Crown Castle mega-deal, Quebecor lead $2.8 billion day; cellular bonds busy on MetroPCS news

By Paul Deckelman and Paul A. Harris

New York, Oct. 3 - The junk bond market kept up its new-issue pace Wednesday with a pair of big deals, joined by a pair of small add-on transactions out of the energy sector. A total of some $2.8 billion of new U.S. dollar-denominated, purely junk-rated debt from domestic or developed-country issuers priced during the session.

All were quickly shopped offerings from borrowers and their respective bankers looking to take advantage of favorable issuance conditions and the seemingly insatiable Junkbondland appetite for new paper.

The big deal of the day was the $1.65 billion 10.25-year transaction from communications antenna tower operator Crown Castle International Corp. The deal was well received, moving up in the aftermarket - the only one of the day's new issues seen trading around afterward.

There also was a big deal from Canada's Quebecor Media Inc., which came to market with an upsized $1.36 billion two-part offering, denominated in U.S. and Canadian dollars.

Of less interest, traders said, were a pair of $150 million add-on offerings from Houston-based oil and natural gas operators Swift Energy Co. and Alta Mesa Holdings, LP - the former a 10-year offering and the latter a six-year piece of paper.

Among recently priced issues, traders saw some activity in the eight-year portion of Hertz Corp.'s two-part mega-deal, which priced on Monday, but less in the 10-year tranche.

Away from the new deals, statistical indicators of junk market performance were seen better on the day.

There was also some activity in the bonds of cellular phone operators, in the wake of the big merger deal announced between Deutsche Telekom AG's T-Mobile unit and pre-paid wireless carrier MetroPCS Inc. One big gainer, traders said, was Metro rival Leap Wireless International's Cricket Communications Inc.

Crown Castle drives by

The drive-by market continued to crank on Wednesday, with four issuers, each one bringing a single U.S. dollar-denominated tranche, combined to raise $2.81 billion.

Crown Castle International priced a $1.65 billion issue of non-callable 10.25-year senior notes (B1/B-) at par to yield 5¼%, at the tight end of the 5¼% to 5 3/8% yield talk.

The new bonds closed at 101 3/8 bid, 101¾ offered in subsequent trading, according to a trader, who added that quite a few bonds traded on the break.

The joint bookrunners for the quick-to-market deal were Bank of America Merrill Lynch, Morgan Stanley, SunTrust, J.P. Morgan, RBC, RBS, TD, Barclays, Credit Agricole, Citigroup, Deutsche Bank and Mitsubishi.

Proceeds will be used to fund the acquisition of rights to about 7,200 T-Mobile USA Inc. towers. If for any reason the T-Mobile transaction does not close or closes at a reduced number of sites or for reduced consideration, the company expects to use any remaining proceeds for general corporate purposes.

Quebecor massively upsizes

Quebecor Media completed a massively upsized $1.36 billion equivalent two-part offering non-callable 10.25-year senior notes (B2/B+).

The deal, which was increased from the equivalent of $1 billion, included an $850 million tranche of 5¾% notes which priced at par to yield 5.752%. The yield printed in line with yield talk set in the 5¾% area.

Bookrunners for the dollar-denominated notes were Bank of America Merrill Lynch, Citigroup, National Bank of Canada and TD.

In addition Quebecor priced a C$500 million tranche of 6 5/8% notes at par to yield 6.627%.

The yield came at the tight end of price talk which was set in the 6¾% area.

Bookrunners for the Canadian dollar-denominated tranche were Scotia, Bank of America Merrill Lynch Canada, RBC Dominion and TD.

The Montreal-based communications and media company plans to use the proceeds to finance the purchase of C$1 billion of equity from one of the existing shareholders, CDP Capital d'Amerique Investissements Inc., a subsidiary of Caisse de depot et placement du Quebec.

Swift Energy at the cheap end

Swift Energy priced a $150 million add-on to its 7 7/8% senior notes due March 1, 2022 (B3/B+) at 105 to yield 6.993%.

