Caesars' $2.15 billion leads $3.5 billion day in primary; J.C. Penney rallies on stock sale

By Paul A. Harris and Stephanie N. Rotondo

Phoenix, Sept. 27 - Activity in the new issue market remained vigorous on Friday, as four issuers brought a total of five junk tranches, raising $3.5 billion.

Caesars Entertainment Resort Properties, LLC priced $2.15 billion of senior secured notes in two tranches on Friday after having reworked the deal and the parallel bank financing.

Howard Hughes Corp. priced an upsized $750 million of eight-year senior notes during the session and there were smaller deals from Forum Energy Technologies, Inc. and Allegion US Holding Co.

Meanwhile the secondary high-yield bond market was giving back some recent gains on Friday ahead of month- and quarter-end on Monday.

Of the day's dealings, a trader said it was "a repeat of yesterday," with J.C. Penney Co., Inc. and Caesars Entertainment Corp. again making headlines.

J.C. Penney bonds were continuing to rally following news out late Thursday regarding a common stock offering. The company priced 84 million shares at $9.65 early Friday, raising $810 million.

For its part, Caesars existing bonds were trending mostly lower as the company brought its $2.15 billion bond offering and finalized pricing on a downsized $2.5 billion term loan. Terms were set one day after the company shuffled the financing around, increasing the first-lien bond portion and reducing the second-lien bonds and term loan.

Caesars atop widened talk

Caesars Entertainment Resort Properties led business in the primary with $2.15 billion of senior secured notes in two tranches on Friday, according to a syndicate source. Both parts matched talk that had been widened significantly from earlier levels.

The deal included an upsized $1 billion tranche of eight-senior first-lien notes which priced at par to yield 8%.

The tranche was increased from $500 million.

The yield printed on top of revised yield talk. Initial talk was 7¼% to 7½%.

A downsized $1.15 billion tranche of second-lien notes (Caa2/CCC+) priced at par to yield 11%.

The tranche was cut from $1.35 billion.

The yield printed on top of revised yield talk. Initial talk had the second-lien notes coming to yield 10¼% to 10½%.

Citigroup Global Markets Inc., BofA Merrill Lynch, Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., J.P. Morgan Securities LLC, Goldman Sachs & Co., Macquarie, Morgan Stanley & Co. LLC and UBS Investment Bank were the joint bookrunners.

Proceeds, along with proceeds from a downsized $2.5 billion bank loan, and $200 million from the sale of common shares, will be used to repay CMBS financing and repay the Octavius/Linq credit facility. The new loan was reduced from a previously planned $3 billion size.

Howard Hughes upsizes

Howard Hughes priced an upsized $750 million issue of eight-year senior notes (Ba3/B) at par to yield 6 7/8% on Friday, according to an informed source.

The deal was upsized from $500 million.

The yield printed at the wide end of yield talk in the 6¾% area.

Credit Suisse Securities (USA) LLC was the bookrunner.

The Dallas-based property developer plans to use the proceeds for general corporate purposes.

Forum Energy at tight end

Forum Energy Technologies priced a $300 million issue of eight-year notes (Ba3/BB) at par to yield 6¼% on Friday, according to a market source.

The yield printed at the tight end of yield talk set in the 6 3/8% area.

J.P. Morgan Securities LLC, Wells Fargo Securities LLC, BofA Merrill Lynch, Citigroup Global Markets Inc. and Deutsche Bank Securities Inc. were the joint bookrunners.

The company plans to use the proceeds to repay its term loan and pay down its revolver.

Allegion's eight-year deal

Allegion priced a $300 million issue of eight-year senior notes (Ba2/BB+) at par to yield 5¾% on Friday, according to a market source.

The yield printed on top of the yield talk.

Goldman Sachs & Co., J.P. Morgan Securities LLC, BNP Paribas, BofA Merrill Lynch, Citigroup Global Markets Inc. and Credit Suisse Securities (USA) LLC were the joint bookrunners.

Proceeds, along with a $1.5 billion credit facility, will be used to pay a special cash distribution to current parent ADT Corp. prior to the proposed spin-off of its commercial and residential security businesses as Allegion and for general corporate purposes.

In a change to the planned financing, the company downsized the bond portion by $200 million to $300 million from $500 million, and upsized its term loan by the same amount, to $500 million from $300 million.

