Prince, Tops, Kenan, Rex among deals pricing to conclude $10 billion week

By Paul Deckelman and Paul A. Harris

New York, Dec. 7- The high-yield primary sphere closed out an already busy week with pricings of another $2.1 billion of bonds Friday, as issuers hurried to get their financing needs done while currently favorable market conditions persist and before Junkbondland goes into its traditional year-end holiday "snooze" mode.

Prince Mineral Holding Corp. did an upsized $285 million offering of seven year first-lien secured notes. The new bonds were little seen in the aftermarket.

On the other hand, supermarket operator Tops Holding Corp.'s $460 million of five-year secured notes were tops with investors, who took the bonds solidly higher when they were freed for secondary dealings.

Kenan Advantage Group's $200 million of six year notes were also winners in the aftermarket after the logistics company's deal priced.

Also pricing during the session were names including Rex Energy Corp. - which came back in with essentially the same $250 million deal it had first tried to get done several weeks ago, and sector peer Armstrong Energy, Inc., which priced a $200 million secured offering.

The new deals closed out a week that saw some $10 billion of new U.S. dollar-denominated, fully junk-rated paper from domestic or developed-country issuers, according to data compiled by Prospect News.

That was up from the previous week's totals of about $6.6 billion. New issuance is running about 47% ahead of the pace seen at this time last year.

Deals pricing earlier in the week from such names as HCA Holdings, Inc. and MGM Resorts International were seen holding onto their secondary trading gains.

Overall, secondary market levels were firm, with most activity centered in the newly-priced deals.

Statistical market performance indicators were higher across the board on both the session and versus where they were at the end of the previous week.

Top prices at tight end

The primary market remained busy on Friday, with five issuers bringing a combined six dollar-denominated tranches, raising a total of $2.1 billion.

Tops Holding Corp. and Tops Markets, LLC priced a $460 million issue of five-year senior secured notes (B3/B+) at par to yield 8 7/8%, at the tight end of yield talk that was set in the 9% area.

Bank of America Merrill Lynch and Morgan Stanley were the joint bookrunners for the quick-to-market debt refinancing and dividend deal.

Prince Mineral oversubscribed

Prince Mineral priced an upsized $285 million issue of 11½% seven-year first lien senior secured notes (Caa1/B) at 98.828 to yield 11¾%, also at the tight end of yield talk, in this case set at 11¾% to 12%. The amount was increased from $260 million.

The deal was oversubscribed, a trader said, spotting the newly minted Prince Mineral 11½% notes trading around 102.

Credit Suisse and BMO were the joint bookrunners.

Proceeds will be used to fund an acquisition and repay debt.

Rex returns

Returning with a deal it pulled in late November due to market conditions, Rex Energy priced a $250 million issue of 8 7/8% eight-year senior notes (B3/B-) at 99.3 to yield 9% on Friday.

The yield printed on top of yield talk.

Wells Fargo was the left bookrunner for the debt refinancing and general corporate purposes deal. KeyBanc, SunTrust and RBC were the joint bookrunners.

Kenan brings six-year deal

Kenan Advantage priced a $200 million issue of six-year senior notes (B3/B-) at par to yield 8 3/8%, in the middle of the 8¼% to 8½% yield talk.

Goldman Sachs, KeyBanc and Merrill Lynch were the joint bookrunners.

The North Canton, Ohio-based logistics and liquid bulk transportation services provider plans to use the proceeds to pay a $175 million dividend to sponsors Goldman Sachs Capital Partners and Centerbridge Partners, and partially repay term loan debt.

Altice's three-part deal

In a transaction that attracted followings in emerging markets as well as high yield, Israel-focused Altice Financing SA/Altice Finco SA priced euro- and dollar-denominated notes on Friday.

The deal included $450 million of seven-year secured notes (Ba2/BB-) that priced at par to yield 7 7/8%, on top of price talk that had tightened from earlier talk of 8% to 8¼%.

Altice also priced a €200 million tranche of the seven-year secured notes (Ba2/BB-) at par to yield 8%, also on top of revised talk; earlier talk had the euro tranche coming 12.5 basis points behind the dollar tranche's original talk, implying 8 1/8% to 8 3/8%.

