Upsized Digicel mega-deal leads $3 billion-plus primary, new Axles active, Starz on tap

By Paul Deckelman and Paul A. Harris

New York, Sept. 5 - With the previously shut door to the high-yield new-issue market having been kicked open during Tuesday's session, borrowers with a pent-up need to do new bond deals came streaming in on Wednesday, creating a financing frenzy that resulted in more than $3 billion of new dollar-denominated, junk-rated deals pricing by the close.

It was the busiest new-issue day seen in Junkbondland in over three weeks, since Aug. 14, when $3.5 billion came to market in six tranches. Wednesday also saw a half-dozen dollar tranches.

The biggest deal of the day was the massively upsized $1.5 billion offering from Caribbean wireless provider Digicel Group Ltd. That deal - the first mega-deal sized offering since Continental Resources Inc.'s $1.2 billion issue back on Aug. 13 and the biggest junk transaction since Sprint Nextel Corp.'s $1.5 billion on Aug. 9 - was more than doubled in size from $700 million initially.

In descending size order, the market also saw pricings during the session from QEP Resources, Inc. ($650 million), Catalent Pharma Solutions, Inc. ($350 million), Carrizo Oil & Gas, Inc. ($300 million), Smurfit Kappa Acquisitions ($300 million) and Sally Holdings LLC ($150 million). There was also a euro-denominated pricing from German broadband operator Unitymedia GmbH.

Most of the new dollar-denominated issues were seen about even with their respective issue prices or up slightly when they hit the aftermarket, with only QEP really breaking out.

There meantime were heavy secondary dealings in Tuesday's new deal from American Axle Manufacturing Inc., though mostly around the same levels a little above issue where those bonds had priced.

Away from the issues which have actually priced, Nuveen Investments Inc. and Midstates Petroleum Co. Inc. put new deals on the forward calendar. Price talk emerged on Starz LLC/Starz Finance Corp.'s $500 million offering, which is expected to come to market on Thursday.

Traders said little was going on outside the new-deal realm.

Statistical indicators of market performance were mostly firmer on the day.

Strong deal executions

The primary market, which got off to a big post-Labor Day start on Tuesday, continued to roll on Wednesday.

In the dollar-denominated market half a dozen issuers, each one bringing a single tranche, raised a combined total of $3.26 billion.

The executions were notable.

Five of the six dollar-denominated tranches were upsized. Four of the six came at the tight end of yield talk. One came at the tight end of downwardly revised talk. And the remaining tranche price on top of talk.

Digicel massively upsizes

Jamaica's Digicel Group priced a massively upsized $1.5 billion issue of eight-year senior notes (Caa1//expected B-) at par to yield 8¼%.

The deal was upsized from $700 million.

The yield printed at the tight end of the 8¼% to 8½% yield talk.

Citigroup was the left bookrunner for the quick-to-market debt refinancing deal. J.P. Morgan, Credit Suisse, Barclays, Deutsche and Davy were the joint bookrunners.

QEP bullet deal

QEP Resources priced an upsized $650 million issue of non-callable 10.5-year senior notes (confirmed Ba1/existing BB+) at par to yield 5¼%.

The yield printed on top of yield talk. The amount was increased from $600 million.

J.P. Morgan, BMO, Deutsche Bank, Wells Fargo and Citigroup were the joint bookrunners for the quick-to-market acquisition financing deal.

Catalent upsizes

Catalent Pharma Solutions priced an upsized $350 million issue of six-year senior notes (Caa1/B) at par to yield 7 7/8%.

The yield printed at the tight end of yield talk that was set in the 8% area. The reoffer price came on top of price talk. Catalent raised the size from the original $250 million.

In addition, timing on the deal was moved ahead. It was originally expected to price on Friday.

Morgan Stanley, Deutsche Bank, Goldman Sachs, Jefferies and J.P. Morgan were the joint bookrunners for the debt refinancing deal.

Carrizo at the tight end

Carrizo Oil & Gas priced an upsized $300 million issue of eight-year senior notes (B3/B) at par to yield 7½%.

The yield printed at the tight end of the 7½% to 7¾% yield talk. The amount was increased from $250 million.

RBC, Wells Fargo and Credit Suisse were the joint bookrunners for the quick-to-market debt refinancing and general corporate purposes deal.

