First Data, Horton, Lennar drive-bys lead $2.2 billion day; Copano jumps on acquisition news

By Paul Deckelman and Paul A. Harris

New York, Jan. 30 - The high-yield primary sphere had another busy day on Wednesday, although the more than $2.2 billion of new junk-rated, dollar-denominated paper that priced paled in comparison with Tuesday's more than $5.7 billion tally, which was the busiest new-deal session of the year so far.

All seven of Wednesday's dollar tranches came from opportunistically timed and quickly marketed transactions rather than from conventionally marketed forward-calendar offerings.

Homebuilders D.R. Horton Inc. and Lennar Corp. led the way, with Horton doing a $700 million two-part offering consisting of five- and 10-year notes, while Lennar also did a two-parter, split into a new tranche of five-year notes and an add-on to its existing 2022 bonds. Both halves of the Lennar issue were quoted trading near their respective issue prices.

Those two deals were just the latest of several offerings to come out of the building sector; earlier in the week, Weekley Homes, LLC and Beazer Homes USA Inc. also brought deals to market.

Away from the builders, the day's biggest deal came from electronic transaction processing company First Data Corp., which did $785 million of eight-year notes. Those bonds traded a little below issue.

Add-ons to existing bonds were a major trend on Wednesday. Besides the aforementioned tranche from Lennar, equipment rental company H&E Equipment Services, Inc. and energy operator Antero Resources Finance Corp. re-opened existing issues. So did Spanish gaming concern Cirsa Luxembourg SA in the eurobond market.

Traders said that the overall junk bond market was lower, as borne out by statistical indicators of market performance, which fell across the board for a second straight session. They saw some of Tuesday's new deals trading at easier levels, including such names as Chiquita Brands International, Inc. and Netflix, Inc.

Away from the new deals, Copano Energy LLC's bonds shot up on the news that Kinder Morgan Energy Partners plans to buy the midstream natural gas company in a deal valued at $5 billion. Out of that same gas sector, Chesapeake Energy Corp.'s bonds traded actively on the news that embattled CEO Aubrey McClendon will step down.

First Data extends maturity

Drive-by action dominated the primary market on Wednesday.

Five issuers brought a total of seven tranches of junk, raising a combined total of $2.27 billion.

First Data priced a $785 million issue of eight-year senior notes (Caa1/B-) at par to yield 11¼%.

The yield printed on top of yield talk.

Citigroup, Deutsche Bank, HSBC, Wells Fargo, Bank of America Merrill Lynch and Credit Suisse were the joint bookrunners.

The Atlanta-based electronic commerce and payment processing company plans to use the proceeds repurchase all of its outstanding 10.55% PIK notes due September 2015.

Those bonds were priced in the early autumn of 2008, as part of the debt financing backing KKR & Co. L.P.'s $29 billion buyout of First Data, which had closed amid the market turbulence of 2007.

The valuation of Wednesday's refinancing deal looked fine to one high-yield investor who nevertheless declined to play.

It was a classic example of a legacy LBO issuer taking advantage of the presently issuer-friendly leveraged markets to push out a maturity, the investor remarked.

DR Horton prints at 3 5/8%

Two homebuilders brought drive-by deals into the market on Wednesday.

D.R. Horton priced $700 million of non-callable senior notes (Ba2/BB-) in two restructured tranches.

The deal included a $400 million tranche of five-year notes which were priced at par to yield 3 5/8%.

The yield printed at the wide end of the 3½% to 3 5/8% yield talk. The tenor of the 3 5/8% notes was reduced to five years from seven years.

In addition the Fort Worth, Texas-based homebuilder priced a $300 million tranche of 10-year notes at par to yield 4¾%.

The yield printed at the wide end of the 4½% to 4¾% yield talk. The tenor of the 4¾% notes was reduced to 10 years from 12 years.

J.P. Morgan, Citigroup, Deutsche Bank, RBS, UBS and Wells Fargo were the joint bookrunners for the general corporate purposes deal.

An investor chalked the shortened maturities of the DR Horton bonds to the chop in the U.S. capital markets which was stirred up by news that preliminary fourth quarter GDP in the United States came in at a negative 0.1%, and reports out of Europe that prosecutors have opened up a case against the Central Bank of Italy and its former governor Mario Draghi (now president of the European Central Bank), over accounting irregularities related to derivatives.

Lennar off high-grade desks

Also from the homebuilding sector, Lennar priced $450 million of senior notes (Ba3/BB-/BB+) in new and reopened tranches.

The offering included $275 million of a new note due Dec. 1, 2018 priced at 99.998 to yield 4. 1/8%, in line with talk in the low 4% area

There was also a reopening of 4¾% notes due Nov. 15, 2022 to add $175 million. Pricing was at 98.073 to yield 5%, in line with guidance of 5%.

