Clearwire, Sallie Mae drive by with megadeals; smaller Prestige prices; new bonds solidly up

By Paul Deckelman and Paul A. Harris

New York, Jan. 24 -Clearwire Corp. came to market on Tuesday with a quickly shopped $300 million offering of five-year notes. The mobile broadband company's new deal was seen by traders to have firmed smartly when it was freed for secondary dealings.

Consumer products company Prestige Brands Inc.'s downsized $250 million eight-year bond deal, which priced off the forward calendar, was also seen having jumped multiple points on the break after pricing.

Traders said that generally, the new-issue realm was on fire, with higher prices also seen for Monday's deals from building products maker Summit Materials LLC/Summit Materials Finance Corp. and from Westmoreland Coal Co.

One new deal not seen trading around since it came at a fairly late hour, traders said, was education finance provider SLM Corp.'s greatly upsized $1.5 billion two-part drive-by deal. While the split-rated issue priced off the high-grade desks, it's expected to generate no small amount of interest in Junkbondland as well.

Canada's Cash Store Financial Services, Inc. also joined Tuesday's pricing parade, with a secured five-year Canadian dollar deal.

Away from the deals which actually got done, price talk was heard out on several other upcoming issues - PetroBakken Energy Ltd., Welltec A/S and JBS USA LLC - any or all of which could price as soon as Wednesday.

Spanish cable operator Grupo Corporative ONO SA was also head to be in the market with a $400 million secured offering, which could price by the end of the week.

Apart from the new issues, traders said not that much was going on, although Bon-Ton Department Stores Inc.'s bonds and shares rose nicely in apparent response to the retailer's appointment of a new chief executive officer.

Clearwire yields 14¾%

The Tuesday primary market saw a pair of issuers, each pricing a single tranche of junk-rated notes, raise $550 million.

Clearwire Communications LLC and Clearwire Finance, Inc. cleared the market with the biggest yield since early last Autumn.

Clearwire priced a $300 million issue of non-callable first-priority senior secured notes due Dec. 1, 2016 (B3/CCC) at par to yield 14¾%.

The yield printed at the tight end of the 14¾% to 15% yield talk. The reoffer price came at the rich end of the 0-1 points OID talk.

J.P. Morgan ran the books for the quick-to-market capital expenditures and general corporate purposes deal.

The new Clearwire 14¾% secured notes due Dec. 1, 2016 sport the highest yield printed on a junk bond since Platinum Energy Services priced a $50 million add-on, which yielded 16.196% late last September.

Prestige prices at tight end

Prestige Brands priced a downsized $250 million issue of eight-year senior notes (B3/B-) at par to yield 8 1/8%.

The yield printed at the tight end of price talk set in the 8¼% area.

The notes issue was downsized from $290 million, as $40 million of the acquisition financing was shifted to the term loan B, which was upsized to $660 million from $620 million.

Morgan Stanley was the lead bookrunner. Citigroup and RBC were joint bookrunners.

The bond deal went very well, according to an informed source who added that demand was big and allocations were tough.

The bonds went out at 103 bid, the source added, up 3 points versus the reoffer price but down from earlier levels as high as 103 5/8 bid.

Allocations are apt to be just as tough for the Prestige Brands term loan B which is set to break for trading on Wednesday, the source added.

Cash Store Financial upsizes

In the Canadian dollar-denominated high-yield market, Cash Store Financial Services priced an upsized C$132.5 million of 11½% five-year senior secured notes (B3/B/) at 94.608 to yield 13%.

The deal, which was upsized from C$125 million, was talked to price with an 11½% to 12% coupon to yield 12¾% to 13%.

Imperial Capital and Canaccord Genuity were the bookrunners.

Sallie Mae $1.5 billion deal

In the crossover space, education lender Sallie Mae priced $1.5 billion of split-rated notes Ba1/BBB-/BBB-) in two tranches.

The deal included a $750 million tranche of 6% five-year notes, which priced at 98.942 to yield 6¼%, tight to the 6¼% to 6 3/8% price talk.

In addition, Sallie Mae priced a $750 million tranche of 7¼% 10-year notes at 98.264 to yield 7½%, tight to the 7½% to 7 5/8% price talk.

