Upsized BMC megadeal leads $2.6 billion session, rises in trading; SandRidge up on numbers

By Paul Deckelman and Aleesia Forni

New York, Aug. 7 - BMC Software, Inc. brought an upsized $1,625,000,000 offering of eight-year notes to market on Wednesday, syndicate sources said - the biggest junk bond transaction to get done in a month and a half.

Several traders saw the new bonds firm smartly when they hit the aftermarket later in the session, gaining as much as 2 points from their issue price.

The software company's new deal accounted for most of the more than $2.6 billion of new U.S. dollar-denominated, fully junk-rated paper from domestic or industrialized-country borrowers, eclipsing Tuesday's roughly $2 billion total.

Aside from the giant-sized BMC offering, four other junk deals priced, the sources said.

William Carter Co., a maker of clothing for babies and young children, priced $400 million of eight-year notes.

Film and television production company DreamWorks Animation SKG, Inc. - the people who gave the world Shrek - did a $300 million seven-year deal.

Ship operator Viking Cruises Ltd. sailed by the junk market with an unscheduled and upsized $175 million of five-year PIK toggle notes, via a financing subsidiary.

And agricultural products company Southern States Cooperative, Inc. priced a $130 million eight-year secured deal.

Away from the deals that actually priced, the syndicate sources heard that energy operator Venoco Inc. had begun a roadshow to market $250 million of five-year PIK toggle notes.

Out of that same sector, Halcon Resources Corp. announced plans to price a $300 million offering of senior notes due 2022.

And Multi Packaging Solutions Inc. has set price talk for its planned $200 million offering of eight-year senior notes.

Away from the new-deal world, traders saw brisk upside activity, at higher levels, in SandRidge Energy Inc.'s bonds - though not its shares - after the company beat quarterly earnings expectations and said on its conference call that it is considering joint ventures, or possibly monetizing infrastructure assets, to improve its cash flow.

Overall, though, traders saw a softer market tone, and statistical performance indicators slipped across the board for a third consecutive session.

BMC upsizes

Wednesday's largest primary market deal came from Houston-based BMC Software, as the company priced an upsized $1,625,000,000 of 8 1/8% senior notes due 2021 at par, according to a syndicate source.

The deal was increased from $1.38 billion.

The securities priced in the middle of price talk, which was set at 8% to 8¼%.

The company announced earlier in the week that it had dropped its previously planned euro-denominated tranche.

The notes will be non-callable for three years and there is an equity clawback of up to 40%.

The.

Proceeds will be used for a leveraged buyout.

Credit Suisse Securities (USA) LLC, RBC Capital Markets LLC, Barclays, Deutsche Bank Securities Inc., Citigroup Global Markets Inc., Goldman Sachs & Co., Jefferies & Co. and Mizuho Securities are the bookrunners for the Rule 144A and Regulation S notes.

Hospira brings cross-overs

The session also saw a split-rated issue from Hospira Inc.

The company priced $350 million of 5.2% notes due 2020 at Treasuries plus 325 basis points.

The notes came at 99.751 to yield 5.243%

Hospira also brought to market $350 million of 5.8% notes due 2023, which were also priced with a spread of 325 bps over Treasuries.

The 10-year notes sold at 99.663 to yield 5.854%

Joint bookrunners for the seven-year deal were Morgan Stanley & Co. LLC, Goldman Sachs & Co., J.P. Morgan Securities LLC, Citigroup Global Markets, RBS Securities Inc. and U.S. Bancorp Investments Inc.

Morgan Stanley & Co. LLC, Goldman Sachs & Co., J.P. Morgan Securities LLC, Citigroup Global Markets, RBS Securities Inc. and Mitsubishi UFJ Securities (USA) Inc. were joint bookrunners for the 10-year tranche.

The company plans to use the proceeds from the sale, along with cash on hand, to redeem its $400 million of 5.9% notes due June 2014 and $250 million 6.4% notes due May 2015.

The specialty pharmaceutical and medical delivery company is based in Lake Forest, Ill.

Carter's prices tight

In other primary action, William Carter Co., a wholly owned subsidiary of Carter's, Inc., priced a $400 million offering of 5¼% senior notes due 2021 at par, according to an informed source.

The debt came at the tight end of price talk that had been set at 5¼% to 5½%

BofA Merrill Lynch was the left bookrunner, while J.P. Morgan Securities LLC was a joint bookrunner.

Carter's plans to use the proceeds from the Rule 144A with registration rights deal for share repurchases, dividends and other general corporate purposes.