Friday's activity shrunk the new issue calendar substantially.

Heading into the weekend just three deals remained on the active calendar, and two of them are euro-denominated.

Look for the week ahead to be quieter, a trader said, adding that earnings reports should keep many issuers on the sidelines.

Market tone weakens

In the secondary, market indicators turned soft Friday as investors staked their positions ahead of month- and quarter-end.

Investors were also likely attempting to settle in while the federal government debated raising the debt ceiling or not.

The KDP High Yield Daily index came in to 73.66 versus 73.7 the day before. However, the yield held in at 6.07%.

The CDX North American High Yield Index meantime lost a quarter-point, closing at 104½ bid, 104 5/8 offered.

Gannett, Sinclair firm

A trader said recent new issues remained active during the final trading session of the week.

Gannett Co., Inc.'s $650 million of 6 3/8% notes due 2023 moved up to 991/2, the trader said, after pricing Thursday at a discounted price of 99.086.

The media company priced the upsized $1.25 billion two-part offering of senior notes in a Thursday drive-by. The overall deal size was increased from $1 billion and included a $600 million tranche of 5 1/8% notes due 2019, along with the 6 3/8% notes.

Also from Thursday business, Sinclair Television Group, Inc., a subsidiary of Sinclair Broadcast Group, Inc., saw its upsized $350 million issue of eight-year senior notes trading around 1001/2, a trader said.

The deal was upsized from $300 million and came at par.

The yield printed at the tight end of yield talk.

J.C. Penney rebound continues

J.C. Penney continued to be a topical name Friday, following Thursday's announcement that the company had commenced a sale of 84 million common shares.

The Plano, Texas-based retailer's debt continued to rebound during the session, after declining on Wednesday on the back of an analyst note that stated the company would need to raise cash. On Thursday, Myron Ullman, chief executive, was reported to have said there was no need to raise fresh capital - and then came the news of the stock sale, as well as a lowered liquidity forecast.

A trader on Friday saw the company's 5.65% notes due 2020 rising almost a deuce to 763/4. However, he said the 7.95% notes due 2017 were unchanged at 88.

The trader also saw the 6 3/8% notes due 2036 at 71, up 2½ points and the 5¾% notes due 2018 at 80, up 2 points.

Another trader placed the 5.65% notes around 77, which compared to levels around 75 on Thursday. The 6 3/8% notes traded up to 71, he said.

Goldman Sachs - the bank that provided a $2.25 billion loan for the company earlier this year and ironically, where the analyst report that initially drove the debt and stock down on Wednesday came from - led the stock sale. The shares were priced at $9.65 per share, a 7.4% discount to Thursday's closing price. There is a greenshoe for an additional 12.6 million shares.

J.C. Penney also said Thursday that liquidity would be around $1.3 billion, excluding proceeds from the stock offering. The company had previously claimed it would have well over $1.5 billion by the end of the year.

Caesars ups rates

Caesars Entertainment's debt was again trading actively on Friday as the company again revised terms of a planned financing effort.

A trader saw the company's existing 10% notes due 2018 falling almost a point to 541/4, though he said the 8½% notes due 2020 improved slightly to 931/4.

Another market source deemed the 10% notes down over a point at 54 bid.

As previously reported, Caesars is looking to refinance about $4.4 billion of CMBS debt and the $450 million senior secured credit facility entered into by Octavius Linq Holding Co. LLC, an indirect subsidiary. As such, the company is looking to sell $1.85 billion of senior secured notes.

The deal was said to include a $500 million tranche of seven-year first-lien notes and a $1.35 billion tranche of eight-year second-lien notes. Both tranches come with three years of call protection.

However, on Wednesday the Las Vegas-based casino operator said it was upping the amount of first-lien notes to $1 billion and trimming the second-lien notes sale to $1.15 billion.

The company also said it was reducing a planned bank loan to $2.5 billion from $3 billion.

Come Thursday, Caesars reportedly was increasing the rates on the various debts.

The coupon on the first-lien notes was upped to 8% from a 7¼% to 7½% context originally. The rate on the second-lien notes meantime moved up to 11% from 10¼% to 10½%.

As for the term loan, the interest rate is slated to be Libor plus 6%, versus initial talk of Libor plus 5.5%.

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