Warner Music, Revlon deal price, move up; Joy jumps on acquisition news; funds gain $322 million

By Paul Deckelman and Paul A. Harris

New York, July 21 – The high-yield primary market saw a pair of new deals totaling $750 million get done on Thursday.

Recording and publishing company Warner Music Group Corp. did a quickly shopped $300 million of new seven-year secured notes.

Traders saw the new deal firm smartly in active trading.

Cosmetics company Revlon Inc. priced an upsized $450 million of eight-year notes, which was also quoted higher later in the session.

For a second straight session, there was busy activity in the recently priced NRG Energy Inc. issue, still trading just slightly above its pricing level.

Away from the new deals, it was a happy day for Joy Global Inc.’s bondholders and shareholders, whose securities shot up solidly on the news that the mining equipment maker is to be bought by Japanese industry peer Komatsu for $2.9 billion.

Statistical market performance measures turned mixed on Thursday after being higher across the board on Wednesday.

It was the second mixed session in the last three trading days.

Another numerical gauge, though – flows of investor money into or out of high-yield mutual funds and exchange-traded funds, which are considered a reliable barometer of overall junk market liquidity trends – remained definitely positive, posting its third consecutive net inflow this week, following three straight weekly outflows. Some $322 million more came into those weekly-reporting-only domestic funds than left them in the form of investor redemptions during the week ended Wednesday – although that was well down from the near-record $4.351 billion inflow reported last Thursday for the week ended July 13.

Revlon prices tight

Two issuers raised a combined $700 million during the Thursday primary market session.

Revlon priced an upsized $450 million issue of eight-year senior notes (B3/B+) at par to yield 6¼%.

The issue size was increased from $400 million.

The yield printed at the tight end of the 6¼% to 6½% yield talk.

BofA Merrill Lynch was the left bookrunner. Citigroup, Credit Suisse, Deutsche Bank, Macquarie and Barclays were joint bookrunners.

Proceeds will be used to help fund the acquisition of Elizabeth Arden Inc., expected to close by the end of the year.

Warner oversubscribed

WMG Acquisition Corp., a wholly owned subsidiary of Warner Music Group, priced Thursday’s sole deal, a $300 million issue of seven-year senior secured notes (Ba3/B) that came at par to yield 5%.

The yield printed on top of yield talk.

The deal was oversubscribed and played to a considerable amount of reverse inquiry, according to a trader who spotted the new WMG trading at 101¼ bid in the secondary market.

Credit Suisse, Barclays, UBS, Macquarie and Nomura were the joint bookrunners for the quick-to-market debt refinancing deal.

New Warner Music gains

In the secondary sphere, traders said that the new Warner Music Group 5% senior secured notes due 2023 moved up solidly when they were freed for secondary dealings.

The New York-based music publishing and recording company’s quick-to-market offering moved higher to a 101 to 101½ bid context “right out of the gate,” a trader said.

That was well up from its par issue price.

A second saw the bonds moving up to 101½ bid, 101 9/16 offered.

More than $34 million of the new notes changed hands, putting the credit high up on the Most Actives list.

Revlon quoted better

The day’s other new deal – from cosmetics and personal care company Revlon, also based in New York – came to market later in the session, and thus did not see quite as much aftermarket activity for that regularly scheduled forward calendar deal.

A trader pegged those new bonds at 101¼ bid, 101 3/8 offered, up from their par issue price.

Hughes split-rated deal busy

There was considerable activity on Thursday in the new two-part $1.5 billion offering that Hughes Satellite Systems Corp. priced during Wednesday’s session.

One of the traders said that the 5¼% senior secured notes due 2026 were at 100¼ bid, up from the par level at which that scheduled forward calendar offer had priced. The notes were expected to be split-rated, receiving Ba2 from Moody’s Investors Service and BBB- from S&P but S&P lowered the bonds to BB+ on Thursday citing the upsizing of the deal to $1.5 billion, equally split between senior secured and senior unsecured notes, from $1 billion of senior secured notes originally.

A second trader, though, saw the bonds doing better, located at 101 bid. More than $70 million of the notes changed hands, although he noted that much of the activity – although not all of it – came from high-grade accounts.

The other half of that deal – its unsecured and fully junk-rated (B3/BB-) 6 5/8% notes due 2026 – was seen by one trader at 100 3/8 bid and by another at 100½ bid, with over $48 million traded.

Hughes Satellite, a Germantown, Md. based provider of broadband satellite networks and services, priced a total of $1.5 billion of the new notes, in equally-sized tranches of $750 million each.

NRG activity continues

NRG Energy’s new 6 1/8% notes due in January 2027 remained among the most actively traded issues in Junkbondland on Thursday, with over $37 million trading.

A trader saw those bonds holding steady at 100¼ bid.

A second said that the notes were closer to par, down ¼ point.

NRG, a Princeton, N.J.-based wholesaler power producer, priced $1.25 billion of those notes at par on Tuesday after the quick-to-market offering was upsized from the original $1 billion.

It was easily the most active issue in the junk world on Wednesday, when more than $128 million of those bonds changed hands, moving in a 100 1/8 bid, 100 7/8 offered area.

Joy Global jumps

A trader said that “the big winner” on the day was Joy Global, whose 5 1/8% notes due 2021 zoomed by more than 16 points on the session to above the 111 bid mark, powered by the news that the Milwaukee-based maker of heavy mining equipment has agreed to be acquired by Japan’s Komatsu Ltd. for $2.9 billion in cash, with the total value of the transaction approximately $3.7 billion, including assumption of Joy’s debt.

Another trader saw the bonds up around 17 points at 111 7/8 bid.

More than $30 million of the notes traded.

Another market source also heard the 5 1/8s up 17 points at 112 after hitting a high of 113 during trading.

He said that Joy’s 6 5/8% bonds due 2036 jumped to 118 from 81.

“There were tons and tons of trades,” a trader said. “That’s where all the activity was.”

Joy’s New York Stock Exchange-traded shares meantime jumped by $4.65, or 19.75% closing at $28.20, on more than eight times the normal volume.

Indicators turn mixed

Statistical market performance measures turned mixed on Thursday after having been higher across the board on Wednesday.

It was the second mixed session in the last three trading days.

The KDP High Yield Index retreated by 3 basis points on Thursday to end at 69.25, giving up the same 3 bps that it had gained on Wednesday. It was the index’s second loss in the last three sessions.

Its yield meantime rose by 1 bp to 5.51% after being unchanged on Tuesday and then having come in by 1 bp on Wednesday. It was the third widening in the last five sessions.

The Markit Series 26 CDX Index lost 7/32 point on Thursday, closing at 104½ bid, 104 5/8 offered, versus the 1/8 point gain recorded on Wednesday. It was the second loss in three sessions.

However, the Merrill Lynch High Yield Index rolled to its fourth straight gain on Thursday, firming by 0.095% on top of Wednesday’s 0.128% improvement – its fifth upturn in the last six sessions.

Thursday’s advance raised its year-to-date return to 12.495%, a third consecutive new peak year-to-date return, up from the previous zenith of 12.388%, set on Wednesday.

-Stephanie N. Rotondo contributed to this review

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