Schaeffler, Realogy, several add-ons drive by; Erickson talk out, Charter, Wind keep gaining

By Paul Deckelman and Aleesia Forni

New York, April 23 - It was drive-by day in Junkbondland on Tuesday, high yield syndicate sources said, as five quick-to-market deals totaling $1.7 billion priced - four of them same-day transactions and the fifth an offering which had been announced on Monday.

That latter deal was also the biggest pricing of the session, as German ball-bearing manufacturer Schaeffler AG brought $850 million of new dollar-denominated eight-year secured notes to market, as part of an upsized €1.2 billion equivalent financing that also include a tranche of five-year euro-denominated secured notes.

The dollar notes firmed modestly when they were freed to trade.

Among the same-day deals, real estate services firm Realogy Group LLC did $500 million of three-year paper, which hovered just a little above its pricing level in the aftermarket.

There was also a trio of quickly-shopped add-on tranches to already existing notes, from oil and gas operator Rex Energy Corp. energy midstream company Hiland Partners LP and Associated Materials LLC, a manufacturer of windows and other residential exterior building products. Only Rex's $100 million tack-on transaction was quoted trading afterward.

The syndicate sources meantime heard price talk emerging on helicopter lift services provider Erickson Air-Crane Inc.'s $400 million secured note offering.

Among recently priced bond transactions, Charter Communications, Inc.'s $1 billion Friday offering of 10.75-year notes continued to record modest gains. Wind Acquisition Finance SA's dollar-denominated seven-year notes - part of a big dual currency deal - were also seen on Tuesday having moved up further from their initial trading levels.

Statistical indicators of secondary market performance were seen up across the board on Tuesday, after having been mixed on Monday.

Schaeffler prices €1.2 billion

The pace of the high-yield primary picked up on Tuesday, as Schaeffler Finance BV priced an upsized €1.2 billion issue of senior secured notes in two parts, according to an informed source.

In the day's largest deal, the company priced $850 million of 4¾% senior secured notes due May 15, 2021 at par to yield 345 basis points over Treasuries.

There was also a €600 million tranche of 4¼% five-year senior secured notes, which priced at par to yield Treasuries plus 392 bps.

Citigroup Global Markets Inc. will bill and deliver for the dollar-denominated notes, and Barclays will bill and deliver for the euro tranche.

BayernLB, BNP Paribas Securities Corp., CBK, Deutsche Bank Securities Inc., HSBC Securities, J.P. Morgan Securities LLC, Landesbank Baden-Wurttemberg and Unicredit Group are also banks on the deal.

The Regulation S and Rule 144A without registration rights notes will feature a 101% poison put.

Proceeds will be used to repay part of the company's outstanding amount under its senior facilities agreement.

Schaeffler Finance is a subsidiary of Herzogenaurach, Germany-based Schaeffler AG, a manufacturer of bearings for automobile and industrial OEMs.

Realogy sells $500 million

In other primary action, Realogy Group LLC and Sunshine Group (Florida) Ltd. Corp. sold and upsized $500 million of 3 3/8% three-year senior notes at par during Tuesday's session, according to a market source.

The deal priced tighter than talk, which was set at the 3½% area.

J.P. Morgan Securities LLC, Goldman Sachs & Co., Barclays, Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC and Credit Agricole Securities (USA) Inc. were the bookrunners.

Proceeds from the Rule 144A and Regulation S for life transaction will be used to redeem the company's outstanding 11½% senior notes due 2017.

Realogy is a Parsippany, N.J.-based provider of real estate brokerage, relocation and settlement services.

Hiland brings add-on

The session also saw Hiland Partners LP and Hiland Partners Finance Corp. come to market to sell a $150 million tap of their existing 7¼% senior notes due Oct. 1, 2020 at 109 to yield 5.31%, according to a market source.

The notes priced at the tight end of talk, which was set at 108.5 to 109.

BofA Merrill Lynch, Wells Fargo Securities LLC and RBS Securities Inc. are the joint bookrunners.

Proceeds will be used to reduce borrowings under the company's revolving credit facility.

The company priced the original $400 million issue at par on Sept. 11, 2012.

Hiland Partners is an Enid, Okla.-based private energy partnership focused on providing midstream services to oil and gas producers in the Williston Basin, Bakken Shale and Mid-Continent regions in the United States.

Rex Energy's $100 million tap

In another add-on, Rex Energy priced a $100 million tap of its existing 8 7/8% senior notes due Dec. 1, 2020 at 105 to yield 7.754%, according to a market source.

Pricing was in line with talk, which was set in the area of 105.

Proceeds from the Rule 144A and Regulation S with registration rights deal will be used to fund a portion of the company's 2013 capital expenditures and for other general corporate purposes.