The deal was priced on the high-grade desk.

Bookrunners were Citigroup, Merrill Lynch, BMO, Deutsche Bank, J.P. Morgan and UBS.

Proceeds will be used for working capital and general corporate purposes, including repayment or repurchase of some outstanding senior notes.

Not long for junkland?

An investor, who took some of the Lennar 4 1/8% notes due 2018 - the more popular of the two tranches, the buy-sider said - more or less shrugged at the low prints on the bonds sold by Wednesday's pair of junk-rated homebuilders.

There seems to be conviction in the market that these homebuilders, along with Toll Brothers, are headed for investment grade, the money manager explained.

The ratings agencies have gotten more positive on these companies during the past 12 to 18 months, the investor added.

Antero taps 6% notes

The Wednesday session also saw a pair of drive-by add-ons.

Antero Resources priced an upsized $225 million add-on to its 6% senior notes due Dec. 1, 2020 (B2/B+) at 103 to yield 5.391%.

The reoffer price came at the cheap end of the 103 to 103.5 price talk.

J.P. Morgan, Wells Fargo, Barclays, Citigroup and Mitsubishi UFJ were the joint bookrunners for the deal which was upsized from $150 million.

The Denver-based independent oil and gas company plans to use the proceeds to repay a portion of its revolver.

H&E at the rich end

H&E Equipment Services priced a $100 million add-on to its 7% senior notes due Sept. 1, 2022 (B3/B+) at 108.5 to yield 5.55%.

The reoffer price came at the rich end of the 108 to 108.5 price talk.

Deutsche Bank Securities Inc. ran the books for the debt refinancing deal.

Permian plans secured notes

The session also saw a buildup of the active forward calendar.

Permian Holdings, Inc. plans to price a $175 million offering of five-year senior secured notes during the middle part of the week ahead, via bookrunner Jefferies.

Proceeds will be used to refinance debt and pay a distribution to the owners.

There were also deal announcements in Europe and Canada.

Nara Cable Funding Ltd., a financing unit of Spanish cable operator Grupo Corporativo ONO SA, began a roadshow on Wednesday for a €250 million offering of senior notes due March 1, 2020.

The deal, which comes with initial guidance of 8% to 8¾%, is set to price in the mid-to-late part of the week ahead, according to a market source.

Deutsche Bank, BBVA and ING are the joint global coordinators. Bankia, BNP Paribas, Merrill Lynch, Credit Agricole, JP Morgan, Santander and SG are the joint bookrunners.

Elsewhere Ukraine-based iron ore company Ferrexpo plc plans to start a roadshow in Europe on Thursday for a dollar-denominated offering of five-year senior notes.

The size remains to be determined. However Fitch Ratings assigned a B rating to a proposed $500 million issue.

Morgan Stanley and Credit Suisse are leading the Rule 144A and Regulation S offer.

Alliance Grain C$125 million

Alliance Grain Traders Inc. expects to sell C$125 million of five-year senior secured second-lien notes (/B/DBRS: B) through a private placement following a roadshow.

The roadshow for the Rule 144A and Regulation S-eligible issue will start in Vancouver, B.C., on Friday and continue Monday and Tuesday in Toronto.

Scotia, CIBC and GMP are the lead managers for the debt refinancing and general corporate purposes deal.

Day's deals trade near issue

A trader said that H&E Equipment Services' 7% notes due 2022 were probably "right back to 109-110, which is where they were prior to the 108.5 add-on."

However, neither he nor anyone else had any firm quotes on Wednesday on the Baton Rouge, La.-based construction and industrial equipment rental firm's smallish $100 million add-on to the notes that the company sold last summer.

A trader saw Lennar's 4 1/8% notes due 2018 trading in a par to 100¼ bid context, just a little above the 99.998 level at which the Miami-based homebuilder's $275 million tranche had priced.

He saw the $175 million add-on to its 4¾% notes due 2022 at 98 bid, 98½ offered, versus its 98.073 pricing level.

Antero Resources' add-on to its 6% notes due 2020 was quoted at 103¼ bid, 103¾ offered - a little bit improved from the 103 level at which the Denver-based oil and gas company priced its $225 million offering.

However, First Data's new stand-alone 11¼% notes due 2021 were seen by traders to be struggling in the aftermarket; one pegged the bonds at 99 5/8 bid, 100 3/8 offered, while another had the Atlanta-based electronic transaction processor's paper as low as 99¼ bid, 99¾ offered, versus the $785 million tranche's par issue price.

None of the traders saw any immediate aftermarket action in D.R. Horton's new $700 million two-part issue.

