Revived LeasePlan seen firmer; new First Data, Sinclair bonds up; funds gain $1.796 billion

By Paul Deckelman and Paul A. Harris

New York, March 10 – The high-yield primary arena saw a new deal on Thursday that was actually an old deal, as Dutch vehicle leasing company LeasePlan Corp. NV – which had shopped a dollar- and euro-denominated deal around back in February, only to shelve the transaction at that time due to market volatility – opportunistically took its deal off the back burner and brought it front and center, including a $400 million tranche of five-year secured notes.

Traders quoted the new paper firmer.

Also on the upside among the new and recently priced issues were transaction processor First Data Corp.’s add-on to its existing 2024 notes and television station owner Sinclair Broadcast Group, Inc.’s 10-year paper, both of which had priced on Wednesday.

Away from those new or recent deals, copper miner First Quantum Minerals Ltd. rose on news of an asset sale.

Tailored Brands, Inc. – the apparel retailer formerly known as Men’s Wearhouse – shot up as the company unveiled a turnaround plan that includes the closing of 250 stores.

Statistical market performance measures turned higher across the board on Thursday after having been mixed on Wednesday and lower on Tuesday. Before that, the indicators had shown eight consecutive stronger sessions.

Flows of investor cash into or out of high-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall junk market liquidity trends – stayed strongly positive this week, posting their fourth consecutive advance and third straight sizable gain as $1.796 billion more came into those weekly-reporting-only domestic funds than left them in the form of investor redemptions during the week ended Wednesday.

ECB friends LeasePlan

Vehicle leasing company LeasePlan appeared to be the inadvertent beneficiary of a ranging stimulus regime, including lower interest rates and bond purchases, unveiled on Thursday by the European Central Bank, a trader said.

Hours after the ECB news circulated, creating a tailwind for junk bonds in Europe and the United States, LeasePlan sized, talked and priced two tranches of five-year senior secured notes (B1/BB+/BB-) in a transaction that saw the company realize a huge reduction in its cost of capital relative to rates it was looking at in mid-February, when the deal was pulled due to market conditions.

A €1.25 billion tranche of notes priced at par to yield 6 7/8%. The euro-denominated notes priced at the tight end of re-launch yield talk in the 7% area. That talk had been truncated from original yield talk of 7½% to 7¾%.

A $400 million tranche priced at par to yield 7 3/8%, at the tight end of relaunch yield talk in the 7½% area. However, as with the euro tranche, the dollar-denominated notes priced well inside of the original talk in the 8¼% area.

A proposed tranche of euro-denominated seven-year notes was abandoned.

Prior to the entire deal being pulled that longer maturity euro-denominated tranche had been talked at 8% to 8¼%.

The deal was pretty much circled up when the relaunch was announced earlier this week, a London-based sellside source said.

And others concurred that when the deal returned it enjoyed notably smooth sailing.

Joint bookrunner JPMorgan will bill and deliver. Goldman Sachs International, Credit Suisse and ING are also joint bookrunners.

Proceeds will be used to help fund the buyout of the Flevoland, Netherlands-based company by a consortium of investors.

The issuing entity is special-purpose vehicle Lincoln Finance Ltd.

Elsewhere on Thursday, in crossover action Masco Corp. sold $900 million of senior notes (Ba2/BBB/BB+) in two tranches.

The deal included $400 million of 3½% five-year notes that priced at Treasuries plus 212.5 basis points, versus spread talk in the 225 bps area, and $500 million of 4 3/8% 10-year notes which priced at Treasuries plus 250 bps, versus talk in the 262.5 bps area.

Citigroup was the left bookrunner for the deal which priced on the investment grade desk and did not appear to be generating significant interest among high-yield investors, sources said.

Thin calendar

With LeasePlan having cleared, just on deal remained on the forward calendar.

TRAC Intermodal LLC and TRAC Intermodal Corp. are marketing $485 million of second lien notes due 2021.

The deal is set to price before the Friday close.

No formal price talk was circulated on Thursday, sources said.

Early guidance is 10%, but it could come wider, as interested investors are looking for more coupon and covenant concessions, a portfolio manager said.

LeasePlan up in aftermarket

In the secondary realm, a trader said that the new LeasePlan 7 3/8% secured notes due 2021 “seemed to be doing well” in initial aftermarket activity.

He quoted the issue as high as 102 bid, 103 offered – well up from its par issue price.

First Data, Sinclair gain

Wednesday’s offerings from First Data Corp. and from Sinclair were both seen better on the day, in active dealings.

A trader said that more than $83 million of Atlanta-based electronic transactions processor First Data’s 5% notes due in January 2024 had changed hands, making it easily the most active credit in Junkbondland.

He saw the bonds trading during the afternoon between par and 101 1/8 bid – up from the 99.5 level at which the $900 million add-on to its existing notes had priced, yielding 5.076%.

That drive-by offering came to market after having been upsized from $500 million originally.

The trader said that actually, “in the morning, they were trading a little higher,” in a context of 100 7/8 to 101 1/8.

