Giant Gtech prices along with Citgo megadeal; Casella adds on; busy Dollar Tree, Gtech activity

By Paul A. Harris and Paul Deckelman

New York, Feb. 9 – The high-yield primary market picked up on Monday right where it had left off on Friday, pricing a hefty chunk of new dollar-denominated, fully junk-rated paper, highlighted by a $3 billion-plus multi-tranche offering.

On Friday, that description had aptly fit deep-discount retailer Dollar Tree, Inc.’s two-part $3.25 billion offering of five- and eight-year notes. On Monday, Italian gaming technology company Gtech SpA assumed that role with a $3.2 billion three-part dollar deal, offered in tandem with a €1.55 billion two-tranche euro-denominated transaction.

Besides Gtech, Monday saw a second megadeal get done, this one from petroleum refiner and marketer Citgo Holding, Inc., which priced a $1.5 billion five-year secured deal.

Casella Waste Systems, Inc. topped things off with a $60 million add-on to its existing 2019 notes.

All told, the day’s issuance generated $4.69 billion of proceeds in five tranches, versus Friday’s $3.55 billion in three tranches.

Monday’s issuance was the heaviest so far this year, topping the $4.325 billion that had come to market in five tranches on Jan. 30, and was the biggest new-issuance day Junkbondland had seen since Oct. 10, 2014, when three issuers had priced a whopping $6.7 billion of new high-yield paper in six tranches.

The new Gtech dollar-denominated bonds traded actively when they were freed for aftermarket activity, although they pretty much stayed around their par issue levels. Traders said that Citgo and Casella priced too late in the session for any real secondary dealings.

But the big name in the aftermarket on Monday was Dollar Tree, with its two new issues generating over $150 million of activity and building upon the already robust gains notched in Friday’s initial dealings.

Traders said that the main focus in the secondary arena was trading in the new and recent deals, other than the energy names, which saw their own brisk trading as crude oil prices strengthened.

Statistical indicators of market performance were mixed for a second consecutive session.

Gtech prices five tranches

Gtech priced $3.2 billion and €1.55 billion of non-callable senior secured notes (Ba2/BB+) in a dual-currency five-tranche transaction on Monday, according to a syndicate source.

A $600 million tranche of five year notes priced at par to yield 5 5/8%, in the middle of the 5½% to 5¾% yield talk.

A $1.5 billion tranche of seven-year notes priced at par to yield 6¼%, at the wide end of the 6% to 6¼% yield talk.

A $1.1 billion tranche of 10-year notes priced at par to yield 6½%, at the wide end of the 6¼% to 6½% yield talk.

A €700 million tranche of five-year notes priced at par to yield 4 1/8%, at the tight end of yield talk in the 4¼% area.

And an €850 million tranche of eight-year notes priced at par to yield 4¾%, on top of yield talk.

Joint lead bookrunner Credit Suisse will bill and deliver for the acquisition financing. Barclays and Citigroup were also joint lead bookrunners.

Citgo prices $1.5 billion

Citgo Holding priced $1.5 billion of 10¾% five-year senior secured notes (Caa1/B-) at 95.071 to yield 12%.

The yield printed on top of final yield talk, which had been revised from earlier talk in the 11¾% area. Early guidance had the deal coming in the 11% area.

The reoffer price came in line with final price talk staking out five points of original issue discount. Earlier talk laid out a discount of four to five points.

The deal had been scheduled to price last week. Timing, however, was moved back and it was in the market over the weekend, sources said. It also underwent covenant changes.

Deutsche Bank Securities Inc. was the bookrunner for the dividend deal.

Casella taps 7¾% notes

Casella Waste Systems priced a $60 million add-on to its 7¾% senior subordinated notes due Feb. 15, 2019 (Caa1/B-) at 99.25 to yield 7.972%.

The reoffer price came on top of initial guidance, a trader said.

BofA Merrill Lynch, J.P. Morgan Securities LLC, Comerica Securities and Raymond James were the joint bookrunners for the debt refinancing.

Cogent secured deal

Cogent Communications Holdings, Inc. plans to price a $245 million offering of senior secured notes due 2022 on Tuesday.

BofA Merrill Lynch is leading the offer.

The Washington, D.C.-based provider of high-speed internet access plans to use the proceeds to finance the redemption of $240 million of its 8 3/8% senior secured notes due 2018.

Wittur upsizes, sets talk

Wittur International Holding GmbH talked an upsized €225 million offering of eight-year senior notes (B3//) to yield in the 8½% area.

The acquisition financing deal is upsized from €200 million.

Books close at 10 a.m. ET on Tuesday.

Deutsche Bank is leading the sale.

New Gtech bonds trade

In the secondary market, a trader said that he saw “a decent amount traded” in the new Gtech notes, with all three of the tranches “kind of wrapped around par,” where each of the three dollar-denominated tranches, as well as the euro-denominated paper, had priced.

