Market chop puts high-yield deals on hold

By Natalie Harrison

NEW YORK, Aug 6 (IFR) - Plans for a late-summer issuance spree in the high-yield market have been derailed this week, with at least two deals postponed as a burst of volatility has pushed borrowers to the sidelines.

Spurred by the largest outflows from the asset class in a year, the market choppiness is forcing issuers to pay up to get deals over the line - and others to put their plans on hold.

More than US$5.5bn of cash was pulled from high-yield funds in July alone, according to Lipper, and the yield-to-worst on the Barclays (LSE: BARC.L - news) high-yield index has increased by almost 100bp to 5.75% from 4.83% on June 20.

"The market feels pretty rough, and it's all about price discovery right now and trying to see where deals will clear," said one senior leveraged finance banker.

"With summer setting in, there's a lot of apathy in the market, and people are not really feeling a need to put money to work."

Some corporate treasurers are now hoping for more stable market conditions in September once people return from the summer holidays.

Aircraft leasing company Milestone Aviation became the latest Wednesday to scupper its plans, pulling a US$350m high-yield bond due to the volatile market conditions.

"The company is an opportunistic issuer and the sloppiness of the market made it an easy decision to come back when things are more rational," said one market source.

Whispers on the three-year senior note, heard at 4.25% initially, were widened out to 4.75%-4.875% before the deal was yanked altogether.

Another source said that the issuer could have printed the trade but was sensitive about pricing.

JP Morgan is left-lead on the trade, while Bank of America Merrill Lynch, Deutsche Bank (Xetra: 514000 - news) , Nomura, SunTrust, Hunter and Jefferies are bookrunners.

NOT ALONE

Milestone is not the only would-be borrower coping with pushback from investors, who want to compensated for the re-pricing in the market and the poor secondary performance of recent new issues.

A much larger US$1.125bn eight-year issue for Jupiter Resources, which was expected to price last week, has also been delayed, market sources said. It is now not expected to come to market until after Labor Day, they said.

The deal, which will finance private equity company Apollo's purchase of Encana Corp's Bighorn energy properties in Alberta, had already seen whispers widened to 8.5% from 7.5%.

Given that the deal has not yet closed, the banker said, the underwriters had some flexibility on timing.

Credit Suisse (NYSE: CS - news) is left-lead, while bookrunners are TD Securities, RBC, Barclays, Goldman Sachs (NYSE: GS-PB - news) , UBS (NYSEArca: FBGX - news) , Deutsche Bank and Nomura.

There are nevertheless still some deals in the pipeline expected to price this week.

The first may be a US$300m eight-year bond for Warren Resources. Books on the deal, which will fund part of the acquisition of the Marcellus Assets from Citrus Energy, close at 2pm New York time.

But the yield is expected to be 100bp wide of the 8.25% area talk announced last week. BMO is left lead, while Jefferies and Wells Fargo (Other OTC: WLRGP - news) are bookrunners.

Container manufacturer BWAY Intermediate is on target to price a Triple C rated US$770m senior unsecured note on Thursday.

Bank of America Merrill Lynch is left-lead.

The bond, part of a broader financing that includes a US$1.1bn term loan, will repay its existing term loan, senior notes, and payment-in-kind (PIK) notes, as well as paying a US$200 million dividend to its shareholders.

Whispers on the deal are heard at 9% area.

Goldman Sachs and RBC are meanwhile aiming to price a US$310m senior secured five-year bond for NCSG Crane & Heavy Haul Corporation, but the issuer will have to pay more than it initially expected.

Whispers on that deal have widened out to 9% from 7.5%-8%.

The bridge loan that underwriters had put in place to finance the deal has been syndicated so banks have no exposure, the banker said.

LOAN MARKET SWAMPED

Just last week, syndicate officials had been hoping that strong technicals in the loan market - driven by a strong bid from collateralised loan obligations - would give them scope to shift some bond financing into loans.

But that looks less likely now, with tons of deals in the market and signs of pushback from investors.

Cable company Charter Communications (NasdaqGS: CHTR - news) has launched US$8.9bn in loans to finance its purchase of Time Warner Cable (NYSE: TWC - news) assets from Comcast, while private equity group Cerberus, which owns retailer Albertsons, is in the market with US$4.6bn of loans to back its buyout of Safeway (NYSE: SWY - news) .

"Those two deals alone come to over US$13bn, which will take a lot of cash out of the market," said the banker.

Banks have sweetened the terms on the Albertsons covenant-lite loans, TRLPC reported.

Credit Suisse has widened the spread on the US$1.519bn first-lien term loan B-3 to Libor plus 375-400bp from initial Libor plus 325bp price guidance, while the discount price has increased to 99 from 99.5.

The spread on the US$3.04bn first-lien term loan B-4 has been flexed up to Libor plus 425-450bp from Libor plus 375bp at launch.

The US$1.625bn bond backing the deal is yet to be formally announced, as is an US$800m bond for the leveraged buyout of sales and marketing Acosta by Carlyle. Goldman is expected to lead the bond financing.

The US$2.065bn loan financing for the deal was launched by JP Morgan on Monday.

DEALS EXPECTED TO PRICE WEDNESDAY:

WARREN RESOURCES INC (NasdaqGS: WRES - news)

Warren Resources Inc, rated Caa1/B-, announced a US$300m 8yr nc3 senior note offering via BMO(left)/JEFF/WFS. Co-managers CapOne, US Bancorp, BOSC, Comerica (OTC BB: CMPWW - news) , KeyBanc, Santander. EQUITY CALL: Up to 35% at par plus the coupon for the first 3 years. USD101 COC put. 144a w/reg rights.

