American, Memorial, Roundy's round out $8.4 billion week; Continental up on Moody's upgrade

By Paul Deckelman and Paul A. Harris

New York, Dec. 13 - Busy primary activity continued in the high-yield market on Friday, as more issuers rushed to get their bond deals done before the inevitable mid-December closing of the window of opportunity for getting a deal done before the year-end holidays.

Syndicate sources saw five fully junk-rated, U.S. dollar-denominated issues come to market during the day, totaling $1.07 billion of proceeds.

Automotive components manufacturer CTP Transportation Products LLC priced $250 million of six-year secured notes.

Grocery chain operator Roundy's Supermarkets Inc. checked out with $200 million from an offering of seven-year secured notes that priced at a steep discount to par - but moved up smartly in the aftermarket, a trader said.

Energy operator Memorial Resource Development LLC had the big deal of the day - a $350 million five-year PIK toggle note transaction.

Besides those regularly scheduled deals, participants saw two same-day offerings get done.

American Airlines Inc. brought $256 million of airline pass-through certificates due 2017 to market.

And inVentiv Health, Inc. priced a quickly-shopped $25 million add-on to its existing 2018 notes - almost exactly one year to the day after having priced the original $600 million tranche of those bonds.

The day's deals brought the week's new-paper tally to around $8.4 billion in 19 tranches, according to data compiled by Prospect News, slightly under the $8.8 billion that came to market in 18 tranches last week, ended Friday Dec. 6.

Year-to-date issuance came to an estimated $322.55 billion in 686 tranches, running marginally ahead of where issuance was at this point on last year's calendar, and just $4.5 billion short of the record $327.055 billion that priced in 691 tranches in all of last year.

That record will be broken if the total week manages issuance equal to, or even somewhat less than, the $8.4 billion seen in the week just completed.

Away from the new deals, Continental Resources Inc.'s bonds jumped in heavy trading after Moody's Investors Service upgraded the oil company's ratings to investment grade.

Memorial sells PIK toggles

On Friday, Memorial Resource Development LLC and Memorial Resource Finance Corp. priced a $350 million issue of five-year senior PIK toggle notes (B3/B-/) at 98 to yield 10.524%.

The notes pay a 10% cash coupon which toggles to 10¾% for PIK payments.

The coupons and issue price came on top of talk.

Citigroup, BMO and Wells Fargo were the joint bookrunners.

Proceeds will be used to fund a dividend, repay bank debt and provide liquidity.

American's pass-throughs

In a deal that was almost completely rolled up by reverse inquiry, according to a buyside source, American Airlines priced a $256,018,000 offering of 6% pass-through certificates, series 2013-2C, (/B+/B+) at par on Friday.

The general corporate purposes deal, led by physical bookrunners Credit Suisse, Morgan Stanley and Deutsche Bank, came on top of talk.

Tight pricing for CTP

CTP Transportation Products, LLC and CTP Finance Inc. priced $250 million issue of six-year senior secured notes (B2/B+) at par to yield 8¼%, at the tight end of yield talk set in the 8 3/8% area.

Shortly after the terms were announced, the notes were up 3 points in the secondary market, according to a buyside source.

SunTrust was the left bookrunner for the acquisition financing. Credit Suisse was the joint bookrunner.

Roundy's places secured notes

Roundy's Supermarkets priced a $200 million issue of 10¼% seven-year senior secured second-lien notes (B3/CCC) at 96.999 to yield 10 7/8%.

The deal came at the tight end of price talk that specified a discount as well as a yield in the 11% area.

Credit Suisse and J.P. Morgan were the joint bookrunners.

The Milwaukee-based supermarket chain plans to use the proceeds to fund the acquisition of Dominick's stores and to repay debt.

inVentiv taps 9% notes

inVentiv Health priced a $25 million add-on to its 9% senior secured notes due Jan. 15, 2018 (B2/B-) at 102.5.

The yield to worst is 8.06%. The yield to maturity is 8.26%.

The deal came without official price talk.

Citigroup ran the books for the quick-to-market general corporate purposes deal.

Darling starts Monday

Market activity is expected to diminish during the week ahead, sources say.

However there will be activity in the new issue market.

Darling International Inc. plans to start a roadshow for a $500 million offering of eight-year senior notes (B1//) on Monday.

The deal is expected to price during the week ahead.

Goldman Sachs, JP Morgan and BMO are the joint bookrunners.

Proceeds will be used to redeem the company's 8½% senior notes due 2018, to finance a portion of the acquisition of the Vion Ingredients division of Vion Holding NV, and for general corporate purposes.

Three other previously announced deals are expected to price by the end of the Dec. 16 week.

Global Ship Lease Inc. plans to sell $400 million seven-year first-priority secured notes (expected ratings B3/B), via Citigroup. The roadshow is expected to run 17.

Camac Energy Inc. is expected to be on the road with a $300 million offering of five-year senior secured notes, via Arctic Securities.

And Sierra Hamilton expects to price a $110 million offering of five-year senior secured notes via Lazard Capital.

Little new-deal trading

In the secondary market, a trader, asked where there was much going on with new or recently priced paper, succinctly replied "not really - today was more of a secondary market day."

With most of the deals pricing late in the day, another trader could offer quotes on only two of the day's deals - although he saw Roundy's new 10¼% senior secured notes due 2020 having firmed solidly to 101 bid, 102 offered.

