Lamar, Parker, Hovnanian price year's first junk deals, trade up; MDC comes too; Verso gains

By Paul Deckelman and Paul A. Harris

New York, Jan 7 - While much of the United States suffered in the grip of the dreaded polar vortex on Tuesday, things got red hot in Junkbondland as the high-yield primary sphere priced its first deals of the new year.

Homebuilder K. Hovnanian Enterprises, Inc.'s mid-afternoon [ET] $150 million issue of five-year notes represented the first dollar-denominated, fully junk-rated issue to come to market since Dec. 19, when Houston-based energy exploration and production company Sierra Hamilton LLC's $110 million issue of five-year senior secured notes closed the book on 2013 junk market new issuance.

Hovnanian's deal was soon followed by a pair of same-day drive-by offerings that swelled the day's new-issuance total to $1.02 billion.

Outdoor advertising company Lamar Media Corp. brought the big deal of the day - a $510 million tranche of 10-year notes - while oilfield services provider Parker Drilling Co. capped things off with a $360 million issue of 8.5-year notes.

In between, Hovnanian sector peer MDC Holdings Inc. did a $250 million split-rated 10-year note issue.

Although most of the pricing activity came fairly late in the day, traders saw all of the new deals quoted at higher levels in initial aftermarket activity.

The primary also saw pricing activity out of Europe, from Spanish gaming company Cirsa Luxembourg SA, which brought a €120 million add-on to its existing 2018 notes.

Back on the domestic scene, Lamar sector peer CBS Outdoor Americas Inc. was heard shopping around an $800 million two-part offering, while price talk emerged on what is expected to be the year's first megadeal: diversified holding company Icahn Enterprises LP's $3.5 billion three-part offering, which is expected to price some time after the order books close on Wednesday afternoon.

Away from the new deals, Verso Paper Corp.'s bonds were seen having jumped in busy trading for a second straight session in the wake of Monday's news that the company will acquire sector peer NewPage Holdings Inc. and begin an exchange offer for two series of its existing notes in connection with that planned merger.

Statistical measures of market performance turned mixed after two consecutive sessions on the upside.

Lamar Media at the tight end

The first new deals of the new year priced on Tuesday, as a trio of junk issuers brought single-tranche deals, raising a combined total of $1.02 billion.

One deal came at the tight end of price talk, and the other two came on top of final talk. However all came tighter than initial guidance, sources said.

Lamar Media priced a $510 million issue of 10-year senior notes (Ba2/BB-) at par to yield 5 3/8%.

The yield printed at the tight end of yield talk that was set in the 5½% area and inside of the initial 5½% to 5¾% initial guidance.

The order book finished at more than three times deal size, according to a market source.

J.P. Morgan, Wells Fargo and SunTrust were the active bookrunners for the quick-to-market debt refinancing and general corporate purposes deal.

Parker Drilling drives by

Parker Drilling priced a $360 million issue of 8.5-year senior notes (B1/B+) at par to yield 6¾%.

The yield came on top of yield talk and well inside of the 7% initial guidance, according to a trader.

The deal was a blowout, a buysider said.

BofA Merrill Lynch was the left bookrunner for the quick-to-market debt refinancing deal.

Wells Fargo, Barclays, Deutsche Bank and Goldman Sachs were the joint bookrunners.

Hovnanian prints at 7%

K. Hovnanian Enterprises priced a $150 million issue of five-year senior notes (Caa1/CCC/CCC) at par to yield 7%, on top of yield talk.

Credit Suisse and JPMorgan were the joint bookrunners for the debt refinancing and general corporate purposes deal.

MDC split-rated deal

In the crossover market, MDC Holdings priced a $250 million split-rated issue of 10-year senior notes (Baa3/BB+/BBB-) at par to yield 5½%.

The yield came on top of yield talk that had narrowed from initial talk of 5½% to 5 5/8%.

Citigroup and U.S. Bancorp were the joint bookrunners.

The company plans to use proceeds for general corporate purposes, which may include repayment of its 5 3/8% senior notes due 2014 and its 5 3/8% senior notes due 2015.

