Linn, Hertz, Virgin lead $3.3 billion day; new bonds continue to dominate thin secondary

By Paul Deckelman and Paul A. Harris

New York, Feb. 28 - The junk bond primary heated up on Tuesday as no fewer than five rapidly appearing drive-by offerings came to market, almost all of them within hours of having been announced. Several of the deals were upsized.

Chief among them was the big deal of the day, from Linn Energy LLC. The oil and natural gas operator's offering of seven-year notes, which first surfaced on the radar screens on Monday, priced after having been greatly upsized to $1.8 billion, accounting for more than half of the day's new-deal volume.

From that same sector, pipeline operator Holly Energy Partners, LP turned the spigot on a $300 million same-day issue of eight-year notes. The bonds firmed solidly in the aftermarket - the only one of the day's new deals to really see much trading.

There was, in contrast, only a little aftermarket action in Hertz Corp.'s quickly shopped $250 million add-on tranche to the car-rental giant's existing $1 billion of 2019 notes sold last year.

Virgin Media Finance plc and RR Donnelley & Sons Co. also priced new upsized seven-year deals just hours after announcing plans to sell bonds. British communications and entertainment operator Virgin came to market with $500 million of new paper, while Donnelley, an integrated communications technology provider, increased its offering to $450 million.

The Linn megadeal, Virgin Media and RR Donnelley all priced too late in the session for any kind of aftermarket dealings.

There was a fair amount of activity in Sprint Nextel Corp.'s giant-sized two-part deal, which priced too late on Monday to trade at that time. The wireless operator's tranche of secured guaranty bonds did considerably better than its unsecured bonds did.

But away from that, trading was seen as largely restrained, with numerous market participants away from their offices at the J.P. Morgan junk bond conference in Florida.

Statistical market performance measures, though, were better across the board.

Linn upsizes to $1.8 billion

Linn Energy LLC and Linn Energy Finance Corp. priced an upsized $1.8 billion issue of 6¼% seven-year senior notes (B2/B) at 99.989 to yield 6¼%.

The yield printed on top of the price talk.

RBS Securities, Barclays Capital Inc., Citigroup Global Markets Inc., Credit Agricole Securities (USA) Inc., Credit Suisse Securities (USA) LLC, RBC Capital Markets, LLC and Wells Fargo Securities, LLC were the joint bookrunners for the quick-to-market issue, which was upsized from $1.5 billion.

RBS will bill and deliver.

Proceeds will be used to fund the Hugoton Basin acquisition, to repay revolver debt and for general corporate purposes.

Virgin at the tight end

Virgin Media Finance priced an upsized $500 million issue of non-callable 10-year senior notes (Ba2/BB-/BB+) at par to yield 5¼%, at the tight end of the 5¼% to 5 3/8% price talk.

Bank of America Merrill Lynch, BNP Paribas, Credit Agricole CIB, Deutsche Bank Securities Inc., Goldman Sachs & Co., HSBC, JP Morgan Securities LLC, Lloyds TSB, RBS Securities Inc. and UBS Securities Inc. were the joint bookrunners for the quick-to-market issue, which was upsized from $400 million.

Proceeds will be used to repurchase a portion of the company's dollar-denominated 9½% senior notes due 2016 or repurchase, redeem or repay any other debt.

RR Donnelley upsizes

RR Donnelley & Sons priced an upsized $450 million issue of seven-year senior notes (Ba1/BB+/BB+) at par to yield 8¼%, at the tight end of the 8¼% to 8½% price talk.

Bank of America Merrill Lynch, J.P. Morgan Securities LLC and Wells Fargo Securities LLC were the joint bookrunners for the deal, which was upsized from $300 million.

Proceeds will be used to partially fund tender offers for up to $350 million of the company's 4.95% notes due in 2014 and its 5½% notes due in 2015.

Holly prices at tight end

Holly Energy Partners and Holly Energy Finance Corp. priced a $300 million issue of eight-year senior notes (B1/BB-) at par to yield 6½%, at the tight end of the 6½% to 6¾% yield talk.

Timing on the deal was moved ahead. When the deal was announced, the books were scheduled to stay open until 10 a.m. ET Wednesday.

Citigroup Global Markets was the left bookrunner for the quick-to-market deal. UBS Securities Inc. and Wells Fargo Securities LLC were the joint bookrunners.

Proceeds will be used to help fund the tender offer for $185 million senior notes due 2015, pay down its promissory notes, and to repay its revolver.

