Upsized NXP deal prices, moves up; MasTec, Titan up next; market firmer as stocks soar

By Paul Deckelman and Paul A. Harris

New York, March 5 - NXP BV was heard by syndicate sources to have come to market on Tuesday with an upsized $500 million issue of 10-year notes. When the Dutch semiconductor maker's quickly shopped deal was freed for secondary trading, the bonds firmed by more than a point.

NXP was the only junk-rated, dollar-denominated deal from a domestic or developed-country issuer to price during the day. Two other European borrowers - German steelmaker ThyssenKrupp AG and France's Rallye SA, a distributor of food and sporting goods products - priced euro-denominated offerings during the session.

Back among the dollar deals, the syndicate sources heard price talk on two other pending transactions, which could come to market on Wednesday. Infrastructure construction company MasTec Inc. is doing an upsized $400 million of 10-year notes, while off-road vehicle wheel and tiremaker Titan International Inc. is scheduled to roll in with a $275 million add-on to its existing 2017 paper.

Also in the primary arena, sources saw telecommunications operator MetroPCS Wireless, Inc. about to begin a short roadshow for its offering of two benchmark-sized tranches of eight- and 10-year notes, expected to be an end-of-week pricing.

Secondary market traders saw generally firmer levels all around, as the risk markets seemed to draw strength from stocks' explosive upturn, which included a new record-high close for the bellwether Dow Jones industrial average. Junk market statistical performance indicators firmed across the board, with one such market gauge hitting a new high level for the year.

Among specific credits, traders saw continued improvement in the new Range Resources Corp. 10-year notes that had priced on Monday and firmed smartly in initial aftermarket dealings. Other recent deals, notably last week's Equinix Inc. two-part issue, were also seen at better levels.

Away from the new credits, Chesapeake Energy Corp.'s recently very busy 2019 notes were again heavily traded amid market speculation about whether the natural gas company will act to redeem some or all of that paper during a soon-to-expire special redemption period, when it can redeem the notes at a considerably lower cost as compared to what it will have to pay to optionally take them out once that window of opportunity closes.

NXP upsizes

Netherlands-based NXP BV and NXP Funding LLC priced an upsized $500 million issue of 10-year notes (B3/B) at par to yield 5¾%.

The deal was upsized from $300 million, and the yield printed on top of yield talk.

Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., Goldman Sachs & Co. and KKR Capital Markets LLC were the joint bookrunners for the quick-to-market deal.

Proceeds, including the proceeds from the $200 million upsizing, will be used to refinance bank debt.

ThyssenKrupp upsizes

During the European session, ThyssenKrupp priced an upsized €350 million add-on to its 4% notes due Aug. 27, 2018 (Ba1/BB/BBB-) at 100.625 to yield 3.874%.

The deal was upsized from €250 million.

The reoffer price came in line with the 100.375 to 100.75 price talk.

Citgroup and UniCredit were the joint bookrunners.

The German steelmaker plans to use the proceeds for general corporate purposes.

Talking the deals

Looking toward the Wednesday session, MasTec upsized its offering of 10-year senior notes (existing Ba3/BB-) to $400 million from $350 million and talked those notes with a yield in the 5% area on Tuesday.

The deal, via lead left bookrunner Barclays and joint bookrunners Morgan Stanley & Co. LLC and SunTrust Robinson Humphrey Inc., is set to price on Wednesday afternoon.

In another deal set to price on Wednesday, Titan International talked a $275 million add-on to its 7 7/8% notes due Oct. 1, 2017 (B1/B+) to price at 106.25, plus or minus 0.25 points.

Goldman Sachs & Co. is the lead left bookrunner, and Jefferies & Co. is the joint bookrunner.

MetroPCS two-part deal

MetroPCS Wireless plans to start a roadshow on Wednesday for a benchmark-sized offering of eight- and 10-year senior notes.

The roadshow wraps up on Friday, and the notes are expected to price on the same day.

Deutsche Bank Securities Inc., Credit Suisse Securities (USA) LLC, J.P. Morgan Securities LLC and Morgan Stanley & Co. are the bookrunners.

Proceeds to repay bank debt related to the acquisition of the company by T-Mobile USA and for general corporate purposes. Proceeds will be held in a restricted account pending the closing of the merger.

