Avis drive-by, Tervita price; new BreitBurn jumps in heavy trading; busy Caesars on the slide

By Paul Deckelman and Paul A. Harris

New York, Nov. 20 - Avis Budget Group, Inc. drove by the high-yield market on Wednesday, doing a quickly shopped $250 million of new four-year notes.

Primaryside sources noted that the number-two U.S. car-rental giant's new deal was an unusual floating-rate transaction, rather than the kind of fixed-rate paper usually seen in Junkbondland - although another well-known issuer, Level 3 Communications, Inc., also recently did a floater.

The day's other issue was a scheduled forward calendar offering from Canadian environmental services company Tervita Corp., which priced a slightly upsized $335 million of five-year notes.

The latter bonds, which got done fairly early in the session, were seen by traders having firmed smartly after pricing at a deep discount to par. Meanwhile, the Avis paper, which also came at a discount, moved up slightly in the aftermarket.

But the star performer of the day was BreitBurn Energy Partners LP's new 8.5-year deal, which priced on Tuesday as an add-on to its existing bonds; the oil and natural gas company's paper was among the most actively traded credits on the day and moved up solidly on the session.

There was also fairly brisk trading in T-Mobile USA Inc.'s big two-part issue, which had completely dominated Tuesday's market activity. However, volume levels in the wireless provider's new deal were nowhere near the several hundred millions of dollars in the two issues that had traded Tuesday.

Apart from issues that have actually priced, the junk forward calendar continued to build, with prospective new deals seen coming from Kratos Defense & Security Solutions, Inc. and Wesco International, Inc., while price talk emerged on Brand Energy & Infrastructure Services, Inc.'s eight-year offering, which is expected to come to market on Thursday.

Away from the new-deal realm, traders saw considerable activity in Caesars Entertainment Corp. bonds, which lost several points on the session.

Statistical market-performance indicators were mixed for a third consecutive session.

Tervita at the tight end

Two issuers finished single-tranche transactions - one a drive-by, the other not - raising a combined total of $571 million, during the news-heavy Wednesday primary market session.

Tervita Corp. launched and priced an upsized $335 million issue of 10 7/8% senior notes (Caa2/CCC) at 96.684 to yield 11 7/8%.

The deal was upsized from $325 million.

The yield printed at the tight end of yield talk set in the 12% area. The reoffer price came toward the rich end of the four to five points of discount talk.

RBC was the left bookrunner. Deutsche Bank, Goldman Sachs and TD were the joint bookrunners.

The Calgary, Alta.-based environmental management services provider for the oil and gas industry plans to use the proceeds to fund the tender for its 11% senior notes due 2015. The additional proceeds resulting from the $10 million upsizing of the issue will be used to fund the original issue discount.

Avis drives by

Avis Budget Car Rental, LLC and Avis Budget Finance, Inc. priced a $250 million issue of three-month Libor plus 275 basis points senior floating-rate senior notes due Dec. 1, 2017 (expected ratings B2/B/) at 98.75.

The reoffer price came at the rich end of price talk in the 98½ area.

Citigroup was the sole bookrunner for the debt refinancing and general corporate purposes deal.

Brand Energy price talk

Brand Energy & Infrastructure Services, Inc. talked its $550 million offering of senior notes due 2021 (Caa1/CCC+) to yield 8% to 8¼%.

Books close at noon ET Thursday, and the deal is set to price thereafter.

Morgan Stanley, Citigroup, Goldman Sachs, UBS, HSBC, ING, Natixis, RBS, SG and SunTrust are the joint bookrunners for the Rule 144A for life notes offer.

Kratos investor call Thursday

Kratos Defense & Security Solutions, Inc. will participate in a conference call with investors at 12:30 p.m. ET on Thursday to discuss its proposed $675 million offering of senior secured second-lien notes due 2020 (expected ratings B3/B), which are set to price on Friday afternoon.

Wells Fargo is the left bookrunner for the debt refinancing deal. SunTrust is the joint bookrunner.

Wesco eight-year deal

Wesco Distribution, Inc., a subsidiary of Wesco International, Inc., plans to price a $400 million offering of eight-year senior notes (B1//) on Thursday.

