Watco, Jefferies, Avis lead $2 billion primary session; new Chesapeakes firm, 2019s stay busy

By Paul Deckelman and Paul A. Harris

New York, March 19 - Fresh from Monday's nearly $4 billion megadeal extravaganza, which saw issues of $1 billion or more pricing from Chesapeake Energy Corp. and CenturyLink, Inc., the high-yield primary sphere went back to grinding it out on Tuesday with a series of smaller deals that still ended up bringing nearly $2 billion of new fully junk-rated, dollar-denominated paper to market.

Besides scheduled offerings off the forward calendar from railroad operator Watco Cos. LLC, which priced $400 million of 10-year notes, and from Jefferies Finance LLC, which did an upsized $600 million of seven-year paper, Junkbondland also saw several opportunistically timed, quickly shopped deals come to market.

Familiar issuer Avis Budget Car Rental LLC drove by with an upsized $500 million of 10-year notes, as did another automotive-related borrower - components manufacturer Cooper-Standard Holdings Inc. with its $175 million of five-year PIK toggle notes.

Away from the auto names, Caribbean and Pacific wireless operator Digicel Ltd., which priced $1 billion of eight-year notes just last month, paid a return visit on Tuesday with a an upsized $300 million add-on. There was also a euro-denominated pricing from a unit of packaging manufacturer Owens-Illinois Group, Inc.

Traders said that the Watco and the Jefferies offerings each firmed smartly when they were freed for secondary dealings. The day's other transactions came too late in the session for any real aftermarket activity, although Avis' existing 2018 bonds, which are to be taken out via a tender offer funded by its new deal proceeds, moved solidly higher in busy trading.

The traders also saw nicely firm levels in Chesapeake's huge new deal from Monday, as well as in CenturyLink's new bonds. But they said Monday's other offering - Sinclair Television Group Inc.'s eight-year paper - stayed right at its par issue price.

Away from the issues actually priced, syndicate sources heard talk out on French electrical products maker Rexel SA's dollar- and euro-denominated seven-year notes and also said that communications satellite company Intelsat (Luxembourg) SA is shopping a $1.5 billion deal around. Both are expected to price Wednesday.

Apart from the new deals, Chesapeake Energy's 2019 bonds were once again the most actively traded junk issue, amid the continuing controversy over whether the company will be able to call those bonds at par plus accrued interest or not.

Statistical market performance measures remained mixed on Tuesday.

Jefferies prints inside talk

Five issuers completed single-tranche dollar-denominated deals on Tuesday, raising a total of $1.97 billion.

Three of the five tranches came as drive-bys, and three of the five were upsized.

Two of the deals came on top of price talk. One came at the tight end of talk. And two came inside of price talk.

Jefferies Finance and JFIN Co-Issuer Corp. priced an upsized $600 million issue of seven-year senior notes (B1/B+) at par to yield 7 3/8%.

The yield printed 12.5 basis points beneath the low end of the 7½% to 7¾% yield talk.

Jefferies LLC was the bookrunner for the general corporate purposes deal, which was upsized from $500 million.

Avis Budge upsizes

Avis Budget Car Rental and Avis Budget Finance, Inc. priced an upsized $500 million issue of 10-year senior notes (B2/B) at par to yield 5½%.

The yield printed on top of yield talk.

BofA Merrill Lynch, Morgan Stanley & Co. LLC, RBS Securities Inc. and Scotia Capital (USA) Inc. were the joint bookrunners for the debt refinancing deal, which was upsized from $450 million.

Watco at the tight end

Watco Cos. and Watco Finance Corp. priced a $400 million issue of 10-year senior notes (B3/CCC+) at par to yield 6 3/8%.

The yield printed at the tight end of yield talk set in the 6½% area.

Wells Fargo Securities LLC, J.P. Morgan Securities LLC, Barclays, BMO Capital Markets Corp. and U.S. Bancorp Investments Inc. were the joint bookrunners for the debt refinancing deal.

Digicel taps 6% notes

Jamaica's Digicel priced an upsized $300 million add-on to its 6% senior notes due April 15, 2021 (B1//B) at par to yield 5.998%.

The reoffer price came on top of price talk.

Citigroup Global Markets Inc. was the left bookrunner for the quick-to-market add-on that was upsized from $250 million and transacted on the emerging markets desk.

J.P. Morgan Securities LLC, Credit Suisse Securities (USA) LLC, Barclays, Deutsche Bank Securities Inc. were the joint bookrunners.

The Kingston, Jamaica, wireless communications company plans to use the proceeds for general corporate purposes.

Cooper-Standard PIK deal

Cooper Standard priced a $175 million issue of five-year senior PIK toggle notes (Caa1/B) at 99.50 to yield 7.497%.

