Everest, Constellation lead $4 billion primary; most junk eases but Supervalu up on numbers

By Paul Deckelman and Paul A. Harris

New York, April 10- A day after Monday's sleepy session, which saw no bond deals price, the high-yield primary arena roared back to life on Tuesday, seeing its busiest new-issue day in over six weeks.

The big deal was EP Energy Corp.'s $2.75 billion issue, done through the oil and natural gas operator's Everest Acquisition LLC and Everest Acquisition Finance Inc. subsidiaries. Both the seven-year senior secured tranche and eight-year unsecured piece were quoted by traders as having moved up a little from their respective par issue prices when they hit the aftermarket.

Apart from that big forward-calendar deal, the rest of the day's activity came in the form of opportunistically timed, quickly-shopped deals from a trio of issuers.

Wine and spirits maker Constellation Brands, Inc. uncorked an upsized $600 million offering of 10-year notes, which traders said firmed smartly when they were freed for secondary dealings.

High-yield syndicate sources also heard that units of outsourced business services provider Sitel Worldwide Corp. brought a $200 million issue of 5.5-year bonds to market, while Solera Holdings, Inc., which provides software for the auto insurance claims industry, drove by with an upsized $400 million add-on to an existing series of 2018 bonds that it sold last year. Those two smaller deals were not seen in the aftermarket, traders said.

All told, the day's new deals tipped the scales at a shade under $4 billion of new paper - the most Junkbondland has seen since back on Feb. 24, when a giant-sized three-part issue from United Rentals Inc. , plus familiar issuers Range Resources Corp. and Ball Corp. powered a $4.275 billion session.

Away from the new-deal sphere, traders saw improved volume in the secondary versus Monday, but said that the market was clearly weaker, with decliners including such well-known names as Sprint Nextel Corp., ATP Oil & Gas Corp. and Caesars Entertainment Corp.

Among the few credits bucking that negative trend was SuperValu Inc., whose bonds were better after the supermarket operator's fourth-quarter earnings beat estimates, while its chief financial officer said it aims to cut debt by at least $400 million annually.

But overall, statistical performance indicators pointed southward.

EP Energy sells $2.75 billion

The primary market saw a big day on Tuesday as four issuers priced a combined five tranches raising a total of $3.95 billion.

EP Energy priced a downsized $2.75 billion amount of high-yield notes in two tranches.

The deal included an upsized $750 million issue of seven-year senior secured notes (Ba3/BB-) which priced at par to yield 6 7/8%. The secured tranche was increased from $500 million, and priced at the tight end of price talk which was set in the 7% area.

EP Energy also priced a downsized $2 billion issue of eight-year senior unsecured notes (B2/B) at par to yield 9 3/8%. The unsecured tranche was downsized from $2.5 billion, and priced at the tight end of price talk which had been set in the 9½% area.

Citigroup and J.P. Morgan were the joint physical bookrunners. Credit Suisse, Deutsche Bank, BMO, RBC, UBS and Nomura were the joint bookrunners.

The overall size of the bonds was decreased to $2.75 billion from $3 billion, with $250 million being shifted to the company's term loan.

Covenant changes were announced along with the price talk and revised sizing on Monday.

Proceeds will be used to help fund the leveraged buyout of the company by Apollo Global Management LLC, Riverstone Holdings LLC, Access Industries Inc. and other investors.

EP oversubscribed

The EP Energy deal went well, according to a trader from a mutual fund that was in the deal.

The order book for the unsecured tranche was 1.5 times the deal size at Tuesday's open, the trader said. The book for the secured tranche was 2- to 2.5-times oversubscribed.

There may have been a perception among investors that those who took part in the unsecured tranche would do better on allocations of the secured paper, the trader said.

Constellation Brands upsizes

In drive-by action, Constellation Brands priced an upsized $600 million issue of non-callable 10-year senior notes (Ba1/BB+) at par to yield 6%.

The yield printed on top of price talk.

Bank of America Merrill Lynch, J.P. Morgan, Rabobank and Barclays were the joint bookrunners.

The Victor, N.Y.-based beverage company plans to use the proceeds for general corporate purposes, which might include reducing term loan debt, acquisitions of complementary assets or businesses, or common stock repurchases.

The deal was oversubscribed, according to a source from a high-yield fund, who added that there were some yield discussions which took place below 6% on news that Moody's upgraded the bonds to Ba1 from Ba2.

The buyside had its heart set on a six-handle deal, the source remarked.

Ultimately Constellation Brands did come with a 6% yield.

Solera taps 6¾% notes

Also in drive-by action Audatex North America, Inc., a wholly owned subsidiary of Solera Holdings, priced an upsized $400 million add-on to its 6¾% senior notes due June 15, 2018 (Ba2/BB-) at 102.72.

The pricing resulted in a 6% yield to worst, which came on top of price talk that had been downwardly revised from earlier talk in the 6 1/8% area. The amount was increased from $300 million.

