CBS Outdoor prices; Burger King call on the menu; new Acosta issue busy; RCN, PlyGem gain

By Paul Deckelman and Paul A. Harris

New York, Sept. 16 – The high-yield primary had only a modestly busy day on the pricing front on Tuesday, with syndicate sources hearing that just one issue had come to market – New York-based billboard advertising company CBS Outdoor Americas, Inc.’s upsized $600 million two-part issue, consisting of an add-on to its existing 2022 notes and a tranche of new 10.5-year paper.

That was off from the $1 billion of new U.S.-dollar-denominated and fully junk-rated debt that had gotten done on Monday. Traders meantime saw heavy trading in that earlier session’s big deal, Acosta Sales & Marketing Co.’s $800 million of eight-year notes, seen up slightly from their issue price.

Two smaller Monday offerings – building products maker PlyGem Industries Inc.’s tranche of mirror notes to its existing 2022 issue and cable, internet and phone service provider RCN Telecom Services LLC’s add-on to its 2020 notes – were seen having extended the initial gains they had notched after pricing.

Last week’s three-part bond behemoth from energy operator California Resources Corp. remained among the busiest issues in Junkbondland and was seen having firmed across the board.

Away from the deals that have actually priced over the past few sessions, primaryside players were anticipating Wednesday’s scheduled launch of Burger King Worldwide’s $2.25 billion offering of 7.5-year notes. The fast-food giant plans an investor call to discuss the deal, which will help fund its planned acquisition of Canada’s Tim Hortons Inc. eatery chain and which is expected to price sometime next week.

In the non-new-deal secondary market, Sears Holdings Corp.’s bonds moved lower, along with its shares, on the news that the underperforming retailer has had to borrow $400 million from the hedge fund controlled by its chairman and chief executive officer, Edward S. Lampert, in order to have cash on hand to fund its operations during the all-important year-end holiday sales period.

Statistical indicators of junk market performance were mixed for a second straight session on Tuesday after having been lower across the board the previous two sessions.

CBS Outdoor: Upsized, rich, tight

CBS Outdoor Americas priced Tuesday's sole deal, an upsized $600 million two-part senior notes transaction (B1/BB-).

The deal included an upsized $150 million add-on to the CBS Outdoor Americas Capital LLC and CBS Outdoor Americas Capital Corp. 5¼% senior notes due Feb 15, 2022, which priced at 99.5 to yield 5.333%. The tranche was upsized from $100 million. The reoffer price came at the rich end of the 99.25 to 99.5 price talk.

The transaction also included a $450 million tranche of new senior notes due March 15, 2025, which priced at par to yield 5 7/8%. The yield printed at the tight end of yield talk in the 6% area.

Wells Fargo Securities LLC was the left bookrunner for the quick-to-market deal, the overall size of which was increased from $550 million. Goldman Sachs & Co. was the joint bookrunner.

Proceeds, together with cash on hand and revolver borrowings, will be used to fund the acquisition of certain outdoor advertising businesses from Van Wagner Communications LLC.

Burger King’s $2.25 billion

Burger King Worldwide plans to take part in an investor conference call at 12:30 p.m. ET on Wednesday to discuss its $2.25 billion offering of 7.5-year senior notes (/B-/).

The deal figures to get a warm reception because of its size and because of the involvement of Warren Buffett, who is investing in the merger, an investor said.

Buffet's involvement in the H.J. Heinz Co. $3.1 billion issue of 4¼% notes due October 2020, which priced in March 2013, served to amplify the buyside's appetite for that deal, the source added.

The Burger King deal is scheduled to price during the middle part of the week ahead.

Wells Fargo Securities is the left bookrunner. J.P. Morgan Securities LLC and BofA Merrill Lynch are the joint bookrunners.

Proceeds will be used to finance a portion of the cash consideration for the merger of Tim Hortons and Burger King, as well as to partially fund the repayment of any and all of Tim Hortons’ and Burger King’s existing debt and for other general corporate purposes.

The issuing entities are 11011778 B.C. Unlimited Liability Co., an unlimited liability company organized under the laws of British Columbia, and New Red Finance, Inc., a Delaware corporation.

Tim Hortons is an Oakville, Ont.-based fast food restaurant company.

Burger King is a Miami-based fast food restaurant chain.

The new combined global company is to be based in Canada.

GameStop pricing this week

GameStop Corp. is in the market with a $250 million offering of five-year senior notes (Ba1/BB+), sources say.

The deal is set to price Friday.

BofA Merrill Lynch and JPMorgan are the joint bookrunners.

The Grapevine, Texas-based electronic game retailer plans to use the proceeds to pay down its asset-based credit facility and for general corporate purposes, which may include acquisitions, dividends and stock buybacks.

Tembec starts Wednesday

Tembec Industries Inc. plans to start a roadshow on Wednesday in New York for a $375 million offering of senior secured notes due December 2019 (B3/B-).

The deal is expected to price Tues., Sept. 23.

Deutsche Bank Securities Inc. is the left bookrunner. RBC Capital Markets is the joint bookrunner. CIBC World Markets and Imperial Capital are the co-managers.

