Michael Baker, Memorial Production price; syncreon, Allied Vehicles hit road; Forest Oil busy

By Paul Deckelman and Paul A. Harris

New York, Oct. 7 - The high-yield primary market continued to chug along at the start of a new week on Monday at the same moderate pace seen last week, when new issuance declined markedly from the previous week's red-hot pace.

Syndicate sources saw two issues totaling $641 million of new fully junk-rated, dollar-denominated paper come to market.

Engineering company Michael Baker International, LLC was heard to have priced $350 million of five-year senior secured notes off the forward calendar. Traders said the new bonds firmed solidly when they reached the aftermarket.

Energy operator Memorial Production Partners LP drove by with a $300 million add-on to the company's 2021 notes that it originally priced in two transactions this past spring. The paper was quoted up slightly later on.

Among recently priced issues, TMS International Corp.'s new eight-year notes added to the already solid gains they notched in initial aftermarket dealings after pricing on Friday.

Apart from the already-priced issues, syndicate sources heard a pair of prospective issuers embarking on roadshows to market their upcoming deals to interested investors: supply-chain services provider syncreon Global with a $225 million eight-year offering and ambulance and fire engine manufacturer Allied Specialty Vehicles Inc.'s $200 million seven-year secured deal.

Another vehicle manufacturer - Navistar International Inc. - was seen unchanged to easier in the non-new-deal secondary market, after the announcement that it will issue new convertible notes and use credit facility borrowings to take out some existing convertible debt coming due next year.

Forest Oil Corp.'s bonds were busy for a third consecutive session in the wake of last week's announcement of a $1 billion asset sale.

Statistical market performance indicators turned mixed after having been mostly higher on Friday.

Memorial taps 7 5/8% notes

Monday saw a pickup in news volume compared to the anemic volume of news the high-yield primary market generated last week.

Two deal priced, one of them a roadshow deal and the other a drive-by transaction.

In drive-by action, Memorial Production Partners and Memorial Production Finance Corp. priced a $300 million add-on to their 7 5/8% senior notes due May 1, 2021 (Caa1/B-) at 97 to yield 8.163%.

The yield printed on top of price talk.

Wells Fargo was the left bookrunner. BofA Merrill Lynch, Barclays, Citigroup, JP Morgan, RBC and RBS were the joint bookrunners.

The Houston-based energy partnership plans to use the proceeds to pay down its revolver and for general partnership purposes.

Michael Baker at tight end

In an execution following a full roadshow, Michael Baker International priced a $350 million issue of five-year senior secured notes (B2/B+) at par to yield 8¼%, at the tight end of the 8¼% to 8½% yield talk.

Jefferies was the bookrunner for the acquisition deal.

syncreon starts roadshow

In addition to deals pricing, there were also new deal announcements on Monday.

syncreon began a roadshow on Monday for its $225 million offering of eight-year senior notes (Caa1/CCC+).

The deal, led by Goldman Sachs and Morgan Stanley, is expected to price late this week.

Proceeds will be used to help fund Centerbridge Partners LP's acquisition of a 40% minority stake in the company, as well as to refinance debt and put cash on the balance sheet.

Allied Specialty notes

Allied Specialty Vehicles plans to sell $200 million of seven-year senior secured notes during the Oct. 14 week, at the conclusion of an investor roadshow.

Deutsche Bank, Morgan Stanley and Goldman Sachs are the joint bookrunners.

Proceeds will be used to pay down debt and fund an acquisition.

Rhiag starts Tuesday

As European sources promised last week, there were deal announcements on Monday in the euro-denominated high-yield market.

Italy's Rhiag Group plans to start a roadshow on Tuesday for its €350 million two-part offering of seven-year notes.

The deal features a €195 million tranche of senior secured notes, which come with three years of call protection, and a €155 million tranche of PIK-toggle notes, which come with 1.5 years of call protection.