J.P. Morgan Securities LLC ran the books for the quick-to-market add-on.

Proceeds will be used to repay non-extending term loan lenders and for general corporate purposes.

The original $450 million issue priced at par in June 2011.

The company intends to launch a consent solicitation that will make the old and new 6¾% notes fungible.

Dallas-based Solera is a provider of software and services to the automobile insurance claims processing industry.

Sitel prices 11% notes

Sitel, LLC and Sitel Finance Corp. priced a $200 million issue of 11% 5.5-year senior secured notes (B1/B) at 96 for a 12.058% yield to worst.

Unofficial guidance was 11¾% to 12%, according to a trader from a mutual fund, who remarked that the deal went well because the buyside found a 12% print on a single B deal to its liking.

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

Proceeds will be used to repay the Nashville-based company's revolver and its non-extended term loan debt.

Freedom Group pricing Thursday

Freedom Group Inc. plans to price a $250 million offering of eight-year senior secured notes (B3/B-) on Thursday.

The deal is being marketed at an investor breakfast Wednesday morning in Boston, and later the same day at a lunch in New York City.

Bank of America Merrill Lynch, Deutsche Bank and RBC are the joint bookrunners.

Proceeds, along a new term loan, will be used to fund tender for and/or redeem the company's 10¼% senior secured notes due 2015 and its 11¼%/11¾% senior PIK notes due 2015, and for general corporate purposes.

Apart from Freedom Group there were no roadshow starts announced on Tuesday.

An issuer from the health care space plans to announce a roadshow start for a deal sized at around $300 million on Wednesday, a market source said.

Look for Morgan Stanley to be in the lead.

Meanwhile the fresh round of volatility in the capital markets is making its impact felt in the primary market, one source said, adding that at least two potential issuers decided to stand down, for the moment, to see if the volatility subsides.

EP trades near issue

Traders said that when the big new EP Energy two-part deal was freed to trade, the Houston-based company's senior secured and unsecured bonds moved around in a narrow range anchored around their par issue price.

"They don't seem to be running up," one of them said of that nearly $3 billion issue.

He said that both the 6 7/8% senior secured notes and the 9 3/8% unsecured paper "both priced at par, and they're pretty much trading at the par level, into par bids."

He said he had even heard of "some trading down at the 99¾ level - but who knows?"

A second trader quoted the 9 3/8s straddling their issue price, at 99¾ bid, 100¼ offered, while the 6 7/8s were at 100¼ bid, 100¾ offered.

As to whether market players were enthusiastically jumping into the deal, he said that "it's trading - it's not as crazy as some have been historically, but it's definitely trading, both the secureds and unsecureds."

A bit later on, a trader at another desk saw the 9 3/8s having improved to around 100¼ bid, while the 6 7/8s were centered around 100 3/8 bid, 100 5/8 offered. And yet another trader, still later on, said the 9 3/8s were going home at 100 1/8 bid, 100 3/8 offered, and the 6 7/8s had risen a little to 100 5/8 bid, 100 7/8 offered.

Constellation is a star

On the other hand, a trader said that the new 10-year notes from Constellation Brands "are trading better than EP [Energy]," pegging the wine and spirits maker's upsized $600 million deal in a 101-to-102 range, well up from their par issue price.

A second trader had the wine and spirits manufacturer and importer's new bonds as high as 101½ bid, 102½ offered, quipping "I'll drink to that," while at another shop, they were seen going home at 101 3/8 bid, 101 7/8 offered.

Traders saw the Sitel secured five-year deal price, but one said: "I don't think you'll see much in that one. It's just a $200 million deal, and I heard a lot of it was done as reverse [inquiry]," with those portions of the transaction already spoken for.

The quick-to-market Solera Holdings six-year add-on, while fairly sizable at $400 million, came to market way too late for any kind of dealings.

HD Supply trades around

Among the recently priced issues, a trader saw both halves of HD Supply Inc.'s $1.625 billion two-part offering trading on Tuesday, quoting its $675 million of 11% second-priority senior secured notes due 2020 having gotten as good as 102 3/8 bid, 102 7/8 offered.

The Atlanta-based building products supplier's bonds had priced on Thursday at par after that tranche had been downsized from an originally shopped $775 million, and they had not been seen in the aftermarket on Monday. He meantime saw the company's 8 1/8% first-priority senior secured notes due 2019 having moved up to 101 1/8 bid.

That $950 million issue also priced late Thursday at par, and then was seen on Monday initially having gotten as good as 100½ bid, 101 offered, before going home later Monday at 100¼ bid, 101 offered.

Secondary softens up

Away from the new-deal universe, a trader opined that "stuff's come in a little bit - but it's not like low bids are getting hit. Stuff is just backing up a little bit."

He said that the people at his shop were asking other market participants "is stuff trading in, are bids being hit, or are cheap offerings being lifted?"

