Sabine megadeal leads $3.28 billion primary session, gains in secondary; Genesis, Suburban busy

By Paul Deckelman and Paul A. Harris

New York, May 13 - The high-yield market saw yet another strong day of pricing activity on Tuesday, with syndicate sources tabulating that $3.28 billion of new dollar-denominated, fully junk-rated paper had priced during the session in four tranches.

That was more than double the $1.53 billion in three tranches that had gotten done during Monday's session, according to data compiled by Prospect News.

The day's signature transaction was Sabine Pass Liquefaction, LLC's upsized, quick-to-market $2 billion offering of 10-year secured notes.

Traders said that megadeal from the subsidiary of natural gas company Cheniere Energy Partners, LP firmed smartly when it was freed for secondary market activity.

The energy sector was a busy place Tuesday, also producing scheduled forward calendar deals from Alpha Natural Resources, Inc. and KCA Deutag Alpha Ltd.

Bristol, Va.-based coal producer Alpha brought an upsized $500 million of 6.25-year secured paper to market, while Scottish well drilling contractor KCA Deutag did $375 million of seven-year secured notes. The latter issue was quoted higher in the aftermarket.

The session's lone dollar-denominated non-energy offering was Parsippany, N.J.-based Avis Budget Car Rental, LLC's upsized $400 million drive-by issue of eight-year paper.

Two quick-to-market 10-year energy issues that priced on Monday were seen among the most actively traded credits in Junkbondland on Tuesday - oil and natural gas operator Genesis Energy, LP's new bonds and those from propane and fuel oil distributor Suburban Propane Partners, LP.

Traders meantime saw relatively little happening in the secondary market away from the new issues and recent pricings.

Statistical market performance indicators were seen having turned mixed after two consecutive higher sessions.

Sabine Pass $2 billion drive-by

The dollar-denominated primary market saw four issuers bring single-tranche deals and raise $3.28 billion on Tuesday.

Executions were notable. Three of the four deals were upsized. Two of the four were a.m.-to-p.m. drive-bys. Three of the four came at the tight end of talk, and the other came on top of talk.

Sabine Pass Liquefaction priced an upsized $2 billion issue of non-callable 10-year senior secured notes (Ba3/BB+) at par to yield 5¾%.

The deal was upsized from $1.5 billion.

The yield printed on top of yield talk.

RBC Capital Markets LLC was the left bookrunner for the quick-to-market deal.

Mizuho Securities USA Inc., SG Americas Securities LLC, Morgan Stanley & Co. LLC, HSBC Securities (USA) Inc., Scotia Capital (USA) Inc., Credit Suisse Securities (USA) LLC, Lloyds Securities Inc., Mitsubishi UFJ Securities (USA) Inc., Credit Agricole Securities (USA) Inc., BBVA Securities Inc., ING Financial Markets LLC, Banca IMI SpA, Standard Chartered Bank, J.P. Morgan Securities LLC and SMBC Nikko Securities America Inc. were the joint bookrunners.

The Houston-based liquid natural gas company plans to use the proceeds, including the additional $500 million resulting from the upsizing of the deal, to pay capital costs in connection with the construction of liquefaction trains 1 through 4 and to repay bank debt.

Biggest-ever deal for RBC

For the high-yield syndicate at RBC, Sabine Pass' $2 billion deal is the biggest-ever to come off that desk, an informed source said.

It tops the LINN Energy, LLC and LINN Energy Finance Corp. $1.3 billion issue of 8 5/8% notes due April 15, 2020 - also a 10-year deal and also upsized - that priced on RBC's high-yield desk on March 30, 2010.

Alpha upsized and tight

Elsewhere on Tuesday, Alpha Natural Resources priced an upsized $500 million issuer of senior secured second-lien notes due Aug. 1, 2020 (B2/B) at par to yield 7½%.

The deal was upsized from $400 million.

The yield printed at the tight end of the 7½% to 7¾% yield talk.

BofA Merrill Lynch, Citigroup Global Markets Inc., Barclays, BMO Capital Markets Corp., Credit Agricole, Deutsche Bank Securities Inc., Goldman Sachs & Co. and Morgan Stanley were the joint bookrunners for the debt refinancing and general corporate purposes deal.

Avis Budget drive-by

Avis Budget Car Rental priced an upsized $400 million issue of eight-year senior notes (B2/B+) at par to yield 5 1/8%.

The deal was upsized from $350 million.

