SandRidge, Windstream lead active drive-by parade; secondary softer but NewPage busy, better

By Paul Deckelman and Paul A. Harris

New York, Mar. 2 - The high-yield primary arena made it two-for-two in the month of March so far, seeing a hectic session that easily dwarfed Tuesday's already-busy first day of the month. In fact, with domestic issuers bringing almost $3 billion of new paper to market during the day, it was the busiest primaryside session in nearly a full month.

Amazingly, none of the new deals came off the established forward calendar; rather, almost all of the action was in quickly-shopped deals which were just announced in the morning and priced by the afternoon, plus one or two others which priced within a day or two of having been announced.

The biggest deal of the day was SandRidge Energy, Inc.'s upsized $900 million of 10-year notes, followed by phone operator Windstream Corp.'s $600 million of 12-year notes.

There were also drive-by deals from Isle of Capri Casinos, Inc. and apparel maker Jones Group, Inc. ($300 million each), from Consol Energy, Inc. ($250 million), MarkWest Energy Partners, LP ($200 million), clothier Perry Ellis International, Inc. ($150 million) and HealthSouth Corp. ($120 million).

While those deals were pricing, Canadian drugmaker Valeant Pharmaceuticals Inc. launched a $1.5 billion two-part offering.

Domestic building products concern Headwaters Inc. announced plans for a $400 million senior secured deal. Price talk meantime emerged on the deals for MEMC Electronic Materials, Inc. and Jo-Ann Stores, Inc, both of which are expected to price Thursday.

Away from the new-deal area, traders saw market performance indexes trending lower. Solo Cup Co.'s paper kept sliding, but NewPage Corp.'s bonds were both busy and better.

SandRidge massively upsized

The primary market swung back into full stride on Wednesday with eight issuers bringing a combined nine tranches, raising a total of $2.82 billion.

SandRidge Energy priced an upsized $900 million issue of 10-year senior notes (B3/B) at par to yield 7½%, on top of the price talk. The amount was increased from $700 million.

RBC Capital Markets was the left bookrunner for the quick-to-market deal. Barclays Capital, Bank of America Merrill Lynch, Mitsubishi UFJ Securities (USA) and Wells Fargo Securities were the joint bookrunners.

The Oklahoma City-based oil and natural gas company plans to use the proceeds to repurchase its existing 8 5/8% senior notes due 2015, and for general corporate purposes, including the repayment of borrowings under its revolver.

Windstream matches talk

Meanwhile Windstream priced a $600 million issue of 12-year senior notes (Ba3/B+) at par to yield 7½%, on top of the price talk.

Citigroup, Wells Fargo Securities, BNP Paribas, RBC Capital Markets and RBS Securities were the joint bookrunners for the quick-to-market deal.

The Little Rock, Ark.-based communications and technology company plans to use the proceeds to fund a partial tender for its 8 5/8% senior notes due 2016.

Isle of Capri at wide end

Isle of Capri Casinos priced a $300 million issue of 7¾% eight-year senior notes (B3/B-) at 99.264 to yield 7 7/8%, at the wide end of price talk which had been set in the 7¾% area.

Credit Suisse Securities, Wells Fargo Securities and Deutsche Bank Securities Inc. were the joint bookrunners for the quick-to-market issue.

The deal underwent covenant changes.

The St. Louis-based gaming, lodging and entertainment company will use the proceeds to repay its term loans.

Jones prices drive-by

Jones Group priced a $300 million issue of eight-year senior notes (Ba3/B+) at par to yield 6 7/8% on Wednesday, at the wide end of price talk which had been set in the 6¾% area

Citigroup was the left bookrunner for the quick-to-market issue. J.P. Morgan Securities LLC, Bank of America Merrill Lynch, SunTrust Robinson Humphrey and Wells Fargo Securities were the joint bookrunners for the debt refinancing and general corporate purposes deal.

Consol at the tight end

Consol Energy priced a $250 million issue of 10-year senior notes (B1/BB) at par to yield 6 3/8%, at the tight end of price talk which had been set in the 6½% area.

Bank of America Merrill Lynch, PNC Capital Markets, RBS Securities and Scotia Capital were the joint bookrunners for the quick-to-market issue.

The Canonsburg, Pa.-based fuel producer plans to use the proceeds to repay its outstanding 7 7/8% senior notes due 2012 at maturity.

