Delphi, drive-by NRG mega-deals price, Linn Energy also; Ardagh slates; Caesars up on results

By Paul Deckelman and Paul A. Harris

New York, May 10 - NRG Energy, Inc. - which visited the junk market with a mega-sized offering earlier this year - was unexpectedly back on Tuesday, pricing a $2 billion two-part offering of eight-year and 10-year notes at par. But the big power generating company's even bigger deal came too late in the session for any kind of an aftermarket.

The Princeton, N.J.-based company's existing bonds were meantime actively traded, though mostly little-moved in price on the day, including the issue being tendered for using the proceeds of the new offering.

That deal dwarfed what otherwise would have been considered the signature transaction of the day: automotive components maker Delphi Corp.'s slightly downsized $1 billion two-part offering. It also consisting of eight-year and 10-year paper. Both halves of that forward-calendar deal came at par and were seen having firmed when the new bonds were freed for trading.

Also pricing was a quick-to-market $750 million issue of eight-year notes from Houston-based oil and gas exploration and production company Linn Energy, LLC. The new bonds firmed solidly from their discounted issue price when they began trading around.

Lions Gate Entertainment Inc. priced a quickie $200 million add-on to an existing tranche of bonds. The movie and television programming producer's new bonds moved up in light aftermarket dealings.

From overseas came word that Europcar had priced an add-on to its euro-denominated secured 2017 notes.

High-yield syndicate sources meantime heard price talk on energy operator Unit Corp.'s upsized $250 million of senior subordinated 10-year notes. The order books closed Tuesday afternoon.

The sources also heard that Irish glass packaging maker Ardagh Group SA was hitting the road on Wednesday to market a multi-part seven-year PIK bond deal. The offering will consist of dollar- and euro-denominated paper.

Away from the new deals, traders saw busy activity in Ceasars Entertainment Corp.'s bonds, helped by the Las Vegas-based casino giant's first-quarter results.

NRG drives through $2 billion

It was super-deal Tuesday in the primary market. Three issuers priced a combined five tranches of junk generating $3.74 billion of proceeds.

Two of the issuers accounted for $3 billion of the business.

In drive-by action, NRG Energy, Inc. priced $2 billion of senior notes (B1/BB-) in two parts.

The deal included an $800 million tranche of eight-year notes that priced at par to yield 7 5/8% and a $1.2 billion tranche of 10-year notes that priced at par to yield 7 7/8%.

Both tranches priced on top of the price talk.

Morgan Stanley & Co. Inc., Bank of America Merrill Lynch, Barclays Capital Inc., Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., Goldman Sachs & Co., J.P. Morgan Securities LLC and RBS Securities Inc. were the joint bookrunners for the quick-to-market deal.

A special call provision was removed that would have allowed the issuer to redeem 10% of the notes annually at 103 during the non-call period.

Delphi ratchets down talk

Elsewhere, Delphi priced a downsized $1 billion of senior notes (Ba3/BB) in two parts.

The deal included a downsized $500 million tranche of eight-year notes that priced at par to yield 5 7/8%.

The yield printed on top of price talk, which was revised 12.5 basis points lower from the original 6% area talk.

Delphi also priced a downsized $500 million tranche of 10-year notes at par to yield 6 1/8%, on top of price talk.

JPMorgan and Citigroup were the joint bookrunners for the deal, the overall size of which was decreased from $1.1 billion. Both tranches were reduced by $50 million.

Proceeds, along with cash on hand, will be used to fund the repurchase of stock from General Motors and Pension Benefit Guaranty Corp.

They're ratcheting down price talk and the allocations will be horrible, lamented a high-yield mutual fund manager toward the middle of the New York morning not long before Delphi priced.

Linn prices at the tight end

Linn Energy and Linn Energy Finance Corp. priced a $750 million issue of 6½% eight-year senior notes (B2/B) at 99.232 to yield 6 5/8%.

The yield printed at the tight end of price talk that had been set in the 6¾% area.

Citigroup was the left bookrunner for the quick-to-market deal.

Credit Agricole, the European coordinator, was a joint bookrunner, as were Barclays Capital, BNP Paribas, RBC Capital Markets, RBS Securities, Wells Fargo Securities and Credit Suisse.

The Houston-based oil and gas company plans to use the proceeds to fund its Texas Panhandle acquisition, to repay revolver debt in full and for general corporate purposes.

Europcar taps 9¾% notes

In the European primary market, which has lately generated an uncharacteristically heavy volume of news, Europcar priced a €100 million fungible add-on to its 9¾% senior secured notes due Aug. 1, 2017 (B2//) at 109.75 to yield 7.74%.

The reoffer price came in the middle of the 109.5 to 110 price talk.

Deutsche Bank AG, Credit Agricole CIB, Natixis Bleichroeder, Royal Bank of Scotland and SG CIB were the joint bookrunners for the quick-to-market deal.

Deutsche Bank will bill and deliver.

The Saint Quentin en Yvelines, France-based car rental company plans to use the proceeds to refinance debt and fund fleet purchases.

