Level 3, First Data price drive-by deals, Garda on tap; new Pittsburgh Glass, Navios gain

By Paul Deckelman and Paul A. Harris

New York, Oct. 30 - The high-yield drive-by parade continued unabated on Wednesday, as syndicate sources heard two same-day deals totaling $1.64 billion come to market, each from a familiar junk bond name.

Telecommunications and internet backbone operator Level 3 Financing Inc. priced $640 million of 7.25-year notes via a financing subsidiary.

And electronic transaction processor First Data Corp. did a sharply upsized $1 billion add-on to its existing 2021 subordinated notes.

Both of those deals came to market too late in the session for any kind of secondary activity. However, traders saw some of First Data's established paper trading at better levels on busy volume.

With Wednesday's new deals not an aftermarket presence, junk players instead focused on some of the issues that came to market the first two days of the week.

They saw Pittsburgh Glass Works LLC and Navios Maritime Acquisition Corp.'s new deals, which priced on Tuesday, both having firmed smartly in Wednesday's dealings - Navios beginning trading after having priced late in the day on Tuesday, and Pittsburgh Glass building on the already solid gains its new issue notched in initial aftermarket trading after pricing.

But Tuesday's other deal, from power generator Calpine Corp., continued to trade near its issue price.

Away from the deals that have actually priced, the syndicate sources heard that Garda World Security Corp. upsized its pending eight-year deal, which is expected to price on Thursday.

In the overall market, statistical performance indicators turned mixed after having been higher across the board on Tuesday.

First Data doubles deal size

The high-yield drive-by deal engine, which has been humming since the beginning of the week, continued to do so on Wednesday.

Two issuers showed up with single-tranche quick-to-market deals, raising a combined total of $1.64 billion.

First Data priced an upsized $1 billion add-on to its 11¾% senior subordinated notes due 2021 (Caa2/CCC+) at par to yield 11¾%.

The deal doubled in size from the $500 million amount announced earlier in the session.

The reoffer price came at the cheap end of the 100 to 100¼ price talk.

BofA Merrill Lynch, Citigroup, Deutsche Bank, Barclays, Credit Suisse, Goldman Sachs, HSBC, Wells Fargo and KKR were the joint bookrunners.

Level 3 at the tight end

Level 3 Financing priced a $640 million issue of senior notes due Jan. 15, 2021 (B3/CCC+/BB-) at par to yield 6 1/8%.

The yield printed at the tight end of yield talk set in the 6¼% area.

Citigroup, BofA Merrill Lynch, Morgan Stanley, Credit Suisse, Jefferies and JPMorgan were the joint bookrunners for the debt refinancing deal.

Garda upsized due to demand

Garda World Security upsized its offering of eight-year senior notes (B3/B-) to $425 million from $300 million.

Although official price talk has not yet surfaced, the deal has been discussed in a yield context of 7 3/8% to 7½% and is expected to price on Thursday, according to a buyside source.

BofA Merrill Lynch and RBC are joint global coordinators and joint bookrunners. TD and Mizuho are joint bookrunners.

Along with the increase in the bond offer, Garda also upsized its seven-year term loan B to $600 million from $525 million.

The increases were undertaken because of "significant demand" for both bonds and loan, the source said.

Garda plans to use the proceeds to refinance debt and fund the acquisition of G4S Cash Solutions for C$110 million.

Proceeds from the $200 million upsizing of the financing will be used to fund a distribution to shareholders.

Abengoa taps 8 7/8% notes

The European market was also active on Wednesday.

Spanish conglomerate Abengoa Finance SAU priced a €50 million add-on to its 8 7/8% senior notes due Feb. 5, 2018 (existing ratings B2/B) at 105¼ to yield 7.408%.

The reoffer price came at the rich end of the 105 to 105¼ price talk.

Morgan Stanley ran the books for the debt refinancing deal.

Elsewhere, British motoring services provider AA Group is in the market with a £350 million offering of unrated six-year senior PIK toggle notes via Deutsche Bank, Royal Bank of Scotland, Barclays and Mizuho.

Books are scheduled to close Thursday. Preliminary guidance is at 9% to 10%, according to a buyside source based on the East Coast of the United States.

And Spain's NH Hoteles SA is scheduled to wind up its roadshow on Thursday for a €225 million offering of six-year senior secured notes via JPMorgan, Deutsche Bank AG, Bankia, BBVA and Santander.

Preliminary guidance is in the mid-7% range, the East Coast buysider said.

Level 3, new FDC latecomers

In the secondary realm, traders said that the new 6 1/8% notes due 2021 from Broomfield, Colo.-based telecom and internet backbone network provider Level 3 arrived too late in the session for any real aftermarket dealings.

That was also the case with First Data's massively upsized add-on to its 11¾% senior subordinated notes due 2021.

However, a market source said that the Atlanta-based electronic transaction processor's established 11¼% notes due 2016 were among the busiest bonds seen in Junkbondland on Wednesday, with over $19 million having changed hands.

He saw that paper going home at around the 100¾ bid area, calling that up about ¼ point.

Pittsburgh Glass gains persist

Among the issues that priced on Tuesday, a trader said that Pittsburgh Glass Works' new 8% senior secured notes due 2018 added on to the already robust aftermarket gains that the issue had enjoyed when it was initially freed to trade after pricing.

He quoted the Pennsylvania-based auto glass manufacturer's paper as high as 102¼ bid, 102¾ offered.

That was up from the levels around 101½ bid, 101¾ offered at which the bonds were seen going home on Tuesday, and well up from the par level at which that $360 million scheduled forward calendar deal had priced earlier that day.