The Montreal-based manufacturer of forest products company plans to use the proceeds to repay debt including its existing 11¼% secured notes.

JAC Products secured notes

JAC Products plans to price a $140 million offering of five-year senior secured notes this week.

Jefferies LLC is the sole bookrunner.

The Pontiac, Mich.-based designer and manufacturer of roof rack systems for light vehicles plans to use the proceeds to refinance debt and fund a distribution.

Tower postpones

Tower International, Inc. cited less-favorable market conditions as it announced the postponement of its $250 million offering of eight-year senior notes (B2/B) in a Tuesday press release.

Early guidance on the deal was in the low-6% yield context, market sources said.

JPMorgan, Citigroup Global Markets Inc., Goldman Sachs and Wells Fargo Securities were the joint bookrunners.

The Livonia, Mich.-based automotive components manufacturer had planned to use the proceeds to repay bank debt.

Alcoa split-rated

Alcoa Inc. plans to price a benchmark offering of 10-year senior notes (Ba1/BBB-/BB+) on Wednesday.

The deal, which is guided at 5½%, will price on the investment-grade desk but trade on the high-yield desk, the investor said.

The ratings from Moody's Investors Service and Fitch are stable, however the BBB- rating from Standard & Poor's has a negative outlook, the source added.

Morgan Stanley & Co. LLC and Credit Suisse Securities (USA) LLC are joint bookrunners for the public offering.

Proceeds will be used to fund the acquisition of the Fifth Rixson business.

CBS Outdoor unseen, Rubiales off

In the secondary market, traders said they had not seen any initial dealings in either tranche of CBS Outdoor Americas’ upsized $600 million two-part issue, which priced fairly late in the session.

They did see some slightly easier levels in Pacific Rubiales Energy Corp.’s 5 5/8% notes due 2025.

The Toronto-based company, which explores for and produces oil and natural gas in Colombia, Peru and Guatemala, announced Tuesday that it had priced $750 million of those notes.

A trader said that about $14 million of the notes had traded in a 98½-to-98¾ context, “so they were trading off a little” from the 99.045 level at which the deal had priced to yield about 5.7499%.

A second also quoted them at 98¾ bid.

At another shop, a trader said he had not seen the new deal, allowing that “it was more of an emerging markets story” because of the company’s Central American operations.

The company’s existing 7¼% notes due 2021 were quoted at 109¼ bid on volume of more than $7 million. Its 5 1/8% notes due 2023 were at 98¼ bid on about $5 million of volume.

Acosta issue busy

Probably the busiest junk bond name of the session was Acosta Sales & Marketing’s 7¾% notes due 2022. The Jacksonville, Fla.-based promotions company priced $800 million of those notes at par late in Monday’s session, and they were not seen having traded around at that time.

When they moved into the aftermarket on Tuesday, a trader said that initially they had moved around in a 100½-to-100¾ context but had come back in later in the day to finish somewhere between par and 100 3/8.

A second trader said they ended down 3/8 from their early peak, to 100 1/8 bid.

And a third saw them going out at 100 1/8 bid, estimating volume in the new credit at a robust $50 million-plus.

PlyGem, RCN add to gains

Traders saw the new PlyGem and RCN additions to those companies’ existing bonds hitting better levels for a second consecutive session, although not on much volume.

A trader saw Cary, N.C.-based building products maker PlyGem’s non-fungible mirror tranche of its existing 6½% notes due 2022 at 94½ bid, calling that up ¾ point on the day. But he said that only about $3 million of size trades had taken place.

A second pegged the bonds in a 94¼ to 95¼ context.

PlyGems had priced that quick-to-market $150 million offering on Monday at 93.25 to yield 7.721%. The bonds went home Monday seen in a 93¾-to-94¼ context.

Princeton, N.J.-based cabler RCN’s fungible add-on to its 8½% notes due 2020 were trading at 103¾, which he called up ½ point.

But here too, only about $3 million of the bonds had traded, “so there was really not a lot of volume.”

He opined that “on the first day or so, you get these huge amounts of volume, as everyone is housekeeping, but then it dies down.”

A second trader located the RCN bonds trading between 103¼ and 104 bid, calling that up ½ point on the day.

On Monday, the company had priced $105 million of the add-on notes at 102 to yield 7.996%, and the bonds had firmed to between 102¾ and 103¾ when they hit the aftermarket.

California climb continues

A trader saw “a fair amount” of the new California Resources notes that priced last week in three big tranches totaling $5 billion continuing to trade on Tuesday.

He said that “they started out unchanged, to maybe 1/8 point or so weaker.”

However, by later on in the session, he said that its 6% notes due 2024 had moved up to 103¼ bid, “so that kind of gave some strength to the rest of them.”

He saw the company’s 5½% notes due 2021 “at least” at 102½ bid, and the 5% notes due 2020 were trading between 102 and 102¼ bid.

“They definitely firmed up,” he declared, adding “that one has really held in there. It’s traded well, especially for such a big issue,” explaining that while there’s ample paper to go around and lots of investors like such notable deals, that liquidity turns into a double-edged sword, since investors looking to raise cash will often sell those same big-volume holdings.

