Magnum Hunter, Penn Virginia, Libbey deals close $7B primary week; bad news hurts Chesapeake

By Paul Deckelman and Paul A. Harris

New York, May 11 - The high-yield primary sphere closed out the week Friday, pricing three dollar-denominated junk deals - all of them for eight-year bonds - generating $1.49 billion.

Glassware maker Libbey Glass Inc. came to market with a $450 million tranche of senior secured notes; those new bonds firmed smartly when they hit the aftermarket, up nearly 2 points.

In the energy sector, exploration and production operator Magnum Hunter Resources also priced a $450 million note issue at a discount to par. These bonds also were seen solidly improving when the issue was freed for secondary dealings.

And coal and natural gas midstream company Penn Virginia Resource Partners LP also was going to do a $450 million deal, but upsized it to $600 million. Traders heard the new issue up nearly a point.

The trio of deals raised the week's new-issuance total to about $7.1 billion in 15 tranches, according to data compiled by Prospect News, topping the nearly $5.7 billion in 14 tranches that priced the week before, which ended May 4. Year-to-date issuance grew to $132.891 billion in 277 tranches, lagging about 8% behind the $145 billion of new paper which had priced by this time a year ago.

Apart from the deals that actually priced, high-yield syndicate sources heard two prospective issuers getting ready to hit the road Monday to market deals likely to price in the upcoming week - Generac Power Systems Inc. and Harland Clarke Holdings Corp.

Away from the primary arena, traders said the bonds of recently troubled Chesapeake Energy Corp. were again getting clobbered Friday, on heavy volume, in tandem with its stock.

The latest Chesapeake churning followed the news that the company may have to delay some previously scheduled asset sales to preserve cash flow needed to comply with its credit facility covenants. This endangers its strategy of using such sales to close the big gap between operating revenues and its heavy capital spending and debt-repayment requirements.

On the upside, pre-paid wireless operator Cricket Communications Inc.'s bonds jumped on news reports that its parent, Leap Wireless International Inc., was in talks to possibly be acquired by telecom giant AT&T Inc.

The overall market was seen softer, though, both on the session and on the week.

Penn Virginia upsizes

The Friday session produced a purposeful volume of primary-market news.

In the dollar-denominated market, three issuers - each one bringing a single tranche of junk bonds - raised $1.49 billion.

Penn Virginia Resource Partners, LP and Penn Virginia Resource Finance Corp. II priced an upsized $600 million issue of eight-year senior notes (B2/B) at par to yield 8 3/8%.

The yield printed at the tight end of yield talk that was set in the 8½% area.

The deal, which was nearly four times oversubscribed, went very well, according to a syndicate source.

RBC was the left bookrunner for the acquisition and debt-refinancing deal, which was upsized from $450 million.

J.P. Morgan, Wells Fargo and SunTrust were the joint bookrunners.

Libbey Glass prices tight

Libbey Glass moved up timing on its $450 million issue of eight-year senior secured notes (B2/B+) and priced it at par to yield 6 7/8% at the tight end of yield talk, which was set in the 7% area.

The deal was previously announced as business for the May 14 week.

Citigroup was the left bookrunner. Barclays and J.P. Morgan were the joint bookrunners.

The Toledo, Ohio-based glassware manufacturer plans to use the proceeds to make a pension plan contribution, to fund the tender offer for its existing notes and to call $40 million of those notes that remain outstanding following the close of the tender at 103.

Magnum Hunter prices wide

Magnum Hunter Resources priced a $450 million issue of 9¾% eight-year senior notes (Caa1/CCC+) at 98.646 to yield 10%.

The yield printed 37.5 basis points beyond the wide end of price talk, which was set in the 9½% area.

Citigroup and Credit Suisse were the joint global coordinators, joint physical bookrunners and joint allocators. Credit Suisse will bill and deliver. Citigroup will stabilize.

BMO was the joint global coordinator and lead bookrunner.

Capital One Southcoast, Deutsche Bank, Goldman Sachs, RBC and UBS were the joint bookrunners.

The Houston-based independent exploration and production company plans to use the proceeds to fund its acquisition of Baytex Energy Corp., to repay its existing revolver and term loan and for general corporate purposes.

Schmolz + Bickenbach downsizes

In Friday's euro-denominated market, Schmolz + Bickenbach Luxembourg SA priced a downsized €258 million issue of 9 7/8% seven-year senior secured notes (B1/B+) at 96.957 to yield 10½%.

The coupon, price and yield came on in line with price talk.