Hertz taps 6¾% notes

Hertz priced a $250 million add-on to its 6¾% senior notes due April 15, 2019 (B2/B) at 104.0 to yield 5.833%.

The reoffer price came at the rich end of the 103.75 to 104.0 price talk.

Barclays Capital Inc. ran the books for the quick-to-market deal.

The Park Ridge, N.J.-based auto and equipment rental company plans to use the proceeds, along with cash on had, to redeem dollar- and euro-denominated bonds maturing in 2014.

The original $500 million issue priced at par in January 2011. A previous $500 million add-on priced at 100.375, resulting in a 6.69% yield to worst in March 2011.

The deal went very well, according to an informed source, who added that the order book was slightly below three-times oversubscribed.

Heading into the transaction, the existing Hertz 6¾% notes due 2019 were 104¼ bid, 104½ offered, so the tap came at slim discount to the existings.

The add-on notes traded as high as 105 bid in the secondary market on Tuesday before settling in at 104 3/8 bid.

Clear Channel on Wednesday

Clear Channel Worldwide Holdings, Inc., a wholly owned subsidiary of Clear Channel Outdoor Holdings, Inc., is expected to price $1.25 billion of senior subordinated notes in two tranches on Thursday, according to market sources.

The deal will be comprised of a $250 million tranche of series A senior subordinated notes due 2020 and a $1 billion tranche of series B senior subordinated notes due 2020.

Goldman Sachs & Co., Citigroup Global Markets, Credit Suisse, Deutsche Bank Securities Inc., Morgan Stanley & Co., Wells Fargo Securities LLC and RBS Securities Inc. are managing the sale.

Proceeds plus cash on hand will be used to pay a special cash dividend to parent Clear Channel Outdoor Holdings Inc., which will make a special cash dividend with the funds to all holders of its class A common stock and class B common stock, including Clear Channel Holdings Inc. and CC Finco LLC. Depending upon the size of the distribution, funds may also be used to repay Clear Channel Communications bank debt.

Clear Channel Outdoor Holdings is a San Antonio-based outdoor advertising company.

Afren sets deal size

Afren (B/B) plans to sell $300 million to $350 million of seven-year four-year senior secured notes (/B/B) during the present week, according to a market source.

BNP Paribas, Deutsche Bank AG and Goldman Sachs International are the managers.

Proceeds will be used to repay bank debt and for general corporate purposes.

Afren is based in London, and conducts its oil and gas exploration, development and production operations in African countries, including Nigeria, Gabon, Republic of the Congo, Ivory Coast and Ghana.

In addition to Afren and other announced deals on the forward calendar, drive-by business is expected to remain brisk through the remainder of the week, a syndicate banker said.

Holly moves higher

A trader said that the only new deal he really saw trading around after it priced was Holly Energy's $300 million of eight-year notes.

He saw the bonds bid at 1001/2, up from their par issue price. He remarked, "I think that they're better bid away."

But a second trader queried later pegged the bonds at 101¾ bid, 102¾ offered.

Another opined that Holly "is doing very, very well." He saw the bonds at 102 bid, 102¼ offered.

Hertz spins its wheels

The only other deal to price in time to trade on Tuesday, Hertz's $250 million add-on to its 2019 notes, "didn't do much," a trader said, quoting the bonds at 104 bid, 104½ offered, versus the 104 level at which the add-on priced.

A second trader saw the bonds at 104¼ bid, 104½ offered.

Traders saw no immediate aftermarket dealings in either the Linn bonds, in Virgin Media, or in RR Donnelley.

The latter company's existing 6 1/8% notes due 2017 saw a little trading, easing to 96½ bid, a loss of about a quarter-point. About $5 million traded on a round-lot basis, although there was also a fair amount of odd-lot dealings.

Sprint secureds do well

Among the bonds priced on Monday, a trader said that "we saw some stuff" in the new Sprint Nextel bonds, which priced fairly late in the session Monday.

He said that the Overland Park, Kan.-based wireless carrier's new 9 1/8% non-guaranty notes due 2017 were trading at 100½ bid, 100¾ offered, after the quickly shopped $1 billion issue had priced at par on Monday, while the other half of the deal - $1 billion of 7% junior guaranty notes due 2020 - traded at 101½ bid, 102 offered, up from Monday's par issue level.

Another said that the Sprint 7% notes "did well rising to 101½ bid, 101¾ offered from par," while the 91/8% notes "are up some, but not as well as the 7s," ending wrapped around 1001/2.

"The secured tranche definitely did the best."

