Greektown deal prices, pops; new Regal, TreeHouse bonds also strong; Forest Oil falters

By Paul Deckelman and Paul A. Harris

New York, Feb. 26 - The high-yield primary sphere saw one pricing on Wednesday, as Greektown Holdings LLC/Greektown Mothership Corp. came to market with a $425 million offering of five-year secured paper, syndicate sources said. Investors, starved for new junk debt and attracted by a generous and secured coupon, decided to roll the dice on the Detroit-based casino operator's new issue, scooping the bonds up smartly when they hit the aftermarket.

That one pricing stood in contrast to the three new deals, accounting for $1.275 billion of new junk-rated, dollar-denominated paper from domestic or industrialized-country borrowers, that had gotten done on Tuesday, as the primary market continued its tentative treading, market sources said.

Two of those Tuesday deals were seen trading strongly during the session: movie-theater operator Regal Entertainment Group and pickle and salad dressing producer TreeHouse Foods, Inc. Both of those upsized, quick-to-market eight-year transactions were among the most heavily traded high-yield issues on the session.

But the busiest name, by far and away, was Forest Oil Corp., whose bonds and shares both tumbled after the energy company reported poor quarterly earnings. Tuesday's big loser, Momentive Performance Materials, Inc., continued to slide. Jones Group Inc. was also off on the day.

Statistical market performance measures, however, were mostly higher after having been mixed on Tuesday.

Greektown at the tight end

One deal priced on Wednesday.

Greektown Casino-Hotel priced a $425 million issue of five-year senior secured notes (B3/B-) at par to yield 8 7/8%.

The yield printed at the tight end of yield talk set in the 9% area.

The deal was heard to be roughly five times oversubscribed, according to a market source.

Jefferies was the left bookrunner for the debt refinancing and general corporate purposes deal.

Credit Suisse, Goldman Sachs, UBS and Wells Fargo were the joint bookrunners.

Cloud Peak Energy for Thursday

Cloud Peak Energy Resources LLC talked its $200 million offering of 10-year senior notes (expected B1/confirmed BB-) to yield in the 6½% area.

The deal is expected to price on Thursday.

Goldman Sachs, RBC, J.P. Morgan, Credit Suisse, Deutsche Bank, Credit Agricole and Wells Fargo are joint bookrunners.

Kerneos guidance grinds tighter

In the euro-denominated primary market, the Kerneos Tech Group SAS €335 million two-part offering of seven-year senior secured notes (B2/B+) is also possible Thursday business, according to a London-based debt capital markets banker.

A €200 million minimum tranche of seven-year fixed-rate senior secured notes is shaping up in the low 6% context, the banker said, calculating that this yield context could be seen as much as 125 basis points below fair value.

Earlier in the week the whisper on the fixed-rate piece of the Kerneos deal was 6½%.

"Investors are taking these prices without hesitating," the sellsider remarked.

"The reason is that it costs more to be on the sidelines, in cash, than it does to be invested in expensive paper."

The Kerneos deal also features a to-be-determined amount of floating-rate notes, which were whispered at a 400 bps spread to Euribor earlier in the week.

The roadshow wraps up on Thursday.

Goldman Sachs is the bookrunner.

Primary poised to open

Meanwhile the lull continues in the primary market, sources say.

Year-to-date dollar issuance for 2013 is lagging behind that of 2014 by 33%, according to Prospect News data.

Year-to-date issuance for this year is $35.3 billion versus the $49.3 billion that priced during the same period in 2013.

Deal volume for 2014, meanwhile, lags last year's by 43%, with 71 tranches having cleared thus far in 2014 versus 110 for the same period in 2013.

And the early 2014 lull could continue for a while, sellside sources on both sides of the Atlantic advise.

"It won't be completely quiet," a New York-based debt capital markets banker said on Wednesday.

This source has a shadow calendar of about $11 billion of high-yield new issue business on the horizon.

Meanwhile a London-based banker is not looking for things to pick up very soon. In fact, the euro-denominated primary market might not pick up until the second week of March, the source suggested.

"There is some potentially big M&A activity taking shape that we could possibly see ahead of Easter," the banker added.

Primary market watchers in Europe do have an eye on one name for the near-to-intermediate term, however.

France's Labeyrie Fine Foods is expected to bring a deal that will be led by BNP and SG CIB, sources said on Wednesday.

Greektown goes to town

In the secondary market, the new Greektown Holdings 8 7/8% senior secured notes due 2019 were seen having shot up from their par issue price.

One trader quoted the new bonds at 102¾ bid, 103¼ offered, while a second pegged them at 102¼ bid, 103 offered.

At another desk a trader had them at 102 7/8 bid, 103 1/8 offered.

The first market source meantime saw the company's existing 13% notes due 2015 having firmed to 104 5/8 bid, on trading of over $5 million, activity which he called "crazy."

He marveled at the sharp rise in the new Greektown bonds, noting that the company's casino was "third in size in a market of three casinos - in a city that is bankrupt and doesn't have a real tourist attraction."

"I must be missing something."

One of the other traders said that at his shop, "we tried to buy bonds all afternoon - but I don't think there were a lot of sellers. It was pretty tightly held."

He predicted, though, that once the novelty of the issue wears off, "in a day or two, you'll go to sell it and the bid will be around 102" versus the current level around 103.

But he suggested that whatever the challenges facing Greektown in terms of market position and its location in a city that is not exactly enjoying a Renaissance right now, "you wind up owning it [the bond] - and if nothing else, it's secured."

And yet another trader opined that the Greektown issue - as well as Tuesday's deals from TreeHouse Foods and Regal Entertainment - were probably benefitting from the pent-up investor demand for paper in the face of a recently sparse new-deal market.

