Upsized Landry’s prices, new bonds up; Sabine issue busy; Community Health weakens

By Paul Deckelman and Paul A. Harris

New York, Sept. 20 – The high yield primary sphere saw one fully-junk rated and dollar-denominated issue price during the session on Tuesday, as restaurant, gaming and lodging company Landry’s, Inc. served up an upsized $600 million of eight-year notes.

The new bonds firmed smartly when they hit the aftermarket, traders said, with Landry’s being among the most active credits.

The day’s menu also included an issue from another restaurateur, Brinker International, Inc., which did a split-rated $350 million tranche of eight-year notes.

Monday’s split-rated deal from natural gas company Sabine Pass Liquefaction LLC was the busiest name in Tuesday’s trading, although much of the interest in that upsized megadeal came from yield-seeking crossover investors rather than traditional junk accounts.

Away from the deals that have already priced, primaryside sources heard price talk out on Versum Materials, Inc.’$425 million eight-year issue, which is expected to come to market on Wednesday.

The forward calendar grew new-deal announcements from the likes of aluminum giant Alcoa Inc., which will do a $1 billion eight-year deal later in the week, as well as LSC Communications Inc., Donnelley Financial Solutions Inc. and Avis Budget Finance plc, the latter deal being a euro-denominated offering.

Away from the new deals, Community Health Systems, Inc.’s bonds remained in focus, actively trading across the board for a second straight session after the hospital operator said it was exploring strategic options, but some of the bonds that had firmed on Monday were in retreat Tuesday.

Statistical market performance measures turned mixed on Tuesday after having been higher across the board on Monday for the first time in more than a week; it was the second mixed session in the last four trading days.

Landry's upsized and tight

The primary market news flow remained high on Tuesday.

Landry's, Inc. priced an upsized $600 million issue of eight-year senior notes (Caa1/CCC+) at par to yield 6¾%.

The issue size was increased from $575 million.

The yield printed at the tight end of the 6¾% to 7% yield talk.

Jefferies was the lead left bookrunner. Citigroup, Deutsche Bank, Rabo and KeyBanc were the joint bookrunners.

Proceeds, along with proceeds from a concurrent $1.5 billion senior secured credit facility, will be used to refinance existing debt, including the 9 3/8% senior unsecured notes due 2020 and an existing senior secured credit facility, and to make a distribution to the indirect parent to redeem all of its outstanding 10¼% senior unsecured notes due 2018.

The additional $25 million of proceeds resulting from the upsizing of the deal, along with $25 million of cash on the balance sheet, will be used to fund a $50 million dividend to Landry’s parent.

Brinker split-rated

Brinker International, Inc. priced a $350 million issue of split-rated non-callable eight-year senior notes (Baa3/BB+/BBB-) at par to yield 5%.

The yield printed on top of yield talk.

JP Morgan, BofA Merrill Lynch and Wells Fargo managed the sale.

The Dallas-based casual dining restaurant company plans to use the proceeds to repurchase up to $300 million of its common stock and to repay up to $50 million of outstanding debt under its revolving credit facility, with any remaining proceeds to be used for general corporate purposes.

Versum talk 5 5/8% area

Versum Materials, Inc. talked its $425 million offering of eight-senior senior notes (Ba3/BB-) to yield in the 5 5/8% area.

Books closed Tuesday, and the deal is expected to price Wednesday.

Avis Budget €250 million

Avis Budget Finance plc, a subsidiary of Avis Budget Group, plans to price €250 million of eight-year senior notes (expected ratings B1/B+) on Wednesday via lead bookrunner Barclays. BofA Merrill Lynch, Credit Agricole and Morgan Stanley are also bookrunners.

The Parsippany, N.J.-based provider of vehicle rental services plans to use the proceeds to partially redeem its 6% senior notes due 2021 and for general corporate purposes.

Elsewhere in the European market on Wednesday Industry a prospective issuer from the service sector will present in London. Barclays sent out a save-the-date memo on Tuesday

LSC Communications whisper high 7%s

LSC Communications Inc. is expected to sell $400 million of senior secured notes (Ba3) on Thursday.

The notes are being guided in the high 7% yield context.

BofA Merrill Lynch, Citigroup, JP Morgan and Wells Fargo are leading the spinoff deal.

Alcoa $1 billion this week

Alcoa Inc. plans to price $1 billion of eight-year senior notes by the end of the week.

Morgan Stanley is at the top of a long roster of bookrunners.

The New York-based aluminum company plans to use the proceeds to fund the separation of Alcoa Corp. from Arconic Inc.

Donnelley whispers mid-7% area

Donnelley Financial Solutions Inc. is expected to price its $300 million offering of eight-year senior notes (B3/B) before the end of the week, as well.

The notes are whispered with initial yield guidance in the mid-7% area, a trader said.

