Upsized Radian Group prices; TI Automotive slates; Ashland plans debt offering; market mixed

By Paul Deckelman

New York, June 16 – The high-yield primary market stirred on Tuesday, producing its first pricing of the week, an upsized $350 million issue of five-year notes from mortgage insurance provider Radian Group Inc.

That represented an upturn from the sleepy pace seen on Monday, when there had been no pricings of any dollar-denominated, fully junk-rated paper from domestic or industrialized-country borrowers.

There was also some news coming out of the primary on Tuesday.

TI Automotive Ltd., a provider of fluid storage, carrying and delivery systems to automotive manufacturers, was heard by syndicate sources to be shopping around a $550 million issue of eight-year notes, with a roadshow set to begin on Wednesday and pricing expected in the middle of next week.

And Ashland, Inc., a producer of specialty chemicals, said that it would be doing a $1.1 billion debt financing to pay for a tender offer for its existing bonds, but the company and the underwriter(s) of that planned financing were playing things close to the vest, releasing no details about the upcoming transaction.

Meanwhile, issuers such as My Alarm Center LLC, Tribune Media Co., Eclipse Resources Corp. and Georgia Renewable Power, Inc. continued to shop pending deals around to potential investors.

The secondary was a mixed bag. Some issues showed strength while others slipped, with no real overriding theme. One of the gainers, in active dealings, was HCA Inc., which got a boost from the news of the hospital operator’s having refinanced its bank facility.

Statistical indicators of junk market performance turned mixed on Tuesday after having been lower across the board for a second consecutive session on Monday.

Upsized Radian prices

The sole pricing of the day Tuesday came from Radian Group (anticipated ratings B2/B), which brought $350 million of five-year senior notes to market.

High-yield syndicate sources said that the issue was upsized from the $300 million originally announced.

The notes priced at par to yield 5¼%, at the wider end of price talk envisioning a yield in a 5 1/8% to 5¼% range.

The SEC-registered public offering was brought to market via joint bookrunning managers Goldman Sachs & Co., Bank of America Merrill Lynch and Deutsche Bank Securities Inc.

The deal priced a day after it was first announced, following a short roadshow.

Radian, a Philadelphia-based mortgage insurance company, plans to use the proceeds from the bond deal, along with shares of its common stock, to purchase some of its $381.02 million of outstanding 3% convertible notes due 2017 and after that to repurchase some of the common stock the company may issue in connection with such purchases and otherwise for general corporate purposes.

The new issue came too late in the session for any kind of real aftermarket activity, a trader said.

TI Automotive hits the road

Apart from the Radian pricing, the main news to come out of the Junkbondland primary arena on Tuesday was TI Automotive’s upcoming $550 million of eight-year senior notes (Caa1/B).

The Auburn Hills, Mich.-based automotive systems manufacturer is scheduled to begin a roadshow on Wednesday for its deal, with pricing expected next week.

The sales campaign kicks off in New York with one-to-one meetings, a group investor lunch and an investor call, with similar meetings and a lunch scheduled for Boston on Thursday. There will be more one-to-one marketing in the New York and New Jersey area on Friday and in the Los Angeles area on Monday. The deal is also being marketed via Netroadshow and is expected to price next Wednesday, June 24.

The Rule 144A/Regulation S-for-life offering will be brought to market via joint bookrunning managers Citigroup Global Markets Inc., J.P. Morgan Securities LLC, Barclays, Mizuho Securities USA Inc., Goldman Sachs, Nomura Securities International, RBC Capital Markets Corp. and UBS Securities LLC.

The notes are to be issued by Omega US Sub, LLC, which is to be merged with and into TI Group Automotive Systems, LLC and Omega NewCo Sub Inc., as part of the planned acquisition of TI Automotive by Bain Capital LLC.

Ashland anticipates financing

Another company expected to be in the market over the next week is Covington, Ky.-based specialty chemicals manufacturer Ashland, which on Tuesday announced plans to tender for its $600 million of existing 3% senior notes due 2016.

