Junk primary revives as Forest Labs, Harland Clarke lead $2.7 billion pricing spree

By Paul Deckelman and Paul A. Harris

New York, Jan. 27 - The junk bond market remained pretty much on the downside for a third consecutive day on Monday, as risk assets continued to largely take their cues from the stock market, which is nervous about pending action by the Federal Reserve and slowing economies in China and elsewhere in the emerging markets.

But new-deal activity picked up, with the pricing of over $2.7 billion of U.S. dollar-denominated, fully junk-rated paper during the session - matching in one day the total that priced during all of last week.

The big deal of the day came from New York-based specialty pharmaceuticals developer and manufacturer Forest Laboratories, Inc., which did a $1.8 billion two-part offering of five-year and seven-year notes.

Harland Clarke Holdings Corp., a producer of checks, credit cards and other transaction-processing products chimed in with a downsized $815 million two-part deal, consisting of six-year secured and seven-year unsecured notes.

Rounding out the day's activities, beauty products maker Elizabeth Arden, Inc. brought a $100 million add-on to its existing 2021 notes.

In the aftermarket, traders saw gains in both tranches of the new Harland Clarke deal, and in the Elizabeth Arden add-on, but the Forest Labs offering priced too late in the session for any kind of secondary activity.

Away from the new deals, traders saw most junk bonds remaining on the downside for a third straight session, although here and there some bucked the trend, including retailers Sears Holdings Corp. and RadioShack Corp.

Statistical measures of market performance turned mixed, after having been lower across the board over the previous two sessions.

Forest sells $1.8 billion

A busy Monday in the high-yield primary market saw three issuers raise a total of $2.72 billion in a combined five tranches of junk.

Forest Laboratories priced $1.8 billion of non-callable senior notes (Ba1/BB+) in two tranches.

The acquisition-funding deal included a $1.05 billion tranche of five-year notes that priced at par to yield 4 3/8%, and a $750 million tranche of seven-year notes which priced at par to yield 4 7/8%.

Both tranches priced on top of price talk.

Morgan Stanley and Credit Suisse were the joint bookrunners for the five-year notes tranche, while Morgan Stanley and JP Morgan were the joint bookrunners for the seven-year notes tranche.

Proceeds will be used to fund the acquisition of Aptalis from TPG.

Harland Clarke downsizes

Harland Clarke priced a downsized $815 million two-part offering of high-yield notes.

The deal included a $275 million issue of six-year senior secured notes (B1/B+) which priced at par to yield 6 7/8%. The yield printed at the tight end of yield talk that was set in the 7% area.

In addition the San Antonio-based company priced a downsized $540 million issue of seven-year senior unsecured notes (Caa1/B-) at par to yield 9¼%. The tranche was reduced from $590 million with the shifting of $50 million of proceeds to the concurrent bank loan. The unsecured notes priced on top of price talk.

Credit Suisse, BofA Merrill Lynch, Citigroup, Deutsche Bank and Jefferies were the joint bookrunners for the acquisition and debt refinancing deal.

Elizabeth Arden taps 7 3/8s

Elizabeth Arden priced a $100 million add-on to its 7 3/8% senior notes due March 15, 2021 (B1/BB-) at 106.75 to yield 5.614%.

The reoffer price came at the cheap end of the 106.75 to 107.25 price talk.

JP Morgan, BofA Merrill Lynch and Wells Fargo were the active bookrunners for the quick-to-market debt refinancing deal. HSBC was the passive bookrunner.

Ardagh returns

After canceling approximately $1.5 billion of priced bonds and returning escrowed proceed to investors earlier in the month, Ardagh Packaging Finance plc and Ardagh Holdings USA Inc. began a roadshow on Monday in New York for an $830 million two-part offering of senior notes (expected ratings Caa1/CCC+).

The deal appears headed for pricing during the middle part of the week.

The deal, via bookrunner Citigroup, is coming in tranches of five-year notes and seven-year notes.

As with the cancelled deal, proceeds will be used to help finance the acquisition of the Verallia North America (VNA) glass container manufacturing operations from Cie. de Saint-Gobain SA.

This time around, Ardagh has elected to get $700 million of the financing from the bank loan market, so not every investor who was taken out of bond earlier in the month will be able to roll into new paper.

