Upsized U.S. Steel prices, Digicel also; market awaits BioScrip; new Bombardiers keep rising

By Paul Deckelman and Paul A. Harris

New York, March 16 - United States Steel Corp. came to market on Tuesday with a quickly shopped, upsized $600 million offering of 10-year notes. The Pittsburgh-based steel giant's new bonds were heard by traders to have moved up more than a point after they priced.

Digicel Group Ltd. also priced a new junk deal, although the Kingston, Jamaica-based wireless service provider's $775 million offering came too late for any kind of aftermarket.

Shopping center real estate investment trust Diversified Developers Realty Corp. weighed in with an upsized $300 million tranche of split-rated seven-year paper, which firmed slightly in secondary dealings.

Apart from the issues actually pricing, talk was heard on BioScrip Inc.'s upcoming $225 million offer of 5.5-year notes, which is expected to price on Wednesday morning. International Lease Finance Corp., a unit of American International Group Inc., was heard by market sources to be planning a benchmark-sized offering of 5.5-year notes, with pricing expected this week. Martin Midstream Partners LP/Martin Midstream Finance Corp. announced plans for a $200 million offering of eight-year notes, which will price early next week.

Among recently priced names, both tranches of Bombardier Inc.'s new mega-deal were seen having continued to move up, building on the gains they notched after the $1.5 billion issue priced on Monday.

Among secondary market names with no new-deal connections, Boston Scientific Corp.'s bonds rebounded after having lost ground on Monday on news the medical device company was suspending sales of one of its key products due to a regulatory snafu.

Visteon Corp.'s bonds traded at mostly lower levels after the auto components company unveiled an amended bankruptcy plan.

Cash bonds were up about ¼ point, on Tuesday, according to a high-yield mutual fund manager.

Digicel plays to $6 billion of orders

Digicel Group's $775 million issue of 10½% senior notes due 2018 (Caa1/CCC+), which priced on Tuesday at par, was a massive blowout, the buy-sider said.

The deal played to $6 billion of orders, the source added.

However, the $775 million deal size is a bit misleading, the investor said.

"It was really a $575 million deal, if you factor in that [Digicel owner] Dennis O'Brien took down $200 million of the issue himself."

Proceeds from Tuesday's transaction will be used to fund the acquisition of a 100% stake in Digicel Pacific Ltd., which O'Brien owns.

So O'Brien will be taking some money off the table, but will also be plowing $200 million back into Digicel.

"He clearly loves the business, in part because it has made him a very wealthy man," said the investor, who had a conversation with O'Brien earlier this month at the JP Morgan High Yield Conference in Miami.

The yield on the new Digicel 10½% notes due 2018 printed at the tight end of the 10½% to 10¾% price talk.

Credit Suisse, Citigroup, JP Morgan and Deutsche Bank Securities ran the books.

Approximately two-thirds of the deal went to high-yield accounts, and the remainder was taken down by emerging markets investors, an informed source said.

U.S. Steel upsizes

Meanwhile, United States Steel priced an upsized $600 million issue of 7 3/8% 10-year senior notes (Ba2/BB/BB+) at 99.125 to yield 7½%, on Tuesday.

The yield printed at the tight end of the 7½% to 7 5/8% price talk. The amount was increased from $500 million.

Bank of America Securities Merrill Lynch, Barclays Capital Inc., Goldman, Sachs & Co., J.P. Morgan Securities Inc. and Morgan Stanley & Co. Inc. were joint bookrunners.

The deal was multiple times oversubscribed, an informed source said.

Developers Diversified brings split deal

Meanwhile, from the crossover sector, Developers Diversified Realty priced an upsized split-rated $300 million issuer of 7½% seven-year senior unsecured notes (Baa3/BB/) at 99.995 on Tuesday.

The size was raised from $250 million.

Bank of America Merrill Lynch, Deutsche Bank Securities Inc. and UBS Investment Bank ran the books for the deal which was priced off the high-grade desk.

The new Developers Diversified 7½% notes due 2017, which priced 0.005 below par, were at par ¼ bid, par ¾ offered in the secondary, according to a hedge fund manager.

BioScrip sets talk

Meanwhile the Wednesday session started taking shape.

BioScrip Inc. talked its $225 million offering of 5.5-year senior notes (B3/B-) to yield 10¼% to 10½%.

The deal is set to price on Wednesday morning via Jefferies & Co.

Proceeds will be used to help fund the acquisition of Critical Homecare Solutions, as well as to refinance existing debt and for general corporate purposes.

The deal from the Elmsford, N.Y.-based specialty pharmaceutical health care organization is five-times oversubscribed, according to a Midwestern high-yield mutual fund manager.

