Columbus International megadeal prices with split-rated Sallie Mae, United in mostly quiet market

By Paul Deckelman and Paul A. Harris

New York, March 24 - Columbus International Inc. kicked off the new week in Junkbondland on Monday by pricing a $1.25 billion issue of seven-year notes.

Traders said that the Barbados-based telecommunications company's notes firmed smartly when they hit the aftermarket, helped by considerable demand for the issue among various type of investors, including - but not limited to - junk marketers.

That single-tranche deal was the sole purely junk-rated, dollar-denominated credit seen to have priced during the session, although Monday did top Friday's $400 million issuance tally, which also came from one single-tranche deal.

Junk players expressed some interest in two other transactions that priced, both carrying split ratings: Newark, Del.-based education financing company SLM Corp. and United Airlines, Inc. The latter was a two-part offering from the main operating unit of Chicago-based airline giant United Continental Holdings, Inc.

Away from the new-deal realm, Momentive Performance Materials. Inc., which dominated the most-actives listings on both Thursday and Friday, traded in far more restrained dealings on Monday. Traders saw the bonds from the Albany, N.Y-based manufacturer of specialty materials for high tech manufacturers ending mixed compared to where they had finished on Friday.

Things were also quieter in Walter Energy, Inc.'s established bonds, which had gyrated around in active dealings, and these too were a mixed bag. The Birmingham, Ala.-based metallurgical coal producer's recently priced PIK toggle notes remained well down from last week's par issue price. An energy analyst cited several likely reasons for the slide in the PIKs and the continued weakness in the established bonds.

Statistical market performance indicators were higher across the board for a second consecutive session.

Columbus atop tightened talk

Columbus International priced Monday's sole high-yield deal, a $1.25 billion issue of seven-year senior notes (B3/B) at par to yield 7 3/8%.

The yield printed at the tight end of revised yield talk in the 7½% area. Earlier talk was in the 7¾% area.

Timing on the deal was moved ahead; the deal had previously been expected to remain in the market until Tuesday.

Citigroup, J.P. Morgan and RBC were the joint bookrunners for the debt refinancing deal.

SLM 10-year bullet

In the crossover market, Sallie Mae priced an $850 million issue of non-callable 6 1/8% 10-year senior notes (Ba1/BBB-/BB+) at 99.082 to yield 6¼%.

The yield printed on top of yield talk.

Barclays, Credit Suisse Securities (USA) LLC and JP Morgan Securities LLC managed the sale.

Entergis sets price talk

Entegris, Inc. talked its $360 million offering of eight-year senior notes (B3/BB-) to yield 6% to 6¼%.

The deal is set to price on Tuesday.

Goldman Sachs is the bookrunner.

Jones Energy roadshow

Jones Energy Holdings, LLC began a roadshow on Monday in New York City for its $300 million offering of eight-year senior notes.

The deal is expected to price on Friday.

Citigroup, Wells Fargo, Barclays, Capital One, Credit Agricole, JP Morgan, SunTrust, TD and Mitsubishi are the joint bookrunners.

The Austin, Texas-based independent oil and gas company plans to use the proceeds to repay its second lien credit facility in full and to pay down its revolver.

Lonestar starts Tuesday

Lonestar Resources America, Inc. plans to start a roadshow on Tuesday for a $200 million offering of five-year senior notes.

The debt refinancing deal, via Jefferies, is set to price during the middle part of the March 31 week.

International Personal Finance

International Personal Finance plc (//BB+) mandated Citigroup and HSBC to arrange meetings with fixed-income investors beginning on Wednesday, according to a market source.

A euro-denominated offering of senior unsecured notes may follow, pending market conditions.

On Monday, the company said it began a cash tender offer for its €225 million of 11½% guaranteed notes due 2015.

Citigroup and HSBC are the dealer managers of the tender offer, which will end on April 2.

The purpose of the tender is to proactively manage the company's upcoming debt redemptions and, along with a new notes issue, to lengthen its debt maturity profile, according to a company press release.

The tender offer is conditioned on the issue of new notes.

