MultiPlan megadeal, Cornerstone price; Hertz up on spinoff plan; Global Geophysical gouged

By Paul Deckelman and Paul A. Harris

New York, March 18 - High-yield new-issuance volume picked up on Tuesday, syndicate sources said, due almost entirely to one big deal successfully coming to market.

MultiPlan Inc., a New York-based provider of health-care cost-management solutions, priced $1 billion of new eight-year notes. There was considerable demand for that paper among investors, who took the new bonds up smartly when they were freed for aftermarket dealings.

That one transaction made up the vast bulk of the day's $1.08 billion of new dollar-denominated, fully junk-rated paper; the day's only other pricing came from Cornerstone Chemical Co., which did a slightly upsized $77.5 million issue of five-year senior PIK toggle notes. Those bonds were not subsequently seen trading around.

The day's total was well up from Monday's tally of $366 million of proceeds from a pair of deals.

One of those Monday transactions - from Toronto-based precious metals mining company AuRico Gold Inc. - was seen on Tuesday continuing to trade at solidly higher levels versus its deeply discounted issue price.

Away from the new-deal realm, Hertz Corp.'s bonds were better in busy trading, helped by the news that corporate parent Hertz Global Holdings, Inc. plans to spin off the company's equipment-rental operation and use a big chunk of an anticipated cash dividend to the parent to pay down some of the remaining legacy vehicle-rental company's debt.

Another automotive name - Armored Auto Group Inc. - was better in active dealings, although there was no immediate news seen out on the maker of aftermarket car-care products and accessories.

Global Geophysical Services, Inc.'s bonds slid badly, in line with its shares, after the provider of seismic data services to the energy industry warned investors that some of its past financial reports cannot be relied upon due to accounting errors.

Overall activity was seen as relatively quiet, with a firmer tone.

Statistical market-performance measures were higher across the board for a second consecutive session Tuesday after having been lower all around on Friday.

MultiPlan prices tight

Tuesday's primary market session generated a heavy news volume.

In the dollar-denominated market, two issuers priced single-tranche deals to raise a combined total of $1.08 billion.

MultiPlan priced a $1 billion issue of eight-year senior notes (Caa1/CCC+) at par to yield 6 5/8%.

The yield printed at the tight end of final yield talk in the 6¾% area. Earlier guidance was in the 7% area.

Despite coming much tighter than the market was anticipating earlier in the week, the deal was nevertheless well received, according to a trader who spotted the notes trading in the 101¼ bid, 102 offered context, shortly after terms circulated.

The deal was multiple times oversubscribed, according to a buyside source.

J.P. Morgan and Barclays were the joint bookrunners for the buyout-funding deal.

Cornerstone PIK toggles

Cornerstone Chemical priced an upsized $77.5 million issue of non-rated five-year senior PIK toggle notes at par, with a cash yield of 10½%.

The notes pay a 10½% cash coupon that steps up by 75 basis points to 11¼% for PIK payments.

The deal was upsized from $75 million.

Both the cash and PIK coupons came on top of coupon talk.

Imperial Capital was the bookrunner.

The Waggaman, La.-based specialty chemical company plans to use the proceeds to pay a cash dividend to shareholders and to fund a debt service reserve account.

Talking the deals

Setting the stage for the midweek session, iGate Corp. talked its $325 million offering of five-year senior notes (B1/BB-) to price with a yield in the 4¾% area.

RBC is the left bookrunner. Deutsche Bank and UBS are the joint bookrunners.

Meanwhile First Cash Financial Services, Inc. talked its $200 million offering of seven-year senior notes (confirmed Ba3/expected BB-) to yield 6¾% to 7%.

Wells Fargo is the left bookrunner. Deutsche Bank is the joint bookrunner.

Both iGate and First Cash are set to price on Wednesday.

Lee Enterprises secured deal

Lee Enterprises Inc. plans to price a $400 million offering of eight-year first-lien senior secured notes (B2/B-) before the end of the week.

JPMorgan and Deutsche Bank are the joint bookrunners for the bank debt refinancing deal.

Fiat €1 billion drive-by

The euro-denominated high-yield primary market also generated news on Tuesday.

Three quick-to-market issuers brought single-tranche deals with which they raised a combined €2.25 billion.

Fiat Finance and Trade Ltd. SA launched and priced a €1 billion offering of seven-year senior notes (B2/BB-/BB-) at par to yield 4¾%.

The yield printed the tight end of the 4¾% to 4 7/8% yield talk.

