Upsized Mylan, Kratos price, rise in aftermarket; most issues better; Towergate drops out

By Paul Deckelman and Paul A. Harris

New York, May 12 - The recently sparse high-yield primary market got some of its old verve back on Wednesday, as Mylan Inc. priced an upsized two-part mega-deal. When the Pittsburgh-based specialty pharmaceuticals maker's new bonds were freed for aftermarket dealings, both tranches were seen having risen more than a point.

Also pricing was an upsized secured notes issue from San Diego-based defense contractor Kratos Defense & Security Solutions Inc. These notes too were seen by traders having firmed around a point after issue.

Among overseas-based issuers, Macau gaming licensee MCE Finance Ltd. successfully priced a $600 million issue of eight-year notes, which firmed in the aftermarket.

Cegedim SA, a French provider of research and technical services to the pharmaceutical and healthcare industries, was heard planning a bond deal, with the size and other details to be announced following investor meetings next week.

Towergate Finance plc, a British insurance brokerage firm, postponed a large multi-tranche, dual currency bond deal, citing market conditions.

But price talk was heard out on Chinese property developer Renhe Commercial Holdings Co. Ltd., which is expected to price a benchmark dollar-denominated five-year deal on Thursday.

There was also talk out on Wireco Worldgroup Inc.'s offering of seven-year senior notes; the St. Louis-based wire rope and cable manufacturer's $275 million deal could price after order books close on Thursday afternoon.

In the secondary market, traders saw a generally firm tone, with continued upside in issues such as Chesapeake Energy Corp. and General Motors Corp.

Primary reawakens

The high-yield primary market appeared to steady, along with the equity markets, on Wednesday, sources said.

Although not yet up to full speed, the new issue market is regaining its footing, and is likely to resume the brisk pace seen in late April should the global capital markets remain stable in the coming days, sell-side sources advised Prospect News.

Mylan massively upsizes

Even with the lingering uncertainty, Wednesday's primary market nonetheless topped $2 billion, as a trio of issuers brought a combined four tranches of junk.

Two came in the form of a massively upsized deal from Mylan, Inc.

Mylan crossed the finish line with $1.25 billion of senior unsecured notes (B1/BB-), increased from $1 billion.

The Pittsburgh-based pharmaceutical company priced a $550 million issue of 7 5/8% notes due July 15, 2017 at 99.972 to yield 7 5/8%.

The yield printed in the middle of the 7½% to 7¾% price talk.

Mylan also priced a $700 million issue of 7 7/8% notes due on July 15, 2020 at 99.970 to yield 7 7/8%.

The yield printed in the middle of the 7¾% to 8% price talk.

Goldman Sachs & Co. ran the books. Bank of America Merrill Lynch, Citigroup Global Markets Inc. and J.P. Morgan Securities Inc. were joint bookrunners.

Proceeds will be used to repay a portion of the company's dollar-denominated tranche B term loans, and for general corporate purposes.

The bonds were trading in the aftermarket at 101¼ bid, 101½ offered, according to a high-yield mutual fund manager.

MCE Finance brings $600 million

Meanwhile, China-based MCE Finance Ltd. priced a $600 million issue of 10¼% eight-year senior unsecured notes (B1/B+) at 98.671 to yield 10½%, on Wednesday.

The deal priced on top of talk.

Deutsche Bank Securities, Bank of America Merrill Lynch, RBS Investment Bank, ANZ Investment Bank, Barclays Capital, Citigroup, Commerz, Credit Agricole, NAB Securities and UBS Investment Bank were the joint bookrunners.

Proceeds will be used to reduce debt under the company's City of Dreams project facility.

The issuing entity is a financing unit of Melco Crown Entertainment Ltd., a Hong Kong-based developer, owner and - through a Macau subsidiary that holds a gaming sub-concession - an operator of casino gaming and entertainment casino resort facilities focused on the Macau market.

