Iron Mountain leads $1.4 billion session; Penney gyrates on CEO talk; funds gain $486 million

By Paul Deckelman and Aleesia Forni

New York, Aug. 8 - Iron Mountain Inc. was heard by high-yield syndicate sources to have come to market Thursday with an upsized $600 million offering of 10-year notes, part of the document storage and information technology company's two-part drive-by deal that also included a downsized tranche of eight-year Canadian dollar-denominated notes.

It was the most notable deal in a session that saw about $1.4 billion of new U.S. dollar-denominated, fully junk-rated paper from domestic or industrialized-country borrowers price, down from the more than $2.6 billion that got done on Wednesday, although most of that earlier total was attributable to just one issuer, BMC Software, Inc.

Apart from Iron Mountain, the sources saw deals from Multi Packaging Solutions Inc., Live Nation Entertainment Inc. and Halcon Resources Corp.

Traders said Multi Packaging's eight-year notes and Live Nation's add-on to existing 2020 paper both firmed up in the aftermarket. Halcon's upsized $400 million offering stayed near its issue price, while Iron Mountain's deal priced too late in the session for any kind of secondary dealings.

Away from the new deals, J.C. Penney Co. Inc.'s bonds traded actively amid news reports that the troubled retailer's largest shareholder wants another chief executive officer.

The overall secondary market was firmer, with statistical indicators better across the board for the first time in four sessions.

And another indicator - cash flows for junk mutual funds and exchange-traded funds, a key barometer of liquidity trends in Junkbondland - turned positive for the latest week, a major fund-tracking service reported.

Lipper funds gain $486 million

As Thursday's activity was wrapping up, junk market participants familiar with the fund-flow statistics generated by AMG Data Services said that during the week ended Wednesday, $485.6 million more came into those funds than left them.

It was a rebound from the week before, ended July 31, when the numbers showed a net outflow of $1.03 billion from those funds.

It was also the fifth time in the last six weeks that the fund flows have been positive. Before last week's downturn, inflows had been seen over the prior four weeks, dating back to the week ended July 3 and totaling $6.41 billion, according to a Prospect News analysis of the figures. That surge included the $3.28 billion cash injection to the funds seen during the week ended July 24 - the second-biggest since Arcata, Calif.-based AMG, a unit of the Lipper analytics division of Thomson Reuters Corp., began tracking flows of money into and out of the junk funds in 1992, surpassed only by the record $4.25 billion cash addition in the week ended Oct. 26, 2011.

Over that larger six-week stretch, interrupted by just the outflow seen last week, net inflows have amounted to $5.87 billion, according to the Prospect News analysis, as the junk market bounced back from a skid of five large outflows recorded in May and June - some in the multi-billion-dollar range - that totaled over $12 billion, according to the analysis.

For the year so far, inflows have now been seen in 19 weeks against 13 weeks of outflows, but cumulative flows for the year as a whole remain negative due to that May-June losing streak, which was prompted by investor worries over whether the Federal Reserve would end its accommodative monetary policy.

The latest inflow shrank that year-to-date net outflow figure to about $3.23 billion, according to the analysis, from the previous week's $3.72 billion deficit.

Cumulative fund-flow estimates may be revised upward or downward or be rounded off and could include unannounced revisions and adjustments to figures from prior weeks.

The sustained flows of fresh cash into junk - and the mutual funds and ETFs represent but a small, though very observable and quantifiable percentage of the total amount of investor money coming into or leaving the roughly $1 trillion junk market - have been seen by analysts as a key element behind the high-yield secondary sphere's strong performance last year versus other fixed-income asset classes and its record active new-deal pace, which easily topped the $350 billion mark.

It was also seen as one of the major drivers behind the robust patterns of primary activity and secondary strength that had continued for much of this year's first half before turning choppy over the past two months or so.

Iron Mountain's two tranches

Late during Thursday's primary session, the market saw Iron Mountain Inc. and Iron Mountain Canada Operations ULC price a restructured two-part offering that included an upsized tranche of $600 million of senior notes and downsized tranche of C$200 million senior notes, according to an informed source.

The dollar tranche was upsized from $450 million, and the Canadian dollar tranche was downsized from C$300 million.

Both tranches priced at the wide end of talk.

Iron Mountain Inc. sold $600 million of 6% senior notes due 2023 at par.

Iron Mountain Canada Operations priced C$200 million of 6¼% senior notes due 2021 at par.

Proceeds will be used to redeem Iron Mountain Canada Operations' outstanding Canadian dollar-denominated 7½% senior subordinated notes due 2017 and Iron Mountain's 8% dollar-denominated senior subordinated notes due 2018 and 8% dollar-denominated senior subordinated notes due 2020.

The company will also use proceeds to fund the purchase of up to $137.5 million of its 8 3/8% senior subordinated notes due 2021 under a tender offer.

