Upsized Equinix two-parter, Level 3, Huntington Ingalls, Multi-Color price; Guitar Center falls

By Paul Deckelman and Paul A. Harris

New York, Nov. 17 – The high-yield primary market remained active on Monday with $2.7 billion of new junk bonds heard by syndicate sources to have come to market in five tranches.

It was the second consecutive high-intensity session, following the more than $3.2 billion of new dollar-denominated, fully junk-rated paper from domestic or industrialized-country borrowers that got done in three tranches on Friday, according to data compiled by Prospect News. This was a solid pick-up from Thursday’s $550 million total.

Equinix, Inc., a Redwood City, Calif.-based interconnection and data center company, had the big deal of the day, doing an upsized $1.25 billion two-part quick-to-market transaction consisting of seven- and 10-year notes. Both tranches firmed in heavy aftermarket trading.

Broomfield, Colo.-based telecom company Level 3 Communications, Inc. and Huntington Ingalls Industries, Inc., a Newport News, Va.-based defense shipbuilder, each did a quickly shopped $600 million offering, with Level 3’s eight-year notes and Huntington Ingalls’ seven-year paper each heard to have firmed.

Multi-Color Corp., a Cincinnati-based product label producer, had the day’s sole regularly scheduled forward-calendar deal – a $250 million offering of eight-year notes that priced late in the session.

Several new deals joined the forward calendar, among them offerings from Moog Inc., KLX, Inc. and EnTrans International, LLC, as one dollar deal already in the pipeline bit the dust. Electronic components manufacturer Kemet Corp. announced that it has withdrawn its planned $400 million five-year offering.

Away from the new deals, Guitar Center Inc. paper was down in busy trading after the musical instrument retailer announced a shakeup in its senior management.

Statistical market performance indicators slid across the board for a third consecutive session.

Equinix upsizes

A busy Monday session in the primary market saw four issuers raise $2.7 billion.

Executions appeared tight.

Three of the five tranches priced at the tight ends of talk, while the other two priced on top of talk.

Three of the four issuers brought their deals as drive-bys.

Only one issuer upsized.

That issuer was Equinix, which completed an upsized, quick-to-market $1.25 billion two-part senior notes transaction (B1/BB).

A $750 million tranche of seven-year notes priced at par to yield 5 3/8%, and a $500 million tranche of 10-year notes priced at par to yield 5¾%.

Both tranches were priced on top of yield talk.

The two-part debt refinancing and general corporate purposes deal was upsized from $1 billion.

J.P. Morgan, BofA MerrillLynch, Barclays and Citigroup were the joint bookrunners.

Huntington Ingalls prices tight

In other drive-by action, Huntington Ingalls priced a $600 million issue of seven-year senior notes (Ba2/BB+) at par to yield 5%.

The yield printed at the tight end of the 5% to 5¼% yield talk.

Credit Suisse, J.P. Morgan, Wells Fargo, BofA Merrill Lynch, U.S. Bancorp and RBS were the joint bookrunners for the debt refinancing deal.

Level 3 at the tight end

Level 3 Communications priced a $600 million issue of eight-year senior notes (Caa1/B/B) at par to yield 5¾%.

The yield printed at the tight end of yield talk in the 5 7/8% area.

Citigroup was the left bookrunner for the debt refinancing deal. BofA Merrill Lynch, Morgan Stanley, Barclays, Goldman Sachs, Jefferies and J.P. Morgan were the joint bookrunners.

Multi-Color prices tight

In the only one of Monday's deals to have run an investor roadshow, Multi-Color priced a $250 million issue of eight-year senior notes (B2/B+) at par to yield 6 1/8%.

The yield printed at the tight end of yield talk in the 6¼% area.

BofA Merrill Lynch, J.P. Morgan and BMO were the joint bookrunners for the debt refinancing deal.

Mercer talks two-part deal

Looking to the Tuesday session, Mercer International Inc. set price talk for its $650 million two-part offering of senior notes (B2/B+).

A $250 million tranche of five-year notes is talked to yield in the 7% area.

A $400 million tranche of eight-year notes is talked to yield 7½% to 7¾%.

The deal is set to price Tuesday.

Credit Suisse, Barclays and RBC are the joint bookrunners.

Owens-Brockway offering

In a deal announced early Monday, Owens-Brockway Glass Container Inc., an indirect wholly owned subsidiary of Owens-Illinois, Inc., set price talk for its $700 million two-part offering of non-callable senior notes (Ba3/expected BB+).

