Caesars prices $1.7 billion, gains in trading; Jonah stays firm; Valeant up on asset sale

By Paul A. Harris and Stephanie N. Rotondo

Seattle, Sept. 29 – It was quite a day in the high-yield bond market on Friday, despite it being the last day of the month and the third quarter.

In the primary, Caesars Entertainment Corp. brought $1.7 billion of eight-year 5¼% notes. A trader said there were “tons of trades” in the new issue, which closed the day above par.

Also pricing Friday was a $300 million issue of seven-year senior notes from FLY Leasing Ltd.

The two deals wrapped a month which saw $33.82 billion of new paper, defying some expectationsfor a sparse primary.

Meanwhile from Thursday’s business, Jonah Energy LLC’s $600 million of 7¼% notes due 2025 also saw “heavy volume” Friday, according to a trader.

That issue continued to trade above par.

As for secondary dealings, Valeant Pharmaceuticals International Inc.’s debt was getting a boost after the company announced it had sold its iNova Pharmaceuticals business.

Proceeds from the asset sale will be used to pay down debt.

Overall, the market had a firm tone as the month wound down.

The KDP High Yield Index firmed to 72.37 from 72.35 previously. The yield tightened to 5.13% from 5.17%.

The CDX North American Series 28 Index was a touch higher at 107.475 bid, 107.555 offered.

Caesars at the wide end

In Friday’s primary market Caesars Entertainment priced a $1.7 billion issue of eight-year senior notes (B3/B-) at par to yield 5¼%.

The yield printed at the wide end of the 5% to 5¼% yield talk. Initial guidance was in the low 5% area, sources said.

When the books closed on Thursday evening the deal was said to have generated $2 billion of interest among investors, a trader noted.

JP Morgan, BofA Merrill Lynch, Citigroup, Credit Suisse, Deutsche Bank, Morgan Stanley, Barclays, Goldman Sachs, Macquarie, Nomura, SunTrust, UBS and Wells Fargo were the joint bookrunners for the debt refinancing deal.

FLY prices tight

FLY Leasing priced a $300 million issue of seven-year senior notes (B1/BB-) at par to yield 5¼%.

The yield printed at the tight end of the 5¼% to 5 3/8% yield talk, which had come in line with initial guidance in the low 5% area.

Jefferies LLC was the sole bookrunner for the debt refinancing deal.

September issuance in line

With Friday’s business in the book September 2017 issuance totaled $33.82 billion in 59 junk-rated, dollar-denominated tranches.

Amid some speculation during the run-up to Labor Day that this September’s issuance could be anemic, possibly below $20 billion – one forecast was for a $15 billion September – those who looked for average September new issue business turned out to be more or less right.

September 2017 came in line with, if slightly below, the $37.15 billion average September issuance over the preceding half decade, a period encompassing the phenomenal crash in crude oil prices in the second half of 2014.

Deal volume of 59 tranches hit that five-year average right on the nose.

The biggest September, in terms of dollar amount of issuance in that time frame, was September 2013 which came in at $46.75 billion.

The heaviest September, in terms of deal volume, was 2012’s 86 September tranches.

The lowest dollar amount, $20.62 billion, came in September 2015, the first September following the big swoop in oil prices which unfolded between mid-June 2014, when a barrel of West Texas Intermediate crude was going for $115, and early December 2014, when the barrel price was around $70.

September 2015 also saw the most anemic deal volume, with just 23 tranches clearing the market during that month.

The week ahead

The new issue market ought to remain robust in the week ahead, syndicate bankers said late in the past week.

The present economic and financial conditions appear to support a healthy primary market.

And accounts seem to have cash to put to work, an investment banker said on Friday.

The drive-by window, which represented 61% of September issuance, should remain open in October, sources say.

Heading into the weekend the active forward calendar showed just one deal in the market.

West Corp. was scheduled to roadshow its $1.35 billion offering of eight-year senior notes (B3/CCC+/B-) in San Francisco on Friday.

The deal is set to price on Tuesday.

Official price talk is expected on Monday.

As the market awaits that official talk, initial guidance was in the low 8% area, a trader said.

Also in the week ahead, Time Inc. is expected to launch $300 million of eight-year senior notes (B2/B).

Pricing discussions are in a very early stage, nevertheless the early whisper has the deal coming in the mid-to-high 6% area, a trader said.

Citigroup is expected to be on the left for the debt refinancing deal.

Vigorous start seen in Europe

The European primary market figures to get October off to a vigorous start, London-based sellside sources say.

Three to four deals totaling €1 billion to €1.5 billion could be in the offing in the week ahead, a senior syndicate official said.

