Nationstar, AOT deals price, move up, Hovnanian, Intelsat also drive by; calendar swells

By Paul Deckelman and Paul A. Harris

New York, Sept. 19 - The high-yield primary arena continued to rack up the new deals on Wednesday, with almost $2.4 billion of new paper coming to market during the session, most of it in the form of opportunistically timed, quickly marketed drive-by offerings.

That was certainly true of the day's largest deal, from homebuilder K. Hovnanian Enterprises, Inc., which turned the key on a two-part, $797 million offering of eight-year first- and second-lien secured paper.

Ditto for communications satellite operator Intelsat Jackson Holdings SA, which priced $640 million of 10-year paper, and for residential lender Nationstar Mortgage LLC, which did $300 million of eight-year paper.

The sole scheduled pricing to come off the forward calendar came from mattress maker AOT Bedding Super Holdings, which brought a downsized $650 million tranche of eight-year notes to market.

The AOT Bedding and Nationstar deals were seen by traders to have firmed solidly when they hit the secondary market.

The traders also saw one of Tuesday's deals, from drug maker Par Pharmaceutical Cos. Inc., come off from the hefty gains those bonds had notched in initial aftermarket dealings after pricing.

Away from the transactions which have actually priced, the primary was percolating with numerous announcements about upcoming new deals, as borrowers looked to take advantage of the currently benign new-issue climate.

Move than $4.6 billion of prospective issuance climbed aboard the forward calendar - twice the amount of paper which actually priced during the session. The biggest such deal was Valeant Pharmaceuticals International Inc., which is bringing a massive $2.25 billion multi-tranche offering to market. It was first thought that the Canadian drug manufacturer's mega-deal might be a same-day drive-by offering, but the bonds had not priced by the close of the session, and are now expected to be Thursday's business.

Thursday's session is also expected to see pricings from General Cable Corp., bringing a quickly shopped $550 million issue of 10-year notes, and from insurance provider CNO Financial Group. Inc., coming off the forward calendar with a $250 million eight-year secured piece of paper.

Apart from the new deals, traders said the market had a firm tone to it, but they saw little if any notable dealings.

Statistical indicators of market performance were firm on the session, including many at their best levels of the year.

Hovnanian resizes

Primary market news volume remained intense on Wednesday, which saw issuers raise a combined total of $2.39 billion.

K. Hovnanian priced a re-sized $797 million two-part senior secured notes transaction which saw $27 million of proceeds shifted to the first lien tranche from the second lien tranche.

The deal included an upsized $577 million tranceh of first lien notes (B3/CCC+) which priced at par to yield 7¼%. The trance was increased from $550 million, and the yield printed on top of yield talk.

Hovnanian also priced a downsized $220 million tranche of second lien notes (Caa2/CCC-) at par to yield 9 1/8%. The tranche was downsized from $247 million, and the yield printed at the tight end of price talk that had been set in the 9¼% area.

Credit Suisse, Citigroup and J.P. Morgan Securities were bookrunners for the quick-to-market debt refinancing deal.

AOT at the tight end

AOT Bedding Super Holdings priced a downsized $650 million issue of eight-year senior notes (Caa1/CCC+) at par to yield 8 1/8%, at the tight end of price talk that was set in the 8¼% area.

The notes issue was downsized from $725 million, with $75 million of proceeds shifted to the term loan.

Goldman Sachs, Morgan Stanley, UBS, Deutsche Bank and Barclays were the joint bookrunners for the acquisition financing.

Intelsat Jackson drives by

Intelsat Jackson Holdings priced a $640 million issue of senior notes due Dec. 15, 2022 (Caa2/CCC+) at par to yield 6 5/8%, in the middle of the 6½% to 6¾% yield talk.

Morgan Stanley, Credit Suisse, Barclays, Bank of America Merrill Lynch, Goldman Sachs, J.P. Morgan and Deutsche Bank were the joint bookrunners for the quick-to-market debt refinancing and general corporate purpose deal.

Nationstar at the tight end

In other drive-by action, Nationstar Mortgage LLC and Nationstar Capital Corp. priced a $300 million issue of eight-year senior notes (B2/B+) at par to yield 7 7/8%, at the tight end of yield talk which was set in the 8% area.

Credit Suisse and Bank of America Merrill Lynch were the joint physical bookrunners for the quick-to-market general corporate purposes deal. Barclays, RBS and Wells Fargo were joint bookrunners.

Valeant for Thursday

Valeant Pharmaceuticals is expected to price a $2.25 billion three-part offering of notes (B1/BB-) on Thursday, according to a buyside source.

The deal was announced as Wednesday's business, but was subsequently pushed into the Thursday session, the source added.

Included is a $500 million fungible add-on to the company's 7¼% notes due July 15, 2022. Although there is no official price talk, guidance is 104.75 to 105, the source said. Proceeds from the add-on will be used for general corporate purposes, including acquisitions.

