Upsized MGM Resorts, Woodside Homes add-on price; tender boosts Cliffs; funds lose $281 million

By Paul Deckelman and Paul A. Harris

New York, Nov. 20 – The high-yield primary sphere had its second straight moderately busy session on Thursday, with syndicate sources reporting that $1.18 billion of new junk bonds came to market in two quickly shopped tranches.

On Wednesday, $1.68 billion of new junk-rated, dollar-denominated paper priced in three tranches, also drive-by deals.

That activity pace had slackened off from the busier pace seen in the three sessions before that, when a total of $9.5 billion of high-yield deals were executed.

Gaming giant MGM Resorts International accounted for most of Thursday’s total with an upsized $1.15 billion issue of 8.25-year notes.

Builder Woodside Homes Co., LLC added a slightly upsized $35 million add-on to its existing 2021 notes.

Traders did not see an initial aftermarket activity in either credit.

However, they did see intense dealings in Wednesday’s $1.25 billion of seven-year secured notes from facilities maintenance and building supplies distributor HD Supply Holdings, Inc., easily the busiest issue of the day in Junkbondland.

Apart from the deals that have already priced, syndicate sources were hearing price talk on a trio of offerings that are expected to price on Friday – a $1.2 billion offering from KLX, Inc. and smaller issues from EnTrans International, LLC and Parq Resort & Casino.

Outside of the new deal realm, Cliffs Natural Resources Inc. was among the session’s busiest names, with the coal and iron ore producer’s recently volatile bonds seen up sharply in heavy trading on news the company is tendering for some of that paper.

Statistical indicators of market performance turned mixed on Thursday, breaking a string of six straight sessions when those signposts were all lower.

But another statistical measure – the flow of investor cash into or out of high yield mutual funds and exchange-traded funds, considered a reliable barometer of overall junk market liquidity trends, - turned negative this week, with a $281 million outflow snapping a string of four consecutive weeks before that in which large inflows to the funds had been recorded.

MGM Resorts upsizes

The Thursday session saw two drive-by issuers bring single-tranche, quick-to-market deals, which were both upsized.

One priced on top of talk, and one priced at the wide end.

MGM Resorts launched and priced an upsized $1.15 billion issue of non-callable senior notes due March 15, 2023 (B3/B+/BB) at par to yield 6%.

The deal was upsized from $1 billion.

The yield printed at the wide end of the 5¾% to 6% yield talk.

BofA Merrill Lynch was the left bookrunner. J.P. Morgan, Citigroup, SMBC Nikko and Morgan Stanley were the joint bookrunners.

The Las Vegas-based hospitality company plans to use the proceeds for general corporate purposes, including repaying certain debt maturing in 2015 and funding a portion of the development costs related to its Maryland and Massachusetts resort projects.

Woodside Homes taps 6¾% notes

Woodside Homes and Woodside Homes Finance Inc. priced an upsized $35 million tack-on to their 6¾% senior notes due Dec. 15, 2021 (B3/B) at 98.26 to yield 7.066%.

The quick-to-market deal was upsized from $30 million.

The reoffer price came on top of price talk.

Credit Suisse was the bookrunner.

The North Salt Lake, Utah-based homebuilder plans to use the proceeds to repay bank debt and for general corporate purposes.

Talking the deals

While the preponderance of the Nov. 17 week's deals have come in the form of a.m.-to-p.m. drive-bys, the week started with a modest calendar, much of which is poised to price on Friday.

Talk surfaced on Thursday for three offerings.

KLX talked its $1.2 billion offering of eight-year senior notes (Ba3/BB) to yield 5¾% to 6%.

J.P. Morgan, Citigroup, Goldman Sachs, Credit Suisse and Wells Fargo are the joint bookrunners.

EnTrans talked $250 million of six-year senior secured notes (B2/B) to yield 8¾% to 9%, including an original issue discount.

Credit Suisse is the bookrunner.

And Parq Resort &Casino talked its $200 million offering of seven-year senior secured second-lien notes (Caa1/B-) with an 11½% coupon to yield 12%.

Credit Suisse and Dundee are the joint bookrunners.

Hapag-Lloyd drive-by

Although it had been quiet throughout the early part of the week, there was news from the European primary market on Thursday.

Hapag-Lloyd AG priced a €250 million issue of five-year senior notes (Caa1/B-/) at par to yield 7½%.

The yield printed on top of yield talk.

Lead bookrunner Deutsche Bank will bill and deliver. Berenberg was also a lead bookrunner.

Citigroup, HSBC and UniCredit were joint bookrunners.

