Boyd upsizes; Aleris active; Intelsat dominates; USG, Rent-A-Center up on buyout news

By Paul A. Harris and Abigail W. Adams

Portland, Me., June 11 – The domestic and European primary market each saw one deal price in a quiet session on Monday with one new deal joining the forward calendar.

New deal volume in the domestic market is forecast to be light throughout the summer.

Boyd Gaming Corp. priced an upsized $700 million issue of 8.2-year senior notes (existing B3/confirmed B/confirmed B+) at par to yield 6% in a quick-to-market trade on Monday, according to a market source. The notes were quoted above their issue price after breaking for trade.

In the European market, Outokumpu Oyj priced a €250 million issue of six-year senior secured notes (expected Ba3) at par to yield 4 1/8%.

TDC A/S plans to start a roadshow on Tuesday for a €1.4 billion equivalent two-part offering of five-year senior notes that will have a dollar- and euro-denominated tranche.

Meanwhile, Aleris International, Inc.’s newly priced 10¾% senior secured junior priority notes due 2023 (Caa2/CCC+) were active in the secondary space with the notes trading well above their issue price.

While Aleris was active, trading of the new paper was eclipsed by Intelsat SA’s junk bonds, which were the most actively traded of the day.

The notes were making gains after the company launched a convertible notes and equity offering.

USG Corp.’s junk bonds were on the rise on Monday on news the drywall manufacturer agreed to a $7 billion buy-out by Knauf KG.

Rent-A-Center Inc.’s junk bonds were also on the rise on news the company had completed its strategic review and rejected the buy-out bids that were on the table.

Boyd Gaming upsizes

In a relatively quiet Monday session, Boyd Gaming Corp. priced an upsized $700 million issue of 8.2-year senior notes (existing B3/confirmed B/confirmed B+) at par to yield 6% in a quick-to-market trade, according to a market source.

The issue size was increased from $500 million.

The yield printed at the tight end of the 6% to 6¼% yield talk, which was also initial price talk.

JP Morgan, Deutsche Bank, BofA Merrill Lynch, Wells Fargo, Fifth Third, US Bancorp, SunTrust, BNP Paribas, Citizens, UBS, Capital One, Credit Agricole and KeyBanc were the joint bookrunners.

The Las Vegas-based operator of gaming entertainment properties plans to use the proceeds for working capital and general corporate purposes, as well as for debt repayment, expansion efforts including acquisitions and for capital expenditures.

The new notes were seen above their issue price after breaking for trade late Monday. The notes were quoted at par ¼ bid, 101 offered and were changing hands between par 3/8 and par ½, a market source said.

New issue activity

With new issue activity substantially off, in terms of year-over-year volume – 20% to 30%, depending upon the counts of various market sources – it is shaping up to be a quiet summer in the primary market, sources say.

There are deals to be done, a debt capital markets banker said on Monday.

However, issuers are sensitive to rates and want to be sure that they are receiving executions that are as favorable as possible.

Right now, that's a challenge, the banker said, adding that headline news, some financial and some geopolitical, can serve to drive pricing wider.

Right now, the bid-offer in high yield is pretty wide, the banker added.

Outokumpu prices €250 million

In the European session, Outokumpu Oyj priced a €250 million issue of six-year senior secured notes (expected Ba3) at par to yield 4 1/8% on Monday.

The coupon came on top of final talk. Initial talk was 4% to 4¼%.

BNP Paribas and Nordea were coordinators and joint lead managers for the debt refinancing deal. Danske Bank and Swedbank were also joint lead managers.

TDC to roadshow €1.4 billion

Elsewhere, Copenhagen-based TDC A/S plans to start a roadshow in the United States on Tuesday for a €1.4 billion equivalent two-part offering of five-year senior notes.

The offer is coming in dollar-denominated and euro-denominated tranches.

A roadshow in Europe is set to run during the June 18 week.

Deutsche Bank has the lead.

Proceeds will be used to fund the acquisition of the telecommunications provider by Macquarie Infrastructure and Real Assets and three Danish pension funds.

