Endo, Digicel, Ashtead drive-bys dominate $1.9 billion primary session; new Sprint hanging in

By Paul Deckelman and Paul A. Harris

New York, Dec. 11 - The high-yield primary deal machine continued to crank out new junk-rated, dollar-denominated deals on Wednesday, racking up some $1.9 billion of new paper, up from Tuesday's $1.7 billion.

A trio of quickly shopped issues accounted for most of Wednesday's total.

Specialty health-care provider Endo Health Solutions Inc. had the big deal of the day, nearly doubling its eight-year offering to $700 million.

There was a pair of add-ons to existing bonds from overseas-based issuers: Jamaica's international wireless service provider Digicell Group Ltd. and British equipment rental company Ashtead Group plc.

Racetrack operator Churchill Downs Inc. priced an upsized $300 million of new paper in the day's lone scheduled deal off the forward calendar. The bonds were quoted up about a point when they hit the aftermarket.

Traders said that the market seemed to take its cue from equities, which fell on the day; they said junk had a heavier tone as the day wore on.

This included recent deals, such as Tuesday's issues from luxury automaker Jaguar Land Rover Automotive plc and worker's compensation services provider One Call Care Management, which both fell from morning levels.

But Monday's big offering from wireless provider Sprint Corp. was seen as mostly hanging on to its gains.

Statistical indicators of market performance were mixed for a second consecutive day, after two sessions before that of having been higher across the board.

Endo massively upsizes

The dollar-denominated high-yield primary market plowed through $1.94 billion of new issue business on Wednesday, as players work to clear what has become an impressive late 2013 deal calendar.

Thursday's business came in four tranches from four separate issuers.

Three were upsized.

Three were drive-bys.

One deal priced inside of talk, two priced at the tight end, and the other came on top of talk.

Endo Finance Co. (Endo Health Solutions) priced a massively upsized $700 million issuer of eight-year senior notes (B1/B) at par to yield 5¾%.

The deal was upsized from $375 million.

The yield printed at the tight end of yield talk in the 5 7/8% area.

RBC, Deutsche Bank, Barclays, Citigroup, J.P. Morgan, BofA Merrill Lynch and Morgan Stanley were the joint bookrunners.

Proceeds are earmarked for refinancing debt associated with Endo's pending acquisition of Paladin Labs Inc. and for general corporate purposes. Additional proceeds, from the $325 million upsizing of the deal, will be used to put cash on the balance sheet.

Digicel drive-by add-on

Digicel Group Ltd. priced a $500 million add-on to its 8¼% senior notes due Sept. 30, 2020 (Caa1// B-) at 103 to yield 7.488%, on top of price talk.

Allocations were tough, one investor said, adding that a $50 million order was filled with $20 million of bonds.

"It was a food fight," the buysider remarked, noting that the top take was a triple-digit amount from the anchor order. The next highest allocation: $35 million.

Citigroup, JP Morgan, Barclays, Credit Suisse and Deutsche Bank were the joint bookrunners for the general corporate purposes deal.

Ashtead taps 6½% notes

England's Ashtead Group plc tapped the dollar market on Wednesday, as it priced an upsized $400 million add-on to its 6½% second-priority senior secured notes due July 15, 2022 (existing ratings B1/BB-) at 106 to yield 5.608%.

The drive-by deal was upsized from $300 million.

The reoffer price came at the rich end of the 105½ to 106 price talk.

Deutsche Bank, Citigroup, JP Morgan, BofA Merrill Lynch, Barclays, HSBC, Lloyds, Mitsubishi, RBS and Wells Fargo were the joint bookrunners for the debt refinancing.

Churchill Downs inside talk

Churchill Downs Inc. priced an upsized $300 million issue of eight-year senior notes (B1/BB/) at par to yield 5 3/8%.

The deal was upsized from $250 million.

The yield printed 12.5 basis points inside of the 5½% to 5¾% yield talk. Initial guidance was 6%.

JPMorgan and Wells Fargo were the joint bookrunners for the bank debt refinancing.

Empark atop tightened talk

The euro-denominated primary market continued to work to clear its calendar, as the record euro issuance year of 2013 winds down.

Empark Funding SA priced €385 million of six-year senior secured notes (B2/BB-/) in two tranches.

Both tranches priced on top of downwardly revised talk.

The Madrid-based company priced €235 million of six-year fixed-rate notes at par to yield 6¾%, on top of revised talk; earlier talk came in the 7% area.

