Upsized Foresight Energy prices to cap $5.4 billion week; Springleaf up after IPO filing

By Paul Deckelman and Paul A. Harris

New York, Aug. 16 - The high-yield market saw one pricing on Friday, according to syndicate sources, who said that coal producer Foresight Energy LLC brought in an upsized $600 million issue of eight-year notes.

After those bonds priced, a trader saw them having moved up a little from their discounted issue price.

That transaction closed out a week in which some $5.4 billion of new dollar-denominated, fully junk-rated paper came to market in 17 tranches, up from the $5.14 billion that got done in 16 tranches during the previous week, ended Aug. 9.

The deal also increased the year-to-date new-issuance volume to just over $202 billion in 476 tranches - running about 7.2% ahead of the pace seen last year, when $188.5 billion of such new paper from domestic or industrialized-country borrowers had come to market by this point on the 2012 calendar.

The syndicate sources meanwhile noted that the week's transactions had pretty much "cleaned out the cupboard" of deals being actively shopped around to potential investors, leaving just one undone - from the Australian heavy-equipment company Orionstone Pty. Ltd. They predicted that there would be little additional pricing activity with the onset of the traditional pre-Labor Day lull.

In the secondary market, traders saw recent new deals such as those from Medical Properties Trust and tw telecom inc. continuing to hold around the levels reached in trading earlier in the week.

Away from the new-issue realm, traders saw some brisk activity in Springleaf Financial Corp.'s bonds, which moved up by several points after the consumer lender filed the paperwork needed to bring an initial public stock offering to market.

AMR Corp.'s bonds ended the week well down from where they had begun, still affected by the federal government's unexpected announcement that it would seek to block the bankrupt airline operator's planned $11 billion merger with industry rival US Airways Group, Inc. on antitrust grounds.

Statistical indicators of market performance were lower on the day across the board and had fallen from the previous Friday's levels for a fourth consecutive week.

Foresight Energy prices

The Friday session saw one deal cross the finish line.

Foresight Energy and Foresight Energy Finance Corp. priced a $600 million issue of 7 7/8% eight-year senior notes (Caa1/CCC+) at 99.276 to yield 8%.

The deal was upsized from $500 million.

The coupon and yield came on top of talk.

Morgan Stanley, Citigroup, Barclays, J.P. Morgan, Goldman Sachs, Deutsche Bank and UBS Securities LLC were the joint bookrunners.

The St. Louis-based producer of thermal coal plans to use the proceeds, together with proceeds from a new credit facility and cash on hand, to fund a dividend, refinance its existing credit facility, take out its 2017 notes and repay about $150 million of other secured debt. The additional proceeds resulting from the upsizing of the deal will be used to increase the dividend to $375 million from $275 million.

Orionstone mulls timing

Only one deal remained on the active calendar at Friday's close.

Orionstone, a heavy-equipment rental company with headquarters in West Kalgoorlie, Australia, has been marketing a $200 million offering of seven-year secured notes (B3/B), also via Morgan Stanley.

Timing on the deal is to be determined, an informed source said on Friday, adding that it is possible but unlikely that the deal will be completed in the week ahead.

Given the fact that so much of the buyside will be out on vacation during the run-up to Labor Day, with the three-day holiday weekend in the United States set to commence after the Friday, Aug. 30 close, primary market activity will likely be extremely thin to nonexistent until early September, the source added.

Foresight firms after issue

In the secondary market, a trader saw Foresight Energy's 7 3/8% notes due 2021 trading around par bid, 100 ¾ offered.

That was up from the 99.276 at which the deal had priced earlier in the session.

Earlier deals hold levels

Traders said that Friday's session was mostly quiet - what one called "a typical summer Friday afternoon," with participants at a number of shops deciding to take advantage of the lack of activity in the market to make an early exit.

There were markets in a few of the new deals that had priced over the last few deals, mostly around the levels at which they had traded in initial aftermarket dealings.

One trader saw Medical Properties Trust's 6 3/8% notes due 2022 at 102¼ bid, 102¾ offered - about the levels where the bonds had traded on Thursday after the Birmingham, Ala.-based health-care investment company priced the quickly shopped $150 million add-on to its existing notes via its MPT Operating Partnership LP and MPT Finance Corp. subsidiaries.

The bonds priced at 102 to yield 6.07%.

A trader pegged NuStar Logistics, LP's 6¾% notes due 2021 at 100 3/8 bid, 101 offered. That was around the same context in which they had traded after the $300 million offering from the San Antonio-based provider of petroleum terminaling and storage services priced at par on Wednesday.

That was also pretty much the story for Access Midstream Partner, LP/ACMP Finance Corp.'s $400 million add-on to its existing 5 7/8% notes due 2021.

