Range drive-by, Unit, Epicor price, EchoStar, First Wind, Exopack slate; Jaguar deal ahead

By Paul Deckelman and Paul A. Harris

New York, May 11 - The high-yield primary market calmed down a little on Wednesday from Tuesday's big borrowing binge, which saw nearly $4 billion of new paper price, although most of that was attributable to two-tranche mega-deal-sized offerings from two issuers, NRG Energy, Inc. and Delphi Corp.

Wednesday's tally of more than $1.2 billion was barely a third of Tuesday's and there were no billion-dollar behemoths pricing. But oil and gas operator and familiar junk issuer Range Resources Corp. did come with a quickly-shopped, upsized $500 million offering of senior subordinated notes. Those 10-year bonds were little changed in the aftermarket from their par issue price.

Also from the energy sector, Unit Corp. did an upsized $250 million deal, which, like Range Resources', consisted of 10-year subordinated paper. Unlike its sector peer, though, the new Unit bonds were heard by traders to have firmed smartly when they were freed for secondary activity.

Earlier in the day, Eagle Parent, Inc. priced $465 million of eight-year bonds in support of the pending buyout of two California-based software companies, Epicor Software Corp. and Activant Group, Inc. The new bonds showed solid aftermarket gains.

High-yield syndicate sources heard price talk on new deals from European issuers Jaguar Land Rover plc, which includes two dollar tranches and a sterling component, and German chemical maker Styrolution Group GmbH, with both transactions expected to price on Thursday.

The forward calendar meantime grew with the addition of deals from satellite TV set-top box supplier EchoStar Corp. - a $1.8 billion two-parter - as well as from packaging maker Exopack Holding Corp. and alternative-energy provider First Wind Capital LLC.

Away from the new-deal arena, Solo Cup Co.'s bonds firmed after the maker of disposable plates, cups and utensils released favorable quarterly earnings numbers. Secondary market statistical performers indicators were mixed.

Range sees big roll

The primary market saw $1.2 billion of issuance on Wednesday as three dollar-denominated issuers each completed a single-tranche deal.

Range Resources priced an upsized $500 million issue of 10-year senior subordinated notes (Ba3/BB) at par to yield 5 ¾%.

The yield printed at the tight end of the 5¾% to 6% price talk. The amount was increased from $400 million.

J.P. Morgan Securities LLC, Bank of America Merrill Lynch and Wells Fargo Securities, LLC were joint bookrunners.

Proceeds, together with cash on hand, will be used to fund the tender offers and consent solicitations for $150 million of the company's 6 3/8% notes due 2015 notes and $250 million of its 7½% notes due 2016.

The deal played to big demand, according to a buy-side source who added that there was a sizable "roll" factor, with investors who are being taken out of the 6 3/8% notes and the 7½% notes eager to retain exposure to the credit, hence "rolling" into the new deal.

"I'm a little surprised that it wasn't upsized by more than $100 million," the buy-sider said, but added that the deal was a lot easier to like at 6%, where initial conversations took place, than at the eventual 5¾% print.

The note were at par bid, par ¼ offered in the secondary, the buy-sider said.

Epicor prices at tight end

Meanwhile Eagle Parent, Inc., the special entity formed to finance the merger of Epicor Software Corp. and Activant Group Inc., priced a $465 million issue of eight-year senior notes (Caa1/CCC+) at par to yield 8 5/8%.

The yield printed at the tight end of price talk which had been set in the 8¾% area.

Bank of America Merrill Lynch is the left lead bookrunner for the merger financing. RBC Capital Markets is joint bookrunner.

The buy-side source's fund stayed out of the Epicor deal due to the triple C ratings, or "triple hooks" from both Moody's and S&P.

Nevertheless the deal went surprisingly well, the buy-sider conceded, spotting the new Eagle Parent 8 5/8% notes due 2019 trading at 102 bid, 102 3/8 offered.

"About 90% of these deals are hot," said the buy-sider.

"People get into them expecting them to trade up 2 points in the secondary."

Unit Corp. prices inside talk

Elsewhere Unit Corp. priced an upsized $250 million issue of 10-year senior subordinated notes (B3/BB-/BB-) at par to yield 6 5/8% on Wednesday.

