Upsized Whiting megadeal, Iron Mountain lead $2.63 billion day; new Whiting jumps; more PetSmart punishment

By Paul Deckelman and Paul A. Harris

New York, Dec. 12 – The high-yield primary market saw an increased activity level on Tuesday comparable to the busy sessions seen last week, as a quartet of issuers priced a total of nearly $2.63 billion of new dollar-denominated and fully junk-rated issues, each doing a single-tranche deal.

Oil and natural gas exploration and production company Whiting Petroleum Corp.’s quickly shopped $1 billion of eight-year notes was the big deal of the day in both the primary and the secondary arenas.

After that upsized megadeal had priced, traders saw the new notes firm smartly on heavy volume.

The company’s several issues of existing paper were also each up more than 1 point in active dealings.

Out of that same energy sphere, Par Pacific Holdings, Inc. priced $300 million of eight-year secured notes, the day’s sole regularly scheduled forward calendar deal.

Away from the new energy issues, document storage company Iron Mountain Inc. did an $825 million offering of 10.25- year notes, while horse race track operator and gaming company Churchill Downs Inc. crossed the finish line with an upsized $500 million of 10-year notes. Like Whiting, the latter two deals were both drive-by issues.

Traders reported that Whiting was the only one of the day’s four deals to see significant aftermarket action.

They meantime said that recently priced deals from issuers such as Valeant Pharmaceuticals International, Inc. and Itron, Inc. traded actively. So did Valeant’s existing bond issues.

Apart from the new issues, PetSmart Inc.’s paper was getting pounded down for a second consecutive session Tuesday, on news reports that the closely held company’s EBITDA numbers were weak – this on top of investor fears about a possible spinoff of the specialty retailer’s lucrative online sales business to benefit its equity sponsors and leave its bondholders holding the bag.

Toymaker Mattel Inc.’s bonds were battered around in the wake of Monday’s ratings downgrades by all three major agencies, completing its fall from investment grade grace into the treacherous waters of Junkbondland – just as the company hopes to price a new $1 billion bond deal this week.

Statistical market performance measures turned mixed on Tuesday after having been higher across the board on Friday and then again on Monday. They had turned better on Friday after having been mixed on Thursday, which in turn had followed last Wednesday’s lower all-around performance, the first such losing session since Nov. 15.

Whiting Petroleum upsized and tight

Primary market news flow remained vigorous, on Tuesday.

The session featured three drive-by deals.

The biggest came from Whiting Petroleum Corp., which priced an upsized $1 billion issue of eight-year senior bullet notes (B3/BB-) at par to yield 6 5/8%.

The issue size was increased from $750 million.

The yield printed at the tight end of yield talk in the 6¾% area.

JP Morgan, BofA Merrill Lynch, Wells Fargo and Citigroup were the joint bookrunners for the debt refinancing deal.

Iron Mountain drives by

Iron Mountain Inc. priced an $825 million issue of 10.25-year senior notes (Ba3/BB-) at par to yield 5¼%.

The yield printed at the wide end of the 5% to 5¼% yield talk.

Lead left bookrunner Barclays will bill and deliver. Credit Agricole, HSBC and JP Morgan Securities were the lead bookrunners.

The Boston-based provider of storage and information management services plans to use the proceeds to finance its acquisition of IO Data Centers, LLC, a Phoenix-based provider of colocation and cloud services to businesses and governments.

Churchill Downs oversubscribed

Churchill Downs Inc. priced an upsized $500 million issue of 10-year senior notes (expected B2/confirmed B+) at par to yield 4¾% in a Tuesday drive-by.

The issue size was increased from $300 million.

The yield printed at the tight end of the 4¾% to 5% yield talk. Initial conversations had the yield coming in the low 5% area.

The order book was said to be around three-times oversubscribed at the upsize amount, a trader said.

JP Morgan, Fifth Third, PNC, US Bancorp and Wells Fargo were the joint bookrunners for the debt refinancing deal.

Par Pacific at a discount

Par Pacific Holdings, Inc. priced a $300 million issue of 7¾% eight-year senior secured notes (B1/BB-) at 99.272 to yield 7 7/8%.

The yield printed tight to initial guidance in the 8% area.

BofA Merrill Lynch was the left bookrunner. Goldman Sachs was the joint bookrunner.

The Houston-based company plans to use the proceeds to repay bank debt, as well as to repay the forward sale amount under supply and offtake agreements with J. Aron & Co. LLC, and for general corporate purposes.

Cooke Omega for Wednesday

Cooke Omega Investments Inc. talked a $330 million restructured offering of five-year senior secured notes (B3/B+) to price at a to-be-determined discount to yield 9¼%.

The deal is set to price Wednesday.

