Upsized Ancestry.com, Hovnanian add-on price, await Activision megadeal; Whiting again busy

By Paul Deckelman and Paul A. Harris

New York, Sept. 11 - The high-yield primary arena continued to churn out new deals on Wednesday, though at a reduced pace from the $1 billion-plus sessions seen on Monday and again on Tuesday.

Online genealogy company Ancestry.com Holdings, LLC came to market with an upsized $300 million issue of five-year senior PIK toggle notes, which priced at a discount to par and then were quoted higher in the aftermarket.

Familiar junk issuer Hovnanian Enterprises, Inc. priced a $42 million add-on to its existing 2016 notes; the homebuilder's paper was seen having moved up subsequently.

Other recently priced deals were all seen at higher levels, including Tuesday's offerings from Oasis Petroleum, Inc. and NXP BV, Monday's deal from Whiting Petroleum Corp. and last week's Sprint Corp. bonds. Whiting's new notes in particular were heavily traded for a second straight session.

Away from the deals which have actually priced, syndicate sources said that Activision Blizzard Inc. had pushed back the pricing of its $2.25 billion two-part issue to Thursday from Wednesday, and had made some covenant changes.

Traders said that the secondary market remained dominated by new-issue activity.

Statistical market-performance indicators were on the upside for a second straight day.

Ancestry.com upsizes

The high-yield primary market continued to generate a high news flow on Wednesday, although only two dollar-denominated, junk-rated deals were priced, for a meager overall total of $339 million.

Ancestry.com Holdings LLC priced an upsized $300 million issue of five-year senior PIK toggle notes (Caa1/CCC+) at 99 to yield 9 7/8%.

The yield printed in the middle of the 9¾% to 10% yield talk. The reoffer price came on top of price talk.

The cash coupon is 9 5/8%. The coupon steps up by 75 basis points to 10 3/8% in the event of a PIK coupon payment.

The issue was increased from $250 million.

Morgan Stanley, Credit Suisse, Deutsche Bank, Goldman Sachs and RBC were the joint bookrunners.

The Provo, Utah-based online family history resource plans to use the proceeds to pay cash dividends on or make other payments related to the issuer's equity interests.

Hovnanian taps 6¼% notes

K. Hovnanian Enterprises, Inc. priced a $41.581 million tack-on to its non-callable 6¼% senior notes due Jan. 15, 2016 (existing ratings Caa2/CCC) at par to yield 6¼%.

Credit Suisse was the bookrunner for the debt refinancing.

Activision launches, delays

Activision Blizzard, Inc. moved back the pricing of its $2.25 billion bond deal to Thursday morning.

The deal had been previously been expected to price on Wednesday.

Books are closed.

There have also been covenant changes.

Earlier on Wednesday both remaining tranches were launched inside of earlier price talk.

An upsized $1.5 billion tranche of eight-year notes, which come with three years of call protection, launched at 5 5/8%; price talk was 5¾% to 6%. The eight-year notes tranche was upsized from $1 billion.

An upsized $750 million tranche of 10-year notes, which come with five years of call protection, launched at 6 1/8%; price talk was 6¼% to 6½%. The 10-year notes tranche was upsized from $500 million.

The restructured two-part bond deal (Ba2/BB+) was earlier downsized to $2.25 billion from $2.5 billion, with $250 million of the proceeds shifted to the company's term loan.

Now an all high-yield trade, a $1 billion tranche of investment-grade rated senior secured notes was withdrawn.

J.P. Morgan and BofA Merrill Lynch are the joint bookrunners for the acquisition financing.

Diamondback talk is 7½% to 7¾%

Diamondback Energy, Inc. talked its $450 million offering of eight-year senior notes (Caa1) to yield 7½% to 7¾%, an informed source said on Wednesday.

The books close at noon ET on Thursday, and the deal is set to price after that.

Credit Suisse and Wells Fargo are the joint bookrunners.

BI-LO plans PIK toggle deal

Meanwhile the forward calendar continued to grow.

BI-LO Holdings LLC intends to price $400 million of five-year PIK toggle notes during the week ahead.

Deutsche Bank and Citigroup are the joint bookrunners for the dividend deal.

American Capital starts roadshow

American Capital, Ltd. began a roadshow on Wednesday for a $350 million offering of five-year senior notes (expected ratings B3/B+).

The deal is set to price early in the week ahead.

JP Morgan, BofA Merrill Lynch, BMO, Citigroup, Goldman Sachs and UBS are the joint bookrunners for the general corporate purposes deal.

