Giant GM three-part offering, ADT megadeal lead $6 billion session; Caesars hits the road

By Paul Deckelman and Paul A. Harris

New York, Sept. 24 - The junk bond juggernaut continued to roll on, seemingly unstoppable, on Tuesday, as over $6 billion of new U.S. dollar-denominated, high-yield rated paper was heard to have priced in six tranches - one of the heaviest-issuance sessions so far this year.

That huge volume was driven by one of the biggest new deals seen so far this year, as General Motors Co. was heard by syndicate sources to have hauled away a Cadillac-sized load of fresh cash - $4.5 billion in all - as it came to market with three tranches of five-, 10- and 30-year paper.

Traders said the much-anticipated GM deal initially moved up, but then gave back some of its gains, especially the 10-year notes.

That giant tripartite transaction overshadowed ADT Corp.'s eight-year offering, which, at $1 billion, would normally be considered a pretty big deal in its own right. However, after pricing, the security alarm company's new paper firmed smartly in the aftermarket, and held on to its gains.

That was also the story with the day's two other junk deals - Nationstar Mortgage's upsized $225 million of five-year notes and building materials maker CPG International Inc.'s $315 million of eight-year notes. They were seen up more than 1 point and almost 2 points from their respective issue prices as trading wound down.

While most of the new deals priced this week and last were seen at least holding their own and then some, such as Monday's issue from Whiting Petroleum Corp. or Friday's from hospitality company Hilton Worldwide, the same could not be said for Monday's megadeal from Dell Inc.; several traders saw the big computer manufacturer's $1.5 billion behemoth struggling just to stay at its par issue price.

Away from the deals that have actually priced, the syndicate sources heard gaming giant Caesars Entertainment Resort Properties, LLC, starting a roadshow to market its $1.85 billion two-part offering to prospective investors. News of that massive offering did not sit well with holders of the company's existing legacy Harrah's Operating Corp. paper, which fell in active trading.

Statistical market-performance measures turned mixed on Tuesday, after having fallen across the board on Monday.

GM inside of guidance

Issuers printed $6 billion of bonds in the high-volume high-yield new issue market on Tuesday.

The issuance came in six dollar-denominated tranches from four issuers.

General Motors priced $4.5 billion of senior notes (Ba1/BB+/BB+) in three $1.5 billion tranches, each non-callable and priced at par.

The deal included a $1.5 billion tranche of five-year notes that priced at par to yield 3½%. The yield printed on top of yield talk. Initial guidance was in the 4% area.

General Motors also priced a $1.5 billion tranche of 10-year notes at par to yield 4 7/8%, also on top of yield talk. Initial guidance on the 10-year notes came in the 5¼% area.

The long tranche was a $1.5 billion issue of 30-year notes which priced at par to yield 6¼%, again on top of yield talk. Initial guidance was 6¾% to 7%.

Citigroup, J.P. Morgan, BofA Merrill Lynch, Morgan Stanley, BNP Paribas, RBS and UBS were the joint bookrunners for the deal, which was priced on the investment-grade desk.

The Detroit, Mich.-based car-maker plans to use approximately $3.2 billion of the proceeds to repurchase 120 million shares of its series A preferred stock from the UAW Retiree Medical Benefits Trust. Approximately $1.2 billion will be used to redeem all of the outstanding Canadian Health Care Trust notes issued by subsidiary General Motors of Canada Ltd.. The remaining proceeds will be used for general corporate purposes.

ADT prices $1 billion

ADT priced a $1 billion issue of eight-year senior notes (Ba2/BB-) at par to yield 6¼%.

The yield printed on top of yield talk.

Goldman Sachs, Deutsche Bank, Citigroup and JP Morgan were the joint bookrunners.

The Boca Raton, Fla.-based provider of security services for homes and businesses plans to use the proceeds to repay revolver debt, repurchase outstanding common stock and for general corporate purposes, including acquisitions.

CPG at the tight end

CPG International priced a $315 million issue of eight-year senior notes (Caa2/CCC+) at par to yield 8%.

The yield printed at the tight end of the 8% to 8¼% yield talk.

J.P. Morgan, Barclays, Deutsche Bank, Citigroup, RBS and UBS were the joint bookrunners.

Proceeds, along with new senior secured credit facilities and sponsor equity, will be used to finance the acquisition of CPG and refinance long-term debt.

