Quiet end to 'a September to remember;' TMS hits road; Stackpole awaited; Caesars struggles

By Paul Deckelman and Paul A. Harris

New York, Sept. 30 - The high-yield primary arena closed out on a quiet note on Monday, a day on which one trader said it was "a September to remember" in terms of a monthly record for new-deal volume. No issues priced during the session in vivid contrast to last week's torrid pace, which saw more than 20 transactions totaling over $17 billion of new paper getting done.

While there were no pricings, syndicate sources said that there was still news percolating around, such as price talk on industrial manufacturer Stackpole International's $360 million eight-year secured notes deal, which could come to market after the books close on Tuesday.

And they heard that TMS International Corp., a supplier of raw materials and provider of various industrial services to steel manufacturers, had begun a roadshow for its $300 million eight-year offering.

The secondary market, meantime, was generally softer between investor wariness over the drama being played out in Washington over the debt ceiling and the market's need to digest all of the billions of dollars of new paper that has recently come clattering down the chute, totaling some $47 billion in the past month.

Looking at some of the recent notable deals, traders saw the more than $2 billion of new senior secured bonds that Caesars Entertainment Resort Properties, LLC priced on Friday trading well below their par issue prices on both the first- and second-lien tranches.

Another big deal not gaining much traction was General Motors Co.'s $4.5 billion three-part behemoth, with all of that transaction's three tranches also seen below issue.

And Dell Inc.'s single-tranche $1.5 billion offering from last week continued to fall further and further from its par issue price.

With so much newly priced paper floating around, dealings in those issues - or in existing issues of companies that were doing deals, such as Caesars and ADT Corp. - continued to dominate secondary market activity, traders said.

Statistical measures of market performance were seen softer.

TMS starts roadshow

The biggest September in the history of the high-yield primary market closed out with a muted Monday session that saw no new issues price.

A roadshow started on Monday for the TMS International $300 million offering of eight-year senior notes.

The deal is expected to price late this week.

Goldman Sachs, JP Morgan, HSBC and Deutsche Bank are the bookrunners for the buyout financing deal.

Stackpole talked 7¾% to 8%

Stackpole International talked a $360 million offering of eight-year senior secured notes (B2/B+) to yield 7¾% to 8%, a syndicate source said on Monday.

Books close 10:30 a.m. ET Tuesday.

Morgan Stanley, Nomura, RBC and UBS are the joint bookrunners.

Proceeds will be used to finance the acquisition of the company by Crestview Partners and to refinance existing debt.

Greece's OPAP two-part deal

Emma Delta Finance set yield talk for the €400 million two-part offering of four-year senior secured notes backing its acquisition of Greece-based betting enterprise Organisation of Football Prognostics SA (OPAP).

A €250 million tranche of first-lien notes is talked with a yield in the 8½% area, and a €150 million tranche of second-lien notes is talked to yield 12%.

Books closed late Monday in Europe and are set to close at 10 a.m. ET on Tuesday for accounts in the United States.

Jefferies LLC is the bookrunner.

Big September and then...

September 2013 enters the primary market record book as the biggest September ever, with $47.41 billion of junk-rated, dollar-denominated issuance.

The past month eclipses the old record, September 2012's $44.36 billion, by $3.05 billion.

September 2013 was a month of megadeals, a syndicate official recounted, noting that three issuers brought nearly $15.6 billion (33%) of the total: Sprint Corp. brought $6.5 billion, Tenet Healthcare Corp. came with $4.6 billion and General Motors brought $4.5 billion.

Tranche sizes, overall tended to be big, the official remarked.

A check of the Prospect News data base bears out this color. September's average tranche size was $701 million, compared to the $516 million average tranche size seen in September 2012, the second-biggest September on record.

Don't look for the closing months of 2013 to generate the kinds of numbers we saw in September, the banker advised, but added that there are still some sizable merger-and-acquisition-related transactions likely to come before the end of the year.

However, the theme for the remainder of 2013 is going to be "opportunistic financing," the source said.

The remainder of the present week may be somewhat quieter than last week, but it won't be dead, the banker added.

"There would have been a drive-by deal today, but they decided not to go forward," the source confided, adding that uncertainty surrounding a possible shutdown of the United States government has created volatility in the capital markets.

This sellsider, however, professed visibility for at least three new deals this week.

Caesars struggles

Among specific recently priced issues in the secondary market, a trader called Friday's new $2.15 billion two-part secured paper offering from Las Vegas-based gaming giant Caesars Entertainment "an interesting one," quoting its 8% first-lien senior secured notes due 2020 having traded as low as 98¼ in morning dealings, although he saw the bonds having recovered a little to go home at 99 bid, 99½ offered.

Caesars' 11% second-lien senior secured notes were finishing at 97½ bid, 98¼ offered.

A second trader pegged the 8% notes at 98½ bid, 99 offered, and the 11s all the way down at 96½ bid, 97 offered.

At a third shop, a trader located the 8% notes at 98 5/8 bid, 991/8 offered, while seeing the 11s at 97 3/8 bid, 97 7/8 offered.

Both of those tranches were trading well below the par level at which Caesars priced them on Friday, after having upsized the overall deal from an originally planned $1.85 billion.

The company upsized the 8% notes to $1 billion from an originally planned $500 million, while downsizing the 11% notes to $1.15 billion from $1.35 billion originally.

