Momentive, AerCap talk; NGPL to hit road; ATP snaps losing streak; Appleton up on acquisition

By Paul Deckelman and Paul A. Harris

New York, May 16 - Momentive Performance Materials, Inc. quickly shopped an upsized $500 million of 81/2-year senior secured notes around the junk market on Wednesday. Although the books closed as scheduled late in the session, no terms had emerged by the time things wrapped up for the day.

The specialty materials company's existing bonds, however, were seen down several points on news of the upcoming deal.

Primaryside players meantime had a more relaxed day than they had on both Monday and Tuesday. No other junk issues came to market.

Price talk did emerge on AerCap Aviation Solutions BV's $300 million five-year offering, which could come on Thursday, syndicate sources said.

The sources also saw natural gas midstream company NGPL PipeCo LLC about to embark on a roadshow to sell its $550 million secured notes deal to prospective investors.

Secondary traders saw brisk dealings in the new Sally Beauty Holdings LLC deal that priced on Tuesday and traded up in the aftermarket.

Away from the new deals, there was heavy trading in the recently beleaguered bonds of ATP Oil & Gas Corp., but the energy company's paper managed to move to the upside after four straight sessions of being pounded down.

Appleton Papers Inc.'s bonds were seen at better levels on the news that the specialty paper and chemical coatings maker will be acquired and may use some of the proceeds from that sale to reduce debt.

However, apart from such story bonds, the overall junk market was seen lower pretty much across the board.

Momentive sets price talk

Momentive Performance Materials talked its upsized $500 million offering of 1.5-lien 81/2-year senior secured notes (B2/B-) with a yield in the 9¼% area on Wednesday.

The books were scheduled to close at 4:30 p.m. ET on Wednesday, and the terms were expected soon thereafter. However, final terms were not available at press time.

J.P. Morgan Securities LLC, BMO Securities, Bank of America Merrill Lynch, Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., Goldman Sachs & Co., Morgan Stanley & Co. LLC and UBS Investment Bank are the joint bookrunners for the quick-to-market deal, which was upsized from $450 million.

The use of proceeds, including the $50 million upsize, will be used to repay first-lien bank debt and to tender for the entire $200 million outstanding amount of the company's 12½% second-lien notes at 107.25. A cleanup call will be issued for bonds not tendered.

The Columbus, Ohio-based producer of thermoset resins also plans to use proceeds for general corporate purposes.

AerCap talks $300 million

Amsterdam-based AerCap Aviation Solutions talked its $300 million offering of non-callable five-year notes (/BB+/BBB-) to yield 6¼% to 6½%.

Citigroup is the left bookrunner. UBS is the joint bookrunner.

The integrated aviation company plans to use the proceeds to acquire, invest in, finance or refinance aircraft assets and for other general corporate purposes, which will include the repayment of the company's E note facilities.

New issue prices widening, buysider says

Although the calendar contains as many as 10 deals that could price before Friday's close, formal talk surfaced only on the AerCap deal on Wednesday.

In some cases, early yield conversations have been overtaken by a sell-off in the broader market, according to a high-yield mutual fund manager whose portfolio includes junk bonds and leveraged loans.

Talk on Consolidated Communications Finance Co.'s $350 million offering of eight-year senior notes (B3/B-), via Morgan Stanley, is shaping up in the 9¼% area, according to the investor, who said that there is a deal to be done at that level but added that such a yield would be substantially higher than initial conversations in the mid-to-high 8% range.

Conversations on Harland Clarke Holdings Corp.'s $295 million offering of seven-year senior secured notes (B1/B+) have taken place in the 8½% context.

Early guidance on Molycorp, Inc.'s $650 million offering of eight-year senior secured notes (B2/B) is 8% to 8¼%, the buysider said.

QR Energy, LP's $300 million offering of eight-year senior notes (Caa1/B-) have been discussed in the low 8% yield context.

"I think you're going to see talk widen on all of these deals," the investor said, adding that in addition to the present volatility, fatigue has become a factor in the high-yield primary market.

"You not only have headline fatigue, there is also earnings fatigue because we're in the peak of high-yield earnings season.

"And you have deal fatigue," the investor said, referring to the active May new issue calendar, which has fattened substantially since the beginning of the week.

Also there is the specter of redemptions, said the buysider, who read from a note that J.P. Morgan Securities sent to its clients Wednesday morning warning of a possible $675 million of outflows for the week, which the dealer believes could be reported by Lipper-AMG on Thursday.

"That really doesn't match up too well with the data we see," the fund manager added, noting that flows on Friday and Monday were modestly positive and flows on Tuesday were flat.

NGPL starts Thursday

The May calendar continued to grow on Wednesday.