Smurfit cross-border deal

Smurfit Kappa priced a €200 million tranche and an upsized $300 million tranche of six-year senior secured notes (Ba2/BB/BB+) on Wednesday.

The €200 million tranche priced at par to yield 5 1/8%, 12.5 basis points below the tight end of the 5¼% to 5½% yield talk.

The upsized $300 million priced at par to yield 4 7/8%, at the tight end of the revised 4 7/8% to 5% yield talk; earlier yield talk was 5% to 5¼%. The tranche was uspsized from $250 million.

Timing on the deal was moved ahead. When the deal was announced the roadshow was set to continue into Thursday.

Citigroup will bill and deliver for the euro tranche. J.P. Morgan will bill and deliver for the dollar tranche.

Citigroup and J.P. Morgan were the global coordinators and joint bookrunners. Credit Agricole CIB, Credit Suisse, Deutsche Bank and RBS were also bookrunners.

The Dublin, Ireland-based producer of paper-based packaging plans to use the proceeds to repay its senior subordinated notes due 2015.

Sally Beauty taps 5¾% notes

Sally Holdings LLC and Sally Capital Inc. priced a $150 million-add-on to their 5¾% senior notes due June 1, 2022 (existing ratings Ba3/BB+) at 106.25.

The reoffer price, which came at the rich end of the 106 to 106.25 price talk, rendered a 4.772% yield to worst and a 4.932% yield to maturity.

Bank of America Merrill Lynch was bookrunner for the quick-to-market deal.

The Denton, Tex.-based specialty retailer plans to use the proceeds for general corporate purposes, which may include funding acquisitions, share repurchases or debt repayment.

The original $700 million issue priced at par on May 15, 2012.

Unitymedia upsizes euro deal

The euro-denominated market saw two issuers raise a combined €850, each one bringing a single tranche of notes.

In addition to the above-mentioned Smurfit Kappa deal, German cable operator Unitymedia priced an upsized €650 million issue of 10-year senior secured notes (Ba3/BB-) at par to yield 5½%.

The deal was upsized from €400 million

The yield printed at the tight end of price talk that was set in the 5 5/8% area.

Joint bookrunner Morgan Stanley will bill and deliver. Bank of America Merrill Lynch, Citigroup, Deutsche Bank and UBS were also joint bookrunners.

Proceeds will be used to refinance debt.

Starz sets price talk

Looking at upcoming deals, Starz, LLC and Starz Finance Corp. talked their debut high-yield issue, a $500 million offering of seven-year senior notes (Ba2/BB), with a yield in the 5¼% area on Wednesday.

The books close at 10 a.m. ET on Thursday, and the deal is set to price shortly after.

Joint physical bookrunner SunTrust will bill and deliver. Bank of America Merrill Lynch and Barclays are also joint physical bookrunners.

Midstates brings $550 million

The calendar continued to build on Wednesday.

Midstates Petroleum Co., Inc. and Midstates Petroleum Co., LLC plan to price a $550 million offering of eight-year senior notes late in the week ahead.

Bank of America Merrill Lynch, SunTrust, Goldman Sachs, Morgan Stanley, RBC, Citigroup, Natixis, RBS and SG are the joint bookrunners for the debt refinancing and acquisition financing deal.

Nuveen marketing $1.145 billion

Nuveen Investments is marketing $1.145 billion of senior notes (Caa2/CCC), in two tranches via an investor roadshow.

The deal is set to price during the week ahead.

It includes a $400 million tranche of five-year notes and a $745 million tranche of eight-year notes.

Deutsche Bank, Bank of America Merrill Lynch, Morgan Stanley, RBC, UBS and Wells Fargo are the joint bookrunners for the debt refinancing.

Quick gains for QEP

When QEP Resources' new 5¼% notes due 2023 were freed for secondary dealings, traders saw the Denver-based energy exploration and production company's quick-to-market new issue having firmed smartly in initial aftermarket dealings.

One trader saw the bonds in a bid range between 101 and 101 3/8, seeing the credit having traded "a couple of times around 101¼ bid."

At another shop, the bonds were seen up a point from their par issue price.

