Reynolds, Toll help post-holiday junk primary reopen with $2.37 billion bang; secondary quiet

By Paul Deckelman and Paul A. Harris

New York, Nov. 12 - It was back to business after the long Veterans Day holiday weekend in Junkbondland on Tuesday, and the high-yield primary roared back to life with a vengeance.

Syndicate sources said that by the time the dust had settled, some $2.37 billion of new junk-rated, dollar-denominated paper from domestic or industrialized-country borrowers had priced - the market's biggest day in more than a month since the $5.6 billion that priced back on Oct. 8.

And while all of the paper sold that day was attributable to just one deal - Deutsche Telekom AG's five-tranche re-marketing of bonds from its T-Mobile USA, Inc. subsidiary - Tuesday's action was considerably more broadly based, with six issuers bringing a total of seven tranches of junk bonds to market, all in quickly shopped drive-by transactions.

The day's biggest deal came from food and beverage packaging producer Reynolds Group Holdings Ltd., which sold $650 million of three-year notes via a pair of financing subsidiaries; those notes were heard to have firmed solidly when they hit the aftermarket.

Homebuilder Toll Brothers Inc. did an upsized $600 million two-part deal via a financing subsidiary, although that offering appeared too late in the session for any kind of secondary dealings.

Media company IAC/InterActive Corp. brought in a $500 million issue of five-year notes, which stayed right near their pricing level.

Familiar telecom name Level 3 Communications Inc. priced a $200 million five-year floating-rate note deal via a financing subsidiary; those bonds moved up just a little when they were freed to trade.

And there was a pair of add-on offerings to existing tranches of notes: an upsized $200 million of 2021 paper from oil and natural gas operator Bonanza Creek Energy, Inc. and an upsized $110 million of 2020 notes from business services provider MDC Partners Inc. The Bonanza Creek bonds were quoted higher in the aftermarket.

Traders said that investors' main focus was the day's slate of new deals, producing little activity in paper that priced last week or in established issues with news out such as DISH Network Corp. or NRG Energy Inc.

Statistical market-performance measures turned lower across the board after having been mixed for the previous four sessions.

Reynolds' three-year deal

Issuers put up big numbers on Tuesday, as players took their places following the three-day Veterans Day holiday weekend in the United States.

Six dollar-denominated issuers raised a total of $2.37 billion with a combined seven tranches.

Reynolds Group priced a $650 million issue of three-year senior notes (Caa2/CCC+) at par to yield 5 5/8%.

The yield printed at the tight end of yield talk in the 5¾% area.

Credit Suisse was the sole bookrunner for the debt refinancing drive-by deal.

Toll Brothers upsizes

In a deal that was transacted on the investment-grade desk, Toll Brothers Finance Corp. priced an upsized $600 million amount of non-callable senior notes (Ba1/BB+/BBB-) in two tranches.

The deal, which was upsized from $500 million, included a $350 million tranche of 4% notes due Dec. 31, 2018 that priced at 99.995 to yield 4%. The yield printed at the tight end of yield talk that was set in the 4 1/8% area; initial guidance was in the 4 3/8% area.

In addition, Toll Brothers priced a $250 million tranche of 5 5/8% notes due Jan. 15, 2024 at 99.985 to yield 5 5/8%. The yield printed at the wide end of the 5½% to 5 5/8% yield talk; initial guidance was in the 5 5/8% area.

Active bookrunner Citigroup will bill and deliver for the quick-to-market acquisition financing deal. Deutsche Bank Securities Inc., RBS Securities and SunTrust Robinson Humphrey were also active bookrunners.

IAC comes mid-talk

IAC (InterActiveCorp) priced a drive-by $500 million issue of five-year senior notes (Ba1/BB+) at par to yield 4 7/8%, in the middle of the 4¾% to 5% yield talk.

JP Morgan, Goldman Sachs, BofA Merrill Lynch and BNP were the joint bookrunners.