BofA Merrill Lynch and Wells Fargo are the joint bookrunners for the debt refinancing.

Brakes Bros at the tight end

The European high-yield primary market generated a steady news flow on Wednesday.

Brakes Bros Ltd. priced a £200 million issue of five-year senior secured notes (B3/B-) at par to yield 7 1/8%.

The yield printed at the tight end of yield talk set in the 7¼% area.

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

Allied Irish's €500 million

Allied Irish Banks, plc priced a €500 million issue of three-year senior notes (Ba3/BB/BBB) at a 235-bps spread to mid-swaps.

The reoffer price was 99.7, and the notes yield 2.981%.

It's unlikely that the deal saw much high-yield play, a London-based sellside source said.

Joint bookrunner Deutsche Bank was the stabilization coordinator. Goldman Sachs, JP Morgan, Morgan Stanley and Nomura International Plc were also joint bookrunners.

Tank & Rast starts Thursday

Germany-based Tank & Rast GmbH Motorway plans to start a roadshow on Thursday in London for a €460 million offering of seven-year senior second-lien notes.

Global coordinator Deutsche Bank will bill and deliver. Barclays is also a global coordinator. Commerzbank, Credit Suisse, ING, Nomura, RBC and UniCredit are joint bookrunners.

Proceeds will be used to refinance debt incurred in the acquisition of the company by an infrastructure investment vehicle owned by Deutsche Bank from Terra Firma Capital Partners in 2007.

The financing also includes €1.4 billion in bank loans and €250 million in PIK debt.

Grainger talks £200 million

England-based Grainger plc talked its £200 million offering of non-callable seven-year guaranteed secured notes (/BB+/BB+).

Books close at 5 a.m. ET on Thursday.

The deal size will not grow.

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

Gateway Casinos talks deal

In the Canadian dollar-denominated market, Gateway Casinos & Entertainment Ltd. talked a C$200 million offering of seven-year second-priority senior secured notes to yield in the 8½% area.

The deal is expected to price on Thursday.

The deal size was announced at up to C$220 million; the C$200 million lower amount reflects an upsizing of the concurrent term loan A.

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

Tervita trades up

In the secondary market, one of the big winners on the day was Tervita's 10 7/8% notes due 2018.

A trader saw those notes at 99¾ bid, 100½ offered, while a second pegged the bonds at 99½ bid, par offered.

Yet another trader quoted them bid as high as 1001/4, noting that the paper was up almost 4 points from its 96.684 issue price. But he said that he had not seen any offered levels.

In commenting on how the bonds got priced so cheaply - even with an attractively fat coupon - he opined that "they got held up - by that I mean everybody said they weren't playing them - then they came, and played."

Avis seen up

Wednesday's other deal - from financing units of Parsippany, N.J.-based car-rental colossus Avis - was seen by a trader at 99 bid, par offered, up from the floating-rate notes' 98¾ issue price.

Another trader, who did not see any dealings in the bonds himself, suggested that "any trading happened at Citigroup," which was the sole bookrunner for the deal.

"I don't know how broad the [aftermarket] distribution was," he added.

BreitBurn issue is hot

But the big name of the day, at least among the new or recently priced deals, was BreitBurn Energy Partners' 7 7/8% notes due 2022.

A trader said they are at 101¾ bid, 102 offered, while a second said that the bonds got as good as 102 1/8 bid, before coming off that peak level to trade for most of the day between 101 and 101 7/8 bid. He saw over $40 million of the notes changing hands, shooting the credit right to the top of the junk Most Actives list for the day.

A market source estimated that the bonds were ending at 101 7/8 bid, up 5/8 point from Tuesday's close.

The Los Angeles-based oil and natural gas acquisition, exploitation and development company, along with its BreitBurn Finance Corp. subsidiary, had priced a quickly shopped $400 million add-on to its existing notes on Tuesday; the new bonds priced at 100¼ to yield 7.823% after the deal was upsized from an originally announced $300 million.

T-Mobile stays active

A trader said that "there were some trades" in the new T-Mobile bonds, though nowhere nearly as much as there had been on Tuesday, when by some estimates, the two new tranches accounted for almost $400 million of turnover between them.

