Nalco megadeal, Tenneco, Dean, Concho drive-bys lead $3.6 billion primary; funds gain

By Paul Deckelman and Paul A. Harris

New York, Dec. 9 - After two days of relatively restrained activity, the high-yield primary market was busting loose all over the place on Thursday, as seven new deals totaling more than $3.6 billion priced. The day was led by Nalco Co.'s quickly shopped $1.014 billion-equivalent offering of dollar- and euro-denominated eight-year notes.

Both tranches priced at par just a day after the Naperville, Ill.-based water treatment and specialty chemicals provider announced its deal, and the dollar-denominated portion was seen to have firmed solidly in the aftermarket to above the 101 level.

And there were several even more rapidly marketed deals, as auto parts maker Tenneco Inc., dairy products producer Dean Foods Co. and energy operator Concho Resources Inc. each priced same-day drive-by offerings: $600 million for Concho, $500 million from Tenneco and Dean's $400 million. The new Tenneco bonds pushed steadily higher in the aftermarket, but Concho and Dean appeared too late for any trading.

Several other deals priced off the forward calendar, including logistics supplier CEVA Group plc's upsized $450 million offering, a $450 million issue from energy drilling equipment company Trinidad Drilling Ltd. and poultry producer Pilgrim's Pride Corp.'s $500 million transaction. While Pilgrim's Pride and CEVA stayed around their respective issue prices, Trinidad traded solidly better in the secondary.

Also in the primary arena, price talk emerged on metals producer Novelis Inc.'s $2.5 billion two-part behemoth of a deal, which is expected to price on Friday morning.

Away from the new deals, secondary market performance indexes showed little change, but hog producer and meatpacker Smithfield Foods, Inc.'s bonds bounced busily as the company posted good fiscal second-quarter results and reported debt-cutting progress on its conference call.

After being battered by three straight weeks of net outflows totaling nearly $2 billion, weekly reporting high-yield mutual funds - a reliable barometer of overall junk market liquidity trends - bounced back big time as more than $1 billion more came into those funds than left them in the week ended Wednesday.

Junk funds bounce back

Well after the market had closed for the day, participants familiar with the weekly AMG high yield mutual fund flow statistics generated by Lipper/FMI - considered a reliable barometer of overall market liquidity trends - said that in the week ended Wednesday, some $1.03 billion more came into those funds than left them.

It was the first net inflow seen after three straight weeks of net outflows totaling about $1.959 billion, according to Prospect News analysis of the figures. That three-week losing streak included the $1.15 billion cash hemorrhage seen in the previous week ended Dec. 1, although that outflow had originally been reported by Lipper as a $723 million loss, but was then later revised.

The three weeks of back-to-back-to-back outflows was the longest negative run since a six-week outflow binge that began in early May and continued through June 9, according to the analysis.

However, inflows have still now been seen in 34 out of the 49 weeks since the beginning of the year, while there have been 15 outflows, the analysis indicated.

The latest week's big inflow brought the year-to-date cumulative total for the weekly reporting funds up to around $11.504 billion versus about $10.47 billion the previous week. However, that total remains well down from the $12.434 billion recorded in the Nov. 10 week, the peak inflow level for 2010, according to the new analysis.

Cumulative fund-flow totals may be revised upward or downward and could include unannounced revisions and adjustments to figures from prior weeks.

Analysts say the continued flow of fresh cash into Junkbondland - and the mutual funds represent but a small, though quantifiable, percentage of the total amount of money coming in - has fueled the record new-deal borrowing binges seen last year and again this year, as well as the robust secondary market, although the latter seems to have moderated a little since around Veterans' Day.

Nalco eight-years

On Thursday, Nalco priced $1.014 billion-equivalent of eight-year senior notes (Ba2/BB-).

In a dollar-denominated tranche, Nalco priced $750 million of the notes at par to yield 6 5/8%. The company plans to use the proceeds to repurchase a portion of its $465 million of 8 7/8% senior subordinated notes due 2013, its €200 million of 9% senior subordinated notes due 2013 and about $260.8 million of the 9% senior discount notes co-issued by Nalco Finance Holdings LLC and Nalco Financing Holdings Inc.

Concho 4x oversubscribed

Elsewhere, Concho Resources priced a massively upsized $600 million issue of 10-year senior notes at par to yield 7%, at the tight end of the 7% to 7¼% price talk.

J.P. Morgan Securities LLC, Bank of America Merrill Lynch, Credit Agricole Securities (USA) and Wells Fargo Securities were the joint bookrunners.

Proceeds will be use to repay a portion of the company's credit facility.

The deal was four-times oversubscribed, according to a high-yield mutual fund manager who received an allocation total one-fifth of the order he submitted.

In the secondary market, the new Concho 7% notes due 2021 were par 7/8 bid, 101¾ offered, the manager added.

Pilgrim's Pride upsizes

Pilgrim's Pride priced an upsized $500 million issue of 7 7/8% eight-year senior notes (B3/BB-) at 99.271 to yield 8%, at the tight end of 8% to 8¼% price talk.

