Group 1, Teleflex, Atlas price to cap $9.3 billion week; Chesapeake up on unit spinoff plans

By Paul Deckelman and Paul A. Harris

New York, May 16 - The high-yield primary arena saw a lighter deal flow on Friday, market participants said, as three issuers combined to bring $700 million of new U.S.-dollar-denominated, fully junk-rated paper to market - well down from the slightly more than $3 billion of such securities that priced in six tranches during Thursday's session, according to data compiled by Prospect News.

Houston-based auto dealership and collision services center chain Group 1 Automotive Inc. had the big deal of the day - a $350 million regularly scheduled forward calendar issue of eight-year notes, upsized from $300 million.

Teleflex Inc., a Limerick, Pa.-based surgical equipment manufacturer, brought a quickly shopped $250 million of 10-year notes to market.

Also driving by, with a $100 million addition to its existing 2021 bonds priced via two subsidiaries, was Atlas Resource Partners, LP, a Pittsburgh-based oil and natural gas exploration and production company.

The new Group 1 and Atlas Resource notes were each seen having firmed slightly when they reached the aftermarket. Traders did not immediately see the new Teleflex bonds.

The three deals closed out a week which saw $9.26 billion of new junk paper brought to market in 16 tranches - a little behind the $10.07 billion that priced in 21 tranches during the previous week ended May 9, according to the Prospect News data.

This week's primaryside activity raised the year-to-date Junkbondland new-issuance total to $129.48 billion in 248 tranches - running about 7.6% behind the $140.15 billion in 312 tranches that had priced by this time on the calendar last year, according to the data.

Traders saw CommScope Inc.'s new two-part megadeal start trading Friday, after having priced fairly late in the day in Thursday. They saw the bonds firm modestly. Other Thursday deals trading at better levels on Friday included AES Corp. and Kissner Milling Co. Ltd.

Away from the new issues, traders saw some upside in Chesapeake Energy Corp.'s bonds after the energy company announced that it expects to soon close the spinoff of its oilfield services business and several other asset-sale transactions as part of its plans to raise some $4 billion and cut debt.

The news that sector peer Midstates Petroleum Co. Inc. is exploring possibly selling itself gave the money-losing energy operator's bonds a boost.

J.C. Penney Co. Inc.'s paper rose after the underachieving department-store retailer posted better revenue numbers and a smaller net loss than analysts were expecting for its most recent quarter.

Statistical market performance indicators were mixed on the day, after having turned lower across the board on Thursday. Those indicators meanwhile ended the week mixed versus where they had been at the end of last week, after two straight weeks before that of having been higher all around.

Group 1 Automotive upsizes

Friday's dollar-denominated primary market saw three issuers complete single-tranche deals, raising a combined total of $700 million.

Two of the three came as drive-bys.

One priced at the tight end of talk. One came at the rich end. And one came on top of talk.

One of the three was increased from the originally announced size.

Group 1 Automotive priced an upsized $350 million issue of eight-year senior notes (B1/BB) at par to yield 5%.

The deal was raised from $300 million.

The yield printed on top of yield talk and in line with early guidance.

J.P. Morgan, Wells Fargo and BofA Merrill Lynch were the joint bookrunners for the debt refinancing deal.

Teleflex drives by

Teleflex priced a $250 million issue of 10-year senior notes (Ba3/BB) at par to yield 5¼% in a quick-to-market deal to refinance bank debt.

The yield printed at the tight end of the 5¼% to 5 3/8% yield talk.

BofA Merrill Lynch was the left bookrunner. J.P. Morgan was the joint bookrunner.

Atlas Resource taps 7¾% notes

In other drive-by action on Friday, Atlas Energy Holdings Operating Co., LLC and Atlas Resource Finance Corp. priced a $100 million add-on to their 7¾% senior notes due January 15, 2021 (Caa1/B-) at 99.5 to yield 7.846%.

The reoffer price came at the rich end of the 99.25 to 99.5 price talk.

Wells Fargo was the left bookrunner for the acquisition financing. Deutsche Bank was the joint bookrunner.

Matalan prices at tight end

In Friday's European session England-based Matalan Finance plc priced £492 million of secured notes in two tranches, both of which came at the tight end of talk.

The debt refinancing deal included a £342 million tranche of five-year first-lien notes (B2/B-) which priced at par to yield 6 7/8%, at the tight end of yield talk that was set in the 7% area. Initial guidance had the first-lien notes pricing in a low-7% context.

