Upsized CityCenter leads $5 billion new-deal torrent; most issues rise in trading; funds gain

By Paul Deckelman and Paul A. Harris

New York, Jan. 13 - The floodgates opened up in Junkbondland on Thursday, as more than $5 billion of new high-yield paper priced in nearly a dozen issues - all of it dollar-denominated and originating with domestic issuers.

Some of these issuers slipped in to take advantage of favorable conditions with opportunistically timed "drive-by" deals.

The biggest deal of the session - and the last to price on the day - was CityCenter Holdings, LLC/CityCenter Finance Corp.'s $1.5 billion two-part offering of five-year and six-year notes. The big Las Vegas-based gaming, retail and residential complex issue - a joint venture of casino giant MGM Resorts International and a unit of Dubai World - was upsized from the originally announced $1.1 billion.

Sensing favorable conditions and brisk investor demand, several other deals were also upsized: heavy equipment rental company RSC Equipment Rental, Inc. (to $650 million), textile producer Polymer Group, Inc. (to $560 million), shipping operator Navios Maritime Holdings Inc./Navios Maritime Finance II (US) Inc., (to $350 million), cosmetics company Elizabeth Arden, Inc. (to $250 million) and plumbing fixtures manufacturer American Standard Brands (to $187.5 million).

Broadband operator Cequel Communications Holdings I, LLC ($625 million) and financial firm Nuveen Investments Inc. ($150 million) priced add-on deals to existing tranches of bonds.

Also bringing deals to market were automotive battery maker Exide Technologies, Inc. ($675 million), advertising and marketing firm Valassis Communications, Inc. ($260 million) and industrial materials handling equipment maker Columbus McKinnon Corp. ($150 million).

The Cequel, Navios, Valassis and Nuveen deals were quickly shopped and priced within a matter of just hours after their initial announcements.

While the new Valassis deal was little changed in the aftermarket from its pricing level, traders said virtually all of the other deals firmed smartly once they were freed for secondary activity, with some having popped 3 points or more.

Traders said the new-deal market absolutely dominated secondary dealings, with notable non-primary issues seen few and far between. Numerical indexes continued to rise.

And high-yield mutual funds, considered a reliable indicator of overall market liquidity trends, registered a net inflow of $967 million in the week ended Wednesday. This marked its second consecutive cash injection of the new year.

Junk funds rise

As activity was wrapping up for the day, participants familiar with the weekly AMG high-yield mutual fund flow statistics generated by Lipper/FMI said that the $967 million inflow was widely expected, given the surge seen in Junkbondland's performance since the start of the year.

It was the sixth consecutive cash infusion, following on the heels of the $743.4 million injection seen the week ended Jan. 5.

In those six weeks dating back to Dec. 8, $2.808 billion of net inflows have come into the junk market, according to a Prospect News analysis of the figures.

On a year-to-date basis, 2011 net inflows have totaled some $1.71 billion, according to the analysis, with cash infusions seen in each of the two weeks against no outflows yet.

That continues the strong inflow trend seen in 2010, when some $10.67 billion more came into the funds then left them, and inflows were seen in 37 weeks, against just 15 weeks which experienced outflows.

Cumulative fund-flow estimates may be revised upward or downward or be rounded off and could include unannounced revisions and adjustments to figures from prior weeks.

Analysts say the continued flow of fresh cash into junk - and the mutual funds represent but a small though quantifiable percentage of the total amount of money coming in - fueled the record new -deal borrowing binges seen in both 2009 and then in 2010, as well as the robust secondary market seen both years. Both trends are continuing on in 2011 as well so far.

CityCenter massively upsizes

Eleven issuers raised $5.33 billion in a dozen tranches on a thundering Thursday in the high-yield primary market.

Six of the 12 tranches came upsized. Seven priced at the tight end of price talk, while another priced on top of price talk that had been reduced by 25 bps.

CityCenter, Thursday's biggest issuer, priced a massively upsized $1.5 billion two-part notes transaction.

The overall size of the transaction was increased from $1.1 billion.

CityCenter Holdings and CityCenter Finance priced a $900 million tranche of five-year senior secured first-lien notes (B2/B) at par to yield 7 5/8%.