Kratos Defense upsizes

Kratos Defense & Security Solutions, Inc. priced an upsized $225 million issue of seven-year senior secured notes (B3/B+) at par to yield 10%.

The yield printed on top of talk and the amount was raised from $200 million.

Jefferies & Co. ran the books.

Proceeds will be used to complete the pending acquisition of Gichner Holdings, Inc. for $133 million, as well as to refinance existing debt and for general corporate purposes.

Kratos is a San Diego-based national security, information technology, assurance and public safety solutions provider.

Talking the deals

Dealers set the stage for a moderately active Thursday session by issuing price talk on a pair of transactions.

WireCo Worldgroup, Inc. talked its $275 million offering of seven-year senior notes (expected B3/confirmed B) to yield in the 10% area.

The prospective issuer also made changes to the bond's credit facility debt incurrence test covenant.

The order books are scheduled to close at 4 p.m. ET Thursday.

Goldman Sachs & Co. and J.P. Morgan Securities Inc. are the joint bookrunners for the debt refinancing and general corporate purposes deal.

Meanwhile, China's Renhe Commercial Holdings Co. Ltd. (Ba2/BB) talked its benchmark dollar-denominated five-year notes to yield in the 12% area.

The deal had been delayed due to volatility in the global capital markets, but is expected to price on Thursday.

Bank of America Merrill Lynch, BOC International, JP Morgan and UBS Investment Bank are the bookrunners.

Cegedim for next week

Looking farther ahead, French healthcare technology company, Cegedim will hold investor meetings in Europe mid to late in the week ahead for an expected offering of bonds.

Credit Agricole and SG Corporate & Investment Banking will be among the banks leading the deal.

Further details, such as the size of the offering and the tenor of the bonds, will not be disclosed prior to the meetings, the source said.

Standard & Poor's assigns its BB+ corporate credit rating to the Paris-based company.

Other news out of Europe came in the form of a postponement.

Towergate Finance plc postponed its £665 million equivalent multi-tranche offering of high-yield notes due to market conditions.

JPMorgan and Credit Suisse were the physical bookrunners..

Proceeds were to be used to refinance bank debt and a portion of the company's preferred shares, and to fund an acquisition.

Mylan moves up...

When the new Mylan 7 5/8% notes due 2017 and 7 7/8% notes due 2020 were freed for secondary dealings, traders saw both tranches of the new bonds move up by at least a point and stay there.

A trader saw both tranches of the bonds breaking at 101¼ bid, 101¾ offered, well up from the 99.972 level at which the seven-year notes had priced, and up as well from the 99.97 level at which the 10-year notes had come to market.

A second trader pegged both sets of bonds at 101 bid, 102 offered, while yet another had them going out at 101 bid, 101¾ offered.

...as does Kratos...

Traders saw very similar levels on the new Kratos Defense & Security Solutions 10% senior secured notes due 2017, which had priced at par earlier in the day.

One saw the issue at 101¼ bid, 101¾ offered. A second trader pegged the bonds at 101 bid, 102 offered.

...and MCE issue

Several traders saw MCE Finance Ltd.'s 10¼% notes at 101 bid, 102 offered. The issue priced earlier in the day at 98.671.

Market indicators turn north

Among bonds not connected with the new-deal market, a trader saw the CDX Series 14 index gain a full point on Wednesday to end at 98 3/8 bid, 98 5/8 offered, after having dropped by ¼ point on Tuesday.

The KDP High Yield Daily Index continued its recent volatile path, jumping 51 basis points on Wednesday to end at 71.66, after having lost some 20 bps on Tuesday. The index's yield meantime tightened by 17 bps on Wednesday 20 8.29%, after widening by 5 bps on Tuesday.

Advancing surged back ahead of decliners on Wednesday, by an eight-to-five margin, after having fallen back on Tuesday, though by only a relative handful of the more than 1,400 issues tracked.

