Warner Music, BWAY, drive-bys price in $1.7 billion day, Virgin next; new Plains busiest name

By Paul Deckelman and Paul A. Harris

New York, Oct. 24 - The high-yield primary market maintained an active pace on Wednesday as more than $1.7 billion of new dollar-denominated, junk-rated paper from domestic or developed-country issuers was priced, according to syndicate sources.

The big deal of the day was Warner Music Group Corp.'s upsized $727 million equivalent offering of dollar-and euro-denominated eight-year secured notes. Traders saw the music publishing and recording company's dollar tranche having firmed smartly after it was freed for aftermarket dealings.

Container-maker BWAY Parent Co., Inc. priced a downsized $335 million offering of senior PIK toggle notes, which moved up a little after coming to market.

The rest of the pricing activity came from a group of smaller deals all in the $200-to-$250 million range and most of them opportunistically timed, quickly shopped same-day deals.

That description fit satellite services company Telesat Canada and coal operator Foresight Energy LLC, which both fungible add-ons to existing five-year notes. TV station owner Nexstar Broadcasting Group Inc. did an upsized eight-year stand-alone deal. Shearer's Foods Inc. - the sole scheduled forward calendar deal of the quartet - brought in an upsized seven-year secured issue. The latter bonds were heard by traders to have moved up solidly in the secondary, while the other deals were modestly above their respective issue prices.

Away from the deals which actually priced on Wednesday, the syndicate sources said U.K. communications provider Virgin Media, Inc. launched a $1.25 billion equivalent 10-year offering consisting of dollar- and sterling-denominated paper, which is expected to price on Thursday. Industrial water solutions provider Heckmann Corp. announced a $150 million add-on to its existing seven-year notes, although that deal isn't pricing till next week.

The traders said that the dominant secondary arena name Wednesday was Plains Exploration & Production Co.'s big new two-part deal, which had priced on Tuesday. Both halves of the energy operator's new mega-deal initially went up, but then fell back to end just slightly higher.

Little was seen going on in the secondary away from Plains Exploration and the other new or recently priced issues. Statistical performance measures were mixed.

Warner plays to $5 billion book

Primary market activity remained robust on Wednesday, as six issuers brought a combined seven tranches of notes, raising a total of $1.96 billion.

Warner Music priced an upsized $727 million equivalent of senior secured notes due Jan. 15, 2021 (Ba2/BB-) in two tranches.

The transaction included a $500 million tranche which priced at par to yield 6%, at the tight end of the 6% to 6¼% yield talk.

Warner Music also priced a €175 million tranche at par to yield 6¼%, at the tight end of talk which had the euro-denominated notes yielding 25 basis points to 50 bps behind the dollar-denominated notes.

The deal played to $5 billion of orders, according to an investor who participated.

The offering's overall size was increased from $635 million equivalent.

Credit Suisse, Barclays, UBS, Macquarie and Nomura were the joint bookrunners for the debt refinancing deal.

BWAY at the tight end

BWAY priced a downsized $335 million issue of five-year senior PIK toggle notes (Caa1/CCC+) at par, with a cash yield of 9½%.

The notes pay a 9½% cash coupon and a 10¼% PIK coupon.

The cash yield printed at the tight end of 9½% to 9¾% cash yield talk. The reoffer price came on top of price talk.

The notes issue was downsized from $375 million, with $40 million being shifted to the bank loan.

Bank of America, Deutsche Bank and Goldman Sachs were the leads.

The Atlanta-based supplier of general-line rigid containers plans to use the proceeds to finance the acquisition of the company by Platinum Equity, LLC, as well as to refinance and repurchase existing debt of BWAY Parent Co., Inc. and its subsidiaries.

Nexstar upsizes

Nexstar Broadcasting, Inc. priced an upsized $250 million issue of eight-year senior notes (Caa1/B-) at par to yield 6 7/8%, at the tight end of yield talk that was set in the 7% area.

The size was increased from $200 million.

Bank of America, UBS and RBC were the joint bookrunners for the quick-to-market debt refinancing deal.

Shearer's atop tightened talk

Shearer's Foods priced an upsized $235 million issue of seven-year senior secured notes (B3/B) at par to yield 9%, on top of yield talk that was revised tighter from earlier talk in the 9¼% area.

The LBO deal was upsized from $215 million, after having been previously upsized from $210 million.

BMO Capital Markets, Barclays and KeyBanc Capital Markets were the leads.

Foresight at the rich end

Foresight Energy priced an upsized $200 million add-on to its 9 5/8% senior notes due Aug. 15, 2017 (Caa1/B) at 103 to yield 8.673%.

The reoffer price came rich to the 102.75 price talk while the size was increased from $110 million.

Morgan Stanley and Citigroup were the joint bookrunners for the quick-to-market issue.