Remaining proceeds will be used to repay debt under the company's revolving credit facility and for general corporate purposes.

Wells Fargo Securities LLC is the left bookrunner, and BofA Merrill Lynch, J.P. Morgan Securities LLC, Credit Agricole Securities (USA) Inc., HSBC Securities, Morgan Stanley & Co. LLC and RBS Securities Inc. are the joint bookrunners for the dollar tranche.

For the Canadian dollar notes, Scotiabank is the left bookrunner, and BofA Merrill Lynch, JPMorgan, Barclays and TD Securities are the joint bookrunners.

Iron Mountain is a Boston-based provider of information management services.

Halcon prices $400 million

Halcon Resources was also in the market on Thursday. It price an upsized $400 million offering of 9¼% senior notes due Feb. 15, 2022 at par, according to an informed source.

Proceeds from the Rule 144A and Regulation S deal will be used to repay a portion of the company's outstanding borrowings under its senior secured revolving credit facility. The company is also selling stock, which will also be used to repay revolver borrowings.

The left bookrunner on the deal was BMO Capital Markets Corp., while Barclays, JPMorgan and Wells Fargo were joint bookrunners.

The issuer is a Houston-based oil and gas exploration and production company.

Multi Packaging prices tight

A $200 million sale from Multi Packaging Solutions hit Thursday's market, pricing at the tight end of talk, according to a syndicate source.

The 8½% eight-year senior notes were priced at par. Talk had been set at 8½% to 8¾%.

Proceeds from the offering will be used to help fund the company's buyout by Madison Dearborn Partners from Irving Place Capital and to repay debt.

The Rule 144A and Regulation S without registration rights notes will be non-callable for three years.

BofA Merrill Lynch acted as the left bookrunner and was joined by Barclays, Citigroup Global Markets Inc. and UBS Investment Bank as joint bookrunners.

The notes were issued through Mustang Merger Corp.

Multi Packaging Solutions is a New York-based manufacturer of printed folding cartons, labels and inserts for customers in the health-care, consumer and media end markets.

Live Nation sells $200 million

Also on Thursday, Live Nation Entertainment priced a $200 million tap of its 7% notes due Sept. 1, 2020 at 104.5 to yield 5.954%, according to a market source.

Proceeds, together with borrowings under the company's new senior secured credit facilities, will be used to repay the company's existing senior secured credit facilities and redeem all its outstanding 8 1/8% notes due 2018.

JPMorgan, BofA Merrill Lynch, Scotiabank, Goldman Sachs & Co., HSBC, Morgan Stanley, RBS and Wells Fargo are the joint bookrunners for the Rule 144A and Regulation S for life deal.

The notes will be immediately fungible with the existing notes.

The West Hollywood, Calif.-based provider of live event ticketing sales and marketing services priced the original $225 million issue at par on Aug. 15, 2012.

Murphy Oil on deck

Looking ahead to Friday's session, Murphy Oil USA, Inc. is expected to sell a $500 million offering of 10-year senior notes after having set talk on Thursday at a yield of 6% to 6¼%, according to a market source.

Books were scheduled to close at 5 p.m. ET on Thursday, and the issue was expected to price on Friday.

The Rule 144A and Regulation S with registration rights notes will be non-callable for five years.

Proceeds from the offering will be used to fund a dividend to Murphy Oil Corp.

JPMorgan and Stephens are the joint bookrunners.

RBC Capital Markets, Regions, Wells Fargo, UBS, BTMU, Fifth Third, Capital One, Comerica and PNC are the co-managers.

The oil and gas exploration and production company is based in El Dorado, Ark.

DS Waters roadshows

DS Waters of America Inc. was added to the forward calendar on Thursday, having scheduled a roadshow to begin on Friday ahead of a planned offering of $350 million eight-year second-priority senior secured notes, according to a market source.

The company expects the Rule 144A with registration rights deal to price during the Aug. 12 week.

The notes come with three years of call protection and will then be callable at par plus ¾ of the coupon.

The notes will feature an equity clawback of up to 35% for the first three years and a change-of-control put at 101%.

Credit Suisse Securities (USA) LLC, Barclays, Jefferies & Co. and BMO Capital Markets Corp. are the joint bookrunners.

DS Waters is an Atlanta-based direct-to-consumer beverage services provider.

Day's deals trade firmer

In the secondary market, a trader said that Multi Packaging Solutions' 8½% notes due 2021 moved up to 101 bid, 101½ offered when they were freed for aftermarket activity, versus the par level where the company's $200 million deal had priced.

The trader also saw Live Nation's 7% notes due 2020 having moved up to 105¼ bid, 105¾ offered after the entertainment company priced its $200 million add-on tranche at 1041/2.

A second trader said that he had heard offerings on the bonds as good as 106½ but with no left side.