Nationstar taps 6½% notes

Nationstar Mortgage LLC and Nationstar Capital Corp. priced an upsized $225 million tack-on to its 6½% senior notes due Aug. 1, 2018 (B2/B+) at par to yield 6½%.

The quick-to-market deal was increased from $150 million.

The reoffer price came on top of price talk.

Credit Suisse was the bookrunner.

The Lewisville, Texas-based non-bank mortgage services provider plans to use the proceeds to fund working capital and for general corporate purposes, including acquisitions of mortgage servicing rights.

Aviation Capital's crossover

Aviation Capital Group Corp. priced $600 million of three-year senior notes (/BB+/BBB) at par to yield 3 7/8% in a Tuesday crossover transaction.

Barclays, BNP, Citigroup, Credit Suisse and UBS were the joint bookrunners for the deal, which was priced on the investment grade desk.

The Newport Beach, Calif.-based provider of aircraft operating leases plans to use the proceeds for general corporate purposes.

Plastipak sets price talk

Looking ahead to Wednesday's session in the new issue market, Plastipak Holdings Inc. talked its $300 million offering of eight-year senior notes (Caa1/B) to yield 6¼% to 6½%.

Books close at 10 a.m. ET on Wednesday, and the deal is set to price thereafter.

J.P. Morgan, Wells Fargo, RBS, BofA Merrill Lynch and Goldman Sachs are the joint bookrunners.

Caesars starts roadshow

Caesars Entertainment Resort Properties began a roadshow on Tuesday for a $1.85 billion two-part offering of senior secured notes.

The deal includes a $500 million tranche of seven-year first-lien notes (B2/B) and a $1.35 billion tranche of eight-year second-lien notes (Caa2/CCC+). Both tranches come with three years of call protection.

Citigroup, BofA Merrill Lynch, Credit Suisse, Deutsche Bank, JP Morgan, Goldman Sachs, Macquarie, Morgan Stanley and UBS are the joint bookrunners.

Proceeds will be used to help refinance about $4.4 billion of CMBS debt and the $450 million senior secured credit facility entered into by Octavius Linq Holding Co. LLC, an indirect subsidiary of Caesars.

Abengoa taps 8 7/8% notes

The euro-denominated high yield primary market also generated news on Tuesday.

Agengoa Finance SAU priced a €250 million add-on to its non-callable 8 7/8% senior notes due Feb. 5, 2018 (expected ratings B2/B) at 100.25 to yield 8.799%.

The reoffer price came at the cheap end of the 100.25 to 100.75 price talk.

Joint physical bookrunner Citigroup will bill and deliver. Morgan Stanley was also a joint physical bookrunner.

Proceeds will be used to repay debt.

OPAP plans acquisition deal

Emma Delta Finance plc is on the road with a €400 million two-part offering of four-year senior secured notes, backing its acquisition of Greece-based betting enterprise Organisation of Football Prognostics SA (OPAP).

The deal is coming in the form of two tranches of four-year notes: a €250 million tranche of first-lien notes and a €150 million tranche of second-lien notes.

Jefferies is the bookrunner.

GM firmer after pricing

In the secondary market, a trader said that General Motors' new bonds "all seem to be trading pretty well" following pricing at par of the massive three-part issue.

He quoted GM's 3½% notes due 2018 as being "right around" 100½ - about the same level seen for its 4 7/8% notes due 2023 - and pegged the 6¼% bonds due 2043 at 101 bid.

A second trader saw two-sided markets in the three new tranches, initially quoting the five-year notes at 100¼ bid, 100½ offered, the 10-years at 99½ bid, 99¾ offered, and the 30-years at 101 bid, 101½ offered.

However, a little later on, he saw all three issues having come in a little for their earlier levels, with the five-years ending the day at 100 1/8 bid, 100¼ offered, the struggling 10-years at 99 bid, 99¼ offered, and the long bonds at 101 bid, 101¼ offered.

Other deals do well

Away from the GM megadeal, traders saw Tuesday's other transactions all doing well when they were freed for aftermarket action.

One saw ADT's $1 billion of 6% notes due 2021 at 101 bid, 101½ offered, up from their par issue price, while a second located the new bonds at 101¼ bid, 101 5/8 offered.

Scranton, Pa.-based building materials maker CPG International's $315 million of 8% notes due 2021 were seen having gotten as good as 101 7/8 bid, 102 3/8 bid, versus their par issue price.