RBC Capital Markets LLC is the left lead bookrunner. KeyBanc Capital Markets LLC, SunTrust Robinson Humphrey Inc. and Wells Fargo Securities LLC are the joint bookrunners.

The original $250 million issue priced on Dec. 12, 2012 at 99.3 to yield 9%.

Rex is a State College, Pa.-based independent oil and gas company operating in the Appalachian Basin in Pennsylvania and Ohio and the Illinois Basin in Illinois and Indiana.

Associated Materials' deal

Also in the primary, Associated Materials LLC and its wholly owned subsidiary, AMH New Finance Inc., priced a $100 million add-on to their 9 1/8% senior secured notes due Nov. 1, 2017 at 106, according to a company news release.

Proceeds from the Rule 144A and Regulation S deal will be used to repay all of the outstanding borrowings under the company's senior secured asset-based revolving credit facilities and for other general corporate purposes.

The original $730 million issue priced on Oct. 1, 2010 at par.

The sale of the new notes is expected to close on May 1.

Associated Materials manufactures and distributes exterior residential building products and is based in Cuyahoga Falls, Ohio.

Eyes on forward calendar

A number of deals are lined up for pricing during the April 22 week, including a $400 million offering of seven-year second-priority senior secured notes from Erickson Air-Crane.

"They came out with official talk on Erickson Air Crane, looks like 8 ¼% area," one trader said.

The company is conducting a roadshow thought April 24, and books close Wednesday at 5 p.m. ET.

"I think the deal is in pretty good shape," the trader added.

"Some people are looking at the yield. They're getting comfortable with the acquisitions."

Deutsche Bank Securities Inc. is the left bookrunner. Wells Fargo Securities LLC is the joint bookrunner. Stifel Nicholas and Imperial Capital are the co-managers.

The Portland, Ore.-based provider of helicopter lift services plans to use the proceeds to fund the acquisitions of Evergreen Helicopters, Inc. and Air Amazonia and to refinance debt.

Buena Vista, CST on deck

Other companies looking to price deals during the week include Buena Vista Gaming Authority and CST Brands, Inc.

Buena Vista is set to sell a $220 million offering of eight-year senior secured notes, while CST Brands is eyeing a $550 million offering of 10-year senior.

"I haven't seen official talk or timing yet on CST or Buena Vista," the trader said.

Abadino, Spain-based Gestamp Automocion, SA is also planning to hit the market during the week with a €750 million equivalent note offering due 2020.

The notes will be issued in dollar- and euro-denominated tranches by Gestamp Funding Luxembourg SA.

"I'm not really paying any attention to Gestamp," the source noted.

As for Wednesday's market, the source added that the pace may be modest.

"I would imagine we'll have some more small drive-bys tomorrow."

Not much aftermarket seen

A secondary trader said that there was not much going on in the way of dealings in day's new issues.

He quoted Schaeffler Finance's 4¾% senior secured notes due 2021 as having been offered at 101, but did not see a left side.

Generally speaking, he opined that most of the day's new paper "priced and then went away. I'm not seeing any re-trading, other than Schaeffer. The add-ons just price and go away."

Two other traders did see some aftermarket movement in the German ball-bearing manufacturer's deal, which had priced at par, pegging the new bonds at 100¼ bid, 100¾ offered.

Yet another trader saw them at 100 3/8 bid, 100 7/8 offered.

Realogy rises a little

Realogy Group's new 3 3/8% notes due 2016 were seen by a trader to have edged up to 100 1/8 bid, 100 3/8 offered, up slightly from the par level at which the Parsippany, N.J.-based provider of real estate brokerage, relocation and settlement services had priced its new deal earlier in the session.

A second trader called the bonds 100¼ bid, 100½ offered.

A third trader said that he had heard that the deal "was driven by three large institutions" that took up much of the $500 million of new paper.

Despite a stingy 3 3/8% coupon, he said that the deal had its attractions.

"It's a three-year bullet piece of paper. Everybody is looking for three years and shorter."

He said the company and its underwriters "priced it relatively aggressively - but nobody wanted to sell it. Guys went into that to own it, as a place to stick cash."

Despite the small coupon, he said, "guys are willing to pay 115, 114, 113, 112, for paper that's callable in two or three years, yielding 3%, so on this one, you pay par, you get that 3 3/8% coupon for three years, and you figure that if rates go up in 2015, it's going to be a one-year piece of paper [from that date until maturity] and you're not going to get hurt.

"It will be an underperformer for three years," he projected, adding that "but it's a very defensive piece of paper. It's a bet on housing and the economy."

Such a bet, he continued, is not without its risks.

"Obviously, if housing slows down, or if the economy stumbles, Realogy is back in the soup, since they make their money on transactions, not anything else.

