Upsized Conva Tec, Mohegan, PHH lead $2 billion session; Spectrum gains on tender news

By Paul Deckelman and Aleesia Forni

New York, Aug. 6 - The high-yield primary market picked up its pace considerably on Tuesday as syndicate sources heard that four transactions totaling almost $2 billion of new dollar-denominated, purely junk-rated paper from domestic or industrialized-country borrowers had priced during the session. This was about 10 times the amount seen on Monday, when just one smallish deal was completed.

Three of the four deals were upsized to meet investor demand, the sources said, including the day's biggest deal, which came from medical products manufacturer Conva Tec Inc. The company's $900 million quick-to-market offering of 5.5-year PIK toggle notes was done via a financing unit.

Casino operator Mohegan Tribal Gaming Authority finally rolled the dice on its $500 million offering of eight-year notes, which had been postponed for a time last week, the syndicate sources said.

Management services provider PHH Corp. also upsized its quickly shopped offering of eight-year notes to $350 million before pricing.

The day's other deal, from oil and natural gas operator Endeavor Energy Resources, LP, was actually downsized to $250 million before that eight-year paper came to market.

Traders said that the new Mohegan Gaming bonds were well-received in the aftermarket, as were the Conva Tec notes, each gaining more than a point, while the other two deals were going home only slightly up from their respective issue prices.

The syndicate sources saw price talk out on BMC Software Inc.'s $1.38 billion eight-year deal, which was restructured into a single dollar-denominated tranche. Revised talk came out on Southern States Cooperative, Inc.'s $130 million issue of eight-year secured notes. Both of those offerings are expected to price on Wednesday after the order books close.

Away from the new issues, Spectrum Brands Holdings Inc.'s 2018 bonds firmed smartly, though on limited volume, on the news that the consumer products manufacturer plans to take them out via a tender offer announced Tuesday.

DISH DBS Corp.'s bonds were seen easier after the satellite television broadcaster reported quarterly results.

Statistical market performance measures were lower across the board for a second consecutive session on Tuesday.

Conva Tec PIK toggle notes

Tuesday's largest deal in the high-yield primary space came from Conva Tec Finance International SA.

The company was heard by high-ield syndicate sources to have priced a $900 million offering of 8¼%/9% senior PIK toggle notes due Jan. 15, 2019 during the session.

The notes priced at 99 to yield 8.486%.

The issue was upsized from the originally announced $800 million.

The Rule 144A Regulation S for life notes came to market in a quick-to-market transaction just a day after the initial new-deal announcement via joint bookrunning managers Goldman Sachs & Co., J.P. Morgan Securities LLC, Bank of America Merrill Lynch, Deutsche Bank Securities Inc. and Morgan Stanley & Co. Inc.

The notes will be non-callable for the first year after issue.

The Luxembourg-based issuer is a holding company affiliate of Conva Tec Inc., a Skillman, N.J.-based manufacturer of wound-care products, ostomy-are products and other medical technologies that was acquired in 2008 by the private equity companies Nordic Capital and Avista Capital Partners.

The company plans to use the new deal proceeds to pay a cash dividend of some $779 million to its shareholders via partial redemption of outstanding preferred equity certificates.

Mohegan prices on top of talk

The session also saw Mohegan Tribal Gaming priced an upsized $500 million 9¾% eight-year senior notes (Caa1/CCC/) on top of talk on Tuesday, according to a syndicate source.

The notes sold at par to yield 9¾%.

Sources said the original $425 million deal was postponed last week after it was expected to price on Thursday.

Credit Suisse Securities (USA) LLC, RBS Securities Inc., Goldman Sachs & Co., Credit Agricole CIB, SunTrust Robinson Humphrey Inc. and Jefferies LLC were the joint bookrunners.

The Rule 144A and Regulation S with registration rights notes will be non-callable until Sept. 1, 2016 and will then be callable at 107.313.

The Montville, Conn.-based owner and operator of gaming properties plans to use the proceeds to refinance its third-lien notes and to repurchase its 11% senior subordinated notes.

PHH upsizes...