NXP moves up

When NXP 's new 5¾% notes due 2023 were freed for secondary activity, a market source saw the Dutch semiconductor manufacturer's new issue trading "pretty actively" right around the 101 bid level, up from par, where that quick-to-market offering had priced.

"It traded up a little bit above [101]," he said, but by the end of the day had settled in around 101 to 101¼ bid.

A second trader pegged the new deal at 100 7/8 bid, 101 1/8 offered, while yet a third had them going home at 101 1/8 bid, 101 3/8 offered.

Range rally continues

A trader saw Range Resources' 5% senior subordinated notes due 2023 at 101 7/8 bid, 102 3/8 offered on Tuesday.

That extended the show of strength by the Fort Worth, Texas-based energy exploration and production company's quickly shopped new deal.

The $750 million transaction had priced at par on Monday after it was upsized from an originally announced $500 million. When the bonds went into the aftermarket, they had quickly firmed to a closing level Monday of 101½ bid, 101¾ offered.

"I would say this one traded well," a trader said, noting the move well above the 101 level.

He added: "If you look at what the last couple of new deals did, they kind of stuck around [their] issue price - so it was a nice change of pace there, I think."

The company's existing bonds were also busy.

A market source quoted its 6¾% notes due 2020 as having gained 1/8 of a point to end at 109 3/8 bid, on round-lot volume of over $14 million, putting those bonds among the more active junk issues on the day.

Range Resources' 5% notes due 2022 gyrated around in a narrow range before going home at 102 5/8 bid - unchanged on the session - with over $13 million having changed hands.

Noranda edges up

Friday's offering from Noranda Aluminum Acquisition Corp. was seen higher on Tuesday, with a trader quoting those 11% notes due 2019 at 100 1/8 bid, 100 5/8 offered.

A second trader earlier had seen "someone bidding a little below issue price. I never saw an offer. I haven't been involved myself."

The Franklin, Tenn.-based producer of rolled aluminum and other such products priced $175 million of those bonds at par, after the deal was downsized from an originally announced $225 million.

Equinix excellence continues

While the Noranda bonds seemed to be having trouble getting their footing, another deal from last week - Equinix's big two-part offering - continued to nimbly tap dance higher on Tuesday, maintaining and extending the strong gains seen ever since the Redwood City, Calif.-based data center operator's upsized megadeal came to market.

A trader said Tuesday that the company's 4 7/8% notes due 2020 had moved up to 101¾ bid, 102 offered, while a second saw them at 101¾ bid, 102¼ offered.

That was up from the 101¼ to 101½ bid levels seen on Friday, when the bonds were first freed to trade.

The $500 million issue had priced at par on Thursday, but came to market too late in the session for any kind of secondary dealings at that time.

The company's 5 3/8% notes due 2023 traded on Tuesday at 101½ bid, 101¾ offered, a trader said, while a second pegged the bonds at 101½ bid, 10 2 offered.

At another desk, a market source saw them going home at 101 3/8 bid, which he called unchanged on the day, with over $10 million having traded.

Equinix had priced $1 billion of those 10-year notes on Thursday at par, and they had moved up to around a 100 5/8 to 100 7/8 bid context on Friday in very heavy dealings of over $50 million traded.

On Monday, each tranche of that deal had seen respectably busy trading volume of about $10 million.

Charter notes strengthen

While the Equinix issues were seen doing very well in the aftermarket almost from the get-go, the same was not true of last week's other big megadeal. That was the $1 billion two-part offering from Charter Communications Inc., which, like Equinix, had priced during last Thursday's $4 billion issuance avalanche.

Both tranches of the St. Louis-based cable, phone and broadband service provider's drive-by deal - its $500 million pf 5¼% notes due 2021 and its $500 million of 5¾% notes due 2023 - had priced at par, but then had stayed right around that issue price, or even slightly below it, traders said.

However, on Tuesday, a trader saw the eight-year notes having moved back above the par level, to 100¼ bid, 100 5/8 offered, while seeing the 10-year having gotten as good as 100 7/8 bid, 101 3/8 offered.

