Warner Music, Guitar Center lead nearly $5 billion day; Jones keeps jumping, Toys tumbles

By Paul Deckelman and Paul A. Harris

New York, March 26 - The high-yield new-deal market saw its busiest session of 2014 so far on Wednesday, as nearly $5 billion of new junk-rated, dollar-denominated paper priced in 11 tranches.

That not only far surpassed Tuesday's modest $1.36 billion in two tranches, but it also topped the previous most busy session of 2014, which occurred on Feb. 4, when $4.43 billion of new bonds priced in five tranches, according to data compiled by Prospect News.

And it was the busiest day seen in Junkbondland since Oct. 8 of last year, when $5.6 billion of new paper came to market in five tranches, the data indicate.

Unlike both of those days, which were dominated by multi-part megadeals for Chrysler Group LLC and T-Mobile USA, Inc., respectively, Wednesday's activity showed no such super-sized offerings, although several of the day's transactions came close to cracking the magic $1 billion mark.

Los Angeles-based musical instrument and accessories retailer Guitar Center, Inc. brought $940 million of five-year secured notes and six-year unsecured paper to market, while another music-oriented name - WMG Acquisition Corp., a financing unit of New York-based recording and music publishing company Warner Music Group - did $935 million of eight-year notes, split into senior secured and senior unsecured notes. Warner's existing 2018 notes, which are being refinanced with the new-deal proceeds, traded busily around their anticipated takeout level after the company announced a tender offer.

Another big deal came from Calumet Specialty Products Partners, LP, an Indianapolis-based producer of specialty hydrocarbon products and fuels. The company brought a quickly shopped, upsized $900 million of seven-year notes to market.

Other notable issues that got done during the almost non-stop, rapid-fire, pricing barrage came from such borrowers as Kindred Healthcare, Inc.,Videotron Ltee, Jefferies Finance LLC and SunGard Availability Services Capital Inc., among others.

Much of the day's secondary-market activity was new-deal focused, even though most of the session's pricing activity came too late to allow much of an aftermarket. Recent new deals from the likes of Cemex SAB de CV, SLM Corp. and Columbus International Inc. remained busy.

Away from the new deals, Jones Group, Inc.'s 2019 bonds remained active in the wake of news about an exchange offer by the apparel company for those bonds.

Toys 'R' Us, Inc.'s bonds fell after the retailer reported disappointing fourth-quarter and full-year earnings.

And Global Geophysical Services, Inc.'s roller coaster ride continued after the company filed for Chapter 11 protection.

Statistical junk-market performance measures were mixed versus the previous day's levels for a third consecutive session.

Calumet upsizes

A torrid high-yield primary market saw issuers raise $4.88 billion in 11 dollar-denominated tranches on Wednesday.

Of note, all but two of the tranches came at the tight end or rich end of price talk. Of the remaining two, one came on top of talk and one came at the wide end.

Calumet Specialty Products Partners and Calumet Finance Corp. priced an upsized $900 million issue of seven-year senior notes (B2/B+) at par to yield 6½%.

The deal was upsized from $850 million.

The yield printed at the tight end of the 6½% to 6¾% yield talk.

BofA Merrill Lynch, Barclays, RBC Capital Markets and J.P. Morgan Securities LLC were the joint bookrunners for the debt refinancing and general corporate purposes deal.

Warner two-part deal

Warner Music Group priced $935 million of eight-year notes in two tranches.

The quick-to-market deal included a $275 million tranche of senior secured notes that priced at par to yield 5 5/8%, at the tight end of yield talk in the 5¾% area.

The company also priced a $660 million tranche of senior unsecured notes at par to yield 6¾%, at the tight end of the 6¾% to 7% yield talk.

Credit Suisse Securities (USA) LLC, Barclays, UBS Investment Bank, Macquarie Capital and Nomura were the joint bookrunners for the debt refinancing deal.

Guitar Center: Two at tight end

Guitar Center priced $940 million of notes in two tranches.

The deal included $615 million of 6½% five-year senior secured notes (B3/B-) that priced at 98.943 to yield 6¾%. The yield printed at the tight end of the 6¾% to 7% yield talk.

