Five deals price for $1.7 billion; new Essar, Forestar bonds gain; Ortho-Clinical on tap

By Paul Deckelman and Paul A. Harris

New York, May 7 - After several sessions in which just a single pricing, or maybe two, had come to market each time, the high-yield primary realm got busy on Wednesday, pricing a total of five new deals, collectively worth some $1.67 billion.

Unlike some recent sessions, no one deal dominated the proceedings. The largest transaction weighed in at $450 million - Midwest iron ore producer Essar Steel Minnesota LLC's six-year senior secured notes, which came to market at a hefty discount to par after that deal had been restructured to shorten its duration and lengthen its call protection, among other changes.

Energy and real estate company Forestar Group Inc. brought a $250 million issue of eight-year secured notes to market.

Essar and Forestar were the first two out of the day's five deals to price, and were the only ones to be seen in the aftermarket, with traders seeing both companies' new bonds having moved up when they were freed to trade.

Coming too late in the day for any trading at that time were a pair of domestic financial firms: Philadelphia-based mortgage insurer Radian Group Inc., with an upsized $300 million of five-year notes, and Atlanta-based mortgage originator and servicer Ocwen Financial Corp.'s quick-to-market $350 million five-year issue.

Another latecomer was Australia's Transfield Services Ltd., a provider of operations, maintenance and construction services to the energy, natural resources and other industries. It did an upsized $325 million issue of six-year notes.

Besides the deals that priced, several other deals had price talk out on them in preparation for coming to market on Thursday. These included health-care name Ortho-Clinical Diagnostics Inc., which is selling $1.5 billion of eight-year notes; German ball-bearing manufacturer Schaeffler Group, whose €2 billion equivalent five-tranche offering does include a $700 million issue of seven-year secured notes; and Canadian copper producer First Quantum Minerals Ltd., bringing a $650 million tranche of eight-year notes.

Away from the new deals, traders saw continued relatively brisk trading in Forest Oil Corp.'s two issues of bonds, at or near the highs they hit on Tuesday on the news that the energy exploration and production company will be acquired by sector peer Sabine Oil & Gas LLC.

Caesars Entertainment Corp.'s bonds were mixed, as investors reacted to news of a big recapitalization effort for the Las Vegas-based gaming giant.

Statistical indicators of market performance were higher across the board, after having been mixed over the previous six sessions.

Essar restructures, discounts

Although the Wednesday session did not put up a big dollar amount, it was a busy day in the high-yield primary market, which saw five issuers bring single-tranche deals ranging in size from one-quarter to one-half a billion dollars, raising a grand total of $1.67 billion.

Executions tended to be crisp, with three of the five coming at the tight end of guidance, and the other two coming on top of, or in the middle of, guidance.

Two of the five were upsized.

And one of the five came as an a.m.-to-p.m. drive-by.

Essar Steel Minnesota priced its restructured $450 million issue of 11½% six-year senior secured notes (Caa1/CCC+/) at 97.901 to yield 12%.

The coupon and yield came on top of talk. The discount came in line with original issue discount talk of about two points.

The maturity changed to six years from seven years.

Call protection was extended to the life of the bond from the previous non-call-four structure.

There were also covenant changes.

Credit Suisse, Morgan Stanley and Jefferies were joint bookrunners for the capital expenditures deal.

Ocwen drives through

Ocwen Financial priced a $350 million issue of five-year senior notes (B2/B) at par to yield 6 5/8%.

The yield printed in the middle of the 6½% to 6¾% yield talk.

Barclays was left lead on the quick-to-market general corporate purposes deal. Wells Fargo, BofA Merrill Lynch and Morgan Stanley were the joint bookrunners.

Transfield Services upsizes

Sydney, Australia-based Transfield Services priced an upsized $325 million issue of six-year senior notes (Ba3/B+) at par to yield 8 3/8%.

The deal was upsized from $300 million.

The yield printed at the tight end of the range set in the mid-8% initial guidance.

Physical bookrunner BofA Merrill Lynch will bill and deliver. HSBC Securities was also a physical bookrunner. Mitsubishi UFJ and Wells Fargo were joint bookrunners.

Proceeds, along with a A$500 million credit facility, will be used to refinance debt and provide working capital.

Radian upsized and tight

Radian Group priced an upsized $300 million issue of non-callable five-year senior notes (B3/B-) at par to yield 5½%.

The deal was upsized from $200 million.

The yield printed at the tight end of the 5½% to 5¾% yield talk.

Goldman Sachs ran the books for the acquisition and debt refinancing deal.

Forestar at the tight end

Forestar Group priced a $250 million issue of eight-year second-lien senior secured notes (B2/BB-) at par to yield 8½%, at the tight end of the 8½% to 8¾% yield talk.

Goldman Sachs, KeyBanc and J.P. Morgan were the joint bookrunners.