The notes pay a 7 3/8% cash coupon; the PIK coupon is 8 1/8%.

The yield printed 15.5 basis points inside of yield talk that was set in the 7¾% area.

Deutsche Bank Securities Inc., BofA Merrill Lynch, J.P. Morgan Securities LLC and UBS Securities LLC were the joint bookrunners.

Proceeds will be used to finance the company's cash tender offer for up to 4,651,162 shares of its common stock, with any excess proceeds for general corporate purposes.

Owens-Illinois upsizes

In the euro primary market, OI European Group BV, an indirect wholly owned subsidiary of Owens-Illinois Group, priced an upsized €330 million issue of eight-year senior notes (Ba2/BB+) at par to yield 4 7/8%.

The yield printed at the tight end of yield talk set in the 5% area.

Goldman Sachs & Co. and Barclays are global coordinators, while BNP Paribas Securities Corp., BofA Merrill Lynch, Credit Agricole CIB, Deutsche Bank Securities Inc., HSBC Securities (USA) Inc. and J.P. Morgan Securities LLC were joint bookrunners for the quick-to-market deal, which was upsized from €300 million.

Proceeds will be used to redeem OI European Group's 6 7/8% senior notes due 2017.

Rexel dollar/euro deal

Rexel talked both tranches of its $500 million and €500 million offering of senior notes due June 15, 2020 (Ba3//BB) to yield 5¼% to 5½%.

Books were scheduled to close at the end of the day on Tuesday for accounts in the United States and are scheduled to close at 3 p.m. GMT/9 a.m. ET on Wednesday for Europe-based accounts.

J.P. Morgan Securities LLC is the global coordinator and will bill and deliver for the dollar notes, while BNP Paribas Securities Corp. is a global coordinator and will bill and deliver for the euro notes.

Credit Agricole Securities (USA) Inc., HSBC Securities (USA) Inc., ING Financial Markets LLC, Natixis Securities North America Inc. and SG Americas Securities LLC are the joint lead bookrunners.

Proceeds will be used to refinance the company's notes due 2016 and for general corporate purposes.

Intelsat's $1.5 billion

Intelsat (Luxembourg), a subsidiary of Intelsat SA, plans to price $1.5 billion of eight-year senior notes on Wednesday.

Goldman Sachs & Co., Morgan Stanley & Co. and J.P. Morgan Securities LLC are the joint bookrunners for the debt refinancing deal.

Jefferies jumps in aftermarket

In the junk bond secondary market, a trader said that the new Jefferies Finance 7 3/8% notes due 2020 "traded up pretty well," pegging the New York-based commercial financial services company's $600 million offering at 101 7/8 bid, 102 1/8 offered.

A second trader also saw the bonds at that level, well up from par at which the scheduled forward-calendar deal had priced earlier, after having been upsized from an originally launched $500 million.

A third trader saw the bonds having gone home at 101¾ bid, 102¼ offered.

Watco on the right track

Earlier in the session, a trader saw Watco Cos.' 6 3/8% notes due 2023 trading around 102¼ bid, 102½ offered. That was well up from the par level at which the Pittsburg, Kans.-based railroad operator and railcar maintenance and repair services provider's $400 million forward-calendar offering had priced.

A little later in the session, he said that Watco "just popped," seeing the bonds move up to 102¾ bid, 103¼ offered.

Drive-bys unseen in trading

In contrast, the day's trio of quick-to-market transactions - Avis Budget, Digicel and Cooper-Standard - priced fairly late in the session and was not seen immediately trading around afterward.

However, a trader noted a fair amount of activity in Avis Budget's existing 9 5/8% notes due 2018.

The Parsippany, N.J.-based No. 2 vehicle rental giant is tendering for that $450 million of bonds, financing the buyback with the proceeds from its new deal. More than $14 million of those bonds changed hands in round-lot dealings, with the paper going up nearly 2 points to about the 113 level, just above the 112.75 total consideration price the company is offering for those notes in the tender offer.

There was, however, considerably less activity in Avis' 9¾% notes due 2020, as a market source said he didn't see any dealings in them on Tuesday.

While Avis included the 93/4s as part of the tender offer it announced on Tuesday, outlining plans to buy back a portion of the $250 million of outstanding notes via a modified Dutch auction process, it made it clear that the amount it will spend on the 2020 notes would be equal to the $450 million it expects to get from the bond deal, minus whatever it spends to buy back the 9 5/8% notes.

If all of the latter notes are tendered by their holders and accepted by the company for purchase under the tender, the offer for the 93/4s would essentially be moot.