Recent deals seen mostly lower

Wednesday's generally easier market pushed recently priced deals down a little from the gains they had notched in the aftermarket

For instance, a trader said that HD Supply, Inc.'s 7½% notes due 2020 "traded at a discount to pricing all day today," seeing those bonds going home at 99½ bid, while a second trader had them even lower, at 98½ bid, 99 offered. The Atlanta-based distributor of tools and building products had priced its quick-to-market $1,275,000,000 issue at par on Tuesday, although it came too late in that session for any secondary dealings at that time.

The first trader saw Netflix's 5 3/8% notes due 2021 trading "plus or minus issue all day."

The Los Gatos, Calif.-based internet distributor of movies and TV programs had priced its upsized $500 million of the bonds at par on Tuesday, after that drive-by deal was upsized from $400 million. A trader saw those bonds go home Tuesday quoted as high as 101¼ bid, 101¾ offered, but located the bonds on Wednesday way off that peak, at 99¾ bid, 100¼ offered.

Chiquita Brands International's 7 7/8% notes due 2021 were seen by a trader to be wrapped around the 101 mark, while a second had the credit at 100 5/8 bid, 101 1/8 offered.

The Charlotte, N.C.-based importer of bananas and other fresh produce had priced its quickly shopped $425 million offering at 99.274 on Tuesday to yield 8%, and the bonds had gotten as good as 101¾ bid, 102 offered in initial secondary dealings.

Also down from its initial aftermarket highs was Sabine Pass Liquefaction, LLC's 5 5/8% senior secured notes due 2021; the Houston-based natural gas company had priced $1.5 billion of those notes at par on Tuesday after upsizing that scheduled forward-calendar deal from an originally announced $1 billion, and the new bonds traded as high as 101¾ bid, 102 offered. On Wednesday, on trader had them at 101¼ bid, 101½ offered, while a second saw them at 101 bid, 101½ offered.

DuPont euros doing well

While those recently priced dollar-denominated bonds were easing from recent highs, a bond market sours said that DuPont Performance Coatings' euro-denominated notes were slightly better in secondary trading.

He said the 5¾% senior secured notes due 2021 traded on the day at 100 5/8 bid.

DuPont Performance Coatings, a Wilmington, Del.-based supplier of vehicle and industrial coating systems, sold €250 million of the notes on Jan. 16 at par, as part of a larger deal that also featured a $750 million issue of dollar-denominated notes.

Copano climbs on buyout deal

Away from the new issues, a trader said the secondary market star of the day was Copano Energy's 7 1/8% notes due 2021.

When he first looked it up, he said "this can't be right," since he quoted the bonds around 115 bid, well up from the mid-to-high 100s area at which they had recently been trading.

But a market source confirmed that the bonds had indeed jumped to around a 114 to 115 bid context, up from around 109 bid on Monday and Tuesday. Over $34 million of the bonds changed hands in round-lot transactions, making Copano one of the busiest Junkbondland names.

The bonds boomed on the news that Kinder Morgan Energy Partners has agreed to buy the Houston-based midstream natural gas company in a transaction valued at $5 billion.

Chesapeake is volume champ

As busy as Copano was, though, it was outdone by natural gas sector peer Chesapeake Energy, whose bonds traded actively on the news that embattled chief executive officer Aubrey McClendon will give up that post after having had some differences with the Oklahoma City-based company's newly revamped board of directors.

Some $68 million of Chesapeake's 6 1/8% notes due 2021 changed hands, although the bonds were only up by about ¼ point to 107 bid.

Some $39 million of its 6 5/8% notes due 2020 were traded on a round-lot basis, a market source said, and those bonds shot up by more than 2 points to end at 110 1/8 bid.

Market measures soften further

Overall, statistical junk market performance indicators were lower for a third consecutive session on Tuesday.

The Markit Series 19 CDX North American High Yield index lost 21/32 point on Wednesday to finish at 102 3/32 bid, 102 7/32 offered, after having eased by 1/32 point on Tuesday. It has now fallen over three straight sessions.

The KDP High Yield Daily Index also posted a third straight loss on Wednesday, falling by 17 basis points to finish at 75.91; that followed Tuesday's 9 bps loss.

Its yield rose by 6 bps on Wednesday to 5.48%, its third straight increase, after having widened by 3bps on Tuesday.

And the widely followed Merrill Lynch U.S. High Yield Master II Index saw its second straight downturn on Wednesday, falling by 0.177%, on top of Tuesday's 0.172% retreat, which had been its first downturn after nine consecutive sessions of gains.

The latest loss left its year-to-date return at 1.634%, down from Tuesday's 1.815% and down as well from Monday's 1.991% reading, the peak level for the year so far.

Cristal Cody contributed to this review

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