RJS megadeal is sole pricing, moves up; Allegiant active; Constellation firms on numbers

By Paul Deckelman and Paul A. Harris

New York, July 2 – Things quieted down in Junkbondland on Wednesday as participants started getting ready for the upcoming market holiday on Friday and the three-day July 4th weekend.

High-yield syndicate sources saw just one deal price during the session – but it was a big one, a $1.25 billion issue of five-year notes from Maryland-based power producer RJS Power Holdings LLC. Traders saw the new bonds quoted higher in the aftermarket.

That one megadeal-sized offering stood in contrast to Tuesday’s action, when four issuers each brought one tranche to market, totaling some $2.35 billion of new dollar-denominated, fully junk-rated paper.

Those four deals were all seen having firmed from their respective issue prices, including Hub International Ltd. and Puma Energy, neither of which had been seen on Tuesday immediately after their pricings, as well as AmSurg Corp. and Jaguar Holding Co. I., which were both seen having moved up.

Among recently priced issues, there was a fair amount of activity in Allegiant Travel Co.’s five-year notes that priced back on June 20, although nobody had seen any fresh news out on the Las Vegas-based low-cost airline carrier.

Away from the new deals, Constellation Brands, Inc.’s paper traded at firmer levels – though on not much volume – after the beer, wine and spirits producer and importer reported sharply better quarterly results from a year ago, helped greatly by its multi-billion-dollar purchase last year of the sole U.S. marketing rights to the wildly popular Mexican beers Corona and Modelo.

Statistical market-performance indicators were seen mixed on Wednesday after having headed higher on Tuesday.

RJS Power inside of talk

With activity winding down in the dollar-denominated high-yield bond market ahead of Thursday's early close and the three-day Independence Day weekend, Wednesday's quiet session saw just one dollar deal transacted.

RJS Power Holdings priced a $1.25 billion issue of five-year senior notes (B1/BB-) at par to yield 5 1/8%.

The yield printed 12.5 basis points inside of the tight end of the 5¼% to 5½% yield talk.

J.P. Morgan, Citigroup, Goldman Sachs and Morgan Stanley were the joint bookrunners for the debt refinancing deal.

Talking the euro deals

Meanwhile the Thursday session will open to a full docket of deals in the European market.

Information on several transactions surfaced on Wednesday for deals expected to price Thursday.

Iglo Group set price talk for its €500 million two-part offering of six-year senior secured notes (expected ratings B2/B+).

A €350 million tranche of floating-rate notes, which come with one year of call protection, is talked with a 450 bps to 475 bps spread to Euribor.

A €150 million tranche of fixed-rate notes, which come with 1.5 years of call protection, is talked to yield in the 5¼% area.

Joint bookrunner Credit Suisse will bill and deliver. Deutsche Bank and Nomura are also joint bookrunners.

Jarden Corp. talked its €300 million offering of non-callable seven-year senior notes (expected ratings Ba3/BB) to yield 4%.

Joint bookrunner Barclays will bill and deliver. JPMorgan, Credit Agricole, Credit Suisse and Wells Fargo are also joint bookrunners.

Titan Cement Co. SA talked its €300 million offering of non-callable five-year senior notes (/expected BB/) to yield 4¼% to 4½%.

Global coordinator and joint bookrunner HSBC will bill and deliver. JPMorgan and SG CIB also joint bookrunners and global coordinators. Alpha Bank, Eurobank and NBG Securities are also joint bookrunners.

And IMO Car Wash talked its €240 million offering of five-year senior secured notes (expected ratings B2/B) to yield in the 6¾% area, in line with initial guidance in the high 6% range.

JPMorgan is the bookrunner.

The European high-yield market may see two or three more weeks of steady news, sources say. However activity is almost certain to diminish with the approach of August, they added.

RJS notes on the rise

In the secondary market, a trader saw that RJS Power Holdings’ 5 1/8% notes due 2019 had moved up to 101 bid, 101¼ offered from their par issue price, calling the power generator’s new paper “up nicely.”

Tuesday deals all firmer

Traders saw the deals that had come to market during Tuesday’s session at levels above their respective issue prices.

One trader saw Puma Energy’s 6¾% notes due 2021 at 103¾ bid, 104¾ offered.

The Singapore-based midstream and downstream oil and natural gas company priced a $250 million add-on to those notes on Tuesday via its Puma International Financing SA subsidiary, with the bonds coming to market at 103.125 to yield 6.16%.

The notes had not been seen in aftermarket trading on Tuesday.

Another no-show from Tuesday’s aftermarket quoted around on Wednesday was Hub International’s 8 1/8%/8 7/8% senior contingent cash-pay notes due 2019.

The Chicago-based insurance company had priced that quickly shopped $380 million issue at 99.75 to yield 8.186% via its Hub Holdings, LLC and Hub Holdings Finance, Inc. subsidiaries.

On Wednesday, a trader saw those bonds at 101 bid.

AmSurg’s 5 5/8% notes due 2022 were seen by several traders hovering around the 102 bid area.

The Nashville-based health-care facilities operator had priced $1.1 billion of those bonds at par on Tuesday after upsizing the issue from an originally announced $880 million, and they had traded about in a 101½ to 102 context when they were freed for secondary dealings.