Chesapeake churns higher

Traders said that all three tranches of Chesapeake Energy's $2.3 billion blockbuster offering moved up from the par level at which the Oklahoma City-based natural gas and oil production company's new bonds had priced in a quick-to-market transaction on Monday.

One trader said, "They were bouncing around all over the place." He saw the $1.1 billion of 5¾% notes due 2023 trading in a 101 3/8-to-101½ bid context.

He said that the company's $700 million of 5 3/8% notes due 2021 were somewhat more restrained, going out at 100½ bid, 100¾ offered, while its $500 million of 3¼% notes due 2016 finished at 101 bid, 101¾ offered, "give or take.

"It went very well," he said of the new deal.

A second trader said that 10-year piece "traded down" to 101 3/8 bid. 101 5/8 offered, after having traded at somewhat stronger levels earlier in the session.

He said that the three-year paper "held in pretty steady because it's just three years (i.e., an attractively short duration)." He saw the bonds at 101 1/8 bid, 101¼ offered, while seeing the eight-year notes at 100 1/8 bid, 100 5/8 offered.

A market source said that the new bonds were among the most actively traded junk issues on the day, estimating that more than $16 million of the 10-year notes and more than $15 million of the eight-years had changed hands by mid-afternoon.

Existing Chesapeake champ

Those numbers, while fairly impressive, took a back seat to the company's existing 6.775% notes due 2019, which have consistently been the junk bond volume leader for at least the past seven sessions or so.

Over $25 million of the bonds changed hands in round-lot transactions, but a market source also said that there was "page after page" of smaller odd-lot pieces trading on the Trace system, boosting total volume to a market-best level of over $40 million by mid-afternoon.

While the bonds were seen to have dipped as low as the mid-102 area on an intraday basis, by the time things finally wound down for the day, they had moved back up to 104 5/8 bid, unchanged on the day.

Those bonds have been the focus on intense speculation for well over a week amid a legal battle pitting Chesapeake against its bondholders and the trustee for those 2019 notes, the Bank of New York Trust Corp.

They have been battling over the company's plans to try and call those notes at par plus accrued interest, with Chesapeake insisting that its announcement this past Friday of the upcoming redemption at that price was totally proper under terms of the bonds' indenture.

The trustee and the bondholders, though, say that Chesapeake blew it in terms of giving sufficient advance notice to the holders so that it could complete that redemption - not just announce it - during a special early-redemption period that expired on Friday.

Chesapeake plans to use some of the proceeds from its new deal to fund that redemption, assuming the courts ultimately allow it to take place.

Century Link moves up

A trader said that Monday's new offering from CenturyLink "did well." He quoted the Monroe, La.-based telecommunications company's new bonds at 100¾ bid, 101 offered.

The company priced a radically upsized $1 billion of 5 5/8% notes due 2020 at par, after having doubled the amount of the deal from the originally announced $500 million.

The company's existing 5.80% notes due 2022, on the other hand, were seen down by around 3/8 point, at 101 bid. Volume was over $10 million.

Sinclair struggles a little

One of the traders said that Sinclair Television Group's 5 3/8% notes due 2021 was "the one [deal] that didn't do so well, unfortunately, because I liked it."

He quoted the Hunt Valley, Md.-based television station ownership group's $600 million deal trading right around par, the same level at which that quickly shopped transaction had priced on Monday.

A second trader said the bonds went home "just straddling par."

Charter up on Liberty news

Away from the new deals, a trader said that Charter Communications Inc.'s bonds "moved up a little" on the news that Liberty Media Corp. will buy a 27% stake in the St. Louis-based cable television and broadband company and put several representatives on Charter's board of directors.

He said, "They were up¼ to1/2, because Liberty is just doing great."

Market indicators stay mixed

Overall, statistical junk performance indicators were mixed on Tuesday for a third consecutive session. The Markit Series 19 CDX North American High Yield index dropped by a quarter-point to end at 103 15/16 bid, 104 1/16 offered, its third straight loss. On Monday, the index fell by 7/32 of a point.

The KDP High Yield Daily index was unchanged on Tuesday at 75.66, after having risen over the previous three straight sessions, including Monday's gain of 2 basis points. Its yield was likewise unchanged Tuesday at 5.49%. That too had shown improvement over the previous three sessions, including Monday, when it came in by 1 bp.

But the widely followed Merrill Lynch High Yield Master II index resumed its winning ways on Tuesday, posting a gain of 0.04%. That followed a rare 0.008% loss on Monday, which had broken a 13-session winning streak that dated back to Feb. 27.

Tuesday's gain lifted its year-to-date return to 2.694%, up from 2.653% on Monday. Tuesday's return was a new peak level for the year so far, eclipsing the old high point of 2.661%, which had been established on Friday.

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