Citigroup and HSBC are the dealer managers.

Columbus climbs in aftermarket

A trader said that the new Columbus International's 7 3/8% notes due 2021 were trading at 102 bid, 102½ offered, well up from the par level at which that deal had priced earlier in the session.

A trader at another desk, who saw the bonds open at 101 bid after their pricing, was not surprised that the issue did well in its initial aftermarket action.

He noted that when the company began shopping the megadeal around, "they started [with the expected yield] at 8¼%, and now they're down to 7 3/8%."

He estimated that about $840 million of the proceeds would be used to take out existing debt, with another $400 million of new money to be raised.

He said that the order book of prospective investors wanting a piece of the deal consisted of "some crossover guys, some emerging markets guys and some high-yield guys. So it's going to be another screwy deal, like Puerto Rico, in terms of how it trades."

He was referring to the island commonwealth's $3.5 billion of 8% series 2014A general obligation bonds due 2035. Those notes came to market on March 11 at an issue price of 93, after the deal was upsized from an original $3 billion.

The new issue had attracted interest from municipal bond investors, junk market players and even some distressed-debt investors who noted Puerto Rico's junk-bond-level ratings (Ba2/BB/BB), a relative rarity among municipal issuers.

While the Puerto Rico bonds had traded up into the mid 90s from 93 when they initially moved into the aftermarket after pricing and eventually peaked at levels just under 98 bid, the trader said they were trading during Monday's session "at around like 91-92.

"That hasn't been a real good performer - and that might be the understatement of the year," he added.

Sallie Mae a little firmer

Elsewhere among newly priced issues, a trader saw initial trading in the new SLM Corp. 6 1/8% notes due 2024 at 99¼ bid.

A second trader also pegged those bonds around 99¼ bid, 99½ offered, up a little from the 99.082 level at which the transaction had priced.

While the deal is nominally split-rated - Moody's Investors Service and Fitch Ratings have it at the top end of the junk spectrum, while Standard & Poor's has the rating just barely in investment-grade territory - the first trader noted that "it's got a pretty big coupon on it for a split-rated deal," in speculating that at least some junk market participants would be playing in it along with high-grade crossover investors.

Sallie Mae's existing 5½% notes due 2023were heard to have eased by ½ of a point to end at 98 bid, with around $7 million of those notes having traded.

The 4 5/8% notes due 2017 traded around the 105½ mark at mid-afternoon, also with around $7 million of the credit having changed hands.

Fly the busy skies

United Airlines' new 4¾% class B pass-through certificates due 2022 - the junk-rated half of its $949.4 million two-part fly-by offering - were seen by a market source having firmed slightly to 100¼ bid from the par level at which that $212.8 million tranche of certificates had priced.

Another trader quoted the paper at par bid, 100¼ offered and said that turnover in the new issue was over $21 million, putting it right at - or at least near - the top of the actives list on a generally quiet day.

United also priced $736.6 million of investment grade-rated 4% class A certificates due 2026 at par.

Lee bonds a little easier

Among issues priced before Monday, a trader said that he had seen "nothing" in such deals doing on Monday.

"Nobody cares. Nobody is sure what to do," he opined.

"It's slow day for sure."

A second trader did see some levels in Lee Enterprises Inc.'s new 9½% first-lien senior secured notes due 2022. The Davenport, Iowa-based newspaper publisher priced $400 million of the notes at par on Friday in a regularly scheduled offering off the forward calendar, and the new bonds were seen by traders to have zoomed as high as the 103 bid mark in initial aftermarket activity.

On Monday, the trader quoted the bonds at 103 1/8 bid, 103 3/8 offered.

However, at another desk, a trader called the bonds down 1/8 of a point, seeing them going home at 102¾ bid, 103 1/8 offered.

Momentive calms down

Away from the new or recent deals, a trader said that Momentive Performance Materials' 9% notes due 2021 were trading in a context of 81-82, which looked to be about unchanged from last week's closing levels.