Jaguar Holding’s new 9 3/8%/10 1/8% PIK toggle notes were seen about unchanged on Wednesday in a 102½ to 103½ context.

The parent company of Wilmington, N.C.-based drug and biotech company Pharmaceutical Product Development LLC had priced a $600 million add-on to the existing bonds in a quick-to-market transaction Tuesday at 101.5 to yield 8.621%.

They had moved up to a 102 and above context when freed for initial aftermarket dealings.

One of the market sources said of those bonds, and those of the other issuers, “they’re just staying right where they came last night – no great shakes.”

He added that “it was so quiet out there that a lot of this stuff wasn’t even quoted.”

Allegiant is active

Going back a little further, traders saw some activity in Allegiant Travel’s new 5½% notes due 2019.

One was quoting them as having gotten as good as 103¾ bid on relatively busy volume of over $8 million by mid-afternoon.

However, a second source said later in the day that the bonds had lost some 2¼ points from those lofty levels, leaving them around 101½ bid.

At yet another desk, a market participant said the bonds had been “all over the map” between 101½ and 104½. The final round-lot trades of the day went off at about 102 5/8, which he called down 5/8 point on the day, with volume of over $11 million. There was also busy odd-lot activity in the credit after the last round-lot transaction, taking the bonds back up to 104½ by day’s end.

Allegiant had priced its $300 million offering at par back on June 20. They had traded in a 101¾ to 102¼ context in initial aftermarket dealings and had pretty much stayed in that neighborhood subsequently.

There was no fresh news seen out on Wednesday about the low-cost air carrier.

Constellation up after numbers

Away from the new or recent pricings, a trader called Constellation Brands’ bonds better on the session – though on light volume – after the Victor, N.Y.-based producer, importer and distributor reported significantly better results in its 2015 fiscal first quarter ended May 31 versus year-ago levels.

The major difference was all of the money Constellation made after acquiring sole U.S. marketing rights to Mexican beers Corona and Modelo, ranked as the Number-One and Number-Three imported beers in the U.S. on a sales basis (see related story elsewhere in this issue).

Constellation’s 4¼% notes due 2023 were seen by a market source having gained ½ point to end at 100 5/8 bid on volume of over $5 million.

Its 7¼% notes due 2017 and 6% notes due 2022 each gained ¼ point on volume of over $3 million to end at 114¾ bid and 112¾ bid, respectively.

However, another trader said the bonds were largely unchanged, opining that “I’m sure [the favorable earnings news] was pretty much priced in.”

Isle improvement continues

For a third straight session, bonds of Isle of Capri Casinos Inc. were seen moving up.

The company’s 8 7/8% notes due 2020 gained ½ point to end at 110½, though on only about $1 million or $2 million of turnover.

Those bonds had risen by nearly2 points on Monday afternoon to 109¼ bid on volume of over $5 million on new reports that the St. Louis-based regional gaming operator had resumed its on-again, off-again talks with would-be suitor Gaming and Leisure Properties Inc. on a possible sale of Isle. Deutsche Bank subsequently suggested that Gaming and Leisure might be willing to pay as much as $15.82 per share for Isle.

On Tuesday, the bonds rose another ¾ point to end at 110 on $3 million of volume.

The company’s other issue, its 5 7/8% notes due 2021, was seen busier, and considerably better, with a trader seeing them up 2½ points at 106¼ bid on volume of over $6 million.

Those bonds had gained 1¾ points Monday on volume of over $6 million, ending at 102 7/8 bid, with most of the activity coming in the last minutes of the trading day when the Gaming and Leisure Properties news first broke.

Things picked up on Tuesday right where they had left off on Monday evening. The bonds added on another point to end at around 103 7/8 on volume of over $5 million, setting the scene for Wednesday’s big jump.

Isle of Capri’s Nasdaq-traded shares, which had risen by 3.74% on Tuesday on better than three times the usual volume, jumped by another $1.07, or 12.05%, on Wednesday to end at $9.95. Volume of 1.9 million shares was over 13 times the norm.

Another slow day

However, a trader said that generally “it was very slow out there, very slow.”

He called the overall tone in the market “pretty firm again,” but said that most of the day’s activity was “odds and ends – more of a smoke-and-mirrors type of a day. I wouldn’t say anything stellar.”

And he predicted that Thursday is going to be even quieter, with most participants expected to beat an early retreat ahead of Friday’s full market shutdown.

“It will be a non-event.”

Market indicators turn mixed

Statistical indicators of junk market performance meanwhile turned mixed on Wednesday after having been higher on Tuesday, which in turn had followed a mixed session on Monday.

The KDP High Yield Daily index eased by 3 bps Wednesday to end at 74.95 after having gained 2 bps on Tuesday to break a string of two consecutive sessions on Friday and Monday.

Its yield was unchanged at 4.94% after having come in by 1 bp on Tuesday.

The Markit CDX Series 22 index was off by 1/32 point on Wednesday to close at 108 7/8 bid, 108 15/16 offered. It had gained ¼ point on Tuesday.

The widely followed Merrill Lynch High Yield Master II index posted its third straight gain Wednesday, edging up by 0.002% on top of Tuesday’s 0.031% advance.

Wednesday’s rise lifted the index’s year-to-date return to 5.675% from 5.673% on Tuesday, although it remains below its peak level for the year, 5.727%, recorded last Tuesday.

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