The deal played to €4.5 billion of orders, according to an informed source.

Banca IMI, Barclays, Credit Agricole CIB, Credit Suisse, Mediobanca, Morgan Stanley and Royal Bank of Scotland were the bookrunners.

Royal Bank of Scotland will bill and deliver.

ArcelorMittal 3% notes

ArcelorMittal (Ba1/BB+/BB+) launched and priced a €750 million issue of 3% five-year notes at mid-swaps plus 210 bps.

The reoffer price was 99.648, and the yield was 3.077%

Barclays, BNP Paribas, Commerzbank and SG CIB were the active bookrunners. ING, Rabobank and Santander were the passive bookrunners.

SG will bill and deliver.

Pireaus atop tightened talk

Greek lender Piraeus Bank SA (Caa1/CCC/B-) priced €500 million of 5% three-year notes at 99.66 to yield 5 1/8% on Tuesday, according to market sources.

The yield printed on top of price talk that had been revised from earlier talk of 5¼% to 5½%.

The quick-to-market deal played to €3 billion of orders, according to an informed source.

BNP Paribas, Credit Suisse, Deutsche Bank, Goldman Sachs and HSBC were the joint bookrunners for the general corporate purposes deal.

Elsewhere Barcelona-based pharmaceutical firm Almirall SA talked its €325 million offering of seven-year senior notes (Ba3/BB-) to price with a yield in the 5% area.

The roadshow was cut short, with the cancellation of planned Wednesday stops in Paris and Frankfurt, and timing on the deal was moved ahead. Pricing is now set for Wednesday.

Joint bookrunner Deutsche Bank will bill and deliver. BBVA, Banca March and Nomura are also joint bookrunners.

The European high yield is busy, a London-based debt capital markets banker said on Tuesday shortly after the market closed there.

Expect at least two more deals to surface before the end of the week, the sellsider advised.

MultiPlan moves up

In the secondary realm, MultiPlan's new 6 5/8% notes due 2022were seen by a trader to have firmed solidly to 101¼ bid, 101¾ offered when the bonds were freed for initial aftermarket dealings.

A second trader, who had not seen the aftermarket levels, said he had heard that despite the fact "the company had really pushed it" to get the yield down to the eventual 6 5/8% level - way tight of earlier price talk of 6 ¾% and before that, even 7% - there was still "big demand" for the new deal among investors.

He also heard that the latter would likely wind up with "lousy allocations."

Gold issue continues to shine

Also on the new-deal front, a trader said that Monday's issue of 7¾% senior secured second-lien notes due 2020 from AuRico Gold was "one name that had momentum."

He pegged those bonds "as high as 99¾ to par."

"It was the one bond that definitely stands out."

A second trader saw the bonds bid "up around par," while a third located them at 99 5/8 bid, 100 1/8 offered - a more than 2-point jump from the levels in the mid-97 area at which he had seen the bonds when they began trading on Monday, although there had been some in the market who had quoted the bonds up around 99ish near Monday's close.

The bonds had firmed smartly from the 96.524 level at which that $315 million deal had priced on Monday to yield 8½%. The bonds priced after the regularly scheduled forward calendar deal had been upsized from an originally planned $300 million.

United Rentals still popular

Traders said that apart from the new MultiPlan bonds and AuRico Gold's issue, there didn't seem to be much going on with other recently priced offerings - with one exception.

For a fourth consecutive session, there was notable activity in United Rentals (North America), Inc.'s new 5¾% notes due 2024.

A market source said that more than $13 million of those bonds had changed hands by the close, putting the credit high up on the day's Most Actives list.

He saw the bonds around 100 13/16 bid, calling that a gain of about 5/16 on the day.

The Greenwich, Conn.-based construction and industrial equipment rental and leasing company had priced that $850 million tranche of bonds late in the day last Wednesday at par as part of a $1.38 billion two-part drive-by offering. While they had come too late in the day for any trading after pricing, the bonds more than made up for it with a vengeance on Thursday, when an estimated $117 million of bonds changed hands, including some $106 million of round-lot transactions, easily topping the day's Most Actives list. They initially traded at 100 1/8 bid, 100 3/8 offered.

They continued to trade actively after that, hovering around a ¼ point or so above their issue price, with over $20 million traded on Friday and another $40 million of turnover on Monday, when the bonds were again one of the most heavily traded credits in Junkbondland.