A second trader located the latter bonds at 100¼ bid, 100 5/8 offered, calling them up a half-point.

He also saw another issue that seemed to be struggling to stay above its par issue price: Cedar Fair LP's $500 million of 5¼% notes due 2021. The trader marked that as having improved to par bid, 100½ offered.

He saw the Sandusky, Ohio-based amusement park operator's same-day deal having finished Friday at 99½ bid, par offered.

Overall market firms

Away from the new issues, a trader characterized Tuesday's session as "a quiet day today."

He said, "People were just kind of sitting and watching the equity market, with less focus on high yield."

Stocks saw a powerful surge Tuesday that carried the bellwether Dow Jones Industrial Average up 125.95 points, or 0.89%, to a new record-high close of 14,253.77, surpassing the old record high of 14,164.53, set back on Oct. 9, 2007.

The Dow has more than doubled its recent low of 6,547.05, reached on March 9, 2009.

Other, broader stock indexes, like the Standard & Poor's 500 and the Nasdaq composite index, also marched higher in lockstep with the Dow.

Seeing that, the trader said, "I guess everybody is feeling a little bit better about themselves."

However, the stocks' strength, while theoretically a good omen generally for risk-asset markets that also include junk bonds, are something of a double-edged sword.

The trader opined, "You have a little bit of weakness in the bond market when you have equities performing so well," as some investors look to shift out of fixed income, despite its strong gains of the past several years, and into the now suddenly-hot stock arena.

"I think that takes a little bloom off fixed income," he continued.

"With so many new high-yield coupons coming with 4% and 5% handles" - quite low by traditional Junkbondland standards - "I think even longtime high-yield guys are starting to look at spreads to Treasuries."

Market indicators turn higher

But any potential junk market weakness on the stock market's revival was not evident in statistical junk performance indicators.

They were firmer across the board on Tuesday, improving after three straight sessions during which they had been mixed, although with a generally higher bias.

The Markit Series 19 CDX North American High Yield index posted its third consecutive gain, improving by 7/32 of a point to end at 103 13/32 bid, 103 17/32 offered, after having risen by nearly a half-point on Monday.

The KDP High Yield Daily index broke out of a two-session rut, tacking on 10 basis points on Tuesday to close at 75.41, after having declined by 2 bps on Monday. Its yield came in by 4 bps, to 5.60%, after having edged up by 1 bp on Friday and then having been unchanged on Monday.

And the widely followed Merrill Lynch High Yield Master II index made it five straight sessions on the upside as it improved by 0.152% on Tuesday, on top of Monday's 0.081% advance.

The latest gain lifted its year-to-date return to 2.097%, which marked a new peak level for 2013 so far. That was up from 1.942% on Monday and also eclipsed the former high point for the year so far of 1.991%, which had been set back on Jan. 28.

Chesapeake as volume champ

Among specific junk market names, Chesapeake Energy's 6.775% notes due 2019 were by far the busiest bond of the session, a market source said, seeing over $25 million of those bonds traded on a round-lot basis on Tuesday.

Counting smaller odd-lot trades, well over $40 million changed hands. He saw the bonds going out at 104 3/8 bid, calling that down 3/8 of a point on the session.

Over $35 million had traded in round lots on Monday, when the bonds had gained a half-point.

A trader said that the heavy trading has been spurred by the question, "Do they get called or not?"

When the Oklahoma City-based natural gas company sold that $1.3 billion of bonds in February 2012, it included in the indenture a provision allowing Chesapeake to call those bonds at a price of par plus accrued interest at any time between last Nov. 15 and March 15.

The company could call the whole issue, or could just do a partial call, although in the latter case, it would have to leave at least $250 million outstanding in order to be allowed to call the bonds at par.

Once that window of opportunity for calling the bonds at par closes, Chesapeake can still call them any time after March 15, but it will then have to redeem them at make-whole price plus accrued interest - a considerably more costly option.

The trader, seeing those bonds trading well above the par level, suggested, "I think the market is comfortable saying those bonds are not coming out. So that's what a lot of the energy guys have been whipping around."

He said that while movement has been minimal the past session or two, "these things are up 2½ to 3 points from last week, so the big move was really last week - now it's just continuing the positive momentum."

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