Steel Dynamics, Western, GEO deals price; Chesapeake churn continues; Travelport up on refi news

By Paul Deckelman and Paul A. Harris

New York, March 12 - The high-yield primary sphere saw a trio of new issues totaling $1 billion come to market, syndicate sources said on Tuesday.

All three of the day's deals were opportunistically timed and quickly shopped transactions.

Metals manufacturer Steel Dynamics Inc. priced $400 million of 10-year notes, which moved up modestly when they hit the aftermarket.

GEO Group, Inc., which provides corrections, rehabilitation and other services to government agencies in the United States and abroad on an outsourced basis, did $300 million of 10-years, which firmed by more than a full point when they moved in the secondary realm.

And petroleum processor Western Refining, Inc. came to market with $350 million eight-year notes, although they appeared too late in the session for any kind of aftermarket activity.

Europe saw Italian automotive powerhouse Fiat SpA drive by with €1.25 billion of five-year notes.

Monday's dollar-denominated deals from real estate operator CBRE Services, Inc. and clothing maker Levi Strauss & Co. were both seen on Tuesday trading up more than a point from their respective issue prices.

Away from the deals actually priced, the syndicate sources heard talk out on Alaskan engineering, construction and logistics company NANA Development Corp.'s six-year note issue, which is expected to come to market on Wednesday.

Away from the new deal world, Chesapeake Energy Corp.'s 2019 bonds continued to move up in very active dealings, with investors apparently putting their money behind their belief that the courts will not allow the natural gas producer to call those bonds for redemption at par, well below current trading levels.

Speculation over a possible call on a different bond issue, from retailer J.C. Penney Co. Inc., has recently been driving activity in those 2023 notes. Those bonds continued to gain on Tuesday, although they - along with the company's shares - may have been lifted by market rumors that the underperforming company's CEO, Ron Johnson, could be skating on thin ice.

Even though Penney normally ignores market scuttlebutt, it took the unusual step of denying that Johnson's job was in any danger.

Travelport LLC's bonds firmed smartly in busy trading, after the travel services provider announced refinancing plans that include an exchange offer for some of that outstanding paper.

Statistical indicators of market performance were mixed for a second consecutive session on Tuesday.

Steel Dynamics drives by

Steel Dynamics priced a $400 million issue of 10-year senior notes (Ba2/BB+) at par to yield 5¼%.

The yield printed at the tight end of yield talk set in the 5 3/8% area.

The deal went very well according to a trader who took interest and who heard that there were "several billion" of orders in the book.

Joint physical bookrunner BofA Merrill Lynch will bill and deliver. Goldman Sachs & Co. and J.P. Morgan Securities LLC were also joint physical bookrunners.

The Fort Wayne, Ind.-based steel producer and recycler plans to use the proceeds, along with available cash, to fund the tender offer for its 6¾% senior notes due 2015 and for general corporate purposes, including debt repayment, capital expenditures and working capital.

Western Refining atop talk

In a deal that was in the market overnight, Western Refining priced a $350 million issue of eight-year senior notes (Ba2/BB-) at par to yield 6¼%, on top of yield talk, according to a market source.

The deal was said to be four to five times oversubscribed, according to the trader.

Deutsche Bank Securities Inc., BofA Merrill Lynch, Credit Suisse Securities (USA) LLC, Goldman Sachs & Co. and RBS Investment Bank were the joint bookrunners.

The El Paso-based independent refiner plans to use the proceeds to fund the tender offer for its 11¼% notes due 2017 and for general corporate purposes.

GEO Group at tight end

GEO Group priced a $300 million issue of 10-year senior notes (B1/B+) at par to yield 5 1/8%.

The yield printed at the tight end of yield talk set in the 5¼% area.

BofA Merrill Lynch, Barclays, SunTrust Robinson Humphrey Inc., Wells Fargo Securities LLC and J.P. Morgan Securities LLC were the joint bookrunners for the quick-to-market debt refinancing deal.

Fiat five-year deal

In the European market, Italian car-maker Fiat launched and priced a €1.25 billion issue of five-year senior notes (expected ratings B1/BB-/BB-) at par to yield 6 5/8% on Tuesday.

The deal hit the market at benchmark size, with initial yield discussions taking place in the context of 7%, according to a market source.

It played to over €7 billion of orders, according to a syndicate source who added that it went well.

Banca IMI, Barclays, Credit Agricole CIB, Mediobanca, Royal Bank of Scotland, Santander and UBS were the joint bookrunners.

Barclays will bill and deliver.

Elsewhere in Europe, Peugeot SA's finance company, Banque PSA Finance, has scheduled a lender call, according to a debt capital markets banker.

