Sabine megadeal, upsized Penn Virginia lead $3.6 billion primary, Penn Virginia pops

By Paul Deckelman and Paul A. Harris

New York, April 10 - The high-yield primary "stepped on the gas" - literally - on Wednesday, pricing $3.6 billion of new U.S.-dollar denominated, fully junk-rated paper from domestic or industrialized-country issuers, well up from the previous session's activity level.

Fully half of that paper came from a single-issuer - liquid natural gas company Sabine Pass Liquefaction, LLC, which did a $1.5 billion two-part transaction, split into eight- and 10-year senior secured notes. That drive-by deal came too late in the session for any aftermarket trading.

An energy-sector offering which did price in time for secondary market dealings was oil and gas exploration and production company Penn Virginia Corp., which first nearly doubled the size of its seven-year issue to $775 million. Those new bonds were heard by traders to have firmed solidly from their issue price.

AAR Corp., a defense contractor and supplier of products and services to the commercial aviation industry, did an upsized, quickly shopped $150 million add-on to its existing 2022 bonds; those notes were also quoted higher in the aftermarket.

And Sensata Technologies BV, a maker of sensors and controls, came to market with a same-day offering of 10-year notes, upsized to $500 million. That issue came too late for any aftermarket action.

Market participants saw Tuesday's new deals from Hecla Mining Co. and Rentech Nitrogen Partners LP continuing to trade around the aftermarket levels they initially reached after pricing, which has been the recent trend with most of the new issues.

But while most of those were showing gains, traders noted the continued inability of last week's DISH DBS Corp. two-part megadeal to get out of its own way and gain any traction.

Statistical indicators of junk market performance were better across the board after having turned mixed on Tuesday.

Sabine brings $1.5 billion

Seven junk-rated tranches from six issuers, totaling $3.6 billion, priced during the busy Wednesday session.

Sabine Pass Liquefaction, a subsidiary of Cheniere Energy Partners, LP, priced $1.5 billion of secured notes (Ba3/BB+) in a two-part quick-to-market transaction.

The transaction included a $500 million add-on to Sabine Pass' 5 5/8% senior secured notes due Feb. 1, 2021 which priced at 102.5 to yield 5.229%. The reoffer price came on top of price talk.

The deal also included a $1 billion tranche of new 10-year senior secured notes which priced at par to yield 5 5/8%. The yield printed on top of yield talk.

Morgan Stanley & Co. LLC, SG Americas Securities LLC, Mizuho Securities USA Inc., RBC Capital Markets LLC, Credit Suisse Securities (USA) LLC, Standard Chartered Bank, Mitsubishi UFJ Securities (USA) Inc., Credit Agricole Securities (USA) Inc., HSBC Securities (USA) Inc., ING Financial Markets LLC, Banca IMI, J.P. Morgan Securities LLC, Lloyds Securities LLC, Scotia Capital (USA) Inc. and SMBC were the joint bookrunners.

Proceeds will be used to pay costs in connection with the construction of Train 1 and Train 2.

Penn Virginia hugely upsized

Penn Virginia Corp. priced a massively upsized $775 million issue of seven-year senior notes (Caa1/B-) at par to yield 8½%.

The deal was upsized from $400 million.

The yield printed on top of yield talk.

RBC Capital Markets LLC was the left bookrunner. Wells Fargo Securities LLC was the joint bookrunner.

The Radnor, Pa.-based independent oil and gas company plans to use approximately $400 million of the proceeds to partially finance the acquisition of certain Eagle Ford properties from Magnum Hunter Resources.

Approximately $330 million of the proceeds will be used to fund Penn Virginia's obligations under its anticipated tender offer for all of its outstanding 10 3/8% senior notes due 2016, and the remaining proceeds will be used to repay its revolver.

Sensata sells 10.5-year deal

Sensata Technologies priced an upsized $500 million issue of 10.5-year senior notes (B1/BB-) at par to yield 4 7/8%.

The deal was increased from $400 million.

The yield printed at the tight end of yield talk that was set in the 5% area.