While more than $24 million of those notes had changed hands on Friday, he saw "just a couple of million trading [on Monday]," with none of its issues making the most-actives list that it had dominated for much of last week.

"I guess they just ran out of steam from last week," he theorized, seeing only one transaction "of size."

"There were all kinds of trades on Friday in that name, but it doesn't look like it was a popular name today."

He saw its 11½% notes due 2016 racking up just 1 large trade at 31 bid, which was "a lot different than it was on Friday," when over $34 million of the notes had changed hands, while the bonds slid below the 30 mark to end at 29¾ bid.

Another trader said: "There was not nearly as much activity" In Momentive on Monday as at the end of last week.

He quoted the 9s down a little to around the 82 bid level, after having been around 82½ bid on Friday and 84½ last Wednesday, its most recent peak level.

While those unsecured issues continued to struggle, the company's secured 10% notes due 2020 continued to rise on Monday, getting up to 107¼ bid versus 106½ on Friday and its recent low point of 104½ bid, traded last Tuesday.

Walter less volatile

Traders saw restrained activity in Walter Energy's new and established bonds, which gyrated around last week as the coal producer brought a two-part issue to market.

"There was not a tremendous amount of activity" in the coal producer's bonds, one said, seeing its 8½% notes due 2021, which he called "about in line" with recent levels around 65.

A market source at another shop saw those notes down½ point at 64¾ bid, with about $6 million traded. The deal, which had been trading above 70 earlier last week, dropped to around as low 64 bid, but then seemed to recover some lost ground on Friday.

He saw its 11%/12% second-lien senior secured PIK toggle notes due 2020 "creeping back up" to around the 95 bid level - still down from the par level at which those notes had priced last Wednesday, but up from the lows they hit around 94 almost as soon as they began trading last Thursday.

What's wrong with Walter?

The steep drop in those bonds surprised many in the market and had people scratching their heads about that precipitous decline.

An industry analyst theorized that "there were a couple of things that happened."

For one, he said that "a number of players," who held some of the company's term loan A debt that is being taken out using the proceeds from the new bond deal, "rolled into the PIK notes, not necessarily as long-term holders."

He said that they, in an effort to be supportive of the deal and get themselves cashed out from their current holdings, rolled into the PIK notes as well as the other half of that new deal, the 9½% senior secured add-on notes due 2019.

The analyst said that they went into the transaction "with the belief that in a normal market, they could sell [the PIK notes] at or near the new-deal price."

He said that there were also some investors "who wanted to own the 91/2s and were told that they needed to take a slug of the PIK or they wouldn't get a decent allocation of 91/2s."

Again, he said, some people went into the deal thinking that while they didn't like especially like the PIKs as much as the 91/2s, they could always find a buyer for their position in the PIK after the deal was priced.

"So you had a less-than-strong investor base in the PIK."

On top of that, he said, there had been "a steady drumbeat" of negative news and analyst opinion about the near-term prospects for the metallurgical coal business, culminating with a negative report on the industry last week BofA Merrill Lynch, "calling into question the pricing profile of met coal over the next two years" and setting a drastically reduced equity price target for Walter Coal.

"So that made all of those people probably rush for the exits sooner than they had planned and drove away any potential near-term buyers of it on the break."

Market indicators stay firm

Statistical junk performance indicators had their second consecutive strong session on Monday, building on the momentum generated Friday, when the indicators were higher across the board after having been mixed for the previous two sessions.

The KDP High Yield Daily index gained 1 basis point on Monday to end the day at 74.83, its second consecutive gain, on top of the 7 bps rise seen on Friday. That earlier gain had followed a 13 bps plunge on Thursday. Its yield, meanwhile, held steady at 5.27%, after having come in by 1 bp on Friday, versus Thursday's 4 bps widening out.

The widely followed Merrill Lynch High Yield Master II index improved by 0.074% its second consecutive advance. On Friday, it was up by 0.103%, bouncing back from Thursday's loss of 0.158%.

The gain raised its year-to-date return to 2.75% from Friday's 2.675%, although it remained below the 2.812% reading seen on March 5, its 2014 peak level.

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