Dell hits the road with $3.25 billion offering; Beazer shops deal; market firm; Caesars busy

By Paul Deckelman and Paul A. Harris

New York, Sept. 16 - The junk bond primary sphere took a little breather on Monday after Friday's more than $6 billion session, one of the heaviest new-issuance days seen this year.

But while there were no actual pricings in Junkbondland, that did not mean nothing was happening - quite the contrary.

Computer giant Dell Inc. was heard by syndicate sources to be readying the launch of its long-awaited $3.25 billion two-part offering of secured notes via a roadshow scheduled to start on Tuesday. Proceeds are slated to be used to help fund the company's coming leveraged buyout transaction. There was active trading in some of the company's existing paper.

Familiar junk name Beazer Homes, USA, Inc. shopped a $200 million offering of eight-year notes around to potential investors.

Price talk emerged on a trio of deals that could come to market on Tuesday from Hub International Ltd., BI-LO Holdings LLC and American Capital, Ltd. The big deal from insurance brokerage company Hub was heard by the sources to have been downsized.

Traders saw Tenet Healthcare Corp.'s huge new two-part deal continuing to trade well. The hospital operator's $4.6 billion of new seven- and 8.5-year notes firmed smartly in initial aftermarket dealings on Friday after pricing.

Away from the new deals, Caesars Entertainment Corp.'s bonds were among the most heavily traded junk issues, given a boost by the news that the gaming giant will launch a real-money online poker website this week.

Statistical marker performance measures were higher across the board for a second consecutive session.

Dell starts Tuesday

Dealers rolled out the deal to help fund the acquisition of Dell on Monday.

Dell's $3.25 billion two-part offering of secured notes is comprised of a $2 billion tranche of seven-year first-lien notes (Ba2/BB+) and a $1.25 billion tranche of eight-year second-lien notes (Ba3/BB).

Joint bookrunner Credit Suisse will bill and deliver. Barclays, BofA Merrill Lynch, RBC and UBS are also joint bookrunners.

Pricing is expected before the end of the week, market sources say.

Beazer eight-year deal

No deals priced by Monday's close.

However, Beazer Homes announced a $200 million offering of eight-year senior notes (expected ratings Caa2/CCC) as a Monday drive-by.

No terms were available at press time on the deal, which is talked with a yield in the 7¼% area.

Goldman Sachs, Credit Suisse, Deutsche Bank and UBS are the joint bookrunners for the general corporate purposes deal.

Talking the calendar

Elsewhere on Monday, price talk surfaced on a trio of deals that have been on roadshows and are expected to price on Tuesday.

Hub International downsized its offering of eight-year senior notes to $950 million from $1.035 billion on Monday, shifting $85 million of proceeds to its term loan in raising the loan to $1.87 billion from $1.785 billion.

The notes were also talked on Monday to yield 7¾% to 8%.

BofA Merrill Lynch is the left bookrunner. Morgan Stanley, RBC, Macquarie, BMO and UBS are the joint bookrunners.

BI-LO Holdings talked its $400 million offering of five-year PIK toggle notes (Caa1/CCC+) with coupon of 8½% to 8¾% at 99 to yield 8¾% to 9%.

Deutsche Bank and Citigroup are the joint bookrunners.

And American Capital talked its $350 million offering of five-year senior notes (B3/B+/BB-) to yield 6 ¼% to 6½%.

J.P. Morgan, BofA Merrill Lynch, BMO, Citigroup, Goldman Sachs and UBS are the joint bookrunners.

Jerrold £200 million

The session also produced primary market news out of Europe, as the sterling-denominated calendar grew to half a billion.

Cheshire, England-based mortgage lender Jerrold Holdings Ltd. plans to sell £200 million of five-year senior secured notes (B+) before the end of the week.

Royal Bank of Scotland, Jefferies and Lloyds are leading the deal the debt refinancing deal.

Phones 4U PIK toggle deal

Phosphorus HoldCo plc, the parent of England-based Phones 4U, began a roadshow on Monday for a £200 million offer of 5.5-year senior PIK toggle notes.

Goldman Sachs is the physical bookrunner for the dividend deal. Lloyds is the joint bookrunner.

Jerrold and Phones 4U are joined on the calendar by London-based Soho House, which began a roadshow last week for its £105 million offering of five-year senior secured notes via Imperial Capital.

Existing Dell paper better

In the secondary market, Dell's existing bonds were seen by market sources to have firmed in active trading on the prospect that its huge debt offering to help fund its upcoming LBO was finally scheduled to hit the road Tuesday for marketing to interested investors.

The big deal had been on radar screens since February, only to have been delayed by the months-long fight for control of the Round Rock, Texas-based computer giant between its founder and chief executive officer Michael Dell and investors led by billionaire Carl Icahn and Southeastern Asset Management Inc. over the takeover price.

With the resolution of that long-running conflict late last week, the uncertainty that hung over the transaction dissipated, although a trader said now "everybody's trying to figure out where that's going to come and how to play it."

