GM Financial drives by with $1.5 billion two-parter in otherwise quiet post-holiday session

By Paul Deckelman and Paul A. Harris

New York, July 7 – The junk bond market got back to work on Monday following the July 4th holiday break with one very big deal heard by syndicate source to have priced: a quickly shopped $1.5 billion two-part issue from General Motors Financial Co., Inc., the Fort Worth, Texas-based captive auto-finance arm of General Motors Co.

While secondary market traders did see some quotes after the megadeal priced, they noted that with the transaction having come off the investment-grade desks of the various underwriters despite its nominally high-yield ratings, and with the deal having priced to produce very tight and un-junk-like yields – below 3% on the three-year tranche and below 4% on the five-yield piece – they didn’t expect the deal to see much activity from traditional junk bond investors.

GM Financial was the only dollar-denominated, junk-rated deal to have priced Monday.

The syndicate sources said that one other such deal had been announced – a $1.185 billion two-part offering from Paragon Offshore Ltd., a provider of oil-drilling services. The eight-year-and 10-year notes were being shopped around to potential investors via a roadshow, with pricing seen at the end of the week.

There was also activity in the non-dollar market, including a pricing of a euro-denominated deal from Greek telecommunications provider OTE plc and a number of announcements of upcoming transactions.

Back in the dollar-denominated segment, traders said the day was uniformly boring, although they held out the hope that activity levels might pick up with the pricing of expected new deals later on in the week.

Among established issues, bonds of the company formerly known as Radiation Therapy Services Inc. slid, though most of the activity was in smallish odd-lot trades. With no fresh news seen out on the company, there was no immediate explanation for the downturn.

Now known as 21st Century Oncology Holdings, Inc., the medical services provider decided several weeks ago to postpone a planned initial public stock offering and to cancel a planned credit facility deal.

Verso Paper Co.’s notes continued to gyrate around in the wake of the coated paper manufacturer’s newly announced exchange offer for two series of its debt, which it hopes will be more successful than a similar offer with less generous terms that it was forced to terminate back in February.

Statistical market-performance indicators were seen mixed for a fourth consecutive session on Monday.

GM Financial drive-by deal

GM Financial priced Monday's sole dollar-denominated junk deal: $1.5 billion of non-callable senior notes (Ba2/BB-/BB+) in two tranches.

The deal, which came as a drive-by, included a $700 million tranche of three-year notes, which priced at par to yield 2 5/8%. The yield printed on top of yield talk that had been revised from earlier talk in the 2¾% area.

In addition, the company priced an $800 million tranche of five-year notes at par to yield 3½%. The yield printed on top of yield talk that had been revised from earlier talk in the 3 5/8% area.

The offering was announced at benchmark size on Monday morning and was subsequently priced on the investment-grade desk.

Credit Suisse, Barclays, BofA Merrill Lynch and Citigroup were the joint bookrunners.

Paragon two-part offer

Paragon Offshore began a roadshow on Monday for a $1,185,000,000 two-part offering of senior notes (Ba3/B+).

The deal, which is expected to price on Friday, is coming in tranches of notes maturing in 2022 and non-callable for three years and notes due 2024 and non-callable for five years.

Deutsche Bank and J.P. Morgan are the joint global coordinators.

Barclays, Citigroup, Credit Agricole, Credit Suisse, HSBC, SunTrust and Wells Fargo are the joint bookrunners.

Proceeds will be used to help fund the spinoff of Paragon Offshore, a Houston-based offshore drilling company, from Noble Corp.

Although the news flow was thin in Monday's dollar-denominated primary market, look for things to pick up on Tuesday with perhaps two or more deals being announced in the energy sector, a source advised.

Other announcements are expected during the post-Independence Day week.

OTE upsizes

The euro- and sterling-denominated primary markets were busy in a Monday session rife with new deal announcements.

One deal priced.

OTE came to market with an upsized €700 million issue of 3½% six-year senior notes (confirmed B2/expected BB-) at a 280 basis points spread to mid-swaps.

The debt refinancing deal was upsized from €500 million.

The spread came on top of spread talk that was revised from earlier talk of 290 to 300 bps.

The notes sold at 99.284 to yield 3.635%.

Deutsche Bank and Morgan Stanley managed the sale.

