Upsized KAR deal, Chesapeake drive-by lead $3 billion primary session; PetSmart shops megadeal

By Paul Deckelman and Paul A. Harris

New York, May 22 – Junkbondland saw its heaviest new-issuance day in nearly two months on Monday, as five drive-by issuers teamed up to price $3.06 billion of quickly shopped and opportunistically timed new dollar-denominated and fully junk-rated paper.

KAR Auction Services, Inc., which serves the used-car sales industry, had the big deal of the session, upsizing its offering of eight-year notes to $950 million.

Familiar junk issuer Chesapeake Energy Corp. priced $750 million of 10-year notes, funding a tender offer for some of its existing bonds.

Oil refinery operator PBF Energy, Inc., did $725 million of eight-year notes.

Molina Healthcare, Inc. brought $330 million of eight-year paper to market, while builder Meritage Homes Corp. capped off the day’s dealings with $300 million of 10-year notes.

Secondary market traders said that most of participants’ attention was focused on waiting for the late-day pricings of the five new deals, pushing other concerns to the sidelines.

Given the lateness of the hour that the new deals finally came, the traders did not immediately report any sizable initial aftermarket activity in the day’s new deals. Chesapeake’s existing paper firmed.

There was also considerable upside activity in specialty retailer PetSmart Inc.’s existing paper, even as the company began a roadshow Monday for its $2 billion two-part offering slated to price later in the week.

Among recently priced credits, SunCoke Energy Partners LP’s eight-year deal was little changed on busy volume. Another of last Friday’s new credits, from Coeur Mining, Inc., fell back from its initial gains.

Statistical market performance measures were higher across the board for a second straight session on Monday; they had improved on Friday after having been mixed on Thursday and having ended lower all around on Wednesday for the first time in nearly two weeks, since May 4.

KAR Auction upsizes

A big Monday in the new issue market saw five issuers show up with single tranche drive-by deals and raise a combined total of $3.06 billion.

Executions tended to be tight.

Only one of the five deals was upsized.

KAR Auction Services, Inc. priced an upsized $950 million issue of eight-year senior notes (B3/expected B) at par to yield 5 1/8%.

The issue size was increased from $800 million.

The yield came tight to early guidance in the mid 5% area.

JPMorgan, Barclays, BofA Merrill Lynch, Credit Suisse and Goldman Sachs were the joint bookrunners.

The Carmel, Ind.-based company plans to use the proceeds to repay a portion of the existing term loans outstanding under its senior secured credit facilities and for general corporate purposes.

Chesapeake prices tight

Chesapeake Energy Corp. priced a $750 million issue of 10-year senior notes (Caa2/CCC) at par to yield 8%.

The yield printed at the tight end of the 8% to 8¼% yield talk.

Citigroup was the left bookrunner. Credit Agricole CIB and JPMorgan were the joint bookrunners.

The Oklahoma City-based oil and gas producer plans to use the proceeds to finance concurrent tender offers and for general corporate purposes.

PBF at the wide end

PBF Energy, Inc. priced a $725 million issue of eight-year senior notes (B1/BB) at par to yield 7¼%.

The yield printed at the wide end of the 7% to 7¼% yield talk.

Citigroup was the left global coordinator for the debt refinancing deal. UBS was the joint global coordinator.

Molina accelerates timing

Molina Healthcare, Inc. priced a $330 million issue of eight-year senior notes (Ba3/BB) at par to yield 4 7/8%.

The yield printed at the tight end of yield talk in the 5% area.

Timing was accelerated. Following its announcement on Monday morning, the debt refinancing deal had been expected to remain in the market until Tuesday.

SunTrust was the left bookrunner. JPMorgan, Barclays, Morgan Stanley, BofA Merrill Lynch and Wells Fargo were the joint bookrunners.

Meritage 10-year bullet

Meritage Homes Corp. launched and priced a $300 million issue of 10-year senior bullet notes at par to yield 5 1/8%.

The debt refinancing deal was priced on the investment-grade syndicate desk.

Citigroup, BofA Merrill Lynch, JPMorgan, RBC, US Bancorp, Mizuho and PNC were the joint bookrunners.

PetSmart roadshows $2 billion

PetSmart, Inc. started a roadshow on Monday in New York for a $2 billion two-part offering of eight-year notes.

The acquisition financing deal includes $1.35 billion of senior first-lien notes (Ba3) and $650 million of senior notes (B3) and is expected to price on Thursday.

Joint bookrunner Citigroup is the left lead for the first-lien notes. Joint bookrunner Barclays is the left lead for the unsecured notes. Jefferies, Nomura and RBC are also joint bookrunners.

