Drive-by Realogy, upsized JBS, PetroBakken price, Welltec too; SLM, other new bonds firmer

By Paul Deckelman and Paul A. Harris

New York, Jan. 25 - The high-yield primary sphere saw its busiest day of the new year so far on Wednesday, as more than $2.8 billion of new paper clattered down the chute, eclipsing the $2.1 billion that came to market on Jan 11, the only other session this year to top $2 billion.

The big deal of the day was a quickly-shopped $918 million two-part offering of senior secured notes from real estate and relocation services provider Realogy Corp. That priced too late in the day to trade around - but the company's existing notes firmed on the news.

There were two upsized eight-year offerings that priced - $900 million from PetroBakken Energy Ltd. and $700 million from meat processor JBS USA LLC. Canadian-based PetroBakken's transaction also was too late in the day for an aftermarket, but the JBS bonds were seen by traders to have moved solidly higher.

The same could not be said for Welltec A/S, whose $325 million of seven-year secured notes also came to market Wednesday; the Danish oilfield services company's new paper struggled to stay above even its deeply discounted issue price.

Welltec seemed to be the exception to this week's general rule of new deals trading up; Tuesday's junk offerings from Prestige Brands Inc. and Clearwire Corp. were holding onto the solid gains they initially notched in the aftermarket, while both halves of split-rated SLM Corp.'s massive two-part deal also traded well above issue.

A recently priced deal which was taking it on the chin, though, on Wednesday was the two-part issue from AmeriGas Partners LP. Those bonds dropped in very active trading after the propane distributor reported bad quarterly numbers.

But the overall junk market, including its statistical performance indicators, was stronger on the day.

Realogy brings $918 million

The primary market topped the $2.5 billion mark for the first time in two weeks on Wednesday, as four issuers priced a combined five tranches of notes, raising $2.82 billion of proceeds.

It was the biggest day in terms of dollar amount of issuance since Nov. 8, which saw $3.4 billion in five tranches.

Realogy priced Wednesday's biggest deal, a $918 million two-part eight-year senior secured notes transaction.

The deal included $593 million of first-lien notes (existing B1/confirmed B-) which priced at par to yield 7 5/8%, at the tight end of price talk which was set in the 7 ¾% area.

In addition Realogy priced $325 million of 1.5-lien notes (existing Caa1/confirmed CCC-) at par to yield 9%, at the tight end of the 9% to 9¼% price talk.

J.P. Morgan, Barclays, Credit Suisse and Goldman Sachs were the joint bookrunners for the quick-to-market debt refinancing deal.

PetroBakken upsizes

PetroBakken Energy priced an upsized $900 million issue of 8 5/8% eight-year senior notes (Caa1/CCC+) at 99.50 to yield 8.713%.

The yield came toward the tight end of price talk which had been set in the 8¾% area. The amount was increased from $750 million.

Credit Suisse and Bank of America Merrill Lynch were the joint global coordinators for the deal. Credit Suisse, Bank of America Merrill Lynch and RBC were the joint bookrunners.

The Calgary, Alta.-based light oil exploration and production company plans to use the proceeds to fund the concurrent partial tender of up to $450 million of its convertible notes maturing in 2016 and to repay a portion of its revolver. The $150 million upsize amount will also be applied to the company's revolver.

The deal was oversubscribed and went well, according to a syndicate source.

JBS massively upsizes

JBS USA LLC and JBS USA Finance Inc. priced a massively upsized $700 million issue of 8¼% eight-year senior notes (B1/BB/BB-) at 98.569 to yield 8½%.

The yield printed at the tight end of the 8½% to 8¾% price talk. The amount was upsized from $400 million.

J.P. Morgan, BB Securities, Bradesco BBI, Rabo Bank, Banco Santander and Wells Fargo were the underwriters.

The Greeley, Colo.-based meat processor plans to use the proceeds to fund a distribution to its parent, Brazil-based JBS SA, as well as to repay debt at the parent company, and for general corporate purposes.

Of the additional proceeds generated from the upsizing of the deal, $100 million will be paid to the parent and $200 million will be used for a rights offering and to pay down revolver debt.

Welltec comes wide of talk

Danish oilfield services provider Welltec priced a $325 million issue of 8% seven-year notes (B1/BB-) at 97.402 to yield 8½%.

The yield printed 12.5 basis points beyond the wide end of price talk which had been set in the 8¼% area.

Joint bookrunner Goldman Sachs will bill and deliver. Credit Suisse was also a joint bookrunner.

The Allerod, Denmark-based company plans to use the proceeds to refinance debt, to fund a distribution to shareholders and for general corporate purposes.