The yield printed at the tight end of the 7¾% area price talk.

Bank of America Merrill Lynch, Barclays Capital Inc. and RBS Securities Inc. were the active bookrunners for the first-lien tranche, which was upsized from $500 million.

BNP Paribas Securities Corp., SMBC and UBS Investment Bank were the joint bookrunners.

Meanwhile, CityCenter Holdings, LLC priced a $600 million tranche of six-year senior secured second-lien PIK notes (Caa2/CCC) at par.

The second-lien notes pay a cash coupon of 10¾%, and a PIK coupon of 11½%.

The cash-pay interest came at the tight end of the 10¾% to 11% talk. PIK interest talk was 75 basis points behind the cash-pay interest, hence the PIK interest came on top of talk.

RBS Securities, Bank of America Merrill Lynch and Barclays Capital were the active bookrunners for the debt refinancing.

Exide at the tight end

Exide Technologies priced a $675 million issue of seven-year senior secured notes (B2/B) at par to yield 8 5/8%, at the tight end of the 8¾% area price talk.

Deutsche Bank Securities Inc. was the left bookrunner. Wells Fargo and Morgan Stanley & Co. Inc. were the joint bookrunners.

Proceeds will be used to repay bank debt, to fund a tender offer for the company's 10½% senior notes due 2013, to fund working capital and for general corporate purposes.

RSC Equipment drive-by

RSC Equipment and RSC Holdings priced an upsized $650 million issue of 10-year senior notes (existing Caa2/confirmed B-) at par to yield 8¼%, at the tight end of the 8¼% to 8½% price talk.

Deutsche Bank Securities, Bank of America Merrill Lynch, Wells Fargo Securities, Barclays Capital, J.P. Morgan Securities LLC and Goldman Sachs & Co. were the joint bookrunners for the quick-to-market debt refinancing deal which was upsized from $450 million.

Polymer Group upsized

Polymer Group priced an upsized $560 million issue of eight-year senior secured notes (B1/B) at par to yield 7¾%.

The yield printed on top of the revised 7¾% price talk, which had been lowered from earlier talk of 8% area.

Citigroup Global Markets Inc. was the left bookrunner for the issue, which was upsized from $530 million. Morgan Stanley & Co. Inc., Barclays Capital Inc. and RBC Capital Markets Corp. were the joint bookrunners.

Timing on the deal was twice moved ahead. The books closed 90 minutes earlier than anticipated on Thursday. Earlier in the week, timing on the deal was moved ahead to Thursday afternoon from the originally scheduled Friday pricing.

Proceeds will be used to help fund the buyout of the company by the Blackstone Group. The additional proceeds will be used to reduce the equity by $30 million to $260 million, bringing the equity contribution to 32%

Navios upsizes

Navios Maritime Holdings and Navios Maritime Finance priced an upsized $350 million issue of eight-year senior notes (B3/B+) at par to yield 8 1/8%, at the tight end of the 8¼% area price talk.

Bank of America Merrill Lynch and JP Morgan Securities LLC were the joint bookrunners for the quick-to-market issue, which was upsized from $325 million.

Proceeds will be used to fund the tender offer for the company's 9½% notes due 2014 and for general corporate purposes.

Valassis drives by

Elsewhere, Valassis Communications priced a $260 million issue of 10-year senior notes (Ba3/BB-) at par to yield 6 5/8%, in the middle of the 6½% to 6¾% price talk.

Bank of America Merrill Lynch and J.P. Morgan Securities LLC were the joint bookrunners for the quick-to-market debt refinancing deal.

Elizabeth Arden upsizes

Elizabeth Arden priced an upsized $250 million issue of 10-year senior notes (B1/B) at par to yield 7 3/8%, at the tight end of the 7½% area price talk.

J.P. Morgan Securities LLC, Bank of America Merrill Lynch and Wells Fargo Securities were the joint bookrunners for the debt refinancing.

American Standard tight

American Standard Brands priced an upsized $187.5 million issue of five-year senior secured notes (B3/B) at par to yield 10¾%, at the tight end of the 10¾% to 11% price talk.

Goldman Sachs & Co. was the left bookrunner for the quick to market, issue which was upsized from $175 million. UBS Investment Bank was the joint bookrunner.