In an unsecured tranche, the company priced $400 million of eight-year notes (B2/B) at par to yield 9 7/8%, also on top of final talk. Previous to revision talk on the unsecured paper was 10% to 10¼%.

Goldman Sachs, HSBC and Morgan Stanley were the bookrunners for the Rule 144A and Regulation S deal.

Proceeds will be used to refinance the telecommunications company's debt and to finance the acquisition of the remaining 31% stake in Hot Mobile that Altice does not own.

USI plans eight-year deal

Compass Investors, Inc., the parent of USI Holdings Corp. plans to price a $630 million offering of eight-year notes on Friday.

An investor call is set to take place at 10:30 a.m. ET on Monday.

Morgan Stanley, Merrill Lynch, Citigroup, Goldman Sachs, RBC and UBS are the joint bookrunners for the LBO deal.

Tempur-Pedic starts Monday

Tempur-Pedic International Inc. plans to take part in an investor conference call on Monday to discuss its $350 million offering of eight-year senior notes (B3/B+), according to a syndicate source.

The deal will also start out on a brief roadshow that is set to start on Monday and wrap up on Wednesday.

Merrill Lynch, Barclays, J.P. Morgan and Wells Fargo are the joint bookrunners.

Proceeds, along with proceeds from the new credit facility and cash on hand, will be used to help fund the acquisition of Sealy Corp. and repay substantially all of Sealy's and Tempur-Pedic's outstanding debt.

The week ahead

In the run-up to Thanksgiving sources - especially on the sellside - were looking for a reasonably quiet slog to year-end, reasoning that the big dealers had all made their quotas, in this year of record-setting (record-burying) issuance, while the buyside has seen double-digit returns.

However that anticipated slowdown obviously did not materialize.

The week ahead gets underway with a robust calendar of deals on the road, all of which are expected to price before Friday's close.

Among them, TPC Group Inc. is expected to price a $655 million offering of eight-year senior notes (/B/) on Tuesday, according to a trader who added that the deal is being discussed in a yield context in the 9% area.

Merrill Lynch, Jefferies and Morgan Stanley are the joint bookrunners.

Cleaver-Brooks, Inc. is expected to price a $285 million offering of seven-year senior secured notes (B2/B) on Tuesday, the trader said, and noted that 9% to 9¼% yield discussions have taken place.

RBC is the left bookrunner. UBS and SunTrust are the joint bookrunners.

Brookfield Residential Properties Inc.'s $400 million offering of eight-year senior notes (B2/BB-) could also come Tuesday, said the trader, who expects the deal to get done in the mid-6% range.

Credit Suisse, Citigroup and J.P. Morgan are the joint bookrunners.

Timing is less clear on the Rain CII Carbon LLC/Rain CII Carbon Corp. $675 million equivalent offering of eight-year senior secured second-lien notes (expected ratings B1/BB-), the trader said.

However the $400 million tranche appears to be shaping up at about 9%, and the €210 million tranche seems to be coming together in the low-to-mid 9% context.

Citigroup is the left bookrunner and Goldman Sachs is the joint bookrunner.

And the drive-by market will remain active, sources say.

As to why the anticipated late-year slowdown failed to materialize, sellside sources have lately been pointing to the "Fiscal Cliff" negotiations taking place between the executive and legislative branches of the U.S. government.

Those negotiations are expected to bear fruit before the end of the year.

And whether the government acts of its own accord to reduce its deficit, or allows default spending cuts mandated by the Budget Control Act of 2011 to take effect, the U.S. economy could be negatively impacted, they say.

Hence, the anticipated late 2012 lull in the high-yield market may have given way to a "get-it-while-you-can" mindset on the part of issuers and their underwrites, sources say.

Tops deal tops with investors

When the new Tops Holding issue was freed to trade in the secondary market, the supermarket operator's five-year senior secured notes were seen by a trader having moved up to 102¼ bid, 102¾ offered from their par issue price.

A second trader quoted the bonds in a 102 to 103 bid context.

Elsewhere among the day's new deals, Kenan Advantage Group's six-year notes were seen by a trader around 101 bid, 101½ offered, up from their par issue price.

At another desk, a trader saw the bonds going home as high as 101½ bid, 102¼ offered.