Bank of America Merrill Lynch, Barclays and Deutsche Bank were the joint bookrunners for the quick-to-market issue, which was priced on the investment grade desks, but which saw significant play among high-yield investors, according to a trader from the crossover space.

Although the bonds are not expected to be free to trade until Wednesday, the notes were massively active in the gray market, according to the trader who saw the five-year notes up 3/8 of a point and the 10-year notes up a half-point.

"Everybody got cut back on allocations," the trader remarked, adding that allocations amounting to half the amounts ordered were about par for the course.

"It's the quintessential crossover bond," the source added, noting that Sallie Mae commands a lot of attention from both the high-yield sector and the investment-grade sector.

A high-yield investor saw both Sallie Mae tranches up a half-point in the gray market.

Talking the deals

The dealers set the stage for a busy Wednesday session, with price talk surfacing on three offerings.

Canada's PetroBakken talked its $750 million offering of eight-year senior notes (Caa1/CCC+) with a yield in the 8¾% area. Bank of America Merrill Lynch, Credit Suisse and RBC are joint bookrunners.

Denmark-based Welltec talked its $325 million offering of seven-year senior secured notes (B1//) with a yield in the 8¼% area. Goldman Sachs and Credit Suisse are joint bookrunners.

And JBS USA talked its $400 million offering of eight-year senior notes (B1/BB/BB-) with an 8½% to 8¾% yield.

J.P. Morgan, BB Securities, Bradesco BBI, Banco Santander and Wells Fargo are the joint bookrunners.

Apart from the deals that were talked, there was chatter on Post Holdings Inc.'s $775 million offering of 10-year notes (B1/B+), according to a trader from a high-yield mutual fund. The trader added that the deal appears to be going really well, with initial yield discussions in the 7¾% area.

Post, which is in the market via left bookrunner Barclays and joint bookrunners J.P. Morgan, Wells Fargo and Credit Suisse, is expected to price Friday, the trader said.

The Harrah's Chester $315 million offering of eight-year senior secured notes has been discussed with initial guidance of 10% area, the trader said.

The deal, in the market via left bookrunner Citigroup and joint bookrunners Bank of America Merrill Lynch, Credit Suisse and J.P. Morgan, is set to price on Monday, according to an informed source.

"The supply we're seeing is being absorbed pretty well," said the trader, taking a minute to parse the active forward calendar.

"There is still plenty of cash out there to be put to work."

A high-yield syndicate banker gave a similar opinion and added that the dealers are hard at work to meet an intense demand for speculative-grade paper.

ONO to price Friday

Spain's Grupo Corporativo plans to price a $400 million offering of senior secured notes due Dec. 1, 2018 on Friday.

JP Morgan, BNP Paribas and Deutsche Bank AG are leading the deal.

The Spanish cable operator plans to use the proceeds to refinance the Nara Cable Funding's 8 7/8% notes.

New bonds breeze higher

When the new Clearwire five-year notes were freed for secondary dealings, a trader saw the Bellevue, Wash.-based mobile broadband provider's offering having moved up to 102½ bid, 103 offered, well up from the par level at which that $300 million deal got done.

"They did well," another trader said, seeing the quick-to-market deal get as good as 103 bid.

The trader saw Prestige Brands' new eight-year notes doing even better, with one trader pegging the issue at 103¾ bid, 104¼ offered and a second agreeing that they were "wrapped around 104, well north of par, where the bonds priced.

"All of these have pretty much jumped," one of the traders opined.

Monday's bonds up as well

The strength also extended to the deals that came to market on Monday, too late for any real dealings then.

For instance, Westmoreland Coal's $125 million add-on to its 10¾% senior secured notes due 2018 were seen by a trader having moved up a half-point to 96 bid, 97 offered. The Englewood, Colo.-based coal company's deal had priced on Monday at 95.492 to yield 11.82%

A second trader estimated that the bonds were right near their issue price, at 95½ bid, but he said "that might be low since everything else is running up."

The trader saw small pieces of the issue trading as high as 97 bid. With levels like that, he theorized that perhaps "someone may have just thrown out a low bid" at around 951/2.

