NRG drives by with upsized $1.25 billion deal; calendar grows; recent issues quiet; Intelsat up, Gibson dives

By Paul Deckelman and Paul A. Harris

New York, July 19 – The high yield primary sphere saw its first billion-dollar-plus sized deal in nearly two weeks on Tuesday, as wholesale power producer NRG Energy, Inc. came to market with a quickly shopped and upsized $1.25 billion of 10.5-year notes, the only deal to get done during the session.

It was the first such megadeal-sized offering to price since Swiss global offshore energy drilling contractor Transocean Ltd. also priced a $1.25 billion offering back on July 7. A number of smaller deals have priced since then.

Traders did not immediately report any initial aftermarket activity in the new NRG notes.

Among other recently priced deals, traders saw a drying up of activity, with only heavy-equipment rental company Cloud Crane LLC’s bonds seen having really generated any kind of volume, as that paper continued to firm.

Apart from the deals which have actually recently gotten done, syndicate sources said that several other prospective new issues were being shopped around in Junkbondland.

These include satellite communications company EchoStar Corp., doing a $1 billion secured note offering via its Hughes Satellite Systems Corp. subsidiary; beauty-care products company Revlon Inc., doing $400 million of eight-year notes; industrial textile manufacturer Xerium Technologies, Inc., shopping a $475 million five-year secured deal; and Irish building products company James Hardie Industries plc, doing a $75 million add-on to its existing 2023 bonds.

Among established issues, traders said that communications satellite company Intelsat SA’s several series of bonds were mostly higher in active dealings.

However, musical instrument maker Gibson Brands, Inc.’s bond were heard to have swooned by at least 10 points, despite a lack of fresh news out about the company.

Statistical market performance measures turned mixed on Tuesday, after having firmed on Monday and having been lower across board on Friday. It was the second mixed session in the last four trading days.

NRG upsizes

In Tuesday's primary market NRG Energy, Inc. priced an upsized $1.25 billion issue of 10.5-year notes (B1/BB-) at par to yield 6 5/8% on Tuesday, according to a syndicate source.

The issue was upsized from $1 billion.

The yield printed on top of yield talk.

Morgan Stanley & Co., Barclays, JP Morgan Securities LLC, BNP Paribas, Citigroup Global Markets, Commerz, Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., ING, MUFG, Natixis and SMBC Nikko were the joint bookrunners.

The wholesale power generation company plans to use the proceeds to fund the full redemption of the NRG 8¼% senior notes due 2020 and the partial redemption of the NRG 7 7/8% senior notes due 2021.

NRG has headquarters in Princeton, N.J., and Houston.

Xerium roadshow

Xerium Technologies, Inc. began a roadshow on Tuesday in New York for a $475 million offering of five-year senior secured notes, according to an informed source.

The roadshow continues in New York on Wednesday, moves to Boston on Thursday, and to Los Angeles on Friday.

The Rule 144A and Regulation S with registration rights offer is set to price in the middle part of the week ahead.

Jefferies LLC is the left bookrunner. Macquarie Capital is the joint bookrunner.

The notes come with two years of call protection.

Proceeds will be used to refinance the existing term loan and unsecured notes.

Xerium Technologies is a Raleigh, N.C.-based manufacturer of industrial textiles and rolls used primarily in the paper production process.

James Hardie tapping 5 7/8% notes

James Hardie Industries plc announced in a Tuesday press release that it plans to place a $75 million fungible add-on to its 5 7/8% senior notes due Feb. 15, 2023.

The Dublin-based building materials company plans to use proceeds from the Rule 144A and Regulation S offer for general corporate purposes.

The original $325 million issue priced at 99.213 to yield 6% in February 2015, in a deal led by BofA Merrill Lynch.

Hughes announces $1 billion

EchoStar Corp., a subsidiary of Hughes Satellite Systems Corp., announced in a Tuesday press release that it plans to offer $1 billion of senior secured notes via Rule 144A and Regulation S.

The Englewood, Colo.-based provider of satellite and video delivery solutions plans to use the proceeds for capital expenditures, working capital and general corporate purposes.

Revlon acquisition deal

Revlon Inc. announced in a Tuesday press release that its wholly owned subsidiary Revlon Consumer Products Corp. plans to sell $400 million of eight-year senior notes via Rule 144A and Regulation S.

Proceeds will be used to help fund the acquisition of Elizabeth Arden Inc., expected to close by the end of the year.

Debt financing for the acquisition is being led by Citigroup Global Markets and BofA Merrill Lynch.

