Genesys Labs pricing opens short pre-holiday week, Studio City on tap; new deals, energy names up

By Paul Deckelman and Paul A. Harris

New York, Nov. 21 – The high yield primary market opened what is scheduled to be a short and probably not-so-busy week ahead of the Thanksgiving Day holiday in the United States with one pricing on Monday, as Genesys Telecommunications Laboratories, Inc. did a $700 million issue of eight-year notes, syndicate sources said.

Traders said the communications solutions company’s new deal moved to solidly higher levels when it hit the aftermarket.

They said that most of the new or recently priced issues were better on the day on Monday amid a general market upturn, including credits such as Hilton Grand Vacations Borrower LLC, EP Energy LLC and Tenet Healthcare Corp.

Even Bombardier, Inc.’s recently priced five-year offering, which has struggled from the get-go in the secondary arena, was seen a little firmer on Monday.

Among the names which have not yet priced, new-deal players were looking forward to a likely Tuesday pricing for Macau gaming and hotel operator Studio City Co. Ltd.’s $1.2 billion two-part secured paper offering.

And they said that Xerox Corp. spinoff Conduent Inc. downsized its planned eight-year notes deal to $500 million.

Away from the primaryside, traders said that energy names such as California Resources Corp., EP Energy’s existing bonds and Whiting Petroleum Corp. were up by multiple points, helped by a surge in world crude oil prices Monday on expectations that OPEC nations meeting in Vienna at the end of the month will cut global output in order to support prices.

Statistical market performance measures were higher across the board on Monday after having weakened on Friday, their second stronger session in the last three trading days.

Genesys prices tight

Genesys Telecommunications Laboratories, Inc. priced its $700 million issue of eight-year senior notes (Caa2/CCC) at par to yield 10% on Monday.

The yield came at the tight end of the 10% to 10¼% yield talk.

There were numerous covenant changes (see related story in this issue).

Goldman Sachs was the left bookrunner for the acquisition financing. BofA Merrill Lynch, Citigroup and RBC were the joint bookrunners.

Studio City talks $1.2 billion

Studio City Co. Ltd. set price talk for its $1.2 billion two-part offering of senior secured notes (B1/BB-).

The deal includes a three-year bullet talked to yield in the 6% area and a tranche of five-year notes, with two years of call protection, talked to yield in the 7 3/8% area.

Tranche sizes remain to be determined.

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

Global coordinator and left bookrunner Deutsche Bank will bill and deliver. BofA Merrill Lynch is a joint bookrunner. ANZ and BOC International are joint passive bookrunners.

The Macau-based hotel and entertainment company plans to use the proceeds, together with cash on hand, to pay off its HK$10,855,880,000 senior secured term loan and revolver dated Jan. 28, 2013.

Studio City is a 60% owned indirect subsidiary of Melco Crown Entertainment Ltd. and a 40% directly owned subsidiary of New Cotai LLC.

Conduent downsizes

Conduent Inc. downsized its offering of eight-year senior notes (expected ratings B2/B+/BB) to $500 million from $750 million.

The spinoff deal is talked to yield 9¾% to 10%, and is set to price on Tuesday.

The issuer is also contemplating an extra year of call protection, which would up call protection to four years, the trader said.

Conduent's notes offer widened dramatically since the deal began its roadshow a week ago, when initial guidance was 7¾ % to 8%, according to market sources.

BofA Merrill Lynch, J.P. Morgan, BNP Paribas, Citigroup, Credit Suisse, Goldman Sachs and Mizuho are the joint bookrunners.

Friday outflows

The cash flows of the dedicated high yield bond funds were negative on Friday, the most recent session for which data was available at press time, a trader said.

High yield ETFs sustained $377 million of outflows on the day.

Actively managed funds sustained $120 of outflows on Friday.

However, the cash flows of the dedicated loan funds were strongly positive on Friday, at $384 million of inflows on the day, the trader said.

New Genesys gains

In the secondary market, traders reported stronger levels in the new Genesys Telecommunications Laboratories 10% notes due 2024.

One trader saw the bonds shoot up to a 101 to 102 bid context, well up from its par pricing level, helped by “that fat coupon,” while a second pegged the new notes at 101¼ bid.