Empark also priced €150 million of six-year floating-rate notes at 99 to yield Euribor plus 550 bps, also on top of revised talk. Earlier talk had the floater pricing at 99 with a Euribor spread of 550 bps to 575 bps.

Joint bookrunner JPMorgan will bill and deliver for the debt refinancing deal. Barclays, Caixa and Espirito Santo Investment Bank were also joint bookrunners.

Hunstman twice upsized

Huntsman International LLC priced an upsized €300 million issue of non-callable seven-year senior notes (B1/B+) at par to yield 5 1/8%.

The deal was upsized from €250 million, after having been earlier upsized from €200 million.

Joint bookrunner Citigroup will bill and deliver for the debt refinancing. Barclays, BofA Merrill Lynch, Goldman Sachs, JPMorgan, PNC, RBC and Royal Bank of Scotland were also joint bookrunners.

SLM crossover deal

In the crossover space, SLM Corp. priced a $1 billion issue of 4 7/8% 5.5-year medium-term notes (Ba1/BBB-/BB+), series A, at 99.405 to yield 5%.

The deal was talked at a 5 1/8% yield, according to a trader, who added that it came tight to that talk.

The new SLM 4 7/8% notes moved higher in the secondary market where they were 99½ bid, 99¾ offered, the trader said.

Barclays, Deutsche Bank and JPMorgan were the joint bookrunners.

Talking the deals

The deal wheel continues to spin on Thursday, with offerings teed up in Europe and the United States.

Salix Pharmaceuticals Ltd. talked its $750 million offering of seven-year senior notes (B2/B) to yield 6% to 6¼% and is set to price on Thursday.

Jefferies is the bookrunner.

Walter Investment Management Corp. talked its $500 million offering of eight-year senior notes (B3/B) to price with a yield in the 7 7/8% area and is set to price on Thursday morning.

Barclays, Morgan Stanley, BofA Merrill Lynch, Credit Suisse, RBS and JPMorgan are the joint bookrunners.

Eletson Holdings Inc. talked its $290 million offering of eight-year senior secured first-priority ship mortgage notes to yield 9¾% to 10%, including an original issue discount of 1 point to 1.5 points.

The deal is set to price Thursday via joint bookrunners Jefferies and DNB.

CTP Transportation Products, LLC and CTP Finance Inc. talked their $250 million offering of six-year senior secured notes (B2/B+) to price with a yield in the 8 3/8% area.

Books close Thursday, and the deal is set to price on Friday morning.

SunTrust is the left bookrunner. Credit Suisse is the joint bookrunner.

And in the euro market, PortAventura Entertainment Barcelona BV set tranche sizes and price talk for its €400 million two-part offering of senior secured notes (/B-/) on Wednesday.

A €250 million tranche of seven-year fixed-rate notes, which come with three years of call protection, is talked to yield 7½% to 7¾%.

A €150 million tranche of six-year floating-rate notes, which comes with one year of call protection, is talked to price at 99, with a Euribor spread of 550 bps to 575 bps.

Global coordinator JPMorgan will bill and deliver. Banca March, BNP Paribas, Caixa, Commerzbank and Nomura are also joint bookrunners.

Global Ship Lease roadshow

The market also heard a new deal announcement.

Global Ship Lease Inc. began a roadshow on Wednesday in London for a $400 million offering of seven-year first-priority secured notes (expected ratings B3/B).

Citigroup is the sole bookrunner.

Off to the races

In the secondary arena, a trader saw Churchill Downs' new 5 3/8% notes due 2021 having moved up to 101 bid, 102 offered right out of the starting gate.

The Louisville, Ky.-based race track operator and gaming technology provider's upsized $300 million deal had priced at par.

The trader also quoted Digicel Group's add-on to its 8¼% notes due 2020 at 103 bid, 103¾ offered, versus the Kingston, Jamaica-based international wireless provider's 103 issue price.

Traders did not see any immediate aftermarket dealings in Malvern, Pa.-based specialty health-care company Endo's sharply upsized new eight-year deal, nor in Leatherhead, England-based equipment rental company Ashtead Group's add-on to its 2022 secured notes.

New Jag sags

Among the deals that came to market on Tuesday, a trader saw several of them lose ground on Wednesday as the day wore on, observing that "the overall market tone turned heavy."