He said that the consensus answer they got was "it's too hard to tell because there was just not a lot trading."

A second trader proclaimed that "lower is the word," but he added: "It's a little more active than [Monday], obviously, which is a good thing."

There was, he said, "definitely more volume, and things were definitely lower - but it's more generic than specific at this point."

"The market was busy," a third trader said, "but it finally felt weaker, and the buyers weren't filling in like they used to over the past six months."

He estimated that prices were off ¼ to 3/8 point, or ½ point, which was the amount "the higher-dollar bonds were trading off."

Among specific names, he said, "we were very active in Sprint [Nextel], all across the curve, no one [bond] or index, but that paper felt heavy by about ½ to ¾ point."

The Overland Park, Kan.-based Number-Three U.S. wireless carrier's 8 3/8% notes due 2017 were quoted down 1 5/8 points at 95 bid.

One of the trader said that the overall market was "clearly weaker today - there was volume and it was weaker."

He said that "we've probably been down for three or four days in a row and high-beta stuff is down multiple points in that period, while lower-beta stuff is down a ½ to 1 point as well. So high-yield stuff is for sale, and we saw that particularly today."

For instance, he said that ATP Oil & Gas' 11 7/8% second-lien senior secured notes due 2015 "are back down wrapped around 70, versus levels as high as 74 and closing levels in the 71-72 area which the Houston-based energy exploration and production company's bonds recorded on Monday.

He saw Springleaf Finance Corp.' paper down ½ to 2 points on the session; the Evansville, Ind.-based consumer lender's 6.90% notes due 2017 were trading as low as 77 bid late in the day.

A market source elsewhere saw company formerly known as American General Finance Corp.'s 6½% notes due 2017 likewise down a deuce on the day at 77 7/8 bid.

Another widely traded issue seen points lower on the day Tuesday was Caesars Entertainment's 10% notes due 2018; they dropped as much as 3 points, a trader said, pegging the notes at 72.

Another market source called the Las Vegas-based casino giant's issue down nearly 2 points at 73¾ bid.

Bucking the trend

However, "there were some names that hung in there," a trader said, especially as "the buyers stepped in as the day moved on."

One notable name that seemed to buck the overall trend was SuperValu, the Eden Prairie, Minn.-based operator of Albertsons and a number of other large supermarket chains across the country.

Its 8% notes due 2016 moved up to about 104½ bid from prior levels around 103 5/8, on fairly heavy round-lot volume of $24 million, and a market source said that by the end of the day, some smaller trades had lifted those bond even higher, to nearly the 107 mark.

Its 7½% notes due 2014 firmed to 102 bid, a gain of ¾ point, on volume of around $3 million.

The old Albertsons' 8.70%bonds due 2030 were about unchanged at 80 bid, on $5 million traded.

The bonds rose in tandem with the company's New York Stock Exchange-traded shares, which zoomed by 81 cents, or 15.23%, to close at $6.13, after having been up more than 18% intra-day, following the release of the company's fiscal fourth-quarter numbers. Volume of 38 million shares was six times the norm.

SuperValu reported that in the fiscal quarter ended Feb. 25, it posted a $424 million loss, or $2 per share, versus its year-earlier profit of $95 million, or 44 cents per share - but most of the loss was due to big charges the company took against goodwill and other impairments as it tries to restructure its business. Excluding such one-time charges and other unusual events, adjusted earnings came in at 38 cents per share - beating Wall Street's expectations of about 35 cents. Revenues of $8.23 billion also beat expectations of about $8.15 billion.

On its conference call following the release of earnings, the company's chief financial officer outlined the progress the company has made in cutting its debt load, and said SuperValu now expects to continue reducing debt by around $400 million annually (see related story elsewhere in this issue).

Market signposts again lower

Statistical measures of junk market performance meanwhile were headed lower for a third consecutive session on Tuesday, having also done so on Monday and on Thursday, the last real day of trading last week.

A trader saw the Markit Group CDX North American Series 18 High Yield Index down ½ point on Tuesday at 94 5/8 bid, 94 7/8 offered, after having been about unchanged on Monday. He said the index was even lower earlier on, but it "came back" toward the end of the day to close with the smaller loss.

The KDP High Yield Daily Index showed its fourth consecutive loss, down 24 basis points on Tuesday to 73.28, after having fallen 17 bps on Monday. Its yield rose by 12 bps on Tuesday to 6.84%, on top of the 6 bps rise on Monday.

And the widely-followed Merrill Lynch High Yield Master II Index suffered its fourth consecutive loss on Tuesday as it fell by 0.171%, following Monday's 0.203% retreat.

That left the index's year-to-date return at 4.733%, down from 4.966% on Monday - the first time the cumulative return had dipped below the psychologically potent 5.00% mark since early March. It was down as well from its peak 2012 level of 5.361%, recorded on March 2.

Stephanie N. Rotondo contributed to this report.

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