T-Mobile, Sabine Pass megadeals drive by; calendar builds; ServiceMaster gyrates on spinoff plans

By Paul Deckelman and Paul A. Harris

New York, Nov. 18 - After weeks of absence, the megadeals returned to Junkbondland on Monday in a big way.

Two issuers - T-Mobile US, Inc. and Cheniere Energy Partners, LP - each came to market with quickly shopped super-sized bond offerings, although traders said they priced too late in the day for any kind of aftermarket action.

T-Mobile USA Inc., a subsidiary of the number four U.S. wireless operator, did a $2 billion two-part transaction consisting of 8.25- and 10.25-year notes, with each tranche sized at $1 billion.

Meanwhile, liquid natural gas company Cheniere's Sabine Pass Liquefaction, LLC unit priced $1 billion of 8.25-year secured paper.

They represented the first deals of $1 billion or more since Oct. 30, when First Data Corp. priced a $1 billion add-on to an existing series of notes, and Oct. 31, when Kinder Morgan, Inc. came to market with a pair of $750 million bond issues that totaled $1.5 billion of new paper.

T-Mobile and Sabine Pass were the only junk deals to price during the session.

However, syndicate sources said several other prospective new issues hit the radar screens, from Brand Energy & Infrastructure Services, Inc. and from Canada's Tervita Corp.

Away from the primary sphere, traders saw another mostly bland and unexciting day, although one or two did note the heavy trading in ServiceMaster Co.'s bonds, which have gyrated around the past two sessions after the company released third-quarter results and announced plans to spin off its struggling TruGreen lawn care business.

Statistical measures of junk-market performance turned mixed on Monday, after having been higher across the board on Friday.

T-Mobile blowout

Two junk issuers raised a total of $3 billion with a combined three tranches of notes on Monday.

T-Mobile USA priced $2 billion of senior notes (expected Ba3/confirmed BB) in two evenly sized tranches.

A $1 billion tranche of 8.25-year notes priced at par to yield 6 1/8%, at the tight end of the 6 1/8% to 6 3/8% yield talk.

In addition, a $1 billion tranche of 10.25-year notes priced at par to yield 6½%, on top of yield talk that had the 10.25-year notes coming 3/8% behind the yield of the 8.25-year notes.

The deal was a blowout, according to a trader who spoke an hour before the final terms circulated and noted that the short-maturity tranche was shaping up and the tight end of talk.

JP Morgan, Credit Suisse, Deutsche Bank, Citigroup, Goldman Sachs, RBC and RBS were the joint bookrunners.

The Bellevue, Wash.-based wireless network operator plans to use the proceeds for general corporate purposes, including capital investments, enhancing its financial flexibility and opportunistically acquiring additional spectrum in private party transactions and/or government auctions.

Sabine Pass prices $1 billion

In a capital expenditures deal, Sabine Pass Liquefaction priced a $1 billion issue of non-callable senior secured notes due March 15, 2022 (Ba3/BB+) at par to yield 6¼%.

The yield printed at the wide end of yield talk that was set in the 6 1/8% area.

Morgan Stanley was the structuring agent. Mizuho, RBC, SG, HSBC, Credit Suisse, Lloyds, Mitsubishi, Scotia, Credit Agricole, ING, Banca IMI, Standard Chartered, JP Morgan and SMBC were the bookrunners.

Elsewhere, in a transaction that was executed on the investment-grade desk, TRW Automotive Inc. priced a $400 million issue of split-rated 4.45% notes (Ba1/BBB-) at a 181 basis points spread to Treasuries.

The notes came at a roffer price of 99.774 to yield 4.478%.

Brand starts $550 million

The Monday session saw a buildup of the active new issue calendar with the announcements of two roadshows from dollar-denominated issuers.

Brand Energy & Infrastructure, the successor to Bullseye Merger Sub, Inc., plans to price a $550 million offering of senior notes due 2021 (expected ratings Caa1/CCC+) on Thursday.

The deal kicked off at a Monday investor lunch in New York.

Morgan Stanley, Citigroup, Goldman Sachs, UBS, HSBC, ING, Natixis, RBS, SG and SunTrust are the joint bookrunners for the LBO deal.

Tervita starts roadshow

Tervita began a roadshow on Monday for a $325 million offering of 4.25-year senior notes (existing ratings Caa2/CCC).

The deal is set to price this week.

RBC is the left bookrunner for the debt refinancing. Deutsche Bank, Goldman Sachs and TD are the joint bookrunners.

