Citgo, upsized Micron drive-by price; new Regency rises in heavy trading; Clear Channel climbs

By Paul Deckelman and Paul A. Harris

New York, July 23 – For a second straight session, the high-yield primary sphere was heard by syndicate sources on Wednesday to have priced a pair of new dollar-denominated, fully junk-rated deals.

Some $1.8 billion of new junk paper priced, as semiconductor manufacturer Micron Technology, Inc. did an upsized and quickly shopped $1.15 billion of 10.5-year notes, while gasoline refiner and marketer Citgo Petroleum Corp. priced $650 million of eight-year secured notes as a regularly scheduled forward calendar offering.

Traders said the Micron megadeal appeared too late in the session for any kind of aftermarket activity, but the new Citgo bonds had firmed smartly when it was freed to trade.

They also said that Tuesday’s upsized drive-by transaction from Regency Energy Partners, LP continued to firm in heavy trading for a second consecutive session.

Away from the new deals, traders saw a generally better overall market tone as Junkbondland tried to regain its footing for a second straight session after several sessions of malaise before that.

Among specific issues, Clear Channel Communications Inc. bonds were mostly higher after the broadcasting, digital media and outdoor advertising company reported second-quarter results, despite a slide into the red. It also reported continued progress in taking out most of its near-term maturities.

Statistical market performance indicators were trending unchanged to higher after having been mixed on Tuesday and lower on Monday.

Micron massively upsizes

The primary market saw issuance from across the credit spectrum on Wednesday.

In the dollar-denominated market, two issuers raised $1.8 billion.

Both priced single-tranche deals, one of which came as a drive-by.

Micron Technology priced that drive-by, a massively upsized $1.15 billion issue of 10.5-year senior notes (Ba3/BB) at par to yield 5½%.

The yield printed on top of revised yield talk that was announced in conjunction with the deal's upsizing to $1.15 billion from $750 million. Talk for the deal at the originally announced size had been set in the 5 3/8% area.

Morgan Stanley, Goldman Sachs and Credit Suisse were the joint bookrunners.

The Boise, Idaho-based semiconductor manufacturer plans to use the proceeds to take out its 1 7/8% convertible senior notes due 2031 by means of paying conversion settlements or by repurchasing or redeeming the notes, as well as to retire other convertible notes and debt and for other general corporate purposes.

Proceeds from the $400 million upsizing will also be used for general corporate purposes.

Citgo at the wide end

At the conclusion of its roadshow, Citgo Petroleum priced a $650 million issue of eight-year senior notes (B1/BB-) at par to yield 6¼%, at the wide end of the 6% to 6¼% yield talk.

Deutsche Bank was the left bookrunner for the debt refinancing and dividend deal. RBS was the joint bookrunner.

Findus PIK election notes

In the euro-denominated market, London-based frozen food and seafood company Findus Group priced a €200 million issue of five-year senior PIK election notes (/CCC/CC) at 98.5 with an 8 5/8% cash yield and a 9 3/8% PIK yield.

The notes pay an 8¼% cash coupon, which steps up by 75 basis points to 9% for PIK coupon payments.

The coupons and reoffer price all came on top of talk.

Joint bookrunner JPMorgan will bill and deliver. Credit Suisse and Goldman Sachs International were also joint bookrunners.

The company plans to use the proceeds to partially refinance shareholder loans.

Phoenix Pharma talks 3¾%-3 7/8%

Phoenix Pharmahandel GmbH & Co KG (Phoenix Pharma) is targeting a €200 million to €300 million size for its new issue of seven-year notes, which are being guided with a yield of 3¾% to 3 7/8%.

The deal, which rolled out on a Wednesday investor call, is expected to price on Thursday.

Commerzbank, Credit Suisse and ING were the arrangers.

Citgo issue soars

In the secondary market, traders saw what one called “a good pop” in the newly priced bonds of Citgo Petroleum.

One of them saw the Houston-based petroleum refiner and marketer’s 6¼% senior secured notes due 2022 trading inside a 101½ to 102 bid context after having priced earlier in the session at par.

“That was where a lot of the day’s trading took place,” he said.

He said about $25 million of the bonds had traded but called that “nothing terribly huge.”

At another shop, a trader saw the Citgo bonds trading between 101¼ and 101¾, and noted that late in the session they were at 101¾ bid, with no offerings seen, “so that one did well.”