The bond buyback, earlier in January, was triggered by the passage of the deadline for the acquisition to close.

Completion of the acquisition was delayed due to an antitrust complaint which went before the U.S. Federal Trade Commission.

Radio One starts roadshow

Radio One, Inc. began a roadshow on Monday for a $335 million offering of six-year senior subordinated notes.

The deal is set to price on Wednesday.

Credit Suisse is bookrunner of the deal which will be used to take out Radio One's senior subordinated notes due 2016.

Parsley starts marketing

Parsley Energy, LLC began a roadshow on Monday for a $325 million offering of eight-year senior notes.

The deal is set to price late this week.

Credit Suisse and Morgan Stanley are the joint bookrunners for the debt refinancing deal.

Lansing sets roadshow

Lansing Trade Group plans to start a roadshow on Wednesday for a $175 million offering of seven-year senior notes (/B+/).

The deal is scheduled to price during the middle part of the Feb. 3 week.

Macquarie has the books for the debt refinancing deal.

Bond Aviation taps floaters

In the sterling-denominated high-yield primary market, Bond Aviation priced a £60 million add-on to the Libor plus 575 basis points senior secured floating-rate notes due May 1, 2019 (B2/B) issued by Bond Mission Critical Services plc.

The add on was sold at 99.

JPMorgan and KKR were the joint bookrunners.

Harland moves higher

In the secondary market, traders saw Harland Clarke's new notes moving higher when they were freed for aftermarket dealings, particularly the company's 6 7/8% senior secured notes due 2020.

Traders at two separate shops saw that issue move up to 101 bid, 102 offered, versus its par issue price.

A third pegged those bonds at 101½ bid, 102½ offered.

The other half of the company's two-part deal, its 9¼% senior unsecured notes due 2021, showed more modest gains; one trader saw it in a par to 101 context, while a second located it around 100½ bid, 101½ offered, also up from a par issue price.

Elizabeth Arden sitting pretty

A trader quoted Elizabeth Arden's 7 3/8% notes due 2021 at a 107 to 107½ bid context.

That was up from the 106.75 level at which the Miramar, Fla.-based beauty products maker had priced it quick-to-market $100 million add-on to the existing bonds.

Forest Labs a no-show

Owing to the relative lateness of the hour at which it priced, traders saw no immediate aftermarket activity in Forest Laboratories' quickly shopped $1.8 billion two-part offering.

Friday deals a mixed bag

Going back to the issues which priced on Friday, a trader saw Northern Blizzard Resources, Inc.'s 7¼% notes due 2022 at 100 1/8 bid, 100 5/8 offered, calling them up 1/8 point on the day.

The Calgary, Alta.-based oil and natural gas exploration and production company priced $425 million of those notes at par. They had been initially seen trading in a par to 100 1/8 bid context.

Also slightly better, he said, were Intrepid Aviation Management LLC's new 6 7/8% notes due 2019. The Stamford, Conn.-based aircraft leasing company had priced $300 million of those notes at par after upsizing its deal from an original $250 million, and they rose to an altitude of 101¼ bid, 101¾ offered in their initial secondary trading, then tacked on another ¼ point on Monday.

But he saw Nesco, LLC's 6 7/8% senior secured notes due 2021 off 5/8 point on Monday to go home at 100 3/8 bid, 100 7/8 offered.

The Fort Wayne, Ind.-based provider of fleet equipment rental, sales and services priced $525 million of those notes at par, after the deal was upsized from an original $500 million. The notes moved up to 101 bid, 102 offered when they initially hit the aftermarket after pricing.

The trader saw Waterjet Holdings, Inc.'s 7 5/8% senior secured notes due 2020 unchanged 102½ bid, 102 7/8 offered.

The Baxter Springs, Kan.-based waterjet industrial cutting technology company priced $250 million of the notes at par on Friday, upsizing the deal from $200 million originally, and they had firmed smartly when freed to trade, jumping to jumping to levels above the 102 bid mark.

Sears seen higher

Away from the new-deal arena, a trader said that "Sears had some activity today," noting dealings in the Hoffman Estates, Ill.-based department store operator's 6 5/8% notes due 2018.