Proceeds, including $40 million resulting from the upsizing, will be used to fund a dividend. The remainder will be used to repay revolver debt.

Telesat taps 6% notes

Telesat Canada and Telesat LLC priced a $200 million add-on to their 6% senior notes due May 15, 2017 (existing ratings B3/B-) at 103.5 to yield 4.911%.

The reoffer price came at the rich end of the 103 to 103.5 price talk.

J.P. Morgan, Credit Suisse and Morgan Stanley were the joint bookrunners for the quick-to-market deal.

Proceeds will be used to refinance shareholder notes owed to principal shareholders PSP and Loral, and for general corporate purposes.

Virgin Media talks $1.25 billion

Virgin Media Finance plc set price talk for a $1.25 billion equivalent offering of dollar-denominated and sterling-denominated non-callable senior notes due Feb. 15, 2022 (expected ratings Ba2/BB-/BB+).

The dollar-denominated notes are talked in the 5% area, and the sterling-denominated notes are talked to yield 25 basis points behind the dollar-denominated notes.

The books were scheduled to close on Wednesday for accounts in the United States, and are scheduled to close on Thursday for European accounts, with the deal set to price after that.

J.P. Morgan is the joint physical bookrunner and will bill and deliver for the dollar-denominated notes, while Goldman Sachs is the joint physical bookrunner and will bill and deliver for the sterling-denominated notes.

Bank of America, BNP, Credit Agricole, Deutsche Bank, HSBC, Lloyds, RBS and UBS are joint bookrunners.

Proceeds from the registered notes will be used to repay the company's outstanding dollar-denominated and euro-denominated senior notes due in 2016, as well as a portion of the company's outstanding dollar-denominated and sterling-denominated notes due in 2019.

Heckmann plans tack-on

Heckmann will run a roadshow for a $150 million tack-on to its 9 7/8% senior notes due April 15, 2018 through early next week.

Jefferies, Wells Fargo and Credit Suisse are the joint bookrunners.

Proceeds will be used to fund the acquisition of Power Fuels LLC and to refinance existing debt.

The original $250 million issue priced at 99.442 to yield 10% on April 4, 2012.

Fund flows, cash balances

For the first time since June 5, one manager's high-yield mutual fund saw a negative flow on Wednesday.

Recent mutual fund flows have been positive, said the manager. Exchange traded funds, on the other hand, have recently seen negative numbers for cash flows, the most recent being a loss of $177 million for the week to Oct. 17.

Cash balances are coming down, the manager noted, citing information in a strategy piece from JP Morgan.

Present cash balances are 3.5% to 4%, down from 4.8% at the end of the third quarter.

Cash balances peaked at 8% in July, said the manager, again citing the JP Morgan report.

Earnings this week have been better than last week, especially in the tech sector, the manager said, noting that Facebook's reported positive revenue growth caused its stock to go up 20% on Wednesday.

That's a good deal better than Google and Apple did last week, the junk bond investor remarked.

There are still some significant unknowns out there, said the investor, pointing to the so-called "fiscal cliff" - an economic slowdown forecast should Congress fail to head off automatic deficit reduction measures set to go into effect at the beginning of 2013

"Also if you have exposure to Europe it's hurting you," the investor added.

Noting the intensity of a rally that has been going on in high yield for over a year, with only minimal disruptions, the investor said "It's hard to imagine tightening from here."

A hit for Warner Music

When the new Warner Music senior secured eight-year bonds were freed for secondary dealings, a trader saw the New York-based music publisher and recording company's 6% notes wrapped around the 101½ level, up from their par issue price.

A second trader said that the issue "hit a 101½ bid right out of the gate" and were going home around 100¼ bid 100½ offered.

One of the traders said that he "had not seen any action" in the euro-denominated 6¼% notes due 2020.

A trader said BWAY Parent Co.'s new BOE Merger Corp. 9½%/10¼% senior PIK toggle notes "have been very quiet." He saw the Atlanta-based rigid container manufacturer's deal quoted at 100½ to 1003/4, "so it was up a half-point on the break. But that one seems quiet - there hasn't been a lot of activity. It's just starting to hit the broker screens."

A second trader agreed that there was "not much activity" in the new BWAY bonds, quoting them at 100¼ bid, 100½ offered.

Shearer pops up

Snack-food manufacturer Shearer's Foods' 9% notes were seen by a trader going home somewhere between 101½ and 102 bid, with "most of the trades between [101]¾ and 102."

However, he said that the upsized $235 million offering "broke kind of late, and it's a smaller deal, so I don't anticipate a lot of trading in them."

Other deals little traded

A trader said of Foresight Energy's new bonds and Telesat Canada's that he "didn't see much activity in either one."