Last month, Standard & Poor's lowered the long- and short-term counterparty credit ratings on Banque PSA Finance and its subsidiary Credipar to BB+ from BBB-. The outlooks on both companies are negative.

NANA sets talk

At $3.53 billion, the active forward calendar of roadshow deals is conspicuously big, given how the market has been dominated by drive-by deals during the past six months.

NANA Development talked its $275 million offering of six-year notes (B3/B+) with a yield in the 9½% area on Tuesday.

The deal, which has been making the roadshow rounds, is expected to price on Wednesday via Goldman Sachs.

Among the other deals on the calendar expected to price by Friday's close, McGraw-Hill Global Education Holdings, LLC's $1.05 billion offering of eight-year first-lien senior secured notes (B2//BB) stands out due to its size.

Official price talk has yet to emerge, according to a trader who said that discussions have taken place in the 8½% to 9% yield context.

The deal is expected to price on Friday, the trader added.

Credit Suisse, Morgan Stanley, BMO, Jefferies, Nomura and UBS Investment Bank are the joint bookrunners for the LBO financing.

Steel Dynamics' strength

In the secondary market, a trader saw the new Steel Dynamics 5¼% notes due 2023 trading at 100½ bid, 101 on the break, after the Fort Wayne, Ind.-based steel producer and recycling company priced its quick-to-market $400 million issue of those bonds at par.

A little later in the afternoon, he saw the bonds having improved a little to 100¾ bid, 101 offered.

A second trader pegged the new bonds at 101 bid, 101¼ offered.

GEO Group shows gains

Several traders saw gains of more than 1 point in GEO Group's 5 1/8% notes due 2023, after the Boca Raton, Fla.-based outsource provider of detention, correction and rehabilitation services to governmental entities came to market with its $300 million same-day bond deal.

One trader quoted the bonds at 101 bid, 101 3/8 offered, although another saw the bonds get as good as 101¼ bid, 101 5/8 offered.

Western Refining not seen

A trader said late in the day that at his shop, "we're all waiting on our tippy-toes" for Western Refining's $350 million offering of eight-year notes, which had just been announced during Monday's session.

The El Paso, Texas-based petroleum refining company's bonds did eventually price, but that occurred well after activity for the day had pretty much wound down.

Monday deals trade better

A trader said that he "didn't see a thing today" in CBRE Services' new 5% notes due 2023, which had priced on Monday.

However, at another desk, a trader did see the Los Angeles-based real estate company's upsized $800 million issue trading at 101 1/8 bid, 101¼ offered - well up from the par level at which those bonds had come to market, after having been upsized from an originally announced $500 million.

Levi Strauss' 6 7/8% notes due 2022 were seen by a trader on Tuesday to have been moving around at 109¼ bid, 110¼ offered.

The iconic San Francisco-based blue jeans manufacturer did a quickly shopped $140 million add-on to the existing $385 million of those notes, which it sold in April of 2012, pricing the new notes at 108 to yield 5.438%.

The 2022 notes, which had been trading around 109¼ bid last week before the add-on was announced, were seen late Monday having moved back up to around a 109-to-109¼ bid context.

New MetroPCS eases slightly

A trader said that MetroPCS Wireless Inc.'s big two-part offering traded at slightly easier levels on Tuesday versus where the Dallas-based pre-paid wireless operator's bonds had traded Monday, when they were freed for secondary market activity.

He saw the 6¼% notes due 2021 at 101 1/8 bid, 102 offered, off slightly from Monday's 101½ bid level.

That $1.75 billion issue had priced at par on Friday, too late in the session for any aftermarket dealings.

The other half of that giant-sized transaction - $1.75 billion of 6 5/8% notes due 2023 - was at 101 bid, 101 58 offered, down from the 101¼ level seen on Monday. Those bonds had also priced at par on Friday, too late in the session for any aftermarket.

Chesapeake churn

Away from the new deals, Chesapeake Energy's 6.775% notes due 2019 were the busiest in Junkbondland, with a market source seeing well over $46 million having changed hands during the session, just in round-lot dealings.

"So much paper traded," a source at another desk noted, pointing out that the bonds got as good as 106½ bid, up some 5/8 on the day at that point.

The notes finally went out with round-lots trading at 106 bid, up about 1/8 from where they had gone home on Monday on some $35 million of volume.

The bonds have been powered upward by investor skepticism over the Oklahoma City-based natural gas producer's announced intentions of calling those bonds at par plus accrued interest - well under where they have been trading this week and last.

When Chesapeake sold the $1.3 billion of bonds in February of last year, it wrote into the bonds' indenture a provision allowing it to call the notes at par plus accrued during a special early redemption period that began last November 15 and which is scheduled to conclude on Friday.