Belden taps 5½% notes

Also in the euro primary, Belden Inc. launched and priced a €200 million add-on to its 5½% senior subordinated notes due April 15, 2023 (Ba3/B+) at 103.5 to yield 4.98%.

Joint bookrunner Deutsche Bank will bill and deliver. J.P. Morgan and Wells Fargo were also joint bookrunners.

The St. Louis-based provider of signal transmission solutions for mission critical applications plans to use the proceeds for general corporate purposes and potential future acquisitions.

DHX marketing C$150 million

In the Canadian dollar-denominated primary, DHX Media Ltd. plans to price C$150 million of seven-year senior notes (/BB-/) on Tuesday.

RBC and Scotia are the joint bookrunners.

The Halifax, Nova Scotia-based media production, distribution and broadcasting company plans to use the proceeds to refinance debt and for general corporate purposes.

New MGM deal unseen

In the secondary market, traders reported having not seen the big new MGM Resorts 6% notes due in March of 2023 in initial aftermarket dealings after the gaming giant’s megadeal priced at par.

However, there was some activity in the company’s existing 6 5/8% notes due 2021, which closed at 107 bid, down 1¼ point, on brisk volume of over $13 million.

No aftermarket trading was seen in Woodside Homes’ smallish ($35 million) add-on to its 6¾% notes due 2021.

HD Supply dominates dealings

The traders saw considerable activity in HD Supply Holdings’ new 5¼% first-priority senior secured notes due 2021, which had priced at par in a quick-to-market transaction on Monday.

A trader said that over $85 million of the Atlanta-based facilities maintenance and building supplies distributor’s new deal changed hands on Thursday, making it easily the day’s busiest name.

He quoted the bonds trading in 100 3/8 to 100½ bid context.

A second trader saw the bonds going home 100 3/8 bid, but called that down from earlier levels as high as 101.

And yet another trader agreed that the bonds had traded higher in the morning, pegging them around 100¾ bid, before falling as low as 100 1/8 later on.

He saw them ending the day trading between 100¼ and 100¾, noting that “volume seemed to be pretty good,” as befits a $1.25 billion issue.

The company’s existing 8 1/8% notes due 2019 had risen nearly ¾ of a point on Wednesday on the news it was bringing a new deal, with the bonds going out at 108¾ bid, on more than $10 million traded.

On Thursday, that paper firmed by about another 5/32 of a point to end just under the 109 bid level, with over $7 million traded.

A trader saw Wednesday’s other issue – Asbury Automotive Group, Inc.’s 6% senior subordinated notes due 2024 – trading between 100½ and 100¾ bid on Thursday, on volume of about $10 million.

The Duluth, Ga.-based auto retailer and collision repair center operator drove by on Wednesday with a $400 million issue of those notes, pricing them at par.

There had been no immediate aftermarket seen in either issue, given the relative lateness of the day when they priced, traders said.

Equinix, Moog issues ease

Among other recently priced deals seen trading around, a market source quoted Equinix, Inc.’s 5¾% notes due in January 2025 as having eased by ½ of a point to finish at 99 7/8 bid, on volume of more than $15 million.

But a second trader saw them continuing to hang around their issue price in par to 100½ context.

The company’s 5 3/8% notes due in January of 2022 were off by ¼ of a point at 100 3/8 bid, on more than $11 million of turnover.

Equinix, a Redwood City, Calif.-based interconnection and data centers company, priced the two issues on Monday as part of a quickly shopped $1.25 billion transaction, upsized from an originally announced $1 billion.

That deal consisted of $750 million of the 2022 notes and $500 million of the 2025s, both pricing at par.

Moog, Inc.’s 5¼% notes due 2022 edged downward by 1/8 of a point on Thursday in active dealings of more than $12 million – but still went out at a healthy premium to its par issue price, ending at 101 5/8 bid.

The East Aurora, N.Y.-based designer, manufacturer and integrator of precision control components and systems priced $300 million of then notes at par on Tuesday, after upsizing that regularly scheduled forward-calendar offering from an originally announced $250 million.

The bonds were seen having jumped to a 101¼ to 101¾ context in initial aftermarket dealings and continued to stay at those lofty levels after that.

Cliffs pops on tender

Away from the new deals, the news that Cliffs Natural Resources was launching a tender offer for its 6¼% notes due 2020, the 3.95% notes due 2018, the 4 7/8% notes due 2021, the 4.8% notes due 2020 and the 5.9% notes due 2020 helped push the company’s recently volatile paper solidly higher on Thursday.

“They were very active,” a trader said, seeing the 6¼s having pushed up to around a 66 to 67 context on Thursday after going home Wednesday trading around 59-60.