Barclays Capital Inc., BMO Nesbitt Burns, Jefferies & Co., Morgan Stanley & Co. Inc. and Rabo Securities were the joint bookrunners for the issue, which was upsized from $350 million.

The Pittsburg, Texas-based poultry processor will use the proceeds to repay its term loan A.

Tenneco drives through

Tenneco priced a $500 million issue of 10-year senior notes (B2/B+) at par to yield 6 7/8%, at the tight end of the 7% area price talk.

Bank of America Merrill Lynch, Citigroup, Deutsche Bank Securities, JP Morgan, Morgan Stanley, RBS Securities and Wells Fargo Securities were the joint bookrunners for the quick-to-market deal.

Proceeds will be used to tender for and/or redeem the company's 8 5/8% senior subordinated notes due 2014.

CEVA at the tight end

CEVA priced a $450 million issue of seven-year senior secured notes (B1/B) at par to yield 8 3/8%, at the tight end of the 8½% area price talk.

Credit Suisse, Deutsche Bank Securities, Goldman Sachs & Co. Morgan Stanley and UBS Investment Bank were the joint bookrunners for the quick-to-market debt refinancing deal.

Trinidad Drilling notes

Trinidad Drilling priced a $450 million issue of 7 7/8% eight-year senior notes (B2/BB-) at 99.246 to yield 8%, at the tight end of the 8% to 8¼% price talk.

Wells Fargo Securities was the left bookrunner. RBC Capital Markets and TD Securities were the joint bookrunners for the debt refinancing deal.

Dean Foods drive-by

Finally, Dean Foods priced a $400 million issue of eight-year senior notes (B2/B-) at par to yield 9¾%, on top of the price talk.

Bank of America Merrill Lynch, J.P. Morgan Securities LLC, Wells Fargo Securities, Credit Agricole Securities (USA), RBS Securities and SunTrust Robinson Humphrey were the joint bookrunners for the quick-to-market debt refinancing deal.

Novelis talks $2.5 billion

Looking toward what promises to be an active Friday session, Novelis set yield talk for its $2.5 billion two-part offering of senior notes (expected ratings B1/B+) on Thursday.

For the tranche A notes, which mature in 2017 and come with three years of call protection, yield talk is 8¼% to 8½%.

For the tranche B notes, which mature in 2020 and come with five years of call protection, yield talk 8 5/8% to 8¾%.

Tranche sizes remain to be determined.

Pricing is set for late Friday morning.

In addition to yield talk, there were covenant changes.

Citigroup Global Markets Inc. is the left bookrunner. J.P. Morgan Securities LLC, Bank of America Merrill Lynch, RBS Securities Inc. and UBS Investment Bank are the joint bookrunners.

FMG talks, restructures

FMG Resources Pty. Ltd. restructured its $800 million notes offering and set price talk on Thursday.

A previously announced tranche of seven-year senior notes (B1/B/B+) is expected to be downsized to $400 million from $800 million. The seven-year notes, which come with three years of call protection, are talked at 6 7/8% area.

Meanwhile, FMG added a tranche of five-year notes, which is expected to be sized at $400 million. The five-year notes, which come with two years of call protection, are talk with a 6½% area yield.

The notes are expected to price on Friday.

J.P. Morgan Securities LLC has the books.

Quebecor C$250 million

The market heard only one roadshow announcement on Thursday.

Quebecor Media Inc. will start a roadshow for a C$250 million offering of 10-year senior notes on Monday.

Scotia Capital, TD Securities and National Bank Financial Inc. are the leads.

Proceeds will be used by subsidiary Sun Media Corp. to redeem and retire all outstanding Sun Media notes in February and to finance the settlement and termination of related hedging contracts.

CDW greenshoe

Finally, CDW LLC and CDW Finance Corp. announced that underwriters exercised a $50 million greenshoe option, upping to $500 million the amount of outstanding 8% notes due Dec. 15, 2018.

The original $450 million issue (B2/B/) priced at par on Dec. 3 via JPMorgan, Deutsche Bank, Barclays and Morgan Stanley.

Greenshoe options are relatively rare in the high-yield bond market, according to Prospect News data. However, they are not unheard of.

DirecTV Holdings LLC and DirecTV Financing Co.'s $1.5 billion deal, which priced in May 2008, featured a greenshoe.

So did Thornburg Mortgage, Inc.'s $1.15 billion of senior subordinated notes deal, which priced in March 2008.

More recently, the Ares Capital Corp. $200 million senior notes issue, which priced in October of this year, featured a greenshoe.

Tenneco trades up...

A secondary market trader noted the new 10-year bonds from Lake Forest, Ill.-based automotive components company Tenneco Inc., opining, "I never thought in my lifetime that I'd see Tenneco's 6 7/8s at par."

He initially saw the bonds offered at 1011/2, but with no bid side. However, before too long, he was hearing the bonds quoted at 100¾ bid, 101½ offered versus the par level at which the offering had priced.

A second trader saw the bonds at 101 1/8 bid, 101 5/8 offered, while yet another had them going out at 101¼ bid, 101¾ offered.

