Sirius XM Radio, Icahn, Tesoro Logistics lead $2 billion session as market awaits Fed

By Paul Deckelman and Paul A. Harris

New York, July 29 - The high-yield primary sphere kicked off the new week - the last in July -- as a quartet of deals collectively worth $2 billion of new fully junk-rated, dollar-denominated paper from domestic or industrialized-country borrowers priced. All were opportunistically timed and quickly shopped around to investors.

Satellite Broadcaster Sirius XM Radio Inc. had the biggest deal of the session, a $600 million offering of eight-year notes.

Tesoro Logistics LP, an entity controlled by petroleum refiner and marketer Tesoro Corp., brought an upsized $550 million of eight-year paper to market.

Icahn Enterprises LP, a diversified holding company controlled by billionaire financier Carl C. Icahn, upsized its offering of seven year notes to $500 million.

And party supplies distributor Party City likewise upped the size of its issue of six-year PIK toggle notes, via a pair of financial subsidiaries, to $350 million.

All of the day's deals priced late in the session and none showed any immediate aftermarket activity.

Other prospective borrowers heard by syndicate course to be shopping deals during the session included RCN Telecom Services LLC, Aguila 3 SA and KeHE Distributors LLC.

Traders saw some secondary market activity among recently priced deals, like those from Alliance One International, Inc., CIT Group, Inc., Michaels Stores Inc. and Gibson Brands Inc.

But, they said, the secondary was generally slow - partly a function of it being the typical "summer Monday" and partly because investors were waiting to hear any new updates from the Federal Reserve, whose policy-making committee meets on Tuesday and Wednesday.

Statistical indicators of market performance were mixed for a third straight session.

Sirius XM drives through

The July-August crossover week got under way with a quick-to-market Monday that saw four issuers bring single-tranche transactions.

Executions, though mixed, tended to be tight.

All four deals priced as drive-bys, and three of the four upsized.

One came inside of talk. One came at the tight end. One came on top. And the fourth came well wide of talk.

And three of the four came via left bookrunner BofA Merrill Lynch.

Sirius XM Radio priced a $600 million issue of eight-year senior notes (B1/BB) at par to yield 5¾%, 25 basis points beyond the wide end of the 5 3/8% to 5½% yield talk.

BofA Merrill Lynch was the left bookrunner for the quick-to-market debt refinancing deal.

Deutsche Bank, J.P. Morgan, Citigroup, Credit Agricole, Morgan Stanley and SunTrust were the joint bookrunners.

Tesoro Logistics upsizes

Tesoro Logistics LP and Tesoro Logistics Finance Corp. priced an upsized $550 million issue of eight-year senior notes (B1/BB-) at par to yield 6 1/8%.

The deal was upsized from $300 million.

The yield printed at the tight end of yield talk set in the 6¼% area.

BofA Merrill Lynch was the left bookrunner for the debt refinancing/acquisition deal.

Wells Fargo, Deutsche Bank, Morgan Stanley and UBS were the joint bookrunners.

Icahn upsizes

Icahn Enterprises LP and Icahn Enterprises Finance Corp. priced an upsized $500 million issue of seven-year senior notes (expected ratings Ba3/BBB-) at par to yield 6%.

The deal was upsized from $350 million.

The yield printed on top of yield talk.

Jefferies LLC was the bookrunner for the quick-to-market general corporate purposes deal.

Party City PIK toggles

Party City priced an upsized $350 million issue of six-year senior PIK toggle notes (Caa2/CCC+) at 99.00 to yield 8.966%.

The notes pay a cash coupon of 8¾% and a PIK coupon of 9½%.

The deal was upsized from $300 million.

The yield printed 22 bps below the tight end of yield talk set in the 9% area.

BofA Merrill Lynch, Deutsche Bank, Barclays, Goldman Sachs, Morgan Stanley and Moelis were the joint bookrunners for the dividend deal.

Cabot at the tight end

There was also news on Monday of a quick-to-market market deal in the sterling-denominated high-yield primary market.

Cabot Financial (Luxembourg) SA priced a £100 million issue of seven-year senior secured notes (expected ratings B1/BB) at par to yield 8 3/8%.

The yield printed at the tight end of yield talk that was set in the 8½% area.

Joint bookrunner JPMorgan will bill and deliver. Lloyds was also a joint bookrunner.

The West Malling, Kent, England-based debt collector plans to use the proceeds to repay bank debt and shareholder loans.

KeHe talks $200 million

The early August deal calendar continued to take shape on Monday, with new deals being announced and price talk surfacing on a transaction that has been on the road.

KeHE Distributors and KeHE Finance Corp. talked their $200 million offering of eight-year senior secured second-lien notes (B3/B) with a yield in the 7¾% area.

The deal is set to price Tuesday via left bookrunner BMO. J.P. Morgan is the joint bookrunner.

Swissport plans 7/8% notes

Aguila 3, a subsidiary of Luxembourg-based airport services provider Swissport International Ltd., plans to price a $390 million add-on to its dollar-denominated 7 7/8% senior secured notes due Jan. 31, 2018 on Tuesday afternoon or Wednesday morning.

Citigroup, BNP, SG, Morgan Stanley and UBS are the joint bookrunners for the acquisition financing.

RCN starts Tuesday

RCN Telecom Services and RCN Capital Corp. plans to start a roadshow on Tuesday for its $200 million offering of seven-year senior notes, in a deal set to price early in the Aug. 5 week.

