Post prices upsized 10-year, current bonds firm; Sprint up on numbers, Outerwall on M&A, Clayton Williams gains

By Paul Deckelman and Paul A. Harris

New York, July 25 – The high yield primary opened the last trading week of July by serving up a big deal from breakfast cereal giant Post Holdings, Inc., which priced a quickly shopped and upsized $1.75 billion of 10-year notes. Traders initially quoted the notes modestly higher, but later pegged them around their issue price.

Post’s existing 2022 notes – which are to be refinanced using the proceeds from the new deal – firmed smartly, in active dealings.

Syndicate sources said that building products maker Eagle Materials Inc. began shopping a $300 million of 10-year notes around, with pricing expected late in the week.

Away from new-deal names, traders said that Sprint Corp.’s various bonds were multiple points higher across the wireless service provider’s capital structure, after it reported unexpectedly favorable fiscal first-quarter results.

Outerwall Inc. – operator of the ubiquitous Redbox movie and video game rental kiosks – was the big winner on the day, jumping more than 15 points in active trading on the news that it will be acquired by private equity firm Apollo Global Management LLC.

Energy-sector credits such as California Resources Corp. and Oasis Petroleum Inc. lost multiple points, in line with a big downturn in world crude oil prices. But sector peer Clayton Williams Energy, Inc. bucked the negative trend, rising solidly after it said that it will sell $150 million of common stock and may use proceeds from that capital raising to reduce its outstanding bond debt.

Statistical market performance measures turned mixed on Monday after having been higher across the board on Friday. It was the second mixed session in the last three trading days.

Post upsizes

Post Holdings Inc. priced Monday's sole dollar-denominated deal, an upsized $1.75 billion issue of 10-year senior notes (B3/B) that came at par to yield 5%.

The issue size was increased from $1.5 billion.

The yield printed at the tight end of the 5% to 5¼% yield talk. Initial guidance had the notes pricing with a yield in the low-to-mid 5% area.

Barclays was the lead left bookrunner. BofA Merrill Lynch, Credit Suisse and Goldman Sachs were the joint bookrunners.

The St. Louis-based consumer packaged goods holding company plans to use the proceeds to refinance its 7 3/8% notes due 2022 and for general corporate purposes.

Eagle Materials this week

Eagle Materials Inc. announced a $300 million offering of 10-year senior notes expected to price on Friday.

J.P. Morgan, BofA Merrill Lynch, Wells Fargo and BB&T are joint bookrunners.

The Dallas-based manufacturer plans to use the proceeds to repay approximately $295 million under its revolver.

Meanwhile price talk is due out on Tuesday on the Xerium Technologies, Inc. $475 million offering of five-year senior secured notes, via Jefferies and Macquarie. Meanwhile investors are being guided toward a yield in the 8½% area.

The deal has a five-year non-call-two structure with a special call that allows the issuer to redeem 10% of the notes annually at 103 during the non-call period.

Elsewhere the active new issue calendar is thin, and may remain relatively thin, even though players on all sides are looking to the calendar as a place to put cash.

Things are presently tight in the secondary market, a banker said on Monday.

Some issuers are refraining from bringing deals because of earnings blackouts.

Others that could bring deals don't have much use for proceeds, the banker said, adding that this is a sign that reverse inquiry is afoot in the market.

Meantime issuers and dealers, with a view that the issuing window won't remain open indefinitely, would prefer to come to market sooner than later, the banker said.

Mixed flows on Friday

The cash flows of the dedicated high yield bond funds were mixed on Friday, the most recent session for which data was available at press time.

High yield ETFs sustained $220 million of outflows on the day.

Actively managed funds saw $60 million of inflows.

Dedicated bank loan funds saw $5 million of daily inflows on Friday.

eircom taps 4½% notes

Dublin-based telecom company eircom Finance DAC priced a €200 million add-on to its 4½% senior secured notes due May 31, 2022 at 101.50 to yield 4.07%.

The reoffer price came at the rich end of the 101.25 to 101.5 price talk.

Joint global coordinator and joint bookrunner Deutsche Bank will bill and deliver for the debt refinancing deal. Credit Suisse and Goldman Sachs were also joint global coordinators and joint bookrunners.

Barclays, BNP Paribas, DNB, JP Morgan and Morgan Stanley are joint bookrunners.

“We are very pleased with the outcome of the transaction,” Huib Costermans, the company's chief financial officer, said in the late Monday press release.

“We took the opportunity to further optimize our cost of capital and to rebalance our sources of funding.

“This, coupled with the original notes offering and the recent introduction of a €150 million revolving credit facility, further strengthens eir's capital structure.”

Ineos €1.1 billion two-part deal

Ineos Group Holdings SA is expected to price €1.1 billion equivalent of senior notes (expected ratings B3/B-) on Tuesday.

The debt refinancing deal is coming in dollar-denominated notes with initial guidance in the 5¾% area, and euro-denominated notes with initial guidance in the 5 3/8% area, a trader said.

Tranche sizes and official price talk remain to be announced.

Global coordinator BofA Merrill Lynch is the left bookrunner for the dollar-denominated tranche and will bill and deliver for that tranche.

Global coordinator JP Morgan is the left bookrunner for the euro-denominated tranche and will bill and deliver for that tranche.

Barclays, Credit Suisse, HSBC, Lloyds and Royal Bank of Scotland are the joint bookrunners.