Some brisk trading was seen in Tenneco's 8 5/8% notes due 2014, which the company is tendering for using the new-deal proceeds. A market source saw over $11 million of those bonds changing hands, mostly in a 103¼ to 103 3/8 context - up a little from the bonds' Wednesday closing price of 102.75, though off from the previous round-lot close of 1041/4, seen last week.

...as do Nalco, Trinidad Drilling

Back among the newly priced paper, a trader saw the new Nalco dollar-denominated eight-year bonds trading at 101 3/8 bid, 101½ offered, well up from their par issue price, although he said trading in the issue was light. At his shop, "there were only 500 (i.e., $500,000) trading."

Another trader saw the issue at 101 3/8 bid, 101¾ offered, while a third saw them going home at 101½ bid, 102 offered.

The company's existing 8¼% notes due 2017 were meantime seen up ½ of a point at 108½ bid.

Also seen doing well was Calgary, Alta.-based Trinidad Drilling's new bonds, with a trader quoting the oil and gas drilling equipment company's eight-year issue having gotten as good as 101½ bid, 102 offered, up from the 99.246 price at which the deal came to market. A second trader saw them at 101¼ bid, 101¾ offered.

CEVA, Pilgrim's Pride steady

CEVA Group's seven-year senior secured notes were seen by a trader around 99 7/8 bid, 100 3/8 offered, slightly below the par level at which the Dutch supply-chain management provider's new deal had come to market.

Another pegged the bonds at par bid, 100½ offered.

Meanwhile, Pilgrim's Pride's upsized eight-year offering was seen to have moved up a little to 99 5/8 bid, 99 7/8 offered, after having priced at 99.271.

A second trader quoted the poultry producer's bonds at 99½ bid, par offered.

Secondary indicators hold

Away from the new-deal realm, a trader saw the CDX North American Series 15 HY index unchanged on Thursday at 101 3/8 bid, 101 5/8 offered, after having eased by a ¼ of a point on Wednesday.

The KDP High Yield Daily index meantime was unchanged Thursday at 73.93, after having fallen by 18 basis points on Wednesday. Its yield edged up by 1 bp to 7.41%, after having risen by 3 bps on Wednesday.

The Merrill Lynch High Yield Master II index gained 0.031% on Thursday, after having retreated by 0.104% on Wednesday. That lifted its year-to-date return to 14.144% on Thursday from 14.108% on Wednesday, although it remains down considerably from the 2010 peak level of 15.602% recorded on Nov. 9.

Advancing issues overtook decliners on Thursday after having seen their five-session winning streak snapped on Wednesday. The winners led the losers by a seven-to-six margin.

Overall activity represented by dollar-volume levels fell by 10% on Thursday on top of the 13% fall-off seen on Wednesday from the previous session's levels.

Smithfield up solidly

Among specific issues, a trader said that Smithfield Foods' fiscal second-quarter earnings were out "and the bonds really bounced."

He saw its 7¾% notes due 2017 rise to 103 bid from prior levels a little north of 101 bid, while its 7¾% notes due 2013 firmed to 106 bid from a little north of 105.

"Even though it has tendered for a lot of the 7s of '11," he said, "the company announced that it may buy other bonds back from time to time."

On top of that, he noted, "Earnings were pretty good, and the stock was up." The Smithfield, Va.-based hog producer and pork processor's New York Stock Exchange-traded shares rose by an even $2, of 11.30%, to $19.70 per share on 9 million shares of volume - more than four times the norm.

Besides the better earnings, the company said on its conference call that it had retired more than $500 million of bonds in the first half of the 2011 fiscal year that began at the end of April, putting the company half-way to achieving its previously declared $1 billion debt-reduction goal.

McClatchy gains again

For a second straight session, bonds of McClatchy Co. were gaining ground, extending their Wednesday gains.

A trader said the 5¾% notes due 2017 "traded up a bunch," closing around 761/4, with "almost $40 million" changing hands. He said the bonds were "up 21/2, almost 3 points."

Another trader said the notes were "active again," deeming them "up another couple of points" around 76.

Yet another market source saw them going home a little over 76, calling that a nearly 31/2-point ride.

The first trader also saw the 11½% notes due 2017 "up a little bit, but not as much as those other ones," at 108 bid, 108¼ offered.

Yet another market source pegged the notes at 761/2.

At the UBS Annual Global Media & Communications Conference on Wednesday, McClatchy's top management said the Sacramento, Calif.-based publisher of The Miami Herald and other notable newspapers saw improved advertising revenues over the last few months and that it expected those trends to continue.

In October and November, ad revenues dipped 5.8%. But those declines were better than the 6.4% decrease seen in the third quarter and an 8.2% drop in the second quarter.

Classified advertising in particular has experienced a boom, the company noted, with employment ads growing 2.1% since May.

Also, McClatchy said it expected to repay all of its outstanding bank term debt by the end of 2010, leaving total debt at $1.78 billion.

"This leaves us with a very manageable maturity schedule with only $18 million of bonds maturing in mid-2011 and then none until 2014," said Pat Talamantes, chief financial officer of the company, in a statement.

"We expect our leverage ratio to be about 4.6 times cash flow at year-end, down from 5.3 times at the end of 2009."

Cristal Cody and Stephanie N. Rotondo contributed to this report.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.