McGraw-Hill, Sun, MDC, Seitel price to cap $6.5 billion week; new Ceridians 'scream' upward

By Paul Deckelman and Paul A. Harris

New York, March 15 - Like a runner putting on a big kick to power over the finish line, the high-yield primary market stepped on the gas Friday, its busiest day of the week in terms of volume of new deals which priced.

The biggest deal of the day - and the whole week - came from McGraw-Hill Global Education Holdings LLC, as the digital learning company did $800 million of eight-year secured notes, although that offering was first downsized not once, but twice.

Sun Products Corp., a maker of detergents and other household consumer products, priced $575 million of eight-year paper.

Canadian marketing company MDC Partners, Inc. brought $550 million of seven-year notes to market.

And Seitel, Inc., a provider of onshore seismic data to the energy industry, had a $250 million offering of six-year notes.

All of the day's deals were regularly scheduled forward calendar transactions that priced after roadshow presentations to investors rather than the recent spate of quick-to-market deals, and all moved up solidly when they hit the secondary market.

The $2.16 billion of new paper lifted the week's new-issuance total to nearly $6.5 billion of new dollar-denominated, fully junk-rated paper from domestic or developed-country issuers, according to data compiled by Prospect News, though that was a little behind the $6.7 billion that came to market the prior week, ended March 8.

Year-to-date issuance of some $67.2 million on that basis lagged behind Junkbondland's year-earlier pace by about 12%, the data indicate.

Away from the deals that priced on Friday, traders saw generally firm levels in recent new issues - and one said that Thursday's offering from business services provider Ceridian Corp. "screamed" higher by multiple points when it began trading around.

Apart from the new deals, the week ended pretty much as it had begun - with heavy trading in Chesapeake Energy Corp.'s 6.775% notes due 2019, as investors tried to read the tea leaves following Thursday's ruling by a federal judge refusing to endorse a company plan to call those bonds at par, well under where they have been trading recently. But the notes were down significantly on Friday from their all-time the peak levels notched on Thursday.

Statistical measures of market performance turned mixed on Friday, after having been higher across the board on Thursday.

However, those performance signposts all showed gains from the previous Friday's level for a fifth consecutive time.

McGraw-Hill downsizes

The primary market pace remained vigorous on Friday, as four issuers, each one bringing a single tranche of bonds, raised $2.16 billion.

McGraw-Hill Global Education Holdings, LLC and McGraw-Hill Global Education Finance, Inc. priced a downsized $800 million issue of 9¾% first-lien senior secured notes April 1, 2021 (B2/BB) at 98.637 to yield 10%.

The deal was reduced from $1 billion, after having previously been cut from $1.05 billion. Proceeds were shifted to the credit facility, which was upsized to $1.05 billion from $850 million.

The yield printed at the wide end of the 9¾% to 10% yield talk.

In addition to the downsizing, a special call provision, which would have allowed the issuer to redeem up 10% of the notes annually at 103 during the non-call period, was eliminated.

Credit Suisse Securities (USA) LLC, Morgan Stanley & Co. LLC, Jefferies LLC, UBS Securities LLC, Nomura Securities International, Inc. and BMO Capital Markets Corp. were the joint bookrunners for the LBO deal.

Sun Products upsizes

Sun Products priced an upsized $575 million issue of eight-year notes (Caa1/CCC) at par to yield 7¾%, on top of yield talk.

Barclays, J.P. Morgan Securities LLC, BofA Merrill Lynch, Goldman Sachs & Co. and Morgan Stanley & Co. LLC were the joint bookrunners for the deal which was upsized from $500 million.

Proceeds will be used to refinance debt. Of the additional proceeds expected to result from the $75 million upsizing, $50 million will be used to redeem preferred shares and $25 million will be used to reduce senior secured term loan debt.

MDC Partners at the tight end

MDC Partners priced an upsized $550 million issue of seven-year senior notes (B3/B-) at par to yield 6¾%.

The yield printed at the tight end of the 6¾% to 7% yield talk. The amount was increased from $500 million.

J.P. Morgan Securities LLC and Goldman Sachs & Co. were the joint bookrunners.

The Toronto-based marketing communications services company plans to use the proceeds to redeem its 11% notes due 2015. Additional proceeds resulting from the upsizing of the deal will be used for general corporate purposes, including pre-funding a deferred acquisition consideration.