In addition, Guitar Center priced a $325 million tranche of 9 5/8% six-year senior unsecured notes (Caa2/CCC), which priced at 98.875 to yield 9 7/8%. The unsecured notes priced in the middle of the 9¾% to 10% yield talk.

BofA Merrill Lynch was the left bookrunner for the debt refinancing deal.

Deutsche Bank Securities Inc., JPMorgan and RBC Capital Markets were the joint bookrunners.

Videotron drives by

Videotron Ltd. and Videotron Ltee priced an upsized $600 million issue of 5 3/8% senior notes due June 15, 2024 (Ba2/BB) at par to yield 5.376%.

The yield printed at the tight end of the 5 3/8% to 5½% yield talk.

BofA Merrill Lynch was the left bookrunner for the quick-to-market issue that was upsized from $500 million. RBC Capital Markets, Scotia Capital and Citigroup Global Markets were the joint bookrunners.

Kindred at the tight end

Kindred Healthcare priced a $500 million issue of eight-year senior notes (B3/B-) at par to yield 6 3/8%.

The yield printed at the tight end of yield talk in the 6½% area.

JPMorgan, Citigroup Global Markets, Barclays, Morgan Stanley & Co. and Wells Fargo Securities LLC were the bookrunners for the debt refinancing.

Jefferies upsizes

Jefferies Finance and Jefferies Co-Issuer Corp. priced an upsized $425 million issuer of eight-year senior notes (B1/B) at par to yield 6 7/8%.

The deal was upsized from $350 million.

The yield printed at the tight end of the 6 7/8% to 7% yield talk.

Jefferies LLC was the bookrunner for the general corporate purposes deal.

SunGard at the wide end

SunGard Availability Services Capital priced a $425 million issue of eight-year senior notes (Caa1/B-) at par to yield 8¾%.

The yield printed at the wide end of the 8½% to 8¾% yield talk.

The deal was in the market at a size range of $400 million to $450 million.

Deutsche Bank Securities, Citigroup Global Markets and BofA Merrill Lynch were the joint bookrunners.

There were covenant changes.

William Lyon Homes comes tight

William Lyon Homes, Inc. priced a $150 million issue of five-year senior notes (B3/B-) at par to yield 5¾%.

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

Credit Suisse, Citigroup and JPMorgan were 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.

WideOpenWest taps 10¼% notes

WideOpenWest Finance, LLC priced a $100 million tack-on to its 10¼% senior notes due July 15, 2019 (Caa1/CCC+) at 113 to yield 5.489%.

The reoffer price came at the rich end of the 112.5 to 113 price talk.

Credit Suisse Securities and JPMorgan were the joint bookrunners.

The Denver-based provider of residential and commercial high-speed internet, cable television and telephone services plans to use the proceeds to repay its revolver and for general corporate purposes.

Jones upsizes, sets talk

Jones Energy Holdings, LLC upsized its offering of eight-year senior notes (B3/B-) to $500 million from $300 million and talked the deal to price at 6¾% to 7%.

Citigroup Global Markets, Wells Fargo Securities, Barclays, Capital One, Credit Agricole CIB, JPMorgan, SunTrust Robinson Humphrey Inc., TD Securities and Mitsubishi UFJ Securities are the joint bookrunners.

EnQuest $500 million roadshow

EnQuest plc began marketing a $500 million offering of eight-year senior notes.

The deal is set to price during the early part of the week ahead.

JPMorgan, Barclays, BNP Paribas, BofA Merrill Lynch, Credit Suisse Securities and Goldman Sachs & Co. are joint bookrunners for the general corporate purposes deal.

Kaufman & Broad at tight end

In Europe, France-based real estate developer Kaufman & Broad SA priced a €370 million issue of senior notes due Sept. 30, 2019 at par to yield 7%.

The yield printed at the tight end of the 7% to 7¼% yield talk.

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

Proceeds will be used to repay debt, to repurchase preferred shares and for general corporate purposes.

Day's deals little-seen

While there was a pretty steady drumbeat of new deals clattering down the chute pretty much all day on Wednesday, many of those deals appeared too late in the session for any kind of real aftermarket trading.