The Oklahoma City-based natural gas services provider's quick-to-market transaction priced on Wednesday at 101½ to yield 5.503%; while the bonds had initially traded between 102 and 103 bid, a trader said that on Thursday they gave up some of those early gains to finish out the day at around a 101½ to 101¾ bid context and stayed there on Friday.

tw telecom's $800 million two-part drive-by deal was unchanged on Friday from the levels to where those bonds had moved on Thursday.

A market source said that both tranches of the Littleton, Colo.-based provider of network services to telecommunications companies had eased by ¾ point on Thursday. Its $450 million of 5 3/8% notes due 2022, structured as a mirror tranche to its existing notes, priced at 96¼ on Monday to yield 5.913% and initially got as good as 96½ bid, 97 offered before starting to come down off those peak levels. On Thursday, its retreat continued, as the bonds backed up to 95½ bid, 96¼ offered, actually below their issue price, and they stayed there on Friday.

The company's $350 million of stand-alone 6 3/8% notes due 2023 had priced at par on Monday and had traded at or near that level when they were freed for secondary dealings. They too had come in a little on Thursday, to around the 99¼ bid, 99¾ offered level and remained there on Friday.

Springleaf firms post-IPO news

Away from the new-issue world, Springleaf Financial's bonds were seen firmer in brisk trading on Friday after the consumer finance company filed paperwork with the Securities and Exchange Commission for an initial public offering.

A market source said that Springleaf's 6.9% notes due 2017 initially rose about 7/8 point in early dealings during the morning, and then continued to climb as the day wore on, finally finishing around 102 bid, a gain of 1¼ points on the day.

Round-lot volume amounted to about $12 million, making Springleaf one of the busier junk names on Friday.

The bonds moved up on the news that the Evansville, Ind.-based company, which provides loan products to consumers through its branch network and online, filed to raise up to $50 million via the equity offering through its Springleaf Holdings LLC entity. The proceeds are expected to be used for general corporate purposes.

No pricing terms were disclosed in the S-1 filing, nor was any information initially provided about the syndicate for the IPO.

Springleaf plans to list on the New York Stock Exchange.

AMR paper active

Elsewhere, AMR's bonds traded fairly actively, with over $14 million of its 6¼% notes due 2014 changing hands.

They were seen going home around the 93½ level, about unchanged on the day.

However, that paper closed well down from the levels around 115 at which it had begun the week.

Those bonds went into a nosedive on Tuesday on the news that the U.S. Justice Department, joined by the attorneys general from six states plus the District of Columbia, had filed suit to stop the planned merger between the bankrupt AMR and industry peer US Airways.

The bonds got hammered down after the announcement to about the 103 bid level on Tuesday on heavy volume of over $50 million and fell further, to down around the 90 bid level, on Wednesday, with over $70 million traded, as investors mulled over the possibility that the surprise federal move might derail the merger, completely scrambling AMR's plans for emerging from Chapter11 protection.

In fact, the Fort Worth-based air carrier had a hearing on Thursday before the U.S. Bankruptcy Court for the Southern District of New York, but instead of giving final approval for its reorganization plan as expected, the presiding judge instead ordered lawyers for AMR and US Air to file briefs arguing whether he should confirm the proposal in light of the Justice Department suit.

Proceedings are scheduled to resume this coming Friday.

Tempe, Ariz.-based US Airways'6 1/8% notes due 2018 meantime closed at 92 bid on Friday, a trader said, around where that paper had finished up on Thursday. However, it was still down from levels around 96 bid seen before the market got news of the federal intervention in the case.

Market indicators lower

Statistical junk market performance indicators were lower on Friday for a second consecutive session and were down as well for a fourth consecutive week.

The Markit Series 20 CDX North American High Yield index lost 11/32 point on Friday to end at 103 15/16, 104 offered, after having retreated by ¾ point on Thursday.

And it was down from 105 3/32 bid, 105 5/32 offered seen the previous Friday, Aug. 9.

The KDP High Yield Daily index saw its fourth straight loss on Friday, dropping by 8 basis points to end at 73.34, after sliding by 11 bps on Thursday.

Its yield was higher for a second straight session, rising by 3 bps to 6.22%, on top of Thursday's 7 bps increase.

Those results compared unfavorably to the 73.54 index reading and 6.11% yield seen the previous Friday.

And the widely followed Merrill Lynch High Yield Master II index saw its second straight loss Friday, falling by 0.041%. It had been down by 0.255% on Thursday.

The new loss left the index's year-to-date return at 2.827%, down from Thursday's 2.869%, which had been the first time the figure had fallen below the psychologically significant 3% level since July 12, when it had been at 2.74%. The return was down from its peak level for the year so far of 5.835%, recorded on May 9, though still up solidly from its 2013 low point of 0.384%, set on June 25.

For the week, the index was down by 0.328%, its fourth straight weekly downturn. It had lost 0.097% the previous week, when the year-to-date return ended at 3.165%.

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