Rite Aid drives by as bonds rise; Chesapeake trades heavily; market focused on new deals

By Paul Deckelman and Paul A. Harris

New York, Feb. 14 - Rite Aid Corp. made a quick visit to the high-yield market on Tuesday, pricing a same-day $481 million offering of eight-year notes.

The Camp Hill, Pa.-based drugstore chain operator's new deal was heard to have traded around the issue price, but its existing bonds firmed solidly, including the tranche slated to be taken out using the proceeds of the new bond deal.

That was the only pricing seen in the domestic dollar-bond market, in contrast to Monday's busy session, during which more than $2.5 billion priced. More than half of that figure came from Chesapeake Energy Corp.

At $1.3 billion, that was Monday's big deal on the primaryside and was Tuesday's big deal in the secondary arena as well, with traders reporting an astounding $400 million-plus of the new seven-year paper changing hands, almost all of it at or just fractionally above the deal's issue price.

There was also a fair amount of trading in the natural gas company's existing bonds, though nowhere near the volume of the new issue.

Traders said that the secondary market was focused on those two new deals, as well as Monday's $400 million issue from specialty retailer Claire's Stores Inc., pretty much to the exclusion of most everything else. Like the Chesapeake and Rite Aid offerings, the new Claire's bonds also traded around their issue price. They saw little doing outside of that troika of deals.

Primaryside players heard price talk emerge on Education Consulting Solutions Inc.'s $200 million offering of five-year notes, expected to come to market after the order books close on Thursday morning.

Rite Aid prices atop talk

Rite Aid brought Tuesday's only dollar-denominated high-yield deal, a $481 million issue of eight-year senior guaranteed notes (Caa3/CCC), which priced at par to yield 9¼%, on top of price talk.

Citigroup Global Markets, Bank of America Merrill Lynch, Wells Fargo Securities and Credit Suisse Securities (USA) LLC were the joint bookrunners for the quick-to-market deal.

The Camp Hill, Pa.-based drugstore chain plans to use the proceeds to fund tender for the 8 5/8% senior guaranteed notes due 2015.

Faurecia taps 9 3/8% notes

French automotive parts firm Faurecia SA priced a €140 million add-on to its 9 3/8% senior notes due Dec. 15, 2016 at 107.50 to yield 7.481%.

The reoffer price came at the rich end of the 107 to 107.50 price talk.

Credit Agricole CIB and Natixis were global coordinators and joint bookrunners for the quick-to-market add-on. BNP Paribas and SG CIB were also joint bookrunners.

Credit Agricole will bill and deliver.

The Nanterre, France-based company plans to use the proceeds to repay bank debt.

The original €350 million issue priced at 99.479 to yield 9½% on Nov. 4, 2011.

Rock-Tenn brings two-parter

In the crossover market, Rock-Tenn Co. priced an upsized $750 million of split-rated senior notes (Ba1/BBB-/) in two parts.

The deal size was increased from $600 million, a source said.

The $350 million of 4.45% seven-year notes priced at 99.909 to yield 4.465% with a spread of Treasuries plus 312.5 basis points. The tranche priced significantly tighter than talk in the 387.5 bps area.

There is a make-whole call option on the notes at 50 bps over Treasuries.

A second tranche of $400 million in 4.9% 10-year paper priced at 99.81 to yield 4.924% with a spread of 300 bps over Treasuries. The notes were priced tighter than guidance in the 375 bps area.

Active bookrunners were Bank of America Merrill Lynch, J.P. Morgan Securities LLC and Wells Fargo Securities LLC. Stifel, Nicolaus & Co. Inc. and Jefferies & Co. were passive.

Proceeds are being used to prepay all $746.3 million of loans outstanding under an existing term loan B facility and to pay related costs and expenses. Any remainder will be used to repay amounts outstanding under a revolving credit or receivables facility.

Core Education sets talk

Core Education and Consulting Solutions, Inc. talked its $200 million offering of five-year guaranteed senior notes (/B+/) with a yield in the 12½% area with approximately two points of original issue discount.

The books close at 11 a.m. ET on Thursday and the deal is set to price thereafter.

Barclays Capital Inc. and Jefferies & Co. are the joint bookrunners. BMO Securities and Standard Chartered Bank are the co-managers.

The company plans to use part of the proceeds to redeem preferred shares. These proceeds will then be used to repay rupee debt and for general corporate purposes, including funding capital expenditures in India.

Proceeds will also be used repay debt and for general corporate purposes

The prospective issuer is an Atlanta-based provider of technology-enabled education products, services and solutions to the education sector.

Chesapeake little changed

A trader said that more than $400 million the new Chesapeake Energy 6.775% notes due 2019 changed hands during Tuesday's session, making it far and away the most active credit in Junkbondland.

He declared, "Most of that paper is trading at 98 7/8, either up or down one-eighth point from there" - in other words, not too far from the 98¾ at which the Oklahoma City-based natural gas operator priced its $1.3 billion drive-by deal on Monday to yield 7%.