JP Morgan, BofA Merrill Lynch, Citigroup and Wells Fargo are the leads for the spinoff deal.

Steak n Shake starts roadshow

Steak n Shake, Inc. began a full roadshow on Tuesday for a $400 million offering of seven-year senior secured notes.

The deal, in the market via sole bookrunner Jefferies, is set to price in the middle of the week ahead.

Proceeds will be used to repay the existing senior secured credit facility in full and to make a cash distribution of $230 million to the parent, Biglari Holdings, Inc.

Vertiv high 7% to 8%

Vertiv (Cortes NP Acquisition Corp.) plans to start a roadshow on Monday for a $750 million offering of eight-year senior notes (B3/B).

Initial guidance has the notes pricing with a high 7% to 8% yield, a trader said.

The LBO deal is expected to price late in the week ahead.

BofA Merrill Lynch, JP Morgan, Citigroup, Deutsche Bank, Goldman Sachs and Morgan Stanley are managing the sale.

Landry’s leads the way

In the secondary market, the day’s standout performer was the new Landry’s 6¾% notes due 2024, which soared above the 102 bid mark in busy trading after the Houston-based restaurant, gaming and lodging company had priced its regularly scheduled forward calendar issue at par.

A trader saw the deal in a 102 to 102½ bid context, while a second pegged the bonds in a 101 7/8 to 102 3/8 bid range.

At another desk, a trader located the bonds near the end of the day at 102 bid, with over $65 million having changed hands.

Sabine bonds busiest

While the Landry’s bonds were actively traded, Monday’s new deal from Cheniere Energy Partners LLC, via its Sabine Pass Liquefaction unit was the busiest name in Junkbondland on Tuesday – even though, technically speaking, it really isn’t a junk bond.

The Houston-based liquefied natural gas company’s quickly shopped $1.5 billion offering of 5% senior secured notes due 2027 was seen by a trader at 100½ bid, up from the par level at which that split-rated (Ba2/BBB-) offering had priced on Monday after having been upsized from an originally announced $1 billion.

A second trader said the new bonds were “above par,” in a 100¼ to 100¾ bid range, but added that “it was mostly the crossover community playing in that one” rather than traditional junk bond accounts.

More than $150 million of the notes traded on Tuesday.

Community Health bonds retreat

Away from the new or recently priced deals, the healthcare sector continued to be in focus in Tuesday trading.

Community Health Systems Inc. – which was active on Monday on word the Franklin, Tenn.-based hospital operator was exploring its strategic options, possibly including the sale of part or all of the company – again experienced “tons of trades,” according to a trader.

The trader said at least $70 million of the 6 7/8% notes due 2022 traded, falling over half a point to 84 3/8.

However, he said the 8% notes due 2019 were steady at 96½.

At another desk, though, a trader said that the 8s – which had gained 5/8 point on the day on Monday, even as the 6 7/8s had been sinking by more than 2½ points – were also lower Tuesday, calling them down around 1/8 point, at just under 96½ bid, with over $26 million traded.

Its 5 1/8% notes due 2021, which had gained nearly ¾ point on Monday, gave most of that back on Tuesday, closing down ½ point at 97¼ bid, on volume of more than $13 million.

Quiet session ahead of Fed

Overall, a trader said that Tuesday’s session was “pretty quiet.”

“Once again, we saw the equity markets trade well, and the CDX [index] was up a little bit – but it kind of faded towards the end of the day, very similar pattern as [Monday].”

He further said that “a lot of guys were just sitting around, waiting for the Fed.” The U.S. central bank’s policy-setting Federal Open Market Committee began its two-day September meeting on Tuesday, with the get-together stretching into Wednesday, at which time any announcements to raise interest rates – or not – are expected.

Most observers believe the Fed will stand pat and not raise interest rates at this time.

Indicators turn mixed

Statistical market performance measures turned mixed on Tuesday after having been higher across the board on Monday for the first time in more than a week; it was the second mixed session in the last four trading days.

The KDP High Yield index saw its second straight gain on Tuesday following six consecutive losses before that, rising by 6 basis points to end at 70.14, on top of Monday’s 2 bps improvement.

Its yield came in by 1 bp, to 5.42%, after seven straight sessions on the rise, including Monday’s 1 bp increase.

But the Markit Series 26 CDX index lost 5/32 point on Tuesday, closing at 103 11/16 bid, 103 23/32 offered, versus Monday’s gain of more than 3/16 point.

The Merrill Lynch High Yield index rose by 0.049%, its second upturn in a row. On Monday, it had gained 0.13%, after having posted losses most days last week.

The latest advance lifted its year-to-date return to 14.02% from 13.964% on Monday, its first time back above the 14% level since last Monday, when it stood at 14.306%, although it remained well down from the 14.992% return set on Sept. 8, its peak cumulative level for the year so far.

Stephanie N. Rotondo contributed to this review.

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