FCE, Postmedia price, new CKE up a bit; Gulf energy names, TXU gain, Skilled Healthcare dives

By Paul Deckelman and Paul A. Harris

New York, July 7 - FCE Bank plc - the European lending arm of Ford Motor Co. - came to market with an upsized €400 million drive-by offering of three-year notes on Wednesday.

Nor was any kind of aftermarket seen in the new eight-year secured notes priced by Canadian publisher Postmedia Network Inc., since the $275 million issue priced fairly late in the session.

That was the only primaryside activity all day, syndicate sources said.

The traders did see a little upside movement in the $600 million offering of eight-year secured notes which CKE Restaurants, Inc. priced on Tuesday, although activity in the new credit was muted.

Among strictly established names, Gulf oil-spill credits Anadarko Petroleum Corp., BP Capital Markets plc and Transocean Inc. all were seen better, particularly Anadarko's bonds, but innocent bystander ATP Oil & Gas Corp.'s paper gyrated around at mostly lower levels for much of the day.

Elsewhere, Energy Future Holdings Corp.'s bonds were seen up after the former TXU Corp. said in a regulatory filing that it had completed a debt exchange that cut its total leverage by $137 million and outlined other recent debt-cutting moves.

On the downside, Skilled Healthcare Group Inc.'s bonds were being quoted at sharply lower levels, after the nursing home operator was slapped with a nearly $700 million bill for statutory and restitutionary damages stemming from a 2006 lawsuit filed against the company.

Postmedia prices $275 million

Two issues - one dollar-denominated and the other one euro-denominated - priced during the Wednesday primary market session.

Postmedia Network, which ran a roadshow that straddled the extended Independence Day holiday weekend, priced a $275 million issue of 12½% eight-year senior secured notes (B3/B-) at 97.555 to yield 13%.

The yield printed on top of yield talk. The reoffer price came in line with discount talk of 2 to 3 points.

JP Morgan and Morgan Stanley were the joint bookrunners.

Proceeds will be used to acquire the assets of Canwest LP.

FCE Bank upsizes

Meanwhile, FCE Bank priced an upsized €400 million issue of 7¼% three-year senior notes at 99.673 to yield 7 3/8%.

The yield printed on top of price talk that had been lowered from earlier talk of 7½%. The size was increased from €300 million.

Barclays Capital, Credit Agricole CIB, Deutsche Bank Securities and Morgan Stanley were the joint bookrunners for the quick-to-market deal.

The deal went very well, according to a syndicate source who added that orders for the €400 million issue were well in excess of €1 billion.

FCE Bank could have upsized the deal further, the source added.

However, with an eye toward how the new 7¼% notes due 2013 would perform in the secondary market, the issuer declined to further increase the size.

Euro-heavy week

With the Postmedia deal clearing the market on Wednesday, only one dollar-denominated deal remains for the final two sessions of the abbreviated post-Independence Day week.

Fidelity National Information Services, Inc. expects to price its $1.2 billion two-part offering of senior notes (/BB-/) - in seven-year and 10-year tranches - before the end of the week.

Bank of America Merrill Lynch, JP Morgan, Goldman Sachs & Co. and Wells Fargo Securities are the joint bookrunners.

Apart from Fidelity National, the active calendar contains only euro-denominated business heading into Thursday.

And all of that business comes from Germany.

Continental AG is roadshowing a benchmark euro-denominated offering of five-year senior secured notes (B1/B) via Citigroup and Royal Bank of Scotland.

Meanwhile Phoenix Pharmahandel GmbH & Co. KG, is in the market with a €500 million offering of four-year non-callable senior notes (expected ratings B1/B-), being run by a syndicate of banks that is led by Deutsche Bank Securities.

And Oxea GmbH expects to price its €500 million equivalent offering of seven-year senior secured notes (B2/B+) this week.

A U.S. roadshow began Tuesday.

Deutsche Bank Securities, Morgan Stanley and JPMorgan are leading the deal.

However, more dollar-denominated business is apt to surface, if not price, by the end of the week, according to a sell-side source.

Interactive Data Corp. is expected to launch a $700 million offering of senior unsecured notes as early as Friday, according to the source.

Barclays Capital will lead a syndicate of banks that is expected to include Bank of America Merrill Lynch, Credit Suisse and UBS Investment Bank.

