R.R. Donnelley drives by, trades actively; Alcatel-Lucent launches $750 million offering

By Paul Deckelman and Paul A. Harris

New York, Nov. 6 - Activity slackened off a little in the high-yield primary realm on Wednesday, with syndicate sources hearing of just one dollar-denominated, fully junk-rated credit having priced by the time the market closed. Commercial printer and integrated communications solutions provider R.R. Donnelley & Sons Co. brought a quickly shopped $350 million issue of 10-year notes to market.

When the new bonds were freed to trade, they firmed moderately from their issue price, but on very heavy volume, according to market sources.

Those same sources also saw some activity in American Axle & Manufacturing Holdings, Inc.'s new 5.25-year notes, some $200 million of which had priced on Tuesday. However, volume levels were greatly reduced Wednesday from what they had been on Tuesday when the automotive components manufacturer's deal priced and then traded vigorously in the aftermarket.

There was also some activity in Tuesday's other new deal, from gaming, leisure and lodging company Golden Nugget.

Away from the day's one domestic pricing that got done, market observers said that French-American telecommunications equipment maker Alcatel-Lucent USA Inc. began shopping a new $750 million deal around as part of its larger $2.7 billion refinancing effort.

In the secondary market, traders said the overall tone was better after two consecutive lackluster sessions.

Statistical indicators of secondary market performance were seen mixed on the day.

Donnelley at the tight end

The high-yield primary tallied just one new issue on Wednesday.

R.R. Donnelley & Sons priced a $350 million issue of non-callable 10-year senior notes (Ba3/BB-) at par to yield 6½% on Wednesday, informed sources said.

The yield printed at the tight end of the 6½% to 6 5/8% yield talk.

The bonds traded actively in the context of par 3/8 bid, par 7/8 offered, according to a trader who remarked that the deal seemed to have been "priced pretty appropriately," and added that it saw broad participation from high-yield and crossover accounts.

BofA Merrill Lynch, J.P. Morgan, Mitsubishi and Wells Fargo Securities were the joint bookrunners.

The Chicago-based provider of integrated communication solutions to private and public sectors plans to use the proceeds for general corporate purposes, which may include repayment of borrowings under its revolver.

Lazard $500 million split-rate

In the crossover market, Lazard Group LLC priced a $500 million split-rated issue of 4¼% seven-year senior notes (Ba2/BBB) at a 230 basis points spread to Treasuries.

The deal was whispered in the high 200 bps spread-range, the source said. Soon thereafter it launched and priced without formal guidance.

The notes came at a 99.671 reoffer price, with a yield of 4.305%.

Citigroup and Goldman Sachs were the joint bookrunners for the debt refinancing deal, which was priced on the high-grade desk.

Alcatel-Lucent plans offering

Alcatel-Lucent USA plans to price a $750 million offering of seven-year senior notes (existing ratings B3/CCC+) on Thursday or Friday.

The initial guidance has the deal coming with a yield in the low 7% range, according to a high-yield investor.

Joint global coordinator Citigroup will bill and deliver for the debt refinancing deal. Credit Suisse is also a joint global coordinator.

BoA Merrill Lynch, Credit Agricole, Deutsche Bank, Goldman Sachs, HSBC, Morgan Stanley, Natixis and UniCredit are joint bookrunners.

Gastar starts roadshow

Gastar Exploration USA, Inc. began a roadshow on Wednesday for a $125 million add-on to its 8 5/8% senior secured notes due 2018 (Caa2/B-).

Imperial Capital is the sole physical bookrunner for the acquisition financing. Credit Suisse is the joint bookrunner.

Edcon's €400 million notes

South Africa's Edcon Holdings Ltd. plans to price a €400 million offering of 5.5-year notes (expected ratings Caa2/CCC) this week.

Joint global coordinator JPMorgan will bill and deliver for the debt refinancing deal. BofA Merrill Lynch is also a joint global coordinator. Barclays, Goldman Sachs, RMB and Morgan Stanley are joint bookrunners.

Edcon is one of several deals from emerging markets zip codes that have lately attracted some high-yield followers, sources say.

Also on Wednesday, Serbia-based SBB/Telemach Group talked its €475 million offering of seven-year senior secured notes to price at par and to yield 7¾ to 8%.

Books close at 5 a.m. ET on Thursday, and the deal is set to price thereafter.

Global coordinator Credit Suisse will bill and deliver. BNP Paribas and Citigroup are also global coordinators. ING and KKR are joint bookrunners.