Dufry starts roadshow

Switzerland-based Dufry Group began a roadshow on Monday for a €500 million offering of eight-year senior notes.

The debt refinaning deal is expected to price mid-to-late in the present week.

Joint bookrunner Royal Bank of Scotland will bill and deliver. Goldman Sachs is also a joint bookrunner.

THOM Europe two-part offer

Paris-based jewelry retailer THOM Europe began a roadshow on Monday for a €345 million two-part offering five-year seniors secured notes.

The debt refinancing deal is expected to price on Friday.

The deal features a €200 million minimum tranche of fixed-rate notes, non-callable for two years, and to-be-determined amount of floating-rate notes with one year of call protection.

Global coordinator and physical bookrunner Goldman Sachs will bill and deliver. Credit Suisse is also a global coordinator and physical bookrunner. SG CIB and Lloyds are joint bookrunners.

CMC secured notes

Italian construction firm CMC Group began a roadshow on Monday for its €300 million offering of seven-year senior secured notes (/B/).

The roadshow wraps up on Thursday.

BNP Paribas and UniCredit are the global coordinators. Banca IMI is the joint bookrunner.

The Ravenna Italy-based company plans to use the proceeds to refinance debt and for general corporate purposes.

Iceland Foods starts Tuesday

In the sterling-denominated market, Iceland Foods plans to start a roadshow on Tuesday for £955,000,000 of senior secured notes (expected ratings B1/B+) in three tranches.

The deal includes a £275 million tranche of five-year floating-rate notes with one year of call protection, a £430 million tranche of seven-year fixed-rate notes with three years of call protection and a £250 million tranche of 10-year fixed-rate notes with five years of call protection.

The roadshow wraps up on Thursday.

Global coordinator Credit Suisse will bill and deliver. JPMorgan is also a global coordinator. HSBC is a joint bookrunner.

Proceeds will be used to refinance debt.

Iceland Foods is a Deeside, Wales, United Kingdom-based food retailer specializing in frozen foods.

TSL roadshows £300 million

TSL Education Group Ltd. began a roadshow on Monday for a £300 million two-part offering of six-year senior secured notes (B2//).

The deal is expected to price during the middle part of the present week.

The offer is coming in tranches of fixed-rate notes, non-callable for two years, and floating-rate notes, non-callable for one year.

Goldman Sachs International is on the left.

The London-based education services provider plans to use the proceeds to refinance debt, to fund repayment of shareholder loans, and to finance the acquisition of Vision for Education Ltd.

GM deal little seen

In the secondary market, a trader said that all that he saw was the pricing of the new GM Financial deal and no actual trading in the bonds.

A second trader said late in the afternoon that he “hadn’t even seen a quote in it.”

Another trader did quote the new 2 5/8% notes due 2017 in a par-to-100½ context, following their par pricing. He said that the 3½% notes due 2019 were quoted between 100 1/8 and 100 5/8 offered, also versus a par issue price.

The second trader said that he’d “have to look out in the Street, but I’m not seeing anything going on with the high-yield brokers. Maybe the underwriters tried to trade them.”

Of the latter group, he marveled that “they invited everybody” – bookrunners Credit Suisse Securities, Barclays, BofA Merrill Lynch and Citigroup, as well as a long list of co-managers.

He further noted that the new bond deal “is [Security and Exchange Commission] registered,” rather than a Rule 144A deal, “so they’re selling them to individuals.”

“They’ll go from hedge funds, or whoever they allocated them to, to individuals. The deal will be an odd-lot extravaganza,” the trader added.

‘A wasted day’

A trader called Monday’s post-holiday back-to-work session “pretty uneventful.”

Apart from the GM Financial deal, it was “a boring, quiet day.”

“It was not a terribly exciting day,” a second trader agreed. “As a matter of fact, it was a very boring day.”

He added: “Unless you were trading in bank preferreds and hybrids, there was nothing going on in crossover.”

All in all, “it was kind of a wasted day,” he declared, “for those of us that are in.”

However, he suggested that things could pick up as the week wears on.

He said that he had heard “a couple of energy deals” could be announced on Tuesday, and “a few other deals” before the end of the week on top of Paragon Offshore’s massive two-part offering slated for later in the week.

