Gaming & Leisure Properties, GEO Group drive by, new GEO up; Chesapeake gains on debt deal

By Paul Deckelman

New York, April 11 – The high yield primary market opened the new week on Monday with a pair of drive-by pricings from real estate investment trusts totaling $1.725 billion, syndicate sources said.

The big deal of the day came from casino industry REIT Gaming & Leisure Properties Inc., which priced $1.375 billion of new paper, split up into five- and 10-year tranches. That deal appeared too late in the session for any kind of aftermarket, traders said.

However, they did see respectably brisk aftermarket dealings in the day’s other new issue – private corrections and treatment facilities REIT and services provider the Geo Group, Inc.,’s upsized $350 million of 10-year notes. Those bonds gained at least a point when they were freed for secondary dealings.

Among recently priced issues, traders saw Friday’s note offering from Quorum Health Corp. continuing to hold the impressive gains that it notched after it was freed to trade, although they saw reduced volume in the hospital operator’s bonds.

There was continued heavy trading in last week’s super-sized offering from French telecommunications company Numericable SFR SA and from the previous week’s big deal, Western Digital Corp.’s two-part offering.

Away from the deals which have actually been priced, syndicate sources said that another gaming company – Pinnacle Entertainment, Inc. plans to soon shop a $300 million note issue around to potential investors.

MTS Systems Corp., a supplier of high-performance test systems and position sensors, plans a $250 million note offering.

Away from the new deals, Chesapeake Energy Corp.’s paper jumped – helped by higher oil prices and by the news that the oil and gas producer had reached a debt agreement with its lenders.

Statistical market performance measures continued higher across the board for a second consecutive session Monday, their third such stronger session in the last four trading days.

Gaming & Leisure drives by

The big deal of the day came from Gaming & Leisure Properties Inc., a Wyomissing, Pa.-based gaming-oriented real estate investment trust.

It priced a $1.375 billion offering of senior notes (/BB+) in two parts, consisting of a $400 million tranche of five-year notes and a $975 million tranche of 10-year notes.

The deal was done via its operating partnership, GLP Capital, LP, and the latter’s wholly owned subsidiary, GLP Financing II, Inc.

The 2021 notes priced with a coupon of 4 3/8%, well inside price talk of a 5¼% yield. Their tenor was shortened from an originally announced six years.

The 2026 notes priced with a coupon of 5 3/8%, inside of price talk of 5 5/8%.

The deal was brought to market via joint bookrunning managers J.P. Morgan Securities LLC, Bank of America Merrill Lynch, Wells Fargo Securities LLC, Fifth Third Securities Inc., UBS Investment Bank, Credit Agricole CIB, Nomura Securities, SunTrust Robinson Humphrey Inc., Barclays Capital Inc. and Oppenheimer & Co.

The company plans to use the net proceeds from the offering to partially fund its previously announced acquisition of substantially all of the real estate assets of Pinnacle Entertainment, Inc., including for the repayment, redemption and/or discharge of a portion of certain Pinnacle debt to be assumed by Gaming & Leisure Properties in connection with the acquisition and the payment of transaction-related fees and expenses.

However, if the acquisition does not close prior to June 30, the issuers will be required to redeem the notes.

The deal priced too late in the day for any appreciable aftermarket, a trader said.

GEO Group upsizes

Earlier in the session, the GEO Group, Inc. priced an upsized $350 million of senior notes due 2026 (Ba3/BB-) at to yield 6%, high yield syndicate sources said.

That was at the tighter side of price talk envisioning a yield in the 6%-to-6 ¼% vicinity.

The deal was enlarged from the originally announced $300 million.

The notes were brought to market via joint bookrunners Wells Fargo, SunTrust Robinson Humphrey, BofA Merrill Lynch, Barclays, J.P Morgan and BNP Paribas Securities Inc., plus co-managers HSBC Securities (USA) Inc., Fifth Third Securities, Regions Securities LLC and TD Securities (USA) LLC.

The GEO Group is a Boca Raton, Fla.-based real estate investment trust specializing in the ownership, leasing and management of correctional, detention, and reentry facilities and the provision of community-based services and youth services in the United States, Australia, South Africa and the United Kingdom.

GEO plans to use the deal proceeds to fund its separately announced tender offer for its existing 6 5/8% senior notes due 2021 and for general corporate purposes.

New GEO bonds firm

The GEO bonds hit the market early enough in the day to allow for some secondary trading later on.

A market source said that more than $26 million of the notes changed hands.

He said the bonds were going home around 101 bid, a 1-point gain from their par issue price.

InterXion brings euro notes

There was also some pricing activity going on in the European high yield market.

A trader said that InterXion Holding NV, an Amsterdam-based operator of data centers in various European cities, priced a €150 million add-on (B2/BB-) to its existing €475 million of 6% senior secured notes due July 15, 2020.

Those notes priced at 104.5 to yield 4.816%.

Price talk on the quick-to-market offering envisioned a yield in the 104.25% area.

The notes were being brought to market via sole bookrunner Barclays Bank plc and co-manager ABN AMRO Bank NV.

They were marketed to investors via a conference call earlier Monday.

InterXion, sold the original €325 million of the notes in a regularly scheduled forward calendar transaction that priced at par on June 19, 2013. The deal was upsized from an originally announced €300 million.

It also priced a quickly shopped €150 million add-on April 23, 2014 at 106.75 to yield 4.731%, after the add-on was upsized from an original €125 million.

The company plans to use the net proceeds from the new offering for general corporate purposes, including capital expenditures related to the expansion of its existing data centers and for new data centers, plus payment of transaction fees and expenses.