Morgan Stanley & Co. LLC and Barclays were the joint bookrunners.

Proceeds, along with cash on hand, will be used to repay $600 million of existing term loans.

NII taps 11 3/8% notes

NII International Telecom SCA priced a $150 million add-on to its 11 3/8% senior notes due April 15, 2019 at 107.25.

Proceeds will be used for general corporate purposes, which may include, without limitation, expansion of the existing network, the acquisition of telecommunications spectrum licenses or other assets, the deployment of new network technologies, and debt refinancing.

AAR taps 7¼% notes

AAR Corp. priced an upsized $150 million add-on to its 7¼% senior notes due Jan. 15, 2022 (Ba3/BB) at 107.5.

The reoffer price came on top of the price talk and it resulted in a 5.864% yield to worst. The amount was increased from $125 million.

BofA Merrill Lynch, Wells Fargo Securities LLC and RBS Securities Inc. were the joint bookrunners for the quick-to-market add-on.

The Wood Dale, Ill.-based provider of products and services to the worldwide aviation and government defense markets plans to use the proceeds to repay a portion of its revolver.

Lennar taps 4¾% notes

Lennar Corp. priced a $50 million add-on to its 4¾% notes due Nov. 15, 2022 at 98.25.

The Miami-based homebuilder plans to use the proceeds for general corporate purposes and working capital.

Canadian Energy offers notes

In the Canadian dollar-denominated market, Canadian Energy Services & Technology Corp. sold $225 million of seven-year senior notes (/B/DBRS: B) at par to yield 7 3/8%, on top of guidance.

Scotia and RBC were the senior managers.

The Calgary, Alta.-based drilling fluid systems provider for the oil and natural gas industry plans to use the proceeds to terminate a $160 million acquisition facility, partially pay down its senior facility and for general corporate purposes.

Meanwhile Centric Health Corp. talked its offering of C$175 million to C$200 million of five-year senior secured notes (/B-//DBRS B high) to yield in the 8 5/8% area.

National Bank Financial is the lead manager. The co-managers include TD Securities Inc., Scotia Capital Inc., AltaCorp Capital Inc., BMO Capital Markets Corp. and RBC Dominion Securities Inc.

Orange's PIK toggle notes

In the European market Orange Switzerland priced a €250 million issue of six-year senior PIK toggle notes at par to yield 9%.

The yield printed at the tight end of the 9% to 9¼% yield talk.

The notes pay a cash coupon of 9%. The coupon steps up to 9¾% in the event of an in-kind payment.

Joint bookrunner Credit Suisse will bill and deliver. Deutsche Bank, UBS, Citigroup, JPMorgan and Morgan Stanley were also joint bookrunners.

The Renens, Switzerland-based telecommunications company plans to use the proceeds to fund a dividend.

Talking the deals

There is a full slate of deals on deck for Thursday.

Price talk was heard on several of them during the Wednesday session.

New Cotai, LLC and New Cotai Capital Corp. talked their $360 million offering of non-rated six-year senior PIK notes with a coupon in the 10¾% area.

The notes come with attached equity interests in New Cotai Participation Corp.

Credit Suisse Securities (USA) LLC is the bookrunner.

Australia's BlueScope Steel Ltd. and BlueScope Steel Finance talked their $300 million offering of five-year senior notes (Ba3/BB) with a yield in the 7¼% area.

Credit Suisse Securities (USA) LLC is also the bookrunner for BlueScope's deal.

And Affinia Group Inc. talked its $250 million offering of eight-year senior notes (Caa2/B-) to yield 7¾% to 8%.

J.P. Morgan Securities LLC, BofA Merrill Lynch, Barclays and Deutsche Bank Securities Inc. are the joint bookrunners.

Penn Virginia pops up

In the aftermarket, a trader said that Penn Virginia's 8½% notes "did really well," quoting the Radnor, Pa.-based independent oil and natural gas company's issue at 101 bid, 101½ offered.

A second trader saw the bonds at 101 1/8 bid, 101 5/8 offered.

A third said they had broken at 101, well up from the par level at which the bonds had priced.

