Whiting Petroleum brings upsized two-part megadeal; Tenet titan hits road; Sprint holds gains

By Paul Deckelman and Paul A. Harris

New York, Sept. 9 - The high-yield primary arena kicked off the new week in robust fashion with Whiting Petroleum Corp. bringing an upsized $1.9 billion two-part offering to market. The quickly shopped deal, however, priced too late in the session for any kind of aftermarket activity.

Even with only that one late-session pricing, the new-deal realm was a busy place, according to syndicate sources.

Out of that same sector that produced Whiting's megadeal, participants heard that Diamondback Energy, Inc. was shopping a $450 million offering of eight-year notes, with pricing expected later this week, while Sanchez Energy Corp. will hold a Thursday conference call with investors to discuss a planned add-on to its existing bonds.

Those energy deals will be marketed alongside Natural Resource Partners LP/NRP Finance Corp.'s previously announced $300 million eight-year deal, which was being shopped to investors via a roadshow that began on Monday for probable pricing later this week.

Away from the energy sector, hospital operator Tenet Healthcare Corp. hit the road with its $4.6 billion two-part bond behemoth, which is expected to get done on Friday. And healthcare research company PRA Holdings, Inc. was heard to preparing to launch a $375 million offering of notes on Wednesday.

Among deals priced last week, Sprint Corp.'s new 5.5- and 7.5-year notes were seen continuing to enjoy the higher levels to which those new bonds moved in initial aftermarket dealings. But traders said that Regency Energy Partners LP was continuing to struggle, the new seven-year bonds trading below their pricing level.

Traders also said that new-deal activity and trading in recently priced paper was the dominant theme in the market, which was otherwise quiet.

Statistical market performance measures were mixed after having been higher across the board on Friday

Whiting's $1.9 billion deal

One junk deal priced during a news-heavy Monday session, which saw the active deal calendar balloon to $9.25 billion.

Whiting Petroleum priced an upsized $1.9 billion two-part non-callable senior notes transaction (Ba2/BB+).

A $1.1 billion tranche of notes priced at par to yield 5%, and an $800 million tranche priced at par to yield 5¾%.

Both tranches came on top of yield talk.

The deal, which was big to start with and was upsized by $100 million, played to a good book, according to an informed source.

Away from the bookrunner, the new 5% notes were trading at 99¾ bid, 100¼ offered, and the 5¾% notes were trading at 99 7/8 bid, 100 1/8 offered, according to a buyside source.

Wells Fargo was the left bookrunner. J.P. Morgan and BofA Merrill Lynch were the joint bookrunners.

The independent oil and gas company plans to use the proceeds to repay all of the debt outstanding under its credit facility, fund the $260 million acquisition of the Williston Basin assets, retire its $250 million of 7% senior subordinated notes due 2014 and for general corporate purposes.

Tenet starts roadshow

Specifics, including timing and initial yield guidance, surfaced on the Tenet Healthcare $4.6 billion high-yield notes transaction.

The deal is coming in the form of two bullet tranches: a $1.8 billion tranche of seven-year senior secured notes (Ba3/B+/BB) and a $2.8 billion tranche of 8.5-year senior unsecured notes (B3/CCC+/B-).

Initial guidance has the secured tranche being discussed in the context of 6% to 6½%, while the unsecured notes are being discussed in a yield context of 7½ to 8%.

An investor call is set for Tuesday, and the deal is scheduled to price on Friday.

BofA Merrill Lynch is the left bookrunner for the acquisition deal. Barclays, Citigroup and Wells Fargo are the joint bookrunners.

Diamondback's $450 million

The Tenet announcement led what would turn out to be a ballooning of the active forward calendar.

At the close of the Monday session, it contained $9.25 billion, nearly all of which is expected to price by Friday's close.

Diamondback Energy plans to price a $450 million offering of eight-year senior notes late this week at the conclusion of a roadshow.

Credit Suisse and Wells Fargo are the joint bookrunners.

The Midland, Texas-based independent oil and natural gas company plans to use the proceeds to fund the acquisition of mineral interests under about 15,000 acres in Midland County, Texas.

Sanchez to tap 7¾% notes

Elsewhere, Sanchez Energy announced a $150 million add-on to its 7¾% senior notes due June 15, 2021 (existing ratings Caa1/CCC+).

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

RBC is the left bookrunner. Credit Suisse is the joint bookrunner.

The company plans to use the proceeds to fund a portion of its recent acquisitions and its accelerated development program through 2014.

Busy week shaping up

Aside from the formal announcements, the Monday session generated a significant amount of buzz on deals in the market and deals about to come.

Activision Blizzard, Inc. is in the market with a $2.5 billion three-part offering of notes, which is expected to price during the middle part of the week.

The deal includes a $1 billion high grade tranche of seven-year senior secured notes (Baa3/BBB), which is being discussed in a yield context of 4¾% to 5%.

In addition, there are two unsecured tranches (Ba2/BB+), including $1 billion of eight-year senior notes with early guidance of 6% to 6¼% and $500 million of 10-year senior notes guided at 6½% to 6¾%.

J.P. Morgan and BofA Merrill Lynch are the joint bookrunners.

Meanwhile, PRA Holdings is expected to launch a $375 million offering of senior notes on Wednesday, according to a buyside source.

Credit Suisse, Jefferies, UBS and KKR will manage the sale.