The New York-based media and internet company plans to use the proceeds for general corporate purposes, which may include share repurchases and acquisitions.

Level 3's five-year floaters

Level 3 Financing, Inc. priced a $300 million issue of floating-rate senior notes due Jan. 15, 2018 (B3/CCC+) at par to yield six-month Libor plus 350 basis points.

The Libor spread came at the tight end of the 350 to 375 bps spread talk.

Citigroup was the left bookrunner for the drive-by. BofA Merrill Lynch, Morgan Stanley, Credit Suisse, Jeffries and JP Morgan were the joint bookrunners.

The Broomfield, Colo.-based provider of fiber-based communications services plans to use the proceeds to repay all of its senior floating-rate notes due 2015.

Bonanza Creek taps 6¾% notes

Bonanza Creek Energy, Inc. priced an upsized $200 million add-on to its 6¾% senior notes due April 15, 2021 (B3/B-) at 104½ to yield 5.769%.

The reoffer price came on top of price talk.

Wells Fargo was the left bookrunner for the quick-to-market deal.

JP Morgan, KeyBanc, RBC and BMO were the joint bookrunners.

The Denver-based independent energy company plans to use the proceeds for general corporate purposes, including capital expenditures.

MDC at the rich end

In another Tuesday add-on transaction, MDC Partners Inc. priced an upsized $110 million tap of its 6¾% senior notes due 2020 (B3/B-) at 103¾ to yield 5.766%.

The deal was upsized from $100 million.

The reoffer price came at the rich end of the 103¼ to 103¾ price talk.

JP Morgan and Goldman Sachs were the joint bookrunners for the general corporate purposes deal.

Appvion sets 8½% talk

There were also deal announcements on Tuesday in the United States and Europe.

Both transactions are coming on a very short timeline and are expected to clear before Wednesday's close.

Appvion, Inc. talked its $250 million offering of 6.5-year second-lien senior secured notes to yield in the 8½% area.

The roadshow, which opened in New York on Tuesday, moves to Boston on Wednesday, and then is scheduled to wrap up later on Wednesday, with pricing expected thereafter.

Barclays is the lead left bookrunner for the debt refinancing deal. Jefferies is the joint bookrunner. Fifth Third is the co-manager.

Hertz talks €425 million bullet

Hertz Holdings Netherlands BV talked a €425 million offering of non-callable senior notes due 2018 (B2/B) to yield 4¼% to 4½%.

The books closed at the close of business on Tuesday for investors in the United States, and are scheduled to close on Wednesday morning for investors in Europe.

Joint bookrunner Barclays will bill and deliver for the debt refinancing. Credit Agricole, Deutsche Bank, JPMorgan, Natixis and Wells Fargo are also joint bookrunners.

Reynolds on the rise

In the secondary arena, traders saw the new Reynolds Group 5 5/8% notes due 2016 posting solid gains when they moved into the aftermarket.

The Auckland, N.Z.-based manufacturer of packaging products for food and beverages, including its iconic Reynolds Wrap aluminum foil, priced its bonds via a pair of subsidiaries, Beverage Packaging Holdings (Luxembourg) II SA and Beverage Packaging Holdings II Issuer Inc.

After pricing at par, the bonds moved up to 101¼ bid, 102 offered, a trader said, while a second pegged them at 101 bid, 101 ½ offered.

"Clearly, there was some demand there," one of the traders noted.

Existing Reynolds bonds busy

At the same time the company's existing 5¾% notes due 2020 were among the most active of the day, with over $15 million traded, according to a market source who saw the bonds ending at 101½ bid, down ½ point on the day.

"It doesn't surprise me" that the bonds would trade actively, another trader added.

Other existing Reynolds bonds were somewhat less traded. The company's 9% notes due 2019 gained ¼ point to 106¼ bid on volume of over $6 million. Its 9 7/8% notes due 2019 and 8¼% notes due 2021 were each seen ending down about ¼ point on around $4 million of dealings, at around the 110 bid and 103½ bid levels, respectively.