AAR issue improves

AAR Corp's 7¼% notes were seen by a trader to have moved up to the 109 bid, 110 offered level , after that add-on to its existing deal had priced at 107.5.

A second trader saw the Wood Dale, Ill.-based defense contractor and aviation products supplier's issue at 108½ bid, 109 offered.

Sabine, Sensata are no-shows

The day's other two quick-to-market pricings - from Houston-based natural gas company Sabine Pass Liquefaction and from Sensata Technologies, an Attleboro, Mass.-based designer and manufacturer of sensors and controls - each appeared too late in the session for any kind of an aftermarket.

However, one trader opined that Sensata's upsized 4 7/8% notes "will probably do really well" when they do start to trade.

Tuesday deals hold steady

A trader saw Hecla Mining's 6 7/8% notes due 2021 at 100½ bid, 101 offered.

That was about where the Coeur d'Alene, Idaho-based precious metals miner's $500 million issue had traded late Tuesday. Those bonds had priced earlier Tuesday at par after the transaction was enlarged from an originally announced $400 million.

The trader also saw Rentech Nitrogen Partners' 6½% senior secured second-lien notes due 2021 at 101 bid, 102 offered.

That too was around the aftermarket levels reached Tuesday, after the Los Angeles-based chemical fertilizer producer's $320 million offering had priced at par.

DISH continues to disappoint

The behavior of Tuesday's deals - holding onto whatever aftermarket gains they had notched - was representative of how most of the deals which have recently priced have been trading - and most of them had secondary gains to hang onto.

However, a trader said, "the one that couldn't get out of its own way was DISH, still" - the $2.3 billion two-part offering which had priced back on April 2 and which has struggled in the secondary even since then.

He said that both tranches of the Englewood, Colo.-based satellite television broadcaster's drive-by offering "were still trading at a discount" to the par level at which both had priced.

He pegged its $1.2 billion of 4¼% notes due 2018 at 99 3/8 bid, 99 5/8 offered, and saw its $1.1 billion of 5 1/8% notes due 2020 around that same level.

"That one just didn't move," almost alone among the recent new deals, he said.

He suggested that the reason for the bonds' poor performance was two-fold: first, he said, "they priced it too tight," not leaving any room for the bonds to trade up.

Secondly, "they increased the deal," which had originally been announced at $1 billion between the two tranches.

As a result, he added, anybody who had wanted a piece of the DISH deal was able to get one via the allocations - leaving no real impetus for the bonds to trade up in secondary.

Market indicators get better

All told, a trader said that although activity was mostly quiet, with nothing really standing out in the secondary, Wednesday's market was "fairly strong," in terms of deals holding their existing gains.

This was borne out in the across-the-board improvement seen in statistical junk market performance indicators on Wednesday, after they had turned mixed on Tuesday from Monday's higher levels.

The Markit Series 20 CDX North American High Yield Index gained 7/16 point - its fifth consecutive rise - to finish at 104 7/32 bid, 104 11/32 offered. On Tuesday, it had moved up by 1/8 point.

The recently choppy KDP High Yield Daily Index - which has moved up or down by a basis point or so on a day-by-day basis of late - jumped by 10 bps on Wednesday to close at 75.70. That followed Tuesday's 3 bps downturn, which in turn had erased the 2 bps rise seen on Monday.

Its came in by 4 bps to 5.44%, after having been unchanged on Tuesday.

And the widely followed Merrill Lynch High Yield Master II Index rose for a third consecutive session on Wednesday, gaining 0.194%, on top of Tuesday's 0.105% advance.

The latest gain lifted its year-to-date return to 3.41%, a new peak level for the year. That was up from the previous high point for the year, Tuesday's 3.21% reading.

Meanwhile, the index's yield fell on Wednesday to 5.59% - a new low for the year and, in fact, the lowest yield on record, according to most published sources. It surpassed the previous low level of 5.601%, which had been recorded back on Jan. 25.

Its spread over comparable Treasury issues tightened by 10 bps to 480 bps, approaching the year's low level of 474 bps, also set back in late January.

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