"There's not a lot of new issuance coming, and there's all kinds of pent-up cash waiting to be put to work.

"It's riskier not being invested than it is to be invested."

TreeHouse trades up

TreeHouse Foods' new 4 7/8% notes due 2022 climbed solidly when they were freed for aftermarket dealings on Wednesday, with one market source putting them in a 101 3/8 to 101 5/8 bid context and a second quoting them at 101¼ bid, 101½ offered.

Yet another source saw the bonds at 101½ bid, with round-lot volume of over $41 million placing the new deal high up on the Most Actives list.

Oak Brook, Ill.-based TreeHouse, which claims to be the largest manufacturer of pickles and non-dairy powdered creamer in the United States and the largest manufacturer of private label salad dressings, powdered drink mixes and instant hot cereals in the U.S. and Canada based on sales volume, priced $400 million of the notes at par in a quickly shopped deal after upsizing the transaction from an originally announced $380 million. Those bonds came to market too late on Tuesday for any kind of real aftermarket dealings at that time.

Regal reign continues

Tuesday's other notable deal - from Knoxville, Tenn.-based movie theater operator Regal Entertainment - was also among the busiest junk credits of the session, with over $30 million changing hands, although that was down considerably from Tuesday's initial aftermarket turnover of more than $85 million.

A trader quoted the issue up ¾ point on Wednesday to 101 7/8 bid, 102 3/8 offered, while a second located the bonds at 102 bid, calling that up ¼ point.

Regal had priced $775 million of those bonds at par Tuesday in a drive-by transaction after having massively upsized its offering, more than doubling it from the originally announced $350 million size. Those bonds had jumped to around a 101 1/8 to 101 5/8 bid context when they were freed for trading later Tuesday.

A trader meantime said that he had not seen any kind of dealings in Tuesday's third offering - Miami-based homebuilder Lennar Corp.'s quick-to-market $100 million add-on to its 4½% notes due 2019 that the company had sold back on Feb. 5. The new bonds priced at 100½ bid but did not trade after their pricing.

Forest Oil a fiasco

Away from the new deals, a trader said that the most notable name in Junkbondland on Wednesday was Forest Oil Corp., whose bonds and shares slid badly after the Denver-based energy exploration and production company reported bad fourth-quarter numbers.

"Forest Oil absolutely took it in the chops after they missed earnings and said that they were having problems," the trader said, adding that "their conference call this morning was a disaster."

He said that management disclosed on the call that "they're having problems in the Eagle Ford," a petroleum-rich geologic formation in Texas drilled by many major oil companies, "and now they're talking about shifting their focus away from there - and nobody wanted to hear that."

He saw both of the company's bond issues having dropped around 8 to 9 points on the day, into the high 80s from prior levels not far from par.

He quoted the company's 7¼% notes due 2019 down 9 points on the day, at 88 3/8 bid, on volume of over $60 million, while its 7½% notes due 2020 plunged by 8½ points, to 89½ bid, although volume on the latter issue was only a fraction of that of the 2019 bonds.

Another market source saw those 2019s off about 7½ points on the day, sending them home around 90 1/8 bid.

Forest Oil's New York Stock Exchange-traded shares meantime plunged by $1.22, or 37.77%, to end at $2.01. Volume of 63.9 million shares was more than 13 times the norm.

Momentive, Jones both fall

Other big losers on the day included Jones Group - the parent company of New York-based apparel marketer Jones NY - and Momentive Performance Materials.

Jones Group's 6 7/8% notes due 2019 lost 1¼ points on the day to end at 102 7/8 bid on volume of over $16 million.

Albany, N.Y.-based Momentive - whose bonds have been sliding for days on fears the company will either have to restructure its $3.3 billion of debt or face a possible default somewhere down the line - continued to retreat on Wednesday, its 9% notes due 2021 quoted off by nearly 2 points at 87 1/8 bid on volume of over $26 million.

Its deeply distressed 11½% notes due 2016 fell 3½ points to close at 32 bid, with over $11 million of the bonds having changed hands.

Market indicators mostly better

Statistical junk-market performance indicators were mostly better on Wednesday after having turned mixed on Tuesday, which in turn had followed having been higher across the board on Monday. Mixed and higher sessions have been alternating for pretty much all of the past week or so.

The Markit Series 21 CDX North American High Yield index was essentially unchanged on Wednesday at 107 23/32 bid, 107 25/32 offered, after having lost 1/16 point on Tuesday. The index has been choppy over the past week or so, with mostly alternating days of gains or losses.

However, during that timeframe, the KDP High Yield Daily index and the Merrill Lynch High Yield Master II index have been models of consistency.

The KDP index recorded its 14th consecutive gain on Wednesday, rising by 8 basis points to go out at 75.23 after moving up by 5 bps on Tuesday.

Its yield, meanwhile, came in - also for a 14th consecutive session - declining by 4 bps on Wednesday to finish at 5.22%. It had retreated by 2 bps on Tuesday.

And the widely followed Merrill Lynch index ran its consecutive gain streak to "sweet 16" on Wednesday, as it rose by 0.112%, on top of Tuesday's 0.158% improvement.

The latest upturn raised its year-to-date return to 2.516%, its 12th consecutive new peak level for the year, versus 2.401% on Tuesday.

The index's yield to worst declined to 5.217%, its sixth straight new low for the year, eclipsing the previous 2014 low of 5.248%, set on Tuesday. Those levels were well down from the 5.735% seen on Feb. 4, its highest point for the year so far.

Its spread to worst was 398 bps over comparable Treasuries, 1 bp tighter than Tuesday. Wednesday's spread matched the tight spread for the year so far, first achieved back on Jan. 22.Those levels remained well in from Feb. 4th's 444 bps, the wide point for the year so far.

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