CEVA, Post, PBF, Chester lead $3 billion day, Post pops; Solutia strong on buyout by Eastman

By Paul Deckelman and Paul A. Harris

New York, Jan. 27 - The high-yield primary market opened up the throttle on Friday as some $3 billion of new junk bonds priced - the busiest session so far this year.

Several sizable deals from the forward calendar led the way, including supply and logistics company CEVA Group plc's slightly downsized $800 million two-part offering, which included an add-on to an existing tranche of senior secured bonds as well as a brand-new issue of senior debt.

Another big deal was breakfast-cereal maker Post Holdings, Inc., which served up a $775 million offer of 10-year notes, and energy refiner PBF Holding Co. LLC, which did a slightly downsized $650 million of eight-year secured bonds.

Also pricing were an upsized $330 million eight-year calendar deal from gaming operator Chester Downs and Marina LLC, as well as a pair of opportunistically timed and quickly-shopped issues from car retailer AutoNation Inc. and from Genesis Energy LP.

The day's transactions capped off an already active week, whose final tally rose to about the $9 billion level - tops this year so far, and almost triple last week's $3.2 billion.

The new Post deal was easily the star of the day in the secondary market, popping up by more than 3 points when the bonds were freed for trading. The CEVA and PBF offerings meanwhile traded around their respective issue prices, both below par.

Other recent deals hanging around where they priced included Thursday's transaction from Lamar Media Corp., while the new deals from Grupo Corporativo ONO SA and Realogy Corp. were trading below their respective issue levels. The new PetroBakken Energy Ltd. and JBS USA LLC joined Post in trading at a good premium above where they had priced.

Away from the new deals, Post Holdings' neighbor just a few miles down I-64 in St. Louis, chemical manufacturer Solutia Inc., posted strong gains Friday on the news that it has agreed to be acquired by Eastman Chemical Co. in a cash-and-stock deal valued at $4.7 billion when the value of Solutia's debt is thrown in. Solutia's two issues were among the most actively traded paper in Junkbondland.

Junk prices held generally steady, with not much change seen on the session in statistical measures of market performance. However, those indexes showed gains versus last week's levels.

CEVA finishes two-parter

A roaring primary market finished off the final full week of January 2011 with six issuers raising $2.99 billion in seven tranches of junk-rated dollar-denominated notes.

CEVA priced a downsized $800 million two-part notes transaction.

The deal included an upsized $325 million fungible add-on to the 8 3/8% senior secured notes due Dec. 1, 2017 (Ba3/B+) which priced at 98.874 to yield 8 5/8%.

The tranche was increased from $300 million. Both the yield and the reoffer price came in line with price talk.

CEVA also priced a downsized $450 million issue of 12¾% eight-year senior notes (Caa2/B-) at 98.681 to yield 13%.

The unsecured tranche was reduced from $525 million. The yield printed 12.5 bps beyond the wide end of the 12¾% area yield talk.

Credit Suisse, Deutsche Bank, Goldman, Sachs, J.P. Morgan, Morgan Stanley and UBS were the joint bookrunners for the debt refinancing.

The overall two-part transaction was downsized to $800 million from $825 million.

Post prices at the tight end

Post Holdings priced a $775 million issue of 10-year senior notes (B1/B+) at par to yield 7 3/8%, at the tight end of price talk which had been set in the 7½% area.

Barclays was the left bookrunner. J.P. Morgan, Wells Fargo and Credit Suisse were the joint bookrunners for the spin-off funding deal.

PBF comes wide of talk

PBF Holding Co. LLC and PBF Finance Corp. priced a $650 million issue of 8¼% eight-year senior secured notes (Ba3/BB+) at 98.565 to yield 8½%, 37.5 basis points beyond the wide end of the 7¾% area yield talk.

Credit Suisse, Deutsche Bank, Morgan Stanley and UBS were the joint bookrunners.

Although the deal had been announced at a $675 million amount, a management took down $25 million of the issue which had been the plan from the outset, according to the syndicate source. Hence the $650 million amount that was announced on Friday did not represent a downsizing.

The Parsippany, N.J.-based refiner plans to use the proceeds to repay its term loan and seller notes issued in connection with refinery acquisitions.

AutoNation drives through

AutoNation priced an upsized $350 million issue of eight-year senior notes (Ba2/BB+) at par to yield 5½%.

The yield printed at the tight end of the 5½% to 5 5/8% price talk.

Bank of America Merrill Lynch, J.P. Morgan, Wells Fargo and SunTrust were the joint bookrunners for the debt refinancing.

Chester Downs upsizes

Chester Downs priced an upsized $330 million issue of eight-year senior secured notes (B3/B+/BB-) at par to yield 9¼%, at the tight end of the 9¼% to 9½% price talk. The size was increased from $315 million.

Citigroup was the left bookrunner. Bank of America Merrill Lynch, Credit Suisse and J.P. Morgan were the joint bookrunners.

Proceeds will be used to repay existing credit facilities, to repurchase parent notes, for working capital and for general corporate purposes including acquisitions.