New Donnelley deal is active

In the secondary market, a trader said that R.R. Donnelley & Sons' new 6½% notes due 2023 "had most of the activity today."

He quoted the bonds at 100½ bid, 101 offered, up from their par pricing level earlier in the day.

"There was a lot of activity there - north of $60 million traded."

A second trader, who "didn't really get involved" in the issue nonetheless agreed that there had been considerable dealings in the new issue, pegging the bonds around 100½ bid, 100 5/8 offered.

Yet a third trader also saw the bonds at 100½ bid, 101 offered.

Axle, Nugget deals in play

A trader agreed with the observation that the last several sessions had seen atypically heavy activity in newly priced offerings - Wednesday's deal from R.R. Donnelley, for instance, Tuesday's issue of American Axle & Manufacturing, and last Friday's bond deal from United Continental Holdings, Inc.

American Axle, a Detroit-based manufacturer of automotive drive-train components, priced a quick-to-market $200 million of 5 1/8% notes due 2021 at par on Tuesday. Traders saw over $50 million of those notes in play after the pricing, with the bonds finally going out having firmed smartly to 101 bid, 101½ offered.

On Wednesday, a trader saw those bonds having improved by ¼ point, to 101¼ bid, 101¾ offered.

A second trader located the bonds at 100 3/8 bid, 100 5/8 offered, although he had seen them higher on Tuesday and called them off 3/8 point on Wednesday.

Tuesday's other junk market pricing - from gaming and lodging concern Golden Nugget - was seen a little bit better on Wednesday, when those 8½% notes due 2021 were seen up 3/8 point at 100 7/8 bid 101¼ offered. That $295 million tranche of bonds had priced at par on Tuesday.

A trader meantime saw United Continental's 6% notes due 2020 down sharply, quoting the Chicago-based United Airlines parent's paper at 98½ bid, 99½ offered. He called that down 1¼ point.

United Continental had priced $300 million of those notes at par in a drive-by deal on Friday, too late in the day for any aftermarket trading at that time. But as soon as they were freed for secondary dealings on Monday, the new bonds ran into turbulence and lost altitude, traders said, finishing the day around 99½ bid, par offered, with over $50 million of the notes having changed hands. They continued to trade below par on Tuesday and dropped below 99 bid on Wednesday.

Antero activity seen

Going back a little further, a trader said that he had seen "some activity" in the recent deal from Antero Resources Corp., seeing those 5 3/8% notes due 2021 at 102 bid, 102½ offered.

The Denver-based independent oil and natural gas exploration and production company had priced $1 billion of those notes at par on Oct. 24, after the quickly shopped transaction was massively upsized from its originally announced $500 million amount.

The new bonds quickly moved above 101 bid later that session, and then settled in around a 101¼ to 101 5/8 bid context last week, before temporarily dropping off the radar screens until Wednesday.

Firmer session seen

A trader said that away from the new and recent deals, there was "nothing exciting jumping out one way or another. It was just a quiet deal until Donnelley priced, late in the afternoon."

At another shop, a trader characterized the overall market as "feeling good today.

"It was better than it had been over the last two days. The tone was better because there had been a lot more bid lists yesterday [Tuesday] and the day before. Things just felt heavy [those two days]. There was a decent amount of fund outflows that were putting pressure on stuff.

"But equities being up today, and Treasuries being up today definitely helped the [junk] market."

Market signs turn mixed

Overall, statistical junk-market performance indicators were mixed on Wednesday after having been lower across the board on Tuesday, which in turn had broken a string of four consecutive mixed-performance sessions before that.

The Markit Series 21 CDX North American High Yield index continued its recent choppiness, gaining 7/16 point on Wednesday to end at 106 9/16 bid, 106 11/16 offered. On Tuesday, it had lost ¼ point.

The KDP High Yield Daily index suffered its fifth straight loss Wednesday, slipping by 7 bps to finish at 74.46. On Tuesday it had eased by 5 bps.

Its yield was unchanged at 5.68%, after having risen for two straight sessions before that.

But the widely followed Merrill Lynch High Yield Master II index got back in the black with a 0.022% gain on Wednesday. On Tuesday, it had fallen by 0.096%, snapping an amazing 18-session winning streak dating back almost a full month, to Oct. 10.

The gain raised its year-to-date return to 6.281%, up from Tuesday's 6.258%, though still down from Monday's reading of 6.36%, which had been its 10th straight new high point for 2013 so far.

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