Upsized Regency drive-by, Transworld price amid better tone; Peabody bonds gain after numbers

By Paul Deckelman and Paul A. Harris

New York, July 22 – The high-yield primary sphere shook off the rust of two days’ inactivity on Tuesday in pricing two offerings totaling $1.13 billion, syndicate sources said – Junkbondland’s first dollar-denominated deals since last Thursday.

Regency Energy Partners LP was heard to have brought an upsized $700 million issue of 8.25-year bonds to market in a quickly shopped same-session transaction. Traders said that after pricing at a noticeable discount to par, the new bonds firmed smartly when they hit the aftermarket and were among the most heavily traded junk credits seen on Trace.

Business services provider Transworld Systems, Inc. priced $440 million of 7-year secured notes via Aston Escrow Corp. as part of the funding for Transworld’s pending buyout.

Among other recently priced deals, several tranches of American Energy-Permian Basin LLC’s deal from last week were among the more busily traded credits on Tuesday.

But perhaps the busiest junk bond was not a new deal at all, but familiar coal-mining credit Peabody Energy Corp. Its 2021 notes were especially heavily traded – as well as higher – following the company’s release of quarterly results.

Statistical measures of market performance turned mixed on Tuesday after having been lower across the board on Monday.

Regency, upsized and tight

The primary market appeared to regain its footing somewhat on Tuesday, trailing recent volatility stemming from news of selling and redemptions.

A pair of dollar-denominated tranches from two different issuers priced to generate a combined total of $1.13 billion of proceeds.

One of the two deals came as a drive-by that saw a big upsize and priced at the tight end of talk.

The deal came from co-issuers Regency Energy Partners LP and Regency Energy Finance Corp., which priced an upsized $700 million issue of 5% non-callable senior notes due Oct. 1, 2022 (Ba3/BB) at 99.158 to yield 5 1/8%.

The quick-to-market debt refinancing and general corporate purposes deal was upsized from $500 million.

The yield printed at the tight end of yield talk in the 5¼% area.

Joint bookrunner Barclays will bill and deliver. BBVA, Comerica, Deutsche Bank, Morgan Stanley, ABN, BNP, Fifth Third, Goldman Sachs and MUFG were also joint bookrunners.

Transworld comes wide

Elsewhere, Transworld Systems priced a $440 million issue of seven-year senior secured notes (B3/B) at par to yield 9½%.

The yield printed 75 basis points beyond the wide end of the 8½% to 8¾% yield talk and as much as 150 bps wide of the initial guidance in the 8% area, sources said.

The wide pricing reflected not only market volatility but challenges the buy side faced in sizing up the company's business, which involves bill-collecting efforts focused on delinquent student loans and medical-related debts, according to a trader from a mutual fund.

BofA Merrill Lynch, Credit Suisse, BMO, Macquarie and Nomura were the bookrunners for the acquisition financing.

Citgo talk is 6% to 6¼%

Looking to the Wednesday session, Citgo Petroleum Corp. talked its $650 million offering of eight-year senior secured notes (B1/BB-) to yield 6% to 6¼%.

Books closed late Tuesday, and the deal is set to price and allocate on Wednesday.

Deutsche Bank is the left bookrunner.

Pelzer prints at 7½%

In the European session, HP Pelzer Holding GmbH priced a €230 million issue of seven-year senior secured notes (//BB) at par to yield 7½%.

The yield printed at the wide end of the 7¼% to 7½% yield talk.

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

Proceeds will be used to refinance debt, for general corporate purposes and to fund the purchase of Adler SpA’s foreign subsidiaries.

Milan-based Adler acquired HP Pelzer in 2013.

The company manufactures acoustic and thermal components and systems for the automotive sector.

TMF taps two tranches

TMF Group Holding BV priced a €65 million two-part add-on transaction.

The Amsterdam-based company tapped two issues that were priced simultaneously in November 2012.

Tuesday's transaction included a €45 million add-on to the Euribor plus 537.5 bps senior secured floating-rate notes due Dec. 1, 2018 (B1/B), which were priced at 101. The reoffer price came at the rich end of the 100.75 to 101 price talk.

In addition, TMF priced a €20 million add-on to its 9 7/8% senior notes due Dec. 1, 2019 (Caa1/CCC+) at 108.5 to yield 7.837%. The reoffer price came at the rich end of the 108.5 to 108.75 price talk.

Goldman Sachs International was the sole bookrunner.

Proceeds will be used to fund the purchase price of the acquisition of KCS Ltd., provide working capital and for general corporate purposes.

Winoa postpones

Winoa Group postponed its €260 million offering of six-year senior secured notes (B2/B-) due to market conditions.

The Le Cheylas, France-based producer and distributor of steel abrasive products had planned to use the proceeds to refinance debt.