The yield printed at the tight end of yield talk in the 5¼% area; early guidance on the deal was 5¼%.

Morgan Stanley, Barclays, Citigroup and RBS Securities Inc. were the joint bookrunners for the debt refinancing.

KCA Deutag at the tight end

Scotland's KCA Deutag UK Finance plc priced a $375 million issue of seven-year senior secured notes (B3/B) at par to yield 7¼%.

The yield printed at the tight end of the 7¼% to 7½% yield talk.

JPMorgan, Goldman Sachs, HSBC and Lloyds were the bookrunners.

The Aberdeen-based energy drilling contractor plans to use the proceeds to refinance existing bank debt and to add a small amount of cash to its balance sheet.

CareTrust starts roadshow

CareTrust Partnership, LP began a roadshow on Tuesday for a $260 million offering of seven-year senior notes due 2021 (expected ratings B2/B).

The deal appears to be shaping up in the mid-6% yield context, according to an investor who claims to like the story.

Wells Fargo is the left bookrunner. SunTrust Robinson Humphrey Inc. and RBC are the joint bookrunners.

Proceeds will be used to make a transfer to Ensign Group, Inc. in order for Ensign to repay some debt, pay trade payables and, subject to the approval of Ensign's board of directors, pay up to eight regular quarterly dividends. Proceeds will also be used to pay the cash portion of the purging distribution related to the spin-off of CareTrust from Ensign as well as for working capital purposes, to fund acquisitions and for general corporate purposes.

Johnston atop revised talk

In the European market, Johnston Press plc priced a £225 million issue of 8 5/8% five-year senior secured notes (B3/B) at 98 to yield 9.127%.

The reoffer price and yield came on top of tightened talk; earlier talk had the notes coming with an 8¾% coupon at 97 to 98.

The deal saw some pushback, market sources said. The newspaper publishing sector is not the easiest sell, a London-based debt capital markets banker remarked on Tuesday.

JPMorgan, Credit Suisse and Lloyds Securities managed the Johnston Press deal.

Proceeds will be used to refinance debt and service pension obligations.

The deal was slightly upsized from £220 million. The additional proceeds will be used to fund the original issue discount, a market source said.

Glasstank sets talk

Glasstank BV talked its €180 million offering of five-year senior secured notes (Caa1/CC) with an 8½% coupon, to price at a to-be-determined discount, and to yield in the 11% area.

The deal is set to price Wednesday.

The double-C rating from Standard & Poor's notwithstanding, the deal is somewhat attractive to one investor who said that the company operates in some of its markets virtually free of competition.

Also, the 11% yield talk will no doubt generate some close looks and some second looks, the buysider said.

"It has some hair, but it has some yield," the investor summed up.

Citigroup is the bookrunner for the debt refinancing and general corporate purposes deal.

Glasstank operates as Yioula Glass in Greece and the Balkans.

Matalan starts roadshow

England-based Matalan Finance plc began a roadshow on Tuesday for a £492 million two-part offering of senior secured notes.

The deal come in a £342 million tranche of five-year first-lien notes (expected ratings B2/B-) and a £150 million tranche of six-year second-lien notes (expected ratings Caa2/CCC).

Joint global coordinator and joint physical bookrunner Morgan Stanley will bill and deliver for the debt refinancing deal. Lloyds is also a joint global coordinator and joint physical bookrunner. Barclays is a bookrunner.

News continues to stream steadily out of the European new issue market, as syndicate official said on Tuesday.

However, the stream is apt to become more of a torrent during the week ahead, during which the European market is expected to generate as many as 10 deals, the source added.

Sabine strengthens in secondary

In the secondary market, traders said that the day's activity was dominated by the new Sabine Pass offering and other recently priced deals, crowding out the non-new-deal segment of the market.

Sabine's upsized $2 billion of 5¾% senior secured notes due 2024 were seen by one trader having been around a 100½ to 101 context when the deal broke - but he saw the bonds later on having moved up to around 101¼ to 1011/2, well up from their par issue price.

A second trader saw the bonds improve to 101 bid, 101¼ offered from earlier levels around 100¾ bid, 101 offered.

And a third market source pegged them at 101 bid, 101½ offered going home.

KCA Deutag climbs

A trader saw the new 7¼% senior secured notes due 2021 from KCA Deutag at 101¼ bid, although he had not seen a right side.

That was well up from their par issue price.