NGPL PipeCo announced plans to start a roadshow on Thursday for its $550 million offering of seven-year senior secured notes (Ba3/B+/BB-).

The roadshow wraps up on Monday, and the deal is set to price on the same day.

Barclays Capital Inc. is the lead left bookrunner. Credit Suisse and RBC Capital Markets LLC are the joint bookrunners.

The Houston-based natural gas transportation and storage company plans to use the proceeds to fund a portion of the purchase of its 6.514% senior notes due 2012.

Global Brass & Copper

Global Brass & Copper Holdings Inc. plans to price a $375 million offering of seven-year senior secured notes during the week ahead.

Goldman Sachs and Morgan Stanley are the joint bookrunners.

Proceeds will be used to refinance the company's existing term loan and pay a dividend.

Allied Nevada Gold prices

Allied Nevada Gold Corp. announced a C$400 million offering of seven-year senior notes in a bought deal on Wednesday.

The issue is expected to be allocated late Thursday or on Friday, an informed source said.

"It's only had a day of marketing, and we have another day of marketing in New York tomorrow, but we're already building up a book and taking orders," a syndicate source said.

Canadian, European and U.S. accounts are in the deal, the source said.

The company also simultaneously entered into a cross-currency interest rate swap that guarantees a U.S.-dollar denominated $400.4 million at an effective annual interest rate of 8 3/8%.

"When you do the swap, you actually save money going the other way," a bond source said.

Other U.S. issuers also may consider similar arrangements to sell in the Canadian market, the source said.

"There's definitely a few" considering it, the Canadian high-yield source said.

Existing Momentive falls

Secondary market participants saw Momentive Performance Materials' existing 9% notes due 2021 moving lower on the news that the Columbus, Ohio-based specialty chemical and materials manufacturer was shopping a new bond deal around. The new debt will rank higher in the company's capital structure.

A market source quoted the 9% bonds as being down a deuce at 81¼ bid on active volume of more than $15 million.

However, there was little activity seen in Momentive's 12½%second-lien notes due 2014, which are being taken out by the company in a tender offer announced Wednesday that will be funded out of the proceeds of the new bond deal.

A market participant said that there was just one round-lot trade in the bonds all day, around the 107 level, which was actually up slightly from previous trading in size.

Sally Beauty looking good

Among deals that have actually priced, traders saw brisk activity in Sally Beauty Holdings' new 5¾% notes due 2022.

One such market source said that more than $36 million of the bonds traded on Wednesday, making it one of the most active issues in Junkbondland. The source quoted the bonds at 101½ bid - up from the par level at which the Denton, Texas-based beauty supply products wholesale distributor and retailer seller priced that quickly shopped $700 million deal on Tuesday.

A second trader declared that "they've done well," estimating the bonds at 101½ bid, 102 offered.

Inmet issue little moved

A trader said that the new Inmet Mining Corp. 8¾% notes due 2020 did not go far from the levels at which the Toronto-based copper and zinc mining company's massively upsized eight-year issue came to market late Tuesday.

That deal - increased by 50% to $1.5 billion from the originally planned $1 billion size - priced at 98.584 to yield 9%. It came too late in the session Tuesday for any kind of an aftermarket at that time.

On Wednesday, he said that "first thing this morning," the bonds were trading around 98½ bid, which he figured would leave them at 98½ bid, 99 offered. "That's all I saw," he said.

"Inmet was trading right around issue or maybe even a little lower," a second trader opined.

Northern Oil heads south

The other deal that priced Tuesday - an upsized $300 million issue of 8% notes due 2020 from Wayzata, Minn.-based Northern Oil and Gas Inc., an independent exploration and production company - was seen off a little from the levels at which it had traded following pricing.

A trader saw the bonds at 99¾ bid, 100 offered, down from their par issue price and well down from the levels as high as 101 bid at which those bonds had initially traded after Tuesday's par pricing. Traders said that after notching that solid price gain in initial aftermarket dealings, those higher bids got hit, driving the bonds back down to straddling their par issue price.

One of the traders said on Wednesday that while he had not seen the bonds, "they're probably in a little bit" from the late Tuesday levels.

Market easing continues

As has been the case pretty much all week, a trader opined that "stuff's coming in a little bit and people are putting feelers out" looking to sell. This is in contrast to the tight markets seen over the last few months, when traders complained that there simply were few or no bonds available.

"Stuff is trading down, but it's not tons of it, like a sell-off."

Continuing his theme of modest overall market weakness, he noted that "some of the more recent deals that have been priced that may have been trading north of 102 late last week or at the beginning of this week are now trading with a par handle."