The company's failure so far to call the bonds at that drastically lower level gave the investors confidence that such a call would not be forthcoming - and some of them pointed out the need for Chesapeake to give at least 30 days notice before redeeming the bonds.

Those market participants say that by not issuing a notice of redemption a month ago, Chesapeake has lost its window of opportunity for calling the bonds at the cheaper rate and now can only take them out using a much more expensive make-whole call, which could cost as much as $400 million more to call the entire issue for redemption.

However, Chesapeake on Friday filed suit with the federal court in Manhattan, seeking a declarative legal ruling that it can call the bonds at the lower price as long as it officially announces the redemption during the special early redemption timeframe. It named the bonds' trustee, Bank of New York Mellon Trust Corp., as the defendant, seeking to force it to accept a redemption call at par.

On Tuesday, the trustee and an ad-hoc bondholder group responded with their own legal filings, asking the court to declare that Chesapeake had waited too long and had thus missed the boat.

J.C. Penney rally continues

Another company that has been fighting with its bondholders on whether or not there will be a call of one of its issues is J.C. Penney.

A group of noteholders said some weeks ago that if the Plano, Texas-based retailer draws down on a revolving credit line to fund operations, that could trigger a default and thus force the company to call its 7 1/8% notes due 2023 at par.

Penney responded in a Delaware state court last month - and reiterated in additional briefs filed on Monday - that any claims of a possible default were without merit. A number of analysts have also expressed skepticism about a default scenario.

Nonetheless, that has not kept those notes from steadily climbing into the mid-to-upper 90s from prior levels in the middle 80s, and those bonds gained another 2¼ points on Tuesday, with a market source seeing them going home at 98 bid, although he said that trading was relatively light - only about $4 million.

A trader at another desk said that aside from the activity in that bond, dealings in Penney paper were very light, with almost nothing doing elsewhere in the capital structure.

On Tuesday, other factors besides the allegations of possible future default were seen at play in the bonds' rise.

For one thing, Penney put the kibosh on rumors that CEO Ron Johnson was getting ready to leave his post after a turnaround effort has failed to produce positive results.

Bloomberg reported on Tuesday that rumors of Johnson's departure were "false," quoting an e-mail from a company spokesperson.

In its earnings report out last month, J.C. Penney reported a 25% decline in annual revenues, which fell to $13 billion, the lowest level since 1987. Johnson has attempted to change the company's image by turning stores into mini-boutiques and by taking away sales and coupons.

However, customer backlash soon resulted in the reinstitution of sales and other discounts.

Penney's 5.65% notes due 2020 ended at 79½ bid, up a point.

Travelport rises on refi

Elsewhere, a trader said Travelport's 9 7/8% notes due 2014 were "up a bunch" as the company announced a refinancing plan.

The trader pegged the issue at par, up from 96 bid, 97 offered previously. Trading was seen as heavy, with over $43 million of the bonds having changed hands.

He also saw the 11 7/8% notes due 2016 rising "a little bit" to around 79.

Another trader deemed the 9 7/8% notes up 3 points at par, while the 11 7/8% notes increased 2½ points to 801/2. Its 9% notes due 2016 improved to 99 bid, a gain of 7 points on the day.

The Atlanta-based travel services provider said that bondholders had agreed to a plan to swap their debt for new 13 7/8% notes due 2016 or floating-rate notes due 2016, plus cash.

The company also reached an agreement with its PIK-loan lenders to swap the debt for equity.

Travelport also reported quarterly results on Tuesday. Though the company more than doubled its loss to $171 million - compared to $84 million the previous year - the results were in line with expectations.

Market indicators mixed

Overall, statistical junk performance indicators were mixed for a second straight session on Tuesday, after having been higher across the board for most of last week.

The Markit Series 19 CDX North American High Yield index eased by 1/32 of a point - its first retreat after three straight advances. It finished Tuesday at 104 5/32 bid, 104 7/32 offered, after gaining a quarter-point on Monday.

The KDP High Yield Daily index was unchanged on Tuesday at 75.56, after having lost 1 basis point on Monday - its first loss after four straight gains. Its yield rose by 1 bp to 5.54%, after having been unchanged on Monday.

However, while those two indexes were treading water, the widely followed Merrill Lynch High Yield Master II index put up its 10th consecutive advance, rising by 0.076% on Tuesday, on top of the nearly identical 0.078% gain seen on Monday.

The latest improvement lifted its year-to-date return to 2.446%, a new peak level for 2013 so far, and the sixth consecutive session it has reached a new high for the year. The previous high water mark was Monday's 2.368% reading.

Stephanie N. Rotondo contributed to this review

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