International Lease Finance plans benchmark

Meanwhile, International Lease Finance Corp. plans to price a benchmark-sized offer of 5.5-year senior notes (B1/BB+/BB) late Wednesday or early Thursday.

Bank of America Merrill Lynch, Citigroup, Credit Suisse and UBS Investment Bank are joint bookrunners.

The Rule 144A and Regulation S deal will price off the high-grade desk, according to the source, who added that the high-yield syndicates will also be involved.

The notes will be non-callable.

Proceeds will be used for general corporate purposes, including repayment of existing debt.

The Century City, Calif.-based issuer is a wholly owned subsidiary of insurance company American International Group, Inc.

Martin Midstream to bring $200 million

Elsewhere, Martin Midstream Partners LP and Martin Midstream Finance Corp. plan to price a $200 million offering of eight-year senior notes (expected ratings B3/B+) early next week.

Wells Fargo Securities, RBC Capital Markets and UBS Investment Bank are joint bookrunners.

Proceeds will be used to repay bank debt.

A single day of outflows

The high-yield market, which was definitely on fire Monday, was perhaps a little less so on Tuesday, according to a mutual fund manager.

Cash continues to come in, however the flow has not been an undisrupted one, the buy-sider specified.

Last Friday there were redemptions, the source said, adding that it was the first time the fund had seen daily outflows since Feb. 16.

Therefore, while the buy-sider does look for a positive number when AMG Data Services makes its weekly report on the cash flows of the high-yield mutual funds on Thursday, it might not be quite as big as last week's $795 million inflow.

U.S. Steel starts strongly

When the new U.S. Steel 7 3/8% notes due 2020 were freed for secondary dealings, a trader saw the bonds having firmed to 100¼ bid, 100¾ offered, following their pricing earlier in the session at 99.125.

Another trader saw the new bonds "up a little more than a point" from issue at 100 3/8 bid.

Diversified Developers bonds gyrate

A trader said that the new Diversified Developers Realty Corp. 7½% notes due 2017 saw some "pretty good trading," after the Beachwood, Ohio-based REIT priced its $300 million deal at 99.995.

"Right out of the box, they opened at par," he said, and then pushed as high as 1003/4.

However, by late afternoon, he said, they had fallen back to par.

A high-grade market source meantime said that the split-rated (Baa3/BB) deal had moved up to 100¼ bid, 100¾ offered.

The new Digicel 10½% notes due 2018 priced too late in the day for aftermarket action.

Bombardier adds to gains

A trader said that he had seen "a lot of activity in 'the Bombs'," referring to Bombardier Inc.'s two new tranches of new paper. He quoted the Montreal-based aircraft and railroad equipment manufacturer's $650 million of 7½% notes due 2018 and $850 million of 7¾% notes due 2020 both trading in a 102-102¾ range, up from 101¾ bid at the opening, saying "they just kind of worked their way up through the day."

Another trader saw both Bombardier tranches at 102¼ bid, 102¾ offered, up from around 101½ bid, 102¼ offered on Monday, when both parts of the $1.5 billion deal - upsized from the originally announced $1 billion -- had priced at par.

At another desk, a trader said that Bombardier "was pretty strong," seeing the eight-year notes at 102 1/8 bid, 102 5/8 offered, while its 10-year paper was at 102¼ bid, 102¾ offered.

Noting the fact that the company had pulled its $1 billion deal off the market in mid-February when it couldn't do the transaction at an acceptable price due to then-declining market conditions, he opined that in not doing it then and coming back now that conditions have picked up, "they made the right move."

Sitel little seen

A trader said that he had only seen one level on Sitel, LLC/Sitel Finance Corp.'s new 11½% notes due 2018, quoting them at 98 bid, versus the 97.454 level at which the Nashville-based business outsourcing services provider's $300 million issue had priced late Monday to yield 12%.

At another desk, a trader saw the Sitel notes at 98¼ bid, 98¾ offered.

Market indicators seen mixed

Among bonds not connected with the new-deal market, a trader saw the CDX Series 13 index up ¼ point on Tuesday at 99¾ bid, par offered, after having been unchanged on Monday.

However, the KDP High Yield Daily Index dipped by 6 basis points on Tuesday to finish at 71.80, after having gained 5 bps on Monday. Its yield widened by 2 bps on Tuesday, to 7.92%, after having narrowed by 1 bp on Monday.

Advancing issues topped decliners for a 13th straight session on Tuesday, although their winning margin again was just a couple of dozen issues out of the more than 1,400 tracked.

Overall activity, measured by dollar-volume levels, rose by 28% from Monday's depressed pace.