However it is in the following week, the week beginning Oct. 9, that the euro market should really get rolling, sources say.

That week could see €10 billion clear the market, the syndicate official said.

A chunk of that amount could come from a single issuer.

Wind Tre SpA is expected to show up as early as mid-October with new dollar- and euro-denominated bonds and loans as it undertakes to refinance €10 billion equivalent of debt, sources say.

Bookrunners have yet to step forward.

Asset managers’ big outflow

Daily cash flows for dedicated high-yield bond funds were mixed on Thursday, the most recent session for which data was available at press time, according to a bond trader.

High-yield ETFs saw $194 million of inflows on the day.

However asset managers, representing the actively managed funds, sustained a big $690 million of outflows on Thursday, the trader said.

Dedicated bank loan accounts, meanwhile, were positive on the day, with $105 million of inflows on Thursday.

New issues in play

Caesars Entertainment’s new $1.7 billion of 5¼% notes experienced heavy trading on Friday, according to a trader.

The trader said about $150 million of the bonds traded during the month-end session.

He called the bonds up at par ¾.

Meanwhile, Jonah Energy’s 7¼% notes – a deal priced Thursday – were also deemed active and better.

A trader placed the notes at 101 1/8.

The issue size was increased from $500 million and the yield printed at the tight end of the 7¼% to 7½% yield talk.

J.P. Morgan Securities LLC was the lead.

The San Antonio-based oil and gas producer plans to use the proceeds to repay bank debt.

Valeant up on asset sale

Valeant Pharmaceuticals announced on Friday that it had wrapped the sale of its iNova Pharmaceuticals unit to a joint venture made up of Pacific Equity Partners and Carlyle Group for $930 million in cash.

The company plans to use proceeds from the deal to pay down its term loan under a senior credit facility.

On the news, the bonds were “very active,” a trader said.

He called the 6 3/8% notes due 2020 up over a point at par ¼, while the 5 3/8% notes due 2020 inched up over ½ point to par.

The 5 7/8% notes due 2023 were meantime up 1½ points at 88¼, according to the trader.

A second trader pegged the 5 7/8% notes in an 88¼ to 88½ context, which he said was “up a little bit.”

Rite Aid rallies

After trading off on Thursday, Rite Aid Corp.’s bonds rebounded in Friday trading.

One trader said the 6 1/8% notes due 2023 firmed “almost a point” to 92½.

The trader noted that there was “heavy volume” in the issue.

Another trader also deemed the debt “higher,” placing the 6 1/8% notes at 97¼ bid, 97½ offered.

“They’ve been active post-earnings,” he said.

On Thursday, Rite Aid reported its fiscal second-quarter results, showing a loss per share of a penny on revenue of $7.7 billion.

Analysts polled by Thomson Reuters had forecast a loss of 1 cent per share, but had projected revenue of $7.84 billion.

Same-store sales for the quarter fell 3.4%.

The market saw those results as disappointing and sent the company’s debt and equity downwards on Thursday.

Its 6 1/8% notes due 2023 were the most actively traded bonds of that session, with over $135 million changing hands. They finished around 96 5/8 bid, down 1 point on the day.

The company’s 7.7% bonds due 2027 did even worse, plunging by almost 5 points to 89 3/8 bid on volume of over $13 million.

Murray, FirstEnergy power up

Murray Energy Corp.’s 11¼% notes due 2021 got a boost on Friday after the Department of Energy released a proposal aimed at preventing additional premature closures of certain power generating facilities.

“Basically it’s a proposal that would be good for coal generating plants,” a trader said.

He called the bonds “very active” in the wake of the news, seeing the paper rising “over 3 points” to trade “around 60.”

The trader also noted that FirstEnergy Corp.’s 6.05% notes due 2021 were “up a bunch,” trading “in a wide range” in the low to mid 40s.

FirstEnergy is a power producer that happens to be one of Murray Energy’s largest customers.

At another desk, a trader deemed Murray’s debt up 3¼ points at 60.

Murray Energy is a St. Clairsville, Ohio-based coal mining company.

Fresh Market flat

Fresh Market Inc.’s 9¾% notes due 2023 “had a big bounce back,” a trader said Friday.

However, while the bonds were trading up intraday, they closed flat at 60½, the trader said.

Another trader pegged the notes at around 61.

“They had poor earnings a couple days ago,” the trader said, adding that the company is private and therefore the results are not available to the public.

S&P reacted to the recent results on Friday by lowering the grocer’s corporate credit rating to CCC- from B-.

The senior notes were also lowered to CCC- from B-.

The ratings agency said its action were due to the weak operating results, as well as the bonds’ low trading prices, which increases the probability of a distressed exchange.

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