BNP Paribas, Commerzbank, Credit Suisse, Royal Bank of Scotland and UniCredit were the joint bookrunners for the issue, which was downsized from €300 million.

The Emmenbruecke, Switzerland-based specialty steel manufacturer plans to use the proceeds to refinance bank debt and for general corporate purposes.

Generac announces roadshow

Looking to the week ahead, Generac Power Systems plans to start a roadshow Monday for its $425 million offering of eight-year senior notes (expected ratings Caa1/B-).

The deal is set to price May 14.

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

The proceeds will be used to help fund a special cash dividend of up to $10 per share (about $679.5 million) and to repay the existing credit facility.

Harland Clarke starts Monday

Harland Clarke Holdings also plans to start a roadshow Monday for its $295 million offering of seven-year senior secured notes, which is set to price late in the week.

Credit Suisse, Citigroup, Bank of America Merrill Lynch, Deutsche Bank, Jefferies, UBS and Natixis are the joint bookrunners for the debt refinancing deal.

Magnum Hunter moves up

When they were freed for secondary dealings, a trader said the new Magnum Hunter Resources' 9¾% notes due 2020 "did really well," quoting the Houston-based independent oil and gas exploration and production company's bonds at par bid, 100½ offered.

That was well up from the 98.646 level at which that $450 million offering came to market.

Another trader said the bonds initially traded at 99½ when they were freed for aftermarket dealings before moving up.

Yet another trader saw the new deal going home at 100¼ bid, 100¾ offered.

Penn Virginia pops

The day's other new deal out of the energy sector - Penn Virginia Resource Partners and its Penn Virginia Resource Finance Corp. affiliate -also was seen doing well in the aftermarket.

The coal and natural gas midstream company is based in Radnor, Pa.

After its $600 million of 8 3/8% notes due 2020 priced at par, a trader quoted the bonds at 100¾ bid, 101 offered. A second saw them pushing up to 101 bid, 101½ offered.

At another desk, the bonds went out at a wider 100¾ bid, 101¾ offered.

The deal was upsized from an originally announced $450 million.

Libbey Glass glides higher

Toledo, Ohio-based glassware manufacturer Libbey Glass, which was the lone non-energy dollar deal of the session, rose to 101 5/8 bid, 101 7/8 offered after the $450 million of 6 7/8% senior secured notes due 2020 priced at par, a trader said.

A second trader saw the bonds move up to 101½ bid, 102 offered.

Earlier deals hold levels

Traders said most of the deals that came to market Thursday or earlier in the week pretty much held at the same levels at which they were trading.

One notable exception was Crosstex Energy, LP/Crosstex Energy Finance Corp.'s 7 1/8% notes due 2022. That $250 million deal priced at par Thursday, just a day after the Dallas-based natural gas midstream company announced its bond deal and was quoted rising as high as 101 bid, 101½ offered.

However, on Friday the paper came off that peak level, with one trader seeing the notes at 100¼ bid, 100½ offered. Another trader pegged them at par bid, 100½ offered.

Tekni-Plex Inc.'s $485 million of 9¾% senior secured notes due 2019 were trading Friday at a wide 99 bid, 101 offered, a trader said.

That was not far from the 99½ bid, 100½ offered level at which the deal traded Thursday after it priced at 98.756 to yield 10%.

The traders also saw the new Ford Motor Credit Co. LLC's 2¾% notes due 2015 continuing to trade right around the par level at which that $1.25 billion drive-by offering from the Dearborn, Mich.-based financing arm of automotive giant Ford Motor Co. priced Thursday. One trader had them right on the nose at par bid, 100¼ offered, while a second nudged them up a little to 100 1/8 bid, 100¼ offered.

As was the case Thursday, traders saw little real activity from true junk-market accounts in the Fords, owning to the very un-junk-like coupon - a record low yield, by the way. Most of what trading there was in the Ba1/BB+/BBB- issue originated with high-grade investors reaching down a notch or two on the credit scale to grab some yield.

There, likewise, was not too much junk-market enthusiasm shown for the big deal of the week - Englewood, Colo.-based satellite broadcaster Dish Network Corp./Dish DBS Corp.'s $1.9 billion quick-to-market two-part offering, which priced very late Monday after being upsized from an originally announced $1.5 billion and began trading Tuesday.

While both its $900 million of 4 5/8% notes due 2017 and $1 billion of 5 7/8% notes due 2022 priced at par, they began trading down from there shortly after being freed for aftermarket activity, but never recovered.

