Entegris, Cemex megadeal price; Jones up on exchange offer; Global Geophysical slides again

By Paul Deckelman and Paul A. Harris

New York, March 25 - The high-yield primary arena saw a moderately busy session on Tuesday, with some $1.36 billion of new fully junk-rated, dollar-denominated paper heard by syndicate sources to have come to market.

That was up slightly from Monday's $1.25 billion in one tranche. But as on Monday, one big deal accounted for most of the day's issuance, as Mexican building products manufacturer Cemex SAB de CV priced $1 billion of 10-year notes as part of a two-part deal that also included a euro-denominated seven-year issue. The Cemex transaction took place too late in the day for any kind of immediate aftermarket activity.

That was not the case with the day's other deal, from Entegris, Inc., a Billerica, Mass.-based provider of products and services to the semiconductor industry. It priced $360 million of eight-year notes, and traders heard that the new bonds had gained solidly when they were freed for secondary dealings.

Traders said that new deals dominated the Most Actives list, led by Monday's split-rated offering of 10-year notes from education financing company SLM Corp. The bonds initially firmed smartly in heavy trading, although later in the session they came down from their intraday highs to close with more modest gains.

The traders also saw brisk activity in telecommunications company Columbus International Inc.'s new seven-year notes, which held the same high levels they had notched in initial aftermarket activity after pricing on Monday.

Away from the new deals, there was considerable trading at higher levels in Jones Group Inc.'s 2019 notes, as investors mulled over the New York-based apparel and accessories designer, marketer and retailer's change-of-control exchange offer for that paper, a transaction connected with its pending buyout by private equity firm Sycamore Partners.

Global Geophysical Services, Inc.'s bonds slid badly for the second time in a week amid investor fears about what shape a possible restructuring transaction might take.

Statistical market performance indicators ended the session mixed.

Cemex drive-by

The dollar-denominated junk primary market saw two tranches from two issuers price on Tuesday, generating a combined total of $1.36 billion.

One tranche priced at the tight end of revised talk, and the other came at the tight end of original talk.

Mexico's Cemex, SAB de CV priced two tranches of senior secured notes (expected ratings /B+/BB-).

The deal included a $1 billion tranche of 10-year notes priced at par to yield 6%.

The yield printed at the tight end of the 6% to 6 1/8% yield talk, which had been revised from earlier talk in the 6 3/8% area.

The deal played to $5.5 billion of orders, according to a buyside source.

Proceeds will be used to fund a tender offer for a portion of the Cemex Spain 9¼% senior secured notes due 2020 and the Cemex 9% notes due 2018 and for general corporate purposes, including payment of other debt.

Cemex also priced an upsized €400 million tranche of seven-year notes at par to yield 5¼%.

The tranche was upsized from €300 million.

The euro-denominated tranche played to €2 billion of orders, a source said.

The yield printed at the tight end of the 5¼% to 5 3/8% final yield talk, which had been revised from earlier talk in the 5½% area.

Proceeds from the euro-denominated notes will be used to take out the remaining $130 million Cemex 9 5/8% senior secured notes due 2017 and the remaining $115,346,000 Cemex Spain 8 7/8% senior secured notes due 2017 and for general corporate purposes, including payment of other debt.

Joint bookrunner Citigroup Global Markets will bill and deliver for the dollar-denominated tranche. Joint bookrunner J.P. Morgan will bill and deliver for the euro-denominated tranche.

Credit Agricole CIB, HSBC and Santander were also bookrunners.

Entegris at the tight end

Entegris priced a $360 million issue of eight-year senior notes (B3/BB-) at par to yield 6%.

The yield printed at the tight end of the 6% to 6¼% yield talk.

Goldman Sachs was the bookrunner for the acquisition financing.

SunGard sets yield talk

Looking toward Wednesday, SunGard Availability Services Capital Inc. set 8½% to 8¾% yield talk for its $400 million to $450 million offering of eight-year senior notes.

There are also covenant changes (see related story in this issue).

