D.R. Horton, Hiland price; Horton yields early gains; new NRG up; overall market firmer

By Paul Deckelman and Paul A. Harris

New York, Sept. 11 - The high-yield primary market had a little quieter day on Tuesday as two deals totaling $750 million priced. That mark was less than half of Monday's roughly $2 billion of dollar-denominated, purely junk-rated paper from domestic or developed-country issuers.

Familiar junk player D.R. Horton Inc. brought a quickly shopped $350 million issue of 10-year notes to market. Traders said that the homebuilder's new paper initially moved up in the aftermarket in busy dealings, but then gave up those gains and came right back down.

Energy operator Hiland Partners, LP/Hiland Partners Finance Corp. priced an upsized $400 million of eight-year notes, but these appeared too late in the session for any aftermarket dealings.

Apart from the deals that priced, medical devices maker DJO Finance LLC/DJO Finance Corp. and vacation getaway operator Silverleaf Resorts, Inc. were heard to have begun shopping transactions around, while roadshows also began for previously mentioned offerings from Par Pharmaceutical Cos. Inc. and AOT Bedding Super Holdings.

Price talk emerged on Nuveen Investments Inc.'s two-part megadeal, which is expected to price on Wednesday.

Away from the domestic market, Chinese issuer Road King Infrastructure Finance (2012) Ltd. priced a $350 million five-year deal. Finnish papermaker Stora Enso Oyj did a euro-denominated 5.5-year deal, while Britain's Dixons Retail plc sold a tranche of five-year sterling denominated bonds.

Monday's new deals were seen holding their own, including NRG Energy Inc.'s 10.5-year issue, which priced too late in the day on Monday for any kind of aftermarket at that time.

Traders said not much was going on away from the new-deal arena; even Plains Exploration & Production Co., Monday's busiest name among the established bonds, was considerably quieter.

Statistical indicators of junk market performance turned solidly higher after a mixed Monday.

D.R. Horton prints at 4 3/8%

The Tuesday session saw a continuation of the torrid primary market news flow that has been a trend since Labor Day.

The dollar-denominated market saw two issuers raise a combined $750 million, each bringing a single tranche of bonds.

D.R. Horton priced a $350 million issue of non-callable 10-year senior notes (Ba2/BB-/BB) at par to yield 4 3/8%, on top of price talk.

RBS Securities Inc. was the bookrunner for the quick-to-market general corporate purposes deal.

The order book was well oversubscribed, according to a source following the transaction.

Early conversions in the mid-4% context had prompted some investors to sniff and look for the exits, the source said.

However, some of them eventually came around and signed on at 4 3/8%, the source added.

D.R. Horton, an ultra-familiar name in the corporate bond market, has a loyal following in both the high-yield and investment-grade spaces, and both of those were well represented in Tuesday's trade, said the source, who added that the deal even saw some participation from insurance funds.

Hiland prices inside of talk

Hiland Partners and Hiland Partners Finance priced an upsized $400 million issue of eight-year senior notes (B3/B-) at par to yield 7¼%.

The yield printed 12.5 basis points beneath the low end of yield talk that was set in the 7½% area.

The deal played to a $3 billion book and shot up 3½ points in the secondary market, according to a mutual fund manager who was involved.

The notes traded to 103¾ bid before easing to 103½ bid, 103¾ offered after the close.

Bank of America Merrill Lynch, Wells Fargo and RBS were the joint bookrunners for the debt refinancing deal, which was upsized from $350 million.

Drought conditions

Vigorous post-Labor Day issuance notwithstanding, there is simply not enough new paper to soak up all of the cash that is coming into the mutual funds, one manager lamented.

"It's driving everybody nuts," the buysider said, adding that some accounts are north of 15% cash, which is way more than they want to be.

"There is good supply coming, but not enough and not soon enough," the investor said, adding that a lot of the deals, at present, are refinancings, which don't move the needle in terms of helping money managers to stay invested.