For instance, he said, Ineos Finance plc's 7½% senior secured notes due 2020 "were trading north of 102 at the beginning of the week. Now it's trading at par to 1001/2." The financing arm of the London-based chemicals manufacturer had priced its $775 million - radically downsized from the $2.2 billion equivalent that had been shopped around and restructured with the abandonment of a planned euro-denominated tranche - priced at par on April 26.

He also saw the Telesat Canada/Telesat LLC 6% notes due 2017 trading in a 99-to-99¼ bid range, down from a 991/4-to-99¾ context last week. The Ottawa-based satellite communications company's quick-to-market $700 million deal priced at par back on April 30 and had moved as high as 101 in immediate aftermarket dealings.

"There's definite selling pressure," a second trader said. "The market is getting beat on, probably a half point to a point across the board.

"You're seeing it in go-gos, and you're seeing it in the off-the-runs as well. Definitely better selling in high yield took place this afternoon. We're going out on the lows."

Market indicators again easier

Statistical indicators of market performance closed lower for a fourth consecutive session on Wednesday.

The Markit Group CDX North American Series 18 High Yield index fell by 9/16 point on Wednesday to finish at 92½ bid, 92¾ offered after having dropped by nearly 5/8 point on Tuesday. It was the fourth consecutive loss and the ninth loss in the past 10 sessions for the index.

The KDP High Yield Daily index meanwhile plunged 24 basis points Wednesday to end at 73.47 after having dropped by 12 bps Tuesday. It was its fourth straight loss. Its yield shot up by 10 bps to 6.69% after having risen by 2 bps on Tuesday.

And the widely followed Merrill Lynch U.S. High Yield Master II index declined on Wednesday by 0.274%, its third straight downturn, including Tuesday's 0.12% retreat.

That left its year-to-date return at 6.129% on Wednesday, down from Tuesday's 6.421% and well down from the peak level for 2012 so far, 6.80%, set last Monday.

ATP breaks losing streak

Among specific names, a trader said that he "saw a lot today" in ATPG Oil & Gas' 11 7/8% second-lien senior secured notes due 2015, calling the Houston-based offshore energy company's paper "up a little bit," seeing it in a 62-63 context. He called that up a half point.

There was "a lot of volume" in the credit, with over $51 million of those bonds having changed hands on a round-lot basis, making it tops among the junk bond most-actives.

"They were No. 1 on Trace," he said. "Plenty of bonds traded, an awful lot of paper."

A second trader said the bonds closed at 62 bid, 62½ offered and noted that the gain came against a backdrop of "a market that felt weaker."

It was the first time that ATP's bonds have been on the upside in five sessions. Before that they were falling last Thursday and Friday and again on Monday and Tuesday on investor response to disappointing quarterly results and financial projections released after the market closed last Wednesday, followed by a conference call that did not do much to restore investor confidence.

At that time, the bonds were still trading in the mid-70s - but they got hammered down successively, bottoming at lows around 60 on Tuesday, in response to the numbers.

In the quarter ended March 31, ATP recorded a net loss attributable to common shareholders of $145.1 million, or $2.83 per basic and diluted share - wider than the $119.5 million, or $2.34 per basic and diluted share, of red ink seen a year ago in the 2011 first quarter.

Revenue of $146.6 million fell well short - by a yawning $32 million - of Wall Street expectations.

Chesapeake back on the slide

However, in contrast to ATP, sector peer Chesapeake Energy Corp.'s bonds were once more seen heading south on Wednesday. This came after the bonds seemed to have broken their losing streak on Tuesday, when the bonds finally traded up and in heavy volume after having gotten beaten down over the prior several sessions.

A trader said that the Oklahoma City-based No. 2 U.S. natural gas company's bonds were "probably down a couple of points," with the 6 5/8% notes due 2020 finishing down 2¾ points on the day at 91 on volume of over $29 million, the heaviest in its capital structure.

Chesapeake's 6.775% notes due 2019 closed at 91¾ bid, off 2¼ points on the day, with over $19 million having traded, while its 9½% notes due 2015 were down 2 points at 101¾ on $14 million of turnover.

Appleton up on acquisition

Away from the energy world, Appleton Paper's 11¼% notes due 2015 were seen having jumped by as much as 7 or 8 points, closing out the session at 105 bid, although trading volume was relatively light, with only a couple of round-lot trades.

The Appleton, Wis.-based paper manufacturer's bonds zoomed on the announcement that the company will be acquired in a $675 million deal by an entity controlled by Texas leveraged buyout billionaire Thomas O. Hicks Sr. The cash portion of that deal will boost the company's liquidity, lower its net debt level and leverage ratio and may be used to reduce its overall debt levels. (See related story elsewhere in this issue.)

Cristal Cody contributed to this report

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