That having been said, a trader said much of the day on Tuesday was spent with market participants "waiting on the sidelines" for the pricing of the U.S. Steel and Digicel deals, as well as "waiting for the Fed" to see whether the central bank would continue to hold interest rates at their recent record lows to foster the economic recovery and ease high unemployment, which the Fed did.

Boston Scientific bounces back

Among specific issues, a market source said that Boston Scientific Corp.'s bonds - which had retreated on Monday after the after the Natick, Mass.-based medical devices company halted sales of one of its most important products, admitting that it had not filed key documents in the regulatory process - had come at least part of the way back.

Its 6% notes due 2020 - which had been seen down between 2 and 3 points on Monday, gained a point of that back Tuesday, in brisk trading, moving up to just under 97 bid, while its 4.5% notes due 2015, which had been down a deuce on Monday, were also up around a point at that same 97 bid level. A source said that at least $65 million of the former and nearly $30 million of the latter had traded by mid-afternoon, making those bonds among the most active junk issues.

A trader saw Boston Scientific's 7 3/8% bonds due 2040 up by ¾ point to the 97 area.

Visteon very busy

A trader said that Visteon Corp.'s 7% notes due 2014 were trading lower for much of the day after the Van Buren Township, Mich.-based automotive components company submitted an amended bankruptcy reorganization plan. He said that he had seen "no trading for several days" in the name; then on Tuesday, he said, "people started out lower, trying to steal them with 79 and 80 bids.

He said the bonds had traded in an 86½ -87 range on Monday, while Tuesday's first trade was at 78, and then the action moved into the low 80s. While the high trade was 85, the bonds went back down to 811/2, "and then bounced back up" to 84½ at the close. "These things were all over the lot."

At another desk, a market source saw the 7s ending at 843/4, calling that down more than 2 points on the day

Visteon, another trader said, was "tumultuous," quoting the bonds at 81 bid, 82 offered, which he called down 5 points on the session. He said most of the activity in the 7% notes took place around 84, "but they trailed off at the end of the day to end at 82 bid, 84 offered.

He also saw the 8¼% notes due 2010 in that same context. "Not as many traded, but they were still down." He said the 7% notes "were more indicative of size trading, and bigger blocks."

Visteon's bonds bounced crazily around after the company filed its amended reorganization plan with the U.S. Bankruptcy Court in Wilmington, Del., which is overseeing the company's restructuring.

The amended plan of reorganization sought to reflect the improvements in the company's balance sheet, as well as improvements in the auto industry as a whole.

According to the terms of the plan, term lenders holding $1.629 billion in secured claims will receive 85% of equity in the new reorganized company.

However, while the company said the new plan's recoveries were a significant improvement over the original plan, bondholders still get left with little.

Holders of the 12¼% senior notes will divide 6% of the equity amongst themselves, resulting in recovery of less than 50% of face value. Other noteholders - as well as those with non-trade claims - will get another 9% of equity, a 20% recovery.

Existing equity holders will get nothing, which is usually the case in bankruptcy filings.

NewPage slightly better amid acquisition news

A trader saw NewPage Corp.'s 11 3/8% notes due 2014 trading around 971/2-98¼ range, which he called "not terribly different than yesterday, perhaps up a little bit" from a 97¼ - 98 context on Friday. A "fair amount of bonds traded."

A market source at another desk said the bonds had gained a bit over a point to go out at a little over 98.

Yet another put the 11 3/8s at 971/2-981/2, "about where they were" previously.

A trader estimated volume on the 11 3/8s of at least $20 million, and called them ¾ point higher at 98¼ bid, versus late Monday's 971/4-97½ context.

Miamisburg, Ohio-based NewPage announced plans on Tuesday to buy certain assets from Domtar Corp. as the latter closes its coated paper mill in Columbus, Miss., and permanently exits that segment of the paper business (see related story elsewhere in this issue).

Blockbuster bid falls on news

A trader said that "the bid dropped, the offering didn't move" on Blockbuster Inc.'s 11¾% notes due 2014 on late-afternoon news out about the Dallas-based movie-rental company. He saw "a very wide" 72-77 picture, versus more conventional levels earlier in the day around 75¾ bid, 76¾ offered.

He saw the 9% notes due 2012 offered at 231/2-251/2, but said he hadn't seen any post-news levels.

"It looks like a lot is going on. I'm not sure if it's good or bad."

Another trader had the bonds down by 1 point at 24 bid.

Blockbuster said in a Securities and Exchange Commission filing that it is developing and initiating strategies to maximize its cash and cash equivalents over the near term, including a potential exchange of its senior subordinated notes for class A common stock.

The company said it may also seek changes to its senior secured notes (see related story elsewhere in this issue).

-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.