“We should get four or five deals, at least, this week. So there will be some more stuff coming.”

Radiation Therapy rout

Traders saw little or nothing going on in such recently priced credits as Thursday’s megadeal-sized offering from Maryland-based power provider RJS Power Holdings LLC or Wednesday’s big deal from Nashville-based healthcare facilities operator AmSurg Corp.

Among established issues, a market source noted a sharp fall in the Radiation Therapy 9 7/8% notes due 2017. Those bonds had gone home at the end of last week trading in a 91-92 context, but after opening around those same levels Monday morning, they began dropping into the 80s, hammered down to as low as 83 bid in a series of smallish odd-lot dealings.

Then during the afternoon, there were several big round-lot trades that left the bonds bid at 80½.

There was no fresh news out on Monday about the Fort Meyers, Fla.-based radiation oncology services company – now officially known as 21st Century Oncology Holdings – that might explain the downturn.

The company had been planning an IPO, but scrubbed it in late May due to unfavorable market conditions.

At the same time, it pulled the plug on a planned $640 million first-lien bank facility that would have consisted of a $430 million term loan and a $210 million revolving credit line.

Verso retrenches after gains

Elsewhere, Verso Paper remained in focus following last week’s news regarding an exchange offer in connection with the company’s planned merger with NewPage Corp.

But while the news of the sweetened exchange had initially resulted in gains in Thursday’s trading, the bonds were coming in a bit come Monday.

One trader said the 11¾% “one-and-a-half liens” due 2019 were “a little bit lower” at 93¾. That compared to a 95 to 96 context seen on Thursday.

As for the 8¾% second-priority senior secured notes due 2019, those were also lower, trading around 60, he said.

Still, the trader noted that the debt overall was “up a lot over the past couple of weeks.”

At another desk, the 11¾% notes were also pegged at 93¾, down from 95.

The 8¾% notes were seen around 60, versus previous levels of 61½ bid, 62 offered.

And, the 11 3/8% notes due 2016 were quoted at 62¼ bid, 62½ offered.

Late Wednesday, Memphis-based papermaker Verso said it had revised terms of an exchange offer linked to its planned merger with Miamisburg, Ohio-based NewPage. It had originally tried to take out several series of its bonds via an exchange offer announced in January, but was forced to cancel it by later February due to a lack of positive response from investors holding out for better terms.

Under the new terms, holders of the 8¾% notes will receive $950 of new second-lien notes and warrants if tendered by the early deadline. After that deadline, holders will get $668.75 of new notes and warrants.

Investors holding about $213 million of the $396 million principal amount issue have already agreed to participate in the exchange, the company said in a press release.

Holders of the 11 3/8% notes – a $142 million issue – will receive $950 of new subordinated notes and warrants if tendered by the early deadline. After that deadline, holders will get $681.875 of new notes and warrants.

Additionally, the company, which struggled to get the necessary level of participation when it first launched the exchange offer, lowered the minimum threshold level that it must get in order for the merger to move forward, dropping it to 75% from 85%.

The early tender deadline is midnight ET at July 16. The deal expires on July 30.

Market indicators stay mixed

Statistical indicators of junk market performance meanwhile remained mixed for a fourth consecutive session on Monday.

The KDP High Yield Daily index dropped by 2 basis points to end at 74.88, its third consecutive downturn. The index was not published on Friday because of the holiday. On Thursday, it had lost 5 bps.

The yield rose by 1 bp to 4.98%, its third straight widening. On Thursday, it had risen by 3 bps.

The Markit CDX Series 22 index slid by 21 bps on Monday to close at 108 7/8 bid, 108 15/16 offered, its second straight loss. Although the market was not formally in session on Friday, the index was published and declined marginally, after having risen by 7/32 on Thursday.

But the widely followed Merrill Lynch High Yield Master II index notched its sixth consecutive gain on Monday, firming by 0.051%, lifting its year-to-date return to 5.751%, a new peak level for 2014.

That was up from 5.697% on Friday, when the index was published despite the market close, gaining 0.018% on the day. It was also up from a 5.678% reading on Thursday, when it had risen by 0.003%, and was up as well from the previous peak level for the year of 5.727% on June 24.

Stephanie N. Rotondo contributed to this review

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