Upsized United Rentals, Ball, Range Resources cap $5.6 billion week, new deals firm smartly

By Paul Deckelman and Paul A. Harris

New York, Feb. 24 - After a slow start, the high-yield primary market closed out the week with a flourish on Friday, as United Rentals, Inc. priced a greatly upsized three-part offering and familiar issuers Ball Corp. and Range Resources Corp did solidly upsized drive-by deals.

Construction equipment leasing firm United Rentals priced a $2.825 billion tri-partite transaction off the forward calendar, including a tranche of six-year senior secured notes and eight- and 10-year unsecured paper.

Packaging maker Ball brought a $750 million issue of 10-year senior notes to market, while energy operator Range Resources priced $600 million of 10.5-year senior subordinated notes. Interestingly, both deals priced at par, carrying the same low by high-yield standards coupon.

But low coupon or not, all three deals were quoted by traders as rising handsomely from their par issue prices.

A fourth deal from ship operator Norwegian Cruise Line, which did a $100 million add-on to an existing tranche of bonds, did not trade in the secondary.

The day's new deals added up to $4.275 billion, one of the heaviest volume days of the year so far.

That burst of activity capped off a $5.6 billion week on the primaryside - surpassing the previous week's $4.4 billion total, even with the market closed for Presidents Day last Monday.

Among the other, earlier deals, traders saw Thursday's offering from Goodyear Tire & Rubber Co. holding the gains it notched after pricing, while Energy Future Intermediate Holding Co. LLC's Thursday bonds were quoted having gained more than a point.

Chesapeake Energy Corp. saw another day of brisk secondary market action and Sears Holding Corp.'s bonds traded actively for a second straight session.

Statistical market performance measures were unchanged-to-better on the session and up for the week.

United Rentals upsized deal

A busy session in the Friday primary market saw four issuers bring a combined six tranches of notes, raising $4.28 billion.

United Rentals priced an upsized $2.825 billion amount of high-yield notes in three tranches.

The deal included an upsized $750 million tranche of senior secured notes due July 15, 2018 (Ba3/BB-) that were priced at par to yield 5¾%, at the tight end of price talk set in the 5 7/8% area. The tranche was increased from $650 million.

In addition, the company priced an upsized $2.075 billion amount of unsecured notes (B3/B) in two tranches.

These included a $750 million tranche of notes due May 15, 2020 that was priced at par to yield 7 3/8%, on top of price talk, and a $1.325 billion tranche of notes due April 15, 2022 that priced at par to yield 7 5/8%, also on top of price talk.

The combined amount of unsecured notes was increased to $2.075 billion from $1.55 billion.

The overall amount of the three-tranche transaction was raised to $2.825 billion from $2.2 billion.

Morgan Stanley & Co. LLC, Bank of America Merrill Lynch and Wells Fargo Securities LLC were the joint bookrunners.

The proceeds from the Rule 144A with registration rights notes, together with an ABL facility and/or cash on hand, will be used to pay the cash consideration for the proposed acquisition of RSC Holdings, Inc. and to refinance RSC's existing senior secured debt.

Ball massively upsizes

Ball priced an upsized $750 million issue of 10-year senior notes (Ba1/BB+) at par to yield 5%.

The yield printed at the tight end of the 5% to 5 1/8% price talk. The amount was increased from $500 million.

Bank of America Merrill Lynch, Goldman, Sachs & Co., J.P. Morgan Securities LLC, Deutsche Bank Securities Inc. and Barclays Capital Inc. were the joint bookrunners for the quick-to-market issue.

The Broomfield, Colo.-based supplier of packaging for beverage, food and household products plans to use the proceeds to fund a tender offer for its 6 5/8% senior notes due 2018 and for general corporate purposes.

Range Resources at tight end

Range Resources priced an upsized $600 million issue of 10-year senior subordinated notes (Ba3/BB) at par to yield 5%, at the tight end of price talk that was set in the 5 1/8% area.

Bank of America Merrill Lynch, J.P. Morgan Securities LLC, Wells Fargo Securities LLC, Deutsche Bank Securities Inc. and Barclays Capital Inc. were the joint bookrunners for the quick-to-market issue, which was expanded from an original $500 million.