New Post notes around par

In the secondary market, a trader quoted the new Post Holdings 5% notes due 2026 around par bid, right where the St. Louis-based maker of such popular cereal brands as Post Raisin Bran, Shredded Wheat, Honeycomb, Grape-Nuts, Golden Crisp and Fruity Pebbles priced its upsized issue.

A second trader initially quoted the new notes in a 100½-to-101 bid context, but later said that they had fallen back to around a par-to-100¼ range.

Existing Post bonds pop on tender

Post said that it plans to use the proceeds from the new deal to refinance its existing $1.375 billion of 7 3/8% notes due 2022, separately announcing a tender offer for those bonds that will run through this Friday, July 29, at a price of $1,070.83 per $1,000 principal amount plus accrued interest.

Accordingly, a market source said, those existing bonds rose by around 1½ points, to just above the 107 bid mark, on volume of over $26 million.

NRG notes easier

Among recently priced issues, a trader said that NRG Energy, Inc.’s new 6 5/8% notes due in January 2027 “were busy, but trading below par.”

He saw the notes “off a little” at 99¾ bid.

A second trader pegged those notes at 99 5/8 bid, calling them down 3/8 point on the day, on volume of over $29 million.

The Princeton, N.J.-based wholesale power producer priced $1.25 billion of those notes last Tuesday at par, after the quick-to-market offering had been upsized from an originally announced $1 billion.

The notes traded at, or slightly above their issue price for the remainder of last week, before dipping below par on Monday.

Sprint runs up on earnings

Away from the new or recently priced issues, a trader said that Sprint Corp.’s paper “was pretty active, after the company released earnings.”

He called the bonds “up 1 to 3 points across their [capital] structure, in fairly active trading.

“It was probably the busiest name.”

At another desk, a trader said that the Overland Pak, Kan.-based No. 3 U.S. wireless provider’s 7 7/8% notes due 2023 topped Junkbondland’s volume list with over $43 million having changed hands.

He saw the notes up 3¾ points, at 94¼ bid.

Also among the Most Actives were Sprint’s 8¾% bonds due 2032, which rose by 3 points, to 95½ bid, with over $34 million traded.

Sprint’s 7 1/8% notes due 2024 were also 3-point gainers on the day, ending at 90 5/8 bid, as over $29 million moved around.

And its 7% notes due 2020 were seen up 1¾ points, at nearly 97 bid, on $24 million of turnover.

Sprint’s bonds shot up – while its New York Stock Exchange-traded shares zoomed by $1.28, or 27.71%, to $5.90, on more than 8 times the usual equity volume – after the company reported fiscal first-quarter revenue of $8.012 billion, while analysts had expected around $7.97 billion.

Its adjusted net loss narrowed to 6 cents per share, below Wall Street expectations of around 8 cents per share of red ink.

Sprint also reported better subscriber numbers, as it added 180,000 retail postpaid connections, bringing its total at the quarter end up to 30.945 million, a 3.1% year over year gain.

While Sprint lost 331,000 net prepaid connections, it gained 528,000 net wholesale connections.

Outerwall outperforms

The day’s biggest gainer was Outerwall Inc.’s 7/8% notes due 2021, which soared as high as the 102 bid level from last week’s levels in the mid-80s, finally closing at 100¾ bid – still a gain of around 15 points on the session, with over $33 million of the notes traded.

The Bellevue, Wash.-based operator of more than 40,000 Redbox movie- and video-game rental kiosks in the U.S. and overseas and over 20,000 Coinstar coin-collection kiosks jumped on the news that it will be acquired by Apollo Global Management for $895 million in cash.

Including assumed net debt, the transaction has an enterprise value of $2.6 billion.

Clayton Williams gains

World crude prices fell for a second straight session, hurting such credits as California Resources’ 8% notes due 2022, down 2¼ points at 66¾ bid, or Oasis Petroleum’s 6 7/8% notes due 2022, which dropped by 4 full points to 89.5 bid.

But Midland, Texas-based sector peer Clayton Williams Energy’s 7¾% notes due 2019 climbed by 3¾ points on the day, to 89¼ bid, with over $8 million traded, after the company announced plans to raise $150 million though a private equity placement, and said it might use some of the proceeds to reduce the $600 million of outstanding 2019 bonds.

Indicators turn mixed

Statistical market performance measures turned mixed on Monday after having been higher across the board on Friday. It was the second mixed session in the last three trading days.

The KDP High Yield index lost 6 basis points on Monday to close at 69.29, after having gained 10 bps on Friday. It was the index’s second loss in the last three sessions.

Its yield meantime rose by 3 bps, to 5.51%, after come in by those same 3 bps on Friday. It was the second widening in the last three sessions.

The Markit Series 26 CDX index fell back by 11/32 point on Monday to end at 104 13/32 bid, 104 7/16 offered, after having moved up by 7/32 point on Friday. It was the index’s second loss in the last three sessions.

But the Merrill Lynch High Yield index continued to roll along, unscathed, as it posted its sixth straight gain and its seventh advance in the last eight sessions on Monday, firming by 0.022%, nearly identical to Friday’s 0.023% upturn.

Monday’s improvement raised the index’s year-to-date return to 12.546%, a fifth consecutive new peak year-to-date return, up from the previous zenith of 12.52%, set on Friday.

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