Burger King, Ally lead $5.62 billion session; bonds softer despite equity gain; Toys firms

By Paul A. Harris and Stephanie N. Rotondo

Portland, Ore., Sept. 24 – A roaring Wednesday session in the new issue market saw seven issuers bring a combined nine tranches of dollar-denominated junk to raise an overall total of $5.62 billion.

Burger King Worldwide alone accounted for 40% of the day’s proceeds with a $2.25 billion issue of 6% 7.5-year second-lien senior secured notes.

Other issuers included Ally Financial Inc. with $1 billion of notes in two tranches and Aercap Holdings NV with $800 million of 5% seven-year notes.

Abengoa SA priced a €500 million equivalent offering of five-year “green” notes, the inaugural offering of green high-yield bonds from a European issuer.

Meanwhile, high-yield bond prices remained under pressure despite a gain in the equity markets.

“A lot of stuff was down today,” one trader said. “[Things] definitely feel better for sale.”

“There were not a ton of winners today,” another trader said.

Market indicators were mixed on the day.

The KDP High Yield index fell to 72.57, with a 5.49% yield, from 72.77, with a 5.43% yield.

However, the CDX Markit Series 22 index held steady at 106½ bid, 106 5/8.

In the secondary space, Toys ‘R’ Us Inc.’s debt was topical after the company announced it will redeem its 7 3/8% notes due 2016. The bonds were mostly better on the day.

Elsewhere, iHeart Communications Inc., formerly known as Clear Channel Communications, continued to be weak, as it has been since the company reported quarterly results.

The mining sector as a whole was also on the softer side, though on no fresh news.

Burger King sells $2.25 billion

Burger King Worldwide priced a $2.25 billion issue of 7.5-year second-lien senior secured notes (Caa1/B-/) at par to yield 6%.

The yield printed at the wide end of the 5¾% to 6% yield talk.

The deal widened out while it was in the market, sources say.

Heading into Wednesday, there was speculation that it would price wide of talk.

“In the end they got it done within talk, and I think everyone was pleased to see that happen,” a sellside source said.

Wells Fargo Securities LLC was the left bookrunner for the merger deal. J.P. Morgan Securities LLC and BofA Merrill Lynch were the joint bookrunners.

Ally Financial drives by

Elsewhere, Ally Financial priced $1 billion of senior notes (B1/BB/BB) in two tranches.

A $300 million tranche of 3¼% three-year notes priced at 99.646 to yield 3 3/8%. The yield printed at the tight end of the 3 3/8% to 3½% yield talk.

A $700 million tranche of 5 1/8% 10-year notes priced at 98.085 to yield 5 3/8%. The yield printed at the tight end of the 5 3/8% to 5½% yield talk.

Citigroup Global Markets, Deutsche Bank Securities Inc., Goldman Sachs & Co. and Morgan Stanley & Co. LLC were the joint bookrunners for the debt refinancing deal.

Aercap seven-year bullet

Aercap Holdings priced an $800 million issue of non-callable seven-year senior notes (Ba2/BB+) at par to yield 5%.

The yield printed on top of yield talk.

A proposed tranche of five-year notes was withdrawn, and the proceeds were shifted to the seven-year notes tranche.

JPMorgan, RBC Capital Markets and Morgan Stanley were the joint bookrunners.

The deal came with investment-grade covenants.

The Amsterdam-based aircraft leasing company plans to use the proceeds for general corporate purposes.

Tenet 4.5-year deal

Tenet Healthcare Corp. priced a $500 million issue of non-callable 4.5-year senior notes (B3/CCC+) at par to yield 5½%.

The yield printed on top of yield talk.

BofA Merrill Lynch, Barclays, Wells Fargo, Citigroup, SunTrust Robinson Humphrey, JPMorgan and Goldman Sachs were the joint bookrunners for the general corporate purposes deal.

FLY Leasing two-part deal

FLY Leasing Ltd. priced a $400 million two-part offering of senior notes (B2/BB/BBB-) in a Wednesday transaction that saw both tranches resized, with $25 million of proceeds shifted to the new seven-year notes tranche from the add-on tranche.

An upsized $325 million tranche of new seven-year notes priced at par to yield 6 3/8%. The tranche was upsized from $300 million. The yield printed on top of yield talk.

A downsized $75 million add-on to its 6¾% senior notes due Dec. 15, 2020 priced at 104.75 to yield 5.824%. The tranche was downsized from $100 million. The reoffer price came at the cheap end of the 104.75 to 105 price talk.

Jefferies was the left bookrunner. Citigroup, Deutsche Bank and RBC were the joint bookrunners.

The Dublin-based aircraft lessor plans to use the proceeds for general corporate purposes, including the acquisition of future aircraft.

Tembec secured deal

Tembec Industries Inc. priced a $375 million issue of senior secured notes due Dec. 15, 2019 (B3/B-) at par to yield 9%.

The yield printed 25 basis points beyond the wide end of the 8½% to 8¾% yield talk.

Deutsche Bank was the left bookrunner for the debt refinancing deal. RBC was the joint bookrunner.

Abengoa ‘green’ deal

Abengoa priced a €500 million equivalent offering of non-callable five-year “green” notes (expected ratings B2/B/B+).