UOP: to fund a portion of the approximately US$312.5m cash purchase price for its recently announced acquisition of the Marcellus assets of Citrus Energy Corporation and two additional working interest owners.

RATED: Caa1 by Moody's

PRICE TALK: 8.25% area

UPDATE: Price talk is now 9.25% yield (including OID). Books close today at 2pm, pricing thereafter.

DEALS PIPELINE:

BWAY INTERMEDIATE

BWAY Intermediate, rated Caa1/CCC, announced a USD770m senior unsecured notes due 2020/2021 via BAML. Pricing is expected tomorrow (07Aug). UOP: to repay its existing term loan, senior notes, and pay-in-kind (PIK) notes and to pay a $200 million dividend to its shareholders. BIZ: BWAY is one of the largest manufacturers of rigid metal, plastic and hybrid containers in North America.

WHISPERS: 9% area

NCSG CRANE & HEAVY HAUL CORP

NCSG Crane & Heavy Haul Corporation, expected ratings B3/B-, announced a US$310m senior secured second-lien 5yr nc2 notes via GS (KSE: 078935.KS - news) (left)/RBC. Call protection: NC2, Par+75%, Par+37.5%, Par.

UOP: The net proceeds from this offering, together with borrowings under the New ABL Facility and an equity contribution from the Sponsors, will be used fund the Acquisition and to pay certain related transaction costs and expenses.

WHISPERS: Whispers heard initially at 7.5%-8%, now heard 9%. Expected to price this week.

ROOSTER ENERGY (CDNX: COQ.V - news)

Rooster Energy Ltd., expected low single-B or high CCC, announced a US$100m 5-year nc2 senior secured notes via sole-book IMPERIAL. 144a/RegS w/ contingent reg rights. Roadshow (HKSE: 0888-OL.HK - news) : July 17-22. Co-manager is Cowen and Company. Call: Thereafter callable at par plus 3/4 coupon declining ratably every six-months.

UOP: Refinance existing indebtedness, fund cash portion of an acquisition, fund other general corporate purposes and to pay fees and expenses.

Timing: pricing this week

Whispers: 10% area

LINC ENERGY (Other OTC: LNCGY - news)

Linc Energy announced a US$125m first lien senior secured notes via DBS (SES: D05.SI - news) /CS/JPM. UOP: to repay existing indebtedness of certain of our restricted subsidiaries that will guarantee the Notes, for general corporate purposes, and pay fees and expenses associated with offering.

BIZ: Is focused on both conventional and unconventional oil and gas production. The Company owns a diverse and world-class commodity portfolio that includes oil, gas, shale and coal.

AMERICAN EAGLE ENERGY CORP

American Eagle Energy Corporation (AMEX: AMZG - news) announced a US$175m senior secured note offering due 2019 via GMP(expected). UOP: to refinance its existing credit facility, for general corporate purposes (including working capital), and to pay fees and expenses associated with the offering of the Notes and those related to its existing credit facility.

BIZ: Based in Littleton, Colorado, American Eagle Energy Corporation is an independent exploration and production operator that is focused on acquiring acreage and developing wells in the Williston Basin of North Dakota, targeting the Bakken and Three Forks shale oil formations.

RATED: Caa1 by Moody's.

UPDATE: Structure will be 5-year nc2 senior secured notes. Roadshow go into next week (11Aug), with pricing expected shortly thereafter.

US SHALE SOLUTIONS

US Shale Solutions, Inc., ratings tbd, announced a USD210m 3-year NCL senior secured notes via Jefferies. 144a/RegS w/o reg rights. Price talk is 12.5% coupon issue at USD97. Books close at 4pm on Thursday (07Aug). UOP: To finance the acquisition of 1) Ritter Construction, 2) W.Pidhirney Welding, 3) Culberson Construction, and 4) J4 Fluid Services. BIZ: Full-service provider of infrastructure, fluids, and completion services to energy companies operating in unconventional resource plays in North America using technology-enabled, strategically integrated products and services.

POSTPONED:

JUPITER RESOURCES LTD

Jupiter Resources Ltd, ratings tbd, announced a US$1.125bn 8-year nc3 senior notes via CS(left)/TDS/RBC/BARC/GS/UBS/DB/NOMURA. 144a/RegS for life. Call protection: Non-call 3yr then par plus 3/4 coupon. Equity clawback up to 40% within the first 3-years. USD101 COC.

UOP: Fund acquisition of Bighorn assets from Encana. BIZ: Private, Canadian E&P company in the Alberta Deep Basin.

Whispers: Initially mid-7%, now heard 8.5%

THE MILESTONE AVIATION GROUP

The Milestone Aviation Group Limited, ratings tad, announced a US$350m 3-year NC senior note offering via JPM(left)/BAML/DB/NOMURA/STRH/HUNT/JEFF. Roadshows begin today (30Jul), with pricing expected Tuesday (05Aug). 144a/RegS for life.

UOP: Pay down senior secured debt.

BiZ: The first global aircraft operating lease company focused exclusively on the helicopter market. Milestone's global aircraft leasing platform addresses the liquidity needs of a transforming marketplace through 100% operating lease financing. Headquartered in Dublin, Ireland (Other OTC: IRLD - news) .

WHISPERS: Initially 4.25% area, now 4.75%-4/7/8% (Reporting by Natalie Harrison; Editing by Marc Carnegie)