Resolute Forest Products prices to cap $4.7 billion week; Penney pops on Soros investment

By Paul Deckelman and Aleesia Forni

New York, April 26- Resolute Forest Products, Inc. was heard by high-yield syndicate sources to have come to market on Friday with a $600 million issue of 10-year notes, which priced at a discount to par.

However, after pricing, traders said that the notes were unable to gain any traction, and ended the day at or below their discounted issue price.

The Canadian pulp and paper manufacturer's transaction was the day's sole U.S. dollar-denominated, junk-rated issue from a domestic or industrialized-country borrower. It brought the week's total of such new issuance to $4.7 billion in 16 tranches, according to data compiled by Prospect News. That represented a stepping up of the activity level from the previous week, ended April 19, when $3.0 billion had priced in nine tranches, according to the data.

Friday's deal also upped year-to-date issuance to $110.483 billion in 240 tranches, the data indicated, running virtually neck-and-neck with the pace seen at this time last year.

There wasn't much activity seen behind the scenes in the primary market; just one upcoming deal surfaced, with British clothing retailer New Look Group Retail Ltd. planning on selling £800 million equivalent of five-year fixed- and floating-rate notes via a subsidiary; tranche sizes and the particular currencies those tranches will be denominated in remain to be determined. New Look will shop the notes around to investors via a European and U.S. roadshow starting Monday.

Among recently priced deals, traders saw Thursday's offerings from AES Corp. and CST Brands, Inc. continuing to do well in the aftermarket. However, they said that another one of that day's offerings - from Erickson Air-Crane Inc. - had given up some of its initial trading gains.

Away from the new deals, J.C. Penney Co. Inc.'s bonds were seen better on the revelation late Thursday that billionaire investor George Soros had taken a nearly 8% stake in the underachieving department store operator.

Statistical measures of junk market performance strengthened on the session across the board, and also improved from their levels at the close of last week.

Resolute prices

Friday's muted primary market saw a single deal price during the session, a $600 million offering from Resolute Forest Products.

The company sold 5 7/8% 10-year senior notes (Ba3/BB-) at 99.062 to yield 6%, according to a market source.

Price talk was set at 5½% to 5¾%.

BofA Merrill Lynch, Citigroup Global Markets Inc. and BMO Capital Markets Corp. are the joint bookrunners.

Barclays, J.P. Morgan Securities LLC and Wells Fargo Securities LLC are the co-managers.

Proceeds from the Rule 144A and Regulation S with registration rights transaction will be used to redeem the company's existing senior secured notes due 2018 and for general corporate purposes.

Resolute Forest is a Montreal-based pulp and paper manufacturer.

New Look eyes deal

In forward calendar news, New Look Bondco I plc has scheduled a roadshow ahead of a proposed £800 million equivalent offering of senior secured notes in two tranches, a market source said.

The U.S. and European roadshow will kick off on April 29 and run until May 2.

The company plans to sell an issue of fixed-rate, sterling-denominated or dollar-denominated notes due 2018. The notes will be non-callable for two years.

There is also a planned floating-rate issue of sterling-denominated or euro-denominated notes due 2018. The notes will be non-callable for one year.

Goldman Sachs & Co. will bill and deliver and is joined by J.P. Morgan Securities LLC as a joint global coordinator.

Goldman, JPMorgan, Deutsche Bank Securities Inc., HSBC Securities (USA) Inc., Lloyds Bank and RBS Securities Inc. are joint bookrunners for the Rule 144A and Regulation S deal.

New Look is a Weymouth, England-based apparel and footwear retailer.

No rise for Resolute

When Resolute Forest Products' new 5 7/8% notes were freed for secondary dealings, traders said that the Montreal-based pulp and paper manufacturer's new bonds struggled just to stay at their discounted issue price.

A trader saw the bonds open at 99 bid, 99½ offered, versus their 99.062 pricing level.

A second trader pegged those bonds at 98 7/8 bid, 99 3/8 offered.

And at another shop, a trader said he had heard that the bonds were in a 98½ to 98¾ context.

He said that someone he knew "was offered a block of them at 99 1/8, and the best bid they saw was 98 and change.