The original €250 million issue priced at 98.732 to yield 10% in June 2010. Hence Europcar realized 2.26% of interest savings, relative to the original yield, with the yield that printed on the Tuesday tap.

Ipalco prices split-rated deal

In the crossover market, Ipalco Enterprises, Inc. priced a $400 million issue of split-rated eight-year senior secured notes (Ba1/BB+/BBB-) at a 245 bps spread to Treasuries.

The spread came at the tight end of the 250 bps price talk.

Bank of America Merrill Lynch, JPMorgan, RBS Securities and Mitsubishi UFJ Securities (USA), Inc. were the underwriters for the quick-to-market deal, which was transacted on the investment-grade desk.

The Indianapolis-based regulated electric utility plans to use the proceeds to finance its repurchase of up to $375 million of 8 5/8% senior secured notes due 2011.

Talking the deals

Setting the stage for Wednesday, dealers talked Eagle Parent, Inc.'s $465 million offering of eight-year senior notes (Caa1/CCC+) with a yield in the 8¾% area.

Proceeds from the deal are being used to fund the merger of Epicor Software Corp. and Activant Group Inc.

Bank of America Merrill Lynch is the left lead bookrunner. RBC Capital Markets is the joint bookrunner.

The Epicor/Activant deal is hot, market sources said.

A portfolio manager expressed apprehensions that interest in the deal could drive the 8¾% area yield talk lower before the "print" button is hit.

Elsewhere, Unit Corp. upsized its offering of 10-year senior subordinated notes (B3/BB-/BB-) to $250 million from $200 million on Tuesday.

The notes were talked with a 6¾% to 6 7/8% yield.

The order books closed at 5 p.m. ET on Tuesday.

Merrill Lynch and BMO Nesbitt Burns are the joint bookrunners.

Ardagh's dual-currency deal

Ireland's Ardagh Group will begin roadshow presentations on Wednesday in the United States and London for its $300 million and €185 million offerings of seven-year PIK notes.

Citigroup has the books.

The notes are being issued via special-purpose vehicle ARD Finance SA.

The Dublin-based supplier of glass and metal packaging plans to use the proceeds to refinance its existing senior PIK notes and return capital to its shareholders.

'Feeding frenzy'

A trader said that Tuesday's dealings were "the same old thing" as a lot of the recent activity in Junkbondland: "the market awaits the new issues, then when they come, it goes into a feeding frenzy. Then they wait for the next one."

A second trader said that "there's a good appetite" for the new paper, "there's cash for it and people still need the yield, and with default rates incredibly muted, it's hard not to get involved in some of this stuff."

At another desk, a trader saw market activity mostly "focusing on new issues," to the exclusion of just about everything else. He said, "The best way to describe it is that if you're looking to put money to work, that's the only way you can buy anything of substantial size. Hopefully you get an OK allocation. If you play the new issues, you kind of [get] an OK-to-crappy allocation, or you play the secondary and you can't buy anything."

The first trader, meantime, said that "new issues come and go, and they've been trading up - not as crazy as they used to" when some issues would jump 2 or even 3 points on the break and continue to gain after that, "but they still trade up."

Linn is liked

When Linn Energy's new eight-year notes came to market, a trader said that he had seen "a lot" of the new bonds initially trading around a par bid level, up from the 99.232 level at which the $750 million deal had priced earlier in the day.

He saw those bonds then firm to around 100¼ bid, 100 5/8 offered.

A second trader said the new bonds went out trading "well above par," which represented a solid gain from their discounted issue price.

Late in the session, a trader saw the bonds going out at 100 1/8 bid, 100 5/8 offered.

Delphi does well

Both halves of the new deal from Troy, Mich.-based automotive components manufacturer Delphi were seen to have done well after being freed. Delphi made a triumphant return to the junk bond market, where its old bonds had been a longtime mainstay until they were all wiped out during the company's bankruptcy several years ago.

A buyside source saw the new eight-year notes trading on the break at 100¼ bid, 100¾ offered, versus their par issue price, while the 10-year issue, carrying a 25 bps fatter coupon, did even better at 100 5/8 bid, 101 1/8 offered.

A little later, a trader saw the new Delphi eights having firmed a little to the 100½ bid, 100¾ offered level, while the 10s moved up to 101 bid, 101½ offered.

A second trader, later in the session, saw the Delphi eight-year notes and 10-year notes going out at 100 3/8 bid, 100 7/8 offered and at 101 bid, 101½ offered, respectively.

The Lion roars

When Lions Gate Entertainment's add-on deal to its 10¼% notes due 2016 were freed for secondary dealings, a trader said that the Vancouver, B.C.-based movie producer's new bonds traded "right around issue or slightly better," although he said he thought they "didn't trade much."

He quoted the bonds at 102¾ bid, 103¼ offered - up from the 102.219 level at which the $200 million deal, raised from the original $150 million, had priced.

Another trader, though, didn't see anything doing in the issue, noting the relatively small size. "In this day and age, in the 'new normal,' that's a small deal."

NRG an aftermarket no-show

NRG Energy's new issue was anything but a small deal - the $2 billion behemoth is, in fact, one of the biggest deals of the year to date - but it came too late in the day to trade around.