The maturity of the notes is decreased from eight years.

Call protection is decreased to 2.5 years from three years: the notes become callable after 2.5 years at par plus 50% of the coupon. A special call provision allows the issuer to redeem 10% of notes annually at 103 during the non-call period.

There are also covenant changes.

BMO Capital Markets is the bookrunner.

Tidewater initial talk 7% area

In the Canadian market Tidewater Midstream and Infrastructure Ltd. set initial talk for its C$100 million of unrated five-year senior notes in the 7% area.

Books open Wednesday morning. The deal is also set to price on Wednesday.

Whiting paper pops

In the secondary realm, traders saw the new Whiting Petroleum 6 5/8% notes due Jan. 15, 2026 rack up hefty gains in heavy trading when the Denver-based oil and gas E&P company’s big new deal hit the aftermarket.

A trader saw those notes going out around at 101½ bid, which he said was “off a little from their high” at 101 7/8 bid but well up from their par issue price.

A second trader saw those highs even higher, estimating an early peak level north of 102 bid.

And at another shop, a market source saw the bonds in a bid range of 100½ to just under 102, with over $132 million having traded.

One of the traders meantime saw the company’s existing 5¾% notes due 2021 ending around at 102¼ bid, up more than 1 point on the day, with over $21 million having changed hands.

Whiting’s 5% notes due 2019 “were up almost 2 points on the new deal,” he said, seeing them ending at 102¾ bid, with over $20 million having traded.

And its 6¼% notes due 2023 were seen to have gained 1 1/8 point, going home at 101¼ bid.

Other deals little seen

Whiting was the only one of the day’s four issues seen by market sources to have experienced any significant aftermarket trading.

One of the traders did quote the new Par Petroleum LLC and Par Petroleum Finance Corp. 7¾% senior secured notes due 2025at par, appropriately enough, but on not much volume.

While traders did not immediately report any initial aftermarket action in Iron Mountain’s new 5¼% notes due in March of 2028, one market source did see the company’s existing 4 7/8% notes due 2027 at 101½ bid, off ¾ point on the day, with around $9 million having traded.

Its 5 3/8% notes due 2026 eased by ½ point, to 104½ bid.

Valeant, Itron deals stay active

Among recently priced issues, Valeant Pharmaceuticals’ new 9% notes due 2025 firmed by almost 1 full point in active trading – its third consecutive session of posting gains of around 1 point or more on substantial volume.

The Laval, Que.-based drug manufacturer’s issue closed at nearly 102¾ bid, up handsomely from the 98.611 level at which that quick-to-market $1.5 billion offering – upsized from an originally announced $1 billion – priced back on Dec. 4, yielding 9.25%.

More than $19 million traded on Tuesday.

Among the company’s existing issues, its 7½% notes due 2021 finished up ¾ point on the day, at 101¾ bid, with over $14 million of turnover, while its 5 3/8% notes due 2020 gained ¼ point to close at par with about $9 million traded.

However, a market source quoted Valeant’s 6 1/8% notes due 2025 off by 1/8 point on the day at 90 1/8 bid, on brisk volume of more than $30 million.

Elsewhere among the recently priced names, Itron, Inc.’s 5% notes due Jan. 15, 2026 were quoted down ¼ point at 100½ bid, with over $14 million traded.

The Liberty Lake, Wash.-based technology and services company priced $300 million of the notes at par on Friday in a regularly scheduled forward calendar offering.

PetSmart pummeled again

Away from the new or recently priced names, a trader said that PetSmart paper “was pretty active” and “was getting whacked,” adding to the losses that the Phoenix-based pet food and pet supplies retailer had racked up on Monday.

A second trader characterized PetSmart as “taking it on the chin,” while a third said the credit “was getting murdered.”

The first trader saw its 5 7/8% notes due 2025 dropping some 5½ points, down to 79 bid from a mid-80s context at the close Monday. More than $35 million of those notes changed hands.

Its 8 7/8% notes due 2025 did even worse, plummeting by a full 8 points on the day to 66½ bid, on volume of more than $17 million.

The company’s 7 1/8% notes due 2023 fell to 65 bid, down 6 points on the session, on more than $26 million of turnover.

Two separate traders cited headlines indicating that the troubled retailer might be expecting a decline in EBITDA.

On Monday, the notes fell on news reports indicating that the company – empowered by a lax covenant package – could choose to spin off its lucrative Chewy.com online pet supplies business to its private equity sponsors, thus removing the unit’s revenues and earnings from the overall company, which would still be stuck with the $2 billion of junk bonds it issued in May to fund that major acquisition.