U.S. Concrete sets talk

U.S. Concrete Inc. talked its $200 million offering of seven-year senior secured notes (Caa1/B) to yield 9% to 9¼%.

The deal is set to price on Tuesday.

J.P. Morgan is the bookrunner.

Elsewhere, the Gateway Casinos & Entertainment Ltd. could price its C$220 million offering of second-priority senior secured notes due 2020 as early as Tuesday.

Although the official price talk has yet to surface, the deal has been guided in a low 8% yield context, according to a trader.

TD, BMO, Morgan Stanley, SunTrust are the active joint bookrunners.

Brakes Bros and Grainger

A couple of sterling-denominated deals surface on Monday.

Both are coming from England-based issuers, are sized at £200 million and are being led by Barclays.

Brakes Bros Ltd. began a roadshow in London on Monday for its £200 million offering of five-year senior secured notes (expected ratings B3/B-).

Joint bookrunner Barclays will bill and deliver for the debt refinancing. HSBC is also a joint bookrunner.

Also Grainger plc began a roadshow in London on Monday for its £200 million offering of non-callable seven-year guaranteed secured notes.

Barclays, HSBC, Lloyds TSB and Royal Bank of Scotland are the active bookrunners for the debt refinancing.

Royal Bank of Scotland will bill and deliver.

No immediate aftermarket

In the secondary market, traders saw no initial aftermarket dealings in either the new T-Mobile bonds or in Houston-based liquid natural gas operator Sabine Pass' 8.25-year notes, which did not price until late in the session.

"Those deals haven't come yet," a trader said late in the afternoon, "and that's pretty much the excitement on the day."

A second trader presciently predicted that "between 4:30 and 5 [p.m. ET] they'll price it.

"They don't want any accounts to go home early and they don't want to give any other firms [besides the underwriters] an opportunity to re-trade them, or give the accounts an option to sell them away from the lead if the lead wants to buy them."

He added, "They're going to wait until they can trade 'em without the rest of the universe being around."

Valeant holds most gains

Among the bonds that priced late last week, a trader saw Valeant Pharmaceuticals International Inc.'s 5 5/8% notes due 2021 at around 101 bid, 101¼ bid.

A second trader also pegged the Laval, Quebec-based specialty pharmaceuticals maker's new issue at that level, but called that a 1/2-point decline.

Yet a third trader saw the bonds at 100¾ bid, 101 1/8 offered, but cautioned that "that was just a quote - there was nothing really trading."

The company had priced $900 million of the notes at par on Friday in a quick-to-market transaction that upsized from $850 million originally."

CenturyLink stays up there

A trader said that CenturyLink Inc.'s 6¾% notes due 2023 were "wrapped around 102," while another trader said they were at 101¾ bid, up 1/8 of a point on the day.

The first trader said that perhaps $10 million of the bonds had traded, down from last week, when over $55 million of the notes had changed hands after they were priced at par on Thursday in a drive-by deal and another $33 million had moved on Friday.

The Monroe, La.-based telecommunications company's new paper had firmed smartly above the 101 bid level when it was freed for aftermarket dealings and continued to hold those lofty levels on Friday and gain on Monday.

However, yet another market source said that overall "volume was pretty spotty. I would not say there was a lot going on" in such recent deals as Valeant or CenturyLink.

As for any of the deals that had priced earlier last week - such names as Post Holdings, Inc., Reynolds Group Holdings Ltd, Level 3 Communications, Inc. or Toll Brothers Inc. - a trader dismissed them as "ancient history."

ServiceMaster surges

Away from the new deal realm, a trader said that ServiceMaster's 7% notes due 2020 "bounced back" after the Memphis-based provider of home maintenance and cleaning, extermination, lawn care and other types of services released an 8-K filing with the Securities and Exchange Commission in which it outlined its plans to largely divest itself of its underperforming TruGreen lawn care business via a spinoff.

"They talked about an IPO within a year, along with the spinoff of TruGreen," he noted. "That enabled the bonds to bounce 2 to 4 points, depending on whom you talked to."

He saw those bonds having come back up to around the 97 bid neighborhood from their lows around 93 or 94 on Friday.

"ServiceMaster is the volume leader," he said.

A market source at another desk said that by the close, at least $30 million of those bonds had changed hands, easily vaulting the credit to the top of the junk most-actives list. He saw the bonds up nearly 2 points on the day, at just under the 97 bid level.

