Upsized HD Supply drives by, no trading; Peninsula shops deal; SuperValu up as CEO out

By Paul Deckelman and Paul A. Harris

New York, July 30 - The junk-bond primary sphere opened the transition week between July and August on Monday with an upsized, quick-to-market add-on deal from wholesale tool and building products distributor HD Supply, Inc., which did a $300 million addition to the seven-year first-priority secured notes that it sold earlier this year.

However, traders did not see any aftermarket activity in the new bonds.

For that matter, they did not see much going on with any of the recently priced junk deals either, with the possible exception of last Thursday's issue from specialty retailer Toys 'R'Us Inc. - and even those bonds were steady.

Away from deals that actually priced, syndicate sources heard that Peninsula Gaming, LLC was shopping around a $350 million bond deal to help finance the casino company's pending buyout by sector peer Boyd Gaming Corp.

And they heard Canadian copper miner Petaquilla Minerals Ltd. getting ready to market a five-year secured notes deal sometime in the first part of the upcoming month.

Outside of the new-deal arena, traders saw a very slow and inconclusive session, coming up on the end of the month.

There was some bond price movement - though not that much volume - on news that troubled supermarket operator SuperValu Inc. decided to bag its embattled chief executive officer, which could be seen as a possible step toward a sale of the company.

Statistical market performance indicators were mixed on the session.

HD Supply upsizes

The primary market generated a modicum of news Monday.

HD Supply priced the day's only deal, an upsized $300 million fungible add-on to its 8 1/8% senior secured first priority notes due April 15, 2019 (confirmed B2/existing B+).

The deal - a drive-by as has been the case with more than 60% of the dollar-denominated deals that hit the market since the Fourth of July - priced at 107.50, representing the rich end of price talk that was set in the 107.375 area, with a 6.525% yield to worst.

It was upsized from $200 million.

Demand for the paper was robust, according to an informed source who said that orders topping the $1 billion-mark enabled the bookrunners to richen the pricing. Initial conversations took place in the context of 107 to 107.25, before the 107.375 official talk came out.

Prior to launching the tap, the existing 8 1/8% notes due 2019 were trading at 109, the source said, adding that the deal - from an issuer that is quite familiar to high-yield investors - went very well.

Bank of America Merrill Lynch, Goldman Sachs, Barclays, J.P. Morgan, Credit Suisse, Deutsche Bank, Wells Fargo and UBS were the joint bookrunners.

The proceeds will be used for general corporate purposes and, pending such allocation, the entire net proceeds will be applied to reduce outstanding borrowings under the company's revolving ABL facility.

The original $950 million tranche priced at par on April 5, 2012 as part of an overall $1.625 billion transaction, which also included a $675 million tranche of 11% notes due April 15, 2020.

Peninsula Gaming offers $350 million

Elsewhere in Monday's primary market, Peninsula Gaming announced a $350 million offering of 5.5-year senior notes (Caa1//), backing the acquisition of the company by Boyd Gaming.

The deal is expected to price later this week.

The issuing entities will be Boyd Acquisition Sub, LLC and Boyd Acquisition Finance Corp., which will be merged with and into Peninsula Gaming, LLC and Peninsula Gaming Corp.

Bank of America Merrill Lynch, J.P. Morgan, Deutsche Bank and UBS are the joint bookrunners.

Peninsula Gaming joins just two other deals presently parked on the active dollar-denominated new issue calendar.

TRAC Intermodal LLC began a roadshow Monday for its $325 million offering of seven-year senior secured second-lien notes (B3/B-), which also are expected to price late this week.

J.P. Morgan, Bank of America Merrill Lynch, Deutsche Bank, DVB Bank, RBC and Wells Fargo are the joint bookrunners.

The roadshow got off to a good start with the company presenting well, according to an informed source who added that the deal is shaping up in the context of an 11% yield.

Also Crescent Resources, LLC is marketing a $325 million offering of seven-year senior secured notes (confirmed Caa2/expected B+).

That deal, via Jefferies, Credit Suisse and J.P. Morgan, also is expected to price this week.

On Friday, a buyside source watching the deal closely said the rate on Crescent Resources' new secured paper ought to be about 11%, but intimated that given the current technical strength of the market, it will probably be lower.

HD bonds no show in secondary

Secondary market traders said they saw no immediate aftermarket activity in HD Supply's new 8 1/8% senior secured first priority notes due 2019; they said the upsized, quickly shopped add-on deal came to market too late in the session for any kind of trading.

A trader even said that putting the timing aside, there seemed to be little enthusiasm in Junkbondland for any dealings in new or recently priced paper.

Toys 'R' Us little changed

One of the traders, for instance, said Toys 'R' Us' new 10 3/8% senior notes due 2017 were right at the 1003/4-bid context all day, not far from where the Wayne, N.J.-based toy retailer's $450 million deal traded at the tail end of last week.

"I saw them trade there a couple of times today," the trader said, with not much other movement.

The company brought its quickly shopped deal to market late in the session Thursday, after upsizing it from an originally announced $350 million. The bonds priced at 99.033 to yield 10 5/8%, then moved up to around a 1001/2-bid level Friday.

A second trader said he did not see any activity in the Toys deal Monday. Likewise, he also said he saw nothing going on with Thursday's other issue - Aurora USA Oil & Gas Inc.'s 9 7/8% notes due 2017.