A second trader said that the Rome-based gaming technology company’s new 5 5/8% senior secured notes due 2020 were in a tight par to 100 1/8 bid range, with over $30 million of the notes having changed hands.

Gtech’s 6¼% senior secured notes due 2022 saw $60 million of turnover, trading between 100 1/8 and 100¼, while its 6½% senior secured notes due 2025 were going home in a 99 7/8 to par bid context, on volume of over $40 million. The latter bonds, he said. “traded under par a lot today.”

At another desk, a trader opined that the new Gtech issue “didn’t go anywhere. We had an account that wanted to sell, but the bonds were not moving higher than 101 [offered], and then they just settled down.”

Yet another trader pegged the 5¾s between par and 100½ and the 6½s between 99 7/8 and 100 1/8. He did not see the 6¼% paper.

Traders saw no initial aftermarket dealings in either the Citgo bonds or the Casella add-on, owing to the lateness of the hour at which they had priced.

Dollar Tree is most active

As busy as the new Gtech notes were, Friday’s issue from Dollar Tree had them beat volume-wise.

A trader said that its 5¼% notes due 2020 and its 5¾% notes due 2023 “both traded a fair amount,” quoting the five-years as having moved up to around 103 bid, while the eight-years were around 103½ bid.

Another trader said that over $50 million of the 5¼s had traded at 103, while over $100 million of the 5¾s had changed hands, going home at 103¼ bid.

A third trader acknowledged that “they were pretty busy – there were several whole pages of Bloomberg messages [of transactions].”

The 5¾s, he said, had opened around 102-103, “and they’ve just been moving up from there, with better buyers.”

He saw the bonds ending somewhere around 103 to 103 3/8, with the 5¼% notes about ¼ of a point below that, at 102¾ to 103, “but still doing the same as the others, trading very nicely.”

The Chesapeake, Va.-based discount retailer priced $3.25 billion of the notes on Friday, upsizing its regularly scheduled forward-calendar offering from an originally announced $2.5 billion with the addition of the $750 million five-year tranche to the original $2.5 billion of the eight year bonds.

Both priced at par, with the five-years heard to have moved up to the 102½-103 area in initial aftermarket dealings and the eight-years trading as high as 102¾ to 103.

Western Refining little moved

Friday’s other offering – El Paso, Texas-based energy pipeline and storage facilities operator Western Refining Logistics LP’s 7½% notes due 2023 – was seen by a trader at around a 101½ bid context, while a second had the bonds at 101¾ on volume of around $20 million.

That $300 million issue had priced at par off the forward calendar on Friday and then proceeded to move up to a 101¼ to 101¾ bid context going home.

New deals dominate secondary

A trader said that most of the activity in the secondary market on Monday was ‘guys sitting around and waiting for the new deals to price,” particularly the Gtech leviathan.

“It was just secondary trading today, that’s what the accounts were focused on. If you price these things cheap enough, they’ll buy it.”

“It was very spotty in terms of the secondary,” another trader said. “Some guys were doing things, but unless you were trading in distressed paper, the main focus of the day was on the new-issue bonds.

Energy gains on price rise

A trader said that the only thing really going on outside of the new issues was trading in energy-related paper, helped by a rise in crude oil prices. March-delivery West Texas Intermediate crude gained $1.17, or 2.26%, to end at $52.86.

He said, “We saw the normal volume leaders, energy-wise.”

For instance, he said, California Resources Corp.’s 6% notes due 2024 were hovering around an 87½ to 88 context, with “decent volume, as always, but they didn’t move too much.”

Indicators stay mixed

Statistical indicators of junk performance were mixed for a second consecutive session on Monday. They had turned mixed on Friday after having been better across the board on Thursday for the third time in the last four sessions.

The KDP High Yield Daily index was unchanged at 71.54. On Friday, it had soared by 18 basis points, its fifth straight gain, on top of Thursday’s 15-bps jump.

The yield, though, continued to decline for a sixth successive session, easing by 1 bp to 5.29%. On Friday, it had come in by 6 bps for a second day in a row.

The Markit Series 23 CDX North American High Yield index, however, lost 1/32 of a point to end at 106 5/16 bid, 106 11/32 offered, its second straight loss and third setback in the last four sessions. On Friday, it had declined by 3/32 of a point, after having gained 15/32 of a point on Thursday.

The Merrill Lynch U.S. High Yield Master II index posted its 16th consecutive gain Monday, edging upwards by 0.01%, on top of Friday’s 0.274% rise.

The latest gain lifted its year-to-date return to 1.669%, its 12th consecutive new peak level for 2015, up from the previous high point, 1.659% on Friday.

© 2015 Prospect News.
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