Stora Enso drives by

The European market remained active on Tuesday.

Finland's Stora Enso priced a €500 million issue of 5% 5.5-year senior notes (Ba2/BB) at a 400 basis points spread to mid-swaps, at the tight end of the 400 to 410 bps spread talk.

Joint bookrunner Barclays will bill and deliver. Citigroup, J.P. Morgan, Nordea were also joint bookrunners.

The Helsinki-based paper and forestry products manufacturer plans to use the proceeds for general corporate purposes.

Dixons on top of talk

In the sterling-denominated market, England's Dixons Retail priced a £150 million issue of 8¾% five-year guaranteed notes (B1) at 99.015 to yield 9%, on top of the yield talk.

The timing of the deal was moved ahead. When announced on Monday, the deal was scheduled to run a brief roadshow.

Barclays, RBS, HSBC, DNB Markets, Citigroup and BNP Paribas were the joint bookrunners.

Barclays will bill and deliver.

The Hemel Hempstead, England-based European electrical multi-channel retailer plans to use the proceeds to fund the tender offer for up to £50 million notes due 2015 and for general corporate purposes.

Also on Tuesday, some in the high-yield market were watching a deal from China's Road King Infrastructure, which priced a $350 million issue of five-year notes at par to yield 9 7/8%, at the tight end of the 9 7/8% to 10% yield talk.

HSBC, DBS and J.P. Morgan were the joint bookrunners for the quick-to-market deal, Regulation S debt refinancing deal.

Nuveen sets talk

Looking toward the Wednesday session, Nuveen Investments set price talk for its $1.145 billion two-part offering of senior notes (Caa2/CCC).

A $400 million tranche of five-year notes was talked with a yield in the 9% area, and a $745 million tranche of eight-year notes was talked to yield 9¼% to 9½%.

Deutsche Bank, Bank of America Merrill Lynch, Morgan Stanley, RBC, UBS and Wells Fargo are the joint bookrunners.

AOT starts Wednesday

Also on Tuesday, the active forward calendar saw a meaningful buildup.

AOT Bedding plans to start a roadshow on Wednesday for its $725 million offering of eight-year senior notes (/CCC+/), which is set to price in the week ahead.

Goldman Sachs, Morgan Stanley, UBS, Deutsche Bank and Barclays are the joint bookrunners for the acquisition deal.

DJO brings two-part deal

DJO Finance LLC and DJO Finance Corp. plan to start a roadshow on Wednesday for a $540 million face amount of new notes in two tranches, set to price late this week.

The deal includes a $100 million add-on to the company's 8¾% second-lien notes due March 15, 2018. The original $230 million issue of those notes priced at par on on March 13, 2012.

DJO also plans to sell $440 million of new senior notes due April 15, 2018.

Credit Suisse, Goldman Sachs, UBS, Wells Fargo, RBC and Macquarie are joint bookrunners for the debt refinancing.

Par Pharma starts Wednesday

Par Pharmaceutical will begin a roadshow on Wednesday for its $490 million offering of eight-year senior notes (Caa1/B-/), which is set to price during the week ahead.

Goldman Sachs, Bank of America Merrill Lynch, Deutsche Bank, RBC, Citigroup and BMO are the joint bookrunners for the acqquisition financing.

Silverleaf secured deal

Finally, Silverleaf Resorts plans to start a roadshow on Wednesday for its $175 million offering of seven-year senior secured notes (B2//). Again, pricing is set for the middle part of the week ahead.

Deutsche Bank is the bookrunner.

The Dallas, TexAs-based resort operator plans to use the proceeds to pre-fund development of its vacation ownership inventory, refinance a portion of its existing debt and pay a dividend to its sponsor, affiliates of Cerberus Capital Management, LP.