Genesis taps 7 7/8% notes

Genesis Energy, LP and Genesis Energy Finance Corp. priced a $100 million add-on to their 7 7/8% senior notes due Dec. 15, 2018 (B2/B) at 101 to yield 7.682%.

The reoffer price came cheap to the 101.5 area price talk

Deutsche Bank Securities Inc. was the left bookrunner for the quick-to-market add-on. Citigroup, RBC, BMO and Bank of America Merrill Lynch were the joint bookrunners.

The Houston energy company plans to use the proceeds to repay bank debt.

The original $250 million issue priced at par in November 2010.

Icahn brings split-rated tap

In the crossover market, Icahn Enterprises LP priced an upsized $200 million add-on to its 8% notes due in 2018 (Ba3/BBB-) at 103.5 to yield 7.263%, on top of price talk. The final amount was doubled from the originally announced $100 million.

Jefferies & Co. was bookrunner for the general corporate purposes deal.

Schaeffler starts Monday

Germany's Schaeffler AG will start a roadshow on Monday in Frankfurt for a €1 billion equivalent four-part offering of senior secured notes.

A roadshow in the United States will kick off Tuesday in New York City.

The deal features non-callable five-year notes and seven-year notes which come with four years of call protection.

Notes in both tranches are being offered in euro and dollar denominations.

J.P Morgan, Deutsche Bank, BNP and HSBC are the joint bookrunners for the debt refinancing.

Meanwhile an investor who focuses on the European high-yield market expects left bookrunner Barclays and joint bookrunner JP Morgan to announced a €1 billion-plus deal early in the week ahead.

The investor was unable to supply an issuer name but suspects it could be Ineos Group Holdings SA, which has 2014 term loan maturities and 2015 second-lien term loan maturities.

The deal is expected to come in the form of euro-denominated floating-rate notes and dollar-denominated fixed-rate notes, the investor said.

And in the United States, in addition to the announced calendar, look for railroad operator Kansas City Southern to bring high-yield bonds in conjunction with a $275 million tender offer for its 8% notes due in 2015, according to buy-side sources.

Although J.P. Morgan Securities LLC is the dealer manager for the tender, Bank of America Merrill Lynch is expected to lead the bond deal, the manager added.

Post pops in secondary

When the day's new issues were freed for secondary dealings, traders saw a big jump in Post Holdings' new 10-year notes.

When the bonds broke around mid-afternoon, a trader quoted them as having almost immediately moved up to the 103 mark from the par level, where the St. Louis-based manufacturer of such popular breakfast cereals as Post Shredded Wheat, Cocoa Pebbles, Grape Nuts and Golden Crisp priced the $775 million issue.

About an hour later, he saw the bonds having moved still further, to 103¾ bid, 104 offered.

"I guess everyone likes these guys for breakfast," he quipped.

Several other traders also saw the new Post bonds hovering just below 104, and one proclaimed the issue to be "the star of the day."

CEVA, PBF trade near issue

While Post was peppily percolating upward, the other two big deals of the day that came to market in time to trade had trouble getting out of the box, seen trading at, or even a little below their respective issue prices.

A trader saw CEVA Group plc's 12¾% notes due 2020 initially trading into a 98¾ bid, just a little above the 98.681 level where the Dutch supply-chain company had priced that $475 million issue, which was downsized from the originally planned $525 million.

However, a little later on he was quoting the bonds at 98 bid, 98¼ offered.

Another trader said that the company's bonds "aren't going anywhere," also pegging the 123/4s at 98 bid, 98¼ offered.

He saw the other half of that downsized $800 million two-part deal, CEVA's $325 million of 8 3/8% senior secured notes due 2017 "a little lower," at 98¼ bid, 98½ offered. That tranche, upsized from $300 million originally, had priced at 98.874.

Parsippany, N.J.-based energy refiner PBF Holding Co.'s 8¼% senior secured notes due 2020 "doesn't seem to be going anywhere," said one of the traders who quoted that $650 million issue - downsized from $675 million originally - as little changed from the 98.565 level at which those bonds had priced.

Another trader seeing the bonds at 98½ bid, 98¾ offered, observed that they had "traded down initially" before making their way back up from their lows to end about flat with their issue price.

He mused that "it makes you wonder when you have other deals that are up three or four points, and then you have the ones that can't get out of their own way."

Other deals not seen around

Traders did not see any dealings happening in the new bonds priced Friday by Chester Downs, AutoNation and Genesis Energy, owing to the lateness of the hour at which they finally arrived.

Lamar little changed

Among the deals which came to market earlier in the week, traders saw Lamar Media's 5 7/8% senior subordinated notes due 2022 remaining anchored right around the par level at which the Baton Rouge, La.-based outdoor advertising company's $500 million drive-by offering - upsized from the originally announced $400 million - had priced.

"Tons were trading" into a 100 1/8 bid all day," one trader said.

Another saw them at 100¼ locked.

Another issue which didn't venture far from its pricing level was Spanish cable operator ONO, which priced a $1 billion add-on to its existing 8 7/8% notes due 2018. That deal - radically upsized from the originally shopped $400 million - came to market via ONO's Nara Cable Funding Ltd. unit on Thursday, too late for aftermarket trading at that time.