Pricing is expected on Friday.

Joint global coordinator Goldman Sachs will bill and deliver for the secured notes. Joint global coordinator JPMorgan will bill and deliver for the PIK notes. Mediobanca is a joint bookrunner.

Proceeds from the secured notes will be used to repay debt. Proceeds form the PIK notes will be used to fund a dividend.

Xella starts roadshow

Germany-based Xella HoldCo Finance SA began a roadshow on Monday for a €200 million offering of five-year PIK toggle notes (expected ratings B3/B-).

The deal is expected to price late in the present week.

Global coordinator Morgan Stanley will bill and deliver. Goldman Sachs is also a global coordinator.

BNP Paribas, UniCredit and Credit Agricole CIB are joint bookrunners.

The Duisburg, Germany-based building materials manufacturer plans to use the proceeds to finance the acquisition of vendor loan notes from Haniel Group and put cash on its balance sheet.

Michael Baker moves up

In the secondary market, a trader quoted the new Michael Baker International 8¼% senior secured notes due 2018 having moved up to 101¼ bid, 102¼ offered by the end of the day, although a second trader said that he had seen no trace of the new bonds on Trace.

The Moon Township, Pa.-based engineering company had priced its deal at par earlier in the session.

A trader also quoted Monday's other new issue - the add-on to Memorial Production Partners' existing 7 5/8% notes due 2021 - at 97½ bid, 98¼ offered, up a little from the credit's issue price at 97.

New TMS firms further

Among the other deals, which have recently come to market, a trader pegged Friday's offering of 7 5/8% notes due 2021 from TMS International at 102 1/8 bid, 102 5/8 offered.

That was up about 3/8 of a point from the levels around 101¾ bid, 102½ offered, where those bonds had been quoted late Friday after the Glassport, Pa.-based provider of outsourced industrial services to the steel industry priced its $275 million offering - downsized from $300 million originally - at par earlier that session.

CNH seen steady

A trader said that CNH Industrial NV's 3¼% notes due 2017 were little changed on the session from where they had been on Friday, quoting the bonds as being "wrapped around 101 all day," at 100 7/8 bid, 101 18 offered.

Amsterdam-based construction and farm equipment manufacturer CNH had priced that $500 million drive-by issue at par on Thursday via its CNH Capital LLC funding entity. It had moved up to about 100½ bid, 101 offered in initial aftermarket dealings before firming to around 101 on Friday.

Forest Oil in the spotlight

Away from the new deals, Forest Oil's continued to trade actively for a third consecutive session in the wake of last week's announcement of a $1 billion asset sale, although Monday's volume levels were well down from the very heavy volume totals recorded Friday.

A market source said that Forest's 7½% notes due 2020 "showed up as the top trader," with over $18 million having changed hands. That was well down from the over $27 million of that same issue that had moved around on Friday.

He said that the bonds had lost ground, falling to 98 5/8 bid, down 1 7/8 points on the day.

He saw the company's 7¼% notes due 2019 were off by ½ of a point, going out at 1011/2. He said that volume topped the $12 million mark.

On Friday, over $53 million of the latter bonds had changed hands.

Another source said that strictly on a round-lot basis, throwing out all of the mostly smallish odd-lot trades as unrepresented, about $14 million of the 71/2s had traded and were down nearly 2 points on the day, while over $10 million of the 71/4s traded, going out down 1 point.

Both of those issues had moved up to above the 102 bid area on Thursday, following the announcement near the end of the session that the Denver-based oil and natural gas exploration and production company had agreed to sell its oil and gas assets located in the Panhandle region of northern Texas to Templar Energy LLC for $1 billion.

Forest Oil said that it would use the asset-sale proceeds "primarily to reduce debt and enhance financial flexibility."

After that initial boost, the bonds retreated from those highs on Friday, the first full day of trading after the asset-sale news, as volume intensified.

