MGM, Caesars set pace for $3 billion primary; overall market firm; junk funds see second inflow

By Paul Deckelman and Paul A. Harris

New York, Dec. 6 - A pair of gaming companies were rolling the dice on Thursday with new deals, as the high-yield primary sphere saw its busiest session in nearly a month, with $3.7 billion of new paper having priced.

The big deal of the day came from Las Vegas-based casino giant MGM Resorts International, which brought to market an upsized $1.25 billion drive-by offering of nine-year notes. The new bonds traded up in the aftermarket.

Crosstown rival Caesars Entertainment Operating Co. Inc. was also in the market, bringing a quickly shopped and greatly upsized $750 million add-on tranche to its existing issue of secured 2020 notes. That discounted deal also moved up when it was freed to trade.

Traders also saw some activity in the company's existing bonds in the wake of the new-deal news.

Away from the gaming bonds, apparel maker PVH Corp. priced a quick-to-market, upsized $700 million issue of 10-year bonds, which firmed from its issue price.

Midstream energy operator Atlas Pipeline Escrow LLC did a quickly shopped $175 million add-on to its existing bonds, which was not seen trading around afterward.

The day's sole regularly scheduled pricing saw insurance broker Alliant Holdings I LLC bring a downsized $450 million eight-year issue, which firmed in the aftermarket.

Away from the issues which actually priced, new-dealers heard Rex Energy Corp. re-enter the market, shopping the same $250 million eight-year transaction that it recently postponed due to market conditions.

Traders once again saw signs of strength in the overall market, with statistical market performance indicators once more showing gains across the board.

And the flow of fresh cash into or out of high yield mutual and exchange traded funds - seen as a key barometer of overall junk market liquidity trends - showed a second consecutive gain this week, which in turn had followed two straight weeks before that of major losses.

EPFR sees $1.73 billion inflow

As activity was wrapping up for the day on Thursday, EPFR Global said that $1.73 billion more came into those funds in the week ended Wednesday.

It was the second consecutive large weekly inflow reported by the Cambridge, Mass.-based fund-tracking service, following the $1.14 billion cash addition seen the week before, ended Nov. 28.

Those two inflows, totaling $2.87 billion, followed a pair of outflows over the two weeks before that totaling $2.407 billion - $1.45 billion in the week ended Nov. 21 and $957 million in the week ended Nov. 14.

That was in line with a recent pattern of choppiness seen since the end of September, in which a week or two of inflows would be followed by a week or two of outflows, in a back-and-forth motion. Before that, however, had been a dazzling 15-week winning streak.

On a year-to-date basis, cumulative net inflows have now totaled $72 billion - the peak level for the year according to a Prospect News analysis of the figures. The agency has seen inflows in 40 weeks so far this year, against nine outflows, the analysis indicated.

The weekly fund-flow numbers from the other major fund-tracking service - Arcata, Calif.-based AMG Data Services, a unit of Thomson Reuters' Lipper/FMI division - had not been seen as of press time on Thursday night; they generally circulate around the junk market on Thursday afternoons. The two services employ different methodologies for calculating the flow of cash into or out of the funds, but their numbers usually point in the same direction.

Cumulative fund-flow estimates, whether from EPFR or from AMG/Lipper, may be revised upward or downward or be rounded off and could include unannounced revisions and adjustments to figures from prior weeks.

The continued flow of fresh cash into junk - and the mutual funds and ETFs represent but a small, though very observable and quantifiable percentage of the total amount of money coming in - has been seen by analysts as a key element behind the high-yield secondary market's strong performance this year versus other fixed-income asset classes, and its active new-deal pace, which surged past 2011's year-to-date totals some weeks ago.

MGM massively upsizes

In Thursday's torrid primary market seven dollar-denominated issuers raised a combined $3.67 billion.

MGM Resorts International priced an upsized $1.25 billion issue of non-callable nine-year senior notes (B3/B+) at par to yield 6 5/8%.

The deal was upsized from $1 billion and the yield printed on top of yield talk.

Joint physical bookrunner Barclays will bill and deliver. J.P. Morgan Securities LLC was also a joint physical bookrunner. Bank of America Merrill Lynch, Deutsche Bank Securities Inc., BNP Paribas, RBS Securities, SMBC and Credit Agricole CIB were joint bookrunners.

