Caesars, Nationstar and Vector price; market eases but Avaya climbs on exchange offer

By Paul Deckelman and Paul A. Harris

New York, Feb. 4 - The high-yield primary arena started the week by pricing over $2.3 billion principal amount of new junk-rated, dollar-denominated debt on Monday.

Gaming giant Caesars Entertainment Corp. rolled the dice on a quick-to-market $1.5 billion add-on to its existing 2020 notes.

Mortgage servicing company Nationstar Mortgage LLC priced a quickly shopped $400 million of 10-year notes.

Tobacco and real estate operator Vector Group Ltd. priced an upsized $400 million of eight-year secured notes in a regularly scheduled forward-calendar deal.

The three new issues came to market too late in the session for any aftermarket, traders said.

Some of the deals that priced last week, such as the Friday offerings from Ashton Woods USA LLC, Talos Production LLC and Permian Holdings LLC, were seen lower amid a generally easier market that seemed to take its cues from equities, which got pushed lower Monday on profit-taking and European pessimism.

Junk volumes were relatively restrained, with traders also attributing the lack of activity to waiting around for the new deals and the distraction factor from Sunday's Super Bowl.

But Avaya Inc.'s bonds firmed solidly in active trading on the news that the telecommunications equipment company will exchange a new series of notes for that existing paper.

Two of Monday's primary-market issues came as drive-bys.

One of those came from Caesars Entertainment, which priced a $1.5 billion add-on to its 9% senior notes due Feb. 15, 2020 (B2/B) at 97.5 to yield 9.497%.

The reoffer price came 2.5 points cheap relative to the cheap end of the 100 to 100.5 price talk.

Merrill Lynch, Citigroup, Credit Suisse, Deutsche Bank, J.P. Morgan and Morgan Stanley were the joint bookrunners for the quick-to-market debt refinancing deal.

The Las Vegas-based gaming and entertainment company priced the original $750 million issue at par on Aug. 15, 2012. A previous $750 million add-on priced at 98.25 to yield 9.336% on Dec. 6, 2012.

Vector Group upsizes

Vector Group priced an upsized $450 million issue of eight-year senior secured notes (Ba3/B+) at par to yield 7¾%.

The yield printed at the tight end of the 7¾% to 8% yield talk.

Jefferies was the bookrunner for the deal, which was upsized from $375 million.

Proceeds will be used to refinance the company's 11% senior secured notes due 2015 and for general corporate purposes.

Nationstar Mortgage deal

Nationstar Mortgage priced a $400 million issue of eight-year senior notes (expected B2/confirmed B+) at par to yield 6½%.

The yield came on top of yield talk as well as the initial guidance.

Merrill Lynch and Credit Suisse were the joint physical bookrunners for the quick-to-market deal.

Barclays, Wells Fargo and RBS were the joint bookrunners.

Proceeds will be used for general corporate purposes, which may include future acquisitions and transfers of servicing portfolios, including, but not limited to, the acquisition of certain residential mortgage servicing assets from Bank of America, NA, an affiliate of Merrill Lynch, Pierce, Fenner & Smith Inc.

KION offers €350 million

The Monday session also generated primary-market news away from the United States.

Germany's KION Group GmbH launched a €350 million offering of seven-year senior secured notes (B2//).

BNP Paribas, Commerzbank, Goldman Sachs, KKR and UniCredit are managing the debt refinancing deal, which will be marketed on an investor roadshow.

Heading into the European midday, KION's existing 7 7/8% notes due 2018 were trading at 106 bid, yielding about 6½%, a European market source said.

Elsewhere, German do-it-yourself retailer Hornbach-Baumarkt AG could price a €250 million offering of seven-year senior notes (Ba2/BB+) as early as Tuesday, according to a buyside source from the East Coast of the United States.

Commerzbank, HSBC and UniCredit are the leads.

Proceeds will be used to refinance the company's 6 1/8% notes due 2014.

And in a deal being watched in the high-yield market, United Arab Emirates-based Millennium Offshore Services Superholdings LLC plans to price a $225 million offering of five-year senior secured notes (B2//) on Wednesday.

Initial guidance has the deal coming with a yield in the low-to-mid 9% context, a trader said on Monday morning.

Goldman Sachs is the lead for the dividend-funding deal.

Day's deal don't trade

Traders said late in the afternoon that they had not seen any deals price so far, although the Caesars, Nationstar and Vector Group issues did ultimately all come to market by the end of the day. The lateness of the hour precluded any initial aftermarket dealings.

Caesars' existing bonds were seen mixed on the news that the Las Vegas-based gaming giant, formerly known under the more familiar Harrahs Entertainment nameplate, was bringing a huge new add-on to its existing 9% notes due 2020, doubling that issue in size.

The widely quoted the Caesars 10% notes due 2018 were seen by a market source up a half-point on the day, at 69½ bid.

