Acosta, RCN drive-by, PlyGem price overall $1 billion-plus; new WhiteWave busy; Gymboree falls

By Paul Deckelman and Paul A. Harris

New York, Sept. 15 – The high-yield primary opened the new week on Monday by pricing more than $1 billion of new dollar-denominated, fully junk-rated paper in three tranches, picking up the pace from Friday, when just one single-tranche deal worth $500 million priced.

Jacksonville, Fla.-based Acosta Sales & Marketing Co. had the big deal of the day, an $800 million offering of eight-year notes that came too late in the session for any aftermarket activity.

PlyGem Industries, Inc., a Cary, N.C.-based building products manufacturer, brought a quickly shopped $150 million mirror tranche of its existing 2022 notes, while Princeton, N.J.-based RCN Telecom Services, LLC drove by with a $105 million add-on to its 2020 notes. Both deals were later quoted higher.

Friday’s upsized offering from WhiteWave Foods Co. was actively traded, holding on to most of the issue’s initial aftermarket gains.

There was also fairly busy activity in last week’s big deal from energy operator California Resources Corp.

Away from the new deals, Gymboree Corp.’s bonds remained in freefall in the wake of last week’s poor quarterly numbers from the children’s apparel retailer, falling several more points in very active trading.

Medical products manufacturer Alere, Inc.’s bonds rose multiple points – though on only a handful of large-block trades – on the news that its former chief executive officer plans to make a buyout offer for the company.

Statistical indicators of junk market performance were mixed on Monday, after having been lower across the board for a second consecutive session on Friday.

Acosta at the tight end

The Monday primary market executions were noteworthy, particularly in light of executions seen late last week as the primary market was working through a massive $10 billion calendar that was said to have created “indigestion” on the buyside.

Of Monday's three deals, two came as drive-bys and one was slightly upsized.

One came at the tight end of price talk, while the remaining two came on top of talk.

Compare that to last Thursday, which saw nine tranches price. Two of those priced on top of price talk. However, four priced at the wide end of talk and the other three priced wide of talk. None of that session's deals came at the tight end of talk.

Acosta completed Monday's biggest deal, pricing an $800 million issue of notes due 2022 (Caa1/CCC+) at par to yield 7¾%.

The yield printed at the tight end of yield talk in the 7 7/8% area.

During the time it was in the market, pricing backed up on the Acosta deal, which came with early guidance in the low-to-mid 7% yield context and has pushed to the mid-7% context late last week.

Goldman Sachs the left bookrunner for the buyout financing. J.P. Morgan, Morgan Stanley and Barclays were the joint bookrunners.

RCN taps 8½% notes

Elsewhere, RCN Telecom Services and RCN Capital Corp. priced a $105 million tack-on to their 8½% senior notes due Aug. 15, 2020 (Caa1/CCC+) at 102 to yield 7.996% in a quick-to-market transaction.

The dividend deal was upsized from $100 million.

The reoffer price came in the middle of the 101.5 to 102.5 price talk.

Credit Suisse and SunTrust were the bookrunners.

Ply Gem 6½% mirror notes

Ply Gem Industries priced a $150 million issue of notes mirroring its 6½% senior notes due Feb. 1, 2022 at 93.25 to yield 7.721%.

The reoffer price came in the middle of the 93 to 93.5 price talk.

Credit Suisse was the bookrunner for the acquisition financing.

Looking toward the Tuesday session, at least one deal is expected to price.

Tower International, Inc. is in the market with a $250 million offering of eight-year senior notes (B2/B). Although no official price talk circulated on Monday, the notes are whispered in the low 6% yield context, according to a market source.

Service King starts roadshow

Service King began a roadshow on Monday for a $200 million offering of eight-year senior notes (expected ratings Caa1/CCC+).

The acquisition deal is set to price Friday.

J.P. Morgan, BofA Merrill Lynch, Credit Suisse, Deutsche Bank and Macquarie are the joint bookrunners.