Mattel drops after downgrade

A trader noted that Mattel Inc. “got downgraded to junk yesterday [Monday]. They were trading off a little” on Monday, but on Tuesday “they were off precipitously,” even as the El Segundo, Calif.-based toy manufacturer began shopping around a proposed $1 billion of new senior guaranteed eight-year notes in a debt refinancing deal.

He said he heard that the new notes, expected to price this week, might price to yield somewhere in the 6% to 7% area, and the company’s existing bonds “were trading way tight to that.”

He saw “lots of trades” in its 4.35% notes due 2020, but these were mostly smallish odd-lot pieces adding up to around $10 million or so, with the final trades around par, down 1¾ points on the day.

He said that total volume levels in the company’s other notes dropped off quite a bit after that, but were still “very active,” with the Mattel 2.35% notes due 2019 finishing at 98¼ bid, down ¼ point on the day “because it’s so short, I guess ” in duration.

Its 2.35% notes due 2021 lost 1 point, to 91 3/8 bid, while among its longer-dated issues, its 6.20% bonds due 2040 fell by a full 5 points, to 94 bid, while its 5.45% long bonds due 2041 nosedived by almost 10 points, closing at 84½ bid.

All three major ratings services now consider the formerly investment grade name to be junk.

On Monday, Fitch Ratings sliced Mattel’s long-term issuer default rating to BB from BBB- previously and cut its short-term issuer default rating and commercial paper program rating to B from F3; while dropping its senior unsecured nonguaranteed notes to BB-/RR5 from BBB-. The agency also assigned a BBB-/RR1 rating to Mattel's proposed $1.6 billion ABL revolving credit facility and gave the proposed $1 billion note issue a BB/RR4 rating. The outlook is negative.

Moody’s Investors Service meantime cut Mattel’s existing senior unsecured bond ratings on Monday to Ba3 from Baa3, lowered its rating for short-term issuance to Not Prime from Prime-3, assigned a Ba2 rating to the upcoming new bond deal, pegged its corporate family rating at Ba2 and its speculative grade liquidity rating at SGL-1. Moody’s called the outlook stable.

Those agencies joined Standard & Poor’s, which had first chopped Mattel’s ratings down to junk back on Oct. 27, when it pushed Mattel’s corporate credit rating down to BB from BBB- and lowered the issue-level rating on the company's senior unsecured debt to BB from BBB- previously.

S&P again cut the ratings on Monday, reducing its corporate credit rating to BB- from BB, with a negative outlook, and assigned the upcoming bond deal a BB- issue-level rating.

CenturyLink surge continues

On the upside, CenturyLink’s bonds were seen better for a second straight session.

A trader saw the Monroe, La.-based wireline telecom operator’s 6.45% notes due 2021 gained ¾ point, ending at 100 3/8 bid, with over 411 million having traded.

Its 7½% notes due 2024 gained 1½ points to finish at 99 bid, on top of the 1-point gain in those notes seen on Monday. Tuesday volume was around $10 million.

The bonds improved against the backdrop of CenturyLink’s Monday announcement that it had signed a big five-year contract with the Commonwealth of Pennsylvania to provide data networking products to the state’s agencies, commissions, councils, bureaus, authorities and boards. As part of the terms of the contract, CenturyLink is collaborating with Comcast Business to provide high-performance network services and last-mile connectivity to end users.

CenturyLink said that “this is another phase in service delivery associated with the contract award announced in September.”

Indicators turn mixed

Statistical market performance measures turned mixed on Tuesday after having been higher across the board on Friday and then again on Monday. They had turned better on Friday after having been mixed on Thursday, which in turn had followed last Wednesday’s lower all-around performance, the first such losing session since Nov. 15.

The KDP High Yield Daily Index rose by 4 basis points on Tuesday as it finished at 71.91%. This matched Monday’s 4 bps gain after having been unchanged on Friday and having lost 5 bps on Thursday.

Its yield meantime came in by 1 bp on Tuesday, to 5.27%, after having been unchanged on Monday. The yield had also narrowed by 1 bp on Friday, versus Thursday’s 2 bps widening.

But the Markit CDX Series 29 index eased by not quite 1/32 point on Tuesday, closing at 108 bid, 108 1/32 offered – its first loss after three straight sessions on the upside, including Friday, when it had firmed by 7/32 point, and Monday, when it had edged upward by a little over 1/16 point. Those three gains had followed two straight losses before that.

The Merrill Lynch North American High Yield Master II Index was up by 0.081% on Tuesday, its third consecutive gain after two sessions before that on the downside. It had also been up by 0.065% on Monday and by 0.036% on Friday.

Tuesday’s improvement raised the index’s year-to date return to 7.375% from Monday’s close at 7.288%. . However, its year-to-date return remains off from the 7.636% posted on Oct. 24 – the peak cumulative return for 2017 so far.

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