At another desk, a market source said the company's 10¾% notes due 2016 were up 1¼ points, at 90 bid. But Caesars' 8½% notes due 2020were quoted down by as much as 3 point, at 98 bid.

Friday deals mostly easier

A trader said that some of the new deals that priced on Friday were trading at lower levels on Monday amid a generally easier junk market that seemed to be taking its cue from sagging stocks.

The benchmark Dow Jones industrial average ended down 129.71 points, or 0.93%, at 13,880.08, while the broader Standard & Poor's 500 index had its worst day since November, plunging by 1.17%, while the even broader Nasdaq composite index tumbled by 1.51%.

Ashton Woods' 6 7/8% notes due 2021 were seen at 99 bid, par offered, down about a point from the levels at which those bonds had traded on Friday afternoon after the Atlanta-based homebuilder and its Ashton Woods Finance Co. subsidiary had priced their $300 million issue at 99.239 to yield 7%.

Talos Production LLC's 9¾% notes due 2018 were off a quarter-point on the day, quoted at 99 5/8% bid, 100 1/8 offered.

The Houston-based energy exploration and production company, along with its Talos Production Finance Inc. subsidiary, had priced $300 million of the notes at 99.025 on Friday to yield 10%, and the securities were as good as 99 7/8 bid when they hit the aftermarket later that same session.

Also losing about a quarter-point on the session were Miami-based cruise ship operation NCL Corp. Ltd.'s new 5% notes due 2018. That $300 million issue was anchored around 99¾ bid, par 1001/4.

The quickly shopped deal had priced at 99.451 on Friday to yield 5 1/8%, and the bonds had moved up to the par level later that session.

Permian Holdings' 10½% senior secured notes due 2018 were seen down ¾ of a point on Monday, trading around 101 bid, 102 offered. The Odessa, Texas-based manufacturer of oil and gas well field equipment had priced its $200 million transaction at par Friday after upsizing it from an originally planned $175 million. The bonds had gone as high as 101¾ bid in initial aftermarket dealings.

A dull session

A trader said that as of late afternoon, "secondary volumes were pretty light," with his shop, for instance, doing all "one-off crazy names - a couple million of this, a couple million of that, but there was no follow-through, no follow-on trades, no follow-on inquiry."

He said, "People were really pretty much sitting on their hands, attaching equities," which were taking it on the chin after all kinds of negative headlines were coming out of Europe. Spain's prime minister faced calls to resign over a corruption scandal, which sent yields on Spanish bonds up, while a probe of alleged misconduct involving an Italian bank was causing yields on that country's paper to widen out as well.

"Europe got us off to a bad start today," he noted.

Besides the problems in Spain and Italy, "you had comments out of Germany and the Netherlands about forcing people to take losses on bank debt, and then you had [U.K exchequer chancellor] George Osborne threatening to break up the big banks, if necessary," he added.

"With the Dow futures opening up already down 40 points as a result and never recovering, nobody was going to do anything. That started us off ugly."

Besides the chilling effect that watching the carnage in the equity market was having in Junkbondland, the trader also noted that a lot of people "were recovering from the Super Bowl," with water-cooler discussions of Sunday's thrilling game providing "much distraction and a good excuse to not be doing anything."

Avaya advances on swap offer

While the junk market had an overall easier tone amid quiet trading, one notable exception was Avaya's bonds, which firmed in active trading on the news that the Basking Ridge, N.J.-based telecommunications equipment and systems manufacturer had announced plans to offer new 10½% senior secured notes due 2021 in exchange for that existing debt.

Avaya's 9¾% notes due 2015 were seen by a market source to have gained 1 5/8 points on the session, ending at 96 7/8 bid, on round-lot volume of more than $16 million, while its 10 1/8% PIK toggle notes due 2015 shot up by more than 2 points to 97 ½ bid, with over $19 million of the bonds changing hands, making it one of the busiest junk issues of the day.

Market measures turn lower

But overall, away from Avaya, statistical junk market performance indicators once again turned lower on Monday, after having blipped higher for a single session on Friday. Before that temporary upturn, they had been mostly down for the previous three or four sessions.

The Markit Series 19 CDX North American High Yield index lost ¾ of a point on Monday to end at 101 7/8 bid, 102 1/8 offered, after having gained a half-point on Friday.

The KDP High Yield Daily index was back on a downside track on Monday as it lost 16 basis points to end at 75.54. On Friday, it had moved up by 4 bps, positing its first gain after four straight losses, including Thursday's 25 bps plunge. Its yield was higher by 7 bps, ending at 5.62%, after having been unchanged on Friday and rising for four straight sessions before that.

And the widely followed Merrill Lynch High Yield Master II index lost 0.115% on Monday after having gained 0.043% on Friday, its first gain after three straight losses.

Monday's loss dropped its year-to-date return to 1.303% from Friday's 1.419% and well down from its peak level for 2013 so far of 1.991%, set last Monday, Jan. 28.

Cristal Cody contributed to this review

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