In addition the company is expected to bring $1 billion non-fungible tranche of notes mirroring its 7% notes due 2020, and a $750 million non-fungible tranche of notes mirroring its 7¼% notes due 2022.

Those tranche sizes remain in play, the source said.

Again, there is no official talk. However the mirror notes are expected to come approximately 25 basis points behind the existing notes, the source said, adding that the 7% notes due 2020 are trading at 105.75 bid, 106.50 offered, and the 7¼% notes due 2022 are trading at 106 bid, 107 offered.

Proceeds from the mirror notes tranches will be used to help fund acquisition of Medicis Pharmaceutical Corp.

J.P. Morgan, Goldman Sachs and RBC are the joint bookrunners.

Talking the deals

Looking to what promises to be a very busy Thursday session, General Cable talked its $550 million offering of 10-year senior notes (B1/B+) to yield 5½% to 5¾%.

J.P. Morgan, Deutsche Bank, Wells Fargo, Credit Agricole and Goldman Sachs are the joint bookrunners.

Also CNO Financial talked its $250 million offering of eight-year senior secured notes (Ba3/B+) with a yield in the 6½% area.

Goldman Sachs and J.P. Morgan are the joint bookrunners.

ADS Waste starts Thursday

The active forward calendar saw a meaningful buildup on Wednesday.

ADS Waste Holdings Inc. plans to start a roadshow on Thursday for a $750 million offering of eight-year senior notes (Caa1//).

The roadshow wraps up on Tuesday.

Deutsche Bank, Macquarie, UBS, Barclays and Credit Suisse are the underwriters for the acquisition financing.

Sotheby's starts roadshow

Sotheby's started a roadshow on Wednesday for a $300 million offering of 10-year senior notes (Ba3/BB), which are expected to price on Friday.

Goldman Sachs and J.P. Morgan are the joint bookrunners.

Proceeds will be used to redeem the company's 7¾% senior notes due 2015 at the make-whole price, and for general corporate purposes including the potential repayment of other debt.

Petaquilla starts Monday

In the face of a hostile takeover bid from Inmet Mining Corp., Petaquilla Minerals Ltd. plans to proceed with its effort to place $210 million of five-year senior secured notes with qualified investors, an informed source said on Wednesday.

On Sept. 5 Inmet announced that it was attempting to acquire Petaquilla for C$112 million, in a cash and stock bid.

In the press release announcing the bid, Inmet specified that in addition to customary closing conditions its bid was subject to Petaquilla withdrawing the notes offer.

Nevertheless the deal, which had been in the market during the mid-summer period, is set to relaunch with a roadshow beginning Monday in the United States. A London roadshow is set to commence on Oct. 1.

Global Hunter Securities is the sole bookrunner.

Proceeds will be used to refinance debt and to finance capital expenditures related to the Lomero-Poyatos mine in Spain.

Glatfelter starts roadshow

P.H. Glatfelter Co. began a roadshow on Wednesday for a $200 million offering of eight-year senior notes (existing ratings Ba1/BB+), which are expected to price on Friday.

J.P. Morgan has the books for the debt refinancing deal.

Baker & Taylor via Jefferies

Baker & Taylor Acquisition Corp. plans to price $150 million of 4.5-year senior secured notes (expected ratings B3/CCC) early in the Sept. 24 week, according to an informed source.

Jefferies & Co. is the sole bookrunner for the debt refinancing.

Linc private placement

Linc USA GP is roadshowing a $265 million private placement of five-year senior secured notes, according to an informed source who added that the roadshow is set to wrap up on Monday, and the deal is expected to price in the early to middle part of the week ahead.

Imperial Capital is the lead placement agent. ISM Capital is the joint placement agent.

High-yield credit ratings are expected to be announced shortly, the source said on Wednesday.

The Houston-based energy exploration and production company plans to use the proceeds to repay debt, fund capital expenditures and for general corporate purposes.

The issuer is a subsidiary of Australia-based Linc Energy Ltd.

Yields grinding lower

Roaring volume in the primary market has not caused any apparent indigestion among high-yield accounts, according to a mutual fund manager whose portfolio includes junk bonds and leveraged loans.

That could change, said the source, who added that the index's yield to worst grinds lower with each succeeding day; at the time of the Wednesday afternoon conversation the JP Morgan high yield index composite yield to worst was 6.21%, the source said, adding that it would no doubt go lower when Wednesday's action is figured in.

The market could back up, the buysider conceded, but added that there is no evidence that the turn is imminent.

"There's no point in talking about this deal or that deal because they're all oversubscribed, and allocations are always awful," the investor said.

Meanwhile institutional cash and retail cash keeps pouring in, according to the source.

Nationstar, AOT deals move up

When the new Nationstar 7 7/8% notes due 2020 were freed for secondary dealings, a trader saw the Lewisville, Tex.-based mortgage lender and loan servicer's quickly shopped $300 million offering having moved up to 101 5/8 bid, 102 1.8 offered.

A second trader pegged the bonds at 101¾ bid, 102¼ offered.

