Morning Commentary: New Rivers Pittsburgh bonds hold most gains; Cloud Crane seen on tap

By Paul Deckelman

New York, July 15 – The junk bond market opened quietly on Friday, with one prospective new deal expected to price.

Secondary market players, meanwhile, noted that most recent new offerings continue to trade at sizable premiums to their issue prices.

They were also keeping an eye on the equity, Treasury and other financial markets for any signs of volatility in the wake of the latest major terrorism attack, on Thursday in France – although the major U.S. stock indexes were trending slightly higher in Friday morning dealings.

Cloud Crane expected

Junkbondland primaryside players were expecting one new deal to price during Friday’s session off the forward calendar.

Cloud Crane, a Pittsburgh-based heavy-equipment rental service, is expected to come to market with $470 million of eight-year senior secured second-lien notes (B3/B).

Price talk on the deal late Thursday was for a yield of 10¼% to 10½% – tight to initial guidance in the 10½% area.

The books on the offering are scheduled to close at 11 a.m. ET on Friday, and the deal is set to price subsequently.

J.P. Morgan Securities LLC, Barclays and Jefferies & Co. are the joint bookrunners.

Meanwhile, word had circulated in the market late Thursday that timing had moved back and pricing moved north on U.S. Xpress Enterprises Inc.’s planned $320 million of eight-year notes, which was originally 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.

JPMorgan and Wells Fargo Securities LLC have the books for the Chattanooga, Tenn.-based intermodal freight company’s debt refinancing deal.

Rivers Pittsburgh trades up

Traders said that the new Rivers Pittsburgh Borrower LP/Rivers Pittsburgh Finance Corp. 6 1/8% senior secured notes due 2021 that priced on Thursday were slightly off their Thursday peak levels early Friday but still well above their issue price.

One quoted the bonds in a 101¾ to 102 bid context, while a second located them between 101¾ and 102¼ bid.

That was off slightly from levels topping 102 bid seen late Thursday.

The bonds – issued by the operator of the Rivers Casino in Pittsburgh – were priced at par on Thursday as a regularly scheduled forward calendar offering, and then were heard to have moved up late in the day.

Proceeds from the $415 million offering, together with a draw on the company’s 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.

Recent issues hold levels

Among other recently priced new issues, Irving, Texas-based television station ownership group Nexstar Broadcasting Group, Inc.’s new 5 5/8% notes due 2024 were seen on Friday morning trading around 101 bid, on volume of more than $8 million.

On Thursday, those bonds had been the most actively traded paper in the junk market, with more than $99 million changing hands and going home at around 101¼, up around ¼ point from their late levels on Wednesday after that quickly shopped $900 million of paper had priced at par.

Elsewhere among the new deals, Valvoline Inc.’s 5½% notes due 2024 were holding on to the lofty levels they hit shortly after pricing, seen Friday morning at 103½ bid, with around $6 million having traded.

On Thursday, they had finished out the day up 3/8 point at 103 5/8 bid, on volume of more than $63 million.

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

Holly Energy Partners LP’s 6% notes due 2024 were being quoted Friday morning at 102½ bid, but trading volume was light, with only one round-lot trade seen, plus a number of smaller odd-lot transactions.

On Thursday, the bonds had been ½ point gainers on the day, 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. Traders saw them get as good as 102 late in the day on Wednesday and continue to hold, and expand those gains, on Thursday.

Denver-based exploration and production company Extraction Oil & Gas Holdings LLC’s 7 3/8% notes due 2021 were holding steady on Friday morning at 102½ bid, with around $2 million traded in large-bloc trades.

That was about unchanged from their close on Thursday, when they had gained ½ point on the day to end at 102½ bid on volume of over $29 million.

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

And a market source saw the new Medical Properties Trust Inc. 5¼% notes due 2026 also holding steady early Friday around the same 102½ bid level at which the Birmingham, Ala.-based health care-oriented REIT’s new deal had finished on Thursday, when it was up 1 point on the day.

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, and the bonds had moved up to 101½ bid in initial trading.

Paul A. Harris contributed to this review

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