In addition, Matalan priced a £150 million tranche of six-year second-lien notes (Caa2/CCC) at par to yield 8 7/8%, also at the tight end of yield talk in the 9% area. Earlier guidance had the second-lien notes pricing in a low 9% context.

Joint global coordinator and joint physical bookrunner Morgan Stanley will bill and deliver. Lloyds was also a joint global coordinator and joint physical bookrunner. Barclays was a bookrunner.

Ovako upsizes

Sweden-based steel producer Ovako AB priced an upsized €300 million issue of five-year senior secured notes (B3/B) at par to yield 6½%.

The yield printed on top of yield talk as well as earlier guidance.

The debt refinancing deal was increased from €285 million.

Lead bookrunner JPMorgan will bill and deliver. Nordea was also a lead bookrunner. Deutsche Bank was a joint bookrunner.

The Stockholm-based company plans to use the proceeds to refinance debt.

The week ahead

Toward the end of the past week sources were forecasting that the week beginning Monday could be a sizable one.

Although no announced euro-denominated or sterling-denominated deals were on the active forward calendar heading into the weekend, sell-side sources in London are expecting a big week, with as many as 10 deals coming before the Friday, May 23 close.

Xella International SA plans to meet with investors in meetings set to take place on Monday in London to discuss a possible offering of senior floating-rate notes, according to a market source.

BNP Paribas has the mandate as joint global coordinator, and will bill and deliver. The mandate also includes Goldman Sachs International as a joint global coordinator, and Credit Agricole CIB, Morgan Stanley and UniCredit as joint bookrunners.

The Duisburg, Germany-based building materials company would use the proceeds to refinance debt.

Meanwhile the dollar-denominated calendar is thin but not empty, heading into the weekend.

24 Hour Fitness Worldwide Inc. has been roadshowing a $500 million offering of eight-year senior notes (expected Caa1/confirmed CCC+) via J.P. Morgan, Deutsche Bank and Morgan Stanley.

Yield talk has yet to surface on the LBO deal, which is set to price Tuesday. However discussions have taken place in a yield context of 8% to 8¼%, sources say. Watch for 24 Hour Fitness to come at the wide end of that range, a sell-side source advises.

And Enova International, Inc. is also on the road with a $500 million offering of seven-year senior notes (B3/B) via Jefferies.

The roadshow is set to run through the middle of the week ahead.

In addition to those, watch for a $2 billion-plus offer to emerge from the industrial sector during the week ahead, a New York-based debt capital markets banker advised.

Day's deals slightly firmer

When the new Group 1 Automotive 5% notes were freed for secondary dealings, a trader quoted those bonds having gotten out of park and moved up a little to 100¼ bid, 100¾ offered, from their par issue price.

However two other traders said that they had not yet seen any activity in that credit.

A trader quoted the Atlas Resource add-on to its 7¾% notes at 99¾ bid, 100½ offered.

That was up a little from the addition's 99.5 pricing level.

Traders did not initially see any Friday aftermarket activity in the day's other pricing, the Teleflex 5¼% notes.

CommScope starts trading

Thursday's new issue from CommScope Holding Co. began trading on Friday, with both halves of that deal quoted at 100½ bid, 101½ offered, a trader said.

The Hickory, N.C.-based provider of communications infrastructure services priced $1.3 billion in two tranches via its CommScope Inc. wholly owned subsidiary - $650 million each of 5% notes due 2021 and 5½% notes due 2021. Both priced at par after having been upsized from an originally announced $550 million.

At another desk, a market source pegged the 5% notes at 100 5/8 bid, 101 offered.

AES active again

Thursday's new issue from AES was actively traded for a second consecutive session. A market source said that more than $13 million of the floating-rate notes due 2019 changed hands, with the bonds going out at 100 7/8, a gain of about ¼ point.

A second trader had the bonds at 101 bid, 101¾ offered.

The Arlington, Va.-based global power producer had priced $775 million of those bonds on Thursday at 99.75 to yield 300 basis points over Libor, after the quick-to-market issue had been upsized from an originally announced $500 million.

When the bonds were freed for aftermarket activity later Thursday, they were seen having moved up by around ¾ point to around 100 5/8 bid, on volume of over $27 million.