TUI to roadshow €600 million

In the European market, TUI AG plans to start a roadshow on Tuesday in London for a €600 million two-part offering of senior notes.

The deal is coming in tranches of five-year notes and seven-year notes. Tranche sizes remain to be determined.

Joint physical bookrunner JP Morgan will bill and deliver. Citigroup and UniCredit are also joint physical bookrunners.

Barclays, BoA Merrill Lynch, Commerzbank, Credit Agricole CIB, DNB Markets, ING, Lloyds, Natixis and SG CIB are joint bookrunners.

The Hannover, Germany-based travel and tourism company plans to use the proceeds to refinance debt and for general corporate purposes.

The deal is in the market in connection with the merger of TUI Travel and TUI AG.

PlyGem, RCN quoted firmer

In the secondary market, traders saw the new PlyGem and RCN additions to those companies’ existing bonds at better levels after pricing.

While one trader only saw “an indication bid at 94, but no two-sided markets” in PlyGem’s $150 million mirror tranche of 6½% notes due 2022, a second trader pegged the building materials company’s new issue in a 93 ¾-to-94 ¼ context, versus its 93.25 issue price.

He also saw cable, internet and phone service provider RCN’s $105 million add-on to its 2020 notes at 102 ¾ bid, 103 ¾ offered, up from their 102 issue price.

At another desk, those notes were quoted at 103 bid.

New WhiteWave actively traded

Friday’s new issue from WhiteWave Foods was one of the most actively traded credits of the day, as it hung onto to most of the gains it had notched in initial aftermarket dealings after pricing.

A trader saw those bonds early in the session 101¾ bid, 102½ offered, down a little from the levels between 102 and 102½ that the new paper had hit when it was freed for secondary dealings on Friday.

However, a second trader saw the bonds later Monday at 102 to 102¼, with more than $37 million having changed hands, putting it high up on the Most Actives List.

A market source at another desk saw the bonds dip down to 101¾ late in the day, but recover to end at 102 bid, which he called down ¼ of a point.

The Denver-based producer of packaged consumer foods had priced $500 million of those notes on Friday at par, after upsizing it from an originally announced $350 million.

California Resources holds gains

Another one of last week’s names that was seen trading fairly actively on Monday was California Resources Corp., the Los Angeles-based oil and natural gas exploration and production operator that brought a massive $5 billion, three-tranche deal to market last Thursday.

A trader saw the company’s 5½% notes due 2021 at 102 3/8 bid, with over $20 million of volume, while its 6% notes due 2024 were at 102 7/8, with $23 million having changed hands.

He quoted its 5% notes due 2020 at 102 1/8, but with only about $4 million having traded.

California Resources had priced $1 billion of the 5% notes, $1.75 billion of the 5½% notes and $2.25 billion of the 6% notes, all at par.

When it was freed for trading on Friday, the 5% notes jumped to above the 102 bid level, and the other two pieces each quickly moved above 103.

A second trader, who said that the new notes “had traded up, had traded well,” opined that even with over $20 million of trading in some of the California Resources tranches, “all things being relative, it wasn’t extremely busy for such a big deal.”

He said that in the context of seeing a generalized lack of activity in the secondary market.

“Even that was not generating a lot of interest,” he said.

J.C. Penney, Clear Channel firmer

Among other recent names out of the primary market, a trader said that J.C. Penney & Co Inc.’s 8 1/8% notes due 20219 were trading inside a 100 3/8 to 100 5/8 context on over $20 million of activity.

Another market source said the bonds were at 100 7/16 bid, which he called up by about 1/8 of a point.

The Plano, Texas-based department store retailer had priced $400 million of those notes at par on Wednesday, after the deal was enlarged from $350 million originally.

Another Lone Star State issue, Clear Channel Communications Inc.’s 9% senior secured priority guarantee notes due 2022, was seen having pushed up to 101¾ bid, a gain of 1/8 of a point on the session, with over $14 million having traded.

The San Antonio-based broadcasting and outdoor advertising company priced $750 million of the notes at par in a quick-to-market offering on Sept. 5.

