Chuck E. Cheese, Playa price to cap $3.4 billion week, pre-holiday trading firm but quiet

By Paul Deckelman

New York, Feb. 14 - CEC Entertainment, Inc. - the parent company of the popular Chuck E. Cheese family dining and entertainment restaurants - served up a downsized $255 million order of eight year notes on Friday, high yield syndicate sources said, and investors ate up those bonds, taking them up nearly 2 points from their issue price when they hit the aftermarket.

The junk market also saw a $75 million add-on to tropical resort operator Playa Resorts Holding BV's existing 2020 notes that the company sold last summer.

Those deals closed out a week which saw $3.44 billion of new junk-rated, U.S dollar-denominated paper from domestic or industrialized-country issuers come to market in 10 tranches, according to data compiled by Prospect News - although that was only a little more than half of the $6.65 billion that priced in 12 tranches during the previous week, ended Friday, Feb. 7.

The deals lifted 2014 year-to-date issuance to $32.54 billion in 64 tranches - although that was running more than 24% behind the red-hot pace seen a year ago, when $43.01 billion had priced in 99 tranches by this point on the calendar, according to the data, helped by a slew of megadeal-sized offerings that came to market during the opening weeks of 2013.

Away from the deals that priced during the session, traders saw a generally firm market - but a quiet one, as the combination of continued severe winter weather in and around New York and other Northeastern business centers, plus the onset of a three-day holiday weekend, with the markets to be closed Monday for Presidents Day, threw a damper over overall activity levels.

Some recently priced deals, like Thursday's offering from snack-foods manufacturer Diamond Foods, Inc. continued to trade at strong levels, and Wednesday's megadeal from lender CIT Group Inc. remained one of the busiest bonds in Junkbondland.

Away from the new deals, Latin American wireless provider NII Holdings Inc.'s bonds were busily traded, firming on no news, while Charter Communications Inc. paper was also active for a second consecutive session in the wake of this week's news of the pending nuptials between larger cable industry rivals Comcast Corp. and Time Warner Cable Inc. - with Charter spending an unhappy Valentine's Day in the in the role of Time Warner's jilted would-be suitor.

Statistical market performance measures were higher across the board for a seventh straight session, and were also higher all around versus the levels at which they had ended last week.

Chuck E. Cheese, please

The domestic high-yield market saw two single-tranche deals pricing during the session, generating $330 million face amount and $334 million proceeds.

The only deal on the day's forward calendar - for restaurateur CEC Entertainment, Inc. - came to market with a downsized $255 million of eight-year senior notes (Caa1/CCC+), which priced at par to yield 8%.

The pricing came at the wider end of pre-deal market price talk envisioning a yield between 7¾% and 8%.

The bond deal had been reduced from an originally planned $305 million, with a concurrent $35 million increase in the company's pending seven-year covenant-light term loan B deal, bringing the latter up to $760 million from $725 million originally. The company will draw the remaining $15 million of proceeds from cash on hand.

Besides the downsizing, heard to have taken place on Thursday, the bond deal also saw a covenant change.

Proceeds from the Rule 144A and Regulation S with registration rights offering and from the loan deal will be used to fund the pending leveraged buyout of the Irving, Texas-based operator and franchisor of the popular Chuck E. Cheese family dining and entertainment restaurant chain by Apollo Global Management. That $54.00 per share transaction is valued at about $1.3 billion, including assumption of debt.

The deal was brought to market via joint bookrunners Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., Morgan Stanley & Co. LLC, UBS Investment Bank and Apollo.

Playa Resorts adds on

The market also saw a $75 million add-on to Playa Resorts Holding BV's existing 8% senior notes due Aug. 15, 2020 (Caa1 /B).

The unscheduled deal priced at 105.5, for a yield to worst of 6.779%.

The Rule 144A/Regulation S for life offering was brought to market via joint bookrunners B of A Merrill Lynch and Deutsche Bank Securities Inc. - the same banks that led the transaction for the company's original $300 million of the notes, which priced at par on back on Aug. 6, 2013.