The seven-year notes are talked to yield in the 5 1/8% area.

The 10-year notes are talked to yield in the 5½% area.

Tranche sizes remain to be determined.

Books close at 9 a.m. ET Tuesday, and the deal is set to price thereafter.

Deutsche Bank is the left bookrunner for the debt refinancing deal.

BofA Merrill Lynch, J.P. Morgan Securities LLC, BNP Paribas, Citigroup Global Markets, Credit Agricole CIB and Goldman Sachs & Co. are the joint bookrunners.

Moog $250 million

Moog plans to price a $250 million offering of eight-year senior notes (expected ratings Ba3/BB) on Tuesday.

J.P. Morgan Securities LLC, BofA Merrill Lynch and HSBC are the joint bookrunners for the debt refinancing deal.

KLX starts roadshow

KLX started a roadshow on Monday for a $1.2 billion offering of eight-year senior notes (expected ratings Ba3/BB).

The deal, to fund the spin-off of KLX from B/E Aerospace, is expected to price on Friday.

J.P. Morgan Securities LLC, Citigroup Global Markets, Goldman Sachs & Co., Credit Suisse Securities (USA) LLC and Wells Fargo Securities LLC are the joint bookrunners.

EnTrans starts roadshow

EnTrans International, LLC and EnTrans International Finance Corp. started a roadshow on Monday for a $250 million offering of six-year senior secured notes.

The debt refinanicng deal, via sole bookrunner Credit Suisse, is scheduled to price later this week.

Postponed deals

The Monday session also came with news of deals pulled from the market.

Kemet announced in a Monday press release that it has withdrawn its proposed $400 million offering of five-year senior secured notes in response to current market conditions.

The deal, which was in the market via manager BofA Merrill Lynch, ran a roadshow earlier in the month.

And in the euro-denominated high-yield primary, Campofrio Food Group, SA postponed its €500 million offering of seven-year senior notes (expected ratings Ba3/BB+) when a fire destroyed one of the company's facilities in northern Spain, according to an informed source, who added that the company is still assessing the full impact of the fire on its operations.

JPMorgan, BBVA, Barclays, BNP Paribas, Morgan Stanley and Santander were leading the sale.

Mixed flows on Friday

Tracking cash flows to dedicated high-yield funds, the most recent numbers render a mixed picture, according to a trader.

On Friday high-yield exchange traded funds saw $223 million of outflows, while actively managed funds saw $175 million of inflows, the source said.

New deals dominate activity

In the secondary market, a trader said that “really, the focus is back to new issues,” with not much going on beyond that.

A second trader pointed out that seven of the day’s 10 most actively traded junk credits were new or recently priced issues.

When asked if much was going on away from those newly priced deals, the first trader added, “Not really.”

“The non-new-deal secondary seems like it’s on the backburner,” he said, citing a lack of feedback from accounts on such names.

“It’s been really hard to trade anything because [the accounts] have been just looking at the calendar at this point.”

Level 3 leads trading

Among the specific credits, a trader said that Level 3 Communications’ new 5¾% notes due 2022 had edged up to around a par to 100 1/8 bid context “on pretty good volume” of well over $60 million, after having priced earlier at par.

A second trader saw the bonds trading between par and 100½ bid.

A little later on, a market source saw the bonds going home around par bid, on volume of over $74 million.

However, the prospect of a sizable new deal pushed the company’s existing 5 3/8% notes due 2022 down ¼ of a point on the day at 101¼, with over $11 million of the notes having traded.

The company’s 5 5/8% notes due 2022dipped to 109½ bid, down 1 point on the day.

Equinix megadeal moves up

Both tranches of the new Equinix notes were being quoted higher following their pricing at par.

The 5 3/8% notes due 2022 firmed to 100 7/8 bid, on volume of over $28 million, a market source said.

And he saw the other half of that deal – the 5¾% notes due 2025 – getting as good as 100 5/8 bid, with over $36 million of those notes having changed hands.

While news that a company is doing a new bond deal frequently pushes its existing bonds lower, as happened on Monday with Level 3, in the case of Equinix, holders of its existing 7% notes due 2021 couldn’t have been more pleased with the news. The company plans to use the proceeds from the deal to redeem those 7s and for general corporate purposes.

The 7% notes ended at 113 bid, up 4 points on the session on total volume of more than $12 million, consisting of about $4 million of round-lot activity, plus a slew of smaller off-lot transactions that added up.