New Navios does nicely

A trader said that that the new Navios Maritime Acquisition 8 1/8% first-priority ship mortgage notes due 2021 were trading at 101 3/8 bid, 101 5/8 offered on Wednesday.

The Piraeus, Greece-based oil tanker operator, along with its Navios Acquisition Finance (US) Inc. funding subsidiary, had priced $610 million of those notes at par, after slightly upsizing the quick-to-market offering from an originally announced $600 million.

However, that pricing had taken place too late on Tuesday for any further trading that day.

Calpine holds near issue price

While the new Pittsburgh Glass and Navios Maritime notes seemed to have caught a bid, Tuesday's other deal - Calpine's new 5 7/8% senior secured notes due 2024 - were seen little changed on the day versus their Tuesday aftermarket levels.

A trader pegged the notes at 100¼ bid, 100 5/8 offered - about where the Houston-based power generating company's $490 million tranche of 10.25-year notes had ended the day on Tuesday, after the quickly shopped deal priced at par.

USG builds on gains

Going back a little further, traders said that Chicago-based building products manufacturer USG Corp.'s 5 7/8% notes due 2021 continued to firm on Wednesday, with one trader seeing those bonds having pushed up to 101 7/8 bid, 102¼ offered. A second saw the bonds even better than that, quoting them at 102 bid, 102½ offered.

That quick-to-market $350 million issue had priced at par on Monday and then had jumped to bid levels between 101 and 101¼ by late Monday afternoon. On Tuesday, the gains continued, with the notes going out at 101½ bid, 102 offered.

Freescale holds gains

Freescale Semiconductor Ltd.'s 6% senior secured notes due 2021 were seen Wednesday trading around the same higher levels at which they had closed out Tuesday's session.

A trader was quoting those bonds at 101 1/8 bid, 101½ offered.

That was also about where they had finished on Tuesday, he said.

The Austin, Texas-based computer-chip manufacturer had priced $960 million of those notes at par on Monday via its wholly owned indirect subsidiary Freescale Semiconductor Inc. after the drive-by deal was radically upsized from an originally announced $500 million. The deal came to market too late in Monday's session for any kind of trading at that time.

J. Crew holds near issue

While the USG and Freescale transactions were well received in the aftermarket, participants continued to see only modest upside in Monday's other deal from New York-based apparel retailer J. Crew Group Inc.

Its 7¾%/8½% senior PIK toggle notes due 2019 were seen on Wednesday around 100½ bid, 100 5/8 offered - about the same neighborhood where those bonds had wrapped up trading on Tuesday.

The company's indirect corporate parent, Chino Intermediate Holdings A, Inc., priced $500 million of those 5.5-year notes at par in a quickly marketed deal, but they came too late in the day for any trading at that time.

Issues active on earnings

Away from the new-deal sphere, trading generally was described as fairly sedate and lackluster.

For instance, a trader said that there was no real reaction to either the Federal Reserve announcement that its bond-buying stimulus program would continue in the near-term, or the ongoing pronouncements from administration officials about the Obamacare program.

"Trading was abysmally light," he lamented, "even among the YTC guys" - investors buying junk bonds that they expect will be called for redemption soon, a recently busy segment of the market with all of the refinancing going on.

"Part of it is because people are just sitting on paper that they have because they can't replace it [with similarly generous coupons], and money just keeps coming in."

One area that did see some volume was credits reporting earnings. For instance, Caesars Entertainment Corp.'s 10% notes due 2018 issued by predecessor entity Harrah's Operating Co. were quoted by a market source up 3/16 point, going out at 50¼ bid. Volume of over $32 million was the heaviest of any purely junk-rated bonds.

The notes firmed - just as they had late Tuesday after quarterly earnings were released - despite the fact that the Las Vegas-based casino giant's third-quarter results were not particularly good. Caesars was hurt by a falloff in revenues from its non-Las Vegas properties and lost $761.4 million, or $6.03 per share, in the quarter ended Sept. 30, the red ink deepening from its year-earlier loss of $505.5 million, or $4.03 per share.

Its continuing operations loss of $6.12 per share was far wider than the $1.28 per share that Wall Street was expecting. The results were negatively affected by an accounting charge of $930.9 million for writing down the value of assets in Atlantic City and other markets outside of Las Vegas.

An analyst suggested that the bonds firmed on a combination of short covering and relief that the Las Vegas numbers were actually fairly respectable.

One of the traders said that investors were perhaps relieved that "they didn't go out of business - it could have been worse."

Another busy name following earnings was Sprint Corp. The Overland Park, Kan.-based wireless operator's Sprint Capital Corp. 6 7/8% notes due 2028 gained 5/16 point to end just over 95 bid on volume of over $24 million.

Market signs turn mixed

Overall, statistical junk-market performance indicators were mixed on Wednesday, after having been higher across the board on Tuesday. It was the second mixed session in the last three.

The Markit Series 21 CDX North American High Yield index lost 13/32 to end at 106 15/32 bid, 106 19/32 offered after having risen by 1/16 point on Tuesday.

But the KDP High Yield Daily index gained 11 basis points to close at 74.64, its second straight advance. On Tuesday, it had improved by 4 bps.

Its yield came in by 2 bps for a second consecutive session to finish at 5.64%, its third straight tightening.

And the widely followed Merrill Lynch High Yield Master II index ran its winning streak to an astounding 15 sessions, rising by 0.092%, on top of Tuesday's 0.042% advance.

The latest gain lifted its year-to-date return to 6.329%, its seventh consecutive new high point for 2013, breaking the former mark of 6.231%, set on Tuesday.

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