The Fort Worth-based independent gas and oil company plans to use the proceeds to repay bank debt, to fund capital expenditures and for general corporate purposes.

NCL taps 9½% notes

Norwegian Cruise Line priced a $100 million add-on to its 9½% senior notes due Nov. 15, 2018 (existing Caa1/B+/) at 106.0 to yield 7.943%.

The re-offer price came at the rich end of the 105.75 to 106 price talk.

Deutsche Bank Securities Inc. and Citigroup Global Markets Inc. were the bookrunners for the quick-to-market add-on.

The Miami-based cruise line operator plans to use the proceeds to pay down its revolver.

The original $250 million issue priced at par in November 2010.

New deals dominate the market

With the primary sphere having its busiest day in at least several weeks on Friday, traders said there was no question that this was the focus of the secondary market as well.

"Absolutely," a trader replied when asked whether trading in the new paper took center stage.

"Everything that came did very, very well, so there was no question about that."

United Rentals on the rise

The trader saw the flagship deal of the session - United Rentals' $2.825 billion three-part behemoth - as moving up solidly after all three of its tranches priced at par.

He said that all three parts of the offering went out at about the same 102¾ to 103 context.

"They obviously all traded up," a second trader said. He saw the company's six-year senior secured notes moving up to 102 5/8 bid, 103 1/8 offered, while its eight- and 10-year notes were at 102¾ bid, 103 offered.

"They all did well, they were up there," he added.

Ball, Range deals trade up

He said that Ball's upsized $750 million 10-year note offering "jumped up as well," and was "wrapped around" the 102¼ level.

In fact, he said "the Street is locking them at 1021/4," suggesting a quote of 102 1/8 to 102 3/8 versus their par issue price.

He said "the most Tracing" was the new Ball deal, with some $90 million of the bonds traded.

He also said that Range Resources "just priced [a short while before] and already well over $55 million or $60 million have traded."

He saw those 10.5-year senior subordinated notes trading at 102 1/8 bid, even with a 5% coupon.

He said about the coupon, "Isn't that ridiculous?" as the junk market is used to considerably meatier coupons.

A second trader saw the Range bonds at 102 bid, 102½ offered.

Norwegian Cruise not seen

The new Norwegian Cruise Line add-on to its 9½% notes due 2018 priced too late in the day for any kind of an aftermarket.

At any rate, traders said the deal's small size of $100 million and as an add-on to an existing tranche probably precluded there being much actual trading.

One trader said that most of the time when a deal is that small, the underwriter already has the investors who will get it picked out and just deliver it to them and it's never seen in the market.

TXU goes higher

A trader cited the add-on on status of Thursday's quickly-shopped $350 million issue from TXU unit Energy Future Intermediate Holding Co. and its EFIH Finance Inc. division as a likely reason why he didn't see any trading around.

"Not too much going on there," he declared.

However, a second trader quoted the new 11¾% second-lien senior notes due 2022 at 101¼ bid, 101¾ offered, up from the par level in which the Dallas-based utility operator's deal - upsized from the originally announced $200 million - priced on Thursday.

Goodyear holds its own

Thursday's other deal, Akron, Ohio-based Goodyear Tire & Rubber's $700 million of 7% senior notes due 2022 "kind of went unchanged," said a trader.

"They held [Thursday's] gains, but they really didn't change much today."

That quick-to-market deal priced at par and then was seen by market participants on Thursday as pushing up to 101¼ bid, 101¾ offered after the bonds were freed for trading.

On Friday, a second trader said Goodyear was one of the most active names in Junkbondland; he estimated that at least $ 70 million of the new issue traded.

He quoted the bonds late Friday at 101¼ bid, 101½ offered, essentially little changed versus late Thursday.

Earlier in the day, the giant tire maker's new deal was "100½ lock, but as the day progressed, they started moving up a little bit."

A market source at another shop saw Goodyear's existing 8¼% notes due 2020 gain 1½ points to end at 1091/2.

However, Goodyear's 10½% notes due 2016 - the $650 million issue that is going to be taken out using the proceeds of the new offering plus cash on hand if needed - were quoted down 1 point at the 108 mark.

