Primary quiet as recent new deals hold gains; Petrohawk Energy rise resumes; Kodak trades off

By Paul Deckelman and Paul A. Harris

New York, July 18 - Things were fairly quiet in Junkbondland at the start of the new week on Monday, with no pricings heard or new deal announcements forthcoming from prospective issuers. However, the summer doldrums haven't completely set in, with several deals previously announced deals still on the road, including SunCoke Energy, Inc., North Atlantic Trading Co., Inc., Trader Corp. and Capsugel.

Pricing on these deals is expected this week.

Traders saw recently priced new issues continuing to show strength as they held onto the gains notched after they came to market last week. These included Warner Music Group Corp.'s 2018 bonds, part of its big three-part transaction, along with Level 3 Communications, Inc., SRA International Inc. and ExamWorks Group, Inc..

Away from the new deal realm, Petrohawk Energy Corp., whose bonds zoomed on Friday on the news that the Houston-based oil and gas exploration and production company will be bought out by Australian natural resources giant BHP Billiton Ltd., continued to firm in Monday's dealings.

On the downside, Eastman Kodak Co.'s bonds were seen heading points lower, although there was no fresh negative news out on the company. Ironically, there was favorable news out there, but it arrived too late in the day to do much good.

In the overall market, statistical performance measures were all lower.

Volatility stills the primary

The primary market remained quiet against a backdrop of volatility in the global capital markets on Monday, sources said.

No issues were priced.

Quizzed about details on the handful of announced deals in the market, the dealers played their cards close to their vests, insisting that market conditions will factor into the release of details, such as price talk and timing.

Of deals presently in the market, only one has been officially talked.

Belgium's Coditel Holding SA talked its €260 million offering of seven-year senior secured notes (B3/B/B+) with an all-in yield in the 10½% at a possible discount last Thursday, when the roadshow was set to conclude. The deal is expected to price during the present week, but there were no updates on Monday.

The week's deals

Aside from Coditel, deals presently in the market include SunCoke Energy's $400 million offering of eight-year senior notes (B1/B+/).

The whisper is 8% area, according to a trader from a high-yield mutual fund. No official talk or timing has been announced on the deal, which is being managed by J.P. Morgan, Credit Suisse, Barclays, Citigroup and RBS.

North Atlantic Trading Co. is in the market with a $285 million two-part offering of senior secured notes, via Jefferies.

It includes a $205 million tranche of five-year second-lien notes (B2/B-) and an $80 million tranche of 51/2-year third-lien notes (Caa2/CCC).

Initial guidance is 10¾% on the second-lien notes, while the third-lien notes have initial guidance of 10% cash and 6% PIK, the trader said.

Also Trader Corp. is on the road with a $275 million offering of seven-year senior secured notes (B3//) via bookrunner RBC.

Pro forma on that deal is 10%, according to an informed source.

Academy eyes conditions

Academy Sports + Outdoors could begin a roadshow during the present week for a $450 million offering of eight-year senior notes, according to an informed source.

The deal, backing the acquisition of a stake in the company by Kohlberg Kravis Roberts & Co., will be led by left bookrunner Credit Suisse, and joint bookrunner Goldman Sachs.

Standard & Poor's assigned its preliminary CCC+ rating and 6 recovery rating to the notes on Monday.

A bank meeting is set for Tuesday for the $1.49 billion credit facility, which is also part of the leverage financing.

Since the Academy bonds are bridged, "the deal will come," the source assured, adding that the bonds could come soon unless market volatility increases dramatically.

"These deals are doable," insisted the sellside source, making reference to the active calendar.

Any doubts as to whether the primary market is open should have been assuaged by last Friday's successful transaction from SRA International, Inc. and a pair of drive-by deals done on Thursday by Kratos Defense & Security Solutions Inc. and Level 3 Communications, Inc., the sellsider added.

SRA holds Friday gains

In the secondary market, a trader said that SRA International's new 11% senior notes due 2019 "did quite well" in Monday dealings, despite the softer overall market, as the bonds hung onto the gains they had notched after pricing on Friday.

He saw the Fairfax, Va.-based defense contractor's $400 million of bonds - sold via Sterling Merger Inc. to help fund SRA's leveraged buyout by providence equity partners - trading between 103 and 103 3/8 bid, "so they've hung in there."

He noted that that was about where they had closed after Friday's initial aftermarket dealings, which followed the bonds' pricing at par.

He said he saw one trade around 103 earlier in the day, "but the bid lives, so 103-103 3/8 really covers them."

Warner still a winner

A trader saw Warner Music Group's 11½% notes due 2018 still trading well above the 97.673 level at which the New York-based music publishing and recording giant's WMG Acquisition Corp. unit had priced the $765 million issue - upsized from an originally planned $695 million - last Thursday to yield 12%.

He saw the bonds offered at 99¾ early in the day. He did not see any left side there.

A second trader saw those bonds at 99 bid, 99½ offered late in the session.

The first trader saw Warner's WMG Holdings Corp. 13¾% notes due 2019 offered at par and then later at 99¾ bid, par 100¼ offered.

The $150 million issue - downsized from the originally planned $200 million - priced at par on Thursday and then was seen holding around those levels in their initial aftermarket dealings.

There was no activity seen in the third leg of the deal, WMG Acquisition's $150 million add-on to its 9½% senior secured notes due 2016, which priced at 104.5 on Thursday to yield 8.053%

Level 3, Exam still strong

One of the traders saw Level 3's add-on to its 8 1/8% notes due 2019 trading at par bid, 100½ offered.