That was well up from the deeply discounted 96.999 level at which the Milwaukee-based supermarket chain operator's $200 million issue had priced.

The trader also saw some good upside in CTP Transportation Products' 8¼% senior secured notes due 2019, quoting the bonds going home at 101¾ bid, 102¾ offered, well up from their par pricing level.

Arch seen easier

A trader also saw Arch Coal Inc.'s 8% senior secured second-lien notes due in January 2019 having backed off the gains the St. Louis-based mining company's paper had notched after pricing on Thursday.

He pegged those bonds at 99½ bid, 100½ offered - off from the par level at which that $350 million drive-by offering had priced on Thursday, after having been upsized from the originally announced $300 million.

At another shop, a market source said that the company's new deal "traded a little bit." He located the notes around 101.

After hitting its peak level, he said, "they settled back in, so basically, they were trading around par, so it kind of struggled a little bit."

Among the company's existing notes - which had all firmed about 1½ points to levels around 80 bid on Thursday ahead of the new deal, a trader saw Arch's 7¼% notes due 2020 around a 77 to 79 context, with the day's final trades going off at 78, which he said was pretty much unchanged.

He said its 7¼% notes due 2021 were trading between 76½ and 78 bid, on volume of about $5 million.

The notes were at 76½ bid, 77½ offered "for most of the day," with the last sizable trade at 761/2. He said there had been trades "on both sides of that mark," and estimated that the bonds were down ½ to ¾ point from Thursday's levels.

However, another trader called them unchanged, observing that "they moved up yesterday [Thursday] and seemed to be holding at the higher levels."

"But there wasn't nearly as much activity in those '20s and '21s" as there had been on Thursday, when turnover in each had been above the $20 million mark, he said.

Those established bonds "were maybe a little weaker - they gave back a little of the gains.

"But they weren't all that active, to be quite honest."

Continental rises on ratings

Away from anything having new-deal connections, a trader said that Continental Resources' issue of 4½% notes due 2023 "was very active, after they were upgraded to investment grade.

"That will certainly do it for you."

The notes jumped 2 5/8 points on the day, a market source said, ending at 1011/4, on volume of over $75 million.

The bonds zoomed after Moody's Investors Service increased Continental's senior unsecured rating to Baa3 from Ba2.

Standard & Poor's rates the bonds a BB.

Tronox up on court win

Tronox Ltd.'s bonds were very active on Thursday, at somewhat higher levels, as a federal judge ruled that its former corporate parent was potentially liable for billions of dollars of pollution clean-up costs that the chemical company otherwise could have been stuck with.

Tronox had argued in its lawsuit that former parent Kerr-McGee, now a part of Anadarko Petroleum Corp., had unfairly saddled its former chemicals unit with all of its environmental liabilities before spinning the company off in 2006 as part of its own profitable sale to Anadarko later that same year. Tronox ultimately was forced into a bankruptcy restructuring.

A trader saw the Stamford, Conn.-based chemical company's 6 3/8% notes due 2020 moving as high as 102 bid, before settling in around 101 to 1011/2, "so they were up a little bit on the day, but they were certainly more active."

Over $25 million of the bonds changed hands.

Judge Allan Gropper of the federal bankruptcy court in Manhattan ruled that Kerr-McGee and ultimately, its eventual owner, Anadarko, are liable for anywhere between $5 billion and $14 billion of cleanup costs that predecessor company Tronox Inc. had gotten stuck with when it was spun off in the mid-2000s - costs that ultimately pushed the company into bankruptcy in 2009, from which it emerged two years later.

Tronox said in reaction to the judge's decision that it will receive no immediate or direct benefit from the Dec. 12 ruling. Instead, 88% of the judgment will go to trusts and other governmental entities to remediate polluted sites. The remaining 12% of any funds ultimately received will be distributed to a tort trust "to compensate individuals injured as a result of Kerr-McGee's environmental failures."

Anadarko said it would appeal the decision.

Market signs turn mixed

Overall, statistical junk-market performance indicators turned mixed on Friday, after having been down across the board on Thursday. They had been mixed for the two days before that.

The indicators were also mixed versus where they had ended the previous Friday, Dec. 6.

The Markit Series 21 CDX North American High Yield Index bounced back on Friday after having suffered three consecutive losses. It gained 1/8 point to close at 106 7/8 bid, 107 offered, after having eased by 1/16 point on Thursday.

But the index was down from the previous Friday's 107 1/32 bid, 107 3/32 offered.

The KDP High Yield Daily Index was down by 1 basis point Friday to close at 74.32, its second straight loss. It had lost 4 bps on Thursday.

Its yield rose for a third straight session on Friday, moving up by 1 bp to 5.69%. It had also risen by 1 bp on Thursday.

Those levels compare with an index reading of 74.29 and a yield of 5.66% the previous Friday.

The widely-followed Merrill Lynch High Yield Master II Index struggled for a second straight day, falling by 0.334%, on top of Thursday's 0.075% loss, which had been its first setback after five consecutive gains before that.

The loss left its year-to-date return at 6.975%, down from Thursday's 7.011% and down as well from Wednesday's 7.091%, which had been its fourth straight new 2013 peak level.

For the week, the index rose by 0.106% - its fifth straight weekly gain.

The week before it had risen by 0.053% to leave the year-to-date return at 6.862%.

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