Pending that application of proceeds, Consol plans to reduce its revolver debt and use any other proceeds to reduce CNX Gas's revolver debt.

MarkWest taps 6½% notes

MarkWest Energy Partners, LP and MarkWest Energy Finance Corp. priced an upsized $200 million add-on to their 6½% senior notes due Aug. 15, 2021 (B1/BB-) at 99.50, resulting yield to worst is 6.567%.

The reoffer price came on top of the price talk. The amount was raised from an initial $170 million.

Barclays Capital ran the books for the quick-to-market add-on.

The Denver-based natural gas, natural gas liquids and crude oil company plans to use the proceeds to fund the tender offer for its 8 ¾% senior notes due 2018.

Perry Ellis beats talk

Perry Ellis priced an upsized $150 million issue of eight-year senior subordinated notes (B2/B+) at par to yield 7 7/8%.

The yield printed 12.5 basis points tighter than price talk which had been set in the 8 1/8% area.

Bank of America Merrill Lynch and Deutsche Bank Securities Inc. were the joint bookrunners for the debt refinancing deal which was upsized from $125 million.

HealthSouth two-part tap

HealthSouth priced an upsized $120 million two-part add-on transaction.

The Birmingham, Ala.-based provider of inpatient rehabilitative health care services priced a $60 million add-on to its 7¼% senior notes due 2018 (B2/B+) at 103.25 to yield 6.543%.

The tranche was upsized from $50 million. The reoffer price came at the rich end of the 103 to 103.25 price talk.

HealthSouth also priced a $60 million add-on to its 7¾% senior notes due 2022 (B2/B+) at 103.50 to yield 7.14%.

The 2022 notes add-on was also upsized from $50 million, and the reoffer price came at the rich end of the 103.25 to 103.50 price talk.

The overall size of the deal was increased from $100 million.

Bank of America Merrill Lynch, Barclays Capital, Citigroup, Goldman Sachs & Co. and Morgan Stanley were the joint bookrunners for the quick-to-market sale.

Up to $45 million of the proceeds will be used to repay a portion of the company's revolver, with the balance of the proceeds to redeem a portion of its 10 ¾% senior notes due 2016 on or before the initial June 15, 2011 call date. There were $495.5 million of those notes outstanding as of Dec. 31, 2010.

In addition to the standard call features both tranches feature special calls which allow the issuer to redeem 10% of the notes annually at 103 during the non-call periods.

Both of the original tranches priced at par in an upsized $525 million two-part deal on Sept. 27, 2010. That transaction, which was upsized from $500 million, included $275 million of the 7¼% notes and $250 million of the 7¾% notes.

Talking the deals

Thursday's session gets underway with three deals in the on-deck circle.

MEMC Electronic Materials talked its $500 million offering of eight-year senior notes (B1//) with a yield in the 7¾% area on Wednesday.

Bank of America Merrill Lynch, Deutsche Bank Securities Inc. and Goldman Sachs & Co. are the joint bookrunners.

Meanwhile Jo-Ann Stores talked its $450 million offering of eight-year senior notes (confirmed Caa1/expected CCC+) with an 8% to 8¼% yield.

J.P. Morgan Securities LLC, Bank of America Merrill Lynch and Barclays Capital Inc. are the joint bookrunners.

Valeant talks $1.5 billion

Meanwhile, Valeant Pharmaceuticals International set the price talk on its $1.5 billion two-par senior notes offer.

The five-year notes are talked to yield 6¼%, while the 11-year notes are talked to yield 7¼%.

The deal, which is being led by Goldman Sachs, had been expected to price on Wednesday. However no terms were available at press time.

Headwaters to start roadshow

Finally, Headwaters will begin a roadshow on Thursday for a $400 million offering of eight-year senior secured notes (existing ratings B2/B+).

The deal is expected to price early in the week ahead.

Deutsche Bank Securities is leading the debt refinancing deal.

New bonds mostly hold steady

When they reached the secondary market, the day's new issues for the most part did not stray very far from their respective issue prices, which for most of the day's deals was at par.

A trader mentioned that Consol Energy, for instance, had "a crappy little coupon" of 6 3/8%, and he saw the Pittsburgh-based coal and natural gas producer's new 10-year notes trading around 100½ bid, 101¼ offered, versus their par issue price.