Interactive Data is being purchased by Silver Lake and Warburg Pincus in a transaction valued at $3.4 billion.

American Achievement pulls tender

Elsewhere Wednesday, American Achievement Group Holding Corp. announced it was unable to obtain new notes and/or loans on satisfactory terms to fund the cash tender offer for its existing notes, and, therefore the tender offer was terminated.

The company was planning on proceeds from at least $400 million of proposed debt financing.

Goldman Sachs had been tapped as the dealer manager for the tender.

High-yield returns outdistancing stocks

Their proximity on the capital structure notwithstanding, high-yield bonds and equities are lately decoupled, according to an East Coast asset manager whose portfolio includes both junk bonds and stocks.

"High-yield looks great," the manager asserted, adding that with low defaults and a slow economic recovery investors looking for return are likely to keep cash in lower-tier high-grade bonds and junk, as opposed to stocks.

"Everybody wants income and the stock market is uncertain," the manager said.

"The cash that has been moving into high yield represents a preference for income over potential capital appreciation.

"You could almost characterize it as a `risk-reduction trade,' out of equities and into fixed income junk, which is an equity-like security."

The migration into taxable bonds from stocks has thus far proved to be a good trade, the buy-sider said.

With low investment-grade companies, stock plus dividend returns have been flat to around negative 2%, while the bonds are around positive 4%.

High-yield bonds are up 4% to 5%, just on an index basis, the manager said.

"You have about a 10% swing between generic high-yield and generic equity," the buy-sider said.

New FCE, Postmedia unseen

Traders said that the new Postmedia Network 12½% second-lien senior notes due 2018 came to market too late in the session Wednesday for any kind of secondary dealings.

A trader meantime said he'd seen no trace of the new FCE Bank 7¼% notes due 2013, noting that euro-denominated issues rarely trade around in the U.S. domestic junk market, even if they are connected, as in this case, with a major junk name like Ford Motor Co.

Among the latter's established issues, its 7.45% bonds due 2031 gained 1 point to end at 92¾ bid, 93¾ offered.

Meanwhile, Ford's 6½% notes due 2018 did even better, with a market source seeing them up nearly 3 points on the day at just over the 96 level.

However, the Number-Two domestic carmaker's Ford Motor Credit Co. 7% notes due 2013 lost ½ point to the 102 level.

A trader saw Ford arch-rival General Motors Corp.'s benchmark 8 3/8% bonds due 2033 down 5/8 point on the day at 31 3/8 bid, 31 7/8 offered.

New CKE a little firmer

A trader said that CKE Restaurants' new 11 3/8% senior secured second-lien notes due 2018 had moved up to a 981/2-98 5/8 bid level, although a second trader opined that he didn't think "that a ton of them were trading."

And at another desk, a trader flatly declared that the Carpinteria, Calf.-based fast-food company's $600 million issue "is holding in there - but they're not flying off the grill. These burgers aren't sizzling."

He quoted the bonds at 98¼ bid, 98¾ offered, versus the 98.085 level at which the offering had been priced on Tuesday to yield 11¾%.

Insight extends gains

One of the traders also saw Insight Communications Co.'s 9 3/8% senior notes due 2018 trading at 102 bid, 102½ offered, up slightly from recent levels around 101½ bid, 102 offered and well up from the par level at which the New York-based Midwest cable systems operator's $400 million of bonds had priced last Wednesday.

Market indicators keep gaining

Among established issues having no new-deal connections, a trader saw the CDX North American HY Series 14 Index jump 1½ points on Wednesday to end at 95 5/8 bid, 95 7/8 offered, after having edged up by 1/8 point on Tuesday.

The KDP High Yield Daily Index meantime firmed by 12 basis points on Wednesday to 70.50, after having gained 14 bps on Tuesday. Its yield narrowed by 2 bps to 8.69%, after having come in by 6 bps on Tuesday.

Advancing issues led decliners for a third consecutive session on Wednesday, holding a better than seven-to-five advantage, improved from Tuesday's six-to-five margin.

Overall activity, represented by dollar-volume levels, shot up by 52% on Wednesday, after having more than doubled on Tuesday from the extremely quiet pre-holiday levels seen on Friday.

A trader said that Wednesday's session "still had that vacation-week kind of feel," although he estimated the activity level "a notch or two above between Christmas and New Year's."