“They’re definitely performing well in this market, which kind of repriced the rest of the E&P space.”

The Los Angeles-based oil and natural gas exploration and production operator had priced $1 billion of the 5% notes, $1.75 billion of the 5½% notes and $2.25 billion of the 6% notes, all at par, on Thursday. When the bonds were freed for trading on Friday, the 5% notes jumped to above the 102 bid level, and the other two pieces each quickly moved above 103.

Sears lower on Lampert loan

Bonds and shares of Sears Holdings were lower on Tuesday, as investors reacted warily to the news that the troubled Hoffman Estates, Ill.-based department store operator had borrowed $400 million from the hedge fund controlled by its chairman and CEO, Eddie Lampert.

A trader said that Sears’ 6 5/8% notes due 2018 dropped by 1 point to 90 5/8 bid on volume of more than $20 million, putting it among the day’s most active credits.

A second source who also saw the bonds going out at 90 5/8 called them down 1 1/8 point.

At another desk, a trader said the bonds moved around in a 90¼-to-91¼ context versus Monday’s 91 close, “so they were down ½ to 1 point, depending on what really traded.”

Its Nasdaq-traded shares meanwhile nosedived by $3.15, or 9.4%, to end at $30.37 on volume of 3.6 million shares, or about 4½ times the norm.

Sears – which operates both its own iconic and eponymous store chain as well as the big discount retailer Kmart – disclosed the arrangement in a filing Monday with the Securities and Exchange Commission.

Affiliates of Lampert’s ESL investment are loaning Sears $400 million in two tranches: $200 million now and the remainder on Sept. 30, providing the company meets certain conditions.

The loan carries an annual interest rate of 5%, and Sears has to pay an upfront fee of 1.75% of the amount borrowed, amounting to some $12 million in interest and fees. It matures on Dec. 31, 2014, although the company has the option of extending the loan until Feb. 28, 2015 for a fee of 0.5% of principal, assuming Sears remains in compliance with the terms.

The loan is secured by a first-priority lien against 25 of the company’s stores, with the lender making the choice of which ones. Observers noted that such an arrangement values the stores at an average of $16 million each – considered the low end of the price range Sears could theoretically get from selling some of its vast $5 billion portfolio of company-owned outlets.

The money will allow Sears – which has been burning through its cash reserves at an alarming rate on the way to racking up a loss of nearly $1 billion in the six months ended Aug. 2 – to have liquidity for funding inventory buildup and its operations during the key year-end holiday selling season, considered the make-or-break time of the year in the retailing industry.

Bill Barrett unmoved on asset sale

The news that energy operator Bill Barrett Corp. has inked deals to sell some of its oil and natural gas acreage in a $757 million deal and use some of the proceeds to pay down its revolving credit line and cut its net debt by more than half had little impact on the Denver-based company’s bonds – possibly because they are not going to be taken out but will remain as part of its capital structure (see related story elsewhere in this issue).

A market source saw its 7 5/8% notes due 2019 unchanged on the day at 105¾ bid, although volume was a brisk more than $12 million.

Its 7% notes due 2022 actually lost 3/8 point to end at 101 5/8 bid, but on volume of not even $4 million.

Barrett’s New York Stock Exchange-traded shares, however, jumped by $2.18, or 10.24%, to close at $23.47. Volume of 4.3 million shares was more than four times the usual turnover.

TRW up slightly on sale

TRW Automotive Inc.’s split-rated (Ba1/BBB-/BBB-) 4½% notes due 2021 were seen ¼ point better at 102¼ bid on volume of more than $10 million, although much of that activity was thought to have come from high-grade investors.

It came against the backdrop of Monday’s announcement that German car parts maker ZF Friedrichshafen will buy TRW, a Livonia, Mich.-based automotive components manufacturer, for some $13.5 billion, including debt assumption.

Indicators stay mixed

Statistical indicators of junk market performance were mixed for a second straight session on Tuesday after having been lower across board the on Thursday and again on Friday, the third downside session in four days.

The KDP High Yield Daily index lost 11 basis points to close at 72.77 after having edged up by 2 bps on Monday, its first gain after four straight losses. The index has now seen 11 setbacks in the last 13 sessions.

Its yield climbed by 3 bps to 5.51%, its sixth straight widening and 13th in the last 14 sessions. On Monday, it had risen by 2 bps, even though the overall index – which usually moves inversely to the yield – was also higher on the day.

But the Markit CDX Series 22 index gained 1/8 point to finish at 106 5/18 bid, 106 21/32 offered. On Monday, it had lost 11/32 point – its third consecutive downturn and fifth in the six previous sessions.

However, the widely followed Merrill Lynch High Yield Master II index remained down in the dumps on Tuesday with its sixth successive loss and its 10th setback in the last 11 sessions, retreating by 0.105% after having edged downward by 0.04% on Monday.

The latest loss lowered its year-to-date return to 4.525% on Tuesday, versus 4.635% on Monday. The cumulative return remained well below its peak level of the year so far, 5.847%, set on Sept. 1, when the index was published even though the junk market was closed for all intents and purposes due to the Labor Day holiday break.

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