Upsized Valeant drive-by deal caps $9.1 billion week; new CenturyLink notes, Caesars active

By Paul Deckelman and Paul A. Harris

New York, Nov. 15 - Valeant Pharmaceuticals International, Inc. was heard by high-yield syndicate sources to have come to market Friday with an upsized $900 million offering of eight-year notes.

The drug maker's bonds proved to be just what the doctor ordered for investors, who took the notes solidly higher when they were freed for the aftermarket.

Valeant was the day's sole pricing, and it capped a busy week which saw some $9.1 billion of new paper pricing in 13 tranches, according to data compiled by Prospect News, around double the new-issuance pace seen last week. That prior week, ended Nov. 8, saw $4.54 billion price in 13 tranches. The elevated activity came in a week that was one session short because of this past Monday's Veterans Day holiday observance, which shuttered the U.S. debt markets.

Almost all of the week's deals were opportunistically timed and quickly shopped drive-by transactions, with the same-day deals now becoming the new norm.

Friday's deal brought the new-issuance tally for the year up to $292.92 billion in 632 tranches, according to the Prospect News data, running marginally ahead of the pace seen last year, which turned out to be a record year for new junk. At this point in the calendar last year, $291.17 billion had priced in 609 tranches.

Besides the trading in the new Valeant bonds, traders saw continued brisk activity in CenturyLink, Inc.'s upsized $750 million of 10-year notes. It was among the overall Junkbondland volume leaders for a second consecutive day.

The market had an overall positive tone, benefitting such other recent issuers as Post Holdings, Inc. and Reynolds Group Holdings Ltd.

Away from the new deals, traders saw Caesars Entertainment Corp.'s bonds at or near the top of the Most Actives list. The casino powerhouse's bonds were said to have risen in apparent favorable reaction to a court ruling in an unrelated bankruptcy case involving lender Residential Capital LLC, which is in a dispute with some of its own bondholders.

Valeant Pharmaceuticals upsizes

Friday's primary market saw just one issue clear.

In an upsized, quick-to-market deal Valeant Pharmaceuticals priced a $900 million issue of eight-year senior notes (B1/B) at par to yield 5 5/8%.

The deal was increased from $850 million.

The yield printed at the tight end of yield talk that was set in the 5¾% area.

Goldman Sachs, BofA Merrill Lynch and JP Morgan were the joint bookrunners for the debt refinancing.

DFC Global sets roadshows

DFC Global Corp. took the wraps off of a $650 million equivalent offering of senior notes.

The debt refinancing deal, which is coming in tranches of Canadian dollar- and sterling-denominated notes, will roll out during roadshows scheduled to begin in Canada and the United Kingdom on Monday, and in the United States on Tuesday, with pricing set for late in the week ahead.

The Canadian dollar-denominated tranche of eight-year notes is being managed by left lead bookrunner Credit Suisse, and joint bookrunners BMO, Barclays and SG.

The sterling-denominated tranche of seven-year notes is being managed by left lead bookrunner Deutsche Bank, and joint bookrunners Credit Suisse, Barclays, Nomura and SG.

Tranche sizes remain to be determined.

Vivacom matches tightened talk

Aside from the DFC sterling-denominated tranche, there was plenty of other news regarding the European high-yield primary market.

Bulgarian telecommunications company Vivacom got a notable execution as it priced a €400 million issue of five-year senior secured notes (B1/BB-) at par to yield 6 5/8% on Friday.

The yield printed on top of revised yield talk. Previous talk was in the 6¾% area. Initial guidance was 6¾% to 7%.

Global coordinator Credit Suisse will bill and deliver for the debt refinancing deal. VTB was also a global coordinator. Barclays and Deutsche Bank were the joint bookrunners.

Cozying up to Central Europe

Vivacom is not the only emerging markets credit from Central Europe to lately play in front of European high-yield investors who tend to have a lot of cash to put to work, market sources say.

In late October Romania-based telecom RCS & RDS SA priced a €450 million issue of 7½% notes due Nov. 1, 2020 (B1).

That deal traded as high as 103, with an implied yield in the high 6% context, a London-based banker said, adding that late in the past week RCS eased to 101½ bid.

More recently Serbia-based SBB/Telemach Group priced a €475 million issue of 7 7/8% seven-year senior secured notes (B2/B/).

This recent burst of activity is helping high-yield investors to get comfortable with the Central European sector, a London-based banker remarked.

In so doing it likely helped Bulgaria's Vivacom to get a better execution, the banker added.

Salamander to roadshow

Looking to the week ahead, London-based Salamander Energy plans to start a roadshow on Monday in Singapore for a $150 million offering of callable, non-rated six-year senior bonds.

The roadshow moves to London on Thursday.

It remains to be determined whether a roadshow will be undertaken in the United States, the source said.

Initial guidance is 9% to 9½%.

The deal is being led by Pareto Securities.

Bluewater to market notes

Bluewater Energy Services BV plans to start a roadshow on Wednesday for an offering of six-year notes.

The Hoofddorp, Netherlands-based company has set a size range of $375 million to $425 million for the deal.

Initial guidance on the debt refinancing deal is 8 ¾% to 9 ¼%.

Pareto and DNB are managing the sale.

And a "Save-the-date" memo went out to fixed-income investors on Friday regarding an expected sterling-denominated high-yield offering from an issuer in the real estate sector.

Although neither the identity of the issuer nor the deal size have been disclosed, the deal is expected to come with credit ratings in mid-to-high double-B range, the source said.