A trader saw Summit Materials' 10½% notes due 2020 "wrapped around 101." The Washington D.C.-based producer of concrete, cement, asphalt and other such aggregates priced $250 million of those bonds - upsized from $220 million - on Monday at par.

Priced 'cheap enough'

A trader observed: "Basically, these new issues, even though they are not huge deals, they're pricing them cheap enough and people are sitting on a ton of cash. So they're trading up."

He said that there was "not a huge amount of volume is trading - but they are trading up."

He told the story of "one guy, who was trying to get them to add to a certain new issue that was trading a couple of days ago around 101, today it's at 1031/2."

The trader said that the market participant said at those prices, people were "out of their minds." But he said he would not sell because "I've got too much cash as it is."

The trader noted that "he's not getting paid to sit on cash."

New deals come and go

While Tuesday's deals were performing brilliantly, helped by easy pricing and a glut of cash waiting to be deployed, and Mondays were also seen having improved, nobody saw any signs on Tuesday of the deals, which came last week, including the upsized $1.5 billion two-part offering of 7.5-year and 10-year notes from German kidney dialysis services provider Fresenius Medical Care US Finance II, both halves of which priced at par last Tuesday.

Others included the sizable dollar deals from Irish container maker Ardagh Packaging, Polish telecommunications operator Polkomtel SA, British telecommer Cable & Wireless Communications plc and Belgium's Taminco Global Chemical Corp.

A trader said that in this market, such deals are mostly one- or two-day wonders.

"It quiets down and then it's just kind of bid for because none of them have been really huge deals that tend to keep trading. They'll trade up the first day or two, and then you really don't hear about them that often. Occasionally, they'll pop their head up after just having not seen anything" for a while.

A case in point was the recently priced deal that St. Louis-based cable operator Charter Communications Inc. did back on Jan. 11, when it priced a $750 million drive-by offering of 6 5/8% notes due 2022 via its CCO Holdings, LLC and CCO Holdings Capital Corp. units at 99.5 to yield 6.694%.

After those bonds initially edged up to around the par level, they dropped from sight until this week, when a trader saw them having moved as high as the 103 bid level on Monday.

On Tuesday, the trader said, they were quoted around 102¾ bid, 103¾ offered.

Market mostly holds gains

A trader at another desk said that new issues "were definitely the market's focus today. Obviously some other things did trade, but that was definitely the focus."

Away from the new-deal arena, he said, they tried to open a little weaker, but it ended up being a decent day again.

Statistical measures of junk market performance finally turned mixed after several straight sessions on the upside across the board.

A trader saw the CDX North American Series 17 High Yield index fall by 3/16 point on Tuesday to end at 96 5/8 bid, 96 7/8 offered, after having gained 9/16 point on Monday.

But the KDP High Yield Daily Index gained 5 basis points on Tuesday to close at 73.29, on top of Monday's 18 bps gain. Its yield came in by 2 bps, to 7.08%, after having declined by 6 bps on Monday.

And the Merrill Lynch High Yield Master II Index went seven-up on Tuesday, adding 0.099% on top of the 0.249%,advance seen on Monday.

That latest gain raised the index's year-to-date return to 2.016% for the year on Tuesday, a new 2012 peak level. That was up from Monday's 1.915%, which had been the previous peak level for the year so far.

Bon-Ton gets better

One of the more notable names in an otherwise largely featureless secondary was that of York, Pa.-based retailer Bon-Ton Stores, whose 10¼% notes due 2014 "were up an honest 3 points," a trader said, noting that over $28 million of the bonds had traded, making it the busiest junk bond of the day.

Another trader saw them up at least 3 points from prior levels, going home at 58 bid, 59 offered.

Those sharp gains followed the news that Bon-Ton had hired a new president and CEO in Brendan Hoffman, the former chief of the upscale Lord & Taylor LLC.

He takes over on Feb. 7.

The management change, which will see current CEO Bud Bergren move over to the chairman's post, follows cuts in the company's credit rating from both Standard & Poor's and Moody's Investors Service, which noted Bon-Ton's ongoing weak performance.

© 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.