The first trader did not see any of Sprint's existing bonds trading, declaring that "nothing besides the new deals" were trading.

However, another trader did see the existing bonds. "Sprint still has a little leftover activity" from Monday, when the existing bonds traded busily at generally lower levels in light of the company's announcement that it would lever up by selling $2 billion in new paper.

He said that the bonds were pretty much unchanged, with the 6 7/8% notes due 2028 hanging around a 78-78½ bid context. He called that unchanged but on "a decent amount of volume," with over $11 million seen having traded by mid-afternoon.

He saw the 7 3/8% notes due 2015 also unchanged at 98¾ bid, 99¼ offered, on "decent volume."

QEP holds gain

Traders saw QEP Resources, Inc.'s new 5 3/8% notes due 2022 pretty much holding the gains, which they notched in initial aftermarket dealings on Monday, after the Denver-based natural gas and oil operator priced $500 million at par in a quick-to-market transaction.

One located the bonds on Tuesday at 100 7/8 bid, 101 1/8 offered, while a second quoted them at 101, but said that the issue "had its predominant move" on Monday.

New deals hold sway

A trader said that the Junkbondland focus "clearly remains the new issues" - especially with many participants still at the annual J.P. Morgan High Yield and Leveraged Finance Conference in Miami. The conference opened on Monday.

Even the new Chesapeake Energy Corp. 6.775% notes due 2019 - priced more than two weeks ago on Feb. 13 - continue to trade around.

The first week that the upsized $1.3 billion behemoth traded saw hundreds of millions of dollars of the new bonds changing hands in each of several sessions. Then, last week, at least $50 million to $70 million was trading each day of the week.

By now, volume levels have calmed down a little, with a trader seeing about $19 million having traded on Tuesday - still enough to put the Oklahoma City-based natural gas company's deal on the most-actives list.

He quoted the bonds having pushed up to between 101 and 102 bid, although he also saw a lot of odd-lot trading at lower levels than that.

The bonds had priced at 98.75 to yield 7%. The initially hung around their issue price for several sessions, but eventually pushed up to around the par bid level, and then, last week, up to a 101 bid context.

iStar improves on funding

Away from the new issues, a trader said iStar Financial Inc.'s "front end was better" by about 1 to 2 points on Tuesday, "on the back on their news about their bank loan financing."

He quoted the New York-based real estate lender's 8 5/8% notes due 2013 as having moved up to 97 bid, 98 offered, calling them up a deuce on the day.

iStar, which released fourth-quarter and full-year results on Tuesday, also announced that it will line up some $900 million of new senior secured term-loan financing, using the deal proceeds plus cash on hand to meet unsecured bond maturities and existing loan amortization obligations that are scheduled to come due this year.

Overseas Ship sails higher

Also on the earnings front, a trader said that Overseas Shipholding Group Inc.'s bonds "were up a bit; they had numbers." He saw the New York-based oil tanker operator's 7½% notes due 2024 were ending at 60 bid, calling them up 3 or 4 points.

However, another trader saw them trading around 58-to-60, declaring that's where the bonds had been the last 2 days.

"You really can't tell much, there was no big volume," he said.

The company's 8 1/8% notes due 2018 traded at 64 bid, 64¼ offered last, on "not much trading, perhaps one or two trades." He said the bonds were "maybe down a half-point."

The company reported a fourth-quarter loss of $50 million, or $1.65 per diluted share, versus year-ago red ink of $55.3 million, or $1.83 per diluted share.

Market indicators head higher

Statistical measures of junk market performance, which mostly unchanged on Monday, though with a positive bias, turned definitively higher on Tuesday.

"The market is definitely strong," a trader declared.

A market source said that the CDX North American Series 17 High Yield index was up 3/16 point on Tuesday to end at 98 3/16 bid, 98 3/8 offered, after having been unchanged for the two prior sessions.

The KDP High Yield Daily Index rose by 10 basis points Tuesday to close at 74.53, after having been unchanged on Monday. Its yield came in by 4 bps, to 6.45% after having tightened by 1 bp on Monday.

And the widely followed Merrill Lynch High Yield Master II Index notched its eighth consecutive daily advance on Tuesday, gaining 0.145% on top of Monday's 0.116% rise.

The latest gain lifted the index's year-to-date return above the psychologically significant 5% mark for the first time this year, pushing it up to 5.066% - its highest level since the 5.68% reading seen back on Aug. 3 of last year.

It was also a new peak level for 2012 so far, supplanting the old zenith of 4.914%, which had been seen on Monday.

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