The Piscataway, N.J., manufacturer of bath and kitchen fixtures will use the proceeds to repay bank debt and for general corporate purposes.

American Standard played to a high-quality order book, which was well oversubscribed, according to an informed source who added that the deal traded as high as 102 7/8 on the break.

Columbus McKinnon tight

Columbus McKinnon priced a $150 million issue of 7 7/8% eight-year senior subordinated notes (B1/B+) at 98.545 to yield 8 1/8%.

Price talk was 8¼% area yield, at a discount.

Credit Suisse, Bank of America Merrill Lynch and J.P. Morgan Securities LLC were the joint bookrunners for the debt refinancing deal.

Cequel 8 5/8% notes

Cequel Communications Holdings and Cequel Capital brought one of the session's two quick-to-market add-ons.

Cequel priced a $625 million add-on to its 8 5/8% senior notes due Nov. 15, 2017 (existing ratings B3/B-) at 102.875 on Thursday, resulting in a 7.892% yield to worst.

The reoffer price came in the middle of the 102.50 to 103 price talk.

Credit Suisse, Goldman, Sachs & Co. and J.P. Morgan Securities LLC were the joint bookrunners.

Proceeds, along with cash on hand, will be used to fund the NPG acquisition, as well as to repay in full the capital contributions made by holders of preferred units of Cequel Holdings, to repay a portion of the capital contributions made by holders of common units of Cequel Holdings, and to make payments to holders of options and restricted units issued by Cequel Holdings.

Thursday's transaction represented the second time Cequel tapped its 8 5/8% notes due 2017.

The St. Louis-based cable company priced a $600 million add-on at 102.0 to yield 8.167% on April 29, 2010.

The original $600 million issue priced at 98.58 to yield 8 7/8% on Oct. 30, 2009.

Nuveen drive-by

Finally, Nuveen Investments priced a $150 million add-on to its 10½% senior notes due Nov. 15, 2015 (Caa3/CCC) at 102.75 on Thursday, resulting in a 9.357% yield to worst.

The reoffer price came on top of the price talk.

Bank of America Merrill Lynch, Deutsche Bank Securities, Citigroup, Credit Suisse, JP Morgan, Morgan Stanley, UBS Investment Bank and Wells Fargo Securities were the joint bookrunners for the quick-to-market add-on.

Proceeds will be used to pay down revolver debt and for general corporate purposes.

Looking to Friday

Thursday's big day in the primary market nearly cleared the new issue calendar.

Two deals remained.

DirectBuy is in the market with a $325 million offering of six-year senior secured second-lien notes (B2/B) via J.P. Morgan.

Although no official price talk had been circulated, the deal has been discussed with a 10% area yield, according to a trader from a high-yield mutual fund.

And France's Labco SAS is expected to price a €500 million offering of seven-year senior secured notes (B3//BB-) on Friday.

Credit Suisse, Deutsche Bank, Natixis Bleichroeder and UBS are the joint bookrunners.

Again, there was no official talk on Labco, market sources said on Thursday.

The whisper is in the 8¾% area, according to a debt capital markets banker in London not in the deal.

The banker expects Labco to come in an 8½% to 8¾% yield context.

Issues noisy in secondary

The barrage of new deals was clearly the big story in the secondary market, several traders told Prospect News. Almost all of those deals moved higher when they hit the aftermarket, some by multiple points.

A trader agreed with the proposition that everything was just new deal-oriented.

"There was a new deal focus, no question about it."

Another said, "It was one of those types of days where a bunch of all of these little deals, and a few mid-range ones getting priced, and that was pretty much it."

The day's really big deal, the two-part CityCenter behemoth, came too late in the day to be seen trading around.

One of the earlier deals to price and then move up, a trader said, was Columbus McKinnon's smallish eight-year deal, which came to market at a discounted 98.545 price, but then moved up to a "wide" 102 bid, 103 offered .

A second trader said that the new deal from the Amherst, N.Y.- based maker of cranes, hoists and other materials-handling equipment "came at a discount and then rallied well over 2 points," seeing them at 1011/2, 102 bid.

