KB Home, Gray Television bring upsized deals, Neiman Marcus up next; overall market quiet

By Paul Deckelman and Paul A. Harris

New York, Oct. 15 - The junk bond market reopened on Tuesday after the Columbus Day holiday break the day before, with two opportunistically timed and quickly shopped transactions totaling some $833 million.

Builder KB Home did an upsized $450 million of eight-year notes, which traders said firmed a little when they were freed for secondary dealings. And broadcaster Gray Television, Inc. priced an upsized $375 million fungible-upon-registration add-on to its existing 2020 notes. These two were seen trading a little above their issue price as the day wound down.

High-yield syndicate sources meantime heard price talk on luxury retailer Neiman Marcus Group Ltd.'s $1.56 billion two-part offering, which is expected to come to market on Wednesday.

Talk was also out on ambulance and fire truck producer Allied Specialty Vehicles Inc.'s $200 million offering after the company restructured the deal to shorten the maturity. That offering is also poised to price on Wednesday.

The sources furthermore said that Penn National Gaming, Inc. began a roadshow on Tuesday for the $300 million eight-year deal that the casino operator announced on Friday.

Among recently priced deals, traders saw slightly lower levels for the new bonds from syncreon Global, Wynn Macau, Ltd. and L Brands, Inc. And they saw a mixed bag among the recently remarketed bonds of T-Mobile USA Inc., which continued to be listed among the most active of Junkbondland credits.

However, the overall market remained listless, traders said, with many investors still sideline-sitting to await the eventual outcome of the Washington budget and debt ceiling shutdown process.

Statistical market-performance indicators were unchanged to higher.

KB Home upsizes

The primary market generated a brisk news volume on Tuesday, as the Columbus Day-abbreviated Oct. 14 week got underway.

A pair of single-tranche, junk-rated dollar deals priced in drive-by transactions that generated $833 million of proceeds.

Both were upsized, and executions were on the money.

KB Home priced an upsized $450 million issue of non-callable senior notes due Dec. 15, 2021 (B2/B) at par to yield 7%.

The deal was upsized from $350 million.

The yield printed on top of yield talk.

Credit Suisse, BofA Merrill Lynch, Citigroup and Deutsche were the joint bookrunners for the debt refinancing and general corporate purposes deal.

Gray Television at rich end

Gray Television priced an upsized $375 million add-on to its 7½% senior notes due Oct. 1, 2020 (Caa1/B+) at 102.125 to yield 6.984%.

The add-on was upsized from $300 million.

The reoffer price came at the rich end of price talk that was set in the 102 area.

The deal went well, according to a portfolio manager who played, and whose allocation was cut back.

"It's no longer trading in the grey," the manager quipped, and noted that the deal was up ¾ of a point in the secondary.

Wells Fargo was the left bookrunner for the bank debt refinancing. BofA Merrill Lynch and RBC were the joint bookrunners.

The Atlanta-based television broadcast company plans to use the proceeds to partially repay its term loan B.

Leucadia split-rated deal

Leucadia National Corp. priced an upsized $750 million issue of 5½% 10-year senior notes (Ba2/BBB/BBB-) at a 295 basis points spread to Treasuries.

The notes sold at the tight end of talk, which was set in the area of Treasuries plus 300 bps.

Pricing was at 98.641 to yield 5.68%.

Jefferies was the bookrunner for the debt refinancing and general corporate purposes deal.

Talking the deals

A couple of deals that have been on the road are poised to price on Wednesday, as price talk circulated on Tuesday.

Neiman Marcus Group Ltd. set price talk for its $1.56 billion two-part offering of eight-year senior notes.

A $960 million tranche of cash-pay notes (B2/B) is talked to yield in the 8% area, and a $600 million tranche of PIK toggle notes (Caa2/CCC+) is talked to yield 75 bps to 100 bps behind the cash-pay notes, with a 75 bps coupon increase for PIK payments.

The deal is being led by joint bookrunners Credit Suisse, RBC, Deutsche Bank, Goldman Sachs and Morgan Stanley.

And Allied Specialty Vehicles Inc. decreased the maturity of its $200 million offering of senior secured notes (B3/B+) to six years from seven years on Tuesday.

The restructured deal is talked to yield in the 8½% area.

Deutsche Bank, Morgan Stanley and Goldman Sachs are the joint bookrunners.