And yet another market source located the San Francisco-based communications solutions provider’s deal in a 101¾ to 102¼ bid range.

Recent issues gain

Among some of the new deals that came to market last week, Hilton Grand Vacations Borrower’s 6 1/8% notes due 2024 were seen about ¼ point better on the day, with one market participant seeing them at 101½ bid and a second quoting them at 101¼ bid, 101¾ offered. More than $10 million changed hands.

The Orlando, Fla.-based vacation timeshares company – being spun off from global hotels giant Hilton Worldwide Holdings Inc. – had priced its $300 million deal at par coming off the forward calendar on Friday, and the bonds had pushed up by more than 1 full point in initial aftermarket dealings after that.

Traders said that EP Energy’s new 8% senior secured notes due 2024 jumped by nearly 1 point on the session, with one seeing them going home at 101 bid, and a second seeing them up “anywhere between ¾ point and 1 point,” at 100¾ bid, 101 offered. Volume was around $14 million.

The Houston-based oil and natural gas exploration and production company had priced its $500 million forward calendar transaction at par on Thursday after the deal was upsized from $350 million originally. The notes initially clung to their issue price in the aftermarket, but pushed up solidly on Monday, the traders said, on the back of a strong rise in crude prices.

EP Energy’s existing 9 3/8% notes due 2020 rose by some 1 3/8 points, to 79 3/8 bid, with over $16 million traded.

Tenet Healthcare’s 7½% senior secured second-lien notes due in January of 2022 were seen about unchanged at 104 bid, with about $10 million having traded.

The Dallas-based hospital operator priced $750 million of those notes at par last Wednesday after the quick-to-market offering was upsized from $500 million originally.

The deal was called “a blowout” right out of the gate, a market source said, noting its early trading levels above 103 bid. The bonds stayed up there in subsequent sessions, hitting 104 on Friday and staying there on Monday.

Bombardier edges up

Even last week’s aftermarket underperformer – Bombardier’s 8¾% notes due 2021 – were seen having improved during Monday’s session, although they remained below their issue price.

One trader quoted the notes 97 5/8 bid, 98 1/8 offered, calling them up 1/8 point.

A second, though, saw them unchanged on the day at 97 15/16 bid, with $13 million traded.

The Montreal-based aircraft and railroad-car manufacturer priced $1.4 billion of those notes off the forward calendar on Wednesday. They came at a discount, pricing at 99.001 to yield 9%, initially stayed around the 99 bid area, but had fallen below the 98 bid level by Friday, and stayed in that vicinity on Monday.

Energy names improve

Away from the new deals, energy issues were up solidly on Monday, fueled by a sharp rise in world crude prices on expectations OPEC will support prices with an output cut when the global energy cartel meets in Vienna on Nov. 30.

U.S. benchmark crude grade West Texas Intermediate for January delivery shot up by $1.80 per barrel, or 3.9%, on the New York Mercantile Exchange, settling in at $47.49, while global benchmark grade Brent crude for January delivery galloped by $2.04 per barrel, or 4.4%, closing on the London ICE Futures Exchange at $48.90.

That in turn pulled oil names higher.

California Resources’ 8% notes due 2022 rose by 2 points to 73¾ bid, on volume of over $18 million.

A trader said Whiting’s 6 ¼% notes due 2023 were likewise up a deuce on the day at 96 bid.

Indicators turn stronger

Statistical market performance measures were higher across the board on Monday after having weakened on Friday, their second stronger session in the last three trading days.

The KDP High Yield index gained by 3 basis points to close at 69.94, after having dropped by 5 bps on Friday, its first loss after three straight gains.

The index’s yield was unchanged at 5.91%, having risen by 2 bps on Friday versus Thursday’s 3 bps tightening.

The Markit Series 27 CDX index rebounded by 3/8 point on Monday to 103 15/16 bid, 103 31/32 offered, after having lost 3/16 point on Friday. Monday’s gains was the second in the last three sessions.

The Merrill Lynch High Yield index gained 0.192%, after losing 0.147% on Friday. Monday was its fourth gain in the last five sessions.

That lifted its year-to-date return to 14.499% from 14.28% at the close on Friday.

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