Prince Mineral Holdings' new senior secured issue were seen by a trader at 100½ bid, but with no offering level seen. The company had priced those bonds earlier at 98.828.

Traders said they did not hear of any immediate trades involving either Rex Energy or Armstrong Energy's new issues.

Earlier bonds hold their own

Among the bonds which had priced earlier in the week, traders said that Nashville-based hospital operator HCA Holdings' new 6¼% notes due 2021 remained the standout performer. Several of them saw the bonds still trading above 103 bid on Friday, well above their par issue price.

A market source saw some $7 million having changed hands by mid-afternoon, at a price of 103 5/8 bid.

Another good gainer was the MGM Resorts International mega-deal, which had priced on Thursday at par and then began moving up quickly.

"They're doing very well," a trader said, seeing the Las Vegas-based gaming and lodging operator's $1.25 billion of 6 5/8% notes due 2021 having stayed above the 101½ to 101 7/8 context to which it had risen after its pricing.

MGM's sector peer and cross-town rival Caesars Entertainment Operating Co. Inc.'s 9% senior secured first-lien notes due 2020 were trading at 99½ bid, par offered on Friday. That $750 million add-on to its existing $750 million of the bonds had priced Thursday at 98.25 to yield 9.336%, after having been massively upsized from the originally announced $300 million issue size.

New deals remain the focus

A trader said that trading in the new and recently priced issues clearly remained the focus in the secondary market.

"It was pretty much new-issue driven," he acknowledged.

A second trader - noting the intensifying of primaryside activity over the past two sessions, as issuers rush to get their borrowing done before the usual year-end holiday lull sets in after the middle of the month, and the way that the new deals have dominated the secondary realm, observed that "people want to put money to work before the year end - and a lot of the underwriters want their clients to get their deals in before the year end."

There seems to be no shortage of money to be put to work. During the session, market participants familiar with the statistics on money flows into and out of high-yield mutual funds and exchange-traded funds generated by AMG Data Services of Arcada, Calif., a unit of ThomsonReuters' Lipper analytics unit, said that in the week ended Wednesday $653 million more came into those funds than left them.

It was the second consecutive inflow seen by Lipper, following the $264 million cash infusion seen in the week ended Nov. 28.

On a year-to-date basis, inflows have now been seen in 38 weeks so far this year, with outflows in 11 weeks, according to an analysis of the numbers by Prospect News. The cumulative net inflow stands at an estimated $29 billion, according to the analysis.

On Thursday, another fund-tracking service, EPFR Global of Cambridge, Mass., had reported a $1.73 billion inflow to the funds it tracks during the most recent week. The two services' numbers generally vary widely because of differences in their respective methodologies - EPFR includes non-U.S.-domiciled funds in its tally, for instance - but they generally point in the same direction.

Fund flow numbers are considered a reliable barometer of overall junk market liquidity trends.

Indicators stay strong

Statistical junk market performance indicators were up across the board for a fourth straight session Friday, and were higher versus their week-ago levels as well.

The Markit Series 19 CDX North American High Yield index rose by 1/8 point on Friday to end at 100½ bid, 100 5/8 offered, its fourth consecutive gain. The index had risen by 3/16 point on Thursday.

It was up as well from the 99 29/32 bid, 100 1/32 offered level seen at the close of the previous week last Friday, Nov. 30.

The KDP High Yield Daily Index meantime notched its 14th consecutive gain on Friday, rising by 17 basis points to close at 75.03, after having advanced 8 bps on Thursday. Its yield came in by 6 bps Friday to 5.80%, its 14th straight narrowing, after having declined by 4 bps on Thursday.

Those levels compared favorably with the previous Friday's index reading of 74.33 and its yield of 6.07%.

And the widely followed Merrill Lynch High Yield Master II index rose by 0.145% on Friday, its 15th straight gain, on top of the nearly identical 0.141% rise reported on Thursday.

The latest advance lifted its year-to-date return to a new peak level for the year of 14.816%. It was the seventh consecutive new peak, moving up from the previous high of 14.649%, recorded on Thursday.

The index rose by 0.911% on the week, its third consecutive weekly gain. The week before, the index showed a one-week gain of 0.836%, with a year-to-date return the previous Friday of 13.779%.

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