A market source at another desk saw some brisk activity in Dell's existing bonds, with its 2.3% notes due 2015 having gained a ½ point to end at 100 ¼ bid, on volume of more than $10 million.

Dell's 5 7/8% notes due 2019 did even better, pushing up 1 7/8 points on the session to end just below the par level, although he noted that almost all of that action was on numerous smaller odd-lot trades rather than any kind of size trading.

Dell's 3.1% notes due 2016 were seen having slipped by 1/8 of a point to end at 991/2, with over $4 million of that paper having changed hands.

Tenet stays strong

A trader said that last week's biggest deal - Tenet Healthcare's $4.6 billion two-part offering - continued to trade at levels well above the par issue price for both of those tranches.

He said that the Dallas-based hospital operator's $1.8 billion of 6% senior secured notes due 2020 was trading in a 101¾ to 102 bid context, while its $2.8 billion of 8 1/8% senior unsecured notes were at 103½ bid, 103¾ offered. Both levels were around where the bonds had initially traded on Friday after they were priced.

A second trader quoted the new Tenet seven-years at 101¾ bid, 102 1/8, calling that actually down marginally from where they had been on Friday. But he saw its new 8.5-year notes up by a ¼ point at 103 3/8 bid, 103 5/8 offered.

Tenet's existing 6¼% notes due 2018were among the busiest junk issues of the day, with over $17 million having changed hands. A trader pegged those bonds up a ½ point going home, at 106¾ bid.

Other recent deals trade around

Among the other issues that priced on Friday, a trader said that Sanchez Energy Corp.'s 7¾% add-on notes due 2021were unchanged at 97½ bid, 98 offered.

The Houston-based oil and natural gas exploration and production company's $200 million add-on to its existing 2021s had priced at 96.5 to yield 8.37%, after having been upsized from an originally announced $1590 million.

A trader said that JBS USA, Inc.'s upsized add-on to its 7¼% notes due 2021 came off a little from the initial aftermarket levels reached after the Greeley, Colo.-based meat processing company priced its $500 million deal.

He quoted them Monday as "straddling par" at 99 7/8 bid, 100 1/8 offered, after the issue had firmed a little on Friday to a par to 101 bid range. That deal priced at 99.5 to yield 7.33% after having been upsized from an originally shopped $400 million.

Caesars up on online plans

Away from the new deals, Caesars Entertainment's bonds got a boost on Monday after the Las Vegas-based casino powerhouse said it would launch an online poker website that uses real money on Thursday.

One trader said the old Harrah's Operating Corp. legacy 10% notes due 2018 were the day's "top trader" in all of the high-yield space with "over 30 trades." The paper was up about a point at 63 5/8.

A market source at another desk estimated that over $31 million of those bonds had changed hands, calling them up 5/8 of a point at 63 5/8.

At yet another shop, a trader said the 10% notes were up "about a point and change" at 631/2.

"They were up a bunch on Friday," he said. "So they continued to rally a little bit more."

The first trader also saw the 8½% notes due 2020 gaining nearly 1½ points to end at 97, while the 11¼% notes due 2017 climbed up half a point to 105.

Over $19 million of the 81/2s were traded, the market source said, estimating them 1 7/16 points higher at just under the 97 mark.

He said that over $15 million of the 2017s had moved around, calling them up½ point at 105.

The online gaming system will only be operated in Nevada, as the state legalized online gambling in February. Caesars also hopes to start a similar site in New Jersey later this year.

Caesars intends to market the game under its popular World Series of Poker brand.

Junk quietly firmer

Overall, a trader characterized Monday's session as "actually fairly quiet all around. The market was a little bit firmer, but as far as volumes, it was fairly light."

A second trader opined that "even though everybody thought the market was going to be that firm today, it really wasn't. Nothing really ran away."

He said that while recent new deals, which had moved up, such as Tenet Healthcare, were holding the gains that they had notched at the tail end of last week, "nothing really stood out."

Market indicators stay strong

Statistical junk market performance indicators were higher on Monday for a second consecutive session after having been mixed on Thursday. It was the fourth session in the last five our that those market gauges had been higher across the board.

The Markit Series 20 CDX North American High Yield index was up for a second straight session on Monday, gaining a ½ point to end at 105 11/16 bid, 105 13/16 offered, on top of its 3/32 of a point rise on Friday. The index has now been on the upside over six of the last seven sessions, a positive pattern interrupted only by a loss on Thursday.

The KDP High Yield Daily index jumped by 21 basis points on Monday to end at 73.69, its fifth consecutive gain. On Friday, it had improved by 12 bps. Its yield came in for a third consecutive session, narrowing by 7 bps to go out at 6.18%, on top of Friday's decline of 3 bps.

And the widely followed Merrill Lynch High Yield Master II index made it a lucky seven sessions in a row of gains on Monday, adding on 0.32%. It had risen by 0.053% on Friday.

The latest gain lifted its year-to-date return to 3.523% on Monday, up from Friday's 3.193%. That left the index at its highest reading since July 30, when it stood at 3.53%.

Stephanie N. Rotondo contributed to this review

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