Codere roadshow for Thursday

The active forward calendar saw a modest buildup on Wednesday, with a couple of relatively small deals being announced.

Spanish gaming firm Grupo Codere will host a Thursday breakfast in London to kick off its $250 million offering of seven-year senior notes.

A roadshow in the United States will follow.

Joint bookrunner Credit Suisse will bill and deliver. Barclays Capital and Banco Itau are also joint bookrunners. Proceeds will be used for an acquisition and general corporate purposes.

Aurora starts roadshow

Aurora USA Oil & Gas Inc. began a roadshow on Wednesday for a $200 million offering of 5.25-year senior notes which is set to price during the week ahead.

Credit Suisse and UBS are the joint bookrunners.

The Perth, Australia-based independent energy company plans to use the proceeds to fund the development of acreage, for general corporate purposes and to fund acquisitions.

JBS jumps in secondary

When JBS USA's new eight-year notes were freed for trading, traders said that the Greeley, Colo.-based meat processing firm's steak had plenty of sizzle to it.

One quoted the upsized $700 million offering as having firmed smartly to 100¾ bid, 101 1/8 offered from its 98.569 issue price, continuing the recent trend of investors bidding up most of Junkbondland's new bonds in an effort to deploy some of their swollen cash positions.

A second trader saw the bonds at 100½ bid, 101 offered, although another, queried later in the day, saw a more modest gain, to 100¼ bid, 100¾ offered.

Welltec not doing so well

One of the traders said that Wednesday's new deals "were going in two different directions," pointing to the gains that the new JBS paper had notched - versus the struggle that Welltec's new seven-year senior secured notes was going through.

He saw that $325 million issue trading as low as 96 bid, 97 offered - well down from the 97.402 level at which the Danish oil-drilling firm's paper had priced

A second trader said that Welltec "is having problems getting out from behind its own shadow," saying he had seen one offering at 97¼ and another at 971/2, bracketing the bonds' issue price.

He had no ready explanation as to why this particular issue was having difficulty, while most of the other new deals coming to market were doing quite well trading around.

A third trader had the bonds going home at 97 bid, 97½ offered.

PetroBakken, Realogy not seen

There were no immediate aftermarket dealings seen in PetroBakken Energy's upsized $900 million offering of eight-year notes, owing to the relative lateness of the hour that the Calgary, Alta.-based light oil exploration and production company's deal finally priced off the forward calendar.

That was also the case for the day's sole drive-by deal, from Parsippany, N.J.-based real estate company Realogy's $900 million two-part issue of eight-year senior secured notes.

Existing Realogy bonds better

But while Realogy's new issue arrived too late for any aftermarket dealings Wednesday, investors made up for it with their trading in the company's existing bonds, which rose across the board on the news after the pending new deal was announced.

A market source said that Realogy's 11½% notes due 2017 gained 3½ points on the session, ending at 94 bid. More than $11 million of the bonds traded, putting the issue on the junk market's most-actives list.

At another desk, the 111/2s were seen having risen as much as 4 points on the day, although they were quoted there around that same 94½ level. A trader there saw "pretty active" dealings in the credit. He meantime saw the company's 12% notes due 2017 up 10 to 13 points at 95, though only on a single trade.

Yet another trader pegged the 111/2s as high as 95 and the company's 7 7/8% notes due 2019 at 96.

Tuesday deals trade well

Tuesday's new issues were seen continuing to show strength, including the two big gainers from that session, Prestige Brands and Clearwire.

A trader on Wednesday saw Prestige Brands' new 8 1/8% notes due 2020 at 103½ bid, 104 offered. That was little changed from the levels to which that issue had moved late Tuesday after the Irvington, N.Y.-based marketer of branded consumer products priced the $250 million transaction - downsized from an originally announced $290 million - at par.

That was also the story with the new 14¾% notes due 2017 from Bellevue, Wash.-based mobile broadband provider Clearwire Corp.

That quick-to-market $300 million deal priced at par on Tuesday, and then shot up to 102½ bid, 103 offered.

On Wednesday, a trader saw the new issue at 102½ bid, 103½ offered.

Sallie Mae shows strength

Tuesday's big split-rated deal (Ba1/BBB-) from SLM Corp. followed that same firming trend.

The Newark, Del.-based provider of education financing known as Sallie Mae priced its $1.5 billion drive-by offering - massively upsized from the originally announced $1 billion too late in the day on Tuesday for there to be any kind of an aftermarket.

Although the deal priced off the high-grade desks, it attracted interest on the junk bond side of the fence.

In Wednesday's dealings, a trader quoted the $750 million offering of 6% notes due 2017 at 100¼ bid, 100¾ offered, with a second seeing the bonds around par bid, 100 3/8 offered. That tranche - upsized from the originally announced $500 million - priced at 98.942 to yield 6¼%.