Level 3 up a little

Elsewhere among the day's deals, a trader saw Level 3's new floating-rate notes due 2018 at 100¼ bid, 100½ offered.

Other traders saw a similar trajectory for those notes, which had priced at par. One located them at 100¼ bid, 100 3/8 offered, while yet another quoted them having firmed a little to 100½ bid, 101 offered.

In contrast with the Reynolds 5¾% notes, there was not much activity going on in Level 3's existing paper.

A market source saw its 9 3/8% notes due 2019 down ¼ point at 112¼ on volume of over $3 million, while its 10% notes due 2018 eased by around 3/16 point, at just under the 107 bid mark, with around $2 million changing hands.

Bonanza Creek paper better

Bonanza Creek Energy's 6¾% notes due 2021 were quoted at firmer levels after the company priced its upsized add-on deal at 1041/2.

While one trader saw the bonds right around there in the aftermarket, a second quoted them in a 104½ to 105½ context. A third trader saw the paper get as good as 105 bid, 105½ offered.

There was only slight activity in IAC's new 4 7/8% notes due 2018, with a trader locating them at 100¼ bid, up slightly from their par issue price.

And owing to the lateness of the hour at which they priced, traders saw no immediate aftermarket dealings in the new deals from Toll Brothers, a Horsham, Pa.-based builder of luxury homes, and from MDC Partners, a New York-based provider of business technology, marketing communications and data analytics services.

A trader suggested that Toll "might have been run off the I-G desks, so you wouldn't even see that till tomorrow."

All drive-by, all the time

A trader noted that of the six deals that came to market on Tuesday, "all of them were drive-bys," opportunistically timed and quickly shopped around in a matter of hours.

"Announce 'em between 7 and 9 [a.m. ET], then price 'em, mostly between 4 and 5 [p.m. ET], so that way, nobody can re-trade 'em, and tomorrow, you can forget you did it," another trader said ironically.

Despite the higher levels seen on some of the new bonds, he added, "it seems like there's hardly any enthusiasm for these new deals."

And traders said that there was little or no activity going on in any of the new deals that had priced last week; the only one seen trading in any kind of volume was R.R. Donnelley & Sons Co.'s 6½% notes due 2023. A market source saw over $7 million of the bonds having changed hands, finishing around the par bid level, which he called up ¼ point on the day.

The Chicago-based commercial printer and communications solutions company priced $350 million of the notes at par in a quick-to-market deal last Wednesday. While they had initially gotten as good as around a 100 5/8 bid 101 offered level, by the end of the week, they were being quoted as low as 99¾ bid.

Market signs turn negative

Overall, statistical junk-market performance indicators were lower across the board on Tuesday after having been mixed over the previous four sessions.

The Markit Series 21 CDX North American High Yield index posted its second straight loss, dropping by 9/32 point to end at 106 5/16 bid, 106 7/16 offered.

While the junk bond market, along with other debt markets in the United States, was closed on Monday in observance of Veterans Day, Markit on Monday did publish its index, which showed a 1/32 decline, although there was very little real trading actually going on. On Friday, the index had gained 13/32 point.

The KDP High Yield Daily index suffered its eighth straight loss Tuesday, plunging by 16 basis points to end at 74.25. The index was not published on Monday but did drop by 4 bps on Friday.

Its yield rose by 6 bps for a second consecutive session on Tuesday, finishing at 5.77%.

The widely followed Merrill Lynch High Yield Master II index meantime lost 0.104% on Tuesday. Despite the holiday, the index was published on Monday, when it rose by 0.058%. On Friday, it had posted its first loss after two straight gains, easing by 0.333%.

The latest loss lowered its year-to-date return to 5.964%, down from 6.074% on Monday, 6.012% on Friday, and 6.367% on Thursday, its peak level for 2013 so far. Tuesday's finish marked the index's first time back below the psychologically significant 6% marker since Oct. 23, when it went home at 5.938%.

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