PRA, Prospect Mortgage price; junk pops as taper on hold; SLM, Hub gain; Caesars mixed on refi

By Paul A. Harris and Stephanie N. Rotondo

Phoenix, Sept. 18 - It was another good day for the secondary high-yield bond market, helped by the news from the Federal Reserve's Federal Open Market Committee that it will not begin tapering its stimulus program just yet.

"Everybody is going to put their buying hats back on," one trader said.

Meanwhile two issuers completed single tranche dollar-denominated deals on Wednesday, raising a combined total of $520 million. PRA Holdings, Inc. priced $375 million of 10-year notes while Prospect Mortgage brought a downsized $150 million.

Ahead of the Fed news, a trader said that "everybody was sitting on the edge of their seats, waiting." Post-news, activity picked up considerably and the market took off.

"The market ripped after the Fed [announcement]," another trader said.

That trader also remarked that the news boded well for "yield-y" securities such as new issues.

"Conditions in the job market today are still far from what all of us would like to see," said Ben Bernanke, the Fed chairman, at a press conference in Washington after a two-day meeting. "The committee has concern that rapid tightening of financial conditions in recent months would have the effect of slowing growth."

Caesars Entertainment Corp. meantime had news of its own out as the casino operator said it was planning to price bonds and a new term loan to refinance debt. However, the existing notes and loans had a mixed reaction to the news.

PRA sells 10-year deal

PRA Holdings priced a $375 million issue of 10-year senior notes (Caa1/CCC+) at par to yield 9½%.

The yield printed at the wide end of the 9¼% to 9½% yield talk.

Credit Suisse, Jefferies, UBS, Citigroup and KKR were the joint bookrunners for the LBO deal.

Prospect Mortgage downsizes

Prospect Mortgage priced a downsized $150 million issue of 10¼% five-year senior notes (B2/B+) at 97.162 to yield 11%.

The yield printed on top of yield talk. The reoffer price came in line with discount talk of 2 to 3 points.

The amount was reduced from $200 million.

Credit Suisse and BofA Merrill Lynch were the joint bookrunners.

The Sherman Oaks, Calif.-based full service mortgage company plans to use the proceeds to fund growth through expanding retail and correspondent origination channels and to fund associated working capital, to retain and acquire mortgage servicing rights, and to fund a special dividend.

Phones 4U prices PIK toggle

In Europe, England-based Phones 4U, priced a £205 million issue of 5.5-year senior PIK toggle notes (Caa2/CCC+) at 99.00 to yield 10¼%.

The yield came at the tight end of the 10¼% to 10½% yield talk. The reoffer price came on top of price talk.

The notes pay a 10% cash coupon. The coupon steps up by 75 basis points to 10¾% for PIK interest payments.

The amount was increased slightly from £200 million.

Goldman Sachs was the physical bookrunner for the dividend deal. Lloyds was the joint bookrunner.

Hilton rolls out $3.25 billion

Hilton Worldwide Finance LLC and Hilton Worldwide Finance Corp. plan to begin roadshowing $3.25 billion of high-yield notes in three tranches on Thursday.

The deal is coming in the form of a single $1.25 billion tranche of Rule 144A for life secured notes and $2 billion of unsecured notes in two tranches, formatted as Rule 144A with registration rights.

The eight-year first lien senior secured notes become callable in three years at par plus 50% of the coupon, and feature a special call provision that allows the issuer to redeem 10% of the secured notes annually at 103 during the non-call period.

The senior unsecured notes are coming in tranches of eight-year notes which become callable in three years at par plus 50% of the coupon, and 10-year notes which become callable in five years at par plus 50% of the coupon.

The sizes of the senior unsecured notes tranches remain to be determined.

Pricing is expected in the early to middle part of the week ahead.

BofA Merrill Lynch is the left bookrunner for the debt refinancing. Deutsche Bank Securities Inc., Goldman Sachs & Co., Morgan Stanley & Co., JP Morgan Securities LLC and Wells Fargo Securities LLC are the joint bookrunners.

Air Canada adds first-lien

Air Canada grew its high-yield bond offering to $700 million from $300 million on Wednesday, with the addition of a $400 million tranche of six-year senior first-lien notes (expected ratings B2/B+), non-callable for three years.

The concurrent term loan was downsized by $400 million, taking it to $300 million from $700 million.

The first-lien notes come in addition to a previously announced $300 million tranche of 6.5-year senior second-lien notes (Caa2/CCC+), callable in three years at par plus 75% of the coupon.

The upsized bond deal is expected to price on Thursday.

J.P. Morgan Securities LLC, Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC, Morgan Stanley & Co. LLC and TD Securities are the joint bookrunners for the debt refinancing and general corporate purposes deal.