Deutsche Bank, Citigroup and BofA Merrill Lynch are the joint bookrunners for the offering, which is set to price on Wednesday.

Guitar Center $940 million

Guitar Center Inc. began a roadshow on Tuesday for a $940 million two-part offering of high-yield notes.

The deal includes $615 million of five-year senior secured notes and $325 million of six-year senior unsecured notes.

BofA Merrill Lynch, Deutsche Bank, JPMorgan and RBC are the joint bookrunners for the debt refinancing deal.

Jefferies brings $350 million

Jefferies Finance LLC and Jefferies Co-Issuer Corp. plan to price a $350 million offering of eight-year senior notes on Wednesday.

Jefferies is the sole bookrunner for the general corporate purposes deal, which was the subject of an investor conference call on Tuesday morning.

William Lyon Homes five-years

William Lyon Homes, Inc. plans to price a $150 million offering of five-year senior notes on Wednesday.

Credit Suisse, Citigroup and JPMorgan are the joint bookrunners.

The Newport Beach, Calif.-based homebuilder plans to use the proceeds to fund the acquisition of a portfolio of California residential land assets.

IVS taps 7 1/8% notes

In the euro-denominated high-yield primary, apart from the above-mentioned Cemex tranche, Italian food service vendor IVS Group SA priced a €50 million add-on to its 7 1/8% senior secured notes due April 1, 2020 (/BB-/) at 106 to yield 5.923% in a quick-to-market Tuesday transaction.

The reoffer price came on top of price talk.

BNP Paribas ran the books.

IVS, which operates in Italy and is based in Luxembourg, plans to use the proceeds for general corporate purposes, including acquisitions.

Elsewhere, Kaufman & Broad talked its €370 million offering of five-year senior notes to yield 7% to 7¼%.

The deal is expected to price on Wednesday.

Joint global coordinator and physical bookrunner Goldman Sachs International will bill and deliver. Credit Suisse and Credit Agricole are also joint global coordinators and physical bookrunners. Natixis is a bookrunner.

Entegris up on break

In the secondary market, a trader said that Entegris's new 6% notes due 2022 traded up "right out of the chute," seeing the bonds having jumped to 101¾ bid, 102¼ offered after that regularly scheduled forward calendar deal had priced earlier in the session at par.

A second trader also pegged the bonds at that same level.

In contrast, no immediate aftermarket dealings were seen in Cemex's new dollar-denominated 6% senior secured notes due 2024 after that same-session drive-by deal had priced at par, owing to the relatively late hour at which the deal got done.

Columbus stays strong

Monday's $1.25 billion offering of 7 3/8% notes due 2021 from Columbus International was seen by traders at firmer levels on Tuesday.

"Columbus did well," one said, locating the new issue at 102¾ bid, 103 offered. That was well up from the par level at which the Barbados-based telecommunications company had priced its notes, and up as well from the levels around 102 bid at which those bonds were trading later Monday after they were freed for the aftermarket.

A second trader saw "most of the trading" taking place Tuesday in a range between 102¾ and 103¼ bid, with the last trade he saw at that higher price.

And yet another market source saw the bonds at 102 7/8 bid, 103 1/8 offered, calling them up 7/8 point on the day.

More than $64 million of the new bonds traded on a round-lot basis, and there was heavy odd-lot activity as well.

Sallie Mae most active

But as busy as the new Columbus International issue was, traders said it paled in comparison with the activity level in SLM's new 6 1/8% notes due 2024.

A trader called the Newark, Del.-based education financing company's issue "easily the most active credit" in Tuesday's trading, estimating total volume at over $140 million, with at least $126 million of that attributable to round-lot trades.

He saw the new issue in a narrow bid range between 99¾ and par most of the day.

That was up from the 99.082 level at which that $850 million quick-to-market offering had priced on Monday, when it stayed a little bit above its issue price - at around 99¼ bid - in initial secondary dealings.

Another trader saw the bonds going home at 99 5/8 bid, 99 7/8 offered, calling it a 3/8 point gain.