That was up from the 98.545 level at which the Broomfield, Colo.-based internet backbone network operator's deal - sharply upsized to $600 million from $300 million originally - priced on Thursday to yield 8 3/8%.

Those Level 3 Escrow Inc. notes had traded around the par-to-100¼ range when they hit the aftermarket.

Thursday's other popular deal - for Atlanta-based health care insurance services company ExamWorks Group Inc. - likewise continued to trade above issue on Monday.

A trader saw that $200 million deal at 101¼ bid, 102¼ offered.

That was around where the bonds had traded after they priced at par last Thursday.

Market indicators easier

Away from the new deal arena, traders saw market statistical indicators, which were seen mostly firm on Friday, haqving come in a little on Monday.

A trader saw the CDX North American Series 16 HY Index down by half a point on Monday to close at 99¾ bid, 99 7/8 offered, after having eased by 1/8 point on Friday.

The KDP High Yield Daily Index lost 6 basis points on Monday to end at 75.27, quite a difference from Friday's 21 bps jump, most of which had come late in the session. Its yield moved out by 2 bps to 6.77%, after having shed 9 bps on Friday.

The Merrill Lynch High Yield Master II Index showed a loss on Monday, after three consecutive sessions on the upside. It eased by 0.05%, versus Friday's 0.089% advance.

The loss left its year-to-date return at 5.673%, down from 5.726% on Friday, and down further from its year-to-date peak level of 6.071%, which was reached back on May 20.

Petrohawk pop continues

Among specific issues, traders saw continued gains in Petrohawk Energy paper, which had soared by anywhere from 10 points to 15 points on Friday, spurred on by the news that Australia's BHP Billiton has agreed to buy the Texas company in a transaction valued at $15 Billion, including debt assumption.

A trader saw the company's 6¼% notes due 2019 at 116¼ bid, 117¼ offered. He said that was up from Friday levels around 115½ bid, which were way up from 99½ bid, 100½ offered pre-news. "So they're a little bit better today."

He also saw the company's 7¼% notes due 2018 trading at 117 1/8 bid, although he said that this was about unchanged from Friday's levels. Those bonds had been at the 104 level pre-news.

Another market source, though, said the bonds were up 2 points on the day at 117 bid. Volume of over $23 million put the issue right near the top of the high-yield most-actives list.

Kodak gets clobbered

A trader saw Kodak's 7¼% notes due 2013 fall sharply on the session, despite a lack of fresh negative news out about the Rochester, N.Y.-based photographic products and imaging technology company.

He saw the bonds fall into the lower 80s, from levels on Fridays in the upper 80s.

"Yep, quoted lower," he said, pegging the bonds at 82 bid, 83 offered, which he said was down "a couple of points " from around an 84-85 context in the morning - and that, in turn, was off from 87 bid, 88 offered on Friday.

"There were a lot of quotes on Eastman Kodak today." He said that since the bonds were down 2 or 3 points from the morning levels, and those were below Friday's "so they're down even lower," estimating the overall loss at about 4 or 5 points.

He also noted that "the stock seemed like it got beat up today, too," with the New York Stock Exchange-traded shares falling by 22 cents, or 8.03%, to end at $2.52 each. Volume of 21.7 million shares was more than double the usual turnover.

Ironically, Kodak, which has been battling with Apple Inc. and Canada's Research in Motion over its claims that the two smartphone makers had infringed its patents, got some good news on Monday from the federal government's International Trade Commission. That agency has been hearing Kodak's legal claims against the other two companies and has a decision pending, but on Monday, it issued a ruling that upheld an earlier decision by one of its judges that Kodak did not infringe Apple's patents for imaging and related software.

However, news of the ruling came well after trading in both stocks and junk bonds had wound down for the day.

Cascades largely calm

In the paper sector, Cascades Inc.'s 7¾% five-year notes traded on Monday mostly unchanged from the previous week.

The notes were seen trading at 104.12 bid, fairly unchanged from the 104 1/8 bid, 105 1/8 offer seen on Thursday, a trader said.

The company sold the notes on Nov. 18, 2009 at 98.67 to yield 8%.

Cascades is a Kingsey Falls, Quebec-based producer, converter and marketer of packaging and tissue products.

More distress for Dynegy

Dynegy Inc.'s bonds saw "a lot of, lot of quotes on Monday," a trader said, seeing the Houston-based power generating company's 7¾% notes due 2019 ending around a 68 to 68½ context.

"There's been decent activity in that name," he asserted.

He said that those bonds - battered last week on the news that the company is arranging $1.7 billion of new bank financing - "have been hanging out in the 60s. They're probably unchanged to up a half-point,on that particular bond."

However, he saw the company's 8 3/8% notes due 2016, which he saw ending at 72 bid, or down a point. "That one's probably pretty representative," he said.

"It seemed like there were a lot of Dynegy runs all day long," he declared, "and there's a lot of CDS [trading] that goes with that name as well."

General Maritime still adrift

General Maritime's recently battered 12% notes due 2017 "are still getting whacked and still staying lower," a trader said, quoting the New York-based oil tanker company's paper at 69 bid, 70 offered, which he said was down a half-point on the session.

"There was some trading, moderate trading, not a lot," he said, adding "they're staying at the lower levels. "So we'll keep an eye on that one this week, too."

The bonds fell to their all-time record lows last week, after the company changed the terms of its loans to avoid breaking the conditions of its credit agreements.

Cristal Cody contributed to this report

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