"So it wasn't accepted that well."

He said that meantime the company's established 10¼% senior secured notes due 2018 - which the company formerly known as AbitibiBowater Inc. is tendering for, using the new-deal proceeds to fund that buyback - were trading around 116 7/8 bid on Friday.

Those bonds had moved up to that 117 area on Wednesday, when the new deal and the tender offer were announced. That was up about 2 points from pre-news levels in the low 115s.

New AES bonds stay up there

The trader said that AES' new 4 7/8% notes due 2023 were "doing okay" on Friday.

He declared that "I like them, the company is a good company."

He said that the bonds were trading around 101 5/8 bid, 101¾ offered on Friday afternoon.

The Arlington, Va.-based global and domestic power producer, a very familiar name to high yield participants, had priced its quick-to-market $500 million of the notes at par on Thursday. After initially trading around 100¼ to 1001/2, the bonds were heard to have touched the 101½ bid level later that same session.

On Friday, another trader said, the bonds were up at 101½ bid to 101 7/8 offered, while another market source said he heard there were "buyers between 100 and 101."

CST holds most gains

One of the traders saw the new CST Brands 5% notes due 2023 trading at 102¼ bid, 102¾ offered.

The San Antonio-based gasoline retailer had priced its $550 million offering at par on Thursday.

The bonds quickly moved to a 102½ to 102¾ range, where they finished out the session.

Erickson trades off

A trader said that "the one that faded, a little bit," was Erickson Air-Crane's 8¼% second priority senior secured notes due 2020, $400 million of which had priced at par on Thursday.

He noted that the Portland, Ore.-based helicopter-lift services provider's new issue had traded as high as 102¼ bid on Thursday, but had backtracked to around 101 3/8 bid, 101¾ offered on Friday.

A second trader had seen them earlier in the session hovering as low as 101 1/8 bid, 101 3/8 offered.

Spencer Spirit a no-show

A trader said that he had seen "nothing" doing in the new SSH Holdings, Inc. 9%/9¾% senior PIK toggle notes due 2018, which priced on Thursday.

The Egg Harbor Township, N.J.-based specialty retailer's $165 million of the notes had come to market at 98, to yield 9.51%. There was no aftermarket seen in those notes either Thursday or Friday.

Penney up on Soros news

Several traders mentioned that J.C. Penney's bonds were better, in line with a rise in its shares, on the news that billionaire investor George Soros had taken a 7.91% stake in the underachieving Plano, Texas.-based department store retailer.

One saw Penney's 7 1/8% notes at 102 bid, 102 5/8 offered, up from 101½ bid, 102 late Thursday, remarking that "it looks like Soros is drawing some support."

Penney's 5.65% notes due 2020 gained ¾ point to 83½ bid.

Its 7.65% notes due 2016 firmed to 97 bid.

A market source said that its biggest gainer was the company's 6 3/8% bonds due 2036, seen up 3¼ points on the day to finish just under the 80 mark.

Market indicators stay strong

Overall, statistical junk performance indicators were firmer for a fourth consecutive session on Friday, and were also up across the board from their closing levels the previous week, on Friday, April 19.

The Markit Series 20 CDX North American High Yield Index was up by 3/32 point on Friday to end at 105¼ bid, 105 5/16 offered, its sixth consecutive gain. On Thursday, the index was up by ¼ point.

It was also up versus the previous Friday's close at 104 3/32 bid, 104 7/32 offered.

The KDP High Yield Daily Index, meanwhile rose to 75.90, its fourth straight gain, from Thursday's 75.80, while its yield of 5.24% came in from 5.33% the session before.

That was an improvement from a 75.66 reading and a 5.43% yield the week before.

And the widely followed Merrill Lynch High Yield Master II index posted its seventh consecutive advance on Friday, rising by 0.113%, on top of Thursday's 0.176% gain.

That lifted its year-to-date return to 4.379% - its fifth straight new peak level for the year - from Thursday's 34.262%, the previous peak.

On the week, the index gained 0.746%, versus its loss a week earlier of 0.99% - its first weekly downturn after nine straight weekly gains. The year-to-date return had stood at 3.607% the week before.

© 2015 Prospect News.
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