Seitel six-year deal

Seitel priced a $250 million issue of six-year senior notes (B3/B) at par to yield 9½%.

The yield printed on top of yield talk.

Deutsche Bank Securities Inc. and J.P. Morgan Securities LLC were the joint bookrunners for the debt refinancing deal.

Jefferies for week ahead

Early in the week ahead Jefferies Finance LLC and JFIN Co-Issuer Corp. plan to price $500 million of seven-year senior notes.

Jefferies & Co. Inc. is the sole bookrunner.

The New York-based commercial financial services company plans to use the proceeds for general corporate purposes.

PetroLogistics sets call

PetroLogistics LP and PetroLogistics Finance Corp. plan to host an investor conference call at 11 a.m. ET on Tuesday to discuss a proposed $365 million offering of seven-year senior notes.

The deal is expected to price on Friday.

Morgan Stanley & Co., Barclays, Citigroup Global Markets, Goldman Sachs & Co., Stifel Nicolaus Weisel, UBS Investment Bank and Wells Fargo Securities LLC are the joint bookrunners for the debt refinancing deal.

New issues the focus

As could be expected a trader in the secondary market said that "all of the focus today was new issues," with more than $2 billion of new paper having priced in the junk market and then having firmed smartly when those bonds were freed for aftermarket activity.

"New issues - and basketball," he added, alluding to the beginning of the annual "March Madness" when many market participants' attentions turn to picking expected winners in the national college basketball championship contests, for fun and profit.

All Friday's new deals were seen to have done well when they were freed for aftermarket dealings.

A trader quoted Seitel's 9½% notes due 2019 at 102¾ bid.

Two other traders separately pegged the Houston-based company's bonds at 102½ bid, 103 offered.

Seitel, a provider of seismic services to the energy drilling industry, priced that $250 million issue earlier in the session at par.

Several traders also saw MDC Partners' 6¾% notes due 2020 trading above the 102 bid level, mostly in a 102 1/8 bid, 102 5/8 offered context.

The Toronto-based marketing company had priced its $550 million issue at par.

A trader said he saw Sun Products' 7¾% notes offered around 102 ¼ on the break, but he had not seen a left side on that.

However, another trader did see a 101 7/8 bid, 102 3/8 offered trade after the Winton, Conn.-based consumer products company's deal had priced at par.

Two traders saw McGraw Hill's 9¾% first-lien senior secured notes due 2021 trading at par bid, 100¼ offered, while a third had the issue at 100¼ bid, 100½ offered.

However one of the traders characterized that as "a good move," in view of the fact that the New York-based digital learning company's issue had priced at a discount, coming to market at 98.637 to yield 10%, after the deal had been twice downsized

Ceridian certainly improves

One of the traders said that Thursday's offering from Ceridian Corp. "just screamed upward." He quoted the Minneapolis business services company's $475 million deal having gotten as good as a 106 to 107 bid context.

It had priced at par after having earlier been upsized from $400 million originally.

Chesapeake still fascinates

Aside from the new issues, a trader said that Chesapeake Energy's 6.775% notes due 2023 "are still obviously pretty topical - that's been the most active name the past couple of days."

Friday was no exception, with over $85 million of those bonds having changed hands on a round-lot basis, and tens of millions more in smaller odd-lot transactions.

The bonds were off considerably though from the levels seen on Thursday, when they had hit intra-day highs of over 108 bid, finally going home at 1073/4.

On Friday, the bonds tumbled to 104½ at the opening and never recovered, finally going home, a market source said, at 105 bid - down some 2¾ points.

A second trader saw them at 104¾ bid, 105 offered, while a third gave a wider quote of 104 to 106.

The bonds had jumped well above par on market expectations that Oklahoma City-based natural gas producer Chesapeake would likely not take advantage of a clause in the bonds' indenture allowing it to call them during a special early call period that ended Friday at a price of just par plus accrued and unpaid interest - well below the bonds' market value.

However, Chesapeake last week filed a suit with the federal court in New York seeking a declaratory judgment that it would be permitted to call the bonds at par, despite objections by some bondholders that the company had not given sufficient notice to the holders and had thus missed the deadline and would now have to pay considerably more to redeem the bonds.