The yield printed 12.5 basis points inside of the 6¾% to 6 7/8% price talk. The amount was raised from an initial $200 million.

Bank of America Merrill Lynch and BMO Capital Markets Corp. were the joint bookrunners.

The Tulsa, Okla.-based oil and gas company plans to use the proceeds to repay bank debt and for general corporate purposes.

Refresco prices two-part deal

In Europe, Refresco Group priced €660 million of seven-year senior secured notes (B1/BB-) in two tranches.

The Dutch soft drinks company priced a €360 million tranche of fixed-rate notes at par to yield 7 3/8%.

The yield printed on top of price talk that had been lowered from 7½% to 7¾%.

In addition, Refresco priced a €300 million tranche of floating-rate notes at par to yield three-month Euribor plus 400 bps.

The floating-rate notes priced on top of price talk.

Deutsche Bank AG and Credit Suisse, ABN Amro, BNP Paribas, Rabobank, ING Group NV and SG CIB were the underwriters for the debt refinancing.

Both tranches did well in the secondary market, a source said, spotting the fixed-rate notes at 101¾ bid, and the floating-rate notes at 101 bid.

Talking the deals

Looking ahead to the Thursday session, Jaguar Land Rover set price talk for its £1 billion equivalent three-part offering of senior notes (B1/B+/BB-).

A £500 million tranche of seven-year notes and a $400 million tranche of 10-year notes are both talked to yield 8¼% to 8½%.

Meanwhile a $400 million tranche of seven-year notes are talked with a yield in the 8% area.

Citigroup, Credit Suisse, JP Morgan and Standard Chartered Bank are the joint physical bookrunners.

Meanwhile Germany's Styrolution Group talked its €480 million offering of five-year senior secured notes (B2/B+) with a yield in the 7¾% area.

Barclays Capital and Citigroup are the joint bookrunners.

EchoStar plans $1.8 billion

The forward calendar, now at $9.765 billion, continued to build on Wednesday, and is apt to continue doing that in the near to intermediate term, sources say.

Even though the stock market traded lower on Wednesday, it appeared to have little if any impact on executions in the high-yield primary market, a trader remarked.

There is a lot of cash to be put to work, so the market is unlikely to have difficulty digesting this calendar.

EchoStar will begin a roadshow on Thursday for a $1.8 billion offering of high-yield notes.

The deal is comprised of a $1 billion tranche of eight-year senior secured notes and $800 million of 10-year non-callable senior unsecured notes.

The senior secured notes will be non-callable, but will come with a provision allowing the issuer to redeem 10% of the notes annually.

The roadshow wraps up on Tuesday.

Deutsche Bank Securities Inc. is the bookrunner.

Proceeds will be used to fund the purchase of Hughes Communications, Inc.

First Wind starts Thursday

Meanwhile First Wind Capital, LLC will begin a roadshow on Thursday for a $200 million offering of seven-year senior secured notes.

The roadshow wraps up Monday, and the deal is set to price on the same day.

Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., Goldman Sachs & Co. and RBS Securities Inc. are the joint bookrunners.

The Boston-based wind energy company plans to use the proceeds to redeem its existing term loan, as well as to fund capital expenditures and for general corporate purposes.

Pro forma on the deal is 9½% to 10%, according to a buy-side source.

Range remains near issue

When Range Resources' upsized offering of 10-year senior subordinated notes was cleared for secondary dealings, a trader saw the Fort Worth-based exploration and production company's new bonds at par bid, 100 3/8 offered, not far from their par pricing level.

A second trader saw the bonds trading in a par to 100 1/8 context.

"I can't believe that Range Resources did a 5¾% deal," he said, commenting on the coupon, considered quite low by Junkbondland's usual standards. In contrast, average junk yields were touching their new lows for the year nearly a full percentage point higher, at 6.677% according to the widely followed Merrill Lynch High Yield Master II Index.

The Range Resources bonds priced at a spread of 258 basis points over comparable Treasuries, slightly more than half of the average junk spread of just over 500 bps according to the Merrill index.

However, he added that "it's still not as tight" as the all-time tight junk levels seen at this time four years ago when the average junk spread over government paper had narrowed to an unprecedented 265 bps over and some of the better-quality junk issues mere moving around at spreads of around 100 bps.

