No pricings, but Physio, Atwood deals hit the road; new issues hold most gains; B/E eases

By Paul Deckelman and Paul A. Harris

New York, Jan. 9 - The high-yield primary market opened the second week of the new year on Monday with no pricings. However, several issuers were heard by syndicate sources to have begun roadshows to market deals expected to price this week.

Physio-Control International, Inc. - already on the forward calendar as expected January business - was heard by the sources to have hit the road on Monday with its Charger Merger Corp. senior secured bond deal, which will partly fund the pending buyout of the medical technology company. That $315 million deal is expected to price at the end of the week.

Also taking to the road on Monday was oil drilling operator Atwood Oceanics Inc., which is marketing a $400 million offering to potential investors that is expected to price sometime this week.

Among recently priced issues, the new Chesapeake Midstream Partners LP and AmeriGas Partners, LP deals that came to market last week were seen holding onto most of the gains they notched in initial aftermarket trading.

Away from the new deals, secondary trading was seen as mostly dull. B/E Aerospace Inc.'s bonds were seen off a little on news that the aircraft components maker will acquire an industry peer for $400 million in a debt-funded deal, although the bonds still trade well above par.

Statistical measures of market performance remained mixed on the day.

No North American or European junk issues priced on Monday. However, there was activity in Latin American high yield space.

Chile's Automotores Gildemeister SA priced a $100 million tap of its outstanding $300 million of 8¼% notes due May 24, 2021 (Ba1//BB) at 102.267 to yield 7.9%, via JP Morgan.

Atwood starts roadshow

In the North American market, the forward calendar saw a noteworthy buildup on Monday.

Atwood Oceanics began a roadshow for its $400 million offering of eight-year senior notes (Ba3/BB/).

The deal is set to price during the present week.

Credit Suisse, Barclays and Wells Fargo are the joint bookrunners for the debt refinancing.

Physio-Control secured deal

Physio-Control also began a roadshow on Monday for a $315 million offering of seven-year senior secured notes (B2/B+).

The roadshow wraps up on Friday, and the notes are expected to price on the same day.

Citigroup is the left bookrunner for the LBO deal. RBC is the joint bookrunner.

$10 billion-plus week expected

Monday's slow start notwithstanding, syndicate bankers stuck to their forecasts of issuance north of $10 billion, and one source said way north, for the week to Friday's close.

Aside from the above-mentioned offerings from Atwood Oceanics and Physio-Control, the week's calendar features only one other offering set to price before the end of the week.

Datatel Inc. is roadshowing a $530 million seven-year senior notes (Caa1/CCC+/) in a merger-financing deal via J.P. Morgan, Bank of America Merrill Lynch, Barclays, Citigroup and Credit Suisse.

That deal is expected to price on Wednesday.

Thus, in order for the "north of $10 billion" forecasts to come to fruition, the remainder of the week should see sizable drive-by deals, sources say.

Polkomtel

Turning to the European high-yield market, Poland's Polkomtel SA began a roadshow in the United States on Monday for its €900 million equivalent multi-currency offering of eight-year notes.

An investor call is set for Tuesday.

The U.S. roadshow runs through Friday and will be followed by a European roadshow, which is set to take place during the Jan. 16 week.

The notes are being offered in dollar-, euro- and zloty-denominated tranches.

Deutsche Bank and Credit Agricole the global coordinators and joint bookrunners. Royal Bank of Scotland and SG are joint bookrunners.

European trading volumes were light on Monday, according to a buyside source who tracks the high-yield market there.

Investors are keeping an eye on auctions of government paper from Italy and Spain, set for the present week, the source remarked.

Chesapeake hangs onto gains

In the absence of any new pricings on Monday, traders said that there was some activity on Monday in recently priced issues, among them Chesapeake Midstream Partners' 6 1/8/% notes due 2022. The Oklahoma City-based natural gas operator priced $750 million of those bonds - upsized from an originally announced $600 million - at par on Friday afternoon, and they were heard to have popped up by 2 points when they were freed for secondary dealings.

On Monday, a trader said that he "didn't see them that often," quoting the bonds at 101½ bid, 102 offered.

A second trader pegged them around 101¾ bid, 102 offered, or maybe one-eighth point higher than that on both sides, "whatever makes your story more sensational," he deadpanned.

Yet another trader saw the bonds at 101 7/8 bid, 102 1/8 offered.

One of the traders quoted Chesapeake Midstream's 5 7/8% notes due 2021 at 100½ bid, 101 offered, but saw no real trading there.

Another market source said those bonds haven't traded for months.