Traders said that Halcon Resources' 9¼% notes due 2022 showed less movement after the company's upsized $400 million deal priced at par. Two traders had the bonds going home around par bid, 100½ offered, while a third pegged them at 100¼ bid, 100½ offered.

Halcon's existing 9¾% notes due 2020 were among the most actively traded high-yield credits on the day, a market source said, seeing over $15 million of the notes changing hands on just a round-lot basis.

He said the bonds had firmed by about ¾ point on the day to 103½ bid.

New Iron Mountains a no-show

Traders did not see any dealings in Iron Mountain's new 6% notes due 2023 owing to the lateness of the hour at which the bonds finally priced.

But the company's 5¾% notes due 2024 were high up on the Most Actives list, with over $16 million traded. Those bonds were seen to have lost 1 point on the day, going home at 93 bid.

There wasn't much trading in Iron Mountain's other bonds, including its 7¾% notes due 2019, which ended at 110¼ bid, and its 8 3/8% notes due 2021, one of the issues the company plans to take out with its new-deal proceeds. They ended down a little on the day at 107 13/16 bid, but with only a relative handful of odd-lot trades.

The Gimme Credit independent investor advisory service, meanwhile, takes a cautious view about Iron Mountain's prospects.

In a research note Thursday, senior analyst Evan Mann noted the company's previously announced plan to restructure itself as a real estate investment trust starting this coming January - a move that the Internal Revenue Service must first sign off on.

Mann wrote that a successful REIT conversion, "the most likely outcome, will likely lead to lower leverage and stronger credit ratios over the longer term."

However, approval is by no means a done deal, and the analyst - in seeing the company's current underlying view as "deteriorating" - cautioned that its inability to complete a REIT conversion "is likely to mean higher levels of free cash flow over the longer term, but could also result in the more aggressive pursuit of acquisitions and use of balance sheet leverage."

Wednesday deals holding in

Among the deals that priced on Wednesday, a trader quoted BMC Software's 8 1/8% notes due 2021 at 102 bid, 102½ offered - up a little from the 101 3/8 to 101 7/8 area at which the Houston-based software company's new bonds had gone home on Wednesday after having priced at par and then having firmed smartly when they were freed to trade.

BMC upsized its deal to $1.625 billion from $1.38 billion previously - making it the biggest high-yield deal since June 27, when Canadian drug manufacturer Valeant Pharmaceuticals International, Inc. priced $3.225 billion of new paper in a two-part offering that included $1.6 billion of five-year notes and $1.625 billion of eight-year securities.

A trader meantime saw DreamWorks Animation SKG, Inc.'s 6 7/8% notes due 2020 at 102½ bid, 102¾ offered, well up from the par level at which the Glendale, Calif.-based film and television production company's $300 million issue had priced on Wednesday, too late for any dealings at that time.

Penney bonds gyrate

Away from the new deals, J.C. Penney paper was down as much as 4 points on the day on news the company could oust Mike Ullman, its chief executive officer.

Ullman took the post in April after Ron Johnson got the boot from the top job. Johnson's exit came as his turnaround plan failed to revive the struggling retailer.

A trader saw the 5.65% notes due 2020 around 70, which he said was down "almost 3½ to 4 points." The 6 7/8% notes due 2015 were meantime down a point around 89.

Another trader called the 2020 notes down 3 points at 70.

However, the stock rose 86 cents, or 6.72%, to $13.66 after the news, which was first reported by CNBC.

According to CNBC, the Plano, Texas-based company's board of directors agreed to look into possible replacements for Ullman during a July meeting. The search was initially proposed by activist investor Bill Ackman. Ackman had previously championed Johnson, who originally took over for Ullman in 2011.

Ackman wants a new CEO named within 45 days.

Ackman said in a letter that former CEO Allen Questrom had agreed to come back to the company as chairman as long as he agreed with the new choice for CEO.

Market indicators bounce back

Statistical junk market performance indicators were on the upside across the board Thursday for the first time after three losing sessions.

The Markit Series 20 CDX North American High Yield index gained ¼ point to end at 105 5/32 bid, 105 7/32 offered after having retreated by half a point Wednesday for its third straight loss.

The KDP High Yield Daily index posted its first gain after five consecutive loss, rising by 2 basis points Thursday to end at 73.49. On Wednesday, it fell by 9 bps.

Its yield was unchanged Thursday at 6.11% after having risen over the previous four sessions, including Wednesday, when it was up by 2 bps.

And the widely followed Merrill Lynch High Yield Master II index gained 0.081% on Thursday, its first winning session after six straight days of decline, including Wednesday, when it fell by 0.109%.

The gain lifted the index's year-to-date return to 3.136% from 3.053% on Wednesday. The return was well down from its peak level for the year so far of 5.835%, recorded on May 9, though up solidly from its 2013 low point of 0.384%, set on June 25.

Stephanie N. Rotondo contributed to this review

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