Wynn, L Brands, Aviv bring drive-by deals; D.C. progress boosts market; funds up $489 million

By Paul Deckelman and Paul A. Harris

New York, Oct. 10 - The high-yield primary arena had a busy day on Thursday as a trio of opportunistically timed and quickly shopped drive-by offerings paced a $1.86 billion session.

The biggest was gaming operator Wynn Macau, Ltd.'s upsized $600 million tranche of eight-year notes.

Retailer L Brands, Inc. rang up $500 million of 10-year paper.

And real estate investment trust Aviv Healthcare Properties LP did $250 million of eight-year debt.

The day also saw a scheduled forward calendar deal from midstream oil and gas operator NGL Energy Partners LP, while U.S. Well Services, LLC priced a $46 million add-on to its existing 2017 secured notes.

Traders saw all of the new standalone deals having gained at least ½ point, and in some cases more, when they hit the aftermarket.

There was further brisk trading in the five issues of T-Mobile USA Inc. that the wireless provider's corporate parent, Deutsche Telekom AG, had remarketed on Tuesday. Those bonds had already firmed smartly when they began trading Wednesday and were heard to have moved up around another ½ point Thursday. While the volume on the various issues was easily the biggest on the day, it was still well below the surge of such paper that had traded on Wednesday.

Traders said the overall market had a more positive tone to it, helped by news reports indicating that there was some negotiating going on in Washington to break the government shutdown gridlock, while the Republicans floated a plan to avoid the possibility of a federal default on its obligations through a short-term increase in the U.S. debt limit.

Statistical market performance measures were accordingly firmer across the board Thursday after three straight mixed sessions.

Another indicator - the flows of money into and out of high-yield mutual funds and exchange-traded funds, considered a good gauge of overall Junkbondland liquidity trends - were reported on the plus side of the ledger for a fifth consecutive week.

Lipper funds gain $489 million

As Thursday's market activity was winding down, junk market participants familiar with the fund-flow statistics generated by AMG Data Services said that during the week ended Wednesday, $489 million more came into those funds than left them. Loan funds meanwhile saw an influx of $556 million.

It was the fifth consecutive gain in the junk funds reported by Arcata, Calif.-based AMG, a unit of the Lipper analytics division of Thomson Reuters Corp. The latest inflow followed the $238 million gain seen the week before, which ended Oct. 2.

During that five-week stretch - which also included inflows of $3.1 billion during the week ended Sept. 25, $1.40 billion in the week ended Sept. 18 and $632 million in the week ended Sept. 11 - net inflows have totaled about $5.85 billion, according to a Prospect News analysis of the fund-flow numbers.

For the year so far, inflows have now been seen in 25 weeks, against 16 weeks of outflows, according to the analysis, but cumulative flows for the year as a whole remain negative due to a sizable losing streak seen during May and June, which was prompted by investor worries over whether the Federal Reserve would end its accommodative monetary policy.

However, that year-to-date net outflow figure, which topped the $9 billion mark in late June, according to the analysis, has been steadily whittled down since then. The latest inflow brought it down further still to about $1.8 billion, according to the estimate.

Cumulative fund-flow estimates may be revised upward or downward or be rounded off and could include unannounced revisions and adjustments to figures from prior weeks.

The sustained flows of fresh cash into junk - and the mutual funds and ETFs represent but a small, though very observable and quantifiable percentage of the total amount of investor money coming into or leaving the roughly $1 trillion junk market - have been seen by analysts as a key catalyst behind the high-yield secondary sphere's strong performance last year versus other fixed-income asset classes and its record active new-deal pace, which ultimately produced some $327 billion of new dollar-denominated, junk-rated paper from domestic or industrialized-country issuers, according to data compiled by Prospect News.

It was also seen as one of the major drivers behind the robust patterns of primary activity and secondary strength that had continued for much of this year's first half before turning choppy over the past several months.

The recent run of consecutive net inflows coincided with the explosive expansion of junk primary activity seen last month, when over $47 billion of new paper priced, according to the Prospect News new-issuance data - the biggest September ever.

Wynn Macau drives by

A busy day in the high-yield primary market saw four issuers bring single-tranche deals and one issuer, U.S. Well Services, bring an add-on to raise a combined total of $1.86 billion.

Wynn Macau priced an upsized $600 million issue of eight-year senior notes (Ba2/BB) at par to yield 5¼%.