For instance, he saw Jaguar Land Rover's new 4 1/8% notes due 2018 initially trading up from their par issue price, firming to around 100 5/8 in morning dealings.

However, he saw bonds later trading into a 100 3/8 bid, so they were softer as well.

The Whitley, England-based luxury carmaker - a unit of India's giant Tata Motors Ltd. - priced its $700 million quick-to-market deal after upsizing it from an original $500 million.

The trader also saw One Call Care Management's 8 7/8% notes due 2021 losing some ground.

"That one was weird," he said. "I didn't see a lot of that," he added, quoting the bonds as having gone from par bid, 100¾ offered in the morning to around 99½ bid, par offered level by the afternoon.

"I think it was more a function of as the [equity] market deteriorated, these weakened."

Opal Acquisition Inc., a financing vehicle for the acquisition of One Call Care Management, a New York-based provider of specialized cost-containment services to the workers' compensation industry, priced its $610 million transaction at par Tuesday in a regularly scheduled forward-calendar offering.

New Sprint holds gains

A trader said that the new Sprint 7 1/8% notes due 2024 "hung in" despite the overall market weakness.

He saw the bonds in a 102 to 102¼ bid context during the morning; by late in the day, "they were within 1/8 of that, wrapped around" 101 7/8 bid, 102 1/8 offered, "so that thing held in real well."

But a trader at another shop had a more bearish assessment of the issue, quoting the bonds down 5/8 point at 101¼ bid, 101¾ offered.

Sprint - the Overland Park, Kans.-based Number-Three U.S. wireless carrier, had priced the quickly shopped $2.5 billion deal - one of the year's biggest junk deals - at par on Monday, too late for any trading at that time.

On Tuesday, the notes quickly firmed to around 101 7/8 bid and did not stray far from that area.

US Foods continues firming

Away from the new-deal universe, a trader said that US Foods Inc.'s 8½% notes due 2019 were trading at 109¾ bid during the afternoon versus a 109 3/8 bid, 109 5/8 offered level during the morning.

He said that for a third straight session, the credit was active. Some $9 million had traded by the close - busy enough to put the name on the Junkbondland most-actives list, but nowhere nearly as busy as it had been on Monday and Tuesday.

On Monday, those bonds had jumped into the mid-109 neighborhood from prior levels around 105 to 106 bid with over $55 million traded, making the credit by far and away the busiest seen in the junk market that session, with triple the volume of the next busiest bonds. They traded around those levels on Tuesday, on volume of over $26 million, making them again the busiest junk name on the session.

The bonds surged on the news that investment-grade sector peer Sysco Corp. will acquire Rosemont, Ill.-based US Foods in a transaction valued at some $8.2 million. It will pay the closely held company's owners, including KKR & Co. and Clayton, Dubilier & Rice LLC, a combination of $3 billion in Sysco common shares plus $500 million cash. It will also assume about $4.7 billion of debt.

A heavier tone

Overall, a trader said that with stocks trending lower, "things got a little heavy this afternoon as stocks sold off."

He added that "we definitely saw more 'bid-wanted' lists."

A second trader opined that "I don't think there was much trading at all this afternoon."

Looking at the Trace most-actives list, he pointed out that "the heaviest volume was in the hybrid space" - nominally junk-rated credits from investment-grade-rated financial institutions such as Credit Suisse, Societe Generale and Barclays.

He added that "we did see some selling in the afternoon from the ETFs [exchange-traded funds]."

Market signs stay mixed

Overall, statistical junk-market performance indicators remained mixed on Wednesday for a second straight day, after having been higher over the two sessions before that.

The Markit Series 21 CDX North American High Yield index posted its second consecutive loss after two straight gains, declining by 3/8 point on Wednesday to finish at 106¾ bid, 107 offered. It had been down by 3/32 point on Tuesday.

The KDP High Yield Daily index was unchanged on Wednesday for a second consecutive session at 74.37, after having gained 8 bps on Monday.

Its yield rose by 4 bps to close at 5.67%, after having declined for a second consecutive session on Tuesday.

The widely-followed Merrill Lynch High Yield Master II index put up its fifth consecutive gain on Wednesday, improving by 0.024%, on the heels of the 0.075% advance seen on Tuesday.

The latest gain raised its year-to-date return to 7.091%, its fourth straight new 2013 peak level. That was up from the previous high point for the year of 7.065% on Tuesday, its first time above the 7% marker.

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