However, by the afternoon, he said, they had “dropped back a little’ from those early peaks; he saw the final prints on the day come between 100 1/8 and 100½ bid.

A second trader sighted the bonds going home at par, calling them up ½ point on the session.

The new Sinclair 5 7/8% notes due 2026 pushed up above the 102 bid level in Thursday’s dealings, with a trader seeing more than $31 million having moved around.

He said that during the day, the bonds had circulated in a 101 5/8 to 102 3/8 bid context.

A second trader had the bonds at 102¼ bid going home, up 7/8 point.

Sinclair, a Baltimore-based television station group operator, priced $350 million of the notes at par in a quick-to-market transaction Wednesday via its Sinclair Television Group, Inc. subsidiary.

When those new notes were freed to trade, they quickly moved up to a 101½ to 101¾ bid context on volume of more than $66 million, tops on the session Wednesday.

First Quantum gains on sale

Away from the new issues, the news that First Quantum Minerals had agreed to sell its Kevitsa nickel-copper-platinum group elements mine in Finland for $712 million pushed the Toronto-based metals miner’s bonds up solidly.

A trader said that the company’s paper “has been gapping up.

“Yesterday [Wednesday], they were trading in the mid-60s, today [Thursday], they were north of 70.”

He saw its 7¼% notes due 2022 up 5¼ points on the day, while the 7% notes due 2021 were 5 points better at 70 and its 6¾% notes due 2020 were up 4 points at 70.

At another shop, a trader pegged the 7¼s at 69 bid, while the 7s were at 70.

Men’s Wearhouse moves up

Tailored Brands – the new name for the Houston-based men’s apparel retailer once known as Men’s Wearhouse – announced that it plans to close about 250 underperforming stores around the country out of its 1,700 outlets. Including will be at least 80 to 90 of its Jos. A. Bank stores, which have been a particular drag on earnings since the unit was acquired for $1.8 billion.

Although the company reported worse financial results – a fourth-quarter loss of $1.06 billion, or $21.86 a share, versus a year-ago loss of $35.9 million, or 75 cents a share and, excluding impairment charges and other items, 30 cents per share of red ink, 10 times its 3 cents loss a year ago – the news that it was moving to stanch the money hemorrhage by closing the underperforming stores helped both its bonds and shares.

The 7% notes due 2023 jumped 5¼ points to 83¼ bid, a trader said, on volume of over $36 million.

Meanwhile, its New York Stock Exchange-traded shares shot up by $1.46, or 8.92%, to $17.82. Volume of 4.4 million was almost three times the norm.

Toys posts improved profit

Also in the retailing world, Toys “R” Us Inc.’s 7 3/8% notes due 2018 put on 1½ points in Thursday trading to close at 73 bid, according to a market source.

The gains came as the Wayne, N.J.-based toy retailer reported its fourth-quarter and full-year results late Wednesday.

For the quarter, the company turned a $276 million profit, which compared to a profit of $265 million the year before. For the year, net profit came to $130 million. That compared to a loss of $292 million for the previous fiscal year.

Full-year adjusted EBITDA was $800 million, up from $642 million the year before.

Toys blamed a decline in the year’s net sales to unfavorable currency exchange rates. Net sales fell to $11.8 billion, a drop of $559 million.

Still, same-store sales improved nearly 1%. Internationally, same-store sales gained 3.2%. Domestically, they were down 0.6%.

Clayton Williams slides

On the downside, Clayton Williams Energy Inc.’s 7¾% notes due 2019 were seen by a trader down more than 6 points on the session at 39 bid, after the Midland, Texas-based oil and natural gas exploration and production company reported fourth-quarter results that fell short of analysts’ estimates.

It also discussed a $350 million secured term loan financing that company executives said will give it “a runway” of two to three years (see related story elsewhere in this issue).

However, the deal also adds a sizable new dollop of debt senior to its existing bonds to its capital structure.

Indicators turn firmer

Statistical market performance measures turned higher across the board on Thursday after having been mixed on Wednesday and lower on Tuesday. Before that, the indicators had shown eight consecutive stronger sessions.

The KDP High Yield Daily Index edged up by 3 basis points on Thursday to 65.09, after losing 16 bps on Wednesday, its second straight loss after eight consecutive gains.

Its yield was unchanged at 6.82%, after having risen by 5 bps on Wednesday, the yield’s second straight widening, after eight straight sessions in which it narrowed.

The Markit Series 25 CDX North American High Yield Index posted its second straight gain, improving by 11/16 point to end at 102½ bid, 102 9/16, on top of Wednesday’s ¼ point advance. It was its 10th gain in the last 11 sessions.

The Merrill Lynch North American High Yield Master II Index was up by 0.326%, its first gain after 2 straight losses, but its 9th gain in the last 11 sessions. It had retreated by 0.179% Wednesday, on top of Tuesday’s 0.092% loss – its first such downturn after eight wins in a row.

Thursday’s gain raised the index’s year-to-date return to 1.73% from 1.399% on Wednesday. It was a new peak level for the year, surpassing the previous zenith of 1.675% set on Monday.

-Stephanie N. Rotondo contributed to this review

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