He said Telesat's add-on to its 6% notes opened up at 103½ bid, 104¼ offered, after having priced at 1031/2. It then got up to a 104 to 104¼ bid context, "and I think there might have been a trade at 4¼ - but it really brought out the sellers there."

As for Foresight Energy's add-on to its 9 5/8% notes, "they didn't really trade." He saw a 103 bid, the same as the issue price, "but I haven't seen a two-sided market in them."

A trader said that he had not seen Foresight's new issue trading - but he said that he "would imagine that Foresight trades well on the break, even though they've upsized it."

A third trader, though, quoted Foresight at 103¾ bid, 104¾ offered, while Telesat had moved up to 100 5/8 bid, 100 7/8 offered.

One or two traders said that Nexstar's 6 7/8% notes came too late in the session to really trade.

However, one did see the Irving, Texas-based television station group owner's new deal offered at 101, though with no bid.

Another trader pegged them at 100 5/8 bid, 100 7/8 offered.

Plains dominates secondary

Away from the deals that priced on Wednesday, a market source said that "the big trader of the day was PXP - Plains Exploration."

The Houston-based oil and natural gas company had priced $3 billion of new paper on Tuesday in a quick-to-market transaction that was upsized from an originally announced $2.25 billion. It priced $1.5 billion of 6½% notes due 2020 at par and $1.5 billion of 6 7/8% notes due 2023 at par. The new bonds initially were trading with a 99 handle on both tranches, before firming to levels around 100¼ bid, 100¾ offered late Tuesday.

On Wednesday, the trader said, "the bonds were heavy out of the gate, and traded below their issue price. Then they shot back up pretty early in the session, traded as high as 101 on both tranches."

Later on, though, he saw the bonds "probably ending up ¼ to ½ point.

"That was the focus for the high-yield market today," he declared, "especially in the energy space. We don't get $3 billion deals in the energy space all that often, so that was the big trader."

A second trader agreed that Plains Exploration "was the most bonds today, by far."

He saw "the bulk of the trading" between 100½ and 100¾ bid on the 6½% notes and between 100¾ and 101 bid on the 6 7/8% notes, after the two tranches had started out trading at par in the morning.

"They ticked up throughout the day, and then backed off a little bit towards the end of the day."

Toward the end, he saw the 6 7/8s get as good as 101 bid; then there was "a fair amount of trading between 100¾ and 101." At the end of the day, though, the bonds were around 100 3/8 bid to 100 5/8.

He likewise saw "a lot of trading" in the 6½% notes between 100½ and 100¾ bid, before the bonds went home around 100 1/8 bid, 100½ offered.

Halcon bonds stay up there

Among the other deals that priced on Tuesday, a trader said that Halcon Resources Corp.'s 8 7/8% notes due 2021 continued to show secondary strength, although activity was limited.

The Houston-based offshore oil and gas exploration and production company's quick-to-market $750 million issue had priced at 99.247 to yield 9%, and had gotten as good as 102 bid in immediate aftermarket dealings before coming off those peak levels.

"They closed last night at 1011/2-102," he said," then traded at 1013/4-102 at the opening [Wednesday]. Then they were 1013/4-102¼ for most of the day, with everybody focused on the rest of the calendar. I didn't see a ton of trading in it, away from the initial trades."

A second trader said the bonds were up on the break, but pretty quiet."

Secondary sleepy

Away from trading in the new deals, traders saw not much going on in the secondary market.

One said that "if you looked at Trace, a lot of the stuff was 5-B paper [i.e. split-rated and mainly of interest to high-grade crossover investors]. There was very little on-the-run single-B paper trading relative to the rest of what was going on. So it was pretty light and pretty much unchanged."

He saw Junkbondland "kind of 'creepy-better' in the morning, then sort of stalling at lunchtime and focusing on the calendar."

Market indicators mixed

Statistical indicators of junk market performance were mixed on Wednesday, after having been lower on Tuesday.

The Markit Group CDX North American Series 19 High Yield Index fell for a fourth straight session on Wednesday, losing 5/8 point to end at 99 3/16 bid, 99 5/16 offered; on Tuesday it had retreated ½ point.

The KDP High Yield Daily Index, though, turned upward after two consecutive losses on Monday and Tuesday, firming by 2 basis points Wednesday to end at 74.57, in contrast to Tuesday's 20 bps plunge.

Its yield was unchanged Wednesday after having risen by 8 bps on Tuesday.

And the widely followed Merrill Lynch U.S. High Yield Master II Index remained choppy. It gained 0.034% on Wednesday, versus Tuesday's 0.263% loss, which in turn had followed a gain on Monday and a loss on Friday. The latter downturn snapped a streak of six consecutive winning sessions.

The latest gain raised its year-to-date return to 13.156%, up from Tuesday's 13.118%. Those levels also remain down from last Thursday's 13.455% - the peak level for the year so far.

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