LINN, Alliant, Scientific Games price; new Metro PCS busy; settlement lifts Skilled Healthcare

By Paul Deckelman and Paul A. Harris

New York, Sept. 8 - The high-yield primary arena saw its second mega-deal in as many days on Wednesday, as LINN Energy, LLC, brought an upsized $1 billion offering of 10.5-year notes to market.

The Houston-based oil and gas exploration and production operator's new deal followed by a day the same-sized offering of eight-year notes from MetroPCS Communications Inc., which actually priced after the close on Tuesday.

Also upsizing and pricing on Wednesday was Minneapolis-based aerospace and defense contractor Alliant Techsystems Inc.'s $350 million of 10-year senior subordinated notes.

A new-issue which was not upsized was Scientific Games Corp.'s $250 million senior subordinated deal.

All three of the day's issues were opportunistic drive-by deals, just as MetroPCS had been, with issuers seeking to capitalize on renewed investor enthusiasm for dollar-denominated paper from domestic issuers - something they had not seen since Goodyear Tire & Rubber Co. scored with a quickly-marketed $100 million 10-year add-on deal on Aug. 20. The previous really sizable domestic deal had been NRG Energy Inc.'s upsized $1.1 billion 10-year issue all the way back on Aug. 17.

The new LINN and Alliant bonds traded a little above their issue price, while Scientific Games came too late in the day for any aftermarket action. The new MetroPCS deal, however, more than made up for the lack of any dealings, since traders heard that the new bonds were incredibly busy, though there was little price action.

Away from the new-deal world, Skilled Healthcare Inc.'s bonds shot up dramatically, in busy dealings on news that the Foothill Ranch, Calif.-based nursing home operator and legal foes who brought a class-action suit against the company had agreed to settle the case - and for far, far less than the hundreds of millions of dollars which a California jury had awarded the plaintiffs in the case against the company.

LINN deal size doubles

Three issuers stepped up to price $1.6 billion face amount of junk on Wednesday.

LINN Energy priced an upsized $1 billion issue of 7¾% 10.5-year senior unsecured notes (B2/B) at 98.264 to yield 8%.

The yield printed on top of the price talk. The amount was increased from $750 million.

Barclays Capital, Citigroup, Credit Agricole CIB, RBC Capital Markets, RBS Securities and Wells Fargo Securities were the joint bookrunners for the quick-to-market issue.

Proceeds will be used to repay the revolver and for general corporate purposes, including possible acquisitions.

Alliant upsizes

Elsewhere Alliant Techsystems priced an upsized $350 million issue of 10-year senior subordinated notes (B1/BB-) at par to yield 6 7/8%.

The yield printed on top of the 7% area price talk. The size was raised from $300 million.

Bank of America Merrill Lynch and RBS Securities were joint bookrunners for the quick-to-market deal.

The Minneapolis-based aerospace and defense company will use the proceeds to fund the redemption of its 2¾% convertible senior subordinated notes due 2024 and for general corporate purposes.

Scientific Games prices at tight end

Meanwhile, Scientific Games priced a $250 million issue of eight-year senior subordinated notes (B1/BB) at par to yield 8 1/8%.

The deal priced tight to the 8 1/8% to 8¼% price talk.

J.P. Morgan Securities, Credit Suisse, Goldman, Sachs & Co. and UBS Investment Bank were the joint bookrunners for the quick-to-market deal.

Proceeds will be used to purchase all of the company's 6 1/8% senior subordinated notes due 2012, to repay at least $25 million of senior secured term loans, and for general corporate purposes, which may include payment of a portion of the company's potential obligations in connection with its Italian instant ticket lottery concession, the funding of any future acquisitions, capital expenditures and/or the repayment or repurchase, through open market purchases, redemptions or otherwise, of a portion of the company's outstanding debt, including the 2012 notes that are not purchased in the tender offer, and/or additional senior secured term loans.

Duquesne Light sells split-rated deal

Meanwhile in the crossover market, Duquesne Light Holdings priced a $450 million issue of split-rated 10-year notes (Ba1/BBB-) at 99.272 to yield 6½%.

Barclays Capital, Bank of America Merrill Lynch and Scotia Capital managed the quick-to-market sale which was transacted on the investment grade desk.

Proceeds will be used to refinance part of the Pittsburgh-based utility's A and B term loans.

Chaparral plans $300 million

One brief roadshow got underway during the Wednesday session.

Chaparral Energy, Inc. expects to price a $300 million offering of 10-year senior notes (Caa1/B+) on Friday.

JP Morgan, Credit Suisse, RBC Capital Markets and UBS Investment Bank are the joint bookrunners for the debt refinancing and general corporate purposes deal.

New LINN bonds firm...

When LINN Energy's new 7¾% notes due 2021 were freed for aftermarket dealings, a trader saw them firm to around 98¾ bid, 99½ offered, up from the 98.264 level at which the company's upsized mega-deal had priced earlier. "It got upsized, and is trading up ½ point from the issue price," he said.

A second trader quoted the new bonds at 98 5/8 bid, 99 1/8 offered.

"The came and they tightened," yet another suggested.

...as does Alliant Techsystems'

Alliant Techsystems' new 6 7/8% senior subordinated notes due 2020 were "trading up at 101," one market participant said, up a point from the par price where the upsized $350 million issue had come to market earlier in the day.

A trader at another desk saw those new bonds get as good as 100¾ bid, 101¼ offered.

Scientific Games an aftermarket no-show

As noted, Scientific Games' $250 million issue of 8 1/8% senior subordinated notes due 2018 priced too late in the session for any kind of real aftermarket dealings.

