Extended Stay, Zayo, PrimeSource cap $3.83 billion week; split-rated Quicken day’s big name

By Paul Deckelman

New York, May 1 – The high-yield market closed out the week and opened the month of May on a busy note on Friday, with three new dollar-denominated, fully junk-rated deals having priced, the most of any one session so far this week.

But the most notable deal of the session, in terms of both its size and the busy response it got from investors, was not a junk bond deal at all, strictly speaking.

Online lender Quicken Loans Inc. priced its $1.25 billion split-rated offering of 10-year notes.

The big deal attracted interest from both traditional junk bond investors and from high-grade investors willing to dip down a little on the credit-quality scale to pick up some yield – making Quicken the most actively traded issue of the day. Traders said that those bonds firmed smartly from their par issue price.

Back in the purely junk precincts, the day’s three single-tranche issuers combined for some $1.05 billion of new paper.

Hotel operator Extended Stay America, Inc. came to market with a $500 million offering of 10-year notes, which priced as a regularly scheduled offering off the forward calendar. Those bonds were seen to have moved up solidly when they hit the aftermarket.

PrimeSource Building Products did a downsized $200 million issue off the calendar, opting to transfer some of the borrowing it was going to do in bonds to its concurrent term loan deal. Those eight-year notes firmed modestly in the aftermarket.

The day’s lone opportunistically timed and quickly shopped drive-by offering, from bandwidth infrastructure services provider Zayo Group LLC, consisted of $350 million of 10-year notes. It rose modestly in trading.

The forward calendar meantime grew, with biopharmaceuticals company Quintiles Transnational Holdings Inc. and midstream energy master limited partnership PBF Logistics LP each heard by syndicate sources to be preparing to hit the road in the coming week to market new deals.

The European high-yield market was quiet, except for the news that Spanish hospitality company NH Hotels SA had canceled a planned euro-denominated deal, citing market conditions.

Back in the dollar market, statistical measures of market performance were higher on the session across the board after having been mixed on Thursday.

However, they were lower all around versus where they had finished out the previous Friday. That slide follows two straight weeks during which the indicators had been mixed week to week, and three consecutive weeks before that when they had been broadly higher Friday to Friday.

Quicken out in front

Quicken Loans’ $1.25 billion split-rated (Ba2/BBB-) offering of 10-year senior notes was both the biggest deal of the day and its most active mover, market participants said.

The Detroit-based online lender’s notes priced at par to yield 5¾%, at the tight end of the 5¾% to 6% price talk that had circulated around the market on Thursday.

Credit Suisse Securities (USA) LLC was the left lead bookrunner for the Rule 144A and Regulation S for life offering while J.P. Morgan Securities LLC was the joint bookrunner.

The company plans to use the proceeds from the note sale to fund a distribution to Rock Holdings, its parent, and for general corporate purposes.

After that mid-afternoon pricing traders said that the new deal had an active aftermarket presence among both junk investors and higher-grade buyers reaching down to pick up some yield.

One trader said that “quite a bunch” of the new notes traded. He saw the bonds get as good as 101¾ bid, before they finally settled in in a 101 1/8 to 101 5/8 bid context.

A second trader noted that there was some junk market buying action in the credit.

“A 5¾% coupon on a Ba2/BBB credit – it’s pretty attractive,” he opined.

He saw the notes trading between 101¼ and 101½ bid.

At another desk, a trader quoted the new bonds at 101 3/16 bid – and said that over $122 million had changed hands, easily shooting right to the top of the day’s Most Actives list.

Extended Stay checks in

Back among the purely junk names, Extended Stay America’s $500 million offering of 10-year senior notes (B3/BB-) priced at par to yield 5¼%, junk bond market sources said Friday.

That compares with the price talk in the 5 3/8% area that circulated in the market on Thursday.

The regularly scheduled forward calendar deal priced after a short roadshow that began earlier in the week.

Deutsche Bank Securities Inc. was the left bookrunner for the Rule 144A and Regulation S for life offering. Citigroup Global Markets Inc., Goldman Sachs & Co., J.P. Morgan, Barclays Capital Inc. and Credit Suisse were the joint bookrunners.

The Charlotte, N.C.-based owner and operator of company-branded hotels plans to use the proceeds to repay mortgage debt.

“STAY opened up after 1 p.m. [ET],” a trader said, referring to the hotel company by its appropriate equity ticker symbol.

He said the bonds hit a high of 101½ and a low of 100½ in the aftermarket, with “the bulk of the trading” in a narrow 101 to 101 1/8 context.

Another saw them late in the day trading more toward 100¾ bid.

At another desk, a trader said that activity was brisk, with over $58 million of the notes having traded. He saw them anchored around 101 1/8 bid.

Downsized PrimeSource prices

Another scheduled deal off the calendar came from PriSo Acquisition Corp. – which does business as PrimeSource Building Products.

The Dallas-based building products distributor priced a downsized $200 million issue of eight-year senior notes (Caa1/CCC+) at par to yield 9%.

Syndicate sources said that the pricing took place right at the 9% price talk level seen in the capital markets on Thursday and Friday.

They noted that the deal got done after the company had reduced the size of its senior notes issue from the original $230 million, shifting the other $30 million to the company’s concurrent pending term loan deal, which was upsized to $355 million from $325 million.