Gymboree jinx continues

Away from the recent new issues, Gymboree’s 9 1/8% notes due 2018 continued to get hammered down on Monday in heavy trading, just as they had been most of last week.

“Gymboree was bouncing around this morning” inside a 33-to-33½ bid context, a trader said, estimating that the troubled San Francisco-based children’s apparel retailer’s bonds ended down another 3¼ points on more than $50 million of turnover – easily the most active name in Junkbondland on Monday.

A second market source, also seeing the bonds at 33½ bid in very busy trading, called them down 4¾ points on the day.

Those bonds had begun last week trading around 62 bid, but after Wednesday’s poor earnings report, had plunged down to around 37 by Friday afternoon.

The paper plummeted after the company reported that for the fiscal second period ended Aug. 2, sales slid to $264.3 million from $290.9 a year earlier, while comparable-store sales at outlets open at least one year – considered a key retailing industry performance metric, since it culls out both stores which have not yet established a track record as well as those which have since been closed – swooned by 10% from a year earlier.

Adjusted EBITDA shrank to $9.6 million in the latest period from $24.8 million for the second quarter of fiscal 2013.

The company’s net loss, meanwhile, more than tripled to $31.2 million from the $9.4 million of red ink seen a year earlier.

Alere up on buyout plan

Probably the biggest gainer of the day – although on only limited volume – was Waltham, Mass.-based health care products and services provider Alere, whose bonds and shares rose smartly after the company’s former CEO, Ron Zwanziger, said in a regulatory filing that he had been in talks with several fellow former officers as well as other “multiple parties” regarding a possible buyout bid for the company.

They concluded that such a deal could be financed at $46 per share, amounting to $3.82 billion total.

Asserting that the company’s stock is currently undervalued, Zwanziger plans to formally propose a consensual all-cash bid for the company and request a month-long due diligence period in which the company would fully cooperate, according to the filing.

Alere’s 6½% notes due 2020 jumped 8 points, to 107½ bid, although volume was less than $4 million.

The company’s 3% notes due 2016 gained 2¾ points, to just over the 109 bid mark, though on turnover of less than $3 million.

Other Alere issues saw even less activity.

The New York Stock Exchange-traded shares, on the other hand, saw more than 7.5 times the usual turnover, with over 4.6 million shares changing hands. The equity jumped by $4.53, or 12.37%, to end at $41.14.

Indicators turn mixed

Overall, a trader said that “it’s still really quiet in the secondary. The accounts remain focused on the new deals.”

He saw “the cash secondary a little weaker, generically speaking, off by about ¼ of a point. It’s very hard to find investor interest in the secondary.”

Statistical indicators of junk market performance turned mixed on Monday, after having been lower across the on Thursday and again on Friday, the third downside session in four days.

The KDP High Yield Daily index edged up by 2 basis points on Monday to end at 72.88, its first gain after four straight losses and 10 setbacks in the previous 11 sessions, including on Friday, when it was down by 11 bps.

However, its yield, which normally moves inversely to the index reading and thus most likely would be lower on a rise in the index, instead moved up along with it, rising by 2 bps to 5.48%. It was the fifth straight widening and the 12th in the last 13 sessions, including Friday’s 4 bps rise.

The Markit CDX Series 22 index lost 11/32 of a point on Monday to finish at 106½ bid, 106 17/32 offered, its third consecutive loss and fifth setback in the last six sessions, including Friday, when the index was down by ¼ of a point.

The widely followed Merrill Lynch High Yield Master II index suffered its fifth successive loss on Monday and its ninth setback in the last 10 sessions, edging downward by 0.04%, after having eased by 0.06% on Friday.

The latest loss lowered its year-to-date return to 4.635% on Monday, versus Friday’s 4.677%.The cumulative return remained well below its peak level of the year so far, 5.847%, set on Sept. 1, when the index was published even though the junk market was closed for all intents and purposes due to the Labor Day holiday break.

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