The spreads are greater now because "Treasury rates are lower now than they were back then, that's for sure," he explained.

Unit up after pricing

The day's other new issue out of that same energy patch, for Tulsa, Okla.-based Unit Corp., meanwhile firmed smartly when those 10-year senior subordinated notes were freed for trading, with a trader estimating them at 102 bid, 102¼ offered.

A second trader saw the upsized $250 million issue trading at 102¼ bid, 102½ offered.

The Eagle flies

Eagle Parent's new eight-year notes were quoted by a trader up at 102 1/8 bid, 102 5/8 offered, well up from the par level at which the $465 million leveraged buyout offering priced earlier.

However, a second trader said that he had seen no indications on where the bonds were trading.

"Everybody's been talking about it in our shop," he said. "We weren't really involved, but we were curious about it - sometimes we get involved in the secondary market for this stuff."

New NRG bonds little changed

Among the deals which priced during Tuesday's session, a trader saw NRG Energy's $2 billion two-part offering finally trading around; the Princeton, N.J.-based power generating company's big deal had come to market too late in the day on Tuesday for aftermarket activity at that time.

There were "a fair amount" of the new bonds trading on Wednesday.

He saw the company's $800 million of 7 5/8% notes due 2019 trading in a par to 100 1/8 context, not far from their par pricing level on Tuesday.

The $1.2 billion of new 7 7/8% notes due 2021, which had also priced at par, traded Wednesday at 100½ bid, 100¾ offered.

A second trader saw the eight-year NRG bonds at 100 1/8 bid, 1003/8 offered, while seeing the 10-year issue at 100 3/8 bid, 100 5/8 offered.

Existing NRGs stay active

For a second straight session, NRG's existing bonds were among the most actively traded issues in a largely moribund non-new-deal secondary junk bond market.

A trader said that clearly the 7 3/8% notes due 2016 was the busiest issue, as had been the case on Tuesday, when around $30 million of the bonds had traded. NRG plans to use the proceeds from its new deal to find a tender for the '16s aimed at taking out all $2.4 billion of them. On Wednesday, a market source saw around $15 million of the notes trading - only about half of Tuesday's turnover, but still right near the top of the actives list on a generally dull day.

A trader Wednesday saw the '16s trading right around 104 bid, 104 1/16 offered. "A bunch of bonds traded right there," he said, adding "that's crazy - that's pretty tight."

Those levels were compatible with the 104 level at which they traded on Tuesday, just above the early-deadline total consideration, equivalent to a price of 103.938 plus accrued interest being offered to holders who tender their notes to the company by the May 23 early-tender deadline.

Among other NRG paper seen on Wednesday was the company's 8¼% notes due 2020, which a trader said was the next most active after the 2016 bonds, as had been the case on Tuesday. He saw the issue at 103 5/8 bid, 104 offered, which he said was "down a little bit" from Tuesday's close at 104 ¼ bid, "but not much difference."

Meanwhile, a market source said that just like on Tuesday, about $12 million of NRG's 7 3/8% notes due 2017 traded, and ended the day off about 1/8 point at 105 5/8 bid.

Delphi holds above issue

Both halves of the new two part mega-deal from Troy, Mich.-based automotive components manufacturer Delphi Corp. continued to trade at a slight premium to par, after having priced there on Tuesday.

A trader said that he "didn't see as much trading in them as I expected to."

He said that Delphi's $500 million of 5 7/8% notes due 2019 were trading around 100½ bid, while its $500 million of 6 1/8% notes due 2021 "were doing better" than the eight-years, at 101¼ bid, 101 3/8 offered.

He said that it was strange that the longer issue should be doing better than the shorter, considering that its coupon was only ¼ point higher.

Another trader pegged the new Delphi eight-years at 100½ bid, 100 3/8 offered, while the 10-years were at 101 bid, 101 offered.

The traders said those levels Wednesday were around where the bonds had traded after pricing on Tuesday.

Linn holds in

Tuesday's other deal - the $750 million offering of 6½% notes due 2019 from Houston-based oil and gas operator Linn Energy, LLC - was seen by a trader on Wednesday at 100¼ bid, 100½ offered, while a second saw them at 100 3/8 bid, 100 5/8 offered.