He said that overall, the market was "uneventful," although the Gulf energy names were mostly up.

Another trader projected that the overall market was up between ½ point and a full point.

He said there was "some real buying today."

Oil-spill energy names up...

A trader said that bonds of companies connected with the BP oil well blowout in the Gulf of Mexico were "up pretty substantially today," helped by the perception that progress is being made on efforts to finally stop the massive oil leak.

He saw bonds of Anadarko Petroleum Corp., BP's 25% partner in the joint-venture well, "basically" up 3 points "across the board," for instance pegging the actively traded 5.95% notes due 2016 and the 6.95% notes due 2019 both at around the 92½ bid level. "Take your issue - everything was up," he declared, calling the Woodlands, Texas.-based energy exploration and production company "the big volume guys today."

He also saw BP plc, the majority owner of the blown-out well, and Transocean Inc., owner of the sunken Deepwater Horizon drilling rig whose fiery demise on April 20 triggered the rupture of the well and the resulting huge oil spill, both up between ½ and 1 point. BP's 5¼% notes due 2013 traded in a 95-95½ context and its 3 7/8% notes due 2015 hung in around the 84 level, while its 4¾% notes due 2019 moved up to around 881/2-89.

Meanwhile, Transocean's 6% notes due 2018 traded in a 923/4-93¼ context.

The trader noted news reports indicating that BP chief executive officer Tony Hayward, currently on a visit to the oil-rich sheikdom of Abu Dhabi - where the beleaguered British energy company has a long-standing partnership arrangement in the production of petroleum there - might be trying to encourage some of the cash-laden sovereign wealth funds there to take investment stakes in the company in order to raise cash to fund the ongoing Gulf cleanup. There was no firm comment from either BP or the oil emirates.

He also suggested that while it was too soon to say that "good news" was coming from the company's operations to capture leaking oil and cap the ruptured well 40 miles off the Louisiana coast, "it looks like good news may be coming sooner rather than later" in terms of progress in the operation now proceeding at a quicker pace than originally estimated.

News reports said that a relief well that BP is drilling to siphon oil off from the ruptured undersea well is now only about 15 feet from the side of the leaking well, although still not expected to be finished before mid-August.

BP is also on the verge of more than doubling its oil-capture capacity to 53,000 barrels a day from around 25,000 currently, as a new collection vessel is on site, although it is projected that it will take three more days to hook up, as rough seas hamper efforts to finish the job.

Another trader also saw those Gulf oil names up, but suggested that "they moved up with the market," which he saw up between ½ point and a full point on an overall basis.

...but not ATP

However, as has recently been the case, while BP, Anadarko and Transocean continued to recover from the beatings those nominally investment-grade bonds have endured, which has encouraged junk bond investors to get involved in them as well, there was no such reprieve for a genuinely junk issue, ATP Oil & Gas Corp., whose 11 7/8% second-lien senior secured notes due 2015 have been beaten down to a high 60s, low 70s context from the near-par levels at which that $1.5 billion of bonds originally priced on April 19, the day before Deepwater Horizon exploded, burned and sank in the Gulf.

While ATP had nothing to do with the BP accident, investors fear it will be badly hurt by the toughened federal regulations against deepwater drilling slapped on in the wake of the disaster, since most of its oil and gas reserves lie in the deepwater sectors of the Gulf.

On Wednesday, a trader saw those bonds trading between 68 and 71 for "most of the day," down a little from the lower-70s region they had occupied the previous few sessions. Then, "late in the day, someone finally came along and lifted those bonds at 71

"But you didn't know if they were going to trade down into the 68 bid, or someone was going to come and lift tem. But someone finally decided that at 71, they looked cheap."

He said that activity in the Houston-based energy E&P company's paper "wasn't on huge volume," only $500,000 to $1 million of the bonds.

Another trader quoted the bonds going out at 62 bid.

OPTI Canada busy, higher

Also on the energy front, traders saw OPTI Canada Inc.'s bonds move up, apparently helped by the merger and acquisition speculation sparked by the news that another company in that same oil-sands sector is to be acquired by French energy giant Total SA for $1.4 billion.

A trader said that "there seems to be a pretty decent-sized buyer out there looking for a block" of OPTI Canada's 9% notes due 2012, which had earlier been seen around 101¾ bid, 102¼ offered. He said they were still out there at that same level, "better bid for, but those never traded."