Existing Caesars active

One of the traders remarked that Caesars' existing debt made up "two of the three highest-volume names on Friday," including its 10% notes due 2018.

A market source said that over $25 million of those notes had traded on Friday, with the bonds losing a point to go home at 54 bid.

Trading in the issue slackened off considerably on Monday, with only about $3 million having changed hands, but the bonds tumbled more than 1 point to go home just below the 53 bid mark.

Caesars' 8½% notes due 2020 had also been very busy during Friday's session, with over $16 million of the bonds having changed hands in round-lot trades, as well as numerous additional smaller odd-lot transactions and the bonds losing ¼ of a point on the day to end at 92¾ bid.

On Monday, the 81/2s were seen as probably the busiest bonds in the Caesars capital structure, with over $8 million having traded, losing another ¼ of a point to close at 92½ bid.

Friday deals above par

Apart from the slippage in Caesars' new paper, Friday's other deals seemed to be at least holding their own, although they seemed a bit easier than the initial aftermarket levels seen after their respective pricings.

Howard Hughes Corp.'s 6 7/8% notes due 2021were quoted by a trader on Monday at 100 5/8 bid, 100 7/8 offered - off a little from Friday's finish at 100¾ bid, 101¼ offered, but still up from the par level at which the Dallas-based property developer had priced its $750 million drive-by offering, after having upsized that deal from an originally announced $500 million.

A second trader, however, said he had "not seen Hughes at all," joking that the bonds seemed as hard to find as the eponymous company's famously reclusive billionaire founder had been during his lifetime.

Forum Energy Technologies, Inc.'s 6¼% notes due 2021 stayed at 100¾ bid, 101¼ offered on Monday, about unchanged from their initial aftermarket levels after the Houston-based manufacturer of drilling equipment and other products for the energy exploration industry priced its $300 million issue at par.

Allegion US Holding Co.'s 5¾% notes due 2021 lost½ point on Monday to end at 100¾ bid, 1011/4, off from their initial aftermarket levels above the 101 bid mark, but still above the par level where the Swords, Ireland-based provider of security products had priced its $300 million offering on Friday.

Thursday's $250 million fungible add-on by Clayton William Energy, Inc. to its existing 7¾% notes due 2019 eased to 99¼ bid, 99 7/8 offered, versus the par level at which the Midland, Texas-based oil and natural gas exploration and production company had priced its deal.

GM spins its wheels

Going back a little earlier last week, traders said that General Motors' new three-part issue for the most part continued to trade below the par level at which the Detroit automotive giant had priced each of its three $1.5 billion tranches last Tuesday.

A trader said that he saw the company's 3½% notes due 2018 offered "as cheap as par" at one point during the day, while seeing those bonds offered at 100 1/8 going home. He saw its 4 7/8% notes due 2023 offered at 98, and its 6¼% bond due 2043 offered at 991/4.

He said that bids were probably within ¼ of a point to ½ of a point of those offered levels, but "for some reason, I was just seeing lots of offers."

Another trader saw the 3½% notes parked at 99¾ bid, par offered, unchanged on the day, while the 4 7/8s were at 97½ bid, 98 offered, down 3/8 on the day, and its 6¼% long bonds were at 98¼ bid, 98¾ offered, down¼ point.

ADT stays up there

While GM's bonds seemed to be stuck in reverse, last Tuesday's other big deal - the $1 billion offering of 6% notes due 2021 Boca Raton, Fla.-based security alarm company ADT Corp. - was more than holding its own, traders said.

One of them quoted the notes at 101 5/8 bid, 101 7/8 offered off about 1/8 of a point on the day but still well up from their par issue price.

ADT's existing 3½% notes due 2022 were, meanwhile, among the busier bonds on Monday, with over $9 million having changed hands, but they were unchanged at 85 bid.

Dell decline continues

Computer giant Dell's $1.5 billion issue of 5 5/8% first-lien notes due 2020 were seen on Monday continuing to fall further and further from the par price at which the Round Rock, Texas-based company had priced those bonds last Monday.

A trader quoted them having fallen to 96¾ bid, 97¼ offered, calling them off another ¾ of a point on the day.

"They're struggling," another trader observed, noting that the deal had already been downsized from its initial $3.25 billion size with the elimination of a planned tranche of second-lien notes. And the remaining first-liens were then further cut down from $2 billion to $1.5 billion, perhaps indicating weak demand.

And then when the bonds were priced, he said, "a lot of guys were just flipping it," rather than looking to hold onto the paper.

Market indicators head lower

While Friday's activity level was busy with all of the new deals pricing, a trader said that Monday's market was characterized by "light volume today."

He said that the shutdown scenario being played out in Washington "has people on the sidelines."

And he said that people also "are keenly focused on the Friday employment data" for September, which may determine whether the Federal Reserve starts its long-dreaded tapering off of quantitative easing any time soon.

Statistical junk-market performance indicators were meantime lower for a second consecutive session on Monday.

The Markit Series 21 CDX North American High Yield index eased by 3/32 of a point to end at 104 7/16 bid, 104 9/16 offered, the first downturn since the new Series 21 index began trading at the end of last week following the regular semiannual "roll" out of the previous Series 20 index.

The KDP High Yield Daily index moved lower for a second straight session, as it slid by 24 basis points to end at 73.42. On Friday, it lost 4 bps. Its yield jumped by 8 bps on Monday to 6.15% after having been unchanged on Friday, but after having widened over four sessions before that.

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