The issuer is a subsidiary of Playa Hotels and Resorts BV, a Fairfax, Va.-based owner, operator and developer of all-inclusive beach resorts in Mexico and the Caribbean.

Proceeds from the original bond deal, along with a concurrent $350 million senior secured term loan, plus cash, were used to finance a $1.4 billion transaction last year in which Playa acquired nine hotels in Mexico, three others in the Dominican Republic and one in Jamaica.

Proceeds from the add-on are slated for capital expenditures and general corporate purposes.

Darty deal hits the road

From the European segment of the high-yield market came word early Friday that Darty Financements SAS - a wholly owned funding subsidiary of London-based consumer electronics retailer Darty plc - is scheduled to begin a roadshow on Monday for a €250 million offering of seven-year senior notes.

The roadshow will kick off with a breakfast meeting on Monday in London and a luncheon there on Tuesday, followed by a breakfast meeting on Wednesday in Paris. There will also be a presentation in Frankfurt on Wednesday.

Ratings have not yet been assigned to the issue, which will be sold under Rule 144A and Regulation S, with no registration rights.

BNP Paribas Securities Corp., Credit Agricole Corporate and Investment Bank and HSBC Securities will be the joint bookrunners on the deal. BNP will handle billing and delivery

Barclays, Natixis Securities and SG CIB will also be bookrunners on the issue.

Darty plc, which operates a total of some 400 stores in France, the Netherlands, Belgium, the Czech Republic, Slovakia and Turkey, announced the bond deal as part of a two-part comprehensive refinancing package that also includes a new five-year committed multicurrency revolving credit facility agreement of up to €250 million.

The company plans to use the net proceeds from the bond deal, together with borrowings under the new credit facility, to repay Darty's existing €455 million revolving credit facility.

CEC deal trades up

In the secondary market, a trader opined that "nothing really went on. Many folks left after CEC priced" at mid-morning (ET)."

A trader saw the new Chuck E. Cheese deal "trade up a little, with small pieces offered around 102," although he said that volume was fairly light, given the generally sparse attendance in the junk market.

A little later in the day, he pegged that deal at 101¾ bid, 102¾ offered.

A second trader saw the bonds going out at 101½ bid, 102½ offered.

Diamond stays strong

A trader saw Diamond Foods' 7% notes due 2019 at 101¾ bid, 102¾ offered - but several other traders saw better levels than that.

One put the bonds at 102¼ bid, 102½ offered, while a second located the notes at 102¼ bid, 102¾ offered, calling that a ¼ point gain on the day.

"They traded up off the break yesterday [Thursday]," said one market source, who put the bonds at 102 bid, 102½ offered.

The San Francisco-based maker of packaged snack foods such as nuts, potato chips and popcorn, priced its $230 million issue at par on Thursday off the forward calendar, and investors were seen to have gobbled up those bonds when they were freed for aftermarket dealings.

Among notes which came to market earlier in the week, a trader saw Griffon Corp.'s 5¼% notes due 2022 at 99 7/8 bid, 100 1/8 offered, calling that up 1/8 point.

The New York-based diversified management and holding company priced its quick-to-market $600 million offering at par on Wednesday, after the transaction was upsized from an originally planned $550 million, but the new bonds were trading slightly below their issue price right out of the gate, several traders noted.

CIT still active

A trader saw Wednesday's mega-sized offering of 3 7/8% notes from CIT Group trading at around 100½ bid, 101¼ offered on Wednesday, "right above par," he said.

A second called the bonds up 1/8 point on the session at 100 5/8 bid, 100¾ offered.

A market source meantime said that the New York-based commercial lender and Utah banking company saw round-lot volume on the session of over $7 million, calling that a respectable level of activity, given how quiet the overall market was. It was enough to easily put the credit near the top of the Most Actives list.

The CIT issue - a $1 billion drive-by deal that priced at par on Wednesday - had topped that list both on Wednesday, when it racked up over $50 million of volume upon being freed for aftermarket activity, and again on Thursday, when some $32 million of the bonds had changed hands as it firmed to around the 100½ bid level.