Other new deals firm

Among the day's other issues, Sally Holdings' fungible add-on to its 5¾% notes due 2022 was sitting pretty, with a trader quoting the Denton, Tex.-based beauty supply distributor's quickly shopped new deal at 107½ bid - well up from the 106.25 level at which that $150 million add-on had priced.

A second trader located the bonds in a 106¾ to 107 range, while yet another one quoted them at between 107 and 107½ bid.

One of the traders saw the new Digicel 8¼% notes due 2020 at bid levels between 100½ and 101. The Jamaica-based wireless service provider's $1.5 billion drive-by deal had priced at par.

He also noted that Carrizo Oil & Gas' 7½% notes due 2020 were circulating between 100½ and 101; the Houston-based energy E&P operator's $300 million deal had priced at par, after upsizing from $250 million.

And Smurfit Kappa Acquisitions' 4 7/8% senior secured notes due 2018 were seen by a trader to have emerged at around par bid, 100½ offered. The Irish packaging maker's $300 million issue, upsized from an originally announced $250 million, had priced at par, as part of a two-part deal that also featured a tranche of euro-denominated notes.

Lots of action in Axle

A market source said that by far the most actively traded junk issue was the new deal that priced on Tuesday from American Axle

More than $54 million of those 6 5/8% notes due 2022 had changed hands by mid-afternoon.

The source quoted the Detroit-based automotive drive train manufacturer's deal at 100 5/8 bid - about the level which those bonds had settled in at in initial aftermarket dealings on Tuesday, after the $550 million quick-to-market deal had priced at par.

At another desk, a trader quoted the new Axle bonds at 100½ bid, 100¾ offered, while a second had them as high as 100 5/8 bid, 101 1/8 offered going home.

Indicators mostly firm

Away from the new-deal arena, statistical indicators of junk market performance were mostly on the firm side on Wednesday, after having turned mixed on Thursday.

The Markit Group CDX North American Series 18 High Yield Index was unchanged on Wednesday at 98¼ bid, 98½ offered, after having gained 1/8 point on Tuesday, its second consecutive rise.

But the KDP High Yield Daily Index continued its recent choppy pattern, rising by 2 basis points to end at 73.91, after having eased by 2 bps on Tuesday.

Its yield came in by 2 bps, to 6.17%, after having risen by those same 2 bps on Tuesday.

The widely followed Merrill Lynch U.S. High Yield Master II Index meanwhile continued to pile on the gains.

It notched its 14th consecutive gain on Wednesday, rising by 0.079%, on top of Tuesday's 0.049% advance.

That lifted its year-to-date return to 10.655% - a new 2012 peak, eclipsing the old mark of 10.568% that had been set just the day before. The index is now at its highest level since the last session of 2010, when it closed out that year with a 15.19% return.

Its yield to worst meanwhile stood at 6.711%, down from Tuesday's 6.738% reading, while still above the low yield for the year - 6.678%, set last Thursday.

Nokia knocked around

A trader said that almost all of the day's focus was on trading in the new issues.

However, among the established bonds, one name which seemed notable on Wednesday was Finnish wireless telecommunications equipment manufacturer Nokia Corp. which saw its bonds stutter during the midweek session, after its widely-touted new product offering unveiling failed to wow the masses.

One trader said both of the company's issues dropped a point, the 5 3/8% notes due 2019 to 84½ and the 6 5/8% notes due 2039 at 80.

Another trader said there was "a fair amount of activity" in the 2019 maturity. He called the bonds "a little lower," trading at 84½ at the end of the day.

That compared to an 85-86 context on Tuesday.

A market source placed the turnover in the 2019 bonds at a brisk $25 million, making it one of the most actively traded junk issues, outside of the new American Axle deal. He pegged those bonds at 841/2.

Meantime, the 2039s were nowhere nearly as busy, having racked up only about $7 million of trading by mid-afternoon.

Nokia's New York Stock Exchange-traded shares nosedived by 45 cents, or 15.9%, to end at $2.38.

The company launched its two new smart phones - the Lumia 920 and 820 - powered by Microsoft's latest operating system on Wednesday.

But the company disappointed investors and consumers alike by failing to provide an actual release date, as well as the names of carriers that would be offering the devices.

The release could come under pressure if it comes around the same times as Apple's flashier new iPhone 5 or Google's new phones using its Android operating system.

Stephanie N. Rotondo contributed to this report

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