Alcatel, LSB, D.R. Horton lead $1.8 billion session as calendar builds; J.C. Penney punished

By Paul Deckelman and Aleesia Forni

New York, July 31 - The high-yield primary sphere had another busy session on Wednesday, with syndicate sources seeing some $1.77 billion of new dollar-denominated and fully junk-rated paper from domestic or industrialized-country issuers having come to market in five tranches.

The biggest deal of the day came from Alcatel-Lucent USA Inc., an arm of the eponymous French telecommunications equipment manufacturer; it sold $500 million of 6.5-year notes in a quick-to-market transaction.

Chemicals manufacturer LSB Industries, Inc. did an upsized $425 million of six-year secured notes, but that deal was delayed by almost a week in coming to market and had to undergo some tinkering around before it could get done.

Familiar homebuilder D.R. Horton, Inc. was heard to have driven by with a $400 million offering of 10-year notes, while sector peer WCI Communities, Inc. came in with a $200 million eight-year offering.

Flexi-Van Leasing Inc., a transportation equipment provider, priced $250 million of five-year notes.

Those deals closed out a month that saw some $18.78 billion of new junk come to market, according to data compiled by Prospect News - better than June's anemic $13.63 billion, but still one of the slowest months so far this year.

Year-to-date issuance, however, continued to run over 19% of the pace seen last year, when the junk market saw record new issuance, the data indicated.

Besides the deals that actually priced, Endeavour Energy Resources, LP and BMC Software Inc. were heard shopping new deals around.

Among the issues that priced on Tuesday, Dana Holding Corp.'s big two-part deal was seen busily trading, with both tranches topping the Junkbondland most-actives list.

Away from the new deals, J.C. Penney Co., Inc.'s bonds and shares moved lower on news reports that lender CIT Group Inc. had cut off credit to some of the underachieving retailer's vendors.

Busy end to a sedate month

Syndicate sources said that some $1.77 billion of new junk-rated paper had priced in five tranches on the last day of July - a fairly respectable pace, although down from the more than $2.7 billion of new junk bonds that had priced on Tuesday and the $2 billion that got done on Monday.

That brought activity for the month up to $18.78 billion, according to data compiled by Prospect News - up from June's $13.63 billion but still the second-smallest month this year. July's total was also down from year-earlier issuance of $21.13 billion.

However, year-to-date issuance still looks strong at $190.97 billion, according to the data, and 19.3% ahead of the $160.1 billion recorded for the same period of 2012. Last year ultimately turned out to be the biggest ever in the junk market.

Alcatel-Lucent leads the way

Among specific issues that priced in Wednesday's market, the biggest came from Alcatel-Lucent USA, which was heard by high-yield syndicate sources to have priced $50 million of 8 7/8% senior notes due Jan. 1, 2020 (B3/CCC+) on Wednesday.

The notes priced at par. The quickly shopped issue had been expected to price to yield around the 9% area, the sources said.

Morgan Stanley & Co. LLC and Deutsche Bank Securities Inc. were the joint global coordinators for the Rule 144A/Regulation S for life deal, while Credit Suisse Securities (USA) LLC, Citigroup Global Markets Inc.,

Goldman Sachs & Co. and UniCredit Bank AG were joint bookrunners on the transaction.

The company - a wholly-owned subsidiary of Alcatel-Lucent SA, the Paris-based telecommunications equipment manufacturer formed by the 2006 merger of France's Alcatel and U.S.-based Lucent - plans to use the proceeds from the bond sale for partial repayment of amounts outstanding under its senior secured credit facilities.

LSB arrives - finally

The syndicate sources heard that LSB Industries had priced an upsized and restructured $425 million offering of six-year senior secured notes (Ba3/B+) on Wednesday at par to yield 7¾%.

However, that transaction was a long time in coming to market, and it didn't get done without changes to the deal's structure, the sources said.

The deal - which was first announced on July 18 - had been expected to price last Thursday but did not appear then.

When it finally did price on Wednesday, it had been upsized from the originally announced $400 million.

It was also restructured, with the tenor being shortened to six years from the originally announced eight years, and the notes changed to senior secured from the original senior unsecured notes, the source said.

The enlarged, revamped deal priced in line with revised price talk envisioning a yield in the 7¾% area.

The notes had originally been talked at a 6¾% area yield last week.

Wells Fargo Securities LLC was the left bookrunner for the Rule 144A and Regulation S with registration rights offer.

Merrill Lynch, Pierce, Fenner & Smith Inc. and J.P. Morgan Securities LLC were also joint bookrunners on the deal. Sterne Agee & Leach, Inc. was the co-manager.

The Oklahoma City-based diversified industrial company said that the proceeds from the deal will be used to repay the $67.2 million unpaid principal balance and the prepayment penalty under its existing term loan facility, plus all accrued and unpaid interest, and for general corporate purposes.

Builders get busy

The homebuilding sector saw not one, but two separate deals pricing on Wednesday.

Familiar issuer D.R. Horton (Ba2/BB/BB) priced $400 million of 5¾% senior notes due 2023 at par, according to the syndicate sources.

Deutsche Bank, Citigroup, JPMorgan, RBS Securities Inc. and Wells Fargo were the joint bookrunners for the quick-to-market offering, which was registered with the Securities and Exchange Commission.

The Fort Worth-based homebuilder plans to use the proceeds from the bond deal for general corporate purposes, which could include providing additional working capital to D.R. Horton's business operations, acquiring and developing land, constructing new homes, acquiring companies in homebuilding or other businesses, repaying or repurchasing existing debt or purchasing other investments.