The other half of that mega-deal - Sallie Mae's $750 million of 7¼% notes due 2022 - was seen trading as high as 100 5/8 bid, 101 1/8 offered. The deal - also upsized from the original $500 million - priced on Tuesday at 98.684, to yield 7½%.

Among the company's existing bonds, its 5 3/8% notes due 2014 were little changed on the day, going home perhaps 1/8 point lower at 102¼ bid. The $29 million of those bonds that traded made it one of the most actively traded issues, although a certain percentage of that number probably did go to high-grade investors.

SLM's 8.45% notes due 2018 were likewise not much changed at 108¾ bid, on turnover of over $26 million.

AmeriGas goes down

But while Sallie Mae was busy, easily the most active junk issue on Wednesday was AmeriGas Finance Corp.'s 7% notes due 2022, with over $51 million having changed hands by the close.

The bonds were seen having retreated by 5/8 point on the day to 101 bid, while the Valley Forge, Pa.-based propane distributor's 6¾% notes due 2020 lost 1 5/8 points, falling to 99½ bid on very respectable volume of over $25 million.

AmeriGas had priced $550 million of the 63/4s and $1 billion of the 7% notes in a quickly shopped offering on Jan 5. Both tranches of the new bonds had firmed after that.

But they came back in on Wednesday after the company reported a 43% slide in its quarterly earnings from year-ago levels.

With warmer weather this year cutting into propane sales during the 2011 quarter ended Dec. 31, the company's earnings dropped to $42.5 million, just a little more than half of the year-earlier $74.9 million.

Market mostly firm

But AmeriGas, busy though it was, represented the exception rather than the rule on Wednesday.

A trader said that "the market was very strong - especially after the Fed's comments" keeping interest rates at currently historically low levels at least through 2014. "Offerings got lifted."

He agreed that the prospect of nearly free money certainly was a factor, but added that with rates that low "where else are you going to get income" than in high-yield bonds? He said that this would benefit corporate bonds in general, versus Treasuries, "but especially high yield."

Statistical measures of junk market performance meantime returned to their recently strong status, after having turned mixed on Tuesday.

A trader saw the CDX North American Series 17 High Yield index gain 7/8 point on Wednesday to end at 97 3/8 bid, 97 5/8 offered, after having fallen by 3/16 point on Tuesday.

The KDP High Yield Daily Index jumped 16 basis points Wednesday to end at 73.45, after having gained 5 bps on Tuesday.

Its yield dropped by 7 bps on Wednesday, to 7.01%, after it came in by 2 bps on Tuesday.

And the Merrill Lynch High Yield Master II Index notched its eight straight gain on Wednesday, rising 0.255%, on top of Tuesday's 0.099% advance.

That latest gain raised the index's year-to-date return to 2.276% for the year on Wednesday, a new 2012 peak level. That was up from Tuesday's 2.016%, which had been the previous peak level for the year so far.

Mortgage insurers move around

Elsewhere, a trader said "the mortgage people were moving around" after one of the sector names, Radian Group Inc., announced a major deal with industry peer Assured Guaranty Ltd.

He saw Radian's 5 5/8% notes due 2013 up 1½ points on the session, trading between 71 and 73 bid.

"There was news out on them," he noted, as the Philadelphia-based mortgage- and bond-insurer announced a complicated deal with Assured Guaranty. Radian - which is looking to get out of the bond-insurance business in order to concentrate on its mortgage insurance activities - will pay Assured Guaranty $86 million, and the latter company will take over the re-insurance responsibilities on a $12.9 billion bond portfolio.

Radian will also sell its financial-guarantee unit, Municipal and Infrastructure Assurance - which Radian had bought just last June for $82 million - to Assured for $91 million.

Radian is already a major player in selling protection to mortgage lenders that would compensate them for any losses they may suffer should a borrower default and they fail to recover their costs through foreclosure, and it hopes to get an even bigger share of the pie following the recent bankruptcy of competitor PMI.

The trader acknowledged "yeah, there were some trades there. There was more activity [Tuesday], but there was some moderate activity."

On Tuesday, Radian saw turnover over $14 million, making it one of the busier junk bonds, falling about 3 points to about a 67.5-69 context.

Sector peer MGIC Investment Corp., whose 5 3/8% notes due 2015 had fallen 2 points on Tuesday to 67½ bid, 68 offered after the Milwaukee-based mortgage insurer reported a $135 million net loss in the 2011 fourth quarter - its sixth straight quarter in the red - was seen having firmed about a point on Wednesday, with a trader quoting the bonds at 69 bid, 70 offered, though on "not a lot of volume."

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.