A trader meanwhile quoted the other half of that deal - the $525 million add-on to the company's existing 6 1/8% notes due 2023 - around 106¼ bid, 106 3/8 offered on Tuesday, up from Monday's close around 106 1/8 bid.

Volume, however, was considerably smaller than that of the 5¾% notes.

The 6 1/8s had priced at 105¼ last Wednesday to yield 5.188% and then got as good as a 105 5/8 to 106 1/8 context when they were freed to trade on Thursday on over $50 million of volume.

On Friday, with volume moderating to around $11 million, the notes were seen down 1/8 to ¼ point from Thursday's finish, quoted around 105½ bid. But they moved back up on Monday, and again on Tuesday, though on more restrained volume.

Hertz trades higher

While a trader said that Tuesday's market "was new-issue-driven - that's the name of the game, what everybody is playing," while "the secondary was a tough market," here and there, non-new-deal credits did stand out.

For instance, Hertz's 5 7/8% notes due 2020 were among the day's most active issues, with over $8 million having traded; a market source saw those bonds up 1¼ points at 107 bid.

The Park Ridge, N.J.-based vehicle and construction and industrial equipment rental company's 6¼% notes due 2022 gained 1 5/8 points on the day to end at 107 1/8 bid, with over $6 million having changed hands.

That followed the release of the company's 2013 fourth-quarter and full-year results, which included strong revenues and EBITDA growth, though earnings were impacted by the company having an excessively large fleet of cars after misjudging the strength of the market, a problem it is attempting to come to grips with now.

Hertz also announced plans to separate its equipment-rental and vehicle rental divisions into two separate companies by spinning off the equipment business; it plans to use much of a $2.5 billion distribution back to the parent company at the time of separation to pay down its term loan debt (see related story elsewhere in this issue.)

Armored Auto drives upward

Another gainer was Armored Auto Group's 9¼% notes due 2018; those bonds were seen up some 2 3/8 points on the day at 102 bid, with over $18 million having traded.

Nobody had immediately seen any fresh news out on the Danbury, Conn.-based manufacturer of aftermarket car-care products that might explain the rise.

Global Geophysical punished

On the downside, a trader noted that Global Geophysical Services - a Missouri City, Texas-based company that provides seismic data to the energy industry - got buried under a landslide on Tuesday after it warned investors that its financial reports for each of the fiscal years ended Dec. 31, 2012, 2011, 2010 and 2009 and for the first, second and third quarters of 2013 "should no longer be relied upon because of accounting errors resulting from material weaknesses in the company's internal controls."

"You absolutely don't want something like that," the trader said with some understatement.

He saw the bonds get hammered down to around the 50 bid level from prior levels around 75, although he noted that "it was mostly odd-lot trading," with few sizable transactions seen."

A second market source saw the bonds drop to 50 as well, although there were one or two round-lots traded around 53 bid, still well down from their pre-news levels of about 76. Over $10 million of the bonds changed hands.

The company's New York Stock Exchange-traded shares also got pummeled, nose-diving by 71 cents, or 60.68%, to end at 46 cents per share, versus Thursday's close at $1.17. Volume of 9.5 million shares was 25 times the usual turnover.

Market indicators up again

Statistical junk performance indicators were higher across the board for a second consecutive session on Tuesday, continuing the momentum seen on Monday, which had been the first solidly higher session since March 5. The indicators had been lower all around on Friday.

The Markit Series 21 CDX North American High Yield index gained 11/32 point on Tuesday to end at 107 23/32 bid, 107 25/32 offered - its second straight gain. On Monday, it had improved by 7/16 point, snapping a losing streak of seven consecutive sessions of losses.

The KDP High Yield Daily index added 6 basis points Tuesday to close at 74.86, its second consecutive advance. On Monday, it had risen by 7 bps, also breaking out of a seven-session slump that included a 16-bps plunge on Friday.

Its yield, meanwhile, narrowed for a second straight session, coming in by 3 bps to finish at 5.25%. It had declined by 1 bp on Monday, after two straight rises, including 5 bps on Friday.

And the widely-followed Merrill Lynch High Yield Master II index also made it two successful sessions in a row, rising by 0.146%, on top of Monday's 0.093% improvement. Unlike the prolonged recent losses in the Markit and KDP indexes, the Merrill Lynch gauge had spent the previous week or so alternating gains and losses in a choppy pattern, including Friday's 0.134% retreat.

Tuesday's advance raised its year-to-date return to 2.651% from 2.501% on Monday, although it remained well below the 2.812% reading seen on March 5, its 2014 peak level.

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