Another early pricing deal was New York-based beauty products maker Elizabeth Arden's upsized offering of 10-year bonds, which came at par, but rallied and then went home, a trader said, wrapping around the 102 mark. A second trader, however, said that even though the deal had been upsized to $250 million, he "never saw it," theorizing that the relatively small deal had been snapped up and put away.

Exide Technologies' $675 million offering of eight-year senior secured notes were "on fire," a trader exclaimed, pegging them at 104¼ bid, well up from the par level at which the Milton, Ga.-based manufacturer of automotive and industrial lead-acid storage batteries had priced its deal. Another trader quoted them going out at 103½ bid, 104½ offered.

A trader saw the St. Louis-based telecommunications and broadband operator Cequel Communications' add-on offering move up to 104¼ bid, 105 offered, after having priced at 102 7/8. A second trader saw the bonds at 104¼ bid, 104½ offered.

Later deals trade up as well

The junk bond juggernaut continued to roll on even into the later afternoon, with deals pricing and then being seen breaking into the aftermarket.

After American Standard Brands priced an upsized offering of five-year senior secured notes at par, several traders quoted the new bonds as having zoomed in the secondary, with one seeing them at 104 bid and a second seeing them better than that even, touching 105. This was despite the decidedly unglamorous sector in which it operates as a Piscataway, N.J.-based plumbing fixtures manufacturer.

A trader saw Greek cargo shipping concern Navios Maritime Holdings' upsized eight-year note offering at 100¾ bid, 101¾ offered, while Livonia, Mich.-based advertising and marketing firm Valassis Communications' new bonds only edged up to 100¼ bid, 100¾ offered - relatively modest gains from their respective par pricing levels versus the multiple-point gains some of the other newbies, like American Standard, were seen to have notched.

On the other hand, the trader said that RSC Equipment Rentals' 10-year notes blazed up to 104½ bid, 105½ offered after having priced at par, and the Scottsdale, Ariz.-based heavy equipment rental company's offering was one of the later-pricing deals of the day.

Charlotte, N.C.-based textile producer Polymers Group's eight-year senior secured notes firmed solidly to 102½ bid, 103½ offered .

He also saw Chicago financial firm Nuveen Investments' add-on offering move up to 104 bid, 105 offered versus the 102.75 level at which the $150 million deal priced.

Laredo Pete pops up

Among Wednesday's offerings, a trader saw Laredo Petroleum , Inc.'s 9½% notes due 2019 having pushed up to 103¼ bid, 103¾ offered.

That was up from the 102½ bid, 103½ offered level at which the Tulsa, Okla.-based energy exploration and production company's $350 million issue - upsized from the originally envisioned $325 million - had traded at late in the session on Wednesday, after having priced earlier that day at par.

"They just continued to move up," another trader said, seeing the bonds get as good as 103 bid, 103½ offered.

A trader saw Wednesday's other deal - Spanish health care company Grifols SA's $1.1 billion issue of 8¼% notes due 2018 - offered at 104 during the morning, but he did not see them again.

However, a second trader saw the megadeal trading at 103½ bid, 103 7/8 offered. The bonds had priced at par on Wednesday but came too late in that session for any kind of aftermarket and thus began trading around on Thursday.

Level 3 still lags

Traders also said that most of the slew of new deals priced during Tuesday's $4 billion-plus session were still hanging onto most of the gains - some measuring several points - notched in the aftermarket.

But, as had been the case on both Tuesday and Wednesday, Level 3 Communications Inc. remained the exception to the rule and continued to struggle.

A trader on Thursday said that the Broomfield, Colo.-based telecommunications backbone service provider's $305 million drive-by offering of 11 7/8% notes due 2019 remained under water, trading at just 97¾ bid, 98¼ offered, still not able to break above its 98.173 issue price and stay there.

Secondary indicators add

Away from the new deal realm, a trader saw the CDX North American Series 15 HY index off by ¼ of a point on Thursday to finish at 103¼ bid, 103½ offered, after having risen by ¼ of a point on Wednesday.

But the KDP High Yield Daily index meantime gained 6 basis points on Thursday to close at 74.93, on top of the 7 bps rise seen on Wednesday. Its yield narrowed by 4 bps to 7.10%, after coming in by 3 bps on Wednesday.

