Rivers Pittsburgh prices, new deals move up; Cloud Crane on tap; funds jump by $4.3 billion

By Paul Deckelman and Paul A. Harris

New York, July 14 – The high-yield primary market had a more relaxed day on Thursday as just one new deal – casino operator Rivers Pittsburgh – rolled the dice on a $415 million issue of five-year secured paper.

Traders said that junk investors regarded the deal as pretty good bet, taking it higher in aftermarket dealings.

That rise was right in line with the gains posted by the various bond issues that had priced during Wednesday’s much busier $2.73 billion new-deal session.

They said that the new notes of Nexstar Broadcasting Group, Inc., Ashland Inc.’s Valvoline motor oil subsidiary, Holly Energy Partners LP, Extraction Oil & Gas Holdings LLC and Medical Properties Trust, Inc. were all up solidly from their respective issue prices, in busy trading.’

But one new deal that wasn’t going anywhere was Tuesday’s offering from International Wire Group, Inc.

Away from the issues which have actually priced, syndicate sources said that heavy equipment rental company Cloud Crane is expected to price a $470 million eight-year secured issue, probably during Friday’s session.

Another offering on the forward calendar, for intermodal freight company U.S. Xpress Enterprises, Inc., which had been expected to come to market on Friday, is now more likely to get done on Monday or Tuesday.

Statistical market performance measures turned mixed on Thursday, after having been lower across the board on Wednesday – the first setback for those market gauges since June 27 – and higher all around for four straight sessions before that. It was the third mixed session in the last nine trading days.

However, another numerical indicator – flows of investor cash into or out of high-yield mutual funds and exchange-traded funds, which are considered to be a reliable barometer of overall junk market liquidity trends –posted a second consecutive net inflow this week, following three consecutive weekly outflows.

That inflow was the second largest on record, as $4.351 billion more came into those weekly-reporting-only domestic funds than left them in the form of investor redemptions during the week ended Wednesday. That giant-sized inflow followed – and easily dwarfed – the $1.798 billion inflow reported last Thursday for the week ended July 6.

Rivers Pittsburgh prices tight

Rivers Pittsburgh, operator of the Rivers Casino in Pittsburgh, priced Thursday’s sole dollar-denominated deal, a $415 million issue of five-year senior secured notes (B2/B) that came at par to yield 6 1/8%.

The yield printed at the tight end of yield talk in the 6¼% area and inside of initial guidance in the 6½% area.

The offering appeared to go well, according to a trader who spotted the new notes trading at 102 bid, 103 offered in the secondary market.

Goldman Sachs was the left bookrunner. Wells Fargo, Fifth Third and U.S. Bancorp were the joint bookrunners.

Proceeds, together with a $50 million draw on the company’s super-priority revolver and cash on hand, will be used to pay off the existing credit facility, to redeem all outstanding 2019 notes and to fund the repurchase by Pittsburgh Gaming Holdings of holdco notes and minority interests.

Cloud Crane talk 10¼% to 10½%

Only one deal was on deck as Friday business when the market closed on Thursday.

Cloud Crane talked its planned sale of $470 million of eight-year senior secured second-lien notes (B3/B) to yield 10¼% to 10½%.

Official talk comes tight to initial guidance in the 10½% area.

Books close 11 a.m. ET on Friday and the deal is set to price subsequently.

J.P. Morgan, Barclays and Jefferies are the joint bookrunners.

Meanwhile pricing moved north and timing moved back on U.S. Xpress Enterprises’ $320 million offering of eight-year notes, which had been expected to price on Friday.

New preliminary guidance has the deal coming to yield 9½% to 10%, up from the 9% area, and pricing on Monday or Tuesday, sources say.

J.P. Morgan and Wells Fargo have the books for the debt refinancing deal.

Sisal prices €725 million

In the European high-yield market, Italy’s Sisal Group SpA priced €725 million of senior secured notes (B1/B+) in two tranches on Thursday.

The fixed rate tranche priced inside of talk.

The Milan-based gaming company sold €400 million of seven-year fixed-rate notes at par to yield 7%. That yield printed 25 basis points beneath the tight end of the 7¼% to 7½% yield talk.

In addition Sisal priced €325 million of three-month Euribor plus 662.5 basis points six-year floating-rate notes at 99. The spread came at the tight end of spread talk in the 675 bps area. The reoffer price came on top of price talk.

Global coordinator Morgan Stanley will bill and deliver. Credit Suisse and UniCredit are also global coordinators.

BNP Paribas, Deutsche Bank and UBS are joint bookrunners.

Proceeds, together with cash on hand and an equity contribution from CVC Capital Partners, will be used to help fund the acquisition of Sisal by CVC, to pay off Sisal’s existing debt, including the senior secured notes due in 2017, and for general corporate purposes.

Return of a two-way market

The high-yield bond market, which rallied hard in the early part of the week – with ETFs leading the charge (with perhaps a little too much exuberance, some say) – began to moderate somewhat starting Wednesday, sources said.

“The ETFs have been completely crazy,” a trader said, but added that the junk market was “a little more two-sided” on Thursday.

After record daily cash inflows to dedicated high-yield bond funds earlier in the week, those daily flows moderated on Wednesday, the trader said.