He pegged those bonds around an 89 to 90 bid context going home, calling them pretty much unchanged on the day and estimating volume at about $15 million.

A market source at another desk saw round-lot trading of over $9 million, in addition to brisk trading in the smaller odd lots, and quoted the issue at 90 3/8 bid, up ¼ point on the day.

Sears, another trader said, "hung in there," even as fellow retailers like J.C. Penney were losing ground.

"A lot of Sears traded today," he said, also seeing the bonds having gotten as good as 90 3/8 after having traded earlier at 89½ bid to 90 3/8 offered. He called those levels "basically unchanged."

Sears' New York Stock Exchange-traded shares also managed to buck a generally negative equity trend, gaining 24 cents, or 0.63%, to end at $38.39, in contrast to Penney's NYSE-traded stock, which lost 19 cents, or 2.84%, to close at $6.51. There was no fresh news out on either company.

Penney paper punished

Back in the junk bond market, Penney's 5¾% notes due 2018 lost 2½ points, a trader said, to end at 73 bid, and he saw the troubled Plano, Texas-based department store operator's 5.65% notes due 2020 off by ½ point at 70½ bid.

"So, while Sears hung in," he said, "[Penney] got weaker."

A second trader agreed that the company's notes had gone lower on Monday. He said that the 53/4s had lost 1 point on the day lost between ½ point and 1 point to end in a 72 to 73 bid context.

"They've been drifting lower over the past few days," he noted, with investors apparently not mollified by the company's optimistic assertion earlier in the month that it was pleased with its performance during the just-concluded holiday sales period, or by Penney's announcement a week later that it would close 33 under-performing stores and cut headcount by 2,000, in hopes of saving $65 million this year.

A trader saw Penney's 7.40% bonds due 2037 easing by 2½ points to 69, although he noted that round-lot volume was only $1 million.

Its 6 3/8% bonds due 2036 were unchanged at 68 bid, 70 offered, in similarly quiet dealings.

Radio Shack unveils plan

Also in the retailing space, RadioShack's 6¾% notes due 2019 "were hanging around 60," a trader said, declaring that there was "not a whole lot of activity there."

A second source saw only one or two large trades in the issue, which continued to trader in a 60¼ to 60½ context.

The Fort Worth, Texas-based consumer electronics retail chain operator's bonds, and its shares, had risen solidly last week on the news that hedge-fund Litespeed Management LLC had taken a passive 8.1% stake in the company.

There was further news out on Monday, as the company announced its new brand-positioning initiative, using the slogan "It Can Be Done, When We Do It Together."

The company's chief executive officer, Joe Magnacca, proclaimed that "RadioShack is realigning our brand around our core purpose, which goes beyond our great product assortment and price match guarantee. RadioShack helps consumers find the products they need to connect and power their lives. More importantly, RadioShack can help create technology-based solutions that make anything possible.

"This new approach gives us an internal rallying cry to motivate our team of almost 30,000 associates to go the extra mile for our customers as we continue to make progress with our turnaround plan."

Market indicators turn mixed

Statistical junk-market performance indicators turned mixed on Monday, after having been lower across the board for the previous two sessions.

The Markit Series 21 CDX North American High Yield Index rose by 3/32 point on Monday to close at 106 3/8 bid, 106½ offered, its first gain after seven consecutive losing sessions, including Friday, when it had plunged by 1 full point.

But the KDP High Yield Daily Index suffered its third consecutive loss, sliding by 18 basis points to end at 74.59, after having nose-dived by 21 bps on Friday.

It shot up by 7 bps for a second straight session to 5.54%, its third rise in a row.

And the widely followed Merrill Lynch High Yield Master II Index fell by 0.075% on Monday, its third straight downturn. It had lost 0.335% on Friday.

The latest loss dropped its year-to-date return to 0.697% from 0.722% on Friday. It was down as well from Wednesday's 1.185%, its high point of the year so far.

The index's yield to worst rose to 5.615% from 5.578%, leaving it well above its low level for the year, Wednesday's 5.386%.

Its spread to worst widened out to 425 bps over comparable Treasuries - its second straight new wide point for the year. On Friday, it had risen to 424 bps - well out from the 398 bps over seen on Wednesday, its tightest level of the year so far.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.