Penn National starts roadshow

Penn National Gaming, Inc. began a roadshow on Tuesday for a $300 million offering of eight-year senior notes (expected ratings B1/B+).

The deal is set to price on Oct. 21.

J.P. Morgan, RBS, Credit Agricole, BofA Merrill Lynch, Fifth Third, Goldman Sachs, Nomura, SunTrust, UBS and Wells Fargo are the joint bookrunners for the debt refinancing and working capital deal.

Penn National Gaming is in the market concurrently with Gaming and Leisure Properties, Inc., the entity it is spinning off.

Gaming and Leisure is marketing a $2.05 billion offering of non-callable senior notes (Ba1/BBB-) in five-, seven- and 10-year tranches. BofA Merrill Lynch is the left physical bookrunner and will bill and deliver for all three tranches.

Both Penn National and Gaming and Leisure are set to price during the Oct. 21 week.

EWOS restructures, sets talk

The European market also generated news on Tuesday.

EWOS Group restructured its multi-currency notes offer and set price talk.

A downsized €225 million offering of seven-year secured fixed-rate notes (/B/) is talked to yield in the 7% area. The tranche was downsized from €300 million.

An upsized NOK 1.81 billion tranche of seven-year secured floating-rate notes (/B/) is talked with a 500 bps to 525 bps spread to Nibor. The tranche was upsized from NOK 1 billion.

In addition to the secured tranches, EWOS intends to privately place NOK 1.04 billion of Nibor plus 920 bps seven-year senior subordinated notes (/CCC+/), the source said.

Pricing is expected on Wednesday.

Global coordinator Deutsche Bank will bill and deliver for the euro-denominated notes.

Global coordinator Swedbank will bill and deliver for the krone-denominated notes.

Rabobank and Danska Bank are joint bookrunners.

Proceeds will be used to fund an equity contribution and put cash on the balance sheet.

Befesa PIK toggle deal

Spain-based industrial waste management firm Befesa Media Ambiente SA is expected to price a €150 million offering of five-year PIK toggle notes (expected ratings Caa2/CCC+) on Thursday or Friday, following the conclusion of an investor roadshow.

Joint bookrunner Citigroup will bill and deliver. Barclays is also a joint bookrunner.

The notes come with two years of call protection.

Proceeds will be used to partially repay costs associated with the Triton Partners' acquisition of Befesa from Abengoa SA.

The appetite for PIK toggle notes, on the part of European investors, is showing some vigor.

Befesa follows Germany's Xella, which priced a €200 million issue of five-year PIK toggle notes (B3/B-) at par to yield 9 1/8% late last week.

KB Home higher after pricing

In the secondary arena, a trader declared that "the market was in a holding pattern today. KBH [i.e., KB Home] came and it did okay, considering the weakness of the market."

He quoted the Los Angeles-based homebuilder's upsized and quick-to-market 7% notes due 2021 trading around a 100¼ to 100¾ bid range, versus their par issue price.

A second pegged the bonds in a 100 3/8 to 100 5/8 context, while a third had them circulating between par and 101 bid.

Gray Television trades up

The day's other deal, an upsized $375 million add-on to Gray Television's 7½% notes due 2020, was also seen a little firmer when the issue was freed for aftermarket activity.

A trader said that the notes were up about 3/8 to ½ point from the 102 1/8 pricing level, which would put them around 102½ bid, 102 5/8 offered.

A second trader also saw those bonds better, estimating them at 102 5/8 bid, 103 1/8 offered.

Recent new deals retreat

Among the issues that priced last week, a trader said that syncreon Global's issue of 8 5/8% notes due 2021 was at par bid, 101½ offered.

That was down from the levels around 100¾ bid, 101½ offered at which the Auburn Hills, Mich.-based supply-chain logistics company's new deal traded on Friday afternoon.

The $225 million deal had come to market earlier on Friday at par.

Among Thursday's issues, a trader saw Wynn Macau's new 5¼% notes due 2021 at 100¼ bid, 100¾ offered, which he said was a loss of ¼ point.

A second trader located those bonds at 100 5/8 bid, 101 1/8 offered, which he said was easier on the day.

Wynn Macau - which runs Las Vegas-based corporate parent Wynn Resorts, Ltd.'s two lucrative casinos in the Chinese gambling enclave of Macau - priced the $600 million drive-by deal at par on Thursday after upsizing it from the originally announced $500 million, and they were seen having risen as high as 100¾ bid after that. However, the bonds were seen to have slipped a little on Friday, and a little more on Tuesday.

