quoted at 71½ bid, 72½ offered.

With new delays arising in efforts to cap its leaking Gulf of Mexico undersea oil well, BP Capital Markets plc's bonds were seen lower, with a trader pegging the beleaguered British oil giant's 5¼% notes due 2013 off by 1 point at 97 bid, 98 offered, while its 4¾% notes due 2019 lost 1½ points to end at 91 bid, 92 offered.

And he saw similar movements, "in the same ilk," for the bonds of Anadarko Petroleum, a 25% partner in BP's blown-out Macondo Prospect well. He saw its 5.95% notes due 2016 finishing around 94¼ bid while its 6.20% bonds due 2040 around 86. "They were hanging there most of the day, but that was still down a point from where they were."

Another trader saw BP's 51/4s at 97 bid, 98 offered, down 1 point, while Anadarko's 6.95% notes due 2019 were down 1 point, also at 97 bid, 98 offered. Its 7.95% bonds due 2039 lost 1½ points to close at 95 bid.

Auto names still firm

A trader saw General Motors Corp.'s 8 3/8% benchmark bonds due 2033 up ½ point at 32½ bid, 33 offered, while GM domestic arch-rival Ford Motor Co.'s 7.45% bonds due 2031 gained ½ point to end at 95.

At another desk, the GM benchmarks were seen up ¼ point at 32½ bid, 33 offered, but the Ford long bonds had eased by ½ point to close at 94½ bid, 95½ offered.

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