Upsized Intelsat leads $4 billion day, Rexel, U.S. Steel also price; CenturyLink turns busy

By Paul Deckelman and Paul A. Harris

New York, March 20 - Intelsat (Luxembourg) SA launched a restructured and massively upsized three-part bond deal Wednesday, with the giant offering heard to have come to market well after trading had wrapped up for the day.

The communications satellite company more than doubled the size of its deal to $3.5 billion - putting it into a tie for the biggest junk deal of the year so far with the MetroPCS Wireless Inc. two-part offering that priced earlier this month. Intelsat upsized its original $1.5 billion of eight-year notes to $2 billion, the single largest junk tranche of 2013, and added $500 million of five-year paper and $1 billion of 10-year bonds.

With Intelsat leading the way, nearly $4.3 billion of new dollar-denominated, fully junk-rated paper from domestic or developed-country issuers priced, one of the biggest sessions of the year so far. All of the issues were opportunistically timed, quickly-shopped transactions

Earlier, French electrical products maker Rexel SA priced $500 million of seven-year notes as part of a two-part deal that also included a euro-denominated tranche, while the day's only domestic borrower, United States Steel Corp., did an upsized $275million of eight-year paper. Both of those deals moved a little above their respective issue prices in aftermarket dealings.

Vantage Drilling Co. announced plans for $600 million of 10-year notes, with the offshore energy contractor's transaction expected to price on Thursday.

In the secondary market, there was continued busy activity in Chesapeake Energy Corp.'s 2019 bonds - but for the first time in many days, it was not the volume leader, relinquishing the crown to a pair of issues from CenturyLink, Inc. - the telecommunications company's new seven-year notes, which priced on Monday alongside Chesapeake's $2.3 billion three-part behemoth of a deal, and one of its existing issues.

Statistical indicators of market performance turned higher after having been mixed over the previous few sessions.

Intelsat massively upsizes

In Wednesday's primary market three issuers combined to bring five dollar-denominated tranches, printing a total of $4.28 billion of new junk bonds.

Intelsat (Luxembourg) SA, a subsidiary of Intelsat SA, priced a massively upsized, restructured $3.5 billion three-part senior notes transaction (Caa3/CCC+).

The deal included a $500 million tranche of five-year notes which priced at par to yield 6¾%, a $2 billion tranche of eight-year notes which priced at par to yield 7¾%, and a $1 billion tranche of 10-year notes which priced at par to yield 8 1/8%.

All three tranches came on top of price talk.

The overall deal size grew from the single $1.5 billion tranche of eight-year notes announced on Tuesday.

Goldman Sachs & Co., Morgan Stanley & Co. and J.P. Morgan Securities LLC are the joint bookrunners.

Proceeds will be used to redeem $915 million of the company's 11½%/12½% senior PIK election notes due 2017, as previously announced, as well as to redeem the remaining $1,588,000,000 of PIK election notes, to redeem $754.8 million of 11¼% senior notes due 2017 and to pay fees and expenses. Remaining proceeds will be used for general corporate purposes, which may include the repayment, redemption, retirement or repurchase of additional 2017 senior notes or other outstanding debt.

The issuer is a Luxembourg-based satellite services provider.

Rexel prices at tight end

Rexel priced $500 million and €500 million of senior notes due June 15, 2020 (Ba3//BB).

The 5¼% dollar-denominated notes priced at 99.981 to yield 5¼%. The yield printed at the tight end of the 5¼% to 5½% yield talk.

The 5 1/8% euro-denominated notes priced at 99.982 to yield 5 1/8%. The yield printed at the tight end of yield talk in the 5¼% area. That talk had tightened from earlier talk of 5¼% to 5½%.

Global coordinator J.P. Morgan Securities LLC will bill and deliver for the dollar notes, while global coordinator BNP Paribas Securities Corp. will bill and deliver for the euro notes.

Credit Agricole Securities (USA) Inc., HSBC Securities (USA) Inc., ING Financial Markets LLC, Natixis Securities North America Inc. and SG Americas Securities LLC were joint lead bookrunners.

Proceeds will be used to refinance the company's notes due 2016 and for general corporate purposes.

U.S. Steel drives through

United States Steel priced an upsized $275 million issue of eight-year senior notes (B1/BB/BB-) at par to yield 6 7/8%.

