Berry drive-by and Momentive, Hexion deals price, all trade up; Boyd slates Thursday offering

By Paul Deckelman and Paul A. Harris

New York, Oct. 27 - Investors looking for new high-yield paper did not have to look very far on Wednesday as more than $1.5 billion of new bonds priced.

Most of that total came from Momentive Performance Materials Holdings, whose two divisions, the eponymous Momentive Performance Materials Inc. and Hexion Specialty Chemicals Inc. - recently merged under the Momentive corporate umbrella - each brought a bond offering to market.

Hexion's consisted of one tranche of $440 million 10-year secured notes, while Momentive came with $840 million equivalent of 101/4-year secured notes, divided into dollar- and euro-denominated tranches.

The Hexion bonds and the Momentive dollar issue were each heard to have firmed smartly when they moved over to the secondary side, up by nearly 3 points on the day.

That was also the story with Berry Petroleum Co.'s $300 million of 10-year notes, which moved up by several points after the Denver-based oil and gas exploration and production company's quick-to-market deal priced at par.

The traders also saw Fortescue Metals Group Ltd.'s mega-deal, which priced on Tuesday at par and then rose between 2 and 3 points in the aftermarket, hanging onto its gains. But Monday's offering from MGM Resorts International continued to struggle just to tread water.

MGM sector peer Boyd Gaming Corp. began quickly shopping a $500 million eight-year deal, expected to price on Thursday. Investors meantime will also await Carizzo Oil & Gas Inc.'s $325 million of eight years, with books closing on Thursday morning.

Away from the new-deal arena, traders said no names really stuck out. Statistical performance indexes were mixed.

Momentive/Hexion deals price

The primary market saw $1.375 billion and €150 million price in four tranches on Wednesday.

Momentive Performance Materials Holdings priced $1.28 billion equivalent of high-yield notes, issuing via subsidiaries Hexion Specialty Chemicals, Inc. (Momentive Specialty Chemicals, Inc.) and Momentive Performance Materials Inc.

Hexion (Momentive Specialty Chemicals) priced $440 million of second-lien senior secured notes due Nov. 15, 2020 (Caa1/CCC+) at par to yield 9%.

The Hexion notes priced 12.5 bps richer than the 9¼% area price talk.

Meanwhile Momentive Performance Materials priced $635 million of springing second-lien notes due Jan. 15, 2021 (Caa1/CCC) at par to yield 9%.

The yield on the Momentive Performance Materials dollar-denominated notes also priced 12.5 bps richer than the 9¼% area price talk.

Momentive Performance Materials also priced €150 million of springing second-lien notes due Jan. 15, 2021 (Caa1/CCC) at par to yield 9½%.

The yield on Momentive Performance Materials euro-denominated notes printed at the tight end of the 9 5/8% area price talk.

The Momentive Performance Materials notes will be unsecured prior to the redemption of its 12½% notes due 2014, which are callable in December 2011 at 106.25. Following that redemption, the new 10-year notes will be backed with second-lien security.

J.P. Morgan Securities LLC, Citigroup Global Markets Inc., Credit Suisse Securities, Morgan Stanley & Co. Inc., UBS Investment Bank, Bank of America Merrill Lynch, Deutsche Bank Securities Inc. and Goldman Sachs & Co. were the joint bookrunners.

Proceeds will be used to refinance bond debt that remains on the books in the wake Apollo Management's acquisition of the two chemical companies earlier this month.

The order books for the dollar-denominated tranches were well oversubscribed since early on in the marketing process, sources said.

Berry Petroleum drives by

Meanwhile Berry Petroleum priced a $300 million issue of 10-year senior notes (B2/BB-) at par to yield 6¾%.

The yield printed at the tight end of the 6¾% to 6 7/8% price talk.

Wells Fargo Securities, BNP Paribas, J.P. Morgan Securities LLC, RBS Securities and SG CIB were the joint bookrunners for the quick-to-market issue.

Proceeds will be used to finance the company's Wolfberry acquisitions and to pay down Berry Petroleum's revolver.

Carrizo sets talk

Carrizo Oil & Gas talked its $325 million offering of eight-year senior notes (B3/B) with an 8¾% to 9% yield on Wednesday.

The order books close at 11 a.m. ET on Thursday.

Credit Suisse, Wells Fargo Securities and RBC Capital Markets are the joint bookrunners for the debt refinancing.

Boyd Gaming for Thursday

Elsewhere Boyd Gaming unveiled an overnight drive-by deal on Wednesday.