The U.S. unit of the West Perth, Australia-based energy exploration and production company Aurora Oil & Gas Ltd. priced a $165 million add-on to its existing five-year notes at 101.5 to yield 9.364%, after upsizing that transaction from an originally announced $100 million.

Those bonds firmed smartly in Friday's market to 104 bid, 105 offered, but disappeared Monday.

The first trader also said that while he saw the bonds at those elevated levels Friday, there was no sign of them Monday.

Yet another trader said he had seen "no activity at all" in any of the recent issues Monday.

Little secondary action

The lassitude seen in the secondary market toward new or recent issues carried over, as well, into dealings in existing issues, with one trader characterizing Monday's market as "really a yawner."

Looking at the Trace most actives list, he declared, "I don't know if we'll even get over $1 billion [in total volume] today."

Monday's market, he added was "a regurgitation of Friday's market," which was not terribly busy.

"A Xerox copy of Friday is a [more polite] way to put it," the trader said.

A second trader said, "You would think that there would be a little bit more going on, especially toward the month end." Although, he said many of the accounts may have completed already their end-of-month window-dressing activities.

He also brought up what he called "the Olympic factor," noting that many of the events were being televised in the United States during the business day. This gave market players another distraction, the trader said, and an excuse to do nothing.

Market indicators mixed

Risk markets, such as equities and junk bonds, were seen mostly holding in place as the week opened with participants taking a wait-and-see attitude ahead of scheduled meetings. The Federal Reserve meets Tuesday and Wednesday and the European Central Bank will meet Thursday, which could provide more clues as to whether those central banks will provide further monetary stimulus in order to avoid a slide backward into recession by the United States and European economies.

And the important U.S. jobs-creation report for July is scheduled to be released Friday morning, which could further sideline some market participants who will wait to see which way the economic winds are blowing.

Equities were seen little changed Monday, trading in an extremely narrow range before ending slightly lower, with the bellwether Dow Jones Industrial Average easing by 2.65 points, or 0.02% - its first loss after three straight gains - to end at 13,073.01, and the broader Standard & Poor's 500 and Nasdaq Composite indices losing 0.05% and 0.41%, respectively.

Back in Junkbondland, statistical indicators turned mixed Monday after being up for three straight sessions previously, although the cash market signposts seemed to do well relative to derivatives.

A trader saw the Markit Group CDX North American Series 18 High Yield Index dip by 1/8 point to finish at 97¼ bid, 97 3/8 offered, a far cry from Friday's 1 3/16 points jump.

But the KDP High Yield Daily Index scored its third straight advance Monday, zooming by 17 basis points to close at 73.60, after having risen by 7 bps Friday.

Its yield contracted for a fourth straight session Monday, declining by 5 bps to 6.32%, after having come in by 3 bps on both Thursday and Friday.

And the widely followed Merrill Lynch U.S. High Yield Master II Index made it three upside sessions in a row Monday, adding 0.28%, on top of Friday's 0.164% advance.

The latest gain lifted its year-to-date return to 8.877% from Friday's 8.574%. Monday's reading established a new peak level for 2012, eclipsing the old mark, which had just been set Friday. The index's recent levels are the strongest they've been in nearly 19 months since the end of 2010, when the market measure returned 15.19%.

SuperValu up on CEO ouster

Among specific non-new deal junk names, a trader noted that the troubled Eden Prairie, Minn.-based supermarket chain operator SuperValu Inc. fired its chief executive officer.

"Maybe it sets up the sale of the company, though it's hard to tell," the trader said.

Despite that potentially momentous news about the ouster of Craig R. Herkert, he said he didn't see too much activity in the company's bonds.

For instance, he saw its 8% notes due 2016 moving up about 1 point from last week's levels. "And that's about it," the trader said.

He quoted the bonds at 851/4, suggesting that they were only up about a quarter-point from where they opened before the market got the news of Herkert's firing and his replacement by the money-losing retailer's interestingly named chairman, Wayne C. Sales.

A market source at another desk called the 8s up 13/4-points on the day, pegging them at 85¾ going home, though with only moderate volume of about $8 million.

SuperValu's 7½% notes due 2014 were seen up about a half-point, at 941/2, but on only $3 million or $4 million of volume.

The 8% bonds due 2031 issued by Albertsons Inc., which was bought by SuperValu several years ago, were seen trading at 57 bid late in the day, a gain of more than 2 points, though again, volume was not heavy, coming in at about $4 million.

SuperValu's New York Stock Exchange-traded shares rose by 25 cents, or 12.56%, to end at $2.24, on volume of 12.8 million, about one-third more than their usual activity level.

Expedia extremely busy

One of the traders noted that the most-actives list Monday seemed to be dominated by split-rated issues that were mostly of interest to high-grade crossover investors reaching down to pick up some yield, such as Ford Motor Co. and SLM Corp.

Another such name that is split-rated (Ba1/BBB-/BBB-), Expedia Inc.'s 7.456% notes due 2018 knocked down more than $30 million of turnover, putting it high up on the actives list as it rose 1¼ points to finish at 117¼ bid.

The Bellevue, Wash.-based online travel service's other issue, its 5.95% notes due 2020, were unchanged at 107 bid with only a couple million of those bonds traded.

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