"It doesn't seem like there's been very much action," he said. "I'm not seeing any trading, and not seeing any follow-up. I don't know."

Two other traders pegged those bonds at 100½ bid, 101½ offered.

Jones bonds are jolted

A trader said that Jones Group's new eight-year bonds were offered at 1001/2, after having priced at par earlier in the session.

However, he later saw the New York-based apparel company's new issue having fallen as low as 97¾ bid, 98¼ offered, and wondered whether that was an accurate quote.

But at another shop, a trader confirmed that the Jones bonds were trading well under issue, quoting them at 98 5/8 bid, 99 3/8 offered.

"Ouch," he commented.

Isle bonds up from issue

Isle of Capri's new eight-year notes was one of only three of the day's deals - the others being the add-on tranches from MarkWest Energy and HealthSouth - that priced at a level other than par, in this case, at 99.264.

A trader saw the St. Louis-based gaming company's new debt at 99 7/8 bid, par offered, while a second saw the bonds locked at 99 7/8. Yet another trader quoted them at 99½ bid, par offered.

An analyst said Wednesday that the company had revised a key covenant in the indenture of its new deal in order to address investor concerns about options the company would have to repay or refinance an already existing issue of subordinated bonds.

MarkWest firms a bit

A trader saw MarkWest Energy's new add-on 10-year notes having pushed up to 100 1/8 bid, 100 3/8 offered.

That upsized $200 million offering had priced at 99½ earlier in the session.

A second trader, seeing the Denver-based energy company's bonds trading around par bid, 100¾ offered around midday, quoted them going out at par bid, 100¼ offered - down from intraday, but still a little above issue.

Yet another trader saw the bonds at 100 1/8 bid, 100 3/8 offered.

Key Energy holds its own

Among the bonds which came to market on Tuesday, traders saw Key Energy Services, Inc.'s new 6¾% notes due 2021 holding onto the gains which the Houston-based oilfield services company's $475 million issue had notched in its initial aftermarket dealings later that session. That drive-by issue, upsized from the originally announced $450 million, had priced at par Tuesday, but then moved up to 101 bid, 101½ offered by the close.

On Wednesday, a trader said, the new bonds "were active." He saw them at 101¼ bid, which he called a gain of perhaps ½ point.

Another trader saw the bonds hanging in at 101 bid, 101½ offered.

J. Crew hangs around issue

A trader saw Chinos Acquisition Corp.'s 8 1/8% notes due 2019 - the J Crew Group, Inc. issue - trading at 99 7/8 bid, 100 1/8 offered, exactly straddling the par level at which the New York-based clothing retailer had priced its $400 million of bonds on Tuesday.

Initially after its pricing, those bonds were seen in the aftermarket at 100¼ bid, 100¾ offered.

However, at another desk on Wednesday, the bonds were being quoted at 99¾ bid, 99 7/8 offered.

Indicators mostly softer

Away from the new deal world, a market source saw the CDX North American Series 15 HY index down by 3/16 point on Wednesday to end at 103½ bid, 103 5/8 offered, after having eased by ½ point on Tuesday.

The KDP High Yield Daily index meantime lost 2 basis points on Wednesday to close at 75.96, after having gained 6 bps on Tuesday. Its yield rose by 2 bps, to 6.63%, after having come in by 1 bp Tuesday.

The Merrill Lynch High Yield Master II index eased by 0.014% on Wednesday, in contrast to its 0.118% rise on Tuesday. That left its year-to-date return at 3.576%, down from Tuesday's 3.59%, the peak level for 2011 so far.

Advancing issues, however, led decliners for a fourth straight session on Wednesday, by the same roughly six-to-five margin which had been seen on Tuesday.

Overall market activity, as measured by dollar-volume levels, fell by 24% on Wednesday, after having jumped by 67% on Tuesday from the previous session's activity level.

A trader said that for the most part, secondary activity Wednesday was "pretty much all new deal."

He also noted that this week's J.P. Morgan high yield and leveraged finance conference in Miami is continuing to take its toll on activity levels, with many portfolio managers and other decision makers down there for the well-attended annual event and a lot of those likely opting to stay another day or two after the conference wrap-up.

NewPage is busy and better

Among specific names, NewPage Corp.'s 10% notes due 2012 "were really active," a trader said, calling them up about a point, at 68½ bid.

