Lear, upsized Global Ship deals price; new Lears steady, busy; Bon-Ton better; Caesars slips

By Paul Deckelman and Paul A. Harris

New York, March 11 - The high-yield pricing parade resumed on Tuesday after a one-day hiatus, with two deals generating total proceeds of $739 million seen during the session.

Southfield, Mich.-based automotive components manufacturer Lear Corp. drove by with its $325 million issue of 10-year notes. The new bonds were among the most heavily traded credits in Junkbondland, but were little moved from their issue price.

London-based containership owner and lessor Global Ship Lease Inc. did an upsized $420 million of five-year secured notes as a scheduled forward-calendar offering, but after pricing at a discount, the new bonds were not seen trading around in the aftermarket.

As was the case during Monday's session, traders did not see a lot of activity in the issues that had come to market last week, although Friday's offering from Niska Gas Storage Partners LLC continued to struggle while another Friday deal, from Catamaran Corp., continued to trade well.

Away from the new deals, the busiest junk bond was Bon-Ton Stores Inc.'s 2021 issue, and that was seen having done well, even though the retailer's shares fell after it released its 2013 fourth-quarter earnings and its 2014 outlook.

Caesars Entertainment Corp.'s bonds were lower across the board in active trading after the gaming company released its quarterly results.

But the recently beleaguered Forest Oil Corp. was on the rebound.

And there was also considerable junk market interest in the big new issue of general obligation bonds issued by the Commonwealth of Puerto Rico, whose ratings were recently knocked down to junk-bond status by the major agencies - a relative rarity for municipal debt.

Statistical indicators of junk market performance turned mixed after having been lower the previous three sessions.

Global Ship Lease upsizes

Trailing a Monday session that saw no new issues price, the high-yield primary market sprang to life on Tuesday with a pair of issuers. Both deals price on top of talk.

One of the two was upsized, and one came quick to market.

Global Ship Lease priced an upsized $420 million issue of 10% five-year first-priority secured notes (B3/B) at 98.50 to yield 10.392%.

The deal was upsized from $400 million

The coupon and reoffer price both came on top of price talk.

Timing on the transaction was moved slightly ahead; when the deal kicked off the timeline had it as expected Wednesday business.

Citigroup was the bookrunner.

Proceeds will be used to refinance debt and terminate existing interest rate swaps. Additional proceeds resulting from the $20 million upsizing of the deal will be used to put cash on the balance sheet.

Lear Corp. drives by

Lear Corp. priced a $325 million issue of 10-year senior notes (Ba2/BB) at par to yield 5 3/8% in a quick-to-market Tuesday transaction.

The yield printed on top of yield talk.

J.P. Morgan, Citigroup, Barclays, RBC and UBS were the joint bookrunners for the debt refinancing and general corporate purpsoes deal.

Cornerstone starts roadshow

There was a single roadshow announcement on Tuesday.

Cornerstone Chemical Co. began a roadshow on Tuesday for its $75 million offering of five-year senior PIK toggle notes.

Imperial Capital is the bookrunner.

The notes are non-rated. The operating company, however, is rated B3 by Moody's Investors Service and B- by Standard & Poor's, the source said.

The Waggaman, La.-based specialty chemical company plans to use the proceeds to pay a cash dividend to shareholders and to fund a debt service reserve account.

Grupo Antolin starts Wednesday

Meanwhile, news from the European market has slowed.

As with Monday, the Tuesday European high-yield session came with just a single deal announcement.

Spain-based Grupo Antolin plans to start a roadshow on Wednesday in the United Kingdom for its €400 million offering of seven-year senior notes.

Joint bookrunner Deutsche Bank will bill and deliver. Banco Popular Espanol, Bankia, Bankinter, BBVA, BNP Paribas, CaixaBank, Sabadell and Santander are also joint bookrunners.

The Brugos, Spain-based supplier of automotive interior components plans to use the proceeds to refinance debt and for general corporate purposes.

Quiet conditions in the European primary market notwithstanding, Antolin is the second €400 million-sized offer from a Spanish corporate to roll out in as many days.

On Monday Madrid-based construction and engineering firm Grupo Isolux Corsan Finance BV began a roadshow for its €400 million offering of seven-year senior notes (expected B/confirmed B+).

Joint global coordinator Morgan Stanley will bill and deliver. BofA Merrill Lynch and SG CIB are also joint global coordinators. Santander, Bankia and Deutsche Bank are joint bookrunners.