After jumping by 77 cents, or 12.13%, in after-hours trading on Thursday from its regular close to finish at $7.12, Forest's New York Stock Exchange-traded shares tumbled to $5.74 by Friday's close on profit-taking.

That slide continued on Monday as the shares dropped another 45 cents, or 7.84%, to go home at $5.29.

Navistar easier on converts

Elsewhere, Navistar International's 8¼% notes due 2021 were deemed a point lower, as a trader placed the bonds around 1011/2.

At another shop, those bonds were seen off by around 1 1/8 point, finishing at 101 3/16 bid. A market source said that over $13 million of those notes had changed hands, placing it high up on the Junkbondland most-actives list.

However, yet another trader called the debt little changed, around 101½ bid, 101¾ offered.

"It's been trading with a 101-handle, so it wasn't a real notable move," he said.

That activity followed an announcement by the Lisle, Ill.-based heavy truck, bus and diesel engine manufacturer that it was planning a private sale of $200 million convertible notes due 2018, which could total $230 million if the overallotment option is exercised.

The company said it would use proceeds from the sale - along with $270 million in credit facility borrowings - for general corporate purposes, which could include capital expenditures and a partial redemption of its convertible notes coming due in 2014.

Though the bonds were little moved by the announcement of the offering, Standard & Poor's was not thrilled with the news and cut Navistar's long-term corporate credit rating to CCC+ from B-.

Fitch Ratings, however, affirmed its ratings on the company.

Gimme Credit LLC analyst Vicki Bryan had little positive to say on the matter.

"Interestingly, the interest rate Navistar will get today [on the planned new issue] could be much more expensive than it would get by waiting another year to refinance those notes when they mature next October after operations can turn around as management has projected, so this also seems to signal less confidence in that outcome," she wrote in an afternoon report.

"Indeed, it's troubling that Navistar is borrowing now - and so substantially - just weeks ahead of the Oct. 31st end of the critically important fourth quarter, a quarter which typically is the strongest of the year for cash generation."

Bryan went on to say that the new deal could mean that cash burn has been severe enough that the company has fallen short of its $1.1 billion projection last quarter.

She also noted that the new convertible bonds would be unsecured and that it was possible secured debt would not be fully covered in a bankruptcy situation.

Wall Street was also wary of Navistar's plans, with investors taking its NYSE-traded shares down $1.87 (4.87%) to close at $36.50. Volume of 3 million shares was more than triple the norm.

More offerings seen

Overall, a trader said that "it seems like the acceleration up," seen over several sessions earlier last week, "has slowed. You are seeing some bids get hit."

However, he added the caveat that "you don't see stuff coming in terribly. I wouldn't use the term 'crushed' - it's just that stuff tends to be for sale now, and some bids are getting hit, while some offers are coming in and getting lifted."

He also said that there are now more offers around than there had been just recently.

"The 'offered' side of the scale seems to be getting a little heaver, where in the past month, there pretty much wasn't much there."

Market indicators turn mixed

Statistical junk-market performance indicators turned mixed on Monday, after having been higher on Friday. It was the second mixed finish in three sessions.

The Markit Series 21 CDX North American High Yield index lost 5/8 of a point on Monday to close at 104½ bid, 104 5/8 offered, its first loss after one gain. On Friday, the index had risen by 3/8 of a point.

However, the KDP High Yield Daily index notched its fourth consecutive gain on Monday, advancing by 4 basis points to end at 73.57 on top of Friday's 3-bps rise. Its yield declined by 3 bps to 6.06% after having been unchanged on Friday at 6.09%.

Monday's narrowing was its fourth in the last five sessions.

And the widely followed Merrill Lynch High Yield Master II index made it five gains in a row on Monday, with a 0.076% advance, on top of Friday's 0.101% improvement.

The latest gain lifted its year-to-date return to 4.317% from Friday's 4.237% close.

Stephanie N. Rotondo contributed to this review

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.