The New York-based lottery and pari-mutuel systems and equipment provider's existing 6¼% subs due 2012, which are to be taken out using the proceeds from the new deal, were seen slightly firmer, though on not much trading.

A market source said that the bonds firmed to slightly above the 101 level where they had last traded near the end of August. Throwing out the small trades as unrepresentative and looking only at round-lot transactions, the bonds improved by around ¼ point on the session from the most recent prior round-lot trade around 100½ in late August. Only about $2 million of the bonds traded in size on Wednesday.

Metro PCS a trading monster

Finding enough size trades to look at was certainly no problem for the new Metro PCS 7 7/8% notes due 2018, $1 billion of which had priced very late on Tuesday at 99.277 to yield 8%.

The Dallas-based wireless operator's deal - which had ultimately doubled in size from the $500 million originally announced earlier Tuesday - was seen by a trader having first firmed to 99¾ bid, par offered. Then, he said, "there were par buyers around by the end of the day, so it was pretty well received."

"They were pretty busy," he acknowledged. With an issue that size, "it makes for a lot of secondary trading."

"They've been pretty active in trading," a second trader said. "There were lots and lots of them." He saw them get as good as around a par bid, or a little off that at 99¾ bid, 100¼ offered. "A lot of bonds traded around."

At another desk, a market source said that he had "never seen this much turnover" in a new issue, and estimated that as much as 30% of the $1 billion deal may have changed hands on Wednesday.

"It's done well," he pronounced, pegging the bonds at 99 7/8 bid, par offered.

That source said that overall in Junkbondland on Wednesday, maybe $1.3 billion of paper traded - and "a lot of that was PCS."

Yet another market participant saw "tons and tons traded."

Visant bonds get busy

A trader said that Visant Corp.'s bonds were actively trading around on Wednesday in response to Tuesday's announcement by the Armonk, N.Y.-based marketing and publishing company that it will bring a new $750 million offering of seven-year notes and use the proceeds of that deal to take out three series of existing bonds - its 10¼% senior discount notes due 2013, its 8¾% senior notes due 2013 and its 7 7/8% senior subordinated notes due 2012 - via a tender offer.

The trader said that those bonds were trading around the take-out price - about 100¼ bid for the 2012 bonds and between 103½ and 103¾ bid for the two 2013 issues.

Market indicators push upward

Away from the new-deal world, a trader saw the CDX North American HY Series 14 index gain ½ point on Wednesday to end at 97½ bid, 97¾ offered, after having lost that same amount on Tuesday.

The KDP High Yield Daily index meantime rose by 15 basis points on Wednesday to finish at 72.12, on top of the 9 bps advance seen on Tuesday. Its yield fell by 9 bps to 8.16% after having declined by 2 bps on Tuesday.

The Merrill Lynch High Yield Master II index rose by 0.122% on Wednesday, after having improved by 0.14% on Tuesday. It hit its second new year-to-date 2010 peak level in as many sessions, ending the day at 9.413%, eclipsing the previous high-water mark for the year of 9.28% set on Tuesday.

Advancing issues led decliners for a fifth consecutive session on Wednesday, as their advantage widened to about a seven-to-five margin versus just a couple dozen issues on Tuesday out of the nearly 1,400 tracked.

Overall activity, represented by dollar-volume levels, zoomed by 88% on Wednesday from the prior session, when volume had jumped to nearly three times the truly anemic activity levels seen on Friday heading into the Labor Day holiday weekend.

Apart from the interest generated by the new issues, a trader said, "there wasn't anything too special" happening.

"There was a lot of focus on the new issues," another trader said, "and they're building the calendar. There was not that much going on in secondary trading. The market was up about 1/8 to ¼ point on very light volume."

He noted that there were a number of absences and other people leaving early ahead of the Jewish New Year holiday, which began on Wednesday evening and which will continue through Friday, likely causing reduced attendance and activity levels.

Smithfield holders live high on the hog

A trader said that Smithfield Foods Inc.'s bonds were up by as much as 1½ points during the session after the Virginia-based pork producer reported better fiscal first-quarter results.

He saw its 7¾% notes due 2017 get as good as 98½ bid, "up 1½ points pretty quickly," before coming off that peak to end around 98 bid, still up a point from where they were on Tuesday.

Smithfield said that it had net income of $76.3 million, or 46 cents per share, for the three months ended Aug. 1, about what Wall Street had been looking for, and a solid rebound from its year-earlier red ink of $107.7 million, or 75 cents per share.

"The numbers were quite good," the trader said, "especially versus their last six to eight quarters."

Skilled Healthcare soars on settlement

The trader also saw Skilled Healthcare's 11% notes due 2014 "doing a lot better" on the news that the embattled California-based nursing home operator had reached a settlement with plaintiffs who had sued the company and won a huge jury verdict against it earlier in the summer.

He saw the bonds hitting a high of 98 1/8 bid, before finally ending at 97¾ bid. That was up from morning lows around 951/2, and well up from recent trading levels before the settlement news of 91¼ bid.

The two sides settled the case for $50 million - not exactly chump change, but just a fraction of the more than $670 million which a state court jury hearing a class-action case alleging inadequate staffing at its nursing homes had awarded to the plaintiffs, raising the specter that the company could be forced into bankruptcy if it were unable to appeal.

But after the bonds had fallen into the high 60s immediately after that July 6 verdict from pre-verdict levels above 104, they came off those lows in subsequent days and weeks, and got back into the 90s on growing signs that the two sides would eventually settle for a more reasonable figure and the huge jury award would be moot.

-Stephanie N. Rotondo contributed to this report

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.