What goes up must come down

When the new DR Horton 4 3/8% notes due 2022 were freed for secondary market dealings, traders said that the homebuilder's quick-to-market $3590 million issue was hugely busy, with one trader estimating turnover in the new bonds of as much as $60 million and a second suggesting it might have been even more than that.

A trader said that the bonds were trading as high as 100¾ bid on the break, after having priced earlier at par, "but now it's back trading at par to [100] 1/8 - it kind of shot up, but then bounced back down."

He suggested that the aftermarket upside was limited because "this is a pretty low coupon."

A second trader confirmed that Horton "moved up to 100¾ right away and then kind of faded right back down [...] trading around issue price."

The company's established 6½% notes due 2016 were seen having edged up around a quarter-point, to just below the 112 bid level.

Hiland bonds come too late

No aftermarket dealings were seen in the day's other Junkbondland issue, Hiland Partners' 7¼% notes due 2020.

The Enid, Okla.-based natural gas services provider's $400 million deal - upsized from an originally shopped $350 million - priced too late in the session for any kind of secondary market activity.

Monday deals hold their own

A trader saw NRG Energy's 6 5/8% notes due 2023 "wrapped around" the 102 bid level.

A second trader also saw them in that same area.

The Princeton, N.J.-based electric power producer's $990 million quick-to-market deal - upsized from an originally announced $900 million - priced at par on Monday, but was too late for any kind of aftermarket dealings that session.

An existing NRG issue - its 7 7/8% notes due 2021 - was being quoted at 109½ bid, up 1 point on the day.

A market source said that nearly $20 million of those bonds had changed hands, making them one of the busiest high-yield credits of the day.

Monday's other junk bond offering - SeaDill Ltd.'s 5 5/8% notes due 2017 - was also wrapped around the102 mark, a trader said.

A second said: "They also traded well," in tandem with NRG, seeing them at 102 bid, 102¼ offered.

The Hamilton, Bermuda-based offshore drilling contractor priced its $1 billion issue of those notes at par on Monday. When they were freed to trade in the aftermarket, they initially broke at 101¼ bid, 102¼ offered and then moved up to end the day around 102 bid.

HealthSouth deal trades up

Among the deals priced last week, a trader said that HealthSouth Corp.'s 5¾% notes due 2024 "continue to trade up."

He saw the Birmingham, Ala.-based post-acute care rehabilitation hospital operator's deal having pushed up to 103 bid - about a point higher than the notes were on Friday.

The quick-to-market $275 million issue priced at par last Thursday after having been upsized from an originally announced $250 million. The deal came too late in the day for any trading later that same session, but began trading on Friday, initially around 101 5/8 bid, 101 7/8 offered on the break, before moving up to - and past - the 102 level.

HealthSouth's president and chief executive officer, Jay Grinney, did a presentation to investors on Tuesday at a Morgan Stanley health care conference in New York, in which he touted the impact of several recent big capital markets deals the company had done: amending and extending its revolving credit line and terminating an unneeded term loan facility and the junk bond deal. He credited these with giving the company great balance-sheet flexibility to allow it to weather uncertain conditions in the health care business (see related story elsewhere in this issue).

The trader also acknowledged that "any high-yield company that can issue paper at 5¾% puts themselves in a better spot."

He added that companies coming to market now "are getting an opportunity to issue paper at yields that most of these guys never dreamed of. I would imagine that most [company] treasurers that are coming to market are pretty happy."

Last week's deals trade

Looking at some of the other deals that priced last week, a trader saw continued upside movement in Digicel Group Ltd.'s 8¼% notes due 2020, which he quoted going home on Tuesday at 104 1/8 bid, 104 5/8 offered.

That was up from the 103½ bid, 104 offered level at which the Kingston, Jamaica-based Caribbean cell-phone service provider's $1.5 billion of bonds had traded on Monday.

And that, in turn, was well up from the par level at which the deal had priced last Wednesday.

The drive-by megadeal's bonds initially traded only a little higher than issue, but got a big boost above 102 last Thursday, amid a generally stronger junk bond market, and never looked back.