The day’s other issue, Micron Technology’s upsized 10.5-year note offering, came too late in the session for any kind of aftermarket, traders said.

Regency rise continues

A trader said that Regency Energy Partners’ new 5% notes due in October of 2022 “were doing okay,” seeing them at 100½ bid, 100 5/8 offered – well up from the 99.158 level at which the Dallas-based mid-continent natural gas and natural gas liquids master limited partnership’s solidly upsized deal had priced during Tuesday’s session to yield 5 1/8%.

That $700 million drive-by deal had priced after upsizing from an originally announced $500 million and had risen to around a 100¼ to 100 3/8 bid context in initial aftermarket trading totaling more than$27 million, which easily put it among the day’s most active issues.

On Wednesday, the new deal got even busier, as well as higher; a market source said that over $47 million of the bonds traded, moving between 100½ and 100¾ bid.

Another trader saw the bonds going out at 100¾ bid, calling it a ½-point gain.

Transworld trades up

A trader saw Tuesday’s other pricing – from Transworld Systems, Inc., a Santa Rosa, Calif.-based business services provider – trading at somewhat better levels on Wednesday, although on not much volume.

He said the bonds were anchored around 100 1/8 bid, a little up from the levels around 99¼ bid, 100¼ offered seen late Tuesday after the $440 million of 9½% senior secured notes due 2021 had priced at par via Aston Escrow Corp., which is to be merged with and into Transworld as part of the latter company’s acquisition by Platinum Equity.

A second trader pegged the bonds at 99¾ bid, 100¼ offered, which he called a ½-point gain.

Clear Channel climbs

Away from the new deals, one of the more ubiquitous names in Wednesday’s market was Clear Channel Communications, after the San Antonio-based broadcasting, digital media and outdoor advertising company issued its second-quarter results.

A market source saw the company’s 10% notes due 2018 1½ points higher on the day, going out at 94½ bid on volume of over $32 million, second only to Regency Energy’s new deal.

He said that Clear Channel’s 14% notes due 2021were up 1 1/8 point at 102¼ bid, with over $23 million having traded.

And its 9% notes due 2019 gained 1¼ points to finish at 105½ bid, with over $10 million of the notes having changed hands.

Clear Channel reported better revenue versus the year-ago quarter, and while it posted a net loss versus a year ago, those year-ago figures had been swelled by a large one-time gain at that time.

Clear Channel executives also said on the company’s conference call that they plan to stay “opportunistic” in managing its quite complex capital structure totaling over $20 billion of debt and reported progress in eliminating all 2014 and 2015 maturities and all of their 2016 bond maturities, leaving only its 2016 term loan among short-duration obligations (see related story elsewhere in this issue).

Market tone slightly improves

A trader said that overall, the high-yield market “felt a little bit better today”– the second straight session in which improvement had been seen.

That having been said, he allowed that the sentiment “still felt pretty tenuous.”

He said that bids “are pretty thin, and you can tell buyers don’t have much conviction.”

“After all of these outflows, people are still a little nervous.”

Market indicators turn higher

Statistical indicators of junk market performance were unchanged to higher on Wednesday, after having been mixed on Tuesday and lower on Monday.

The KDP High Yield Daily index broke out of a six-session losing streak, gaining 4 basis points to end at 74.09. In contrast, it had eased by 2 bps on Tuesday to end at 74.05, its sixth straight loss. Still, as of Tuesday, the index had been down in 13 sessions out of the previous 14 – and was just unchanged on the lone session when it was not actually lower.

Its yield came in by 3 bps Wednesday to 5.24% – its first narrowing after having widened out for the previous five sessions, including Tuesday’s 1 bp rise.

The Markit CDX Series 22 index was virtually unchanged on Wednesday at 108 1/16 bid, 108 1/8 offered, after having been up by 7/32 point on Tuesday.

The widely followed Merrill Lynch High Yield Master II index posted saw its second straight gain after five straight losses, rising by 0.113% on Wednesday, on top of a 0.107% advance on Tuesday.

Wednesday’s gain raised its year-to-date return to 5.168%, up from 5.049% on Tuesday. However, it still remained well down from the 5.751% return recorded on July 7, the peak level so far for 2014.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.