The Austin, Texas-based real estate and oil and natural gas company plans to use the proceeds to repay its term loan and for general corporate purposes, including investments in strategic growth opportunities.

Schaeffler on deck

Looking to what promises to be a busy Thursday session, Germany's Schaeffler Finance BV set price talk for its €2 billion equivalent offering of high-yield notes on Wednesday.

The deal, which is coming in dollars and euros, as well as in secured and unsecured notes with three separate tenors, is expected to price on Thursday.

The four tranches are sized and talked as follows:

• Benchmark euro-denominated five-year senior secured notes (Ba2/BB-), non-callable for two years, talked to yield 3%;

• Expected $700 million seven-year senior secured notes (Ba2/BB-), non-callable for three years, talked to yield 4½%;

• Benchmark euro-denominated eight-year senior secured notes (Ba2/BB-), non-callable for three years, talked to yield 3 5/8%; and

• Benchmark euro-denominated five-year senior unsecured notes (B1/B), non-callable for two years, talked to yield 3½%.

Physical bookrunner JPMorgan will bill and deliver for both the dollar- and euro-denominated notes. Physical bookrunner UniCredit will also bill and deliver for the euro-denominated notes.

Ortho-Clinical talks 6½% area

In another big deal on deck for Thursday, Ortho-Clinical Diagnostics talked its $1.15 billion offering of eight-year senior notes (Caa1/CCC+) to price with a yield in the 6½% area.

The deal, which is said to be multiple-times oversubscribed, has shaped up at the tight end of the earlier 6½% to 6¾% guidance.

Goldman Sachs is the left bookrunner. Barclays, Credit Suisse, UBS and Nomura are the joint bookrunners.

First Quantum talks 7% to 7¼%

First Quantum Minerals talked its $650 million offering of eight-year senior notes (B1//BB) to yield 7% to 7¼% in another deal set to price Thursday.

Global coordinator Credit Suisse will bill and deliver. BNP and Jefferies are also global coordinators.

R&R Ice Cream: 5½% to 5¾%

For the Thursday session in Europe, R&R Ice Cream plc talked its £315 million offering of six-year senior secured notes (B1/B) at par to yield 5½% to 5¾%.

Goldman Sachs, Barclays and JPMorgan are the joint bookrunners.

Essar, Forestar trade up

In the secondary arena, traders said that Essar Steel Minnesota's 11½% senior secured notes due 2020 and Forestar Group's 8½% senior secured notes due 2022 were the only deals that priced early enough in the session for any kind of aftermarket dealings.

One trader saw the Essar notes at 99 bid - up from the deeply discounted 97.901 at which the regularly scheduled forward calendar offering priced.

A second trader saw those bonds doing even better than that, going home at 101¼ bid, 101¾ offered.

Forestar Group's new paper was also showing some pop, the traders said.

The notes had priced at par, but one trader saw them having jumped to 103½ bid, 104½ offered.

At another desk, the notes were seen having gotten as good as 103¾ bid, 104½ offered.

Berry bonds easier

Among other recently priced issues, a trader said that Berry Plastics Group, Inc.'s 5½% second-priority senior secured notes due 2022 were probably the most active, with over $13 million having changed hands during the session, although that was down from the more than $37 million that had traded on Monday, right after the bonds priced, and the $36 million of turnover seen Tuesday.

The trader quoted the bonds at 97 7/8 bid, 100 1/8 offered, while a second trader also pegged them at that level.

That was down by around 1/8 point from the par level at which the traders had seen the bonds going home on Tuesday.

Berry, an Evansville, Ind.-based manufacturer of plastic packaging materials, had priced $500 million of the notes at par in a quick-to-market deal on Monday via its Berry Plastics Corp. subsidiary. They had initially traded about ¼ point better than their issue price, before easing from that peak level.

Sirius seen stronger

A trader saw Sirius XM Holdings Inc.'s 6% notes due 2024 continuing to strengthen on Wednesday, quoting them up ¾ point to a closing level at 102½ bid, 103 offered.

That gain was on top of a 5/8 point rise that was seen on Monday and again on Tuesday.

The New York-based satellite radio broadcaster had priced $1.5 billion of those notes at par on Thursday in a drive-by offering via its Sirius XM Radio Inc. subsidiary. They had risen modestly in initial secondary dealings, had finished out last week around a 101 bid context and have continued to firm so far all of this week.

Forest stays firm

Away from the new deals, traders said that Forest Oil's bonds continued to trade actively on Wednesday at or perhaps a little below the levels to which they had zoomed in very heavy trading on Tuesday, on the news that the underachieving Denver-based independent oil and gas exploration and production company will merge with the financially better-situated Sabine Oil & Gas.

While the levels were among the busiest seen on Wednesday in Junkbondland, they still paled in comparison with the stupendous volume racked up on Tuesday on the merger news.

A trader said that "Forest is still pretty firm," quoting its 7¼% notes due 2019 trading in a par to 100¾ context.