However, traders noted during the week that many of the accounts buying the bonds were not traditional high yield accounts, with many of the latter shunning the issue because of its sparse coupon.

NII issue busy

Away from the new deals, market participants noted brisk trading in NII Holdings' bonds at stronger levels, even with the lack of any fresh news about the Reston, Va.-based company, which provides wireless service to customers in Mexico and South American under the Nextel brand.

Its NII Capital Corp. 10% notes due 2016 topped the Most Actives list, with over $16 million having traded by mid-afternoon. Those notes were up ¾ point at 66¾ bid, 67 offered.

Over $12 million of its 7 5/8 notes due 2021 traded, hanging around a 46½ to 48½ bid context which a market source called little changed.

Charter slips back

Another active name - this one with a lot of news involved - was Charter Communications, whose bonds had firmed on Thursday in heavy trading on apparent investor relief that the Stamford, Conn.-based cable operator will apparently not be acquiring larger rival Time Warner Cable in a debt-funded hostile takeover, since the later company agreed to be bought out by still larger rival Comcast in a $45 billion deal - well beyond the $38 billion that Charter had offered.

However, after that initial relief rally, the Charter bonds slipped back on Friday, with its CCO Holdings LLC 5 1/8% notes due 2023 having slipped back, giving up most of the 2 points they had gained on Thursday. A market source quoted them at 95¾ bid late in the day, down 1¼ points, on volume of over $11 million.

The CCO Holdings 5¼% notes due 2022 were down ¼ point at 97¼ bid, with over $7 million traded. Its 5¾% notes due 2024, though, were unchanged at 99 3/8 bid, also on over $7 million of volume.

Quiet but firm

Overall, several traders called Friday's junk bond market "quiet but firm," noting the lack of activity.

One said that many market participants "were working from home today," motivated by both the continued unpleasant wintry weather in the Northeast and a desire to make an early exit ahead of Monday's holiday, which will see U.S. fixed-income markets shuttered.

"Between the weather and the three-day weekend, it was dead," he declared, adding that "some people apparently decided to turn their three-day weekend into a four-day weekend."

Market indicators stay strong

Statistical junk-market performance indicators were higher for a seventh consecutive session on Friday.

And they were higher across the board on a week-over-week basis, after two weeks of mixed performances before that.

The Markit Series 21 CDX North American High Yield notched its second consecutive gain, rising by 7/32 point on Friday to go home at 107 7/8 bid, 107 15/16 offered, on Top of Thursday's 1/8 point advance.

The index was up as well from its 107 1/8 bid, 107 3/8 offered closing level at the end of the previous week on Feb. 7.

The KDP High Yield Daily Index posted its seventh consecutive gain, edging up by 1 basis point to 74.76, after having improved by 5 bps on Thursday.

Its yield declined for a seventh consecutive session as well, moving down by 1 bp to 5.44%, after having narrowed by 2 bps on Wednesday and again on Thursday.

Its levels compared favorably with the 74.46 index reading and 5.57% yield seen the previous Friday.

And the widely followed Merrill Lynch High Yield Master II Index notched its eighth advance in a row on Friday, rising by 0.071%, on top of Thursday's 0.027% advance.

The gain raised its year-to-date return to 1.542%, its fourth consecutive new high level for the year so far, eclipsing the old mark of 1.469%, set on Thursday.

The index's yield to worst declined to 5.47% from Thursday's 5.51%. Those levels were down from last Tuesday's 5.735%, its peak level for the year so far, while also remaining well above the low yield for the year, 5.386% on Jan.22.

Its spread to worst tightened to 416 bps over comparable Treasuries from 421 bps on Thursday. Those spreads remained in from last Tuesday's 444 bps, the wide point for the year so far, although they also were well above the tight spread for the year, 398 bps, on Jan. 22.

For the week, the index rose by 0.547%, its second consecutive weekly advance after two straight weekly losses before that. It had also been up by 0.248% the previous week, when its year-to-date return closed at 0.989%.

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