Kissner climbs

A trader said that Kissner Milling's 7¼% senior secured notes due 2019 had moved up to 102¾ bid, 103¾ offered - calling that up 1¾ points on the day

The Cambridge, Ont.-based rock-salt producer had priced $220 million of those notes at par on Thursday, after upsizing the deal from $200 million. One trader saw them at 101 bid, 101½ offered late Thursday - but a second saw them already reaching the 102 mark.

Chesapeake churns upward

Away from the new deals, traders saw a fair amount of activity in Chesapeake Energy's various notes, which were helped by the news that Chesapeake expects to close soon on a sale of its oilfield services unit, as well as several other sales or divestments of non-core assets.

The Oklahoma City-natural gas producer expects those transactions to contribute to the roughly $4 billion it hopes to harvest from such deals.

Chesapeake's 6 5/8% notes due 2020 gained ½ point to end at 114 bid.

Its 4 5/8% notes due 2022, in contrast, were up more than 2 3/8 points, a trader said, at 104¾ bid.

Midstates moves up

A trader said that the news that Midstates Petroleum is exploring the possibility of selling itself "pushed its bonds up higher," with the Houston-based energy exploration and production company's 9¼% notes due 2021 up 5 points by late afternoon at 110½ bid, 110¾ offered.

Its 10¾% notes due 2020 were likewise seen up 4 points at 114½ bid.

JCPenney earnings boost bonds

JCPenney's turnaround effort looked to finally be gaining ground, based on the company's earnings release on Thursday.

Investors reacted positively to the numbers, which beat expectations.

One trader said the 6 3/8% notes due 2036 and the 7.4% notes due 2037 were trading in an 81 to 82 ZIP code, while the 5¾% notes due 2018 were seen around 90.

The latter issue had been trading around 85 prior to the earnings release, the trader noted.

The 7.95% notes due 2017 were meantime ending "close to 99," he said, which compared to a 94 to 95 context previously.

A second trader, however, called both the 6 3/8% notes and the 5¾% notes unchanged at 81 and 903/4, respectively.

He deemed the 7.95% notes up a point at 99.

Same-store sales saw its second consecutive quarterly gain, rising 6.2% during the first quarter. Online sales meantime increased 25.7%.

Total sales came to $2.8 billion, above the $2.64 billion reported a year ago and above analysts' expectations of $2.71 billion.

The net loss for the quarter was $352 million, or $1.15 per share. Overall, that was wider than a year ago when the net loss was $348 million, but on a per share basis it was better than 2013's first quarter per share loss of $1.58.

Excluding certain items, the loss was $1.14 per share. That beat analysts' expectations of $1.24 per share.

Indicators mixed on day, week

Statistical junk performance indicators were seen by market sources turning mixed on Friday, after having been lower across the board on Thursday.

They were also mixed versus where they had finished the previous week on Friday, May 9.

The Markit Series 22 CDX North American High Yield Index edged upward by 1/32 point on Friday to end at 106 13/16 bid, 106 7/8 offered, after having been off for the previous two sessions; on Thursday, it had fallen by 13/32 point. Before the losses on Wednesday and Thursday, the index had been on the upside for five straight sessions before that.

Friday's finish was down from the 107 bid, 107 1/16 offered level at which it had closed the previous Friday.

The KDP High Yield Daily Index dipped by 2 basis points on Friday to end at 74.93, its second straight downturn. On Thursday it lost 6 bps.

However, its yield - which usually moves inversely to the actual index reading - also moved downward Friday, by 1 bp, to close at 5.09%. It had risen by 1 bp on Thursday.

Friday's levels were mixed compared with those of the previous Friday, when the index had stood at 74.99, with a 5.12% yield.

The widely followed Merrill Lynch High Yield Master II Index returned to its winning ways on Friday after having suffered a rare loss on Thursday. It finished up by 0.011%, versus Thursday's 0.041%downturn; that loss, in turn, had broken a 13-session upside streak dating back to April 28.

Friday's gain raised the index's year-to-date return to 4.328% from Thursday's 4.316%, although it still remained down from Wednesday's 4.358%, its peak level for 2014 so far.

For the week, the index gained 0.222% - its ninth straight weekly gain, going all the way back to March 21. Gains have now been recorded in the 16 weeks out of the 20 so far this year.

A week earlier, the index showed a 0.282% gain on the week, leaving its year-to-date return as of Friday, May 9 at 4.097%.

-Stephanie N. Rotondo contributed to this review

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