High-yield ETFs were flat to slightly negative, sustaining $2 million of outflows on the session.

Actively managed funds, meanwhile, saw $175 million of inflows on Wednesday.

Dedicated bank loan funds saw $100 million of inflows on the day.

The news surfaced as the market awaited a closely followed report from Lipper US Fund Flows on fund cash flows for the week to Wednesday’s close, customarily released shortly after the Thursday close.

In any case, there is plenty of cash to be put to work in junk, the trader said, adding that all the evidence for this that anyone could possibly require could be seen in the strong Thursday secondary market performances of deals that priced on Wednesday.

“There’s plenty of cash,” said the trader.

“The market’s open, but you’re not really hearing anything about a calendar,” the source said, adding that phone calls to the dealers seemed to indicate that deal volume in the week ahead could be light to moderate.

Rivers Pittsburgh rises

In the secondary market, a trader said that the new Rivers Pittsburgh 6 1/8% senior secured notes had moved up to 102 bid, 102¾ offered after pricing earlier in the afternoon at par.

A second trader pegged the gaming company’s new paper at 102 bid, 103 offered.

New deals show gains

A trader said that the rise in those new bonds was in line with the gains notched by all of the new deals which had priced during Wednesday’s hectic session, when $2.73 billion of new paper had come to market in five tranches – the heaviest new-issue volume that Junkbondland had seen since June 13, when $4.905 billion had gotten done in seven tranches, according to data compiled by Prospect News.

At another shop, a trader said that the day’s focus was on digesting all the new issues.

“They all traded fairly well,” he declared.

“Everything that priced yesterday [i.e. Wednesday] was priced on the tights of talk and, for the most part, they were oversubscribed.”

Irving, Texas-based television station ownership group Nexstar Broadcast’s new 5 5/8% notes due 2024 were the most actively traded bonds in the junk market Thursday, a trader said, seeing more than $99 million changing hands.

He saw those notes at 101¼, up around ¼ point from their late levels on Wednesday after that quickly shopped $900 million of paper had priced at par via the company’s Nexstar Escrow Corp. subsidiary.

Nexstar “didn’t really go anywhere” on Thursday, a trader said, seeing the bonds in a 101 to 101¼ bid context, about where they had finished on Wednesday, he said.

Medical Properties moves up

On the other hand, traders saw the new Medical Properties Trust 5¼% notes due 2026 as solid gainers on the day.

A trader quoted the Birmingham, Ala.-based healthcare-oriented REIT’s new deal up 1 point on the day to go home at 102½ bid.

The company had priced $500 million of those notes at par Wednesday via its MPT Operating Partnership, LP unit in a quick-to-market transaction.

Those bonds moved up to 101½ bid in initial trading.

Elsewhere among the new deals, Valvoline Inc.’s 5½% notes due 2024 were seen by a trader up 3/8 point at 103 5/8 bid, with more than $63 million having traded.

The Covington, Ky.-based motor oil manufacturer and marketer, being spun off by chemical maker Ashland, priced $375 million of the notes at par in a regularly scheduled forward calendar offering and those new bonds shot up to the 103 bid level in initial aftermarket dealings.

Another trader on Thursday saw the notes up ½ point at 103 3/8 bid.

Holly Energy Partners’ 6% notes due 2024 were ½ point gainers on the day, a market source said, ending at 102¾ bid, with over $39 million traded.

The Dallas-based petroleum pipeline operator’s $400 million of new notes had priced at par after being twice upsized, from $300 million and then $350 million, coming off the forward calendar. Traders saw them get as good as 102 late in the day on Wednesday.

And Denver-based exploration and production company Extraction Oil & Gas Holdings’ 7 3/8% notes due 2021 gained ½ point on the day to 102½ bid on volume of over $29 million.

That regularly scheduled deal had priced at par on Wednesday after having been upsized to $550 million from $500 million. It hit the 102 mark in initial aftermarket dealings.

Indicators turn mixed

Statistical market performance measures turned mixed on Thursday, after being lower across the board on Wednesday – the first setback for those market gauges since June 27 – and higher all around for four straight sessions before that. It was the third mixed session in the last nine trading days.

The KDP High Yield Index gained 3 basis points on Thursday to end at 69.28, erasing Wednesday’s 3 bps deficit, which had been its first loss after having advanced over the previous 10 consecutive sessions, including robust gains of 37 bps on Monday and 39 bps on Tuesday.

Its yield meantime came in by 4 bps to finish Thursday’s session at 5.49% – a new low for the year – after having been unchanged on Wednesday. Before that, it had tightened over 10 straight sessions, including Tuesday, when it narrowed by 13 bps.

However, the Markit Series 26 CDX Index saw a second loss in a row on Thursday, easing by 1/32 point to end at 104 21/32 bid, 104 23/32 offered. On Wednesday, it had retreated by nearly 1/8 point, its first loss after five straight gains.

The Merrill Lynch High Yield Index rebounded from Wednesday’s loss – its first after four straight upside sessions.

It rose by 0.245%, exactly reversing Wednesday’s 0.245% setback.

That brought its year-to-date return back up to 12.222%, up from Wednesday’s 11.948% return and just marginally shy of Tuesday’s 12.223%, which had been its fourth consecutive new peak level for the year.

© 2015 Prospect News.
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