Icahn talks megadeal

Icahn Enterprises LP and Icahn Enterprises Finance Corp. set tranche sizes and price talk for their $3.5 billion three-part offering of senior notes (/BBB-/) on Tuesday afternoon.

A $1,225,000,000 tranche of non-callable three-year notes is talked to yield 3½% to 3¾%.

A $1,225,000,000 tranche of five-year notes is talked to yield in the 5% area. The five-year notes come with 2.5 years of call protection.

A $1.05 billion add-on to the company's existing 6% notes due Aug. 1, 2020 is talked at a reoffer price of 101½ to 102.

Some of the juice was strained out of the deal, according to a trader who earlier heard yield talk of 4% on three-year paper, 5 1/8% to 5 3/8% on the five-year notes and 101½ on the tap.

Books close at 2:30 p.m. ET on Wednesday, and the deal is set to price thereafter.

Active bookrunner Citigroup will bill and deliver for the debt refinancing deal, which is being run jointly on the high-yield and investment-grade desks. Credit Suisse and Morgan Stanley are also active bookrunners.

CBS Outdoor starts roadshow

CBS Outdoor Americas plans to start what figures to be a full roadshow on Wednesday for an $800 million two-part offering of senior notes.

The deal is coming in tranches of eight-year notes and 10-year notes, with tranche sizes to be determined.

Deutsche Bank, Citigroup and Wells Fargo are the active bookrunners.

Proceeds will be used to make a payment to CBS Corp. for the contribution of the entities comprising the Outdoor Americas operating segment and for general corporate purposes and ongoing cash needs.

Cirsa taps 8¾% notes

In drive-by action out of Europe, Spanish gaming firm Cirsa Luxembourg priced a €120 million add-on to its 8¾% senior notes due May 15, 2018 at 105 to yield 7.38% on Tuesday.

The reoffer price came on top of price talk.

Timing on the deal, which had been anticipated to be in the market overnight and price on Wednesday, was moved ahead.

Deutsche Bank ran the books for the debt refinancing and general corporate purposes deal.

Meanwhile the euro-denominated market has its own megadeal on the road.

Fresenius Finance BV was slated to start a roadshow on Tuesday in Frankfurt for its €750 million offering of senior notes (Ba1/BB+), which is coming in two bullet tranches.

The deal is comprised of a €250 million offering of notes due Feb. 1, 2019 and a €500 million offering of notes due Feb. 1, 2021.

The shorter-dated paper is being whispered in the mid 2% range, while the whisper on the long notes is in the high 2% range, according to a trader.

"That's got high-yield ratings on both sides of the split, mind you," the trader pointed out.

The deal is expected to price on Thursday.

Joint bookrunner Deutsche Bank will bill and deliver. Barclays, Commerzbank, Credit Agricole, SG and UniCredit are also joint bookrunners.

New deals quoted higher

In the secondary realm, traders were quoting all of the day's new dollar-denominated deals as having risen from their respective par issue prices.

One trader saw Lamar Media's new 5 3/8% notes due 2024 as having firmed to 100¾ bid, 101 offered in initial aftermarket dealings.

A second saw the Baton Rouge, La.-based outdoor advertising company's new deal a little better than that, going home at 101 bid, 101½ offered.

Houston-based oilfield services company Parker Drilling's 6¾% notes due 2022 were seen quoted at 101 bid, although no offers were immediately seen.

Late in the afternoon, a trader said that he had not seen any signs of the day's first deal - Hovnanian's 7% notes due 2019 - even though it had priced about two hours earlier.

He suggested that he "probably is not going to see [Hovnanian's] $150 million deal trading around much," because of its relatively small size, but said that the other junk deals, like Lamar, probably would see some trading.

A second trader, though, did see Red Bank, N.J.-based homebuilder Hovnanian's offering, which priced after a very brief roadshow following its new-deal announcement Monday. He quoted the bonds at 101½ bid, 102½ offered.

A trader heard the new MDC Holdings 5½% notes due 2024 offered at 101 but had seen no bids on the Denver-based homebuilder's new issue.