In its ruling Thursday, the court refused Chesapeake's request for a preliminary injunction legitimizing a call at par plus accrued - but it did not explicitly bar such a move either, leaving the issue for legal resolution at some point in the future.

Ameren holds Thursday gains

Elsewhere, a trader said that Ameren Corp.'s 7.95% notes due 2032, issued by the St. Louis company's AmerenEnergy Generating Co. subsidiary - Genco - were "still round 72ish," about the level to which those bonds had jumped from Wednesday's closing spots around 55 bid.

A second trader had those bonds going home at 71¼ bid, 72¼ offered.

At another desk, a market source said that those bonds had traded all day in a 71¾ bid context, which he called down 7/16 point from Wednesday's close just above 72.

He saw around $6 million of those bonds change hands on a round-lot basis, down from more than $10 million that traded Thursday.

The first trader said that the company's most recently active issue, the 7% notes due 2018, were still trading in a mid-70s context, perhaps around the 76 bid mark, which he called about unchanged on the day.

"They had their big run-up yesterday [Thursday]," when the bonds had soared into the mid-70s on news that Ameren will unload Genco and several other non-core subsidiaries on sector peer Dynegy, which wants those companies' coal-fired power plants. Ameren will get neither cash not stock from Dynegy, but manages to off-load $825 million of Genco debt onto a newly formed Dynegy subsidiary, improving its own credit metrics.

A second trader quoted those '18s in a 76 bid, 77 offered context, while a third saw the bonds ending at 76¼ bid, calling that up ½ point on the day.

Round-lot volume in the credit was over $9 million, the most of any bond in Ameren's capital structure, although that was well off from Thursday's busy pace, when over $40 million of those notes had traded, moving up to the mid-70s from pre-news levels around 57.

Travelport holds gains

One of the traders saw little end-of-week activity in the bonds of Travelport, which had risen earlier in the week on the news that the Atlanta-based travel services provider would restructure its debt, including issuing new 2016 notes in exchange for its existing 2014 bonds.

"That was a nice move up," he said, "but there really wasn't much activity today. They were pretty much unchanged," with the 9 7/8% notes due 2014 "still around" 101½ bid.

He saw its 9% notes due 2016, recently up around the par level, "not really trading at all," with its 11 7/8% notes due 2016 likewise in active. He saw the latter bond in an 84 to 85 bid level, "so there was very little on those."

The company' bonds had been strengthening since the announcement Tuesday that bondholders had agreed to a plan that swaps their debt for new 13 7/8% notes due 2016 or floating-rate notes due 2016, plus cash.

The company also reached an agreement with its PIK-loan lenders to swap the debt for equity.

"All the move up was earlier in the week, and today was new-issue focused," the trader said.

Market indicators go mixed

Overall, statistical junk performance indicators were mixed on Friday for the fourth session out of the five in the week, although they had been higher across the board on Thursday.

They were, however, all higher versus week-ago levels for a fifth consecutive week.

The Markit Series 19 CDX North American High Yield Index lost 3/16 point on Friday to end at 104 13/32 bid, 104 19/32 offered. On Thursday, the index had gained ¼ point, its second straight advance.

The index ended the week well up from the 103 15/16 bid, 104 1/32 offered level seen at the close the previous Friday, Feb. 8.

The KDP High Yield Daily Index gained 2 basis points to close at 75.64, on top of its 8 bps rise on Thursday. It was the second straight gain for the index.

Its yield eased by 1 bp to 5.50%, its second straight decline, after having come in by 3 bps on Thursday.

The closing levels compare favorably with a 75.57 reading and a 5.53% yield last Friday.

And the widely followed Merrill Lynch High Yield Master II index, scoffing at superstition, made it 13 sessions in a row of gains on Friday, rising by 0.084%, on top of Thursday's 0.087% advance.

That latest improvement lifted its year-to-date return to 2.661% - a new peak level for 2013 so far, and the ninth straight session in which it has reached a new high point for the year. The previous zenith was Thursday's 2.575% reading.

The index also showed a one-week gain of 0.365%, its fifth consecutive week of improvements.

In the week ended Feb. 8, the index had risen 0.421%, and had a year-to-date return at that point of 2.288%.

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