Aleris strong

Aleris’ 10¾% senior secured junior priority notes due 2023 were performing well in the secondary market with the notes trading more than 2 points above their issue price.

The 10¾% notes were quoted at 102 bid, 102½ offered early in the session, according to a market source.

They were seen trading between 101½ and 102 1/8 with more than $42 million of the bonds on the tape by late afternoon.

The strong performance of Aleris’ new notes was attributed to the high coupon. “Investors are getting compensated well,” a market source said.

While there is most likely a reason for the large coupon, “it’s going to keep an interest in this name.”

Yields, like the ones offered by Aleris, are hard to find, a market source said.

Aleris priced a $400 million issue of the five-year notes at par on Friday.

The yield printed at the tight end of the 10¾% to 11% yield talk and inside initial talk that was set in the 11¼% area.

Intelsat dominates

Intelsat’s junk bonds were the most actively traded in the secondary space on Monday with the structure seeing gains after the company launched a new convertible notes and equity offering.

Intelsat junk bonds were generally up about 1 to 3 points, sources said.

However, the Luxembourg-based communications satellite services provider’s 7¾% senior notes due 2021 were up more than 7 points.

The 7¾% notes traded as high as 95 in odd-ball trades, a market source said. However, the majority of prints were around 93.

With $66 million of the bonds on the tape by late afternoon, Intelsat’s 7¾% senior notes dominated trading activity during Monday’s session.

Proceeds from the $300 million offering of seven-year convertible notes and $200 million equity offering will be used to purchase the 7¾% senior notes due 2021 through a tender offer or open market purchases.

Intelsat’s 8 1/8% senior notes due 2023 were up about 3 points to trade up to 83½.

The company’s 5½% notes were up 1 point to 90; the 7¼% senior notes due 2020 about ¾ point to 99¾; the 12½% senior notes due 2022 about 2 points to 99¾; the 9¾% senior notes due 2025 about 1 point to 106 1/8; and the 7½% senior notes due 2021 about 5/8 point to 97 7/8.

Intelsat equity holders took a hit with the new offering, with stock closing the day down more than 10%.

However, the offering was good news for bond holders, a market source said. “It’s going to bolster their cash flow. It’s credit positive,” the source said.

USG up on buy-out

USG’s junk bonds were up more than 1 point after the company accepted Iphofen, Germany-based latest buy-out proposal, ending months of negotiations.

The 4 7/8% senior notes due 2027 were previously quoted at 99 7/8 bid, par 3/8 offered. They were quoted at 101 7/8 bid, 102 1/8 offered on Monday after news of the buyout broke, a market source said.

USG’s 5½% senior notes due 2025 were not as active as the 4 7/8% notes. However, they were also seeing gains and had moved up to a 104 handle, a market source said. They were seen trading at 104¼, on the bid side, the source said.

The bonds are puttable upon a change of control at 101 or holders can wait for the takeout, the source said.

Rent-A-Center rejects buy-out

Rent-A-Center’s junk bonds were also making gains on Monday after the company announced it had rejected all buy-out offers considered during its strategic review.

The company’s 4¾% senior notes due 2021 were up about 1 point in above average trading activity, a market source said.

The 4¾% notes were trading in the 96 range after closing Friday at 95, a market source said.

The notes were up about 2 points last week amid speculation a decision regarding a buy-out was approaching. The notes were up on Monday because the company did not feel it needed to sell, a market source said.

“They’re obviously not in a situation that’s dire where they needed to hit any bid that came around,” the source said. “It’s a net positive outlook for at least the near to mid-term,” the source said.

Indexes gain

Benchmarks for the high-yield secondary market saw gains on Monday after seeing a slight dip on Friday.

The KDP High Yield index was up 5 basis points to close Monday at 70.67 with the yield now 5.8%. The index was down 1 bps with the yield flat at 5.84% on Friday.

The CDX High Yield 30 index was up 11 bps to close Monday at 106.62. The index was down 3 bps on Friday after a 29 bps drop on Thursday.

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