A second trader saw the bonds up 8 points on the day, at 67 bid, on volume of over $47 million.

The first trader noted, however, that “the shorter maturities aren’t trading as well” as the ’40s were. “They were up, but not quite as much.”

The 3.95% notes ended at 79½ bid, up 6 points on the day, with $13 million traded. The company’s 4 7/8% notes gained about 4½ points to go home at 70½ bid, on volume of more than $27 million.

However, both the 5.9% notes and the 4.8% notes were seen down slightly, bid at 69¾ and 65¾, respectively.

Under the terms of the tender offer, the company is placing the highest priority on the 6¼% notes and the 3.95% notes. Of those two issues, up to $400 million of the 6¼% notes will be accepted and up to $100 million of the 3.95% notes will be accepted.

Holders who participate in the deal will receive $650 per each $1,000 of the 6¼% notes and $800 for each $1,000 of the 3.95%.

There is currently $800 million of the 6¼% notes outstanding and $500 million of the 3.95% notes.

Of the other notes the company is looking to tender, there are no tender caps. Holders will receive $710 for each $1,000 of the 4 7/8% notes, $715 for each $1,000 of the 4.8% notes and $735 for each $1,000 of the 5.9% notes.

The tender will expire at 5 p.m. ET on Dec. 3.

The tender offer will be funded with a new $1.1 billion offering of debt securities coming due prior to the 2020 notes. Additionally, the company said it is entering into a new secured asset-based revolving credit facility with availability of $500 million to $550 million.

News of the tender follows news that the Cleveland-based coal and iron-ore mining company was looking to exit its operations at its Quebec-based Bloom Lake mine, which it had previously been looking for an investment partner for.

The company said that while it had interested investors, it could not get a deal done in a time frame that was acceptable to the company.

There is a likelihood that the mine could be shut down while the iron ore producer pursues its options. That could result in costs of up to $700 million.

Fortescue firmer

A trader said that the Cliffs Resources news may have also been the catalyst behind a rise on Thursday in sector peer Fortescue Resources’ bonds.

“Maybe people think that they might do the same.”

The Australian iron ore producer’s 8¼% notes due 2019 gained 1½ points on the day to finish at 95¼ bid, with over $35 million traded.

The 6 7/8% notes due 2022 were likewise up 1½ points, to 92½ bid, with over $17 million having changed hands.

Sluggish activity seen

Apart from those new deal names, or bonds that had news attached to them like Cliffs Resources, a trader said that Thursday’s market was quiet.

Invoking the upcoming Thanksgiving holiday – now just one week away – he theorized that “there’s so much new paper that’s come in the last few days” – over $12 billion in the last five sessions – “that maybe people are getting some indigestion from all of it, as they look for the wishbone.”

A second trader agreed, opining that people just “seemed to be hung over after all of the new issues.”

Indicators turn mixed

Statistical indicators of junk market performance turned mixed on Thursday, after having been lower for six straight sessions before that.

The KDP High Yield Daily index fell by 10 basis points on Thursday to end at 71.59, its fifth consecutive loss and eighth such downturn in last nine sessions, a skid interrupted only by one session during which it finished unchanged on the day. On Wednesday, it had finished down by 16 bps.

The yield meantime rose by 2 bps to 5.56%, its sixth widening in a row. That followed Wednesday’s 7 bps increase.

But the Markit CDX North American High Yield Series 23 index broke out of a seven-session losing streak on Thursday, edging up by 1/16 of a point to close at 106 15/32 bid, 106½ offered. On Wednesday, it was down by 5/32 point.

However, the Merrill Lynch U.S. High Yield Master II index stayed on the downside for a seventh successive session, retreating by 0.086%, on top of Wednesday’s 0.243% setback.

The latest loss lowered its year-to-date return to 3.634% from Wednesday’s 3.724% finish. The index also remained well down from its peak level for the year of 5.847%, recorded on Sept. 1.

According to the Finra-Bloomberg Active US High Yield Bond index, junk market volume rose to $3.906 billion on Thursday from $3.465 billion on Wednesday.

Funds lose $281 million

High-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall junk market liquidity trends – saw their first net outflow this week after four straight weeks before that of sizable inflows of investor cash.

Market sources familiar with the fund-flow statistics generated by AMG Data Services Inc. said that some $280.7 million more left those weekly-reporting-only funds than came into them in the week ended Wednesday.

That followed the $890.2 million inflow reported last week by Arcata, Calif.-based AMG, a unit of the Lipper analytics division of Thomson Reuters Corp., for the seven-day period ended Nov. 12, which had been a fourth straight weekly upturn in the funds.

Stephanie N. Rotondo contributed to this review

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