With its split rating (Ba1/BBB-/BB+), traders said the new deal was attracting high-grade investors willing to reach down the credit curve into Junkbondland to pick up some yield - but there were also some regular high-yield players, thanks to a reasonably decent-sized coupon, by current junk market standards.

United Air gains altitude

Monday's other split-rated offering, from United Airlines, Inc., was seen having risen a little, although on considerably less volume than either the SLM or the Columbus International offerings.

A trader saw the Chicago-based airline operator's junk-rated (/BB+/BB+) 4¾% class B pass-through certificates due 2022 at 100 1/8 bid, 100 3/8 offered, while a second observed the bonds at 100¼ bid, 100½ offered.

That was up from the par level at which the $212.8 million issue had priced and at which the bonds had initially traded.

The second trader also saw the $736.6 million investment-grade rated (/A-/A) 4% class A pass-throughs at 100¼ bid, 100½ offered, versus their par issue price.

But he said it was no big deal, and "it was just a standard piece that was going to stay right there - and that's what it did."

He also declared that "airline paper is in demand," adding that United "got away with levels tighter than people thought they would come at." He said that the deal was "absolutely" helped by the fact that the issue is secured, with some of the airline's planes as collateral.

Lee eases again

Among issues priced last week, a trader saw Lee Enterprises Inc.'s new 9½% first-lien senior secured notes due 2022 easing for a second straight session on Tuesday. He quoted the bonds at 102 bid, 102¾ offered.

The Davenport, Iowa-based newspaper publisher priced $400 million of the notes at par on Friday in a regularly scheduled offering off the forward calendar, and the new bonds were seen by traders to have zoomed as high as the 103 bid mark in initial aftermarket activity.

The trader had seen the bonds ease by 1/8 point on Monday, going home at 102¾ bid, 103 1/8 offered, and said they were off by another ¾ point in Tuesday's dealings.

Walter little changed

A trader said that Walter Energy, Inc.'s bonds "for the most part look unchanged on the day," adding that he "didn't see much trading."

He saw the Birmingham, Ala.-based metallurgical coal producer's new 9½% senior secured notes due 2019 about unchanged at 102 to103, while the new 11%/12% PIK senior secured second-lien toggle notes due 2020 were also little changed; the trader estimated them around 94 to95.

Walter had priced $350 million of the PIK notes at par late Wednesday as part of an upsized $550 million two-part drive-by new issue, along with the $200 million add-on to its existing 9½% 2019 notes, which priced at 101½ to yield 9.147 after the tranche was upsized from an originally announced $100 million.

They came too late in the day for trading at that time, but when the bonds began trading on Thursday, traders saw the PIKs nosedive all the way down to the 94 bid level before bottoming out down there. While the PIK notes were getting killed, the add-ons held their own Thursday, staying around the 101½ bid mark, and even moving up to between 102 and 102½ bid on Friday and as high as 103 on Monday.

The trader also quoted the company's 8½% notes due 2021 in a context of 64½ to 66. "They were quoted better, but there really was not much activity at all," he said, deciding they were "pretty much unchanged."

He said that Walter's 9 7/8% notes due 2020 also were "about unchanged with not much activity," ending at around 69 to 70. He said "a lot of little pieces traded."

Walter's existing bonds have been trading at distressed levels for quite some time amid investor angst about the weak state of the metallurgical coal industry, which provides the specialized type of coal used in the production of steel and other types of metals and alloys.

An energy industry analyst told Prospect News that the met coal business "is a deeply cyclical industry, operating at current pricing that is well below [normal] levels over the last year and a half to two years. How long met coal pricing is going to stay at these levels is a topic that you can debate for some time."

He cautioned that "I don't see anything in the near term that's going to drive met coal pricing substantially higher." While he said that over the longer term prices should start to strengthen, he added the caveat that this is "unlikely to happen in the next 12 to 18 months, and maybe even longer."