Out of that same sector, WCI Communities priced $200 million of 6 7/8% senior notes due 2021 (B3/B).

The bonds priced after a short roadshow, which had begun on Monday.

Citigroup, JPMorgan, Credit Suisse and BofA Merrill Lynch were the joint bookrunners for the offering, although a source said that the Rule 144A and Regulation S with registration rights transaction priced off the investment-grade desks.

The Bonita Springs, Fla.-based real estate developer and homebuilder plans to use the proceeds to prepay its senior secured term notes due 2017 at 101 plus accrued and unpaid interest and for general corporate purposes, including the acquisition and development of land and home construction.

Flexi-Van's five-year prices

Flexi-Van Leasing, Inc. was heard by high-yield syndicate sources to have priced $250 million of senior notes due 2018 (B3/BB-).

Those notes, carrying a 7 7/8% coupon, priced at 99.488 to yield 8%.

They came to market at the wide end of pre-deal price talk, which anticipated a yield of between 7¾% and 8%.

Merrill Lynch was the left bookrunner for the Rule 144A/Regulation S for life deal, while Wells Fargo was the joint bookrunner.

DVB Capital Markets LLC, Scotia Capital (USA) Inc. and U.S. Bancorp Investments, Inc. were co-managers on the deal, which had been marketed to potential investors via a roadshow.

The Kenilworth, N.J.-based provider of equipment to the intermodal transportation industry plans to use the proceeds to repay bank debt and fund a distribution to shareholders.

Endeavour, BMC hit the road

Apart from the deals that priced, syndicate sources heard that two prospective issuers were starting roadshows for their respective deals on Wednesday.

BMC Software was shopping a $1.38 billion equivalent offering of eight-year dollar- and euro-denominated notes around to investors, with pricing anticipated sometime during the Aug.5th week.

That deal will include $1.05 billion and €250 million of the notes.

The deal will be brought to market via Credit Suisse, RBC Capital Markets LLC, Barclays, Deutsche, Citi, Jefferies & Co. and Mizuho Securities.

The Houston-based software company will use the deal proceeds to fund its leveraged buyout.

A trader speculated that the offering could see price talk of yield anywhere between 7½% and 9%.

Also getting ready to hit the road was Endeavour Energy Resources and its EER Finance, Inc. unit, who will be bringing a $300 million issue of eight-year senior notes, the proceeds of which will be used to repay existing debt and for general corporate purposes.

This deal from the Midland, Texas-based oil and gas exploration and production company is also expected to price during the Aug. 5th week via Credit Suisse, Wells Fargo, Credit Agricole Securities CIB, Mitsubishi UFJ Securities, U.S. Bancorp and RBS Securities.

Southern States sets talk

A syndicate source saw Southern States Cooperative, Inc. having set price talk on its planned $130 million offering of eight-year senior notes in the 9¼% area.

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

The deal will be brought to market via bookrunner BMO Capital Markets Corp., as well as co-managers Fifth Third Securities Inc., PNC Capital Markets and RB International Markets.

Issuers' existing bonds gyrate

In the secondary market, a trader said that the news that Alcatel-Lucent was bringing a new bond deal to market gave a lift to the company's existing paper.

He quoted its 6.45% bonds due in 2029 as having gained 2 points on the session, to 79 bid.

However, the same could not be said of D.R. Horton's bonds.

News that that D.R. Horton had done a drive-by bond deal pushed its 4 3/8% notes due 2022 down a deuce, at 94½ bid.

A second trader pegged that paper at 92½ bid, down 2½ points.

Day's deals hang in

A trader said that LSB Industries' new 7¾% senior secured notes due 2019 had firmed solidly after pricing at par.

He saw the issue going home at 102 bid, 102½ offered.

The trader meantime saw D.R. Horton's new 5¾% notes due 2023 going out at 100¼ bid, 100¾ offered.

The bonds had priced at par.

Traders saw no immediate aftermarket in the new bonds from Alcatel Lucent, Flexi-Van or WCI Communities.

Dana does well

Among the deals that priced earlier in the week, Dana Holding's two-part $750 million offering attracted the most attention.

A market source said that the Maumee Ohio-based vehicular components manufacturer's drive-by deal was easily the most heavily traded name in the junk market.

Dana's $450 million of 5 3/8% notes due 2021 were seen about unchanged on the day at 100¾ bid, with over $19 million of the bonds changing hands in round-lot transactions and over $29 million overall, counting the smaller odd-lot trades as well.

But even that paled in comparison with the $300 million tranche of 6% notes due 2023, which was seen having moved up to the 101 bid level, up ¾ point. Volume topped the $31 million mark.

Both tranches had priced at par on Tuesday.

J.C. Penney's credit issues

Away from the new deals, a trader said J.C. Penney's debt was being quoted down at least 5 points late in the day following news that lender CIT Group had stopped paying some of the retailer's suppliers.

However, he noted that there weren't many trades happening, which led him to speculate that the name might get busier in Thursday trading.

The trader quoted the 5.65% notes due 2020 at 75 bid, 77 offered and the 5¾% notes due 2018 at 80 bid, 82 offered.

Another market source said the 5.65% notes traded down a point at 811/2. Yet another trader called that issue off ½ a point at 81.

The last trader also saw the 7.95% notes due 2017 at 951/2, down just a touch.

The New York Post reported late Wednesday that CIT - the largest lender for the U.S. retail industry - had halted supplier payments, though the bank did not provide a reason. Speculation is that the lenders were spooked after getting a sneak peek at financials during a meeting with the retailer on Tuesday.

Stephanie N. Rotondo contributed to this review.

© 2015 Prospect News.
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