Morning Commentary: Golden Entertainment bonds cling to premium; Staples deal terms eyed

By Paul A. Harris

Portland, Ore., April 9 – Equities opened lower on Tuesday, and crude oil prices slipped. However, quiet pervaded the junk bond market as players were poised to hear final terms on the Staples, Inc. megadeal.

High-yield ETFs were flat on the morning. The iShares iBoxx $ High Yield Corporate Bd (HYG) was down 2 cents, or 0.02%, at $86.36 per share.

Bonds priced Monday by Golden Entertainment Inc. broke to a premium over their new issue price and were clinging to it at mid-morning.

The Golden Entertainment 7 5/8% senior notes due April 2026 (Caa1/CCC+) were par bid, par ¼ offered, having eased from par bid, par 3/8 offered earlier in the session, sources said.

The $375 million deal priced at par, playing to an order book that was twice deal size.

The Power Solutions (Panther BF Aggregator 2 LP/Panther Finance Co., Inc.) 8½% senior notes due May 2027 (B3/B/B-) were down 1/8 point on Tuesday morning, at 101, a New York-based trader said, adding that the $1.95 billion issue, which priced at par in the middle of March, is actively traded and provides a reasonable means of taking the market's temperature.

The dollar-denominated secured paper, the Panther/Power Solutions 6¼% senior secured notes due May 2026 (Ba3/B+/BB), appear be more tightly held, i.e., less active in trading, the trader said, marking the secured notes at 103 on Tuesday.

Away from recent issues, the bonds of CEC Entertainment Inc., parent to the Chuck E. Cheese, which were up 5 points on Monday on news that the San Jose-based restaurant and entertainment company plans a merger and a public offering of shares later this year, gave a little of that gain back on Tuesday.

The CEC Entertainment 8% senior notes due February 2022 were 101½ bid on Tuesday, the trader said.

They had been as high as 102, the source added.

Awaiting Staples

The primary market, meanwhile, was closely focused on the Staples megadeal, which underwent big changes on Monday, and a few more on Tuesday, an investor said.

On Monday Staples upsized its tranche of seven-year senior secured notes (B1/B+) to $2,025,000,000 from $750 million and talked the secured notes to yield 7¼% to 7½%, inside of initial guidance in the 7½% to 7¾% area.

A downsized $1 billion tranche of eight-year senior unsecured notes (B3/B-) was talked to yield in the 10¾% area, wider than initial guidance in the high 9% to low 10% area.

That re-sizing shifted $375 million of proceeds to the secured notes from the unsecured notes, and $900 million to the secured notes from the concurrent bank loan.

Along with the changes and price talk there were also changes to the offering documents on Monday, and further document changes on Tuesday, the investor said.

The secured tranche of bonds, which was heard to be heavily oversubscribed prior to Monday’s upsizing, is still thought to be in good shape, sources say.

Meanwhile there is a buzz in the market that sponsor Sycamore Partners is taking down as much as $200 million of the $1 billion of unsecured Staples paper.

Part of the proceeds from the bond sale are being used to fund a dividend to Sycamore.

Allocations are expected on Tuesday.

Monday inflows

The daily cash flows of the dedicated high-yield bond funds were positive on Monday.

High-yield exchange-traded funds saw $97 million of inflows on the day.

Actively managed high-yield funds saw $110 million of inflows on Monday, the trader said.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.