ViaSat unseen

A trader said that Wednesday's $275 million offering of 6 7/8% notes due 2020 from ViaSat Inc. didn't appear to be trading around on Friday.

The Carlsbad, Calif.-based provider of satellite communications systems had priced its same-day deal at par with the bonds going into orbit after that, rising to 101¼ bid, 101¾ offered in Wednesday's aftermarket dealings and then moving up to the 103¼ bid area on Thursday.

Chesapeake still amazes

But while a deal from two days ago was now not seen around the market, Chesapeake Energy's 6.775% notes due 2019, which priced almost two weeks ago on Feb. 13, were still being actively traded in the market on Friday.

"They're still one of the most active bonds, day in and day out," a trader marveled, estimating that "a good $50 million-plus of this bond is trading."

The trader said it was one of the most traded securities, even though the bonds pretty much settled into a range of 100¼ to 1001/2.

The Oklahoma City-based natural gas exploration and production company's quickly shopped $1.3 billion issue - upsized from an originally announced $1 billion - priced at 98.75 on Feb. 13 to yield 7%.

It quickly became the most popular bond in the junk world with more than $50 million trading in the aftermarket after the pricing, then an astounding $450 million the following day and $150 million each of the next two days.

By last Friday, volume had tapered off a little to the $50 million to $60 million area, but Chesapeake remained the heaviest trader.

The bonds initially held around or a little above their issue price for the first several sessions of trading, but had managed to finally break par at the end of last week. The bonds have hung in a little above par ever since.

New deals the main factor

A trader said, "It seems like there's a bunch of secondary stuff trading. But I think everyone was mostly looking forward to the URIs [United Rentals] and all of these other [new] things."

Sears still in the market

Away from the new deals, Sears Holding's 6 5/8% notes due 2018 remained one of the more actively traded names for a second straight session.

While not quite matching the more than $35 million of those notes that changed hands on Thursday, a trader said Friday that "there was still a lot of them trading around," pegging the volume between $12 million and $15 million.

He saw the bonds largely unchanged in an 86-87 context, saying "they were trading on both sides of that, sometimes at 86 and sometimes at 87."

He said the last trades of the day were at the 86½ bid level, which he called unchanged, but on good volume.

The Sears bonds were among the most active following the Hoffman Estates, Ill.-based department store operator's release of its fourth-quarter results and announcements of two big asset sales aimed at boosting liquidity.

While the fourth-quarter results were disappointing, both the chief executive officer and the chief financial officer called the results "unacceptable."

The executives touted the company's solid liquidity at more than $3.2 billion and the strong roster of assets that back up its secured credit facility and that are available for possible sale.

And Sears on Thursday separately announced plans to sell 11 of its stores to a shopping-center real estate investment trust company to generate $270 million in proceeds.

The company also plans to spin off to its shareholders some of the specialty stores that it runs in addition to its iconic Seas and Kmart department store chains.

The spin-off will be done via a rights issue that aims to raise between $400 million and $500 million for the parent company.

Market indicators positive

As they have been throughout the week, statistical measures of junk-market performance were pretty much on the positive side Friday, and showed clear gains from the week before.

A market source said the CDX North American Series 17 High Yield index was unchanged on Friday at 98 bid, 98¼ offered after having shot up by 1 1/8 points on Thursday.

And it was well up from the 97 1/16 bid, 97 5/16 offered level at which the index had closed the previous Friday, Feb. 17.

The KDP High Yield Daily Index meantime rose for a fifth consecutive session on Friday, tacking on 12 basis points to end at 74.43, on top of Thursday's 10-bps rise. Its yield narrowed by another 8 bps to 6.50% after having declined by 6 bps on Thursday.

Those levels compare favorably with the 74.10 index reading and 6.71% yield seen the previous Friday.

And the widely followed Merrill Lynch High Yield Master II Index notched its sixth consecutive daily advance on Friday, gaining 0.279%, on top of Thursday's 0.203% rise.

The latest gain lifted the index's year-to-date return to 4.792% Friday, a new peak level for 2012. That eclipsed the previous high of 4.501%, which was recorded on Thursday.

The index also showed a one-week gain 0.794%, its 10th consecutive weekly advance dating back to the end of last year. It closed on the previous Friday with a 3.967% cumulative return.

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