The bonds had priced at par on Tuesday and then firmed in the immediate aftermarket to around 100¼ bid, 100 5/8 offered.

"Was that only yesterday [Tuesday] that Linn priced?" the trader asked, only half jokingly. Given all of the pricing activity and other primaryside dealings between early Tuesday when Linn priced and Wednesday afternoon, he said "it seems like it was days ago."

Secondary signals are mixed

For yet another day, traders opined that most of the activity in the secondary market involved trading in the new deals, or in paper like NRG's existing bonds which had some kind of a new-deal connection, while the more traditional secondary issues languished.

Away from the new issues, a trader saw the CDX North American Series 16 HY index slide by 5/16 point on Wednesday to end at 102 13/16 bid, 102 15/16 offered, giving back the 5/16 point gain which had been seen on Tuesday.

The KDP High Yield Daily Index meantime lost 3 basis points on Wednesday to close at 76.32, after having risen by 6 basis points on Tuesday. Its yield moved up by 1 bp to 6.37%, after having come in by 2 bps Tuesday.

But the Merrill Lynch High Yield Master II Index notched its 16th consecutive upturn on Wednesday, gaining 0.071%, on top of Tuesday's 0.025% advance. That raised its year-to-date return to 5.969%, a new peak level for the year, from Tuesday's 5.893%, the previous zenith.

Caesars steps back

Among specific names, a trader saw Caesars Entertainment Corp.'s bonds come off the highs they hit on Tuesday after the Las Vegas-based gaming giant formerly known as Harrah's Entertainment reported smaller first-quarter losses versus a year ago.

He saw the company's Harrah's Operating Co. Inc. 10% notes due 2018 - which on Tuesday had risen between 1½ and 2 points on the session to around 96 bid - finishing Wednesday at 95 5/8 bid, 95 7/8 offered.

Another market source saw the bonds at 96 bid, but called that a ½ point retreat.

The bonds had risen Tuesday after Caesars posted a $147.5 million net loss in the first quarter ended March 31 - an improvement from the year-earlier $195.6 million loss. Overall revenues fell 1% year-over year to $2.18 billion in the quarter.

The quarter also included a gain of $21 million related to an early retirement of debt.

Solo up on earnings

Also on the earnings front, a trader said Solo Cup's 10½% notes due 2013 were active following the release of the company's "decent numbers."

He said about $20 million to $25 million of the paper changed hands in the "105 range."

Another trader said the 10½% notes were up ¼ to ½ point at 1041/2, while the 8½% notes due 2014 gained "about a point" to end around 92.

A third trader said the 8½% have "kind of been cruising up," seeing the notes also around the 92 mark.

"They were in the upper-80s last week," he noted.

The third trader placed the 10½% notes around the 105 level.

For the 13 weeks ending March 27, the Lake Forest, Ill.-based company posted a net loss of $25.3 million, compared to a loss of $16.5 million the year before. Net sales, however, were higher at $371.1 million, versus $344.9 million.

Still, cash and equivalents declined to $16.4 million from $21.5 million.

"Our results of operations for the 13 weeks ended March 27, 2011 continued to be affected by economic and industry conditions," the company said in its 10-K filed Tuesday. "Weak economic conditions continued to reduce the discretionary income of consumers and negatively affect demand for single-use products used to serve food and beverages...Lower consumer discretionary spending translated into a smaller consumer market, as did a shift from national brands to private label products, which are traditionally offered at lower prices."

The company also noted that price increases in raw materials are also weighing down earnings.

Rite Aid gains steam

Rite Aid Corp.'s debt was "grinding higher," a trader said, and in active trading.

The trader said that "at least" $25 million of the 9½% notes due 2017 turned over, up a point at 94 bid, 94 ¼ offered.

Another trader also called the paper up "about a point" at 94¼ bid, 94½ offered.

That compared to 93 bid, 93¼ offered on Tuesday, he said.

A third source saw the 9½% notes moving up over a point to end at 941/2, while yet another source called the 8 5/8% notes due 2015 nearly a point higher at 95 bid.

There was no fresh news out on the Camp Hill, Pa.-based drugstore chain.

Stephanie N. Rotondo contributed to this report

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.