Overall market activity, represented by dollar-volume levels, rose by 13% on Wednesday, on top of Tuesday's 6% gain.

"Stuff is better," a trader said. "You are having offerings lifted, but it's not everything that's moving up. Certain stuff seems to be rising quicker, while other things are just still trying to get out of their own way, looking for a bid."

He said that it was "a kind of a quiet day" overall. "There were little bursts of activity, followed by long stretches when nothing was happening. You could get up and walk away from you Bloomberg to get a cup of coffee, and when you'd get back, you'd find nothing really went on - versus some of the recent sessions when there was a constant deluge of things happening."

Junkbondland, a second trader opined was "stronger across the board," pointing to the behavior of market bellwether Community Health Systems Inc.'s 8 7/8% notes due 2015. He saw the Franklin, Tenn.-based hospital operator's $3 billion-plus issue - frequently seen by some traders as a viable stand in for the overall market because of its great size and widespread distribution - as having moved up to 103¾ bid, a ¾ point gain on the session.

"The high-beta names probably did even better than that."

"There was a pretty good tone, actually," yet another trader offered, "with all things considered, and stocks up."

Chesapeake climb continues

A trader saw Chesapeake Energy's 9½% notes due 2015 as having pushed up to 110 1/8 bid, up more than a point from Tuesday, in "pretty active dealings," continuing the gains which the Oklahoma City-based independent oil and gas exploration and production company's bonds have been seeing since it announced plans late Monday to raise some $5 billion through asset sales and preferred stock placement, and use $3.5 billion of it to take out existing senior bonds.

Another trader, who also saw the 91/2s trading above 110, said that when the news broke late in the session on Monday, "there were still some people around and there were a few trades" that lifted the bonds from around the 106 level to 108 or 109.

Then on Tuesday - especially after company executives outlined their plans in more detail on a conference call -- the bonds actively traded up to and even above the 109 level, and they continued gaining on Wednesday to finish above 110.

GM goes up

A trader saw General Motors Corp.'s 8 3/8% benchmark bonds due 2033 having pushed up by ¾ point to 35½ bid, 36½ offered, while seeing GM domestic arch-rival Ford Motor Co.'s 7.45% bonds due 2031 up a whole 2 points at 92 bid, 94 offered.

Another trader saw the GM bonds at 36 bid, which he called up by 1½ points, on "good volume," while seeing the Ford long bonds up 2 points at 92 bid, 93 offered.

Blockbuster 'pops' before earnings

Blockbuster Inc.'s bonds "seemed to have popped" ahead of the company's earnings release after the market closes Thursday, a trader said.

The trader said there was "a lot of trading" in the 9% notes due 2012 at 21 bid, 22 offered. That compared to levels around 19 on Tuesday.

"Must be position closings," he speculated.

Another trader said the debt was "up a bit," also in that 21-22 range. He added that about "$20-odd million" of the paper changed hands.

The second trader also saw the 11¾% notes due 2014 "up and down" 69, noting that the bonds were quoted into the 70s.

And, another trader said the notes were "moderately active" round the 22 mark.

Blockbuster is a Dallas-based movie rental chain.

CIT active but unchanged

There was "a lot of activity in CIT Group paper," according to a market source. However, he remarked that there wasn't much movement in terms of price.

The source said the 7% notes due 2017 were "probably the most active," trading between 91½ and 921/2.

"They were unchanged to maybe up half a point to a point," he said. "They were kind of all over the place."

Another trader said somewhere around $100 million of the notes turned over, ending "kind of right where it's been" at 921/2.

But another distressed debt player said the bonds were "up a good point, depending on which flavor you're looking at," pegging the 7% notes at 92¼ bid, 92¾ offered.

There was no news out on the New York-based lender to explain the heavy volume. However, CIT debt has been trading actively for the past week or so and could simply be due to the vast array of issues available and the liquidity.

-Stephanie N. Rotondo contributed to this report

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