The roadshow continues into the Thursday session.

Lear little moved

In the secondary market, traders at three different shops all saw Lear Corp.'s new 5 3/8% notes due 2024 trading around par bid, 100 ¼ offered - a level that one characterized as "going nowhere."

The quickly shopped $325 million issue had earlier priced at par.

At another shop, a market source pegged the new bonds at 100 1/8 bid, but noted considerable aftermarket activity in the credit, estimating that over $29 million of those bonds had changed hands headed into the close.

Global Ship Lease's new 10% first-priority senior secured notes, meantime, priced much later in the session and were not immediately seen in secondary dealings.

Recent deals little traded

One of the traders described Tuesday's session as pretty quiet. A second characterized it as "a boring day," while a third opined that "it didn't look like there was a lot of volume" outside of a few select names like the new Lear issue or Bon-Ton.

They all agreed that there seemed to be little trading in the deals, which had come to market last week, although one quoted Niska Gas Storage Partners' 6½% notes due 2019 continuing to struggle at around 99¼ bid, 99½ offered.

The Houston-based independent operator of natural gas storage facilities priced its $575 million scheduled forward calendar issue at par on Friday via subsidiaries Niska Gas Storage Canada ULC and Niska Gas Storage Finance Corp. The bonds were not seen in immediate aftermarket trading on Friday after pricing, but were quoted on Monday around the 99 level.

He saw Catamaran Corp.'s 4¾% notes due 2021 at 101 bid, 101½ offered, well up from the par level at which the Schaumburg, Ill.-based pharmacy benefits management company's $500 million scheduled forward-calendar transaction had priced on Friday. The bonds were seen on Monday and again on Tuesday trading at or above the 101 bid level, although on not much volume.

And one of the traders noted that HCA Inc.'s 5% senior secured notes due 2024 "are still below par," trading around 99 bid all day before closing at 98 7/8 bid.

Another market source saw more than $16 million of the notes traded, putting it high up on the most-actives list. He saw the notes at 98 15/16 bid, little changed on the day.

The big Nashville, Tenn.-based hospital operator priced $2 million of the 5% notes at par last Monday as part of a quick-to-market $3.5 billion two part deal, upsized from an original $3 billion. The notes initially traded above par, but quickly dropped back to trade below that level in very heavy dealings of over $140 million last Wednesday. And although volume moderated after that, the bonds remained busy but could never quit crack the par barrier to move back up.

There was no sign on Tuesday of the other part of HCA's megadeal - the $1.5 billion of 3¾% senior secured notes due 2019, which priced at par last Monday. Those bonds, too, had originally traded on volume of more than $100 million when they were freed for aftermarket dealings last Wednesday and remained busy over the rest of last week and on into Monday, settling in around a par bid, 100½ offered status.

Bon-Ton up despite earnings

Away from the new deals, a trader noted that Bon-Ton Stores' 8% notes due 2021 were the volume champs on Tuesday with over $43 million traded, including $38 million of round-lot transactions, after the company released quarterly earnings - even though the numbers were disappointing.

He saw the York, Pa.-based department store retailer's paper get as good as 94 1/8 bid near the end of trading calling that a 1-point gain.

Another trader called the Bon-Ton bonds "one of the most actives," trading at levels anywhere from 91½ bid to a 93¾ to 94 context, finishing the day at 933/4.

Another source said that represented a gain of about 3/16 of a point on the day, on volume of about $40 million.

While the company's bonds were seen having firmed, its Nasdaq-traded shares plunged by $1.06, or 9.75%, to end at $9.81. Volume was just over 2 million shares, more than four times the norm.

Bon-Ton reported net income of $61.3 million, or $3.04 a share, down from $74.4 million, or $3.71 a share a year ago and down as well from analysts' expectations of about $65 million of profit, in the $3.15-to-$3.20 per share area.

Revenues were also a disappointment, with sales of $914.9 million -- 9.9% below year-ago levels and down as well from the roughly $980 million that Wall Street was expecting. Same-store sales, the retailing industry's key performance metric, fell 7.3%.

On top of the disappointing numbers, the company announced that its chief executive officer, Brendan Hoffman, will leave Bon-Ton when his contract is up next February, citing personal reasons.

Caesars off after earnings

Also on the earnings front, Caesars Entertainment had numbers out, but its bonds were on the downside afterward.