"A good majority" of the new paper traded between 98¾ and 99, he said.

A second trader estimated the volume as high as $450 million, pegging the new bonds at 98 5/8 bid, 99 offered.

"It was just up marginally," said a third, quoting that paper in a 98 7/8 bid, 99 offered context.

Existing Chesapeake cheapens

One of the traders said he saw Chesapeake's existing bonds heading lower, with the 6 1/8% notes due 2021 down almost 2 points to around the 971/2.

He saw the 6 5/8% notes due 2020 largely unchanged at 100¼ bid. Chesapeake's 6 7/8% notes due 2020 were down by a quarter-point, at 101¾ bid.

A market source at another desk estimated Chesapeake's 6 1/8s off by a point on the session on strictly a round-lot basis, at 97¼ bid. The source said that it was down 1 5/8 points from the level seen on Friday.

He added that $18 million of the bonds had traded on Monday, when Chesapeake brought its new deal to market, and an additional $32 million on Tuesday, moving lower both days in response to news of the new mega-deal.

He saw the 6 5/8s, though, actually up around a quarter-point, at 100½ bid, with $18 million traded.

Yet another market source saw the 6 1/8s fall by as much as 2¾ points on the day, going home at the 97¼ bid level, while the company's 9½% notes due 2015 improved to 113 1/8 bid.

Rite Aid trades around issue

When the new Rite Aid eight-year notes were freed for secondary dealings, traders did not see the bonds moving far from the par level at which that $481 million transaction had priced.

One saw the bonds at par bid, 100¾ offered, but later said that had tightened to a 99¾ bid, par offered context.

A second said the bonds had traded into a par bid and were left in a range of 99 7/8 to100 1/8.

Yet another trader said that they were 99 7/8 bid 100 3/8 offered.

With news of the pricing coming late in the day - well after 4 p.m. ET, when market activity is in its daily wind-down - the traders said that there was little volume behind those initial aftermarket quotes.

Existing Rite Aid rallies

The company's existing bond issues, however, were seen doing better, buoyed by Rite Aid's ability to refinance its 8 5/8% guaranteed notes due 2015.

Those are the bonds Rite Aid will be taking out via a tender offer funded by the new bond deal.

The 8 5/8s was the biggest volume mover in the Rite Aid capital structure on Tuesday, with over $31 million of the bonds changing hands.

A market source saw the bonds gaining 1¼ points on the day to end at 102½ bid, the takeout level for the tender offer.

But the biggest beneficiary - though on far less volume - was Rite Aid's 7.7% notes due 2027.

A trader saw them "bouncing around all day" in a mid-80s context

That was well up from the 78 bid level they occupied on Monday.

A market source said strictly looking at round-lot trades and throwing out the numerous smaller pieces, those bonds emerged as 6-point winners on the day, at 85¾ bid.

Traders were split on the wisdom of the company's course, with one questioning the usefulness of replacing lower-coupon debt like the 8 5/8s with higher-coupon paper, like the new 9¼% notes.

However, another trader declared that by showing it could tap the capital markets and extending the maturity for five years, "Rite Aid is doing the Feb. 27."

Claire bonds little moved

A trader saw the new Claire's Stores 9% senior secured notes due 2019 offered at 1001/4.

A second quoted the bonds at par bid, 100 1/8 offered, but opined that he was "shocked that Claire managed to get it off at the level it did."

The Pembroke Pines, Fla.-based specialty retailer priced a quickly-shopped $400 million issue of those bonds at par on Monday, and they had traded as low as a 99-to00¾ context initially.

Meantime, a trader saw Claire's 8 7/8% notes due 2019 up a half-point at 85½ bid on volume of about $15 million.

'Lackluster day'

After getting past the Chesapeake, Rite Aid and Claire's deals, several traders said on Tuesday that they didn't see anything else really going on.

"It was a fairly lackluster day if you weren't involved in Chesapeake," one of them said. "It was all Chesapeake, Rite Aid and their new issues."

He added: "Tomorrow is another day."

A second trader said that other than the trio of new deals, "I've even had people calling me saying it was just slow."

Market data mixed on day

Away from the new deals, statistical measures of junk market performance were mixed for a second straight session on Tuesday.

The CDX North American Series 17 High Yield index dropped by a half-point to 96 7/8 bid, 97 1/8 offered, after having gained a half-point on Monday.

The KDP High Yield Daily Index notched its third straight loss, off 4 basis points on Tuesday to end at 74.20. That followed Monday's 8 -bps loss. Its yield was unchanged at 6.68%, after having risen by 1 bp on Monday.

But the widely followed Merrill Lynch High Yield Master II Index scored its second gain in a row Tuesday, rising by 0.042%, on top of Monday's 0.172% gain.

That pushed the Index's year-to-date return to 3.885% on Tuesday, up from Monday's 3.841%. Tuesday's level was also a new peak for 2012 so far, eclipsing the old zenith of 3.884% recorded last Thursday.

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