Proceeds will be used to help fund KKR's buyout of PRA International from Genstar Capital LLC and ReSearch Pharmaceutical Services Inc. from Warburg Pincus and the merger of the two companies.

Finally, although its ratings place the deal squarely in high-grade land, dealers nonetheless reached out to high-yield accounts on Monday with a multi-tranche deal from Verizon Communications Inc., according to a high-yield portfolio manager.

The deal will consist of three-year fixed- and floating-rate notes and five-year fixed- and floating-rate notes.

There will also be tranches of seven-, 10-, 20- and 30-year bonds.

The deal might cause a stir among the crossover accounts, but likely won't get straight-out junk investors too excited, the investor said.

All the tranches are being guided on a spread basis, the source added, noting that the three-year fixed-rate paper is guided at Treasuries plus 165 basis points, while the spreads are 190 bps on the five-year fixed-rate notes, 215 bps on the seven-year notes, 225 bps on the 10-year notes, 250 bps on the 20-year notes and 265 bps on the 30-year notes.

However, an official on a high-yield syndicate desk pointed out that those spreads almost certainly guarantee that the 10-year, 20-year and 30-year tranches will come with 5%-plus yields.

That ought to be enough to scare up a high-yield crowd, the banker suggested.

J.P. Morgan, Barclays, BofA Merrill Lynch and Morgan Stanley are the active bookrunners for the acquisition deal.

Passive bookrunners are Citigroup, Credit Suisse, Mizuho, Mitsubishi, RBC, RBS and Wells Fargo.

New Whitings don't trade

In the secondary sphere, there was no immediate trading seen in the new Whiting Petroleum deal, market participants said, since the Denver-based exploration and production company's new notes came to market too late in the day.

A trader noted "five or six" energy sector companies that were either doing debt deals, like Whiting, or that could get into the capital markets at some point. He mentioned Oasis Petroleum Inc., Seadrill Ltd., Apache Corp. and Sanchez Energy.

Those real or potential energy patch deals would be in addition to the Diamondback Energy offering now being shopped around and the $300 million eight-year offering that Natural Resource Partners announced last week.

Houston-based Natural Resource kicked off its roadshow on Monday in Los Angeles and now heads east, with presentations set for Wednesday in New York, New Jersey and Boston and pricing expected on Thursday.

Sprints stay strong

Among recently priced issues, a trader noted, "Treasuries kind of rallied a little bit," up a for a second straight session Monday following Friday's lackluster August job-creation and employment numbers, so the new Sprint paper that priced on Wednesday also firmed.

He opined that investors "may have just been in there covering the shorts. They have a little firepower to move the things higher," quoting the two tranches up 1 to 1½ points.

He saw Sprint's 7¼% notes due 2021 at 101 1/8 bid, 101 3/8 offered, about the same levels that the Overland Park, Kan.-based wireless carrier's bonds had moved up to late last week and well up from the par level at which that $2.25 billion tranche had priced.

He said that the company's $4.25 billion of 7 7/8% notes due 2023 "were a little bit better, trading around 102." Those bonds also had priced at par and then had firmed to above the 101 mark by the end of last week.

There was also some brisk activity in the company's existing paper. Its Sprint Capital Corp. 6 7/8% bonds due 2028 traded around 89¼ bid, about unchanged on the day, with over $10 million having changed hands - one of the most active junk names.

The 6% notes due 2016 issued by predecessor company Sprint Nextel Corp. traded between 106¼ and 106¾ bid on volume of over $5 million.

Regency paper struggling

A trader said that Regency Energy Partners' 5¾% notes due 2020 "were still struggling a bit," quoting the Dallas-based master limited partnership's $400 million offering at 98½ bid, 99 0ffered, well under its Wednesday par pricing level.

Another trader noted, "They had marketed the deal as $500 million from the start."

"Then, when they priced it, they announced it was only $400 million. That was a material change to the structure of the deal, which they never announced prior to the pricing, to give accounts the option to stay in the deal or drop out.

"Needless to say, the investment community did not like this, and the bonds priced at par, but then dropped to 98¼ to 983/4," the trader added.

New deals dominate

A trader said that away from all of that new-deal activity, it was "pretty quiet - a difficult trading day. It was very much new-issue focused."

He said that he "hadn't seen much activity" overall.

"Generally speaking," he continued, "the market was pretty firm."

He noted that "the contract [i.e., the Market CDX index] is up at 104.80-104.90, almost touching 105 - we haven't seen that level since July."

The secondary paper cash market "doesn't feel as firm" as the robust derivatives index, "but it's so thin, and so difficult to tell."

Market indicators turn mixed

Statistical junk market performance indicators turned mixed on Monday, after having been higher across the board on Friday.

The Markit Series 20 CDX North American High Yield Index rose by 11/16 of a point on Monday to close at 104 13/16 bid, 104 7/8 offered, its second consecutive gain. On Friday, it was up by 7/32 of a point.

The KDP High Yield Daily index was off by 1basis point on Monday to finish at 73.18, after having risen by 2 bps on Friday.

Its yield, meanwhile, held steady at 6.34% for a second consecutive session.

And the widely followed Merrill Lynch High Yield Master II gained 0.133%, its second straight improvement, after having tacked on 0.05% on Friday to break a two-session losing streak.

The rise brought the index's year-to-date return up to 2.885% from Friday's level of 2.748%. Those returns remained well down from the index's peak level for the year so far of 5.835%, recorded on May 9, though they were still up solidly from its 2013 low point of 0.384%, set on June 25.

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