CPG starts roadshow

CPG International Inc., began a roadshow on Wednesday for a $315 million offering of eight-year senior notes (expected ratings Caa2/CCC+).

The notes are expected to price on Tuesday.

JP Morgan Securities LLC, Barclays, Deutsche Bank Securities Inc., Citigroup Global Markets, RBS Securities and UBS Investment Bank are the joint bookrunners for the acquisition deal.

Sotherly to bring $25 million

Sotherly Hotels Inc. has begun pre-marketing up to $25 million of $25 par five-year senior notes.

The Williamsburg, Va.-based lodging real estate investment trust is targeting a $20 million deal-size with a $5 million greenshoe.

Investors are being guided to an interest rate of about 8%, according to a source close to the deal.

Sandler O'Neill + Partners, LP is the bookrunner.

A portion of the proceeds will be used to take out the trust's 12% series A cumulative redeemable preferred stock, with the remaining proceeds, if any, to be used for general corporate purposes.

Market, indexes rise post-Fed

In the secondary, high-yield bonds were "raging higher," a trader said, after the Fed said it would not begin tapering its $85 billion per month bond repurchase program.

The KDP High Yield Daily Index was stronger at 73.75, with a yield of 6.14%. That compared to 73.73 with a 6.15% yield on Tuesday.

The CDX North American High Yield Index meantime gained over half a point, closing at 106 9/16 bid, 106¾ offered.

One trader noted that the Fed news was especially good for "yield-y" stuff such as recent new issues.

Among recently priced deals, SLM Corp.'s $1.25 billion of 5½% notes due 2019 moved up to 1001/4, the trader said. Another trader placed the issue at par.

The deal priced Tuesday at 98.877 to yield 5.75%.

Hub International Ltd.'s $950 million issue of 7 7/8% notes due 2021 was meantime seen at 100¼ before the Fed's announcement came and at 100¾ afterwards.

The downsized issue also priced Tuesday, along with a $1.87 billion term loan.

Caesars mixed on refi news

Caesars Entertainment's debt saw nixed reactions in the secondary market on Wednesday after the company announced that it will be taking out its roughly $4.4 billion of CMBS debt and $450 million senior secured credit facility entered into by Octavius Linq Holding Co. LLC with new financing, according to a trader.

"Caesars was in focus," a trader said, seeing the 10% notes due 2018 falling to end around 60 versus a 63 to 64 context in the previous session. However, he said the 9% notes due 2020 were "about unchanged to maybe a smidge better" at 98½ bid, 99 offered.

The bonds had been trading up in the previous two days on news the company was launching a real-money online poker game in Nevada on Thursday.

Another trader also saw the 10% notes declining, deeming them down 3 points at the 60 mark. He called the 9% notes unchanged at 99. The 11¼% notes due 2017 were also steady, trading around 105.

A third market source pegged the 10% notes at 63½ bid, up a touch.

The new debt that will be used for the refinancing includes a $3,269,500,000 senior secured credit facility, comprised of a $3 billion term loan and a $269.5 million revolver, $500 million of first-lien notes and $1.35 billion of second-lien notes, the company said in an 8-K filed with the Securities and Exchange Commission.

A bank meeting for the new Citigroup Global Markets Inc.-led credit facility is set to take place at 2 p.m. ET in New York on Thursday, a source added.

Caesars is a Las Vegas-based diversified casino-entertainment company.

TXU still buzzing

Energy Future Holdings Corp.'s Texas Competitive Electric Holdings Co. paper continued to be on the active side Wednesday, though market sources had mixed reviews of how the bonds performed.

One trader said the 15% notes due 2021 dropped over 1½ points to 16 7/8. That issue had fallen a couple points in the previous session as news came out reporting that the parent company was searching for a bankruptcy loan.

But another source said the issue was up on the day, gaining just over half a point to close at 17 3/8 bid, 17 5/8 offered.

According to an article published in The Wall Street Journal late Tuesday, the Dallas-based power producer has spent the last week talking with banks such as Citigroup Inc. and JPMorgan Chase & Co. to provide a debtor-in-possession loan valued at over $2 billion. The loan would be used to continue operating the subsidiary.

Additionally, the company has engaged in negotiations with creditors to try to develop a prepackaged bankruptcy plan. The company is also creating another plan should negotiations fail.

A bankruptcy is expected as soon as November. For its part, Texas Competitive Electric carries about $32 billion of debt.

As for other power producers, Ameren Energy Generating Co.'s debt was firm, with one trader seeing the 7% notes due 2018 at 84 and the 6.3% notes due 2020 at 77.

Sara Rosenberg contributed to this article

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