Credit Suisse and SunTrust are the joint bookrunners for the dividend deal.

Day's deals a no-show

While a trader saw the new 6 1/8% notes due 2021 from San Antonio, Texas-based Tesoro Logistics come to market in addition to Sirius XM's 5¾% notes due 2021, he saw no immediate aftermarket activity in either credit. And those deals were heard to have hit the tape before the Icahn Enterprises and Party City pricings.

There were also no reported dealings in New York-based satellite broadcaster Sirius' 8¾% notes due 2015, which the company plans to redeem using the proceeds from its bond deal, as well as cash on hand.

Sirius sold $800 million of the notes in 2010.

Recent deals trading

Among recently priced issues, a trader quoted Alliance One International's 9 7/8% senior secured second-lien notes due 2021 at 97½ bid, 98 offered.

The Morrisville, N.C.-based leaf tobacco merchant priced $735 million of the notes on Friday at 98 to yield 10¼%, after having downsized the offering from an originally announced $790 million.

He did not see any aftermarket dealings in Friday's other transactions: the $250 million of 7¼% notes due 2018 that Miami-based Brightstar Corp., a provider of services to the wireless telecommunications industry, had priced at 98.973 to yield 7½%.

Among Thursday's deals, a trader saw CIT Group's 5% notes due 2023 trading in a 99 to 99 3/8 bid context, while a second trader saw a wider range of 99 to par.

Activity was considerably slowed down from the heavy volume in the new credit seen on Friday, when over $778 million of those bonds had trading by late in the afternoon, including over $65 million of round-lot transactions of at least $1 million or more, a market source said.

In contrast, Monday's volume level in the credit was less than $10 million overall, including only a handful of round-lot trades.

A trader noted that much of the dealings in those notes came from high-grade accounts reaching for yield and going into the technically junk-rated (Ba3/BB-/BB) issue as a crossover play.

"They're selling Treasuries against it as a true hedge," he observed.

The New York-based commercial lender had priced $750 million of the notes at 99.031 on Thursday in a drive-by transaction, to yield 5 1/8%.

Among Thursday's other deals, a trader saw Parker Drilling Co.'s 7½% notes due 2020 off 1/8 of a point on the day, in a par to 100 1/8 bid context. A second saw the notes around par to 1001/4.

The Houston-based energy contract drilling company's $225 million issue had priced at par and stayed around that level on both late Thursday and Friday and then again into Monday.

Woodside Homes Co. LLC's 6¾% notes due 2021 were seen up 1/8 of a point on Monday, with a trader pegging the North Salt Lake, Utah-based homebuilder's $220 million issue at 101½ bid, 102 offered.

The bonds had priced Thursday at par after having been upsized from $200 million originally and had moved above the 101 bid mark on Friday

Gibson holds gains

Going back a little further, one of the traders saw Gibson Brands' 8 7/8% senior secured notes due 2018 at 102½ bid, 102 7/8 offered, opining that the Nashville-based guitar and piano manufacturer's deal "held up pretty good" after having priced this past Wednesday at par and then having jumped as high as the 103 area when it hit the aftermarket.

Gibson's offering was upsized to $225 million from an initial $200 million, although syndicate sources said that the deal was greatly oversubscribed.

Wednesday's offering from Irving, Texas-based art supplies retailer Michael Stores Inc. was heard to be trading at 101 bid, 101 3/8 offered.

That was up from the levels around par to 100½ at which those bonds had traded when they hit the aftermarket last week.

Michaels priced the $800 million issue of 7½%/8¼% senior PIK toggle notes due 2018 at par, after increasing the deal from an originally announced $700 million.

Gannett Co. Inc.'s 5 1/8% notes due 2018 were quoted Monday around 99 5/8 bid, 99 7/8 offered.

The McLean, Va.-based publisher of USA Today and other newspapers priced $600 million of those bonds in a quick-to-market transaction on Wednesday, after upsizing it from $500 million originally.

The notes priced at 98.566 to yield 5 3/8%

Market seen quiet

Apart from activity in the new deals, a trader called Monday's overall market "very quiet. Summer Mondays and Fridays are always quiet and situational, especially coming up to the months' end."

Market participants also observed the dampening effect that this week's Federal Open Market Committee meeting was having on activity in the financial markets generally and in Junkbondland in particular.

Investors were cautious, waiting to see whether the Fed would have anything concrete to say about the timing of its planned winding down of its quantitative easing monetary stimulus program when the policy committee meeting concludes on Wednesday.

Market signs remain mixed

Statistical junk market performance indicators were mixed for a third consecutive session on Monday.

The Markit Series 20 CDX North American High Yield index lost 3/8 of a point to close at 105 3/8 bid, 105½ offered, after having risen by 9/32 of a point on Friday, its second straight gain after three straight losses.

The KDP High Yield Daily index saw its fifth consecutive loss on Monday, slipping by 14 basis points to end at 73.80, after having backtracked by 16 bps on Friday. Its yield rose by 5 bps to finish at 5.99%, its fourth straight increase. On Friday, it had risen by 5 bps.

But the widely followed Merrill Lynch High Yield Master II index finished on the upside on Monday, breaking a three-session losing streak, as it gained 0.34%. On Friday, it was down by 0.068%.

Monday's gain lifted the index's year-to-date return to 3.501% from Friday's close at 3.466%.

The return was down from its peak level for the year so far of 5.835%, recorded on May 9, though up solidly from its 2013 low point of 0.384%, set on June 25.

© 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.