Pinnacle, MTS plan note deals

Back in the dollar-denominated market, syndicate sources said that a pair of issuers will soon be bringing new bond deals to market as part of larger financing efforts.

But at this time, details on those prospective offerings are sketchy.

Las Vegas-based Gaming operator Pinnacle Entertainment plans to sell up to $300 million of senior unsecured notes, the company said Monday.

There was no immediate word in the market on possible timing of the issue, banks that may be involved or on the structure of the notes to be offered.

Pinnacle said that the notes would be sold via the company’s wholly owned subsidiary, PNK Entertainment, Inc.

Pinnacle, plans to use the new-deal proceeds, along with proceeds from company's anticipated new senior secured credit facilities, to finance Pinnacle's obligation with a subsidiary of Gaming and Leisure Properties, Inc., under the previously mentioned GLPI acquisition of Pinnacle’s assets, the related spin-off of PNK Entertainment to stockholders of Pinnacle and transaction closing costs.

Meanwhile, MTS Systems Corp., an Eden Prairie, Minn.-based supplier of high-performance test systems and position sensors, plans to issue $250 million in senior notes as part of the financing for its $580 million acquisition of PCB Group Inc., a Depew, N.Y.-based designer, manufacturer and distributor of sensor technologies.

According to an 8-K filed with the Securities and Exchange Commission on Monday, the financing will also include a $490 million credit facility, consisting of a $100 million five-year revolver and a $390 million seven-year covenant-light term loan B.

Closing is expected in MTS’ fiscal fourth quarter that ends Oct. 1, subject to regulatory approvals and other customary conditions. On a combined basis, at the effective date of the merger, the company expects to have pro forma debt leverage of 3.5 to 4 times.

Among recently priced issues, a trader saw “a few” of Quorum Health Corp.’s new 11 5/8% notes due 2023 trading around on Monday.

He quoted the bonds at 101½ bid – essentially unchanged from the levels at which they had finished on Friday.

The Brentwood, Tenn.-based operator of acute-care hospitals priced $400 million of the notes earlier Friday at 98.266 to yield 12%, in a regularly scheduled forward calendar transaction.

The new bonds moved up to the 101½ bid mark with about $18 million traded.

Numericable still among busiest

One of the day’s busiest credits was a familiar name – French broadband and wireless provider Numericable’s new 7 3/8% senior secured notes due 2026.

A trader saw the bonds trading in a 101¼ to 101½ bid context, and “on pretty good volume, too.”

At another shop, a trader estimated that more than $59 million of the bonds changed hands, firming by ½ point to go out at 101¼ bid.

Numericable priced the biggest junk bond deal of the year on Wednesday, when it brought $5.19 billion of those notes to market, pricing the super-sized issue at par.

The bonds traded intensely, all during the remainder of last week, particularly on Thursday when turnover was an astounding $450 million.

The bonds had firmed to around the 100¾ level on Friday, setting the stage for Monday’s further gains.

WDC unsecureds struggle

But the biggest-trading issue of the session – finally displacing Numericable from that perch – was the previous week’s big deal, for Western Digital Corp.

Its 7 3/8% senior secured notes due 2023 were seen going home unchanged at 101 7/8 bid, with over $79 million traded.

Another trader pegged those secured bonds “right around 102.”

But he said the other half of that deal – its 10½% unsecured notes due 2024 – continued to struggle, finishing at 99½ bid.

“Those things had initially popped by maybe ¾ point – then they went back down. With more than $18 million traded.”

Since pricing back on March 30, that $3.35 billion tranche of unsecured notes “hasn‘t been able to get out of its own way,” a market source said, noting that the bonds struggled mightily but still have been unable to stay at or above their par issue level.

Chesapeake up on debt deal

Away from the new issues, traders noted that oil pushed up to over $40 a barrel during the session, helped in large part by comments from Russia that its production in 2017 would likely remain flat year over year. However, several banks were expressing doubt that any production freeze deal coming out of Doha next week – when a group of OPEC and non-OPEC producers meet to discuss the proposal – would do much to help rebalance the commodity’s price.

Chesapeake Energy Corp. was a big winner for the day, boosted not only by rising oil prices, but also by news the Oklahoma City-based oil and gas producer had put up most of its assets – the company did not specify which ones – in order to maintain the borrowing base on its $4 billion revolving credit facility due 2019.

Other amendments were also made, including pushing the next redetermination date out until June 2017 and allowing for the incurrence of up to $2.5 billion in first-lien debt.

A trader saw the 8% second-lien notes due 2022 jumping “almost 7 points” on the news to 55. Another market source placed the 6 5/8% notes due 2020 at 42 bid, a gain of 2 points on the day.

The amendments also require that Chesapeake maintain at least $500 million in liquidity.

Indicators stay higher

Statistical market performance measures were higher across the board for a second straight session on Monday, their third rise in the last four trading days.

The KDP High Yield Daily index rose by 4 basis points to end at 65.92, on top of Friday’s 8 bps gain.

Its yield came in by 1 bp to end at 6.58%

The Markit Series 26 CDX North American High Yield index rose by 7/32 bid to end at 102 6/32 bid, 102¼ offered, after having gained 3/16 point Friday.

And the Merrill Lynch North American High Yield Master II index improved by 0.223% on Monday, on top of its 0.272% rise on Friday.

That lifted its year-to-date return to 3.994%, up from 3.713% on Friday.

That set a new peak level of the year, surpassing the old mark of 3.767% set on March 21.

Stephanie N. Rotondo and Sara Rosenberg contributed to this review.

© 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.