Traders said that the new Alpha Natural Resources and Avis Budget Car Rental bonds both priced fairly late in the afternoon, and they had not seen any initial aftermarket.

However, the existing bonds of both companies were seen trading actively ahead of those new deals.

A market source said that more than $19 million of Avis' established 8¼% notes due 2019 had traded, ending just above 107 bid, a gain of more than ¼ point.

But Alpha Natural Resources' 6¼% notes due 2021 were seen having slid for a second consecutive session, on brisk Tuesday volume of over $18 million.

Those bonds had firmed solidly last week, closing out on Friday as high as 81 7/8 bid, but dropped to 78 bid by the close on Monday after the company announced plans to bring a new deal to market. On Tuesday, they continued to lose ground, going out at around 77½ bid.

A trader at another desk saw those bonds down 1 1/8 point on the day at 77 3/8 but also saw its 9¾% notes due 2018 ending up nearly 1½ points at just under par, on volume of more than $7 million.

Monday deals move up

The three quick-to-market 10-year energy deals that priced on Monday were all seen trading at robust premiums to the par level where all three offerings had priced.

The biggest mover was Genesis Energy's 5 5/8% notes due 2024. The Houston-based diversified midstream energy master limited partnership, along with co-issuer Genesis Energy Finance Corp., had priced its $350 million issue at par, with the new bonds closing a little higher in a context of 100½ to 101.

On Tuesday, though, the bonds pushed well above the 101 bid mark, with one market source seeing them up as much as 7/8 point at 101 3/8 bid, 101 7/8 offered.

Another trader quoted them around 101¼ bid, calling that a gain of perhaps ¼ point. He saw more than $31 million of those notes having traded, boosting the credit to the top of the Most Actives list.

In contrast, the traders saw smaller gains in the new issues from Energy XXI Gulf Coast, Inc. and Suburban Propane Partners, both of which had done quite well in Monday's aftermarket following their respective pricings.

The latter $525 million deal, from Whippany, N.J.-based propane and fuel oil retail marketer and distributor Suburban Propane Partners and co-issuer Suburban Energy Finance Corp., had traded very actively on Monday after pricing, when more than $47 million of the new notes had changed hands.

Volume remained brisk on Tuesday at more than $20 million, a market source said, well among the day's top issues. But he saw the bonds about unchanged on the day at 101 5/8 bid.

At another desk, a trader said that Suburban "did very well." He saw the bonds at 101½ bid, 101¾ offered, calling them up about ¼ point.

Energy XXI's 6 7/8% notes due 2024 were seen by a trader at 101½ bid, 101¾ offered, about unchanged on the day. A second trader saw them at 101¼ bid, 101¾ offered, calling that down by ¼ point.

The company - the operating subsidiary of Energy XXI (Bermuda) Ltd., an oil and gas exploration and production company based in that island nation - had priced its $650 million issue at par Monday, more than doubling it from the originally announced $300 million; the new bonds had shot above the 101¼ mark when they were freed for aftermarket activity.

Non-new-deal segment quiet

Away from the new deals, a trader called Tuesday's market "kind of a mixed bag. Things were churning around, but there was no real flow."

A second trader, while seeing things quoted at overall "very firm" levels, characterized Tuesday's session as "very quiet. There are a lot of earnings out."

Indicators turn mixed

Statistical junk performance indicators were seen by market sources mixed on Tuesday after having been higher across the board on Friday and again on Monday.

The Markit Series 22 CDX North American High Yield index edged upward by 1/32 point on Tuesday to end at 107 7/32 bid, 107 9/32 offered - its fifth advance in a row - after having gained 7/32 point on Monday.

But the KDP High Yield Daily index saw its first loss after two consecutive sessions on the upside before that. It lost 4 basis points to close at 74.98 after having firmed 3 bps on Monday.

Its yield meantime increased by 1 bp to 5.11% after having narrowed for five straight sessions before that. On Monday, the yield had come in by 2 bps.

The widely followed Merrill Lynch High Yield Master II index made it a full one dozen advances in a row on Tuesday, gaining 0.082% on top of Monday's 0.094% improvement.

Tuesday's gain raised the index's year-to-date return to 4.28%, its 12th consecutive new peak level for 2014 so far. The prior high point had been Monday's 4.195% reading.

The index's yield to worst declined to 5.141%, its second straight new low point for the year. The previous low point for the year had been 5.16%, set on Monday.

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