The financing – which will be used to help fund the leveraged buyout of PrimeSource by Platinum Equity LLC, a Beverly Hills, Calif.-based private equity company – also includes a $300 million asset-based revolving credit facility.

Deutsche Bank, BMO Capital Markets Corp., Credit Suisse, Goldman Sachs and Nomura Securities International, Inc. were the bookrunners for the Rule 144A and Regulation S for life offering.

When PrimeSource hit the aftermarket, two separate traders quoted the bonds in a 100¾ to 101¼ bid context.

Another saw them originally trading in a wide 100½ to 102 range before coming in to 100½ to 101.

However, the volume levels were nowhere near those of Quicken and Extended Stay.

Zayo drives by

The day’s other new issue, which priced fairly late in the afternoon and which thus did not see much of a robust aftermarket, traders said, was Zayo Group, LLC and Zayo Capital, Inc’s $350 million of senior notes due 2025 (Ca1/B-), which priced at par to yield 6 3/8%.

The notes priced at the tight end of price talk suggesting a yield between 6 3/8% and 6½%.

The quick-to-market offering priced just hours after the planned deal had been announced and marketed to potential investors via a mid-morning Eastern Time conference call.

Morgan Stanley & Co., Barclays, Goldman, Citi, RBC Capital Markets Corp. and SunTrust Robinson Humphrey, Inc. were the bookrunners on the deal, which was being offered to investors under Rule 144A with registration rights and Regulation S.

The issuers, subsidiaries of Boulder, Colo.-based Zayo Group Holdings, Inc., an international provider of bandwidth infrastructure services, intend to use the net proceeds from the bond deal to repay approximately $345 million of term loan borrowings.

A trader saw the new Zayos somewhere in the 100½ to 101 range, but said that he had not seen much action in the credit.

A less busy week

The day’s three new deals, totaling $1.05 billion of paper, brought this week[s issuance total to $3.83 billion in nine tranches, according to data compiled by Prospect News.

That was well down from the $10.54 billion of new junk-rated, dollar-denominated paper which got done in 14 tranches last week, ended April 24.

The week’s issuance raised the year-to-date tally to $129.06 billion in 197 tranches – running around 18% ahead of the pace seen a year ago, when $109.8 billion had priced in 205 tranches by this point on the calendar.

Forward calendar grows

A pair of dollar-denominated prospective deals climbed aboard the forward calendar on Friday, syndicate sources said.

Quintiles will begin a short roadshow early in the coming week for its planned $800 million issue of eight-year senior notes. It is scheduled to market its deal to investors on Monday in New York and on Tuesday in Boston, with pricing to follow, the sources said.

Barclays will handle billing and delivery for the Rule 144A/Regulation S for life deal. J.P. Morgan, LC, Morgan Stanley, Citigroup, Goldman and Wells Fargo Securities LLC will be joint bookrunners on the deal.

The company, a Research Triangle Park, N.C.-based provider of biopharmaceutical development and commercial outsourcing services, plans to use the new-deal proceeds to repay its existing credit facility and for general corporate purposes, including corporate transactions and share repurchases.

Later in the session, PBF Logistics LP and its wholly-owned subsidiary, PBF Logistics Finance Corp., announced plans for a $300 million issue of eight-year senior notes.

The syndicate sources said that the joint issuers will market the bonds to prospective investors on a roadshow during the upcoming week starting on Monday, with pricing expected at the end of the week.

Deutsche Bank and Citi will act as joint global coordinators and bookrunners on the Rule 144A/Regulation S transaction, which is being offered with registration rights.

B of A Merrill Lynch, MUFG, RBC, and Wells Fargo will be joint bookrunners on the deal.

The Parsippany, N.J.-based master limited partnership focused on crude oil and refined petroleum products terminals, pipelines, storage facilities and similar logistics assets, plans to use the proceeds from the sale of the notes to repay some of the borrowings on its revolving credit facility, to pay part of any cash consideration payable by PBF Logistics in the proposed acquisition of the Delaware City Products Pipeline and Truck Rack from its ultimate corporate parent, PBF Energy Inc., and for general partnership purposes.

Indexes up on day, off on week

Statistical indicators of junk market performance were higher across the board on Friday after having been mixed on Thursday and lower for two straight days before that.

But they were lower all around versus where they had finished out the previous week, after two straight weeks of having been mixed and three consecutive stronger weeks before that

The KDP High Yield Daily Index edged up by 1 basis point to 71.67, its first gain after three straight losses.

Its yield was unchanged at 5.18%.

However, those numbers compare unfavorably with the 71.79 index reading and 5.13% yield seen at the close the week before on Friday, April 24.

The Markit Series 24 CDX North American High Yield Index rose by 5/32 point Friday to end at 107¼ bid, 107 9/32 offered – its first gain after 4 straight losses.

But that was still down from last week’s 107½ bid, 107 17/32 offered finish.

The Merrill Lynch North American Master II high yield index was up by 0.016% on Friday, its second straight advance. That lifted its year-to-date return to 3.791%.

However, it lost 0.102% on the week – its first weekly downturn after six straight weekly advances before that, including last week, when it had risen 0.243%, lifting the year-to-date return to 3.897%.

© 2015 Prospect News.
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