"A bunch were trading," another trader observed

"They were trading with a 94 handle [on Friday], so those bonds were up maybe 3 points today."

He added, "Interestingly, the bonds were trading at 97 or 98 on Thursday. They opened up Friday [after the release Thursday of third-quarter preliminary results] trading down - 96, 951/2. And it looks like they were trading down at 94 by the end of the day.

"So all of the losses that they registered on Friday - it looked like they recouped much of what they lost, rallying back around 3 points today," the trader added.

Earnings, he said, "must have driven Friday's decline, but what they came out with today probably put some legs under it."

Monday's filing reiterated more prominently what the company had said in its 10-Q quarterly filing that was released on Thursday: ServiceMaster is planning to spin off TruGreen business through a tax-free, pro rata dividend to the stockholders of the parent company, with a target effective date of Dec. 31.

The company noted that over the past two years, "TruGreen's financial performance has declined substantially, in contrast to ServiceMaster's other business segments."

The company incurred about $1.6 billion total of impairment charges to TruGreen's goodwill and trade name - $913 million in 2012 and $673 million in the first nine months of this year.

Should it successfully jettison TruGreen, such a development "would accelerate a future public offering of Holdings [i.e., the parent company], the proceeds of which we currently expect to use primarily to reduce ServiceMaster's indebtedness."

The game plan, the company said, is to pursue an IPO within one year of the separation of TruGreen, subject to prevailing market and business conditions and regulatory review.

The filing projected that ServiceMaster's leverage ratio - defined as total indebtedness, less cash and cash equivalents, divided by Operating Performance - as of this coming Dec. 31, both before and after giving pro forma effect to the spinoff transaction, will be about 7.6 times.

Momentive movement seen

A market source said that Momentive Performance Materials' 8 7/8% notes due 2020 had gained ¼ of a point to go home at 104¾ bid.

However, a trader who saw the company's 11½% notes due 2016 declared that "stuff traded off - but the movement was more or less sideways." He saw the bonds go out in a 71-72 context.

Columbus, Ohio-based chemical maker Momentive reported third-quarter numbers last week, including net sales of $604 million versus $571 million in the prior-year period, and operating income of $7 million versus a year-earlier operating loss.

However, at the Gimme Credit independent research service, senior analyst Evan Mann remained wary, noting that those improvements were "primarily driven by the company's ongoing cost reduction efforts, not a rebound in underlying business fundamentals. Meanwhile, free cash flow (cash flow from operations less capital spending) remained in negative territory, total debt continued to inch higher, and while liquidity is adequate for now, it is less than robust."

Mann, who rates the company's bonds as "underperform," warned: "The slow EBITDA recovery is concerning, especially when combined with free cash flow shortfalls and uncomfortably high leverage." He predicted that the company would have to modify its capital structure over the intermediate term.

Less Caesars action seen

Caesars Entertainment's bonds dominated the junk/distressed most-actives lists on Friday, with its two tranches of 10% notes due 2018 issued by its predecessor entity, Harrah's Operating Co., accounting for over $90 million of volume.

But on Monday, a trader said, the Las Vegas-based gaming giant's notes were "not anywhere nearly as active as Friday."

He saw the bonds "maybe a smidge better," at around a 49 to 49½ bid context, calling that up ½ of a point at the most.

The company's 8½% notes due 2020 closed at 95¾ bid, little changed on the day, with turnover of around $8 million.

Market signs turn mixed

Overall, statistical junk-market performance indicators turned mixed on Monday, reverting to their default recent pattern.

On Friday, they had been higher across the board for the first time this month. The indicators had been mostly mixed going back to the end of October, with a lower session across the board here and there during that stretch.

The Markit Series 21 CDX North American High Yield index lost 7/32 of a point on Monday to end at 106 5/8 bid, 106¾ offered, breaking a three-session winning streak that had included Friday's gain of ¼ of a point.

But the KDP High Yield Daily index posted its second consecutive gain on Monday, rising by 7 basis points to close at 74.31. On Friday, it had jumped by 22 bps - its first gain after having suffered 10 straight losses before that.

The yield came in for a third straight session, declining by 2 bps for a second straight day to conclude at 5.74%.

The widely followed Merrill Lynch High Yield Master II index gained 0.196% ON Monday, its third straight gain. That followed Friday's 0.092% advance.

The gain raised the index's year-to-date return to 6.354% from Friday's finish at 6.146%. However, it remained down from last Thursday's finish at 6.367%, its peak level for 2013 so far.

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