However, there was brisk trading in the Princeton, N.J.-based power generating company's existing bonds, although not very much in the way of price movement.

The most-active NRG issue was the one slated to be taken out using the proceeds of the bond deal along with cash on hand - its $2.4 billion of 7 3/8% notes due 2014.

A market source said about $30 million of the bonds changed hands on Tuesday, making it one of the top five most active junk bond issues of the day. However, the bonds ended around the 104 mark, just above the early-deadline total consideration - equivalent to a price of 103.938 plus accrued interest - being offered to holders who tender their notes to the company by the May 23 early-tender deadline.

NRG's 8½% notes due 2019 were also busy, with about $20 million of those bonds trading; they actually eased a little more than a point in round-lot dealings, ending at 105½ bid.

Meanwhile, a market source said about $12 million of NRG's 7 3/8% notes due 2017 traded, and they ended the day unchanged at 105¾ bid.

GCI hangs in there

Away from Tuesday's deals, a trader said General Communication Inc.'s new 6¾% notes due 2021 were trading at 101 bid, 101½ offered, around the same level that the $325 million offering from the Anchorage-based broadband, phone and cable service provider's deal had risen to after pricing Monday at par.

"They got up to that 101 level, and then they just died there," he said.

Older new issues hold steady

The trader also said that there was "just a little back and forth" in the slightly older new issues, "and the changes were not that big."

He saw Dutch electric and electronics components supplier Sensata Technologies Holding NV's 6½% notes due 2019 trade around at 100½ bid, 100¾ offered and then get back up to 100¾ bid. They held the gains they notched after the $700 million issue, upsized from the original $600 million, priced at par on Friday.

He saw another Friday deal, from Miami-based construction equipment rental operator Neff Rental LLC, get as good as 101 on Monday, but then "every time it got up there, someone hit the bid and brought them down to par," where the $200 million issue of 9 5/8% second-lien senior secured notes due 2016 had priced Friday and where they were going out on Tuesday.

But another trader said that Ford Motor Credit Co. LLC's 5% notes due 2018 "were almost back up to par today," quoting the issue at 99 7/8 bid, "so they're getting there."

The auto loan financing arm of Ford Motor Co. priced $1.25 billion of the bonds at par back on April 28 - but they proceeded to fall below that issue price and have struggled to get back to it ever since then.

Secondary signs turn north

Away from the new issues, a trader saw the series 16 CDX North American High Yield index up by five-sixteenths of a point on Tuesday to end at 103 3/16 bid, 103 5/16 offered after having gained one-quarter of a point on Monday.

The KDP High Yield Daily index meantime rose by 6 bps on Tuesday to close at 76.35 after having been unchanged on Monday. Its yield likewise came in by 2 bps to 6.36% after having held steady on Monday.

And the Merrill Lynch High Yield Master II Index notched its 15th consecutive upturn on Tuesday, gaining 0.025%, on top of Monday's 0.081% advance. That raised its year-to-date return to 5.893%, a new peak level for the year, from Monday's 5.867%, the previous zenith.

Render unto Caesar

Several traders said that Caesars seemed like the story of the day in the non-new-deal segment of the high-yield market and in the distressed-debt precincts as well.

A trader saw the company's Harrah's Operating Co. Inc. 10% notes due 2018 up between 1½ and 2 points on the session, with the bonds going home around 96 bid after having traded around that level for "most of the day."

In contrast, those bonds had finished on Monday around a 943/4-95 context.

He said that there was "a lot of volume - it was something like number two on the volume list."

"A lot of Caesars changed hands," a second trader said, "and it got a pretty good boost."

He saw the 10s up "a solid 1½ to maybe 2 points," pushing as high during the day as a 96-97 bid complex on volume of between $50 million and $60 million.

The first trader noted that the company was out with its latest quarterly numbers, "which didn't look all that good to me but which were probably better than expected."

The Las Vegas-based gaming giant posted a $147.5 million net loss for the first quarter ended March 31, an improvement from the year-earlier $195.6 million loss. Overall revenues fell 1% year over year to $2.18 billion in the quarter.

The quarter also included a gain of $21 million related to an early retirement of debt.

Clear Channel climb continues

A trader said that Clear Channel Communications Inc.'s bonds were "feeling better," seeing the San Antonio-based media company's 10¾% notes due 2016 trading around 99 bid, up around a half point from the levels seen on Monday, when the bonds had also firmed by around a half point.

He said that activity in the credit was "more quotes than volume."

A market source at another desk saw some relatively brisk activity in the company's 11% notes due 2016, which traded at 97 bid, up nearly a full point from Tuesday's close, on volume of more than $12 million, putting it among the day's more active junk bonds.

The bonds have firmed in the wake of Friday's report by company parent CC Media Holdings Inc. of first-quarter results. The company touted a 5% gain in revenues. They rose to $1.32 billion from $1.26 billion a year ago.

While CC Media finished in the red to the tune of a $132 million net loss in the latest quarter, that was less red ink than $175 million a year ago.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.