On Friday, a trader said the 4 5/8% notes were at 99 3/8 bid, 99 7/8 offered, while its 5 7/8s were at 99¾ bid, 100¼ offered.

'We didn't tank'

Away from the new-deal realm, a trader said that while the financial markets were "in a funk over J.P. Morgan, the market didn't tank like everyone thought it would."

The giant New York-based banking concern reported that it incurred as much as $2 billion in trading losses, prompting scrutiny from the Securities and Exchange Commission.

The trader said things were "just a little weaker, but the stuff didn't tank."

Statistical measures of market performance turned lower Friday after it blipped up Thursday in a generally negative week. They also were lower on a week-to-week basis.

A trader saw the Markit Group CDX North American Series 18 High Yield Index drop by nearly a half-point to 94¾ bid, 94 7/8 offered, after rising up by 3/16 point Thursday, which was its first gain after five straight days of losses.

The index ended the week well down from the 96 bid, 96 1/8 offered level at which it closed out the previous week, ended May 4.

The KDP High Yield Daily Index meanwhile dropped by 7 basis points Friday to finish at 74.06, after having snapped a three-session losing streak Thursday by edging up 1 bp.

Paradoxically, its yield fell by 5 bps on Friday to 6.37%, after having risen by 1 bp to 6.42%. The index was down from 74.22 a week earlier, with a yield of 6.41%.

And the widely followed Merrill Lynch U.S. High Yield Master II Index notched its second straight gain Friday - barely - as it edged up by 0.003%. That came on top of Thursday's 0.092% advance.

The latest gain lifted its year-to-date return to 6.762% Friday from Thursday's 6.759%, although it remained down from Monday's 6.80%, the peak level for 2012 so far.

On the week, though, the index fell by 0.019%, which was its first drop after three straight weeks on the upside, including the week ended May 4, when the index rose 0.696% on the week, for a 6.782% cumulative 2012 return.

Chesapeake chopped up

Among specific names, a trader said that Chesapeake Energy's bonds were multiple points lower, on active volume.

"The bonds dropped at least two or three points on really good volume," a trader said about an hour before the close. "And they could trade down another one or two."

For instance, he saw the Oklahoma City-based natural gas company's 6 5/8% notes due 2020 falling to 95 bid, which he called a 3-point loss on the day on relatively busy volume of $9 million or $10 million, making it one of the busier issues in the junk realm.

As usual, the company's 6.775% notes due 2019 sold earlier this year were even busier, with at least $20 million changing hands. The bonds were "off a couple," a trader said, trading in a 94-96 context.

Even busier was its 9½% notes due 2015 on "a lotta volume," a trader said. Turnover was at least $23 million with the bonds falling to 105 bid, 106 offered, down 2½ points on the session.

Another trader saw the 6 5/8% notes "definitely lower," quoting them as low as 93 or 94 and estimating the loss at 4 points.

The 6.775s were pretty active, around the 95 neighborhood, he said.

Chesapeake, the second trader said, "has been chock full of interesting news lately." Adding to the news was the announcement that it would be delayed in submitting its 10-Q quarterly filing to the SEC, although it subsequently did file.

Even more damaging was another company disclosure: Chesapeake warned that it may have to delay some planned asset sales in order to maintain adequate cash flow and stay in covenant compliance.

Although Chesapeake would expect to make money from the sale of some of its far-flung assets, loss of the cash flow from those properties could threaten its ability to remain in compliance with maintenance covenants to its credit agreement.

However without those asset sales, Chesapeake will not be able to meet its own ambitious targets for raising money for capital expenditures or debt repayment.

The company has been selling some of the assets it aggressively accumulated over the past few years in order to tide it over a revenue shortfall caused by historically low natural gas prices.

"If they're bumping up against their covenants, that can't be good," the trader said.

"As more and more stuff is coming out about them, it's raising [investor] concerns."

Stock investors were just as dismayed at the latest turn of events; Chesapeake's New York Stock Exchange-traded shares swooned by $2.37, or13.80%, to end at $14.81.

Volume of 85 million shares was more than 3.5 times the usual turnover.

Leap leaps up

Elsewhere, a trader said that Cricket Communications' 7¾% notes due 2020 were "up a bunch" on news that the San Diego-based pre-paid wireless company held talks with telecommunications giant AT&T in recent months to discuss possible merger or acquisition scenarios.

Neither company would confirm or deny the reports.

He quoted those bonds as moving up to around the 93-94 level, versus previous levels around 91-92.

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