Friday's Hub International Ltd. 8 1/8% notes due 2018 gained about 1/8 point on Tuesday, a trader said, pegging the Chicago-based insurance brokerage firm's $740 million issue at 102¼ bid, 102¾ offered, up from Monday's 102 bid, 102½ offered.

The bonds priced at par on Friday, after having been upsized from the originally announced $730 million amount and moved up to the 102 context in initial aftermarket dealings.

A trader saw the Tesoro Logistics LP/Tesoro Logistics Finance 5 7/8% notes due 2020 at 102 7/8 bid, 103¼ offered, up from Monday's wide102½ bid, 1031/2offered.

That was about the level to which the San Antonio, Texas-based energy infrastructure and logistics company's bonds had moved on Friday after the $350 million issue - upsized from an originally announced $310 million - priced at par.

Also in the energy space, a trader also saw Carrizo Oil & Gas Inc.'s 7½% notes due 2020 at 101¾ bid, 102¼ offered, down from Monday's 102 bid, 103 offered.

The Houston-based energy exploration and production company priced its quick-to-market $300 million deal at par last Wednesday, and the bonds were gradually lifted to current levels after that.

Indicators take a jump

Away from the new-deal arena, statistical indicators of junk market performance were solidly higher across the board on Tuesday, after having turned mixed on Monday following two consecutive bullish sessions before that at the end of last week.

The Markit Group CDX North American Series 18 High Yield Index gained 3/8 point on Tuesday to end at 100 1/8 bid, 100 3/8 offered, after having lost 3/16 point on Monday.

The KDP High Yield Daily Index jumped by 16 basis points on Tuesday - its fifth consecutive gain - to finish at 74.51. It had risen by 4 bps on Monday, and its yield fell by 7 bps, to 5.99%, after having risen by 2 bps on Monday.

Tuesday's yield marked a new low for the year, bypassing the former low point of 6.06%, which had been set on Friday.

And the widely followed Merrill Lynch U.S. High Yield Master II Index, meanwhile, recorded its 18th consecutive gain on Tuesday, rising by 0.166% on top of the 0.182% advance on Monday. That winning streak dates all the way back to Aug. 17.

Tuesday's gain lifted its year-to-date return to 11.651%, a new 2012 peak eclipsing the old mark of 11.466% that had just been set on Monday. The index is now at its highest level since the last session of 2010, when it closed out that year with a 15.19% return.

Its yield to worst, meanwhile, stood at 6.48%, down from Monday's 6.524% reading. Tuesday's yield was also the new low yield for the year versus the old mark set the previous session.

Plains calms down

A trader said that Plains Exploration & Production Co.'s bonds, which had been the biggest mover in Monday's market on the heels of news of a coming big debt-funded acquisition by the Houston-based E&P company, quieted down considerably on Tuesday.

Plains, he declared, "was pretty much a one-day story."

He said that the bonds "had been the top trader yesterday, but today, you only had a couple of million" in them.

He saw that volume in the company's 6¾% notes due 2022 fall to about "only $5 or $6 million" - a far cry from Monday's $25 million of those bonds. He saw them down a half-point, at 105½ bid.

The bonds had swooned some 2¾ points on Monday.

The same held true of the Plains 6 1/8% notes due 2019, which lost a half-point on Tuesday to finish at 103¾ bid, after having plunged 2½ points on Monday, also on volume of about $25 million.

"It wasn't the high-volume mover like the D.R. Horton deal," he said, noting that the latter transaction had already knocked down over $60 million in Tuesday's trading.

The Plains bonds got clobbered on Monday and continued to retreat on Tuesday on the news that Plains had entered into an agreement to acquire certain offshore assets from oil majors BP and Shell - and will finance that new deal with $7 billion of new debt, consisting of $5 billion of bank facility debt and $2 billion of junk bonds.

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