A second trader agreed that Forest "was active again," seeing those bonds at 100 1/8 bid, 100½ offered, with over $36 million having traded, putting it near the top of the junk Most Actives list.

On Tuesday, those bonds - which had been hammered down into the high 80s over a number of sessions in late February and early March, after the company reported unexpectedly poor fourth-quarter numbers - had jumped by nearly 12 points to 100 7/16 bid on volume of over $150 million, according to market sources.

The second trader also saw the company's 7½% notes due 2020 trading busily with over $16 million having changed hands; he saw the bonds "down a little on the day" from Tuesday's peaks, ending inside a 102¾ to 103¼ context. Yet another trader saw the bonds at 102½ bid, 103½ offered.

On Tuesday, the 2020 notes had soared by some 16½ points to go out at around the 104 bid mark from prior levels around 88. North of $106 million had traded on Tuesday.

Caesars all over the lot

The news that gaming giant Caesars Entertainment is undertaking a big recapitalization transaction caused some movement in the company's bonds, although one market source said that its direction was mixed.

He saw its Caesars Entertainment Operating Co. Inc. 10% notes due 2018 having firmed to 47 bid, a gain of more than 3 points on the day. The 10¾% notes due 2016 were also better, rising 3 points to 93.

However, he also saw the operating company's 6½% notes due 2016 drop by 3 points on the day to end at 90 bid.

Another participant said that most of the company's debt, in fact, was softer at the end of the day in response to the recapitalization plan, which will strip guarantees from debt linked to the operating company.

The 11¼% notes due 2017 were the most active of the structure, according to a trader who said that at least $90 million of those bonds had changed hands. He called the issue off 1½ points at 901/2.

The 8½% notes due 2020 were also weaker, slipping 1¾ points to 793/4.

The 9% notes due 2020 closed down 1½ points around 81.

Caesars announced the recapitalization plan late Tuesday. Under the plan, Caesars Entertainment Operating Co. sold a 5% equity stake to institutional investors. The "opco" will also secure a new $1.75 billion first-lien term loan, which will be used to redeem 2015 maturities and to repay existing bank debt.

As such, the company also announced a tender offer for the 5 5/8% and 10% notes due 2015.

As for the equity sale, in doing so the parent company released its guarantee of the opco bonds. That means that bondholders can no longer place a claim against the parent company's assets in the event of a restructuring. It could also give them less bargaining power in a restructuring.

Some bondholders were already decrying the company's sale of four properties to its Caesars Growth Partners LLC affiliate - another important feature of the recapitalization plan - alleging that it is a fraudulent transfer that strips assets from the opco.

The bondholders also claim that the opco is insolvent.

Caesars also released earnings for the first quarter of 2013.

At the parent company level, casino revenues fell 8.6% to $1.36 billion. Net revenues were down 1.9% to $2.1 billion.

Net loss was $386.4 million, or $2.82 per share. That compared to a net loss of $217.6 million, or $1.74 per share, the year before.

As for the opco, net revenues dropped 10.9% to $1.44 billion. Net loss was $492.9 million, versus $254.2 million the year before.

Those figures did not take into account the opco's continued involvement with the LINQ and Octavius Towers at Caesars Palace.

Meanwhile, the company's Caesars Acquisition Co. affiliate - formed just last year to be the managing member of Caesars Growth Partners - also reported quarterly results on Wednesday.

Executives of that entity said on their conference call that after several debt market transactions earlier this year, the company enjoys a "very flexible" capital structure, and is in the market to further expand its quickly assembled mini-empire of casino properties that it has bought from parent Caesars Entertainment via Caesars Growth Partners.

They also announced a $2 billion financing, which will be used to pay back some term loan debt used for acquisitions (see related story elsewhere in this issue).

Indicators show improvement

But apart from specific story names like Forest and Caesars, "nothing else was jumping out at you," a trader said.

"It was just another quiet day."

Statistical junk performance indicators turned higher across the board on Wednesday, breaking a string of six consecutive sessions during which they had been mixed.

The Markit Series 22 CDX North American High Yield index gained 3/16 point to close at 106 15/16 bid, 107 offered, in contrast to Tuesday's 1/16 point easing, its fourth straight setback.

The KDP High Yield Daily index rose by 10 basis points on Wednesday, ending at 75.02. On Tuesday, it had lost 1 bp, its second straight downturn.

Its yield meanwhile came in by 1 bp for a second consecutive session, closing at 5.16%

The widely followed Merrill Lynch High Yield Master II index continued its upward path for an eighth consecutive session on Wednesday, adding on 0.049%, on top of Tuesday's 0.069% rise.

Wednesday's gain raised the index's year-to-date return to 3.968%, its eighth straight new peak level for 2014 so far. The prior high point had been Tuesday's 3.917% reading.

Stephanie N. Rotondo contributed to this report.

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