The bonds, structured as mirror notes to the existing paper, priced at 96.934 to yield 9 5/8%. On Friday, a trader saw them at 96¼ bid, 96½ offered.

A second trader who saw the bonds at that same level said that "that one certainly didn't run away."

However, Thursday's other deal - from Houston-based natural gas operator Targa Resources Partners LP - held on to the gains which the new issue notched when it was allowed to trade.

The quickly shopped $400 million of 6 3/8% notes due August 2022 priced at par, and then firmed smartly to 101¾ bid, 102¼ offered. On Friday, a trader saw those bonds still holding most of their gains at 101½ and 102 bid. A second saw them at 101 3/8 bid, 101 7/8 offered.

Going back a little further, JBS USA's 8¼% notes due 2020 was another issue that continued to hold its gains.

The Greeley, Colo.-based meat processor - the U.S. division of the Brazil-based international meat-packing giant JBS SA - priced its $700 million of 8¼% notes due 2020, upsized from the original $400 million, on Wednesday at 98.569 to yield 8½%.

The new bonds were seen having moved solidly higher in the secondary, to 100¼ bid, 100¾ offered. On Friday, a trader pegged them at 100½ bid, 101 offered, while a second trader saw them doing even better, at 101 bid, 101 3/8 offered.

Canadian oil and gas exploration and production company PetroBakken Energy's 8 5/8% notes due 2020 likewise clung on Friday to the higher levels it hit earlier in the week.

That deal - upsized to $900 million from the originally shopped $750 million - priced at 99.5 late Wednesday to yield 8.713%. When the bonds were freed to trade on Thursday, they moved up to 101½ bid, 102 offered.

In Friday's dealings, a trader saw them get even better, to 102¼ bid, 102½ offered, while a second trader located them at 102 bid.

Wednesday's $918 million two-part drive-by offering from Realogy, though, was something completely different.

The Parsippany, N.J.-based provider of real estate and relocation services priced $593 million of 7 5/8% first-lien notes due 2020 at par, and priced $325 million of what it called "first-lien-and-a-half" 9% secured notes, also due 2020, also at par. Both tranches initially traded a little above par, but were seen by the end of Thursday's session having come in a 99ish context.

On Friday, a trader saw the 7 5/8% notes continuing to struggle along at 99¾ bid, par offered.

He saw the 9% notes faded to 98½ bid, 99 offered on Friday.

New-deal pace continues

Traders on Friday said that the new deals remained the junk market's main focus, and noted the accelerating pace of the deals - Friday's $3 billion session eclipsed the $2.81 billion which priced on Wednesday as the busiest of the new year so far.

A trader said that with so much cash in investors' hands the temptation among would-be borrowers to add leverage by doing a bond deal is strong,

"In this market, anyone who has a CFO, financials and a phone can probably raise money."

Solutia stands out in trading

Away from the new deals, a trader noted that the big news of the day was the gain in Solutia's bonds, on the news that the St. Louis-based specialty chemical maker has agreed to be acquired by Eastman Chemical Co. in a $3.35 billion cash-and-stock transaction.

The companies estimate the value of the deal, including Solutia debt, at $4.7 billion.

The trader saw Solutia's 8¾% notes due 2017 up 2½ point on the day at 113¼ bid, 113¾ offered. He saw Solutia's 7 7/8% notes due 2020 jump almost 6 points to 117½ bid, 118 offered.

Both issues had trading volume approaching $20 million at mid-afternoon, a market source said, putting them high on the junk market's most-actives list.

Yet another trader said that the 7 7/8s were the more active of the two" because of the bigger price move."

He saw those bonds zoom to 118 bid from prior levels at 112, and meanwhile saw the 83/4s firm to 113 3/8 bid, 113¾ offered from around 110½ bid, 111 offered.

Indicators mixed, up on week

Statistical measures of junk market performance were mixed, with little movement seen in all but one of them on the session, although they were up on the week as a whole.

A trader saw the CDX North American Series 17 High Yield index essentially unchanged for a second straight session on Friday at 97 7/16 bid, 97 11/16 offered.

The index was up from the 96 3/16 bid, 96 7/16 level at which it had closed out the previous week, on Friday Jan. 20.

The KDP High Yield Daily Index lost 5 basis points Friday to end at 73.80, after having zoomed by 40 bps on Thursday, while its yield was unchanged at 6.86%, after having slid by 15 bps on Thursday.

Those levels compare with an index reading of 73.06 and a yield of 7.16% a week earlier.

And the Merrill Lynch High Yield Master II Index notched its tenth straight gain on Friday, rising by 0.943%, on top of Thursday's 0.50% advance.

That latest gain raised the index's year-to-date return to 2.876% for the year on Friday, a new 2012 peak level. That was up from Thursday's 2.788%, which had been the previous peak level for the year so far.

For the week, the index gained 1.194%, after closing out the week before with a 1.662% year-to-date return. It was the sixth consecutive weekly gain.

© 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.