Carter's is an Atlanta-based branded marketer of apparel for babies and young children.

DreamWorks sells $300 million

Another new offering came from DreamWorks Animation, as the company priced $300 million 6 7/8% senior notes due 2020 at par, according to a market source.

The deal came at the tight end of talk which had been set in the 7% area.

BofA Merrill Lynch and J.P. Morgan Securities LLC acted as left bookrunners, while Wells Fargo Securities LLC and SunTrust Robinson Humphreys Inc. were joint bookrunners.

The Rule 144A and Regulation S notes will be non-callable for three years.

Proceeds will be used to prepay outstanding loans under the company's credit facility and for general corporate purposes, including acquisitions and repurchases of company's common stock.

DreamWorks is a Glendale, Calif.-based producer of movies and television programming.

Viking gets PIK toggle notes

Meanwhile, Viking Cruises priced an upsized $175 million offering of senior PIK toggle notes due 2018 at 99 to yield 8 7/8% during the session, according to a syndicate source.

The notes come with an 8 5/8% cash coupon and a 9 3/8% PIK coupon.

The deal matched talk which was set at 99 with an 8 5/8% coupon to yield in the area of 8.86%

Proceeds from the deal will be used to fund a distribution to equityholders.

Wells Fargo Securities LLC, Credit Suisse Securities (USA) LLC and BofA Merrill Lynch are the joint bookrunners for the Rule 144A and Regulation S offering.

The issuer is a Woodland Hills, Calif.-based river cruising company.

Southern States prices

There was also a new offering from Southern States Cooperative. The company priced $130 million of 10% eight-year senior secured second-lien notes at 97 to yield 10.565%, according to an informed source.

Talk was set in the area of 10¼%, widened from the 9¼% area.

BMO Capital Markets Corp. was the bookrunner for the Rule 144A and Regulation S without registration rights notes.

The Richmond, Va.-based supplier of agricultural products and services plans to use the proceeds to refinance debt.

Venoco starts roadshow

Also during Wednesday's session, Venoco kicked off a roadshow ahead of a proposed $250 million issue of senior PIK toggle HoldCo notes due 2018, according to a market source.

The roadshow will run Wednesday and Thursday in New York and New Jersey before heading to Boston on Friday.

The issue is expected to price on Friday.

The notes will be issued via Denver Parent Co.

The Rule 144A and Regulation S notes will come with two years of call protection and a make-whole call for the first two years.

Proceeds will be used to redeem the company's existing HoldCo notes and tender for its 11½% OpCo notes.

Citigroup Global Markets Inc. and BofA Merrill Lynch are the joint bookrunners.

The Denver-based energy company will hold an investor call at noon ET on Thursday.

Halcon, Multi Packaging plan deals

Two other deals were added to the forward calendar on Wednesday, with Halcon Resources and Multi Packaging Solutions announcing plans to price offerings.

Halcon plans to sell a $300 million offering of senior notes due 2022, according to a company release.

Proceeds from the Rule 144A and Regulation S deal will be used to repay a portion of the company's outstanding borrowings under its senior secured revolving credit facility. The company is also selling stock, which will also be used to repay revolver borrowings.

The issuer is a Houston-based oil and gas exploration and production company.

Meanwhile, Multi Packaging set price talk for its planned $200 million offering of eight-year senior notes at 8½% to 8¾%, according to a market source.

Books were scheduled to close at 10 a.m. ET Thursday, and pricing was expected thereafter.

Proceeds will be used to help fund the buyout of the company by Madison Dearborn Partners from Irving Place Capital and to repay debt.

BofA Merrill Lynch is acting as the left bookrunner and is joined by Barclays, Citigroup Global Markets Inc. and UBS Investment Bank as joint bookrunners.

The Rule 144A for life notes are to be issued through Mustang Merger Corp.

Multi Packaging Solutions is a New York-based manufacturer of printed folding cartons, labels and inserts for customers in the health care, consumer and media end markets.

BMC = Big-Moving Credit

In the secondary market, the star of the session among the new or recently priced credits which dominated the day's proceedings was BMC Software's 8 1/8% notes.

The $1.625 billion deal was the first purely-rated junk transaction of $1 billion or more seen since July 18, when German automotive and industrial bearing manufacturer Schaeffler AG sold $1 billion of 6 7/8% senior secured five-year notes as part of a larger two-part offering that also included a tranche of euro-denominated bonds.