He saw its 6 1/8% notes due 2022 at 101¼ bid, 102¼ offered, while its 6½% notes due 2024 finished at 100¾ bid, 101¼ offered, not too far from where they had traded on Tuesday.

A second trader said that during the morning, "the notes were really quiet." Later on, he said, the 6 1/8% notes traded between 101 1/8 and 101 5/8 bid, but were closing nearer to 101 1/8, "so they were off the top."

Bellevue, Wash.-based T Mobile USA, Inc., the nation's number-four wireless operator, priced $1 billion of each tranche of those bonds at par on Monday in a drive-by deal via a subsidiary.

On Tuesday, market sources said that as many as $200 million of the 6 1/8% notes and as much as $175 million of the 6½% paper had changed hands, with the 6 1/8s having moved up to around 101¼ bid, and the 61/2s having risen to 100¾ bid.

Caesars seen lower

Away from the new issues, the 10% notes due 2018 of Las Vegas-based casino giant Caesars Entertainment were seen lower in heavy trading on Wednesday.

There was no fresh news out on the company to act as a catalyst, but a trader opined that it "could be some profit taking," given the bonds' run-up in the previous week.

A market source saw one tranche of those bonds down 5/16 point, at 49 3/16 bid, on volume of over $39 million.

And he saw the other tranche of those bonds, which is considered a separate issue, trading at an even 50 bid, although they were actually up about a half point, on $11 million of turnover.

J.C. Penney investors enthused

Elsewhere, a trader said J.C. Penny Co. Inc.'s 7.95% notes due 2017 experienced a "solid rebound" on Wednesday following the Plano, Texas-based department store operator's fiscal third-quarter earnings release.

The trader called the issue up "2 and change points" at 883/4.

He also saw the 6 7/8% notes due 2015 at 94, which was up nearly 3½ points.

Another trader said the bonds were up "at least 2 to 3 points," depending on which issue you were looking at. He pegged the 6 7/8% notes at 94, deeming that up 3 to 4 points from the previous session.

Yet another market source called the 5.65% notes due 2020 up over a point at 79 bid.

For the quarter, J.C. Penney posted a loss of $489 million, or $1.94 per share. That compared to a loss of $123 million, or 56 cents per share, the year before.

On an adjusted basis, the loss was $1.81 per share. Analysts polled by Thomson Reuters were expecting a loss of $1.72 per share.

Revenue declined 5.1% to $2.78 billion, and same-store sales dropped 4.8%.

However, in October, the company reported its first monthly sales increase, which could be a good omen for the holiday season.

Executives also said on their conference call following the release of the results that the company had $1.7 billion of liquidity as of the end of the quarter on Nov. 2, and expects to have in excess of $2 billion of liquidity by year-end (see related story elsewhere in this issue).

"Although J. C. Penney's fiscal 2013 third quarter results appear to be a little light compared to consensus expectations, the retailer was encouraging about its fourth-quarter outlook," wrote Gimme Credit LLC analyst Evan Mann in an afternoon report. "The retailer expects both same-store sales and the gross margin to improve sequentially and year-over-year in the fourth quarter and reiterated its forecast for year-end liquidity to be in excess of $2 billion."

Market signs stay mixed

Overall, statistical junk-market performance indicators remained mixed for a third consecutive session on Wednesday. Although they had been higher across the board on Friday, the indicators lately have mostly been 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 was unchanged on Wednesday, ending the day at 106 7/16 bid, 106 9/16 offered. That followed Tuesday's 3/16 point loss, which had been its second straight downturn.

The KDP High Yield Daily index stumbled by 4 bps, ending at 74.33. That broke a three-session winning streak, including Tuesday, when the index improved by 6 bps. Those three gains, in turn, had snapped a 10-session losing streak before that.

Its yield meantime came in for a fifth consecutive session on Wednesday, declining by 1 bp for a second straight session to go out at 5.72%.

The widely followed Merrill Lynch High Yield Master II index rose by 0.028% on Wednesday, its fifth straight gain. That came on top of Tuesday's 0.042% advance.

The latest gain lifted the index's year-to-date return to 6.428%, its second consecutive new peak level for 2013, eclipsing the old mark of 6.398%, which had been set on Tuesday.

Stephanie N. Rotondo contributed to this review.

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