Barclays, HSBC, Lloyds Bank and Royal Bank of Scotland will be the bookrunners.

Valeant very strong

In the secondary market, a trader saw the new Valeant Pharmaceuticals deal move up to 101½ bid, 101¾ offered when the bonds were freed for aftermarket dealings.

A second trader quoted the Laval, Que.-based specialty pharmaceuticals producer's new bonds at 101½ bid, 102 offered, well up from their par pricing level.

Century busy, again

For a second consecutive session, CenturyLink's new 6¾% notes due 2023 were among the most actively traded junk credits.

A trader saw over $33 million of those notes having changed hands, quoting them around a 101 3/8 to 101 7/8 bid context for "most of the day."

A second trader pegged the Monroe, La.-based telecommunications company's quickly shopped new deal somewhere between 101½ and 101¾ bid.

On Thursday, the company had priced $750 million of the bonds at par, after having upsized the deal from an originally announced $500 million. The new bonds had firmed smartly when they reached the aftermarket, moving as high as a 101½ to 102 bid context on volume of over $55 million - easily the tops in the junk bond market that session.

Hiland heads higher

A trader saw another one of Thursday's drive-by offerings - Hiland Partners LP and Hiland Partnerss Finance Corp.'s $200 million add-on to its existing 7¼% notes due 2020 - having firmed to 106 bid, 106½ offered.

The Enid, Okla.-based energy midstream services company's quick-to-market transaction had priced at 106 to yield 5.814% and had traded between 105¾ and 106¾ bid late Wednesday.

Post Pop continues

Among deals that came to market on Wednesday or earlier in the week, a trader saw Post Holdings' 6¾% notes due 2021, up 3/8 point at 102 bid, 102½ offered.

Those bonds had priced at par Wednesday after the St. Louis-based breakfast cereal producer had upsized its drive-by deal to $525 million from an originally announced $450 million.

Those bonds had immediately firmed above the 101 bid mark when they hit the aftermarket on Wednesday; and then continued to firm on Thursday and again on Friday.

A trader meantime saw Reynolds Group's 5 5/8% notes due 2016 up ½ point at 102 bid, 102½ offered.

The Auckland, N.Z.-based maker of packaging materials manufacturer had priced a $650 million drive-by deal on Tuesday. The bonds had priced at par, immediately pushed above the 101½ bid mark, and continued to gain in the subsequent sessions.

Caesars seen active

Away from the new issues, the legacy bonds of Harrah's Operating Co. Inc. - the predecessor company of Las Vegas-based gaming giant Caesars - were at the top of the Junkbondland most-actives list on Friday, with a trader seeing its 10% notes due 2018 "in a 48 to 48½ ZIP code," which he said was up 3 points.

A market source at another desk noted that technically, there are two separate tranches of those 2010, both trading in a 48½ to 48¾ bid range. One tranche was up nearly 4 points on the session, on tremendous volume of over $67 million. The second tranche was only up about ½ point, with over $23 million of the bonds having changed hands.

One of the traders said that he had seen no specific news about Caesars itself out that might explain the heavy trading and the robust upside movements.

However, he said that "a ruling in the ResCap [bankruptcy case] that has implications for the treatment of [creditor] claims that Caesars thought was positive."

The ResCap ruling

In that ResCap case, judge Martin Glenn of the U.S. Bankruptcy Court for the Southern District of New York ruled that the company's bondholders may not be able to collect all the interest and penalty fees they are demanding.

ResCap, a mortgage lender owned by Detroit-based Ally Financial Inc., filed for Chapter 11 protection from its creditors last year.

Glenn is holding hearings on various issues in preparation for a session next week at which ResCap will seek approval for its plan of reorganization.

In an opinion made public on Friday, the judge said that the collateral backing $2.2 billion of debt was only worth $1.9 billion, eliminating those noteholders' possibility of collecting post-petition interest accrued since the case was filed.

He also criticized the bondholders' group for being unwilling to compromise with the company.

In the wake of the judge's ruling, ResCap's 9 5/8% notes due 2015 fell by 2¾ points to 107½ bid, on volume of $18 million.

Market signs turn better

Overall, statistical junk-market performance indicators turned higher for the first time this month, after having been mixed for a second consecutive session on Thursday. The indicators had been mostly mixed going back to the end of October, with a lower session across the board here and there during that stretch.

They were mixed versus where they had ended the previous week - Nov. 8 - for a fourth consecutive week.

The Markit Series 21 CDX North American High Yield Index gained ¼ point on Friday to end at 106 13/16 bid, 106 15/16 offered, after having risen by 1/16 point on Thursday.

It was also up from 106 19/32 bid, 106 23/32 at the end of the previous week.

The KDP High Yield Daily Index posted its first gain on Friday after having suffered 10 straight losses. The index rose by 22 bp on Friday to 74.24, after having eased by 3 bps on Thursday.

Its yield came in for a second straight session, declining by 2 bps to end at 5.76%. Its yield had come in by 1 bp on Thursday as well.

But those levels compared unfavorably with the 74.41 index reading and 5.71% yield a week ago.

The widely followed Merrill Lynch High Yield Master II Index meantime gained 0.092% on Friday, its second straight gain. It had risen the previous session by 0.169%.

The gain raised the index's year-to-date return to 6.146% from 6.048% on Thursday. However, it remained down from last Thursday's finish at 6.367%, its peak level for 2013 so far.

For the week, the index rose by 0.126%, its first weekly gain after having lost 0.315% the previous week, when the return stood at 6.012%.

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