Huntington Ingalls higher

The new Huntington Ingalls 5% notes due 2021 were seen by one trader at 100½ bid, with a second seeing a trading range between 100½ and 101½.

Yet another trader pegged the bonds going home at 101 bid, on brisk volume of $25 million.

The 6 7/8% notes due 2018 traded at around 105 3/8, on volume of about $10 million.

Friday deals seen lower

Traders said that the offerings that came to market on Friday were trading lower on Monday.

One saw Scientific Games International Inc.’s 10% notes due 2022 at 89½ bid, 89¾ offered, down ½ of a point on the session, on some $62 million of turnover.

The New York-based maker of technology for the gaming industry priced $2.2 billion of those notes on Friday at 89.865 to yield 12%, and the notes had initially firmed to around the 90 bid level when they were freed to trading after pricing.

The 7% senior secured notes due 2021 slipped by about 1 point to the par level, on volume of over $26 million.

Scientific Games had priced $950 million of those notes at par on Friday after upsizing the issue from an originally announced $700 million and raising the overall size of its two-part forward calendar megadeal to $3.15 billion from an original $2.9 billion. The 7% paper had traded as high as near the 101 mark late Friday.

Realogy Holdings Corp.’s 5¼% notes due 2021 eased to 100¼ bid, down 7/8 on the day, a market source said, on volume of over $15 million.

A second trader said the bonds had traded around 100½ early Monday, “but we didn’t see much in the name after this morning.”

The Madison, N.J.-based provider of residential real estate services priced $300 million of the notes at par Friday off the forward calendar, and the bonds had firmed to around a 100 5.8 to 101 1/8 context when they hit the aftermarket, a trader said.

Singing the Guitar Center blues

Away from the new deals, a trader said that Guitar Center’s 6½% first-lien senior secured notes due 2019 tumbled to an 84¼ to 84¾ bid context Monday from levels around 89 to 90 late last week and from 93 as recently as Oct. 22.

A second source saw them down 6 points on the day at 83¾ bid, on volume of over $16 million.

The company’s 9 5/8% notes due 2020 fell to 59¾ bid, a more than 10-point swoon on the day, also on $16 million of volume.

The Los Angeles-based musical instruments and accessories retailer’s bonds hit those sour notes after the company abruptly announced the resignation of its president and chief executive officer, Mike Pratt, and his replacement by veteran retailing industry executive Darrel Webb.

Abengoa bonds bounce back

Elsewhere, Abengoa SA’s 8 7/8% notes due 2017 were seen coming part of the way back on Monday after nose-diving on Friday into the mid 70s from prior levels around 101 bid, as the company put out a statement seeking to reassure jittery bondholders that their debt is safe.

On Monday, those bonds firmed back to around 92½ bid level, a gain of more than 16 points, although volume was light, at only about $2 million.

The Spanish construction and engineering company’s paper had plunged on Friday after the company asserted when it reported earnings last week that some $630 million of dollar- and euro-denominated junk bonds that it issued in September were non-recourse debt. This meaning that debtors would only have claims on the collateral assets backing the bonds and not on the parent company itself should an event of default occur.

Many investors had been under the impression that the September debt was in fact recourse debt. Analysts said the resulting confusion could create problems for Abengoa should it attempt to refinance any of its current obligations.

On Monday, it said in a statement that the bonds in question are guaranteed by the company and have the same security as other recourse debt – even if they are officially classified as non-recourse.

Indicators continue slide

Statistical indicators of junk market performance were meantime lower for a third consecutive session on Monday.

The KDP High Yield Daily index slid by 17 basis points to close at 72.06, after having lost 11 bps on Friday and having been unchanged on Thursday. Its yield rose by 4 bps to 5.39%, its third widening in a row after having been up by 5 bps on Friday.

The Markit CDX North American High Yield Series 23 index posted its fifth consecutive loss on Monday, declining by 9/32 of a point to end at 106 21/32 bid, 106 11/16 offered. It had been down 3/32 of a point on Friday.

And the Merrill Lynch U.S. High Yield Master II index lost ground for a fourth successive session on Monday, moving downward by 0.15%, on top of Friday’s 0.216% setback.

The latest loss lowered its year-to-date return to 4.20% from Friday’s 4.356% close. The index also remained well down from its peak level for the year of 5.847%, recorded on Sept. 1.

According to the FINRA-Bloomberg Active US High Yield Bond index, Friday’s junk market volume rose to $3.341 billion on Monday from $2.918 billion on Friday.

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