The Las Vegas-based gaming company is expected to price a $500 million offering of eight-year senior notes (/B/) on Thursday.

Price talk for the deal is expected Thursday morning.

JP Morgan, Bank of America Merrill Lynch, Wells Fargo Securities, Deutsche Bank Securities, RBS Securities, Commerz Securities and Barclays Capital are joint bookrunners for the debt refinancing and general corporate purposes deal.

BAA roadshow starts Thursday

BAA (SH) plc, which operates London's Heathrow and Stansted airports, will begin a roadshow on Thursday for a £250 million minimum offering of senior secured notes maturing in the first quarter of 2017 (Ba3//BB+).

The deal, which could grow to £325 million, is expected to price in the week ahead.

Morgan Stanley and the Royal Bank of Scotland are the joint global coordinators and joint bookrunners for the debt refinancing deal. Morgan Stanley, the Royal Bank of Scotland, Barclays Capital, BNP Paribas, ING and Banco Santander are also joint bookrunners.

MB Petroleum brings $350 million

Finally, Oman's MB Petroleum Services will begin a global roadshow on Wednesday for a $350 million issue of senior notes.

The deal, which will be marketed in Asia, Europe and the United States, is expected to garner a limited audience among high-yield players, according to a source close to the transaction.

Barclays Capital, HSBC and Standard Chartered are the bookrunners.

'Good day' for new issues

In the secondary market, a trader who sees a lot of the new paper that comes along when it hits the aftermarket opined that "absolutely - [Wednesday] was a good day for new issues."

He added that "there's no question about that."

Berry trades well

When Berry Petroleum's 6¾% notes due 2020 were freed for secondary dealings, a trader proclaimed that "those things shot straight up" to peak at 103 bid - well up from the $300 million deal's par issue price earlier in the session.

Another saw the Berry bonds "wrapped around" 103.

Momentive moves up

A trader saw Hexion's new deal and that of new corporate cousin Momentive Performance Materials both having also pushed up to between 102 and 103 in aftermarket dealings Wednesday after having each priced at par.

He saw both issues late in the day at 102¾ bid, without any offer levels.

"They initially opened up" at 102¼ bid, 102½ offered on the break, he said, before rising to the 102¾ area on several trades.

Another trader, who also saw both Hexion's new deal and Momentive's bid at 1023/4, also saw 103 offer levels for both bonds.

Fortescue deal holds onto gains

A trader saw the 7% notes due 2015 priced on Tuesday by FMG Resources Pty. Ltd. - i.e. Fortescue Metals Group - trading around 102 3/8 bid, 102 5/8 offered, just a slight bit easier from the 102½ bid, 103 levels seen in the deal's initial secondary trading on Tuesday.

But that was still well up from par, where the Australian iron-ore mining company's $2.04 billion behemoth of a deal had come to market earlier that session, after having been massively oversubscribed on the primaryside, playing to a reported $15 billion order book and resulting in meager allocations to interested parties.

The trader later saw those bonds at 1021/2, in a locked market.

A second trader said that Fortescue "held onto its gains from [Tuesday] - it didn't really move much today, but it was able to hold all of its gains."

Junk grows, amid equity woes

"The [junk] market," the first trader said, commenting on the strength of those new deals "continues to rise.

"Equity seemed to have a little bit of a rally from the lows, up 100 points from the lows," he said, although the bellwether Dow Jones Industrial Average still ended the day down 43.18 points, or 0.39%, at 11,126.28, even with that comeback. The index had been down as much as 150 points earlier on investor angst over whether the Federal Reserve's plans to buy Treasury bonds to drive interest rates lower and encourage lending and spending would be smaller and slower than initially expected. Broader indices were mixed.

Despite that equity-market angst, though, "our market continues to gyrate. There's a lot of cash around, almost regardless of what happens in the Treasury market. There's very little around for sale in high yield, and guys are guys are constantly scouring, looking for whatever they can buy."

MGM: Exception to the rule

But while Wednesday's transactions, and Tuesday's mega-deal, continue to be strongly supported by junk investors, the exact opposite continues to hold true for MGM Resorts' $500 million of 10% notes due 2016, which priced on Monday at 98.897 to yield 10¼% - and which are still struggling just to stay around issue, and not always successfully.

A trader saw the Las Vegas gaming giant's issue around 98¼ bid, 98½ offered, actually below its pricing level. He said that he had not been following the issue too closely and couldn't fathom why it was so unpopular with junk marketers, but volunteered: "I think that issue has just struggled right out of the gate, and had kind of remained heavy."