Boart to bring units

Boart Longyear Management Pty. Ltd. plans to start a roadshow on Thursday for a $300 million offering of notes units.

The issue is sized at 300,000 units, with each unit comprised of $867 of senior secured notes and $133 of senior unsecured notes.

All of the notes will have five-year maturities.

JP Morgan, BofA Merrill Lynch and Goldman Sachs are the joint bookrunners for the debt refinancing.

Polish TV at the tight end

The European high-yield primary market also continued to generate a healthy news flow on Wednesday.

In a debt refinancing deal, Polish Television Holding BV (PTH) priced a €300 million issue of seven-year senior secured PIK toggle notes (/B-/) at par to yield 11%.

The yield printed at the tight end of the 11% to 11¼% yield talk.

The 11% coupon steps up by 100 basis points, to 12%, in the event of a PIK interest payment.

Joint bookrunner JPMorgan will bill and deliver. Deutsche Bank and Nomura were also joint bookrunners.

Study Group sets talk

Study Group UK Ltd. talked its planned £205 million minimum offering of five-year senior secured notes to yield in the 9% area.

The deal is set to price on Thursday via Goldman Sachs and Barclays.

Soho House starts roadshow

London-based Soho House began a roadshow on Wednesday for a £105 million offering of five-year senior secured notes.

The deal will be marketed in the United States as well as in the United Kingdom.

Imperial Capital is the bookrunner for the debt refinancing.

Verizon has an impact

In the secondary market, several traders cited the impact that Verizon Communications Inc.'s record-setting $49 billion multi-tranche deal was having in Junkbondland, attracting the attention of at least a few market players looking to get a piece of the New York-based telecommunications giant's massively oversubscribed issue, particularly the longer tranches carrying the higher coupons.

A trader specializing in the more distressed part of the junk universe said that "the [mainstream] high-yield world is the world today, and with Verizon" attention was moving even higher up the credit spectrum even though the megadeal is nominally investment grade.

A second trader said that "it was a very quiet day, between 9/11" - the somber ceremonies commemorating the 12th anniversary of the terrorist attack monopolized much attention in the canyons of the nearby Lower Manhattan financial district - "and that huge Verizon deal."

He continued that he didn't "know why" Verizon was attracting such attention among junk market denizens, theorizing that "it's such a big issue, people are just watching it."

Yet another trader said that "it was predominantly Verizon in the IG and crossover space," although he allowed that "you might have some [junk] guys that were dabbling in the crossover space if they got the sense that the deal was [pricing] pretty cheap, which obviously it did, based on the way it traded in the secondary."

For instance, he saw its $15 billion tranche of 6.55% bonds due 2043 having tightened some 40 basis points by the end of the day, to a spread of 225 bps over comparable Treasuries from 265 bps over at the pricing, while its $11 billion of 5.15% notes due 2023 improving to 190 bps over from their issue price of 225 bps over.

Day's deals seen better

Back among the purely junk-rated new credits, a trader said that Ancestry.com's 9 5/8%/10 3/8% senior PIK toggle notes due 2018 had moved up to par bid, 100½ offered after having priced at par.

He meantime saw Hovnanian Enterprises' 6¼% notes due 2016 having jumped to the 101¼ bid, 102¼ offered level, after the Red Bank, N.J.-based homebuilder had priced its $42 million deal at par.

Tuesday's deals trade around

A trader said that Oasis Petroleum's 6 7/8% notes due 2022 had moved up to 101¾ bid, 102¼ offered.

The Houston-based independent oil and gas exploration and production company's quick-to-market $1 billion issue had priced at par on Tuesday after having been massively upsized from and originally announced $600 million. It had moved up to around 101¼ bid in initial aftermarket dealings.

Dutch semiconductor manufacturer NXP's 3½% notes due 2016 were quoted Wednesday in a 100¼ to 100½ bid context. That quickly shopped $500 million issue had priced on Tuesday at par.

Going back to Monday, a trader saw both tranches of Whiting Petroleum's upsized $1.9 billion two-part offering having moved up to 100¼ bid, calling that up 3/16 point for the company's $1.1 billion of 5% notes due 2019 and up 3/8 point for its $800 million of 5¾% notes due 2021. Both tranches had priced at par.

Sprint continues to strengthen

A trader who called the market "definitely stronger" opined that "Sprint was up a good bit today."

He saw the Overland Park, Kan.-based Number-Three U.S. wireless carrier's $2.25 billion of 7¼% notes due 2021 up by ¾ point on the day, finishing at 102½ bid.