The deal was upsized from $500 million.

The yield printed at the wide end of the 5 1/8% to 5¼% yield talk.

J.P. Morgan Securities LLC and Deutsche Bank Securities Inc. were the joint global coordinators for the working capital and general corporate purposes deal. Bank of China Ltd. was the Asia coordinator. BNP Paribas, DBS Bank, ICBC and Scotia Capital were the joint bookrunners.

L Brands bullet deal

L Brands priced a $500 million issue of non-callable 10-year senior guaranteed notes (Ba1/BB+/BB+) at par to yield 5 5/8%, on top of yield talk.

BofA Merrill Lynch was the left bookrunner. Citigroup Global Markets and JPMorgan were the joint bookrunners.

Proceeds will be used to repay the company's 5¼% senior notes due in November 2014 at maturity and for general corporate purposes including repayment of the company's revolving credit facility, funding seasonal working capital, share repurchases and dividends.

NGL Energy upsizes

NGL Energy Partners launched and priced an upsized $450 million issue of eight-year senior notes (B2/BB-/BB-) at par to yield 6 7/8%.

The deal was upsized from $400 million.

The yield came 12.5 basis points beyond the wide end of yield talk that was set in the 6 7/8% area.

RBC Capital Markets was the left bookrunner for the debt refinancing deal. Deutsche Bank, PNC Capital Markets LLC, BofA Merrill Lynch, UBS Securities LLC and SunTrust Robinson Humphrey Inc. were the joint bookrunners.

Aviv at the tight end

Aviv Healthcare Properties and Aviv Healthcare Capital Corp. priced a $250 million issue of eight-year senior notes (Ba3/BB) at par to yield 6%.

The yield printed at the tight end of the 6% to 6¼% yield talk.

BofA Merrill Lynch was the left bookrunner. Morgan Stanley & Co. LLC, Goldman Sachs & Co. and Citigroup were the joint bookrunners.

The Chicago-based real estate investment trust plans to use the proceeds to repay its revolver in full and for general corporate purposes including the potential acquisition of additional properties.

REN prices €400 million

In quick-to-market action out of Europe, Portuguese power company Redes Energeticas Nacionais priced a €400 million issue of 4¾% seven-year notes (/BB+/) at a 305 bps spread to mid-swaps on Thursday.

The spread came at the tight end of the mid-swaps plus 305 bps to 310 bps spread talk. Initial guidance was mid-swaps plus 315 bps.

Caixa BI, ING, JPMorgan, Royal Bank of Scotland and SG CIB managed the sale.

The Lisbon-based utility plans to use the proceeds to strengthen its liquidity profile.

Xella at the tight end

Elsewhere, Germany's Xella HoldCo Finance SA priced a €200 million issue of five-year PIK toggle notes (B3/B-) at par to yield 9 1/8%.

The notes pay a cash coupon of 9 1/8%; the PIK coupon steps up 75 bps from that level to 9 7/8%.

The cash coupon came at the tight end of cash coupon talk that was set in the 9¼% area. Earlier guidance was 9½% to 9¾%.

Global coordinator Morgan Stanley will bill and deliver. Goldman Sachs was also a global coordinator.

BNP Paribas, Credit Agricole CIB and UniCredit were the joint bookrunners.

The Duisburg, Germany-based building materials manufacturer plans to use the proceeds to finance the acquisition of vendor loan notes from Haniel Group and to put cash on its balance sheet.

Day's deals move up

In the secondary market, traders saw generally firmer levels when the new bonds that priced during the session hit the aftermarket.

For instance, a trader saw Wynn Macau's quickly shopped offering of 5¼% notes due 2021trading at 100½ bid, 101½ offered. A second trader pegged the new bonds at 100¾ bid, 101¼ offered.

The issuer - which runs Las Vegas-based corporate parent Wynn Resorts, Ltd.'s two lucrative casinos in the Chinese gambling enclave of Macau - priced the notes at par.

Columbus, Ohio-based apparel retailer L Brands' quick-to-market 5 5/8% notes due 2023 traded up to 100½ bid, 101 offered, a market source said, while a second quoted those new notes having gotten as good as 100¾ bid, 101¼ offered, versus their par issue price.

Aviv Healthcare Properties' new 6% notes due 2021 were seen by a trader at 100¾ bid, 101¼ offered, up from their par issue price.