Revlon is a New York-based consumer products company.

Recent deals less busy

In the secondary market, traders did not immediately report any initial aftermarket activity in the new NRG notes.

Among other recently priced issues, a trader said that “they were at similar levels to where they were yesterday [Monday] – but there was not much happening volume-wise.”

He said that “they were bid for, but not very active.

“There really isn’t that much to talk about.

“The new issues just dropped off the map, as far as volume activity,” after some decently sized trading last week and even on Monday.

Cloud Crane, Reynolds trade

One of the few recently priced new deals seen actually trading around was Cloud Crane’s 10 1/8% second-priority senior secured notes due 2024.

A market source said that the bonds moved up by 3/8 points on the session to close at 102 7/8 bid, with around $15 million traded.

A second trader called the notes unchanged at 102 5/8 bid, 102 7/8 offered.

The Pittsburgh-based heavy construction equipment rental company priced $470 million of the notes at par in a regularly scheduled forward calendar deal on Friday. The new notes quickly moved up to and above the102 bid level in heavy initial aftermarket dealings of more than $44 million and have stayed at those lofty levels since then.

Elsewhere, a trader said that he had seen “perhaps $10 million” of the new Reynolds Group Holdings Ltd. 5 1/8% senior secured notes due 2023, pegging the bonds in a 103 5/8 to 104 bid context.

Another trader quoted the bonds up ½ point at 103¾ bid, 104¼ offered.

The Auckland, N.Z.-based maker of Reynolds Wrap aluminum foil and other consumer food packaging products priced $250 million of the notes at 103.5 to yield 4.331% in a quick-to-market add-on offering to its existing bonds on Monday.

Reynolds had priced the original $1.35 billion of those notes at par back on June 13, along with $800 million of 7% senior notes due 2024 and $750 million of five-year senior secured floating rate notes due 2021.

One of the traders opined that “we don’t see many of the new issues today.”

For instance, he said that only around $4 million of the new Valvoline Inc. 5½% notes due 2024 had traded during the day, between 103 5/8 and 103¾ bid.

“All of them were purchased by dealers,” he said.

“Not one account bought the bonds today.”

The Covington, Ky.-based motor oil manufacturer and marketer – being spun off from chemical maker Ashland Inc. – priced $375 million of the notes last Wednesday at par in a scheduled forward calendar deal.

The bonds moved immediately moved up to a 102-to-103 bid context when they hit the aftermarket and have continued firming since then.

Intelsat gains altitude

Away from the new deals, traders saw generally firmer levels in the bonds of Luxembourg-based communications satellite operator Intelsat SA.

Its 8% secured notes due 2024 gained more than a deuce on the day, a trader said, finishing at 93 7/8 bid, on volume of over $29 million.

The company’s Intelsat Jackson Holdings SA 7¼% notes due 2019 gained 1¼ points on the session to close at 71½ bid, with over $11 million traded, he said, while its 7¾% notes due 2021 likewise firmed to 23 bid, , with over $10 million having changed hands.

Gibson gets clobbered

On the downside, a trader said that Gibson Brands’ 8 7/8% notes due 2018 “were down 10 points on the day,” to around 44¾ or 45 bid from prior levels at 55.

He said that over $11 million traded, “with a lot of purchases and sales.

“There were three sales of this Gibson from an account to a dealer and nine purchases from a dealer to an account.”

He did not see any fresh negative news out on the Nashville-based maker of high-end guitars and other musical instruments that might explain the drop.

Indicators turn mixed

Statistical market performance measures turned mixed on Tuesday, after having firmed on Monday and having ben lower across board on Friday. It was the second mixed session in the last four trading days.

The KDP High Yield index eased by 1 basis point, to end at 69.25, after having been unchanged on Monday, its second loss in the last three sessions. On Friday, the index had declined by 2 bps, after having gained 3 bps on Thursday. The index also recently put together a streak of 10 consecutive trading days during which it had advanced.

Its yield meantime was unchanged at 5.51%, after having risen by 1 bp each on both Friday and Monday. Those two small rises occurred after the yield had come in by 4 bps on Thursday. It was the second unchanged yield in the last five sessions.

The Markit Series 26 CDX index was marginally lower on Tuesday, closing at 104 5/8 bid, 104 11/16 offered, after having risen by nearly 3/32 point on Monday after three straight losses which, in turn, followed five straight gains.

The Merrill Lynch High Yield index firmed by 0.024% on Tuesday, its second straight gain after one loss and third gain in the last four sessions. It had improved by 0.021% on Monday.

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