And a trader saw Nationstar Mortgage's quickly-shopped $225 million of 6½% notes due 2018 at 101¼ bid, well up from the par level at which they had priced.

Energy mostly firmer

Among recent energy-sector deals, a trader saw Whiting Petroleum's 5¾% notes due 2021 at 102¼ bid, up "a point and change" from the 101 level at which the Denver-based independent oil and natural gas exploration and production company had priced its $400 million add-on to its existing 2021 bonds on Monday, yielding 5.58%.

A market source meantime quoted the Whitings at 102 3/8 bid, calling them unchanged on the day from where the existing bonds had gone home on Monday. He said volume was a brisk $7 million-plus.

Whiting had priced $800 million of the 2021 bonds at par back on Sept. 9, as part of a $1.9 billion two-part drive-by transaction that also included $1.1 billion of 5% notes due 2019, which also came at par.

On Monday, the existing 2021 notes had fallen to the mid-102 area, after having gotten as good as a 103-104 bid context before that, in apparent reaction to news the company was going to sell more bonds.

However, the first trader said, "it will get back there [to the higher levels], it will grind back in."

He opined that with the add-on, "now you've got two $1 billion [Whiting] deals - a tremendous amount of liquidity."

He called Whiting "a good, solid name in the E&P space. They're in the Bakken" - the rich shale oil fields in the Dakotas which have become one of the most productive U.S. oil drilling regions over the last few years. "It's a great story - and now they finally have some bonds that trade out there."

Another recently strong energy new-deal, he said, has been Oasis Petroleum Inc.'s 6 7/8% notes due 2022, which have "traded straight up," to current levels around 104½ bid, 105½ offered.

Oasis, a Houston-based E&P company, priced $1 billion of the notes back on Sept. 10 at par, after radically upsizing that quick-to-market deal from its originally announced $600 million size. The bonds jumped more than a point as soon as they were freed to trade, moved up to above the 102 bid level the following day and continued to firm after that.

Noting the strength in the overall exploration and production sector, he opined that companies like Oasis and Whiting "are good, solid credits, the leverage is low, and the projections are for these companies to perform very well going forward."

Energy E&P "is such a big part of the market now, everyone wants to be in it."

However, a new energy credit which seems to have not yet found its footing in the same way is Energy XXI Gulf Coast, Inc.'s 7½% notes due 2021, which the trader quoted at around 100 1/8 bid, 100 3/8 offered, "just above par." That was where the Hamilton, Bermuda-based E&P company priced its $500 million issue on Monday, after the deal was upsized from the original $300 million.

Dell not doing well

Monday's big deal, from Round Rock, Texas-based computer maker Dell, was seen by traders continuing to just tread water at or even slightly below the par level where the $1.5 billion deal priced, after having been downsized from an original $2 billion.

One trader saw them at 99¾ bid, 99 7/8 offered and a second had them at 99¾ bid, 100¼ offered.

Yet another trader said that after trading just below par when it was freed on Monday, the paper had actually gotten as good as par bid, 100 1/8 offered on Tuesday morning - but had fallen back to 99¼ bid, 99½ offered by the end of the day.

Market indicators turn mixed

Statistical junk-market performance indicators managed to turn mixed on Tuesday, after having been lower across the board on Monday. It was the third mixed session in the last four days.

The Markit Series 20 CDX North American High Yield Index eked out a small gain, edging up by 1/32 point to 106 1/8 bid, 106¼ offered, after having fallen by 3/32 point on Monday - its third straight downturn.

However, two separate traders characterized the index as essentially unchanged on Tuesday.

But there was no doubt that the KDP High Yield Daily index moved lower for a second straight session, as it lost 15 basis points to close at 73.84. On Monday, the index had slid by 19 bps, its first setback after nine consecutive sessions on the upside.

Its yield rose by 5 bps on Tuesday for a second consecutive session, to end at 6.04%. Monday's rise in the yield had been its first widening out after having come in for seven straight sessions before that.

And the widely followed Merrill Lynch High Yield Master II Index posted its second loss in as many days, retreating buy 0.014%. That was on top of Monday's decline of 0.072%, which snapped an 11- session winning streak dating back to the end of August which had taken the index's year-to-date return up to heights not seen since the end of May.

Tuesday's loss dropped its year-to-date return to 4.141% from 4.156% on Monday and down from its recent peak level of 4.231%, recorded on Friday.

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