Entertainment Properties brings crossover deal as volume declines; Trace volume 'healthy'

By Aleesia Forni and Andrea Heisinger

New York, Aug. 1 - Issuance was light in the investment-grade bond market on Wednesday as a Federal Reserve Federal Open Market Committee meeting took place. A crossover deal from Entertainment Properties Trust made up the bulk of volume.

The real estate investment trust sold $250 million of 10-year senior notes.

In the preferred stock market, Affiliated Managers Group Inc. announced and priced an upsized $200 million of $25-par 30-year senior notes tighter than guidance.

The Fed meeting ended with no new action and no guarantee of another round of quantitative easing. Attention has shifted to the September meeting as there was some foreshadowing that some action could be taken after new economic data becomes available.

This meeting coupled with the jobs report for July coming out Friday made for a front-loaded week. Issuers priced $15 billion of bonds in two days. There was $10 billion to $15 billion of volume expected for the week as a whole.

There was a fluctuation in equities following a trading glitch by Knight Capital in the morning, but that didn't have any influence on the high-grade bond market, a source said.

"Nothing that I'm aware of," she said. "We were more focused on the Fed and this [Entertainment Properties] deal."

There was about $1.1 billion of demand for that split-rated trade, which saw "kind of a mix" of junk and high-grade investors, she said.

"It went really well. They're a pretty illiquid name with only one outstanding [issue]."

Thursday is expected to be "not that busy," a market source said, with a couple of possible deals depending on the market tone at the open.

The Markit CDX Series 18 North American Investment Grade index tightened 2 basis points to a spread of 106 bps.

Though the secondary market seemed "a bit muted" on the day to one trader, Trace volume was seen at a "healthy" $9.2 billion.

Wednesday's $500 million add-on to Citigroup Inc.'s 4.5% notes due 2022 was one of the day's most actively traded deals, the source added, tightening to the "low 230s" after pricing at 235 bps over Treasuries.

Entertainment Properties prices

Split-rated Entertainment Properties Trust sold $350 million of 5.75% 10-year senior notes at par to yield 5.75%, an informed source said.

The notes were seen at 100.875 offered near the end of the session.

The size was increased from $250 million, the source said.

The notes (Baa3/BB+/BBB-) were priced at 424.6 bps over Treasuries - tighter than guidance in the 450 bps area.

The informed source said there weren't a lot of drops on the books despite the 25 bps tightening.

The active bookrunners were Citigroup Global Markets Inc. and J.P. Morgan Securities LLC.

Proceeds are being used to repay $166.3 million of fixed-rate mortgage debt secured by a portion of rental properties. The remainder will be used to reduce debt under an unsecured revolving credit facility.

The deal is guaranteed by the subsidiaries that guarantee the company's unsecured revolver, unsecured term loan facility and existing 7.75% senior notes due 2020.

Entertainment Properties, a real estate investment trust of theaters, entertainment complexes and specialty properties, was last in the market with a $250 million sale of 7.75% 10-year notes priced at 490.7 bps over Treasuries on June 25, 2010. The company is based in Kansas City, Mo.

Affiliated Managers' $25-pars

Affiliated Managers Group brought a $200 million offering of 6.375% $25-par 30-year senior notes, a trader told Prospect News.

The deal size was upped from $100 million, and it priced tighter than talk between 6.5% and 6.625%.

The trader saw a $24.95 bid, par offer in the gray market at midday.

After pricing, another market source echoed that market.

The company will apply to list the new notes on the New York Stock Exchange.

The bookrunners were Bank of America Merrill Lynch, Wells Fargo Securities LLC and Deutsche Bank Securities Inc.

Proceeds will be used in part to pay down a revolving credit facility. Any remaining funds will be used for general corporate purposes.

Affiliated Managers is a Prides Crossing, Mass.-based asset management company.

Stephanie N. Rotondo contributed to this review

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