It said that tender offer was predicated on the company’s being able to complete a $1.1 billion senior debt financing, with some of the proceeds slated to be used to fund that tender.

The remainder, it said, would be used for contributions to its U.S. pension plans and for general corporate purposes.

Ashland said the new debt financing is expected to close by June 23.

However, it gave no indication whether the financing would consist of junk bonds, convertible debt, bank facilities or some combination thereof.

Several market sources queried about the financing stated that further details on the timing of the financing, its structure or which investment banks might be involved were not available at this time.

Other deals marketed

Issuers and underwriters for several other prospective junk deals that were announced last week or that surfaced in the market at that time continued to shop those anticipated transactions around to potential investors on roadshows on Tuesday.

One such offering was My Alarm Center’s $265 million offering of five-year senior secured notes. Imperial Capital is the bookrunner on the Rule 144A/Regulation S-for-life deal from the Newtown Square, Pa.-based provider of security alarm and home automation solutions. The proceeds will be used to refinance debt, to terminate an interest-rate swap and for general corporate purposes. There was no immediate word on the timing of the deal.

Tribune Media, a New York-based broadcasting company, was continuing the roadshow for its $1 billion two-tranche offering of eight- and 10-year notes, the proceeds of which will be used to repay a portion of its term loan. Deutsche Bank, Citigroup, BofA Merrill Lynch, JPMorgan, Goldman Sachs and Morgan Stanley & Co. LLC are the joint bookrunners on the deal, being sold under Rule 144A and Regulation S with registration rights, which is expected to price on Thursday.

Eclipse Resources, a State College, Pa.-based independent oil and gas exploration and production company, continues to shop its offer of $650 million senior notes due 2023, with the proceeds earmarked for financing the redemption of its outstanding 12% senior PIK notes due 2018, funding its capital spending plan and for general corporate purposes. Deutsche Bank, BMO Securities, Goldman Sachs, Citigroup, Morgan Stanley, KeyBanc Capital Markets, Capital One South Coast, RBC Capital Markets and Wells Fargo Securities LLC are the joint bookrunners for the Rule 144A and Regulation S with registration rights deal.

And Georgia Renewable Power, an Albany, Ga.-based renewable power generating company, continues to market its $225 million of first-lien senior secured notes due 2022 (expected rating Ba) via bookrunner Seaport Global. Proceeds from the offering will go for general corporate purposes.

HCA moves up

In the secondary market, a trader said that HCA’s 5¼% notes due 2025 got as high as 100 3/8 bid during the session, although he later saw the bonds going out around par.

“There wasn’t a lot of movement, but they stayed around the par level.”

Another trader saw the Nashville-based hospital operator’s 5 3/8% notes due 2025 firm by about 1/16 point, ending at 100 5/16 point, with over $30 million traded, topping the Most Actives list.

The bonds were seen firming against a backdrop of the company’s announcement that it had amended its bank credit facilities, with a new $1.4 billion A-5 term loan due 2020 replacing two facilities, A-2 and A-4, that were scheduled to mature next year.

Besides extending the maturity by four years, the new loan has better pricing – 150 basis points over Libor, versus 250 bps over on the older facilities being refinanced.

Valeant bonds gyrate

A trader said that while the market was “for the most part quiet, we did see some beta names.” For example, Valeant Pharmaceuticals International Inc.’s 6 1/8% notes due 2025 were active, with over $17 million changing hands.

He said the Canadian drug manufacturer’s bonds “traded off with the market this morning, trading into a 101 bid.”

But by the afternoon, he said, “the market turned around at mid-day a little, and we had a bit of a rally.”

The Valeant bonds, he said, ended the session at 102¼ bid, well up from their morning lows.

Another trader saw them going out just a shade under 102½ bid, up almost ½ point on the day.