At another shop, a trader quoted the MGMs at that same 98 3/8 bid, 98 5/8 offered level, and expressed some skepticism at reports that the bonds had ever even gotten near a 98½ to 99 bid context during Tuesday's dealings, calling such quotes "overly generous. That made it sound better than it was."

The MGM paper, he asserted, "is below issue - and really, that's where it's been since it came."

He agreed with the widely repeated characterization that the issue "just couldn't get out of its own way - not yet."

Boyd just slightly better

MGM sector peer, and - for now - Borgata partner Boyd Gaming's existing bonds were seen by traders mostly unchanged to perhaps up slightly on the news that the Las Vegas-based local gaming operator will sell $500 million of new bonds and use a portion of the proceeds to fund its tender offer for its existing $158.832 million of 7 ¾% notes due 2012.

A trader called those bonds up perhaps 1/8 point at 99¾ bid, 101¾ offered.

"There wasn't much movement" in the existing bonds, another trader argued, "which may be noteworthy in and of itself, in front of the new deal that's supposed to come [Thursday.]"

He said that away from the 7¾% paper, "even the outstanding bonds that aren't being tendered didn't move aren't being tendered for did not move at all today."

Boyd's 7¾% notes due 2012 were seen up ¼ point at just under 101.

Market indicators turn mixed

Away from the new-deal world, a trader saw the CDX North American Series 15 HY index down ¼ point on Wednesday to end at 100¼ bid, 100¾ offered, after having been unchanged on Tuesday.

The KDP High Yield Daily index meantime edged up by 2 basis points on Wednesday to close at 74.51, after having gained 5 bps on Tuesday. Its yield rose by 1 bp to 7.18% on Wednesday, after having come down by 1 bp on Tuesday.

The Merrill Lynch High Yield Master II index gained 0.059% on Tuesday, after having risen by 0.127% on Tuesday. The latest advance pushed its year-to-date return up to 14.234%, its fifth consecutive new 2010 peak level, eclipsing the old mark of 14.167% recorded on Tuesday.

Advancing issues finally fell behind decliners on Wednesday after having beaten them over the previous five straight sessions. However, the margin of difference was just a handful of issues - not even a dozen - out of the more than 1,400 tracked, versus the better than seven-to-six advantage which the gainers held on Tuesday.

Overall activity, represented by dollar-volume levels, fell by 16% on Wednesday, after having shot up by 43% on Tuesday versus the previous session.

Despite the mixed reading from the indicators, a trader said that "the equity market goes down, the [Treasury] bond market goes down -but the high yield market continues to go up."

Tenet and Toll trade around

Among specific names, a trader said that Tenet Healthcare Corp. "had a good day today," calling the Dallas-based hospital operator's 8 7/8% notes due 2019 "fairly active and up about a point" at 112 bid, 113 offered.

Also doing well, a trader said, was Toll Brothers Finance Corp.'s bonds, such as its 8.91% notes due 2017. He quoted the Horsham, Pa.-based luxury homebuilder's paper "about unchanged" at 117½ bid, but said that there was "a fair amount" of Toll bonds trading, even though the bonds had been quiet for the previous several sessions.

He suggested that the Toll bonds may have gotten a boost from the news - disclosed in a filing Wednesday with the Securities and Exchange Commission - that Toll and its wholly-owned subsidiary, First Huntingdon Finance Corp. had entered into an unsecured, $885 million four-year credit agreement with a syndicate of banks led by administrative agent Citibank, NA and syndication agents Deutsche Bank Securities Inc. and Royal Bank of Scotland plc

Elsewhere, the trader said that "the paper space continues to trade well," particularly Catalyst Paper Corp., whose 7 3/8% subordinated notes due 2014 had moved up to 60 bid. "That area continues very well," he said.

Another trader saw those Catalyst bonds at 58 bid, 60 offered, while its 11% senior secured notes due 2016 were at 89½ bid, 90½ offered, although he called both issues unchanged.

New Page Corp.'s 11 3/8% senior secured notes due 2014 meantime moved up ½ point on Wednesday to 95½ bid, 96 offered, he said, on "a lot of activity, a lot of quotes in the name."

He said that Miamisburg, Ohio-based NewPage's paper "was the much more active one," versus Catalyst's activity level.

-Stephanie N. Rotondo contributed to this report

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