Upsized Michaels, Gannett, Gibson price; busy Thursday on tap; Chemtura, Schaeffler slip

By Paul Deckelman and Paul A. Harris

New York, July 24 - The high-yield primary pace picked up on Wednesday, as over $1.6 billion of new dollar-denominated, fully junk-rated paper from domestic or industrialized-country borrowers came to market in three tranches - almost twice as much as got done during Tuesday's session.

The two biggest deals of the day were upsized drive-by transactions, with art supplies retailer Michaels Stores Inc. pricing $800 million of five-year senior PIK toggle notes and newspaper publisher Gannett Co. Inc. doing $600 million of seven-year notes.

Musical instrument maker Gibson Brands, Inc. came to market with an upsized $225 million scheduled forward calendar offering of five-year secured notes.

Syndicate sources meantime said that a slew of deals could price on Thursday now that price talk has emerged on them, including offerings from tobacco merchant Alliance One International, Inc., chemicals maker and HVAC equipment manufacturer LSB Industries, Inc., energy service company Parker Drilling Co. and builder Woodside Homes Co. LLC.

Among recently priced deals, Chemtura Corp.'s bonds saw a third straight session of very active dealings and moved to the downside. Another recent deal losing ground was Schaeffler AG's notes.

Away from such recent deals, traders said the overall junk secondary market was easier. Statistical market-performance indicators were down across the board after two mixed sessions and, before that, three straight sessions of gains all around.

Michaels' PIK toggle drive-by

Amid a heavy news volume, the primary market generated $1.62 billion of proceeds on Wednesday as three issuers brought single-tranche dollar-denominated deals.

Executions were tight.

All three deals upsized.

Two priced at the tight end of talk, and the other priced through price talk.

Two of the three came as drive-bys.

Michaels Stores priced an upsized $800 million issue of five-year senior PIK toggle notes (Caa1/CCC+) at par to yield 7½%.

The quick-to-market deal was upsized from $700 million.

The yield printed at the tight end of the 7½% to 7¾% yield talk.

J.P. Morgan, Goldman Sachs, Deutsche Bank, Wells Fargo, Barclays, Morgan Stanley, BofA Merrill Lynch and Credit Suisse were the joint bookrunners for the dividend deal.

Gannett upsizes

Gannett priced an upsized $600 million issue of 5 1/8% seven-year senior notes (Ba1/BB) at 98.566 to yield 5 3/8%.

The quick-to-market deal was upsized from $500 million.

The yield printed at the tight end of yield talk that was set in the 5½% area.

JPMorgan, Citigroup, Barclays, Mitsubishi, Mizuho, SunTrust and US Bancorp were the joint bookrunners.

The McLean, Va.-based media and marketing solutions company plans to use the proceeds to repay its revolver and other current debt as well as for general corporate purposes. The additional proceeds resulting from the upsizing of the deal will be also be used for general corporate purposes.

Gibson prices through talk

Gibson Brands priced an upsized $225 million issue of five-year senior secured notes (B2/B) at par to yield 8 7/8% on Wednesday, according to an informed source.

The deal was upsized from $200 million.

The yield printed 12.5 basis points below the tight end of the 9% to 9¼% yield talk.

Jefferies and Wells Fargo were the joint bookrunners for the debt refinancing.

Talking the deals

In what is shaping up to be a very busy Thursday, dealers released price talk on the majority of dollar-denominated deals that are slated to price before the weekend.

Alliance One talked its $790 million offering of eight-year senior secured second-lien notes (Caa1/B-) with a yield in the 9¼% area.

Deutsche Bank, Credit Suisse, ICBC, ING, Natixis and Standard Chartered Bank are managing the sale.

LSB Industries, Inc. talked its $400 million offering of eight-year senior notes (Ba3/B+) with a yield in the 6¾% area.

Wells Fargo is the left bookrunner. BofA Merrill Lynch and JPMorgan are the joint bookrunners.

Parker Drilling talked its $225 million offering of seven-year senior notes (B1/B+) to yield 7½% to 7¾%.

Goldman Sachs, Wells Fargo, BofA Merrill Lynch and RBS are the joint bookrunners.

And Woodside Homes talked its $200 million offering of senior notes due December 2021 (Caa1/B) to yield in the 6¾% area.

Credit Suisse, Moelis, Citigroup and Wells Fargo are the joint bookrunners.

U.S. Xpress' seven-year deal

The dollar-denominated forward calendar continued to build on Wednesday.

U.S. Xpress Enterprises Inc. kicked off a $250 million offering of seven-year senior secured second-lien notes due 2020 (expected ratings Caa1/B-).

Wells Fargo is the left bookrunner. Morgan Stanley is the joint bookrunner.

Proceeds will be used to repay the company's existing senior secured credit facility as well as its receivable securitization facility and other debt.

Stearns Lending secured notes

Stearns Lending, Inc. is roadshowing a $200 million offering of seven-year senior secured notes through the week ahead via sole bookrunner Jefferies.

The Santa Ana, Calif.-based independent mortgage origination and servicing company plans to use the proceeds to refinance debt and for general corporate purposes, including the acquisition of additional servicing rights from third parties.

Travelex's dual-tranche deal

News volume in the European high-yield primary remained notably high on Wednesday.

Travelex Financing plc completed a £350 million two-part five-year senior secured notes transaction (B2/B).

A £200 million tranche of fixed-rate notes priced at par to yield 8%, and a £150 million tranche of floating-rate notes priced at par to yield Euribor plus 600 bps.