There was also a Securities and Exchange Commission-registered offering from PHH Corp. on Tuesday.

The company sold an upsized $350 million of 6 3/8% eight-year senior notes at par, according to a syndicate source.

The notes priced on top of talk.

Proceeds will be used to tender for up to $300 million of the company's 9¼% senior notes due 2016.

J.P. Morgan Securities LLC, RBS Securities Inc., BofA Merrill Lynch, Barclays, Citigroup Global Markets Inc., Deutsche Bank Securities Inc., RBC Capital Markets LLC and Wells Fargo Securities LLC were the joint bookrunners.

PHH is a Mt. Laurel, N.J.-based business process management services company for the mortgage and fleet management industries.

...while Endeavor downsizes

In other primary activity, Endeavor Energy Resources and EER Finance, Inc. priced a downsized $250 million offering of 7% eight-year senior notes.

The issue was downsized from the originally planned $300 million and priced outside of pre-deal market price talk envisioning a yield in the 6½% to 6¾% range.

The Rule 144A and Regulation S for life notes came to market via joint bookrunning managers Credit Suisse Securities (USA) LLC, Wells Fargo Securities LLC, Credit Agricole Securities (USA) Inc., Mitsubishi UFJ Securities, U.S. Bancorp Investments Inc. and RBS Securities Inc. following a roadshow for potential investors last week.

The notes will be non-callable for the first three years after issue, other than via a make-whole call at Treasuries plus 50 bps, then initially become callable at three-quarters of the coupon.

The notes also have standard 35% equity clawback and 101% change-of-control put provisions.

The Midland, Texas-based oil and gas exploration and production company plans to use the new deal proceeds to repay existing debt and for general corporate purposes.

BMC sets price talk

Looking to the forward calendar, BMC Software set talk for its planned $1.38 billion offering of eight-year senior notes (Caa1/B-) at 8% to 8¼% late Tuesday, as well as altering the deal's structure.

The company has dropped its previously planned euro-denominated tranche, a market source said.

Books for the Rule 144A and Regulation S deal close at 11 a.m. ET Wednesday, with pricing expected thereafter.

The notes will be non-callable for three years and then will be callable at par plus¾ of the coupon, and proceeds will be used for a leveraged buyout.

The notes will feature an equity clawback of up to 40% in the first three years and a 101% poison put.

Credit Suisse Securities (USA) LLC, RBC Capital Markets LLC, Barclays, Deutsche Bank Securities Inc., Citigroup Global Markets Inc., Jefferies & Co. and Mizuho Securities are the bookrunners.

The software company is based in Houston.

Southern widens guidance

Also in the pipeline, Southern States Cooperative has set widened price talk for its planned $130 million offering of eight-year senior secured second-lien notes (B2/B) to 10¼%, according to an informed source.

The notes were previously talked at the 9¼% area.

Books close at noon ET on Wednesday with pricing expected later during the session.

The notes will be non-callable for four years.

BMO Capital Markets Corp. is the bookrunner. Fifth Third Securities Inc., PNC Capital Markets and RB International Markets are the co-managers.

The Rule 144A and Regulation S without registration rights notes come with four years of call protection.

The Richmond, Va.-based supplier of agricultural products and services plans to use the proceeds to refinance debt.

Mohegan moves up

In the secondary market, a trader said the new Mohegan Tribal Gaming Authority 9¾% notes due 2021 went home "wrapped around 1011/2," seeing a two-sided market for the Native American casino operator's paper at 101 3/8 bid, 101 5/8 offered.

The bonds had priced earlier in the session at par.

Conva Tec climbs

A trader said that Conva Tec's 8¼%/9% senior PIK notes due 2019 had moved up to 100 1/8 bid, 100½ offered from their issue price at 99.

A second trader said the medical products manufacturer's notes had climbed to 100 3/8 bid, 100 5/8 offered; he said that he had heard that the order book for the deal had been as much as 2.7 times oversubscribed.

And a third trader saw those bonds going out even better still, at 100½ bid, 101 offered.