A trader saw AOT Bedding Super Holdings' 8 1/8% notes due 2020 at 101 3/8 bid, 101½ offered.

That was up from the par level at which the Atlanta-based maker of such well-known mattress brands as Serta and Simmons had priced its $650 million issue, after downsizing the deal from an originally planned $725 million.

Hovnanian, Intelsat too late

The days other two pricings - from Hovnanian Enterprises and Intelsat Jackson Holdings - came to market too late in the day for any kind of secondary dealings.

However, traders saw some brisk activity in Hovnanian's existing bonds, notably the Red Bank, N.J. based homebuilder's 10 5/8% senior secured notes due 2016. That particular issue is going to be taken out via a tender offer which the company announced on Tuesday, funded by the proceeds from the new bond offerings.

The bonds rose about a point on the session to just over the 108½ level - the takeout price, including an early tender payment, for those holders who tender their bonds by the early tender deadline at 5 p.m. ET on Oct. 1.

Some $38 million of those bonds were changing hands, tops on the Junkbondland most-actives list for the day, a market source said.

Hovnanian's 8 5/8% notes due 2017 were also seen a bit firmer, at 95 bid, although on considerably less volume than the 2016 bonds - about $6 million at mid-afternoon.

Intelsat Jackson's Bermuda-based parent company's 11½% notes due 2017 were trading around 107¼ bid, on fairly brisk volume of about $10 million.

Par comes off peak

Looking at the deals which priced on Tuesday, a trader noted that the Par Pharmaceutical 7 3/8% notes due 2020 - which priced at par, appropriately enough, and then rose to 102 bid, 102½ offered in the aftermarket, initially held those levels, trading around the same price on Wednesday morning.

However, he saw the Woodcliff Lake, N.J.-based specialty pharmaceuticals manufacturer's new deal having come down from those highs to around 101 bid, 101½ offered late in the afternoon.

Two other traders saw the bonds late Wednesday at 101¼ bid, 101¾ offered.

Tuesday deals struggle

Traders meantime saw Tuesday's other deals mostly just treading water around their respective issue prices on Wednesday.

For instance, both tranches of Biomet Inc.'s $1.625 billion two-part offering were observed trading below issue - the Warsaw, Ind.-based medical devices marker's $825 million add-on to its existing 6½% senior notes due 2020 were seen by a trader at 104¾ bid, 105¼ offered, straddling its 105 issue price.

However, the company's $800 million of 6½% senior subordinated notes due 2020 were quoted at 98¾ bid, 99¼ offered - well down from the par level where those bonds had priced on Tuesday after the issue was upsized from an original $500 million.

Amkor Technology Inc.'s 6 3/8% notes due 2022 were seen hugging the par issue price for the Chandler, Ariz.-based semiconductor services company's quick-to-market $300 million deal.

The same held true for Nielsen Finance LLC's 4½% notes due 2020. The New York-based consumer marketing and broadcasting audience data provider's $800 million deal - upsized from its originally announced $750 million - was seen by a trader Wednesday at 99¾ bid, 101¼ offered.

Things start to back up

One of the traders opined that "people were balking a little at levels though out the day." He said that applied equally to "secondary prices, as well as the new-issue talk on some of these deals. Guys today were not just saying 'okay, that's where they're offered, I'll pay that, can you offer any more.' They were down-bidding, they were trying to buy things cheaper, or they were just passing on offerings."

"Most of these are BB- type deals , and they're not trading really well."

A second trader said that from where he sat, "the secondary had a good tone to it" - but outside of the aforementioned activity in Hovnanian, "there were no real price movements that were notable."

Indicators up on day

Statistical indicators of junk market performance were meantime higher across the board Wednesday for the first time after several sessions in which the indicators were mixed.

The Markit Group CDX North American Series 18 High Yield Index gained 3/32 point to end at 102 bid, 102 1/8 offered, after having been unchanged on Tuesday after a loss Monday.

The KDP High Yield Daily Index scored its second consecutive gain on Wednesday, rising by 7 basis points to 75.24 - a new high for the year, eclipsing the old mark of 75.17 just set on Tuesday.

Its yield fell by 4 bps to 5.69%, after having come in by 2 bps on Tuesday. The yield is at a new low for the year, surpassing the previous 2012 tight yield of 5.73%, set on Tuesday.

And the widely followed Merrill Lynch U.S. High Yield Master II Index meanwhile stretched its recent winning streak to an incredible 24 straight sessions, dating all the way back more than a month, to Aug. 17.

It rose by 0.027%, on top of Tuesday's 0.066%

The latest gain lifted its year-to-date return to 12.814% - a new 2012 peak, bypassing the old mark of 12.784% that had just been set on Tuesday. The index is now at its highest level since the last session of 2010, when it closed out that year with a 15.19% return.

Its yield to worst meanwhile stood at 6.207%%, actually up slightly from 6.199% on Tuesday, its new low point for the year.

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