The company's 9% notes due 2020, the busiest bond in the Las Vegas-based gaming giant's capital structure Tuesday, fell 5/8 of a point to 90½ bid, on volume of over $11 million.

The 10% notes due 2018 were also seen down by 5/8 point, at 43 ¾ bid, with over $9 million having changed hands, while its 8½% notes due 2020lost 7/8 of a point to close at 89 bid, on turnover of over $8 million.

Caesars reported a fourth-quarter loss of $1.76 billion, or $12.83 a share - more than triple its year-earlier red ink of $480 million, or $3.84 a share. Revenue rose 3.2% to $2.08 billion, but that came in below the $2.1 billion analysts' average estimate.

Forest Oil firms up

The day's big gainer was surely Forest Oil's 7¼% notes due 2019, which a trader saw up 2¼ points, at 87¼ bid. Over $16 million of the bonds traded.

The Denver-based independent oil and natural gas exploration and production company's bonds have been falling over the last several weeks, going all the way from around par to levels as low as 84 bid, after it released its earnings on Feb. 25.

The report included lower-than-anticipated production and revenue totals from its field in the Eagle Ford Shale geological formation in southern Texas. The company announced that it was delaying development of its properties there, instead reallocating capital to other, potentially less-lucrative areas - a reversal from the company's glowing description of late last year of Eagle Ford as a core holding, as well as its expectation that production this year there would double 2013's output.

But on Tuesday, a trader said, the bonds were up, suggesting that they may have gotten a boost from a positive research report on the company from Janney Montgomery Scott LLC, which said the recent selloff was probably over-done and predicted that the turn away from Eagle Ford is likely only temporary and that the company would resume investing and drilling there once it re-assesses its seismic reports.

Safeway stays in place

A trader noted considerably less volume in Safeway Inc.'s bonds, which had seen over $500 million trading on Friday and well over $100 million on Monday, as investors reacted to news that the Pleasanton, Calif.-based supermarket giant is to be acquired by Cerberus Capital in a $9 billion leveraged buyout transaction that will be mostly fueled by new debt.

The bonds had mostly jumped multiple points in Friday's very active dealings and had continued to firm on Monday.

But the trader said that on Tuesday, "Safeway was just kind of trading, going sideways. If it moved, it went maybe 1/8 point in either direction."

While Safeway's bonds are currently nominally investment grade credits carrying a Baa3/BBB-/BBB- rating, Moody's and Fitch Ratings are both eying those ratings for a possible downgrade to junk status, noting that the debt deal to fund that LBO is expected to shoot the company's leverage ratio to somewhere in the 6 times EBITDA range from its year-end 2013 level at 3.6 times.

Puerto Rican bonds pop

A trader said that many people in Tuesday's junk market "were focused on Puerto Rico" after the island commonwealth issued $3.5 billion of new 8% general obligation bonds due 2035.

He quoted the bonds - priced at 93 - as having firmed to a 95¼ to 95¾ context, saying that "muni guys were trading it, and high-yield guys and high-yield street brokers. Everybody was getting involved."

The bonds were rated Ba2/BB/BB after the major agencies recently downgraded the commonwealth to junk-bond territory - a relative rarity in the municipal debt markets.

A little later on, the trader said, the Puerto Rican bonds had moved up to going-home levels around 95¾ to 96 bid.

Market indicators turn mixed

Statistical junk-market performance indicators turned mixed on Tuesday after having been lower across the board over the three previous sessions.

The Markit Series 21 CDX North American High Yield index eased by 3/32 of a point on Tuesday, its fourth straight setback, closing at 107 11/16 bid, 107 13/16 offered. On Monday, it had lost 1/32 of a point.

The KDP High Yield Daily index posted its fourth consecutive loss, retreating by 3 basis points to 74.99, after dropping by 10 bps on Monday. Its yield, meanwhile, was unchanged on Tuesday at 5.23%, after having risen by 4 bps for a second consecutive session on Friday and again on Monday.

But the widely followed Merrill Lynch High Yield Master II index got back in the black on Tuesday with a 0.036% rise, snapping a three-session losing streak that included Monday's drop of 0.034%.

Tuesday's gain raised its year-to-date return to 2.572%, up from Monday's 2.535%, though still down from last Wednesday's 2.812% reading, its 2014 peak level.

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