And Tulsa-based NGL Energy Partners' 6 7/8% notes due 2021 were seen going home at 100¾ bid, 101½ offered. The provider of transportation logistics and other midstream services to the U.S. oil and natural gas industry priced its upsized deal off the forward calendar at par.

T-Mobile stays busy

For a second consecutive session, T-Mobile USA was the most popular name in the junk arena, with very active trading in the five tranches of its debt that parent company Deutsche Telekom had remarketed on Tuesday.

A trader saw the Bellevue, Wash.-based No. 4 U.S. wireless services provider's issues - which had jumped by between 1½ point and 2 points on Wednesday in extremely heavy volume of over $600 million after having priced very late on Tuesday - up around ½ point from their Wednesday closing levels.

He said that they were given a boost "once there was news from Washington that they might be nudging the [debt ceiling default possibility] down the road for a couple of weeks." Ultimately, the bonds came in by around 1/8 point from their high levels for the day.

While Thursday's trading volume in those five credits was nowhere near what Wednesday had been, he estimated it at $145 million, "which is still impressive."

At another desk, a market source said that T-Mobile's 6.464% notes due 2019 moved up to a bid level around 104, up about ¾ point from their close on Wednesday. He estimated volume at mid-afternoon of over $30 million, making it the busiest junk bond of the day, although that paled in comparison to the more than $150 million that had changed hands on Wednesday around 103 bid, 103½ offered. Deutsche Telekom had priced $1.25 billion of those bonds late Tuesday at a reoffer price of 102, to yield 6.033%.

The market source saw T-Mobile's 6.836% notes due 2023 at 102½ bid on almost $30 million of turnover. On Wednesday, the bonds had traded up to around 102 bid, 102¼ from the 98 level at which the $600 million tranche - the only one of the five smaller than $1.25 billion - had priced on Tuesday to yield 7.128%. Volume had been $137 million.

T-Mobile's 6.542% notes due 2020 were seen trading at 103½ bid on Thursday; on Wednesday, they had been around 102¼ bid, 102¾ offered on volume of $123 million. Some $1.25 billion of those notes had been priced at par to yield 6.541%.

Its $1.25 billion of 6.731% notes due 2022 were seen going out at 102½ bid on Thursday on volume of almost $17 million after having traded Wednesday at 101½ bid, 102 offered on volume of $110 million. Those notes had priced at 99 to yield 6.887%.

And its 6.633% notes due 2021 traded up to 103 bid on Thursday on volume of over $16 million. That was up from 102 bid, 102½ offered on Wednesday and well up from the par level at which that $1.25 billion of paper had priced on Tuesday. Wednesday volume was over $130 million.

Germany-based communications giant Deutsche Telekom, which owns 72% of the American company, priced a total of $5.6 billion of those bonds, which it had received from T-Mobile as part of the complex financing arrangements for T-Mobile's acquisition via a reverse merger transaction earlier this year of smaller rival MetroPCS Wireless Inc.

D.C. progress has impact

Overall, a trader called Thursday's session "a pretty lackluster day, as everyone was awaiting for news from Washington."

The trader said "things moved up by about a half point. Everything traded up" once there were news reports that there would be talks later in the day at the White House on the budget and the government shutdown as well as news that the Republicans were offering a plan to delay any potential debt ceiling problems for six weeks via a small increase in the debt limit - with the time to then be used for talks on genuine cuts in federal spending.

Market indicators get better

That improvement was reflected in the behavior of the statistical junk-market performance indicators, which were higher across the board Thursday for the first time after three consecutive mixed sessions.

The Markit Series 21 CDX North American High Yield index saw its second straight gain as it rose by 29/32 point to end at 105 5/16 bid, 105 3/8 offered. It had risen by 9/32 point on Wednesday.

The KDP High Yield Daily index rose by 4 bps to end at 73.58, after having lost 6 bps on Wednesday. That loss had snapped a five-session winning streak.

Its yield came in by 1 bp to 6.06%, after having been unchanged on Wednesday and higher on Tuesday.

And the widely followed Merrill Lynch High Yield Master II index also got back on the winning track Thursday, rising by 0.147%; it had finished down by 0.017% on Wednesday, which was its first setback after six straight days of gains.

Thursday's comeback raised its year-to-date return to 4.484% from Wednesday's 4.331% finish.

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