There were, however, about $20 million of OPTI's 7 7/8% notes due 2014 trading, which he saw up 3/8 point at 86 3/8 bid.

And he saw "a small piece" of the Calgary, Alta.-based oil-sands energy company's 8¼% notes due 2014 trading around 87, up ½ point on the day.

Another market source, though, actually saw the 7 7/8s down by more than a point on the day at 86 3/8 bid.

Market participants studied the news about Total SA's planned takeover of another Calgary-based oil sands company, UTS Energy Corp, whose board of directors has agreed to sell UTS to a subsidiary of Total for $1.4 billion in cash and shares in a new corporation. The deal gives Total a 20% stake in the big Fort Hills oil-sands project in Alberta, which is 60% controlled by Suncor Energy.

Energy Future gains on debt cut

A trader said that Energy Future Holdings Corp. - the Dallas-based utility and merchant power operator formerly known as TXU - rallied by a point or two on the news of the successful completion of a debt exchange transaction.

He quoted its 10 7/8% notes due 2017 at 73 bid, 75 offered.

The company said in an 8-K filing with the Securities and Exchange Commission that it had recently completed a private bond exchange transaction with an unidentified institutional investor in which it exchanged $412 million of new 10% senior secured notes due 2020 for $549 million of its outstanding 5.55% notes due 2014, for a debt reduction of $137 million. The company - which was taken private by Kohlberg Kravis Roberts in 2009 via a $32 billion leveraged buyout - has a total of some $38 billion of debt, including pre-LBO obligations. Some $22 billion of that is slated to come due in 2014.

The company also said in its filing that since the start of the second quarter, it had reduced the debt of its Texas Competitive Electric Holdings Company LLC subsidiary by a net of $130 million, which, combined with the aforementioned exchange, brings its total net debt reduction in that time to $267 million. It acquired $413 million of Texas Competitive's debt from their holders in exchange for $72 million of the new Energy Future 2020 notes plus $211 million in cash, excluding accrued interest payments.

Energy Future further said that since last October, when it began what it has called its "liability management program," and running through July 2, it has acquired a total of about $1.366 billion of its own and Texas Competitive's outstanding debt via a series of transactions. After taking into account the new notes and cash given to the holders for those bonds, it estimated that it had reduced its debt burden by a total of $381 million, while extending the maturities of $985 million of outstanding debt. It said that the $381 million debt reduction, together with the related approximately $115 million in total pre-tax projected interest savings through 2014 result in a total projected 2014 net debt reduction of some $496 million.

Skilled gets killed

Skilled Healthcare Group's debt fell significantly during the midweek session as a jury ruled that the Foothill Ranch, Calif.-based healthcare services company should pay $613 million in statutory damages and $58 million in restitutionary damages, according to a trader.

The verdict relates to a complaint filed in 2006 that claimed certain of the company's California-based facilities were understaffed and misrepresented the quality of care provided in their facilities.

The verdict is a result of the first phase of deliberations. The jury has yet to hear the punitive damages phase of the trial.

Following the news, a trader said that Skilled Healthcare's 11% notes due 2014 - said he said last traded on July 1 at 104 - were being quoted at 35 bid, 75 offered. According to the Trace bond-tracking system, the bonds did not trade on Wednesday.

At another desk, a trader was quoting the bonds down at 50 cents on the dollar, versus the pre-news 104 levels. "But it was all quoted," he cautioned - "there wasn't a trade."

"We are deeply disappointed in the verdict, and continue to firmly believe that our facilities are appropriately staffed and that our caregivers work hard every day to provide the care and services our residents need and deserve," said Boyd Hendrickson, chairman and chief executive officer, in a statement posted on the company's website. "We strongly disagree with the outcome of this legal matter, and we intend to vigorously challenge it."

In order to satisfy the typical bonding requirement to defer enforcement of a judgment during the pendency of an appeal, the company would be required to post a bond for 150% of the final judgment amount.

The company currently has $94 million of borrowing capacity under its $100 million revolving credit facility, however, its ability to draw the funds is limited by the revolver covenants.

And, the company's primary professional liability insurance coverage has been exhausted for the policy year applicable to this case.

Stephanie N. Rotondo and Sara Rosenberg contributed to this report

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