Upsized Cengage prices; Crown Castle, Heckmann, WIND on tap; existing Crown bonds trade up

By Paul Deckelman and Paul A. Harris

New York, April 3 - The high-yield primary market saw a slightly more relaxed session on Tuesday, as just one new dollar-denominated junk deal was heard by syndicate sources to have priced: educational materials provider Cengage Learning Acquisitions Inc.'s $725 million offering of eight-year secured notes.

That deal finally priced late in the session after going through something of a multi-step dance - first it was downsized on Monday from the originally announced size, then it was upsized from that lower level on Tuesday and finally priced after again being upsized.

That was the sole dollar pricing, in contrast to each of the two previous sessions, which have seen a bunch of new deals totaling some $2 billion pricing each day.

There was one non-dollar transaction as French carmaker PSA Peugeot Citroen SA drove by with a €600 million five-year deal.

There was, meanwhile, some forward calendar-building going on, as communications antenna tower operator Crown Castle International Corp. announced plans for a $1 billion 10-year deal. Price talk emerged on the deal, which is expected to price on Wednesday. An issue of existing Crown Castle bonds, for which there is a tender offer to be funded using the anticipated proceeds from the new deal, firmed smartly during the session.

Price talk was also heard on two other deals expected to price on Wednesday, from Heckmann Corp., a provider of environmental and other water services to the energy industry, and from Italian telecommunications operator WIND Acquisition Finance SA. The latter consists of dollar- and euro-denominated "mirror" tranche add-ons to multi-currency deal the company priced in 2010.

There was also price talk on building tools and materials distributor HD Supply Inc.'s giant-sized two-part senior secured transaction, which is expected to price on Thursday.

There was no trading in the new Cengage deal, which came too late in the session. The company's existing bonds were heard to be gyrating around amid investor uncertainty over whether the deal would in fact come to market.

There was also some activity in the deals that priced on Monday, notably New Gold Inc., which continued to trade well above the metals mining company's par issue price.

Statistical indicators of secondary market performance turned mixed on the day.

Cengage upsizes

Cengage Learning Acquisitions priced an upsized $725 million issue of eight-year first lien senior secured notes (B2/B) at par to yield 11½%.

The deal was upsized from a range of $650 million to $700 million, which was announced early Tuesday morning. That range itself represented an upsizing from $525 million. The $525 million size represented a reduction from the initially announced size of $575 million.

The yield printed at the tight end of the revised 11½% to 11¾% yield talk. Previous yield talk had been set in the 12% area.

J.P. Morgan, Deutsche Bank, Morgan Stanley, RBC and UBS were the joint bookrunners.

The company, a provider of print and digital teaching and learning services, plans to use the proceeds to repay bank debt.

The additional proceeds will be used to take out first lien debt or for general corporate purposes, which may include prepayments of existing senior unsecured notes, senior subordinated notes or holdco notes.

The deal ran a one-week roadshow and had been expected to price last Friday.

However, the covenants were not to the liking of the buyside, according to a source from a high-yield mutual fund.

The deal was subsequently downsized, the price talk widened and timing was delayed.

Covenant concerns were ultimately addressed, according to an informed source, and the deal finally upsized and came at the tight end of downwardly revised talk.

Peugeot prices at tight end

Peugeot priced a €600 million issue of 5 5/8% fixed-rate notes due July 11, 2017 (Ba1/BB+) at a 412.5 basis points spread to mid-swaps.

The spread came at the tight end of the 412.5 bps to 425 bps spread talk.

BBVA, Credit Agricole, Deutsche Bank AG, HSBC and Natixis managed the quick-to-market sale.

Crown Castle's $1 billion

Dealers set the stage for a busy finish to the holiday shortened pre-Easter/Passover week, with $4.2 billion and €500 million equivalent of announced business and at least one more drive-by to be announced on Wednesday, according to a syndicate banker who declined to furnish any other information.

Crown Castle talked a $1 billion offering of 10-year senior notes (B1/B-) to yield 5½% to 5¾% on Tuesday.

The quick-to-market deal is set to price on Wednesday.