"I haven't seen a [two-sided] trade," he said, adding "I didn't think they were a bargain."

He opined that with a split-rated $250 million deal, "you're really not going to have a lot of [investment-grade] guys that are going to get excited about that, and if you're a high-yield guy, why pay I-G spreads to buy a homebuilder?"

The MDC bonds priced at a very un-junk-like spread of 256 basis points over comparable Treasuries.

Existing Icahn bonds trading

With Icahn Enterprises shopping its $3.5 billion three-part offering around to prospective investors, a trader said that the New York-based diversified holding company's existing paper saw some brisk activity on Tuesday.

"A lot of the older Icahn paper is trading around," he said, quoting its 7¾% notes due 2016 "pretty much" trading right around 102¼ bid, while he pegged its 8% notes due 2018 around 104.3. "It's like yield-to-call paper," he said, and added that those levels were "pretty much where they were" on Monday.

Volume on the 8% notes was somewhere north of $16 million, while over $12 million of the 7¾% notes changed hands.

A second trader wondered "who is going to buy the new Icahn deal," saying that none of the price-talk levels that he's heard on the coming megadeal "really get me excited."

He suggested "a lot of guys have big positions in Icahn already, so if they get called out of the paper," Icahn is already tendering for its $1.05 billion of outstanding 7¾% notes and its $2.45 billion of outstanding 8% notes, "then that will work."

Verso surge continues

Away from the new deals, for a second straight session, Verso Paper's bonds were among the most heavily traded junk issues and showed strong gains from previous levels, boosted by the news that the Memphis-based coated paper maker plans to acquire sector peer NewPage Holdings.

Its 11¾ notes due 2019 jumped 7¾ points to 94½ bid on volume of over $25 million, while its 8¾% notes due 2019 zoomed by 10¾ points to 55¼ bid, with over $18 million changing hands.

On Monday, the 11¾ notes improved by 1¼ points on volume of more than $20 million, while the 8¾% notes climbed nearly 10 points on volume of over $16 million.

Verso will acquire Miamisburg, Ohio-based NewPage for total cash and debt consideration of $900 million, consisting of $250 million in cash, most of which will be paid to the stockholders as a special dividend prior to closing and the remainder of which will be paid at closing, and $650 million of new Verso first-lien notes to be issued at closing.

NewPage's equity holders also will receive shares of Verso common stock representing 20% of the company's outstanding shares, subject to potential adjustment up to 25% under certain circumstances.

Verso also plans to refinance NewPage's $500 million term loan and will, in addition, conduct exchange offers and consent solicitations for its own outstanding fixed-rate second-lien notes and subordinated notes. The closing of the NewPage acquisition is conditioned upon the consummation of the exchange offers.

Market indicators turn mixed

Overall, statistical junk-market performance indicators turned mixed on Tuesday, after having been higher across the board in each of the previous two sessions.

The Markit Series 21 CDX North American High Yield index lost 3/16 point to close at 108 1/8 bid, 108¼ offered, its first downturn after two straight sessions on the upside. On Monday, the index had gained 3/32 point.

But the KDP High Yield Daily index rose by 7 bps on Tuesday to finish at 74.61, its fourth consecutive gain. On Monday, it was up by 2 bps.

Its yield was meanwhile lower by 3 bps, to 5.56%, its first decline after having been unchanged on Monday.

And the widely followed Merrill Lynch High Yield Master II index made it 12 straight gains, a winning streak that dates back to Dec. 19. It was up by 0.168%, on top of Monday's 0.159% advance.

The latest gain lifted its year-to-date return to 0.499%, its third straight new peak level for 2014, passing the previous mark of 0.33%, set on Monday.

Last Tuesday, the index had closed out 2013 with a final cumulative return for the year of 7.419%, less than half of the robust 15.583% return at which the index had finished 2012.

The index's yield to worst and its spread to worst each recorded their third straight new tight levels for the year on Tuesday, at 5.533% and 410 bps over comparable Treasuries, respectively.

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