Upsized First Data deal, MGM lead busy drive-by parade; new Halcon, CTP issues post gains

By Paul Deckelman and Paul A. Harris

New York, Dec. 16 - The high-yield primary sphere opened the last full trading week of 2013 on Monday with a busy slate of quick-to-market transactions.

The next two weeks will be abbreviated due to full market shutdowns associated with the Christmas and New Year's holidays in addition to expected early pre-holiday closes.

The day's new deals totaled some $1.9 billion, as the market challenges last year's record-heavy junk bond issuance.

Heading into Monday's session, just under $323 billion of new dollar denominated, fully junk-rated paper from domestic or industrialized-country issuers had priced, according to data compiled by Prospect News. This figure is only a couple of billion shy of last year's $327 billion total.

Monday's deals closed that relatively small gap even further.

Atlanta-based electronic transactions processor First Data Corp. had the day's big deal, pricing an upsized $725 million add-on to its 2021 subordinated bonds.

Energy operator Halcon Resources Corp. also did an add-on, pricing $400 million of new 2020 notes, which were heard by traders to have moved up in the aftermarket.

Casino giant MGM Resorts International brought $500 million of 6.25-year paper to market.

And Irving, Texas-based art supply retailer Michaels Stores Inc. did $260 million of seven-year subordinated notes.

Among last week's deals, traders saw some upside in the new issues from CTP Transportation Products LLC and Roundy's Supermarkets, Inc.

Statistical market performance measures were mixed for a second consecutive session on Monday.

First Data upsizes

The Monday high-yield primary market session saw a burst of drive-by activity, as four issuers well known to the high-yield universe brought single-tranche deals to raise a combined total of $1.92 billion.

First Data priced an upsized $725 million add-on to its 11¾% senior subordinated notes due Aug. 15, 2021 (Caa2/CCC+) at 103.50 to yield 10.863%.

The deal was upsized from $500 million.

The reoffer price came at the rich end of the 103.25 to 103.5 price talk.

BofA Merrill Lynch was the left physical bookrunner for the debt refinancing. Citigroup and Deutsche Bank were the joint physical bookrunners.

Barclays, Credit Suisse, HSBC, Wells Fargo and KKR were the joint bookrunners.

MGM at the wide end

MGM Resorts priced a $500 million issue of non-callable senior notes due March 31, 2020 (B3/B+) at par to yield 5¼%, at the wide end of the 5 1/8% to 5¼% yield talk.

Deutsche Bank, BofA Merrill Lynch, Barclays and J.P. Morgan were the joint bookrunners.

The Las Vegas-based gaming and lodging company plans to use the proceeds for general corporate purposes, which may include repaying a portion of the 5 7/8%% senior notes due in February 2014.

Halcon taps 9¾% notes

Halcon Resources priced a $400 million add-on to its 9¾% senior notes due July 15, 2020 (Caa1/CCC+) at 102.75 to yield 8.999%.

The reoffer price came in the middle of the 102.5 to 103 price talk.

The deal was up about 1 point in the secondary market, well after the Monday New York close, according to an informed source.

Barclays was the left bookrunner. Wells Fargo was the joint bookrunner.

The Houston-based oil and gas acquisition, production, exploration and development company plans to use the proceeds to refinance debt and for general corporate purposes.

Michaels inside of talk

Michaels Stores priced a $260 million issue of seven-year senior subordinated notes (Caa1/CCC+) at par to yield 5 7/8%.

The yield printed 12.5 basis points inside of the 6% to 6¼% yield talk.

Deutsche Bank, Barclays, BofA Merrill Lynch, Credit Suisse, Goldman Sachs, JP Morgan, Morgan Stanley, Wells Fargo, Guggenheim and Macquarie were the joint bookrunners for the debt refinancing.

Sierra Hamilton price talk

In the wake of Monday's flurry of drive-bys, the forward calendar still sports four deals expected to price before Friday's close.

Sierra Hamilton has talked its $110 million offering of five-year senior secured notes (B3/B-) to yield 12% to 12½%, according to a market source.

Lazard Capital has the books.

Also in the market is Darling International Inc. with a $500 million offering of eight-year senior notes (B1//) via Goldman Sachs, JP Morgan and BMO.

In addition, Global Ship Lease Inc. plans to price $400 million of seven-year first-priority secured notes (expected B3/confirmed B) via Citigroup.

And CAMAC Energy Inc. is selling $300 million of five-year senior secured notes via Arctic Securities.

Near the conclusion of the Monday session, syndicate officials from a couple of the investment banks disclosed that the shutters are going up on the year 2013.

However, with several of the big banks still to be heard from, further drive-by activity during what is widely expected to be the final week for primary market activity this year cannot be ruled out.

Halcon moves higher

In the secondary realm, several traders saw Halcon Resources' 9¾% notes due 2020 rise after the company priced its $400 million add-on tranche at 102.75.

One quoted the bonds at 103½ bid, 103 7/8 offered, while a second initially saw the paper at 103½ bid, 104 offered. He later amended that to 103½ bid, 104½ offered.

"They bounced right back up" from the issue price, he said.

Halcon was the day's only new deal that arrived early enough for an aftermarket.

One trader accurately predicted that "we'll be sitting around until late in the afternoon, waiting for the new deals."

While First Data's new issue came too late for any aftermarket dealings, traders noted that the company's 11¼% notes due 2016 were one of busiest junk credits on the day, trading just above the 100½ level, with over 412 million having changed hands.