And it was the biggest deal Junkbondland has seen since June 27, when Canadian drug manufacturer Valeant Pharmaceuticals International, Inc., priced $3.225 billion of new paper in a two-part offering that included $1.6 billion of five-year notes and $1.625 billion of eight-year securities.

In Wednesday's dealings, a trader remarked that the new BMC notes "traded up right off the break," jumping out to 101 3/8 bid, 101 7/8 offered from their par issue price.

A second trader pegged the bonds at 101¾ bid, 102 "and change" on the offered side, while a third had them going home trading as high as a 101 7/8 to 102 3/8 context.

Southern States slightly stronger

A trader saw one of the day's other credits that priced - Southern States Cooperative's 10% notes - a little bit better at 97¼ bid, 97¾ offered, versus their issue price at 97.

A second trader, however, said that he had not seen any dealings in the new issue after the pricing.

The day's other new issues - from William Carter, DreamWorks and Viking Cruises - came too late in the session for any kind of real aftermarket activity.

Conva Tec comes off peak

Among the issues which came to market during Tuesday's session, a trader said that Conva Tec Finance International SA's 8¼%/9% senior PIK toggle notes due 2019 were down ¾ point from the strong gains that the bonds had notched initially after their pricing.

He quoted the paper at 99 3/8% bid, 99 5/8 offered, versus the 100 1/8 bid, 100½ offered level at which he had seen the bonds finish Tuesday.

A second trader likewise quoted those bonds at 99¼ bid, par offered on Wednesday, versus Tuesday's levels at or above par bid.

On Tuesday, Conva Tec Inc., a Skillman, N.J.-based manufacturer of wound-care, ostomy-care and other medical products, had priced $900 million of the bonds at 99, to yield 8.486%, bringing the deal to market through its Luxembourg-based holding-company affiliate after having upsized the drive-by offering from an originally announced $800 million.

Proceeds of the deal will go to pay a $779 million dividend to its private-equity shareholders, Nordic Capital and Avista Capital Partners, via a partial redemption of the company's outstanding preferred equity certificates.

Endeavor eases

Traders also saw lower levels for Tuesday's deal from Endeavor Energy Resources LP and EER Finance Inc.

One quoted those 7% notes due 2021 down ¾ point on the day, at 99¾ bid, 100¼ offered, though a second had them about unchanged at par bid, 100¼ offered.

Endeavor, a Midland, Texas-based oil and natural gas exploration and production company, priced a downsized $250 million of the notes at par, after having cut the deal's size from $300 million originally.

SandRidge is solid

Away from the new deals, traders saw SandRidge Energy's bonds up solidly after the Oklahoma City-based oil and natural gas operator reported second-quarter results.

A market source said that the company's 7½% notes due 2021 gained 1 point to finish at 99¾ bid, with volume of over $17 million traded, putting it right at the top of the junk market's most-actives list for the day.

Its 7½% notes due 2023 did even better, jumping 1¾ points on the day to close at 98¾ bid, on volume of over $10 million.

Those gains followed the company's reporting that adjusted income for the second quarter rose to $44.6 million, or 8 cents per share, versus $36.8 million, or 7 cents per share, a year ago, while revenues zoomed to $512.99 million from $478.43 million. The adjusted earnings and revenue numbers both topped Wall Street's average analyst forecast of about a 3 cents per share loss and revenues of only about $425 million.

The company also outlined plans during its conference call for boosting cash-flow, possibly via joint ventures or by monetizing some assets.

But equity investors were underwhelmed, knocking its New York Stock Exchange-traded shares down 52 cents, or 9%, to end at $5.26. Volume of 29.1 million shares was more than triple the norm.

Market indicators fall again

Statistical junk market performance indicators were on the downside for a third straight session on Wednesday.

The Markit Series 20 CDX North American High Yield index retreated by ½ point to close at 104 7/8 bid, 105 1/16 offered. On Tuesday, it had fallen by 3/8.

The KDP High Yield Daily index posted its fifth consecutive loss on Wednesday, dropping by 9 basis points to finish at 73.47, on top of Tuesday's 11 bps slide.

Its yield rose by 2 bps, to 6.11%, its fourth consecutive widening out. On Tuesday, it had moved upwards by 5 bps.

And the widely followed Merrill Lynch High Yield Master II index lost 0.109% on Wednesday, its sixth consecutive downturn. It had fallen by 0.093% on Tuesday.

The loss dropped the index's year-to-date return to 3.053% from Tuesday's 3.166% level. The return was well down from its peak level for the year so far of 5.835%, recorded on May 9, though up solidly from its 2013 low point of 0.384%, set on June 25.

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