The 6½% notes due 2017 issued by Chesapeake Midstream's 46% owner, Chesapeake Energy Corp., were seen down nearly 1¼ points on Monday, at just over the 106 bid level, a market source said., while the energy exploration and production company's 6 5/8% notes due 2020 were unchanged, at 107¼ bid.

About $6 million of those bonds traded at that level.

Over $9 million of its 6 7/8% notes due 2018, just above the 107 bid level.

In late December, Chesapeake Energy announced its sale of assets in the Marcellus Shale natural gas formation in the Northeastern U.S. to Chesapeake Midstream Partners for $865 million, of which $600 million was in cash and the rest in stock. This will raise Chesapeake Energy's limited partnership stake in Chesapeake Midstream to about 46% from 42% previously.

AmeriGas bonds still cookin'

A trader said that Thursday's deal from AmeriGas Finance LLC and AmeriGas Finance Corp. "remained in good shape" on Monday, trading above its par issue price.

He saw the company's 6¾% notes due 2020 at 101 bid, 101½ offered, while its 7% notes due 2022 were at 101¾ bid, 102¼ offered.

A second trader said that there was "a fair amount of activity" taking place in the Valley Forge, Pa.-based retail propane distributor's new deal, under which $550 million of the 63/4s and $1 billion of the 7s had priced, just a day after the deal had surfaced in the market.

He quoted the 7s unchanged to down 1/8 point on the day, at 101 7/8 bid, while the 63/4s were down between one-eighth to a quarter-point, at 101 bid, 101¼ offered.

A market source called the AmeriGas 7s the most active totally junk issue on the day, with over $23 million having changed hands.

After pricing on Thursday, both tranches of the new deal had moved up to around the 101 bid, 101½ offered level and had firmed a little above that on Friday.

However, a trader at another desk saw both tranches of the AmeriGas deal get as good as 101¾ bid, 102¼ offered.

Less activity in other deals

A trader said that Icahn Enterprises LP's new 8% notes due 2018 were holding about unchanged at 102½ bid, 103 offered, while a second had the bonds at 102 5/8 bid, 103 1/8 offered.

Some $7 million of the bonds changed hands although a market source saw them closer to 10 3/8 bid.

Billionaire investor Carl Icahn's New York-based diversified holding company priced a split-rated (Ba3/BBB-) $500 million add-on to its existing bonds late Friday at 102.5 to yield 7.475% after upsizing from the originally announced $350 million.

The bonds were quoted at 103 bid, 103¼ offered soon after pricing, but have since come down/

Another big issuer from last week, Ford Motor Credit Co.'s $1 billion two-part add-on offering, was not seen around the market on Monday, a trader said.

The Dearborn, Mich.-based auto-finance arm of No. 2 domestic carmaker Ford Motor Co. priced $300 million of 3 7/8% notes due 2015 at 99.672 on Wednesday to yield 4%.

Ford Credit's $700 million add-on to its 5% notes due 2018 priced at 100.744 to yield 5%.

The bonds were seen mostly trading a little above their respective issue prices last week. But traders said that much, if not most, of the activity came from high-grade accounts looking for crossover action rather than from junk accounts, especially once other deals came to market later in the week.

B/E Aerospace loses altitude

Away from the new deals, a trader said that B/E Aerospace's bonds were down around a point after the Wellington, Fla.-based maker of aircraft interior components announced plans to logistics company UFC Aerospace Corp. for roughly $400 million in cash, funding the transaction through drawing on its credit facility.

"But they still trade like gold," he said, quoting B/E's 6 7/8% notes due 2020 at 108 bid, 108½ offered and its 8½% notes due 2018 at 108½ bid, 109½ offered.

About $2 million of the 6 7/8% notes traded on a round-lot basis, while the 81/2s traded strictly smaller odd-lot pieces.

No real trend seen

Overall, a trader said that there was "not a ton of activity, really."

He said "the market remained firm, but nothing really stuck out."

Another trader described Monday's session as "blah, blah, blah."

Statistical measures of junk market performance, which had turned mixed on Thursday and again on Friday after beginning the new year with unambiguous gains, stayed that way on Monday.

A trader saw the CDX North American Series 17 High Yield index off by 1/8 point to end at 93 5/16 bid, 93 9/16 offered, after having eased by a quarter-point on both Thursday and Friday.

The KDP High Yield Daily rose by 1 basis point on Monday to end at 72.73, after having gained 7 bps on Friday. Its yield was unchanged at 7.27% after having come in by 3 bps on Friday.

And the widely followed Merrill Lynch High Yield Master II Index notched its 17th consecutive gain on Friday - an amazing streak that dates back to the middle of December. It rose by 0.122%, which followed Friday's 0.147% advance.

The gain lifted the index's year-to-date return to 0.887% - its high for the year so far - from 0.764% on Thursday.

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