The yield printed at the wide end of the 6¾% to 6 7/8% yield talk. the amount was increased from $250 million.

J.P. Morgan Securities LLC, Barclays, Goldman Sachs & Co. and Morgan Stanley & Co. LLC were the joint bookrunners for the quick-to-market issue.

The Pittsburgh-based integrated steel producer plans to use the proceeds to repurchase or repay debt and for general corporate purposes.

Vantage Drilling sets talk

Vantage Drilling talked its $600 million offering of 10-year senior secured first lien notes with a yield in the 7¼% area.

The official talk represents the tight end of the initial 7¼% to 7½% guidance.

The books were scheduled to close at 5 p.m. ET on Wednesday, and the deal is set to price on Thursday morning.

Citigroup Global Markets is the left bookrunner for the debt refinancing. BofA Merrill Lynch, Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., Jefferies & Co. and RBC Capital Markets are the joint bookrunners.

Rexel rises after pricing

In the secondary market, a trader said that "the only thing" that he saw really generating much activity among the new issues he was watching on Wednesday afternoon was Rexel's new 5¼% notes due 2020.

He said that the French electrical products company's dollar-denominated notes were trading around 100½ bid. "It's getting hit at 100½ in the street - but it's still there," he said.

The issue had priced earlier at 99.981.

He did not see any dealings in the euro-denominated part of that two-part deal.

A second trader pegged the bonds at 100¼ bid, 101¼ offered, while a third saw them a little tighter than that, at 100½ bid, 101 offered.

U.S. Steel firms a little

One of the traders also quoted U.S. Steel's new 6 7/8% notes at 100¼ bid, 100½ offered.

The Pittsburgh-based domestic steelmaking giant priced its same-session offering at par.

Wednesday's other deal - Intelsat's super-sized three-part transaction - finally priced early Wednesday evening, long after all other activity in Junkbondland had ceased for the day.

Jefferies, Watco hold up

Among the deals which came to market on Tuesday, market participants saw the 7 3/8% notes due 2020 from Jefferies Finance LLC and JFIN Co-Issuer Corp., and Watco Cos. LLC's 6 3/8% notes due 2023 hanging on to most of the gains which those two issues had notched in initial aftermarket dealings right after they had priced.

A trader said that New York-based financial services company Jefferies' $600 million offering - which had priced at par after being upsized from an originally planned $500 million - had a high print for the day around 102 bid in the morning, in line with Tuesday's aftermarket, though he saw the bonds later come a little bit off that peak, trading down to 101 5/8 bid, 101 7/8 offered. However, he said that the deal was "very thinly traded," so the movement was perhaps not that representative.

Another trader saw the bonds trading at bid levels between 101½ and 102, a third saw them closing around 101¾ bid, 102¼ offered.

A trader meantime said that Watco's new deal was "still up there," locating the bonds at 102¾ bid, 103¼ offered. While he didn't see them trade, he said that "it looks like they're right at their highs."

At another desk, a trader said the bonds were moving around in a 102¼ to 103 1/8 context.

The Pittsburg, Kan.-based operator of regional U.S. railroads and provider of railcar maintenance and repair services had priced its $400 million issue at par on Tuesday and the bonds had accelerated upward to levels between 102 and 103 in initial secondary action.

Avis, Digicel, Cooper near issue

On the other hand, a trader noted that Avis Budget Car Rental LLC's new 5½% notes due 2023 "has been stuck around par," the level at which the Parsippany, N.J.-based vehicle-rental giant, along with its Avis Budget Finance Inc. subsidiary, priced its $500 million offering of those notes on Tuesday, after upsizing that drive-by transaction from an originally announced $450 million.

"They were par to 100¼ all day; then after the Rexels got priced, they were like 99 7/8-par," he said.

A second trader quoted the bonds at 99 7/8 bid, 100 3/8 offered, while a third had them going out at par bid, 100¼ offered.

A trader said that Digicel Ltd.'s 6% notes due 2021 "didn't really go anywhere," seeing the bonds at 100¼ bid.

"I didn't see a lot of prints today."

The Kingston, Jamaica-based provider of wireless service in the Caribbean, Central America and some of the Pacific island nations came to market on Tuesday with a quickly-shopped add-on to the existing $1 billion of those 2021 bonds that it had sold last month. The bonds priced at par to yield 5.998%, but came too late in the day for any Tuesday trading.