Morgan Stanley, Bank of America Merrill Lynch, RBS, SunTrust, TD, Barclays, Credit Agricole, J.P. Morgan, RBC, Citigroup, Deutsche Bank and Mitsubishi are the joint bookrunners for the debt refinancing deal.

Talking the deals

Talk was also heard on three previously announced deals.

Heckmann talked its $250 million offering of six-year senior notes (Caa1/B-) to yield 9¼% to 9½%.

The deal is set to price on Wednesday via left bookrunner Jefferies and joint bookrunners Credit Suisse and Wells Fargo.

Italy's WIND set price talk for a €500 million-equivalent two-part offering of notes mirroring its senior secured notes due Feb. 15, 2018 (Ba3/BB).

Notes mirroring the euro-denominated 7 3/8% notes are talked at 90 to 91, and notes mirroring the dollar-denominated 7¼% notes are talked at 92 to 93.

Tranche sizes remain to be determined, and pricing is set for Wednesday.

Deutsche Bank, BNP and Banca IMI are joint global coordinators and joint bookrunners. Barclays, Credit Suisse, ING and SG are also joint bookrunners.

The mirror notes will not be fungible with the existing issues.

And HD Supply set price talk for two tranches of notes, which are part of its $2.625 billion of new bond and bank debt.

The deal features $1.85 billion of debt that will come in the form of a term loan B and seven-year senior secured first-priority notes, which come with three years of call protection.

The notes (B2/B+) are talked to yield 8% to 8¼%.

The loan and first-priority notes tranches, the sizes of which remain to be determined, are being led by joint bookrunners Bank of America Merrill Lynch, Goldman Sachs, Barclays, J.P. Morgan, Credit Suisse, Deutsche Bank, Wells Fargo and UBS.

In addition, HD Supply is offering $775 million of eight-year senior secured second-priority notes (Caa1/CCC+), which come with four years of call protection.

Talk on the second priority notes is in the 10¾% area.

On the second-lien tranche Goldman Sachs, Bank of America Merrill Lynch, Barclays, JPMorgan, Credit Suisse, Deutsche Bank, Wells Fargo and UBS are the joint bookrunners.

The debt refinancing deal is set to price on Thursday.

No trading in new Cengage

With the Cengage Learning deal having appeared late in the session, traders did not see any immediate aftermarket in the new bonds from the Stamford, Conn.-based company, a publisher of print and digital information services for the academic, professional and library markets.

However, there was some volatile trading in the company's existing bonds, with investors - perhaps confused by the various downsizings and upsizings - not yet certain about whether the deal would in fact get done. It ultimately did, though after hours.

Cengage's 10½% notes due 2015, for instance, were "up and down" during Tuesday's session, according to a trader.

He saw the notes hit a low of 73 before they rebounded back to 75 bid, 76 offered.

"It probably wasn't all that different [day over day]," he said. "They're still trying to get that deal done."

At another shop, a trader said the paper "opened lower" at 72½ bid, 74½ offered. The bonds were soon lifted, he said, and the paper "bounced up a little bit," ending at 74½ bid.

In comparison, he said the bonds were 76 bid, 77 offered on March 30.

Existing Crowns trade around

While the Cengage notes were gyrating around at pretty depressed levels as investors waited for that new deal to come, it was quite the opposite story for Crown Castle International's outstanding 9% notes due 2015.

The Houston-based communications antenna tower operator plans to use the proceeds of its upcoming $1 billion bond deal to fund the just-announced tender offer for those 9% bonds and, following that, the redemption of any of the 9s that don't get taken up in the tender transaction.

"That explains their movement," said a trader who saw those bonds up almost 2 points on the day, quoting them going out at 111.85, just above the tender offer's total consideration price of $1,117.31 per $1,000 of the bonds tendered by the early tender deadline of 5 p.m. ET on April 17, the equivalent of a 111.731 price.

He said that volume in the existing bonds was "pretty good," totaling around $13 million.

A second trader said that early in the day, "there were some oddball trades" around 1093/4, about where the bonds had already been, "but since about 11 o'clock [ET] on," all of the trades took place between 111¾ and 111.93, "so I guess they've zeroed in on the tender price."