Sealed Air seen better

Among recently priced offerings, Sealed Air Corp.’s 5½% notes due 2025 were seen up ¼ point at 101½ bid, on volume of over $12 million.

A trader at another desk said that the bonds had “moved up a little” to a 101-to-101¼ bid context from Monday’s closing levels around 100¾ to 101.

The Charlotte, N.C.-based plastic packaging products producer had priced its $400 million issue at par as a regularly scheduled forward calendar offering on Thursday. Those bonds, in turn, were part of a larger, $850 million equivalent offering that also included €400 million of 4½% notes due September 2023 that also priced at par.

Junk investor Kerkorian dies

Veteran junk-market watchers noted the passing of billionaire tycoon Kirk Kerkorian, who died at age 98 on Monday in Los Angeles – a larger-than-life figure whose private holding company, Tracinda Corp., named after his daughters, Tracy and Linda, was at the center of many memorable corporate transactions and sometimes battles involving familiar high-yield companies.

Through Tracinda, Kerkorian – who pursued giant-sized corporate deals with the passion of an avid casino gambler – was for some years the majority owner of the Las Vegas-based gaming giant now known as MGM Resorts International, then-known as MGM Mirage. He lost his majority control in 2009 when the casino company did a big stock offering that diluted Kerkorian’s stake to about 38% from 53% but remained a major shareholder.

He also played key roles in events at some of the rival gaming organizations in the Nevada gaming capital. For instance, Caesars Palace, the flagship casino resort of Caesars Entertainment Corp., was built on 80 acres of land on the Las Vegas Strip that Kerkorian had bought when he first began investing in Vegas in the early 1960s; his original $960,000 investment in the parcel brought him $9 million when he finally sold the land to Caesars at the end of the decade in addition to millions more in rentals he had collected from the company in leases on the property in those years.

Kerkorian was also a major shareholder at one time or another in each of Detroit’s traditional Big Three car makers – all of them former or current junk-bond issuers – and actually made two unsuccessful attempts to acquire Chrysler, now a division of FiatChrysler Automobiles NV, in 1995, when he teamed up with legendary former Chrysler boss Lee Iacocca (who said of his partner “doing deals keeps him alive”), and again in 2007, when he was outbid by Cerberus Capital Management LP. On the latter occasion, Tracinda ended up selling Kerkorian’s stake to Cerberus – but it proved to be a Pyrrhic victory for the private equity firm, which still owned Chrysler at the time it slid into bankruptcy a year or two later during the 2008-09 economic downturn.

Kerkorian’s colorful decades-long career also included investments and sometimes ownership in airlines and movie studios as well as four marriages, one stormy divorce and considerable, though quiet, philanthropic activities, particularly in the Las Vegas area and in his immigrant parents’ native Armenia.

Indicators turn mixed

Statistical indicators of junk market performance turned mixed on Tuesday after having been lower across the board on both Friday and Monday. However, the session was only the third in the past 11 in which the indicators were not all pointing negative.

The KDP High Yield Daily index nosedived by 12 bps on Tuesday to close at 70.50, its third straight loss and 10th loss seen in the last 11 sessions. On Monday, it had plunged by 13 bps.

Its yield moved up by 5 bps to 5.69% after having risen by 3 bps on Monday. Tuesday marked the third consecutive widening and its ninth rise in the last 10 sessions.

But the Markit Series 24 CDX North American High Yield index was up 5/16 point on Tuesday, closing at 106 bid, 106 1/32 offered, its first gain after two straight sessions on the downside. It had lost 15/32 point on Monday, on top of Friday’s 7/16 point drop. But Tuesday’s triumph was only its third advance in the last 11 sessions.

And the Merrill Lynch North American Master II High Yield index fell by 0.11% on Tuesday, on top of Monday’s 0.215% retreat.

It was the index’s 10th loss in the last 12 sessions and dropped its year-to-date return back to 2.758% from 2.871% on Monday. Those levels remain well down from the 4.062% reading, the index’s peak level for the year so far, recorded on May 29.

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