Other deals hold near issue

The day's other two pricings, in contrast, were seen by traders having not strayed very far from their respective issue prices when they hit the aftermarket.

One, for instance, quoted the new Endeavor Energy Resources 7% notes due 2021 at 100½ bid, 101 offered, up only modestly from their par issue price.

And a trader pegged PHH Corp.'s new 6 3/8% notes due 2021 at 100 1/8 bid, 100 3/8 offered, only slightly better than their par issue price.

PHH's existing 9¼% notes due 2016 meantime shot up to 117 bid - just below the level at which the company is tendering for up to $350 million of the $450 million of outstanding notes, under a tender offer and consent solicitation announced Tuesday. Previously, the bonds had traded in a 112 to 114 bid context, with the last really sizable trades around 114.

However, Tuesday's trading at the higher level was termed "lackluster" by a market source, who noted that it consisted of just a handful of trades, with none of them reaching round-lot size.

RCN little changed

Among other recently priced issues, a trader quoted RCN Telecom Services, LLC/ RCN Capital Group's 8½% notes due 2020 at 100¼ bid, 100¾ offered.

That was about where the bonds had finished on Monday, after the cable, internet and phone service provider's $200 million issue had priced at par.

A second trader called the bonds unchanged at par bid, 100¼ offered.

A moribund market

Away from the new issues, a trader said that Tuesday's session was characterized by "really light volume."

He said that Junkbondland was initially off by around 1/8 of a point, "then it bounced back and was maybe up [1/16]. Then it got weaker and ended flat" on the day.

He noted, "A lot of people were off on holidays, so there was not too much volume."

DISH down after numbers

One name bucking the generally quiet trend and encountering a fair amount of trading was DISH DBS Corp. This followed the release of the Englewood, Colo.-based satellite television broadcaster's parent company, DISH Network Corp., posting disappointing second-quarter earnings.

The company's most active issue, the 5% notes due 2023, were seen by a market source having lost 5/8 of a point on the day to close at 9 1/8 bid on volume of over $16 million, making the credit one of the day's busiest bond names.

A trader at another desk said that DISH's 5 7/8% notes due 2022 lost three-quarters of a point to close at 98 bid on volume of about $4 million to $5 million.

DISH reported a second-quarter loss on Tuesday loss of about 2 cents per share, well down from a year-ago, when it notched net income of $225.7 million, or 50 cents per share. The most recent quarterly tally included $438 million of impairment charges related to two of the three satellites it acquired through its acquisitions of DBSD North America Inc. and TerreStar Networks Inc.

And net new pay-TV customer additions of 624,000 for the quarter were running about 50,000 below analysts' forecasts.

Spectrum Brands up

Spectrum Brands Inc.'s 9½% senior secured notes due 2018 shot up by about 5 points on the day to the 112 mark. Volume was over $5 million.

The bonds gained after the company announced plans to refinance the entire $950 million issue, taking them out via a tender offer at just below that 112 mark. Funding for the tender will come from a new bank-debt deal.

Market indicators stay down

Statistical junk market performance indicators were lower for a second straight session on Tuesday. They had slid on Monday after three consecutive sessions near the end of last week during which they had been mixed.

The Markit Series 20 CDX North American High Yield index lost 3/8 of a point on Tuesday - its second consecutive loss - to close at 105 7/16 bid, 105½ offered. On Monday, the index had eased by 1/16 of a point.

The KDP High Yield Daily index posted its fourth consecutive loss on Tuesday dropping by 11 basis points to finish at 73.56, on top of Monday's 5 bps loss. Its yield rose by 5 bps, to 6.09%, its third consecutive widening out.

On Monday, it had crept upwards by 1 bp.

And the widely followed Merrill Lynch High Yield Master II index lost 0.093% Tuesday, its fifth consecutive downturn. It had fallen by 0.003% on Monday.

The loss dropped the index's year-to-date return to 3.166% from Monday's 3.262% level. The return was well down from its peak level for the year so far of 5.835%, recorded on May 9, though up solidly from its 2013 low point of 0.384%, set on June 25.

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