"Now they'll be treated as a money-market instrument," yet another trader said.

New Gold glitters further

There was some continued trading in the new deals which had priced on Monday, with one trader declaring that "the deals did okay."

The star of Monday's secondary trading in new paper, which dominated the market that day, was New Gold, and the Vancouver, B.C.-based gold and copper miner's $300 million issue of 7% notes due 2020 continued to firm in Tuesday's dealings.

A trader saw them "pretty much" trading around 102 3/8 bid, 102¾ offered. A second trader even saw them as high as 102 7/8 bid, although he thought that the bonds might come down from those exalted levels with softer gold prices. Bonds of gold mining companies are frequently seen as a proxy for direct investment in precious metals such as gold.

The latter's price, meantime, tumbled in spot trading on the afternoon announcement from the U.S. Federal Reserve that it saw no need for further monetary easing unless the U.S. economic expansion falters or prices rise at a rate slower than its 2% target. Gold finished down $27.30 on the day, or 1.63%, to end at $1,644.70 per ounce.

New Gold's bonds priced off the forward calendar on Monday at par. When the eight-year notes were freed for secondary market dealings later in that session, a trader initially saw those bonds bid at 1011/2. By the end of the day, traders saw them having gotten as good as 102 bid, 102½ offered.

Monday deals hold levels

Among the other deals coming to market on Monday, a trader saw Oklahoma City-based oil and gas exploration and production operator SandRidge Energy Inc.'s 8 1/8% notes due 2022 "up slightly" at 100 3/8 bid.

A second trader echoed that, seeing two sided markets in the bond early on at 100 3/8 bid, 100½ offered.

He wondered aloud, "How can they trade so tight?"

The company priced its $750 million drive-by deal late in the day on Monday at par. In the aftermarket, a trader saw the bonds initially trading at a wide 100¼ to 101¼ range, while a second a little later on said they had tightened to bid levels around 100 1/8 to 1001/4.

A trader saw Actuant Corp.'s quick-to-market issue of 5 5/8% notes due 2022 on Tuesday at 101½ bid, 102½ offered.

Earlier, he saw the Menomonee Falls, Wis.-based diversified industrial manufacturer's quickly shopped $300 million issue at 101¾ bid,102¾ offered, "but then they faded."

On Monday, a trader had quoted the notes at 101 bid, 101½ offered, up from their par issue price, but he said: "It was thinly traded; there hasn't been a lot of it."

A trader pegged Houston-based offshore energy drilling contractor Vantage Drilling Co.'s' add-on to its existing 11½% notes due 2018 at 109¼ bid, 109¾ offered.

That was up from the 108 level where the company's $775 million fungible add-on priced on Monday and up as well from its immediate aftermarket levels around 109 bid.

But a second trader said he had not seen any activity in the bonds since Monday and wondered aloud, "Why are they disappearing? That's just so weird."

Market indicators turn mixed

Away from the trading in new issues, or in the case of Cengage Learning, Crown Castle International or in the existing bonds of companies bringing new deals, traders said that not much was going on.

"There was nothing screaming, making a dash for it," he opined.

He also saw a number of people out, attributing it to the twin effects of Spring Break as well as Easter week, with many market participants taking the opportunity to take some vacation days.

Statistical measures of junk market performance, meanwhile, turned mixed on Tuesday, after having been stayed firm for a second consecutive session on Monday.

A trader saw the Markit Group CDX North American Series 18 High Yield Index down by a quarter-point on Tuesday, ending at 96¾ bid, 97 offered; it had gained just under a quarter-point on Monday.

The KDP High Yield Daily Index was unchanged at 73.91, and its yield likewise steady at 6.59%. The index had edged up by 1 basis point Monday, while the yield had fallen by 1 bp on Monday.

And the widely followed Merrill Lynch High Yield Master II Index recorded its third straight gain on Tuesday, when it rose by 0.038%, on top of Monday's 0.066% advance.

That lifted index's year-to-date return to 5.259% on Tuesday, up from Monday's 5.219% reading, although the cumulative return remains below its peak 2012 level of 5.361% recorded on March 2.

Stephanie N. Rotondo contributed to this report

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