Another trader on Wednesday quoted them at 100 1/8 bid, 100½ offered.

Tuesday's other dollar-denominated deal - from Novi, Mich.-based automotive components manufacturer Cooper-Standard Holdings Inc. - was seen by a trader parked all day between 100½ and 1011/4.

That quick-to-market $175 million issue of 7 3/8%/8 1/8% senior PIK toggle notes due 2018 had priced on Tuesday at 99.5 to yield 7.497%

A second trader said that the smallish deal had been in a 100 to 100½ context earlier in the day but came off that a little to end between 99 7/8 bid, 100 3/8 offered.

He opined that generally, "it seemed like when [Federal Reserve chairman Ben] Bernanke was talking," in a news conference following the conclusion of the U.S. central bank's latest policy meeting, promising a continuation of the Fed's accommodative monetary policy, "and after they priced the Rexel deal, I'd says the lower-coupon paper sort of backed off by 1/8 to ¼ point."

CenturyLink volume jumps

A trader said that Chesapeake Energy's new $2.3 billion three-part deal "seemed kind of quiet today" Instead, he saw a pickup in activity in the other big offering that had priced on Monday along with Chesapeake's megadeal - CenturyLink's $1 billion of notes due 2020. Those bonds, he said, "have been pretty active."

He said that the Monroe, La.-based telecommunications company's issue of 5 5/8% notes due 2020 - which had priced on Monday at par after the quickly-shopped deal doubled in size from an original $500 million - had traded down to about 100¾ bid late Tuesday from prior levels above 101.

However, he saw them having moved back up on Wednesday to a 101 to 101¼ context, and then up to 101½ bid later in the day.

"It's a BB bond that came relatively cheap to the rest of the world, I think," he said. "You can see from the Trace prints that they're starting to sell them to retail accounts at higher prices, and I think accumulating short positions and buying them back higher.

He saw the bonds ultimately going out in a 101 3/8 to 101¾ bid context. "That's about where it was before it went down a little."

A second trader also saw the bonds in a 101½ to 101¾ context on Wednesday.

A market source at another desk said that the CenturyLink deal was one of the busiest bonds of the day in the junk market, seeing over $37 million of the notes having changed hands in round-lot trades, and seeing additional millions of dollars in numerous odd-lot transactions as well. He saw them going home at 101 1/6 bid, calling that a 1/16 point gain on the day.

The source also saw even heavier activity - round-lot trading of over $43 million - in one of the company's existing issues, its 5.8% notes due 2022, which he called the single most active junk bond of the day. He pegged them at 100¾ bid late in the session, down about ¼ point, but had no explanation for the notes' sudden activity.

In contrast, Chesapeake Energy's 6.775% notes due 2019 - which have been dominating the most-actives list over the past week to 10 days amid the controversy over the Oklahoma City-based natural gas company's plans to call those bonds for redemption at par plus accrued interest - well below their current trading levels - racked up a respectable, but not overwhelming roughly $20 million of round-lot volume, plus a busy slate of odd-lot transactions. They were going out around 104½ bid, about where they had finished on Tuesday.

Market indicators firm up

Overall, statistical junk performance indicators were mostly higher on Wednesday, after having been mixed for the previous three sessions.

The Markit Series 19 CDX North American High Yield Index rose by 3/8 point to end at 104 5/16 bid, 104 7/16 offered, after having dropped by ¼ point on Tuesday, its third straight loss.

The KDP High Yield Daily Index, meanwhile, was unchanged for a second straight day on Wednesday at 75.66, after having risen over the previous three straight sessions.

Its yield came in by 1 basis point to end at 5.48%, after having been unchanged on Tuesday; that too had shown improvement over the three sessions before that.

And the widely followed Merrill Lynch High Yield Master II index improved for a second straight session on Wednesday, posting a gain of 0.04%, the same sized-advance seen on Tuesday, which, in turn had followed a rare 0.008% loss on Monday, breaking a 13-session winning streak dating back to Feb. 27.

Wednesday's gain lifted its year-to-date return to 2.735%, its second consecutive new peak level for the year so far. The previous 2013 high-point, 2.694%, had been recorded on Tuesday.

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