He mentioned that the Miamisburg, Ohio-based coated-paper manufacturer's bonds "are always active," but were a little more so on Wednesday.

He also saw NewPage's 11 3/8% senior secured notes due 2014 better by 1 point at 100½ bid.

"There was a lot of activity" In NewPage, a second trader concurred, seeing the 10s at 68½ bid, 69 offered, "a lot of volume."

He initially saw the bonds "up a couple of points," then estimated them up 1½ points, but said that by the day's end, their gain had been shaved to ¾ point to 1 point.

Yet another trader saw the 11 3/8s trading in a range between 98 7/8 and 1001/4, "all in that one area," on "a lot of bonds moving."

He knew of no fresh developments about the company which would explain Wednesday's activity, especially since NewPage had reported its quarterly numbers back on Feb. 17, "so there's nothing new there."

Solo suffering continues

A trader said that Solo Cup Co.'s 8½% notes due 2014 "have been getting beaten up," seeing the bonds going home at 83 3/8 bid, which he called down another 5/8 point on the session.

"Just 10 days ago, they were at 91," he said.

Solo was "pretty active," a second trader observed, seeing the 81/2s last at 83½ bid, 84 offered.

"It seemed like there was really good volume," he added.

He estimated that the bonds were "down around 2-ish points", but later modified that to a 1½ point decline.

He too was at a loss to explain the recent weakness in the Lake Forest, Ill.-based paper and plastic cup, plate and utensil maker's bonds .

Yet another trader suggested that the bonds were suffering the blowback coming out of the rising tide of world oil prices, which topped $102 in New York on Wednesday and show no signs of stopping.

He noted that the price for styrene - a key ingredient in Solo's line of plastic-based products - had gone for a low of about $13.30 per ton back in August, "and those prices have been going straight up since then," moving up to $15.70 per ton last week.

He suggested that investors "are concerned about the company's ability to pass these extra costs on to its customers in the form of higher prices for its products.

But while he saw the 8½% junior bonds "get beat up," he said that Solo's 10½% senior secured notes due 2013 "held in there," around 103 bid.

"There was not a lot" of the latter bonds moving around, he said, however "a couple of them were traded."

TXU default issue not settled

A trader saw the 6.55% bonds due 2034 of TXU - now known as Energy Future Holdings Corp. - down 1½ points at 32½ offered.

He also saw the 6½% notes due 2024 down 1 point at 43 bid, although he said the latter bonds "weren't very active."

A second trader said that the bonds "are still active," pegging the 101/4s at 55½ bid, 56 offered, "slightly lower than [Tuesday]."

"They have just so many issues, we saw a lot of quotes in the name," he said.

The Dallas-based utility and merchant power producer's bonds have been getting chopped up over the past few sessions amid allegations from one bondholder that it had defaulted on some of its debt - an allegation TXU denies.

As previously reported, Aurelius Capital Management LP, a lender under the credit facility, is alleging that Energy Future Holdings unit Texas Competitive Electric Holdings is in default as a result of certain intercompany loans that were made. The firm is claiming that the loans do not comply with the arm's-length basis requirement and that the non-compliance has resulted in a failure to make certain mandatory prepayments under the credit facility.

Aurelius has hired law firm Dechert to pursue the alleged default and is trying to put together an informal group of lenders to join in the complaint, a source remarked.

On a conference call Monday with Citigroup, the administrative agent on the credit facility, a source said that Citi claimed it was doing what was required under the credit agreement, but for now, everything is staying status quo.

Texas Competitive has said in filings with the Securities and Exchange Commission that the default allegations are without merit and that it will defend itself against the accusations

GM bonds going in reverse

A trader said that the 8 3/8% benchmark bonds due 2033 of Motors Liquidation Co. - the former General Motors Corp., renamed after the latter's bankruptcy restructuring - "might be a little lower" at 32 bid, 32½ offered. He estimated they were down 1 point.

Another trader saw them down 1 point at 31½ bid, 32½ offered.

At another desk, a market source saw the "old GM" bonds down a full deuce at 31 bid.

Traders said that the bonds had not gotten any kind of a boost from Tuesday's release of February auto-sales figures by the major carmakers. GM's sales zoomed 49% from year-earlier levels - although the traders noted that the year-ago levels were so low that a large rise was to be expected and had already been "baked in" to the bonds' trading levels.

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