Among the few that were seen having broken into the secondary realm, a trader said that Jefferies Finance's 6 7/8% notes due 2022 "were floating around" at 101 bid after the New York-based commercial finance company priced its upsized, regularly scheduled forward calendar deal at par.

He also said Wayne, Pa.-based information technology infrastructure company SunGard Availability Services' new 8¾% notes due 2022, which had priced fairly early in the session off the forward calendar at par, "were trading around under par," between 99 5/8 bid, 99 7/8 offered.

Calumet Specialty Products Partners' 6½% notes due 2021 were quoted at par bid, 100½ offered, versus its par pricing level.

And Kindred Healthcare's 6 3/8% notes due 2022 were heard to be right around par to 100 1/8 bid; the Louisville, Ky.-based health-care services company's quick-to-market deal had priced at par just a little earlier in the session.

Kindred's existing 8¼% notes due 2019 - which are being taken out using the proceeds of the new deal - were one of high yield's busier credits on Wednesday, with over $10 million having changed hands. The bonds finished about unchanged at 107 3/8 - a little above the 106.188 price at which those bonds first become callable on June 1.

The new Warner Music two-part deal came to market too late in the day for any kind of aftermarket. However, its existing 11½% notes due 2018 were trading on busy volume of over $12 million around the 113 5/8 bid mark, about where those bonds are slated to be taken out under a tender offer that the company began on Wednesday.

Recent deals trade around

A trader said that the bulk of the day's trading in the junk market was "mostly new-issue driven."

Among the most actively traded credits was the Cemex 6% senior secured notes due 2024, $1 billion of which had priced at par on Tuesday as part of the Mexican building products company's big dual-currency secured transaction.

A market source saw the bonds around 100¼ bid at mid-afternoon, with more than $50 million having changed hands.

A trader said that "Sallie Mae was still very active," with over $30 million of the Newark, Del.-based education financing company's new 6 1/8% notes due 2024 having changed hands; he said the bonds "were pretty much hugging par."

The $850 million quick-to-market offering had priced on Monday at 99.082 to yield 6¼%.

Monday's $1.25 billion offering of 7 3/8% notes due 2021 from Columbus International was seen by a market source continuing to trade above the 103 bid level on Wednesday, with over $14 million having changed hands by mid-afternoon.

Wednesday's trading level 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.

Jones jump continues

Away from the new or recently priced deals, Jones Group's 6 7/8% notes due 2019 continued to see sizable dealings at higher levels.

A market source pegged those bonds at 103 7/8 bid, up 1¼ points on the day, on volume of over $16 million.

Those bonds had also moved up more than 1 point on Tuesday in heavy trading of over $46 million.

Those gains followed Monday's 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, but 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.

Toys 'R' Us tumbles

One of the worst performers on the day was Toys 'R' Us, after the Wayne, N.J.-based specialty retailer reported what its chief executive officer termed "disappointing" earnings for the fourth quarter (see related story elsewhere in this issue).

Its 10 3/8% notes due 2017 lost ¾ point to close at 86½ bid on volume of over $10 million. Its 7 3/8% notes due 2018 plunged by 2¾ points to 83¾ bid on volume of over $6 million.

Market indicators mixed

Statistical junk performance indicators were mixed for a third consecutive session on Wednesday.

The Markit Series 21 CDX North American High Yield index lost 1/8 point to close at 107 5/8 bid, 107 11/16 offered, after having gained 7/32 point on Tuesday.

But the KDP High Yield Daily index jumped by 10 basis points to end Wednesday at 74.9, versus Tuesday's 3 bps loss.

Its yield came in by 2 bps to 5.24%, its second straight decline; on Tuesday, it had tightened by 1 bp.

The widely followed Merrill Lynch High Yield Master II index posted its fourth consecutive advance, a robust 0.82% improvement. That followed Tuesday's 0.031% rise.

The gain raised its year-to-date return to 2.867%, a new peak level for 2014 so far. The cumulative return was up from Tuesday's 2.782%, and up as well from the previous high point for the year so far - a 2.812% reading recorded on March 5.

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