MGM Resorts' 6 5/8% notes due 2021 were trading around the106 bid region, on mid-afternoon volume of over $7 million.

Roundy's, CTP rise

Among the recently priced deals, a trader saw CTP Transportation Products' 8¼% senior secured notes due 2019 having firmed smartly on Monday. He quoted them up 2 points on the session, at 103¾ bid, 104¾ offered.

The Franklyn, Tenn.-based manufacturer of specialty tires, wheels and power transmission belts had priced $250 million of those bonds on Friday at par, and the bonds immediately moved to the 101¾ bid, 102¾ level when they were freed to trade, a market source said.

He also saw Roundy's Supermarkets' new 10¼% senior secured notes due 2020 move up to 101½ bid, 102½ offered, a gain of ½ of a point over Friday's initial aftermarket levels.

The Milwaukee-based supermarket chain operator had priced $200 million of those notes on Friday at 96.999 to yield 10 7/8%, and the notes had gained handsomely when freed to trade, rising to the 101 level.

And a trader saw Memorial Resource Development LLC/Memorial Resource Finance Corp.'s 10%/10¾% senior PIK toggle notes due 2018 at a wide 98-99½ context on Monday.

He said he couldn't tell which side of that level was more accurate.

The Houston-based energy operator had priced $350 million of the notes on Friday at 98 to yield 10.524%.

Tronox slacks off

A trader said trading in Tronox's 6 3/8% notes due 2020 "slowed down a lot today," after the credit had been one of the busiest junk names on Friday, when over $25 million of the notes traded.

He said that the price levels were "pretty much unchanged, right around that 1011/4-101½ type of zip code."

The volume, he said, "fell off substantially."

"It didn't seem that active," a second trader agreed, "just a few million."

The Stamford, Conn.-based chemical company's bonds had firmed in active trading on Friday, getting as good as 102 bid, before settling in around 101 to 1011/2, which traders called up a little.

The bonds rose in the wake of a ruling late Thursday by Judge Allan Gropper of the federal bankruptcy court in Manhattan, who declared that Tronox's former corporate parent, Kerr-McGee, and ultimately, Kerr-McGee's current owner, Anadarko Petroleum Corp., are liable for anywhere between $5 billion and $14 billion of cleanup costs that predecessor company Tronox was stuck with when Kerr McGee spun it off in the mid-2000s. These costs ultimately pushed the company into bankruptcy in 2009, from which it emerged two years later.

Tronox's bankruptcy estate had contended that Kerr-McGee had improperly loaded the company up with its own environmental liabilities having nothing to do with Tronox's titanium oxide pigment production operations, and had misrepresented the extent of those liabilities in representations it made to eventual Tronox shareholders and bondholders when it spun the company off.

In reaction to the judge's decision, Tronox said that it will receive no immediate or direct benefit from the Dec. 12 ruling.

Instead, 88% of the judgment will go to trusts and other governmental entities to remediate polluted sites. The remaining 12% of any funds ultimately received will be distributed to a tort trust "to compensate individuals injured as a result of Kerr-McGee's environmental failures."

Anadarko said it would appeal the decision.

NII still weak

A trader said that NII Holdings bonds remained weak.

He said that company's NII Capital Corp. "weakened a fair amount last week." On Monday, he said, "it was not overly active, but definitely on the weaker side."

He quoted the company's 10% notes due 2016 "straddling 50," while its 7 5/8% notes due 2021 were hanging around a 37-38 bid complex. Its NII International Telecom SCA 11 3/8% notes due 2019 "probably were no better than 79-80."

He said the bonds had gone home on Friday around 80-81, so "they were slightly weaker now."

He said there was "not a lot of volume, though," in the bonds of the Reston, Va.-based company, which sells wireless phone service in several Latin American countries under the Nextel banner.

A second trader said the 11 3/8s were "hanging around" 781/2-80, after having "dropped down this month a little bit." He said that the notes had been around 82 bid.

"Looks like it rolled over a bit," he declared.

He also saw the company's 10% notes around 49-51.

Another quiet day in bonds

A bond trader opined that "today is a tough day to get a lot of feedback. It's a quiet day."

He said that even recently active names, like underperforming retailers Gymboree Corp. and J.C. Penney Co. Inc., were quiet.

Market signs again mixed

Overall, statistical junk-market performance indicators were mixed for a second consecutive session on Monday. The market signposts had turned mixed on Friday after having been down across the board on Thursday and mixed for the two days before that.

The Markit Series 21 CDX North American High Yield index posted its second consecutive gain as it continued to bounce back from last week's three consecutive losses. It gained ¼ of a point on Monday to end at 107 1/8 bid, 107¼ offered, after having risen by 1/8 of a point on Friday.

But the KDP High Yield Daily index was down by 5 basis points on Monday to close at 74.27, its third straight loss. On Friday, it had eased by 1 bp. Its yield came in on Monday for the first time after three sessions on the rise, declining by 5 bps to5.64%. On Friday, it had moved up by 1 bp.

The widely followed Merrill Lynch High Yield Master II index resumed its winning ways on Monday, gaining 0.064% to break a two-session losing streak. On Friday, it had lost 0.334%.

Monday's advance lifted its year-to-date return to 7.043%, up from Friday's 6.975%, though still down from Wednesday's 7.091%, its 2013 peak level.

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