Peugeot prints 1%-handle yield

In the European primary market Peugeot SA priced a €100 million add-on to its 2% senior notes due March 23, 2024 at 101.109 to yield 1.825%.

The yield printed tight to the 1 7/8% final yield talk. Earlier talk was 2%.

Bookrunner HSBC will bill and deliver. BNP Paribas and Natixis were also bookrunners.

The Paris-based automobile manufacturer plans to use the proceeds for general corporate purposes including debt refinancing.

Apart from Peugeot it could be a quiet week in Europe, according to a London-based sellside source who added that there was a thin pipeline of deals, but some or all of it might not appear until the May-June crossover week.

Biggest session since late March

According to data compiled by Prospect News, Monday’s $3.06 billion of new dollar-denominated and junk-rated paper was the heaviest new-deal volume that the junk market has seen in nearly two months, since March 30.

That session saw a total of $3.88 billion of such paper from six domestic and industrialized-country borrowers get done in eight tranches, including megadeal-sized offerings from Six Flags Entertainment Corp. and Charter Communications Inc.

Day’s deals little seen

Secondary market traders said that although investors were focused on the day’s long slate of pending new deals, five of which actually got done during the session, there was no real initial aftermarket trading seen in those new credits, owing to the relative lateness of the hour at which the transactions priced.

Existing Chesapeake paper gains

The traders did see that Chesapeake Energy’s existing bonds firmed smartly during the session on the news of the Oklahoma City-based natural gas and oil exploration and production company’s new deal, as well as the concurrently announced tender offer for five series of its incumbent paper, to be financed with the proceeds of the new bond deal (see related story elsewhere in this issue).

A market source said that Chesapeake’s 8% notes due 2025 jumped by nearly 1½ points, ending at 101 3/16 bid, on busy volume of over $10 million.

At another desk, the company’s 8% notes due 2022 were quoted as having zoomed by nearly 3 points on the day to 109¼ bid.

Its 6 5/8% notes due 2020 moved up by 1 point to close at 104½ bid.

PetSmart paper pops

A trader said that PetSmart’s existing 7 1/8% notes due 2023 gained ¾ point Monday to end at 93¾ bid, given a boost by the news that the San Diego-based pet food and supplies retailer had begun a roadshow for its upcoming $2 billion two-part offering.

He said that the issue easily topped the day’s Most Actives list, with over $53 million trading around.

SunCoke, Coeur deals busy

Looking at the deals that came to market on Friday, a trader said that SunCoke Energy Partners’ 7½% notes due 2025 were little changed from the 99-bid area at which they went home after pricing.

He quoted the paper at 99¼ bid, essentially unchanged on the day, with over $28 million having changed hands.

The Lisle, Ill.-based manufacturer of industrial coke used in the steelmaking process had priced $630 million of those notes at 98.513 on Friday, yielding 7¾%, after the regularly scheduled forward calendar offering was downsized from an originally announced $675 million.

Meanwhile, Coeur Mining’s new 5 7/8% notes due 2024 “were off by quite a bit,” a trader said, seeing the bonds trading around par bid – about 1 full point below where they had finished on Friday. More than $18 million traded.

Coeur, a Chicago-based precious metals mining company, had priced $250 million of those notes at par Friday in a quick-to-market transaction.

Indicators stay firm

Statistical market performance measures were higher across the board for a second straight session on Monday; they had improved on Friday after having been mixed on Thursday and having ended lower all around on Wednesday for the first time in nearly two weeks, since May 4.

The KDP High Yield Daily index moved up by 8 basis points on Monday to end at 72.50, its second consecutive gain; on Friday, it had jumped by 10 bps, rebounding from two straight losses, including Thursday’s 6 bps setback.

Its yield came in by 3 bps to end at 5.04%, after having tightened by 4 bps on Friday. That narrowing came after the yield had widened out over the previous two sessions, including Thursday’s 2 bps rise.

The Markit CDX Series 28 index was up by nearly 7/32 point on Monday, its third straight gain. It had improved by ¼ point on Friday, on top of Thursday’s gain of more than 3/32 point.

\ The Merrill Lynch North American High Yield index posted its second straight upturn, rising by 0.146%; on Friday, it had rebounded after two straight setbacks, advancing by 0.239%, versus Thursday’s 0.098% retreat.

That upturn lifted the index’s year-to-date return to 4.492% on Monday, its second consecutive new 2017 year-to-date high point. That was up from 4.339% on Friday, the previous new peak level.

© 2015 Prospect News.
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