BofA Merrill Lynch was the lead left bookrunner for the debt refinancing. Deutsche Bank, Barclays, Lloyds TSB and UBS were joint bookrunners.

Meanwhile talk surfaced on a couple of deals that have been on the road and are expected to price before the weekend.

CeramTec GmbH talked its €306.7 million offering of eight-year senior notes (/CCC+/) to yield 8¼% to 8½%.

Deutsche Bank, RBC and UBS are managing the sale.

And Italian online gaming company Gamenet SpA talked its €200 million offering of five-year senior secured notes (B1/B+) to yield in the 7¼% area.

UBS and Credit Suisse are global coordinators and joint bookrunners. UniCredit and Banca IMI are also joint bookrunners.

Gibson trades around issue

In the secondary market, a trader said that Gibson's new 8 7/8% senior secured notes were trading around par bid.

That's the level at which the Nashville-based manufacturer of guitars, pianos and other musical instruments and recording equipment had priced its deal a little while before.

The day's other deals, meantime, came to market later than that. While the trader had seen Irving, Texas-based art supplies retailer Michaels Stores' 7½% senior PIK toggle notes price, he correctly speculated that "we won't see anything [today] in that. The brokers are already starting to pull out" for the day.

And there was no immediate aftermarket seen in Gannett's new 5 1/8% senior notes.

Kodiak, Midcontinent better

Among the deals that priced on Tuesday, a trader saw Kodiak Oil & Gas Corp.'s 5½% notes due 2022 "wrapped around 100¼ all day" before going out at 100¼ bid, 100½ offered.

A second trader saw those bonds at 100½ bid, 101 offered, a gain of ¼ point.

The Denver-based independent oil and gas exploration and production company's quick-to-market $400 million issue had priced at par after having been upsized from the originally announced $300 million.

A trader said that Midcontinent Communications' 6¼% notes due 2021 were trading at 100¾ bid, 101 offered.

The Sioux Falls, S.D.-based cable, internet and phone service provider's $250 million transaction had priced at par, too late in Tuesday's session for any immediate aftermarket dealings at that time.

Chemtura, Schaeffler lower

Other recent deals, however, were seen on the downside for the session.

These included Chemtura's 5¾% notes due 2021, which were busily traded for a third straight session on Wednesday.

A market source said that over $20 million of the notes had changed hands on Wednesday - this on top of $26 million trading on Tuesday and $34 million on Monday. The Middlebury, Conn.-based specialty chemicals manufacturer's bonds were among the busiest in Junkbondland each of those three days.

He said that the bonds had finished at 99¾ bid, down 1 point on the session, the first such loss after several previous days of upside movement.

At another desk, a trader quoted the bonds at 99½ bid, par offered, calling that down ¾ point.

Chemtura had priced its quickly shopped $450 million issue at par on Thursday afternoon after having upsized it from the originally announced $400 million size. The bonds had come to market too late in the session Thursday for any trading, market participants said, but had been seen modestly higher when they were freed for the aftermarket on Friday, and they continued to climb on both Monday and again on Tuesday before giving up their gains on Wednesday.

Also on the downside, Schaeffler's 6 7/8% senior secured PIK notes due 2018 were seen by a trader as having plunged by 1 1/8 point on Wednesday, finishing at 102 bid, 103 offered.

While down from their peak levels north of 103 bid earlier in the week, the German industrial and automotive ball-bearing manufacturer's $1 billion issue remained well up from the 99.468 level at which it had priced last Thursday to yield 7%.

Little activity in HanesBrands

Apart from the new deals, a trader said that the secondary market "was still kind of quiet" on Wednesday. He chalked that up to "the time of the year," with the sultry summer having a calming effect on activity levels.

He called the market down ¼ to 3/8 of a point and said that "nothing too crazy" had gone on.

For instance, he said that there had been "not too much volume" in HanesBrands, Inc.'s 6 3/8% notes due 2020 at the 110 bid level - only one trade of $1 million or more - despite big news coming out of the Winston-Salem N.C.-based apparel maker on Wednesday.

HanesBrands announced that it will acquire sector peer Maidenform Brands Inc. in a $575 million deal, to be funded partly from current cash flow and the remaining from a draw on the company's revolving credit line - borrowings it said would be paid back within 18 months or less (see related story elsewhere in this issue).

Market indicators head south

Statistical junk market performance indicators turned lower across the board on Wednesday. They had been mixed for the two sessions before that, following three straight sessions on the upside all around at the end of last week.

The Markit Series 20 CDX North American High Yield index fell by 7/16 point on Wednesday, its third straight decline, to end at 105 5/16 bid, 105 3/8 offered. On Tuesday, it had eased by 5/8 point.

The KDP High Yield Daily index saw its second consecutive loss on Wednesday, sliding by 16 bps to go out at 74.39. On Tuesday, it had fallen by 4 bps - the first such loss after 10 straight session on the upside dating back to July 9.

Its yield rose by 5 bps to close at 5.79% after having been unchanged on Tuesday, which was likewise the end of a 10-session string of improvements.

And even the widely followed Merrill Lynch High Yield Master II index, which had previously bucked the negative trend, finally posted a loss on Wednesday, snapping an 11-session winning streak that also dated back to July 9.

On Wednesday, it was down by 0.326%, versus Tuesday's 0.053% gain.

The loss dropped the index's year-to-date return to 3.925%, down from Tuesday's 4.264% finish.

The return was down from its peak level for the year so far of 5.835%, recorded on May 9, though up solidly from its 2013 low point of 0.384%, set on June 25.

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