The reoffer price came at the cheap end of the 105 to 105.75 price talk.

J.P. Morgan, RBC and Wells Fargo were joint bookrunners for the quick-to-market deal.

The Houston-based oil and gas company plans to use the proceeds to repay revolver debt and for general corporate purposes.

Alta Mesa upsizes

In a deal that was in the market overnight, Alta Mesa Holdings, LP and Alta Mesa Finance Services Corp. priced an upsized $150 million add-on to their 9 5/8% senior notes due Oct. 15, 2018 (B3/B) at 99 to yield 9.85%.

The reoffer price came on top of price talk. The amount was increased from the originally planned $100 million.

Wells Fargo, Citigroup and Mitsubishi were the joint bookrunners for the quick-to-market add-on.

The Houston-based onshore oil and gas exploration and production company plans to use the proceeds, including those resulting from the $50 million upsizing, to repay bank debt.

Talking the deals

Looking towards Thursday's session, Getty Images Inc. talked its $550 million offering of eight-year senior notes (Caal/CCC+) to yield 7% to 7¼%.

Pricing is set for midday Thursday.

J.P. Morgan, Goldman Sachs, Barclays, Credit Suisse and RBC are the joint bookrunners.

The notes offer was downsized to $550 million from $750 million upon the finalization of the $200 million upsizing of the company's concurrent term loan, taking it to $1.9 billion from $1.7 billion.

Elsewhere First Quantum Minerals Ltd. set initial guidance for its $350 million offering of seven-year senior notes (B1/B+/BB) with a yield in the 7½% area.

A London roadshow, being led by joint global coordinator Citigroup Global Markets, is set to wrap up on Thursday.

Jefferies & Co., also joint global coordinator, led a roadshow in the United States which was scheduled to conclude on Wednesday.

And although David's Bridal Inc. has not put out official price talk for its $270 million offering of eight-year senior notes (Caa2/CCC+), yield guidance is 8¼% to 8½%, according to a trader who expects it to price on Friday.

Morgan Stanley, Bank of America Merrill Lynch, Barclays, Goldman Sachs, Credit Suisse and Deutsche Bank are the joint bookrunners.

The trader added that the market was unchanged to a touch softer on "the massive influx of new issues.

"We'll see if the primary market quiets down a little over the next couple of weeks, and if that helps to tighten things up a little," the source commented during a telephone call at mid-morning on Wednesday.

Crown Castle is king

When the new Crown Castle 5¼% notes were freed for aftermarket dealings, a trader quoted the Houston-based communications antenna tower owner and operator's deal trading at 101¼ bid, 101¾ offered.

A second trader also saw the new bonds in that same 101¼ to 101¾ context. The quick-to-market $1.65 billion offering had priced earlier at par.

Yet another trader pegged the bonds at 101 5/8 bid, 101 7/8 offered

Energy deals not seen

The day's other deals failed to register much impact, a trader said.

"Alta Mesa did an add-on, but it was a non-event," a trader said, because of its relatively smallish size, at just $150 million, and the fact that it was an add-on to an existing tranche of bonds somewhere.

He likewise saw nothing doing in the new $150 million tap from Swift Energy Co. - like Alta Mesa, a Houston-based energy exploration and production company.

"There really wasn't anything notable about these add-ons," he opined.

Canadian communications company Quebecor Media's two-part offering - which included a U.S.-dollar-denominated $850 million issue, as well as a smaller Canadian-dollar-denominated tranche - came to market too late in the session for any trading.

Hertz motors higher

Among the deals which priced earlier in the week, a trader said that "Hertz continued to do a little better," seeing the Park Ridge, N.J.-based automotive and equipment rental company's 5 7/8% notes due 2020 as good as 101¼ bid, which he called a ¼ point gain. That $700 million offering, upsized from an originally shopped $600 million, had priced at par on Monday.

