Upsized Micron, Lennar, American Greetings price; heavy trading in new Regency Energy notes

By Paul Deckelman and Paul A. Harris

New York, Feb. 5 - The high-yield primary arena was a little quieter on Wednesday following Tuesday's session that saw the heaviest new-issuances volume so far this year. Even so, three issuers brought nearly $1.3 billion of new dollar-denominated, fully junk-rated paper to market.

The big deal of the day was semiconductor devices maker Micron Technology, Inc.'s upsized $600 million of eight-year notes.

The day's other two pricings were also upsized: home builder Lennar Corp.'s $400 million of five-year notes and a $285 million five-year issue from Century Intermediate Holding Co. 2, the parent of greeting card manufacturer American Greetings Corp.

Unlike Tuesday's more than $4 .4 billion session, in which most of the deals were quickly shopped drive-by transactions, all of Wednesday's pricings were regularly schedule forward calendar affairs, following roadshows.

Lennar's issue, which was radically restructured down from the 12-year notes that were originally shopped around to investors, was the only deal that saw any kind of aftermarket activity, traders said.

But it was well overshadowed by Tuesday's offering from Regency Energy Partners LP, which racked up astounding volume of over $100 million in hectic dealings. While the oil and gas master limited partnership's new bonds firmed on the day, both halves of Tuesday's biggest deal - Chrysler Group LLC's twin add-ons to its five-and-seven-year notes - were seen lower, on respectably busy turnover.

Statistical market-performance measures were mixed for a second consecutive session.

Micron upsizes, prices tight

The news volume in the high-yield new issue market was rather muted on Wednesday, as a trio of issuers brought single-tranche deals to raise a combined total of $1.28 billion.

Executions were a mixed bag.

All three deals were upsized.

One deal came at the tight end of talk. One came at the wide end. And the other came on top of talk that had been revised wider.

Micron Technology priced an upsized $600 million issue of eight-year senior notes (Ba3/BB-) at par to yield 5 7/8%.

The deal was upsized from $500 million.

The yield printed at the tight end of yield talk in the 6% area.

Morgan Stanley, Goldman Sachs and Credit Suisse were the joint bookrunners for the debt refinancing deal.

Lennar upsizes, restructures

Lennar priced an upsized, restructured $400 million issue of non-callable senior notes due June 15, 2019 (Ba3/BB-/BB+) at par to yield 4½%.

The deal was upsized from $250 million, and the maturity decreased to five years from 12 years.

The yield printed on top of revised yield talk. Previous talk was in the 4¼% area.

Joint bookrunners were Citigroup, BMO, BofA Merrill Lynch, Deutsche Bank, J.P. Morgan, UBS and Wells Fargo.

The deal was run on the investment-grade desk by some dealers.

The Miami-based homebuilder plans to use the proceeds for general corporate purposes and working capital.

American Greetings PIK toggle

Century Intermediate Holding Co. 2, the parent of American Greetings, priced an upsized $285 million issue of five-year senior PIK toggle notes (B3/B-) at 99 to yield 10.01%.

The cash coupon is 9¾%. The PIK coupon is 10½%.

The yield came at the wide end of the 9¾% to 10% yield talk. The reoffer price came on top of price talk.

BofA Merrill Lynch, Deutsche Bank, PNC, RBS and Wells Fargo were the joint bookrunners for the issue, which was upsized from $275 million.

Proceeds, together with cash on hand and/or a draw on the revolver of up to $50 million, will be used to fund the redemption of Koch Investment's preferred equity interest in Century Intermediate Holding and to help fund the construction of American Greetings' new world headquarters.

Lowen Play size, structure talk

In the European primary market, Lowen Play GmbH talked its downsized, restructured €235 million offering of seven-year senior secured fixed-rate notes (B2/B) at 99 with an 8¼% coupon.

The deal was downsized from €265 million.

The notes were restructured to feature a fixed-rate coupon instead of the previous floating-rate structure.

The maturity of the notes was increased to seven years from six years. Call protection was extended to three years from two years.

The deal features a mandatory annual amortization offer to repurchase up to 10% of the notes at par, subject to a minimum pro forma cash balance of €30 million. If the pro forma cash balance is less than €30 million, the size of the amortization offer will be reduced accordingly.

Pricing is set for Thursday.

Joint bookrunner Jefferies will bill and deliver. Credit Suisse is also a joint bookrunner.

Lennar leads the way

In the secondary market, a trader saw Lennar's new 4½% notes due 2019 trading in a 99¾ to 100¾ bid context, versus their par issue price.