Deutsche Bank and KKR were the underwriters.

Regency paper pops

In the secondary market, traders saw the new Regency Energy Partners’ 5% notes due in October of 2022 having firmed smartly, after the Dallas-based mid-continent natural gas and natural gas liquids master limited partnership’s solidly upsized deal price at a discount of 99.158.

“They traded right up,” one market source said, pegging the new bonds at 100¼ to 100½, “so they kind of popped.”

A second trader also saw them having risen to that same 100¼ to 100½ context, calling the rise “a nice pop.”

At another desk, a market source saw the bonds having gotten up to 100 3/8 bid. He said volume of over $27 million easily put it among the day’s most active issues.

Transworld trades off

The day’s other pricing – from Transworld Systems, a Santa Rosa, Calif.-based business services provider – generated only a fraction of the interest seen in the new Regency offering.

A trader saw those 9½% senior secured notes due 2021 at 99¼ bid, 100¼ offered, down from their par issue price.

American Energy busy

A trader said that among recent issues, American Energy-Permian Basin’s multi-tranche issue was active.

He saw its 7 1/8% notes due in November of 2020 trade right at par, calling that up 1 full point on the day. Volume in the credit was a brisk $16 million.

He saw the same company’s 7 3/8% notes due in November of 2021 were also trading around par bid, although he called that little changed. Volume was over $10 million.

Another trader called the 7 1/8s up 1/8 point in a 99 3/8 to 99 7/8 context.

He said the 7 3/8s were unchanged, wrapped around par.

American Energy-Permian Basin – an Oklahoma City-based oil and natural gas operator- had priced $650 million of the 7 1/8s and $600 million of the 7 3/8s last Wednesday, both at par, along with $350 million floating-rate notes due 2019 that came to market at 650 bps over the Euribor lending rate.

All three tranches had initially firmed solidly, but they gave up all of those gains during Thursday’s big market slide and were just now getting back to around their respective issue prices.

Peabody powers up on earnings

Away from the new-deal arena, Peabody Energy’s 6¼% notes due 2021were the most active in the purely junk space, a market source said, seeing the notes up by 2 points to 97¾ bid on volume of over $30 million.

Beside that round-lot activity, there was also a considerable number of smaller odd-lot trades in the St. Louis-based coal company’s paper.

Its 6½% notes due 2020 gained 7/8 point to end at 98 3/8 bid, although volume was only about $4 million or $5 million. Here, too, there were considerable odd-lot dealings.

Peabody’s bonds improved after the company reported a somewhat smaller-than-expected second-quarter loss, helped by better-than-expected results from its Australian metallurgical coal operations.

Market edges higher

A trader said that overall, the high-yield market was “still trying to recover from the beat-down it took last week.”

He said it “really definitely made a little bit of comeback today,” helped by better stocks.

“We kind of got back yesterday’s [Monday’s] losses.”

Despite what he called “a mixed bag” in terms of earnings, “the high-yield market had a little bit better tone than it has had in the last few days.”

But he said that after the severe losses seen last week in terms of exchange-traded funds selling paper to meet redemptions, “it’s still struggling to come back. It may take a couple of days.”

Market indicators turn mixed

Statistical indicators of junk market performance turned mixed on Tuesday after having been lower on Monday. That continued a recent pattern of choppiness, as the indicators had also been mixed on Friday, following Thursday’s decisive downside move.

The KDP High Yield Daily index eased by 2 bps on Tuesday to end at 74.05, its sixth straight loss. It had been down by 8 bps on Monday, which had followed slides of 12 bps on Friday and 17 bps on Thursday.

The index has now been down in 13 sessions out of the last 14 – and was just unchanged on the one session when it was not actually lower.

Its yield, meantime, rose by 1 bp on Monday to 5.27%, its fifth straight widening. It had risen by 4 bps on both Friday and Monday after having ballooned upward by 10 bps on Thursday.

The Markit CDX Series 22 index was up by 7/32 point on Tuesday to close at 108 1/16 bid, 108 1/8 offered, after having lost 9/32 point on Monday, part of a recent choppy pattern that saw a 9/32 point gain on Friday after having swooned by 23/32 on Thursday.

The widely followed Merrill Lynch High Yield Master II index posted its first gain after five straight losses, rising by 0.107% on Tuesday. It had been down by 0.04% on Monday and off by 0.166% on Friday, on top of Thursday’s 0.183% retreat.

Tuesday’s gain raised its year-to-date return back over the psychologically significant 5% mark, to 5.049%, after having dipped below it on Friday for the first time since early June, and again on Monday, when it had closed at 4.937%. However, Tuesday’s close still remained well down from the 5.751% return recorded on July 7, the peak level so far for 2014.

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