He saw the other half of that quick-to-market $1.2 billion two-part deal - the 6¼% notes due 2022 - "still up around the 101¾ area." That $500 million tranche, downsized from an original $600 million, had also priced at par on Monday.

Tenet steady

A trader said that Tenet Healthcare Corp.'s 4¾% senior secured notes due 2020 "are still kind of stalled around their issue price" at par, while the Dallas-based hospital operator 's 6¾% senior unsecured notes due 2020 were in a 100½ to 101 bid context, "so there was not a lot of change."

A second trader saw the 43/4s staying right near par, or perhaps ¼ point better, while seeing the 63/4s at "a wide" 100 7/8 to 101¾ range, "but it never tightened up into something that I would trade."

He continued that "the healthcare sector didn't really trade much - it's trading rich and it seems to be more active when the market backs off than when it's going up, unless there's news in the sector.

Tuesday's deals quiet

Tuesday's issue from Algeco Scotsman likewise "didn't trade much," one of the traders said.

He saw the Baltimore-based provider of modular storage units' 8½% notes due 2018 trading between 101¼ and 102 bid, "but it was very limited."

A second trader said that he "wasn't posted on any trades in it, really." He quoted the $1.075 billion issue at 101½ to 1021/4, "But it was not active in the Street, that particular name."

A trader said that [Tuesday's] new deals "were all firm, but they weren't particularly active today, away from the shorter Hertz this morning."

The overall market, he said, "was kind of quiet. Prices were firm all day and up a little with the equity market. They didn't seem to back off when the equities did.

"I would say it's still firm, even though there are a number of new issues that are yet to price. It looks like the more stuff they pile on, the better the market gets - so who knows?"

Indicators improve

Away from the new deals, statistical indicators of junk market performance were up on Wednesday, after having been mixed on Tuesday with a mostly downside bias.

The Markit Group CDX North American Series 19 High Yield Index was up by 5/16 point on Wednesday, closing at 100 1/8 bid, 100¼ offered, after having eased by 1/32 point on Tuesday.

The KDP High Yield Daily Index meantime edged upward, gaining 1 basis point Wednesday to end at 74.23, after having dropped by 9 bps on Tuesday.

Its yield tightened 1 bp to 6.03% after having risen by 3 bps on Tuesday.

And the widely followed Merrill Lynch U.S. High Yield Master II Index posted its fifth consecutive gain on Wednesday, pushing upward by 0.047% on top of Tuesday's 0.022% advance.

That lifted its year-to-date return to 12.238% from Tuesday's 12.185%.

However, the year-to-date level remains below its 2012 peak level of 12.814%, set on Sept. 19.

Cellular bonds busy

Among specific names, the news that pre-paid cellular provider MetroPCS will be acquired by Deutsche Telekom and combined with the German communications giant's T-Mobile U.S. wireless carrier sparked a fair amount of trading in that sector.

A trader saw "a lot of activity" in the Richardson, Texas-based company's 6 5/8% notes due 2020. He said that those bonds had gone home on Tuesday between 109½ and 110, and "there's been a lot of trades between 110½ and 111½ today - so up a point."

A market source at another desk said that over $40 million of the bonds had changed hands heading into the close, making it one of the busiest junk credits on the day.

The source also said that MetroPCS competitor Leap Wireless' Cricket Communications 7¾% notes due 2020 also saw more than $40 million traded.

Another trader said that "Leap gained a point or two in sympathy," moving up to 101¼ bid, although he was of the opinion that MetroPCS's bonds "faded, and gave back" some of their early gains.

The company's 7 7/8% notes due 2018 were also fairly active, with other $20 million traded, ending at 110 bid. A market source called that credit unchanged.

MetroPCS executives, and those of Deutsche Telekom, outlined the complex acquisition transaction on a conference call Wednesday, on which they also predicted that the company would have a "strong, flexible" balance sheet, with debt ratings in the BB range and a leverage ratio of debt versus earnings of under 3.0 times (see related story elsewhere in this issue).

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