The Las Vegas-based hospitality company plans to use the proceeds, together with cash on hand and borrowings from an amended and restated senior secured credit facility, to fund the tender for its existing secured notes and prepay amounts outstanding under its existing senior secured credit facility.

Caesars also massively upsized

Caesars Entertainment priced a massively upsized $750 million add-on to its 9% senior secured first-lien notes due Feb. 15, 2020 (B2/B) at 98.25 to yield 9.336%.

The reoffer price came on top of price talk that had tightened from earlier talk of 98 to 98.5. The amount was raised from an announced $300 million.

Citigroup Global Markets Inc. was the left bookrunner for the quick-to-market issue. Bank of America Merrill Lynch, Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., Goldman Sachs & Co., J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC were the joint bookrunners.

Upon release from escrow, 50% of the proceeds from the notes will be used to pay down non-extended term loans while the other 50% will be put on the balance sheet as cash. The additional $350 million of proceeds resulting from the upsizing will be used to repay debt and for general corporate purposes.

PVH prices at tight end

PVH Corp. priced an upsized $700 million issue of 10-year senior notes (Ba3/BB) at par to yield 4½%.

The yield printed at the tight end of price talk that was set in the 4 5/8% area. The amount was increased from $500 million.

Barclays was the lead left bookrunner for the quick-to-market deal. Bank of America Merrill Lynch, Citigroup Global Markets, Credit Suisse Securities (USA) LLC and RBC Capital Markets were the joint bookrunners.

Proceeds will be used to help fund the cash portion of the acquisition of Warnaco Group Inc.

Academy Sports' PIK toggle

Academy Sports + Outdoors priced an upsized $500 million issue of 8% cash/8¾% PIK senior PIK toggle notes due June 15, 2018 at 99.50 to yield 8.114%.

The deal was upsized from $400 million.

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

Proceeds will be used to fund a sponsor dividend.

Alliant at the tight end

Alliant priced a downsized $450 million issue of eight-year senior notes (Caa2/CCC) at par to yield 7 7/8%.

The yield printed at the tight end of price talk that was set in the 8% area.

The issue was downsized to $450 million from $475 million, with $25 million of proceeds shifted to the company's term loan.

J.P. Morgan Securities LLC, Bank of America Merrill Lynch, Morgan Stanley & Co. LLC, RBC Capital Markets, UBS Investment Bank and Macquarie Capital (USA) Inc. were the joint bookrunners.

Proceeds will be used to fund the acquisition of the specialty insurance broker by KKR.

Atlas taps 6 5/8% notes

Atlas Pipeline Escrow, LLC priced a $175 million add-on to its 6 5/8% senior notes due Oct. 1, 2020 (B2/B+) at 103 to yield 6.003%.

The reoffer price came on the rich end of the 102.75 to 103 price talk.

Wells Fargo Securities LLC was the left bookrunner for the quick-to-market deal. Deutsche Bank Securities Inc., Bank of America Merrill Lynch, Citigroup Global Markets, J.P. Morgan Securities LLC and SunTrust Robinson Humphrey were the joint bookruners.

The Moon Township, Pa.-based midstream energy services provider plans to use the proceeds to fund an acquisition, as well as for ongoing working capital requirements and other general partnership purposes.

MDC Partners at a premium

MDC Partners Inc. priced $80 million of its 11% senior notes due Nov. 1, 2016 at 106 to yield 9.126%.

JP Morgan Securities LLC ran the books.

Proceeds will be used to repay bank debt and for general corporate purposes.

Heathrow prices £275 million

Heathrow Finance plc priced a £275 million issue of senior secured notes due Sept. 2, 2019 (Ba3//BB+) at par to yield 5 3/8%.

The yield printed in the middle of the 5¼% to 5½% yield talk.

Deutsche Bank AG, JPMorgan and RBS were the physical bookrunners. Barclays, Bank of America Merrill Lynch, ING and Morgan Stanley were the joint bookrunners.

Proceeds will be used to refinance bank debt and for general corporate purposes.

Talking the deals

Prince Mineral Holding Corp. talked its $260 million offering of seven-year first-lien senior secured notes (Caa1/B) to yield 11¾% to 12%.

Credit Suisse Securities (USA) LLC and BMO Capital Markets are the joint bookrunners.