He said that "the good news" for Walter Energy is that "the company has at least a year to a year and a half of liquidity, maybe even longer, if they get some asset sales done and they can wait for the uptick in pricing."

However, he added that "the bad news is they're burning cash, and it's unclear when that's going to happen."

Summing up, he opined that "over time, their pricing is likely to improve. It's just a question of when."

Jones is jumping

Away from the new or recently priced deals, a trader said that there was "a lot of activity" in Jones Group's 6 7/8% notes due 2019.

He saw those bonds up 2½ to 3 points on the day, trading in a 103 5/8 to 104 bid context.

Another market source said that Jones' bonds were up some 1 3/8 points at 102 5/8 bid. Volume of over $46 million was second only to the turnover in the new Sallie Mae issue.

The trader said that the jump was probably related to the company's Monday announcement of a change-of-control exchange offer for the $400 million of those 2019 notes as part of its pending buyout by Sycamore Group.

Jones is offering a new series of 8¼% senior notes due 2019 to be issued by its Nine West Holdings, Inc. subsidiary in exchange for the old notes. The exchange offer will expire at 11:59 p.m. ET on April 18. Holders who tender their old notes prior to 5 p.m. ET on April 4, the early participation deadline, will receive $1,000 principal amount of new notes in exchange for each $1,000 principal amount of old notes tendered, which includes an early participation consideration of $30 per note.

The exchange offer is conditioned on the receipt of tenders for at least $300 million of the old notes by the early participation deadline.

Global Geophysical slide resumes

On the downside, a trader saw Global Geophysical Services'10½% notes due 2017 considerably lower on the day, although he did not have a ready explanation for that retreat.

He said the bonds - which had been quoted on Monday in a 57 to 58 range - fell "definitely down a couple" to around 50 or 51, more than 5 points, he estimated. He added that at the end of the day after 4 p.m. [ET], there were some trades even lower - 47, 48 or 49, "but real small, odd-lots."

He explained that "50 to 50½ was where $1 million or $2 [million] traded, but smaller pieces ended the day in the high 40s - 300, 500 bonds, small pieces, which can happen if the big folks don't want to bid on the small pieces."

Those bonds had nosedived last Tuesday down to around the 50 bid level from around 75 to76 previously, after the Missouri City, Texas-based provider of seismic data information services to the energy industry warned investors that that it would have to restate earnings for 2012, 2011, 2010 and 2009, along with the first three quarters of 2013.

The company said the figures should "no longer be relied upon because of accounting errors resulting from material weaknesses in the company's internal controls."

Global Geophysical also announced a delay in filing its 10-K report with the Securities and Exchange Commission in order to allow it to restate its results, said its senior lenders and other creditors had agreed to forbear on pushing the company into default status and said it had hired advisors to explore its possible strategic options.

Following that announcement, the bonds had languished around 50 bid but then had crept back up to around 57 or 58 on Monday before resuming their slide.

A second trader on Tuesday theorized that "more people may be throwing in the towel, in the belief that the senior lenders will try to cram down bondholders to get control of the equity in a restructuring."

Market indicators mixed

Statistical junk performance indicators were mixed on Tuesday.

The Markit Series 21 CDX North American High Yield index gained 7/32 point to finish at 107¾ bid, 107 13/16 offered, after having dipped by ¼ point on Monday, its first loss after two consecutive gains.

But the KDP High Yield Daily index lost 3 basis points on Tuesday to close at 74.8. Before that, it had risen for two straight sessions, including Monday, when it gained 1 bp.

Its yield - which would normally rise on an index loss - actually came in by 1 bp to finish at 5.26% after having held steady on Monday at 5.27%, which in turn had followed a 1 bps narrowing on Friday.

The widely followed Merrill Lynch High Yield Master II index posted its third consecutive advance, rising by 0.031%, on top of Monday's 0.074% improvement.

The gain raised its year-to-date return to 2.782% from Monday's 2.75%, although it remained below the 2.812% reading seen on March 5, its 2014 peak level.

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