He also saw the company's $4.25 billion of 7 7/8% notes due 2023 up by "close to 1 point," at around 103½ bid.

Both tranches of that gigantic drive-by deal priced at par after the deal was massively upsized to $6.5 billion from the more relatively modest $2 billion originally announced.

Ambac trades off

Away from the new deals, Ambac Financial Group Inc.'s bonds tumbled "4 or 5 points" on Wednesday, a trader said, in line with a fall in the bond insurance company's shares, amid investor worry that the company may have too much exposure to Puerto Rico's debt and that of other struggling municipal bond issuers.

He said that the 5.10% notes due 2020 issued by the company's Ambac Assurance Corp. subsidiary "dropped about 5 points" down to the 85 to 87 range, after having traded around a 90 to 91 context on Tuesday.

"They opened up this morning around 89-90, and then the notes were active, right around 85."

He did not have a volume figure but said that "it must have been active," since he had seen all kinds of quotes on the way down to 85-87, "so they probably had a good trading day."

Its Nasdaq-traded shares meantime dropped by $1, or 5.05%, to end at $18.82, on volume of over 3 million, some six times the norm.

The trader cited a news report indicating that investors were getting worried about the bond insurance company's exposure to municipal debt in Puerto Rico, where the company, a subsidiary of New York-based Ambac Financial Group, insured over $2.5 billion of paper as of earlier this year, according to regulatory filings.

Besides its exposure in economically struggling Puerto Rico, the investors are said to be worried about Ambac's exposure to other municipal issuers that have run into trouble, including Detroit, where Ambac guarantees some $170 million of debt.

Retailers show strength

Elsewhere, a trader said that RadioShack Corp.'s bonds "were trading up a little bit."

He saw the underperforming Fort Worth, Texas-based electronics retailer's 6¾% notes due 2019 "trading with a 77 handle, which is up a couple of points, but not a lot of volume."

A second trader also quoted those bonds just over the 77 bid mark but estimated mid-afternoon volume approaching $6 million.

The first trader said that Sears Holdings Corp.'s bonds "are another one that's been moving higher."

He pegged the Hoffman Estates, Ill.-based department store operator's 6 5/8% notes due 2018 up another point on the session.

Overseas Shipholding more buoyant

In the distressed-debt precincts, a trader said that the bonds of Overseas Shipholding Group Inc.'s bonds "jumped a point or two," although he said that there was not a lot of volume in the issue.

He saw the bankrupt New York-based tanker operator's 8 1/8% notes due 2018 trading in a 90 to 90½ bid context, which he called a gain of 1½ points from where they were previously.

He said that volume in the issue amounted to "just a couple of trades, maybe $3 or $4 million.

"But that showed some life."

A news report on Wednesday indicated that a federal judge had tossed out shareholder claims that several of the company's former executives, including Morten Arntzen, who resigned as president and chief executive officer in February, and Myles Itkin, who was the executive vice president and chief financial officer until April, had lied to them about the state of the company's finances.

The New York court also found that the former executives had not sold OSG stock before the company's shares tumbled last fall on revelations of its severe tax problems.

OSG recently completed restatements of its financial reports going back as far as a dozen years, and said that it was now prepared to sit down and negotiate with the Internal Revenue Service over the government's claims that the tanker company owes some $463 million in back taxes, interest and penalties.

OSG acknowledged at that time that the resulting tax bite could be "substantial," perhaps even coming up to $460 million - essentially all of the federal claim.

Market indicators stay higher

Overall, a trader said that "the market rallied," calling it unchanged to up 1/8 point, though on "light volume" in the aftermarket.

A second trader said that "it was all new-issue focused."

Statistical junk market performance indicators were higher for a second consecutive session on Wednesday.

The Markit Series 20 CDX North American High Yield Index gained 11/32 point on Wednesday to end at 105 7/16 bid, 105 9/16 offered - its fourth consecutive gain. On Tuesday, it had improved by 9/32 point.

The KDP High Yield Daily index rose by 3 basis points to finish at 73.25, its second consecutive gain. The index had gained 4 bps on Tuesday.

Its yield meanwhile was unchanged on Wednesday at 6.32%, after having come in by 2 bps on Tuesday.

And the widely followed Merrill Lynch High Yield Master II index gained 0.081%, its fourth straight advance, after having risen 0.017% on Tuesday.

The rise brought the index's year-to-date return up to 2.985% from Tuesday's level of 2.902%. Those returns remained well down from the index's peak level for the year so far of 5.835%, recorded on May 9, though they were still up solidly from its 2013 low point of 0.384%, set on June 25.

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