The Merrill Lynch High Yield Master II index gained 0.153% on Thursday - almost identical to the 0.155% rise on Wednesday. That lifted its year-to-date return to 1.264%, marking a new peak level for 2011 so far, eclipsing the previous mark of 1.109% set on Wednesday, the first time this year that figure was above 1%.

Traders were unanimous in saying that the new deal pricing parade clearly dominated the day's secondary market activity.

"Other than people waiting around for deals to price, that was it," was how one put it.

He said that there was "nothing too exciting. It was pretty much a quiet day. Everyone you talked to was on a conference call for a new issue being priced."

Paper names settle in

Among specific non-new deal names, a trader said that Catalyst Paper Corp. and NewPage Corp.'s bonds, which have been solidly firming over recent sessions, including a big jump in Catalyst on Wednesday, "didn't give anything back, but they didn't really gain anything today, either."

A second trader said that "they're holding at the higher levels" seen Wednesday, with Richmond, B.C.-based papermaker Catalyst 's 7 3/8% notes due 2014 - up solidly the prior two sessions - at 84 bid, 85 offered and its 11% senior secured notes due 2016 at 101½ bid, 102½ offered. The latter had also been up by several points Wednesday.

"There was decent activity" right around the 85 level on the 7 3/8s, the source said. "It was well-bid at 85, with some trading, and holding at the levels."

He meantime saw NewPage's 11 3/8% senior secured notes due 2014 ending in a 961/2- 97½ context, which he called up 1 point on the day, because the Miamisburg, Ohio-based coated-paper manufacturer's bonds "were trading around 971/2-973/4. They were trading on the offering side of their market, holding at the higher levels they've been in the last few days.

TXU trades up

A trader said that the old TXU Corp.'s "legacy bonds had a really good day."

He saw its 6.55% bonds due 2034 up to 40 bid and its 6.50% paper due 2024 up to 43 bid, calling both of those issues up 3 points to 5 points on the day.

At another desk, a trader saw the 2034s up 1 point on the day at 37½ bid.

The bonds, both issued in 2005, are among those left over from the Dallas-based power generator and utility operator's days before it was acquired in 2007 in a $45 billion leveraged buyout by Kohlberg Kravis Roberts, Texas Pacific Group and Goldman Sachs, the biggest LBO in U.S. corporate history, and renamed Energy Future Holdings Corp.

Nebraska Book gets bopped

A trader saw Nebraska Book's bonds trading down about 5 points on the day, which he called the big price move of the day.

A trader at another desk cited an online news story about the company, although he said that, to him, "There wasn't any new news in the story, but obviously some people had concerns." He saw the Lincoln, Neb.-based school textbook company's 8 5/8% notes due 2012 trading down around 85 bid.

A market source said that the bonds, which on Wednesday had risen nearly 1½ points to 90½ bid, fell some 5 3/8 points on Thursday to end at 85 1/8 bid.

Yet another trader said that the company's 11% notes due 2013 were trading around 55 bid, 57 offered in large-block trading, although late in the day, he saw them having traded as high as around 70 "but only in small pieces."

He also saw the company's 10% notes coming due on Dec. 1 right around par. He said: "We saw a lot of quotes, but I don't see a lot of trading" around those two issues.

However, he saw "a lot more activity" in the 8 5/8s seeing the bonds right around 85 bid, 86 offered, estimating them down 5 or 6 points.

"They were in the low 90s the last couple of days," he said, but he saw "no current news" that might explain the credit's gyrations, though "obviously something happened."

The company had no fresh news that could spark such price movements on its website, and there were no new regulatory filings.

GM gains a little

A trader said that the 8 3/8% benchmark bonds due 2033 of Motors Liquidation Co. - the "old" General Motors Corp. before its 2009 bankruptcy restructuring - ended around 37 bid, with most of the trades around 37-37 1/8, up from Wednesday's 36-37 context. He suggested the bonds were up ½ of a point on an "okay amount of volume."

Another trader saw those bonds unchanged 36 bid, 37 offered, while GM rival Ford Motor Co.'s 7.45% bonds due 2031 were down ¼ of a point at 107¾ bid, 108¼ offered.

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