After postponing its deal on Nov. 27 due to market conditions, Rex Energy has returned to the market with its $250 million offering of eight-year senior notes (expected ratings B3/B-), according to a syndicate source.

The deal is talked with a yield in the 9% area.

Wells Fargo Securities LLC is the left bookrunner. KeyBanc Capital Markets LLC, SunTrust Robinson Humphrey Inc. and RBC Capital Markets LLC are the joint bookrunners.

Kenan Advantage Group talked its $200 million offering of six-year senior notes (B3/B-) to yield 8¼% to 8½%.

The deal, which is being led by Goldman Sachs & Co., Bank of America Merrill Lynch and KeyBanc Capital Markets, is expected to price on Friday.

Tops to price Friday

Tops Holding Corp. and Tops Markets, LLC plan to price their $460 million offering of five-year senior secured notes (existing ratings B3/B+) on Friday.

Bank of America Merrill Lynch and Morgan Stanley & Co. are the joint bookrunners.

Proceeds will be used to repurchase or redeem the upstate New York supermarket retailer's existing 2015 senior notes and pay a dividend to its stockholders.

New deals move up

When MGM's mega-deal was freed for secondary market activity, a trader pegged the gaming giant's new bonds at 101¼ bid, 101½ offered, up from their par issue price. Several other traders had not seen any activity in the credit, owing to the lateness of the hour during the session when it priced.

The day's other deal from the gaming sector, for Caesars Entertainment, were also seen firmer.

"We traded a bunch at par," a trader said, noting that the add-on deal had priced at 98.25.

A second trader had the bonds at 99 7/8 bid, 100 3/8 offered, although he said that level was from early afternoon; he had not seen any subsequent levels in them.

Apart from the gaming bonds, clothier PVH's new 10-year issue cut a stylish figure in the aftermarket, with one trader seeing the bonds at 101 bid, 101¼ offered, up from their par issue price. Another saw them at 101¼ bid, 101½ offered.

A trader said that Alliant Holdings' deal "was active" once it moved into the aftermarket, with the bonds rising to 101¼ bid, 101½ offered, up from their par pricing level. A second trader had them at 101 bid, 101¼ offered.

None of the traders saw any dealings in the new add-on deal from Atlas Pipeline Escrow.

Older new deals hold their own

Among other deals which have priced this week, a trader said that Hamilton Sundstrand Industrial's 7¾% notes due 2020 remained in the 103¾ to 104¼ bid context to which those bonds had moved in Wednesday's aftermarket.

The Windsor Locks, Conn.-based manufacturer of pumps and compressors had priced its $650 million deal at par earlier that session via Silver II Borrower SCA and Silver II US Holdings LLC, after downsizing it from an originally planned $775 million.

HCA Holdings Inc.'s new 6¼% notes due 2021were seen holding steady on Thursday at 103¼ bid, 103¾ offered.

The Nashville-based hospital operator's $1 billion drive-by deal had priced at par on Monday, then moved up to around 101½ bid, 101¾ offered by Monday's close. On Tuesday, the bonds had firmed to 102¼ bid, 102¾ offered, and they moved above the 103 bid level in Wednesday's dealings and held that ground on Thursday.

Indicators stay strong

Overall, traders said that the secondary market remained firm on Thursday, with a trader estimating that things were up on the average by about 1/8 to ¼ of a point.

Statistical junk market performance indicators were up across the board for a third straight session.

The Markit Series 19 CDX North American High Yield index rose by 3/16 point on Thursday to end at 100 3/8 bid, 100½ offered, its third straight gain, after having gained 5/16 point on Wednesday.

The KDP High Yield Daily Index meantime notched its 13th consecutive gain on Wednesday, rising by 8 basis points to end at 74.86, on top of Wednesday's 26 bps jump. Its yield came in by 4 bps Thursday, to 5.86%, its 13th straight narrowing, after having declined by 10 bps on Wednesday.

And the widely followed Merrill Lynch High Yield Master II index rose by 0.141% on Thursday, its 14th straight winning session. It had gained 0.316% on Wednesday.

The latest advance lifted its year-to-date return to a new peak level for the year of 14.649%. It was the sixth consecutive new peak, moving up from the previous high of 14.487%, recorded on Wednesday.

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