Senior analyst Vicki Bryan of the Gimme Credit independent investment advisory service called the deal "attractively priced" and opined in a research note that "the extra debt will hardly move the needle on leverage or slow the builder's rapid ascent in credit quality," referring to Tuesday's announcement from Moody's Investors Service of its change in outlook of the company's credit profile to "positive" from "stable"; Moody's cited its expectation that Lennar's adjusted debt leverage will trend toward that of a Ba2-rated homebuilder within the next 12 to 18 months while its other key credit metrics, (e.g., gross margins, interest coverage and return on assets) will continue to improve and, in some cases, exceed Ba2 levels.

Gimme Credit's Bryan meanwhile asserted that "we peg pro forma leverage still dropping by a full turn this year to near 4x, keeping it near the top of our list of high-yield 'favs'."

The new deals from Boise, Idaho-based semiconductor devices manufacturer Micron Technology and from Cleveland-based card manufacturer American Greetings came late in the session and did not generate any immediate aftermarket activity, traders said.

Regency rules Most Actives

Among the deals that priced on Tuesday, the big news came from Regency Energy Partners, whose 5 7/8% notes due 2022 absolutely dominated the Junkbondland Most Actives List.

A market source said volume in the Dallas-based oil and gas master limited partnership's new deal was an amazing $116 million traded - nearly four times the turnover seen in the next busiest issue, El Paso Pipeline Partners Operating Co. LLC's 6½% notes due 2020. The source saw the Regency notes going home at 100½ bid, calling it a gain of 1 point on the day.

"RGP traded quite a bit today," another trader observed, pegging the bonds at 100¾ bid, 101½ offered.

The new deal "traded like crazy today," yet another trader said, seeing the bonds going out at 100¾ bid, 100 7/8 offered.

He noted "energy has been trading a lot in general lately."

Chrysler bonds busy

One of Wednesday's other new issues - Chrysler Group's big two-part offering of five- and seven-year notes - was also seen among the busiest credits of the day, although the Auburn Hills, Mich.-based carmaker's paper was nowhere nearly as active as Regency Energy.

A trader saw its 8¼% senior secured second-lien notes due 2021 down 1 1/8 point, at 111 3/8 bid, with over $20 million of the bonds having changed hands. He saw its 8% senior secured second-lien notes due 2019 off by about 1/16 point at 109 bid on over $9 million of turnover.

Another trader quoted the seven-year notes at 110¾ bid, 111½ offered, while seeing the five-years at 108 bid, 109 offered.

Chrysler - now a wholly owned division of Italian automaker Fiat SpA - priced those two tranches of bonds on Tuesday as add-ons to its existing notes. It came to market with an upsized $2.755 billion of that paper, one of the biggest junk deals seen so far this year. It priced a $1.375 billion add-on to the 8% notes at 108¼ to yield 4.543%, and priced a $1.38 billion add-on to its 8¼% notes at 110½ to yield 5.126%.

Elsewhere among Tuesday's issues, Netflix Inc.'s 5¾% notes due 2024 traded at 100¾ bid, 101½ offered, a trader said. The Los Gatos, Calif.-based provider of movie and television content priced a quickly shopped $400 million of the notes at par.

AMC Entertainment Inc.'s 5 7/8% senior subordinated notes due 2022 were seen trading around 99 7/8 bid, 100 1/8 offered, a trader said, although a second saw them at a wider 99¾ bid, 100¾ offered. The Kansas City, Mo.-based movie theater operator drove by on Tuesday with a $375 million offering that priced at par after upsizing from $325 million.

Market indicators stay mixed

Statistical junk-market performance indicators were mixed for a second session in a row on Wednesday after having been lower across the board during the two previous sessions.

The Markit Series 21 CDX North American High Yield index was virtually unchanged at 106 1/8 bid, 106¼ offered, after rising by 11/32 point on Tuesday, snapping a two-session losing streak.

The KDP High Yield Daily index suffered its fourth consecutive loss, falling by 8 basis points to close at 74.26, on the heels of Tuesday's 6 bps retreat.

Its yield increased by 3 bps, to 5.66%, its fourth straight rise, on top of Tuesday's 2 bp gain.

And the widely followed Merrill Lynch High Yield Master II index got back in the black on Wednesday after three sessions before that on the slide. It rose by 0.037%, in contrast to Tuesday's 0.115% decline.

The gain raised its year-to-date return to 0.655%, up from Tuesday's finish at 0.618%, though it was still well down from the 1.185% it had reached on Jan. 22, its high point of the year so far.

The index's yield to worst declined to 5.731% from Tuesday's 5.735%, its peak level for 2014 so far. Those levels remained well above the low yield for the year, 5.386% on Jan.22.

Its spread to worst tightened to 441 bps over comparable Treasuries from Tuesday's 444 bps, the wide point for the year so far. Those levels remained well above the tight spread for the year, 398 bps, on Jan. 22.

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