L Brands' quick-to-market 5 5/8% notes due 2023 were seen having eased about 1/8 point on the day Tuesday, at 101 bid, 101 3/8 offered, a trader said.

The Columbus, Ohio-based apparel retailer priced its $500 million deal on Thursday at par, and the bonds initially got as good as 100¾ bid, 101¼ offered when they were freed to trade. They pushed upward further on Friday, to 101 1/8 bid, 101 3/8 offered,

NGL Energy Partners LP's 6 7/8% notes due 2021 were quoted Tuesday at 101¼ bid, 101 7/8 offered.

The Tulsa, Okla.-based provider of transportation logistics and other midstream services to the U.S. oil and natural gas industry priced its $450 million deal off the forward calendar at par on Thursday after having upsized it from an originally announced $400 million.

When those bonds hit the aftermarket later on in Thursday's session, they had traded at 100¾ bid, 101½ offered, and had moved up to 101 3/8 bid, 101¾ offered by Friday's close.

T-Mobile a mixed bag

A market source saw last week's biggest deal - the $5.6 billion of remarketed T-Mobile USA Inc. notes - as once again busy on Monday.

However, while all five of those tranches had traded up over three sessions last week since their pricing late last Tuesday, they were more of a mixed bag this Tuesday.

The Bellevue, Wash.-based number four U.S. wireless services provider's 6.464% notes due 2019, for instance, lost 1/8 point to close at 104¼ bid on volume of over $420 million, putting it high up on the most-active list. Deutsche Telekom AG - T-Mobile's parent company - had priced $1.25 billion of those bonds late Tuesday at a reoffer price of 102, to yield 6.033%. They shot up on Wednesday on volume of over $150 million, and continued to move up for the rest of last week on busy volume to a peak level around 104 3/8 to 105 bid.

Its $1.25 billion of 6.542% notes due 2020, on the other hand, were up by 3/8 points to 104 1/8 bid. Volume was over $17 million.

Deutsche Telekom had priced those bonds at par to yield 6.541%, and they had moved up by the close on Friday to around 103¾ bid.

Germany-based communications giant Deutsche Telekom, which owns some 72% of the American company, priced a total of $5.6 billion of those bonds, which it had received from T-Mobile as part of the complex financing arrangements for T-Mobile's acquisition via a reverse takeover transaction earlier this year of smaller rival MetroPCS Wireless Inc. Besides the 2019 and 2020 notes, the deal included $1.25 billion of 6.33% notes due 2021, $1.25 billion of 6.731% notes due 2022 and $600 million of 6.836% notes due 2023.

All had moved up solidly in heavy trading totaling more than $600 million on Wednesday and $145 million on Thursday before volume tapered off to more normal levels on Friday and stayed that way on Tuesday.

Waiting for Washington

A trader characterized Tuesday's session as "just a very lifeless kind of market, like on hold with what's going on down in Washington."

He said that away from the new deals, "the rest of the market was a little soggy," and was "unsure of itself, which is totally understandable," given the complex and fast-changing budget battle.

Market signposts stay firm

Statistical junk-market performance indicators were meantime seen unchanged-to-higher on Tuesday.

The Markit Series 21 CDX North American High Yield index was unchanged from Friday's levels, at 105¾ bid, 105 7/8 offered. It also had the same reading on Monday, when there was no official market activity in the United States due to the Columbus Day holiday, but the index was published anyway. Friday had been its third consecutive advance.

The KDP High Yield Daily index improved by 8 bps on Tuesday to end at 73.71, after having risen by 5 bps on Friday. Tuesday's gain was its third in a row; the index was not published on Monday due to the holiday.

Its yield came in by 4 bps on Tuesday to end at 6.01%, its third consecutive decline. On Friday, it came in by 1 bp for a second straight session.

And the widely followed Merrill Lynch High Yield Master II index also posted a fourth straight gain on Tuesday, rising by 0.104%. On Friday, the index had advanced by 0.074%, while on Monday, it notched a 0.059% rise.

The latest gain lifted its year-to-date return to 4.732% from Monday's 4.623% reading and Friday's 4.562%.

The index's yield to worst, which has been declining steadily in recent days as the index itself has risen, dropped to 5.987% from 6.035% on Monday and 6.063% on Friday. It was the indicator's first time below the psychologically significant 6% mark since Sept. 20, when it stood at 5.971%.

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