It included a $300 million tranche of notes that priced at par to yield 6½% and a €265 million tranche of notes that priced at par to yield 5½%.

The deal represents the inaugural offering of green high-yield bonds from a European issuer.

The notes were offered to eligible traditional high-yield investors as well as dedicated socially responsible investment buyers who have a specific mandate or portfolio for buying green bonds, according to a company news release.

Global coordinator and joint physical bookrunner HSBC will bill and deliver for the euro-denominated notes. Joint physical bookrunner BofA Merrill Lynch will bill and deliver for the dollar-denominated notes. Credit Agricole CIB is also a joint physical bookrunner.

The Seville, Spain-based conglomerate plans to use the proceeds to finance eligible green projects that meet specified environmental and social criteria.

Abengoa has operations in energy, telecommunications, transportation and the environment.

Funds tracking positive

Wednesday's big new issue session came as many market participants were away from the office in observance of Rosh Hashanah.

“People seemed to see a window open up, and they took advantage,” a syndicate official explained well after the Wednesday close.

Meanwhile, the fund flows picture for the dedicated high-yield funds has been on track for a positive weekly report, according to a trader.

Despite negative numbers for Tuesday, the most recent day for which information was available, the funds have seen $725 million of inflows for the week to Tuesday's close, the trader said.

Those numbers factor in $87 million of outflows from exchange-traded funds on Tuesday and $40 million of outflows from actively managed funds.

Recent deals active

RSP Permian Inc.’s $500 million of 6 5/8% notes due 2022 were deemed the “most active” bond of the day by one trader.

He said the bonds were holding steady around par 5/8.

In other recently priced deals, General Motors Financial Co., Inc.’s 3 1/8% notes due 2017, a $750 million deal from Monday, were also unchanged at par, though the $1.25 billion of 4 3/8% notes due 2021 were slightly weaker at par 1/8.

Toys ‘R’ Us calls debt

Late Tuesday, Wayne, N.J.-based Toys ‘R’ Us announced that it will redeem its $350 million of 7 3/8% senior secured notes due 2016 on Oct. 24.

Come Wednesday, the name was being actively traded.

One trader said the 7 3/8% notes put on 1¼ points to close at par ¼, with about $30 million bonds changing hands. Another $40 million “or so” of the 10 3/8% notes due 2017 moved, with the trader calling the paper up a deuce at 83.

The trader also saw the 7 3/8% notes due 2018 ending around 68½, on about $20 million traded.

Another trader also placed the 2016 maturity at “par-ish and a quarter.” He said “the other [issues] were pretty active” as well. But he said the bonds were down, though they had recovered from their lows around 81 to close around 83.

The trader said the 2016 notes were trading up to around the call price, 101.844 plus accrued interest, as there was “some risk of the deal actually getting done.”

Toys ‘R’ Us also said Tuesday that it was seeking up to $1.38 billion of new secured term loans. Part of the proceeds from the new financing will fund the redemption.

Elsewhere in the world of retail, Gymboree Corp.’s 9 1/8% notes due 2018 were seen off a quarter-point at 31¾.

iHeart remains pressured

iHeart Communications’ debt was once again trending downward, according to traders.

One trader said the 14% notes due 2021 were “down another point” at 95¼, while the 10% notes due 2018 declined half a point to 87½.

Another trader quoted the 14% notes at 95 bid, 95½ offered, which was weaker. He also saw the $250 million tap of the 9% notes due 2022 lower at par ¼ bid, par ½ offered.

That add-on came Monday at 101. Proceeds are being used to prepay the company’s term loans B and C.

Coal, mining decline

Mining companies, whether they be coal or other commodities, have been sliding for a few weeks as concerns about demand for coal and steel have risen.

However, there has been very little credit-specific news to move names around.

A trader saw MolyCorp Inc.’s 10% notes due 2020 falling “just about 5 points” to 75, a level echoed at another desk.

The first trader also noted that Cliffs Natural Resources Inc.’s paper “fell off a cliff,” seeing the 4.8% notes due 2020 weaken 2½ points to 83¼. The 5.9% notes due 2020 dropped 2 points to 89½, and the 6¼% notes due 2040 declined 1½ points to 77.

But Quicksilver Resources Inc.’s 7 1/8% notes due 2016 “had a nice rebound,” a trader said, pegging the notes at 42, a 2-point gain day over day.

In the coal arena, Walter Energy Inc.’s 9½% notes due 2019 were deemed unchanged at two desks, with both sources seeing the bonds with a 91 handle.

Alpha Natural Resources Inc.’s 6¼% notes due 2021 “bounced a little bit” as well, a trader said. He placed the debt at 61¾, up a quarter-point.

But Arch Coal Inc.’s 7% notes due 2019 followed the sector’s latest downward trend, sliding 4 points in a single trade to end around 58½.

Nortel notches down

A trader said Nortel Networks Corp.’s 10¾% notes due 2016 were weaker as the company’s bankruptcy court case wound down. He saw the issue at 13½.

The Canadian and U.S. bankruptcy courts have been hearing closing arguments this week via video link. The final arguments are centered around how to divvy up $7.3 billion of remaining assets.

The now defunct telecommunications company has been under Chapter 11 protection since January 2009.

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