"But for now," he said, "everybody's bulled up on housing and everybody's bulled up on home sales" - even despite the lackluster March existing-home sale numbers reported Monday by the National Association of Realtors. Sales, which had been expected to rise to a 5.01 million-unit annual pace, instead fell to a seasonally adjusted annual rate of 4.92 million units.

Nonetheless, he declared, investors "think that there's limited supply and the market is going to take off."

Rex rises a bit

The only one of the day's other new issues to trade around after pricing - out of the trio of same-day add-on transactions - was Rex Energy's tap of its 8 7/8% notes.

The State College, Pa.-based independent oil and gas company's deal priced at 105 to yield 7.754%; a trader saw the new bonds at 106¼ bid, 106¾ offered.

A second trader saw a wider market, at 106½ bid, 108 7/8 offered.

Charter keeps gaining

Among the deals which came to market last week, traders saw Charter Communications' new $1 billion offering of 5¾% notes due 2024 as having continuing the firming trend which began on Monday, when the bonds were freed for trading after having priced at par on Friday, too late for any dealings at that time.

The Stamford, Conn.-based cable television, phone and broadband service provider's bonds had moved as high as 100 7/8 bid, 101¼ offered on Monday afternoon, and on Tuesday morning, a trader saw the bonds having topped the 101 bid mark, at 101¼ bid, 101¾ offered.

By Tuesday afternoon, the same trader saw the bonds having improved further, to 101¾ bid, 102 offered.

A second trader quoted them at 101½ bid, 102 offered.

A market source said that more than $9 million of the new bonds had traded on the day by mid-afternoon, putting the new Charter deal among the most active junk issues of the day.

The company is issuing the bonds through its COO Holdings, LLC and COO Holdings Capital Corp. subsidiaries, planning to use the proceeds to redeem its 7 7/8% notes due 2018 and for general corporate purposes.

Wind blows higher

A trader meantime said that Wind Acquisition Finance's new 6½% notes due 2020 "were stronger, and Charter too" on Tuesday morning, adding to the gains which the bonds - issued by a unit of Italian telecommunications operator Wind Telecomunicazioni SpA - had notched during Monday's session.

Wind had priced $550 million of the notes on Friday as part of a quick-to-market, two-part, dual currency deal that also included €150 million senior secured floating-rate notes due 2019. The dollar notes had priced at par after the tranche was upsized from an originally planned $400 million.

The bonds had been quoted bid at 102¼ late Friday, but with no right side immediately seen; on Monday, they were quoted late in the day having firmed to 102 7/8 bid, 103 1/8 offered going home.

A trader saw them on Tuesday morning at 103¼ bid, 103¾ offered.

In afternoon trading on Tuesday, a trader saw them having improved to 103½ bid, 104 offered. A second trader located the bonds at 103\¾ bid, 104 offered.

AK moves to the upside

Away from the new deals, a trader saw AK Steel Corp.'s bonds "lighter," after the West Chester, Ohio-based maker of stainless steel and other steel alloys for the automotive, electrical and home appliance industries reported a smaller-than-expected first-quarter loss.

A market source saw its 7 5/8% notes due 2020 up nearly 2 points on the session at 84¾ bid.

Some $8 million of the notes had traded by mid-afternoon, making AK one of the busier names on the day.

The company reported that it lost $9.9 million, or 7 cents per share - narrower than its year-ago loss of $11.8 million, or 11 cents per share. Analysts, on average, were looking for an 11 cent loss for this year's quarter as well.

However, revenues fell 9% year-over-year to $1.37 billion, short of Wall Streeter's projections of $1.38 billion of sales.

Market indicators get better

Overall, statistical junk performance indicators turned higher on Tuesday, after having been mixed on Monday.

The Markit Series 20 CDX North American High Yield Index gained 9/32 point on Tuesday to end at 104 21/32 bid, 104 25 32 offered, its third consecutive gain. On Monday, the index was up by 11/32 point.

The KDP High Yield Daily Index, meanwhile, rose by 7 basis points on Tuesday to end at 75.70, in contrast to its 3-bps loss on Monday, its first downturn after two previous sessions on the upside.

Its yield was 1 bp lower at 5.42%, after having been unchanged on Monday.

The widely followed Merrill Lynch High Yield Master II index posted its fourth consecutive advance on Tuesday, gaining 0.175%, on top of Monday's rise of 0.121%.

That lifted its year-to-date return to 3.913% on Tuesday, its second consecutive new peak level for the year. The old mark of 3.732% had been recorded on Monday.

The index's yield to worst declined to 5.433% on Tuesday, a third consecutive new all-time low. It was down from the previous low mark of 5.455% on Monday.

It spread-to-worst narrowed to 472 bps over comparable Treasuries - a new tight spread for the year - from 474 bps on Monday, the previous tight level for 2013.

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