GM unit leads nearly $2.6 billion drive-by parade; overall market easier; Quicksilver quashed

By Paul Deckelman and Paul A. Harris

New York, Sept. 22 – General Motors Co.’s automotive finance unit drove by the high-yield primary market on Monday, opened the trunk and then came home with some $2 billion of fresh cash, split into three-year and seven-year notes.

That was the signature deal of a session that saw some $2.58 billion of new dollar-denominated, fully junk-rated paper price in five tranches, upping the ante from Friday’s session, when just $550 million was completed in two tranches, according to data compiled by Prospect News.

Besides the megadeal from General Motors Financial Co. Inc., there were a pair of $250 million offerings, including an issue of 10-year notes from real estate investment trust the Geo Group, Inc. and an eight-year add-on from a very familiar junk issuer with a not-yet familiar new name. The latter was iHeartCommunications, Inc., the broadcasting and outdoor media company formerly known as Clear Channel Communications, Inc.

And Northern Tier Energy LLC did a $75 million add-on to its 2020 secured notes.

The GM Financial and Northern Tier issues priced too late in the session for any kind of an aftermarket, while the other deals were seen by traders a little above their respective issue prices.

Away from the new deals, the overall secondary market was seen about ¼ to ½ of a point easier on average, but underperforming energy company Quicksilver Resources Inc.’s bonds were down by several points for a second consecutive session, in active trading.

Statistical market performance indicators were mostly lower after having been higher across the board for the previous three sessions.

GM’s $2 billion two-parter

The final session of summer 2014 in the new issue market roared off the starting line with four issuers pricing a combined five tranches.

All of Monday's deals were drive-bys.

General Motors Financial priced $2 billion of non-callable senior notes (Ba1/BB-/BB+) in two tranches.

The public deal, which was priced on the investment grade desk, included a $750 million tranche of three-year notes priced at par to yield 3 1/8%. The yield printed at the wide end of the 3% to 3 1/8% yield talk and on top of initial talk in the 3 1/8% area.

The deal also included a $1.25 billion tranche of seven-year notes which priced at par to yield 4 3/8%. The yield printed at the tight end of the 4 3/8% to 4½% yield talk. Initial talk was mid-4% context.

Deutsche Bank Securities, Bradesco BBI, Goldman Sachs & Co., Lloyds Securities and Morgan Stanley are the joint bookrunners.

The Fort Worth-based finance subsidiary of General Motors Co. plans to use the proceeds for general corporate purposes.

Geo Group at the tight end

Geo Group priced a $250 million offering of 10-year senior notes (existing ratings Ba3/B+) at par to yield 5 7/8%.

The yield printed at the tight end of the 5 7/8% to 6% yield talk.

BofA Merrill Lynch, Barclays, SunTrust Robinson Humphrey, J.P. Morgan Securities LLC, Wells Fargo Securities LLC and HSBC were joint bookrunners.

The Boca Raton, Fla.-based real estate investment trust (REIT) plans to use the proceeds to pay down its revolver.

iHeartCommunications notes

iHeartCommunications, formerly known as Clear Channel Communications, Inc., priced a $250 million add-on to its 9% priority guarantee notes due Sept. 15, 2022 (Caa1/CCC+) at 101.00 to yield 8.778%.

The reoffer price came on top of price talk.

Morgan Stanley & Co., Goldman Sachs & Co., Citigroup Global Markets, Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc. and Wells Fargo Securities LLC are the joint bookrunners.

The San Antonio-based media and entertainment company plans to use the proceeds to prepay $243.5 million of its term loan B and $4 million of its term loan C asset sale facility at par.

Northern Tier taps 7 1/8% notes

Northern Tier Energy LLC/Finance Corp. priced a $75 million add-on to its 7 1/8% senior secured notes due Nov. 15, 2020 (B1//) at 105.75 to yield 5.545% on Monday, according to a market source.

The reoffer price came in the middle of the 105.75 to 106.00 price talk.

J.P. Morgan Securities LLC,

Credit Agricole Securities (USA) Inc. and Wells Fargo Securities LLC were the joint bookrunners.

The Tempe, Ariz.-based independent downstream energy company plans to use the proceeds for general corporate purposes including the purchase of crude oil inventories.

RSP Permian talk 6¾% area

RSP Permian, Inc. talked its $450 million offering of senior notes due 2022 (B3/B-) to yield in the 6¾% area.

Books close at noon ET Tuesday, and the deal is set to price thereafter.

Joint bookrunner Barclays will bill and deliver. RBC Capital Markets, J.P. Morgan Securities LLC and UBS Investment Bank are also joint bookrunners.

Fly Leasing two-part deal

The forward calendar also built up on Monday.

Fly Leasing Ltd. plans to price $400 million notes in two tranches on Wednesday.

The public deal is comprised of a $300 million tranche of new senior notes due 2021, callable after three years at par plus 75% of the coupon.

In addition, the Dublin-based aircraft lessor plans to place a $100 million add-on to its 6¾% senior notes due Dec. 15, 2020. The 6¾% notes become callable on Dec. 15, 2016 at 105.063. The original $300 million issue priced at par on Dec. 6, 2013.

Jefferies LLC is the left bookrunner. Citigroup Global Markets, Deutsche Bank Securities Inc. and RBC Capital Markets are the joint bookrunners.

Proceeds will be used for general corporate purposes including the acquisition of future aircraft.

General Cable starts roadshow

General Cable Corp. started a roadshow for a $250 million offering of five-year senior notes (B3/B+) on Monday.

J.P. Morgan Securities LLC, BofA Merrill Lynch, Credit Agricole CIB, Deutsche Bank Securities Inc. and HSBC are the joint bookrunners.

Proceeds will be used to redeem the floating-rate notes due 2015, fund the restructuring program and repay the ABL facility.

Softer market, inflows

The junk market saw better sellers on Monday, according to a trader based on the East Coast of the United States.

High-beta names took the brunt of the hit, the trader said.

Despite softness in junk – as well as in equities around the globe – on the last day of summer, the most recent fund flows news with respect to dedicated high-yield funds was positive, the trader said.

Last Friday, the most recent day for which numbers are available, exchange-traded funds saw $266 million of inflows, while actively managed funds saw $65 million of inflows.

Although the most recently reported weekly fund flows were decidedly negative, with Lipper-AMG reporting $1.2 billion of outflows for the week to Sept. 17, the two following sessions posted daily inflows totaling $718 million, the trader said.

CNH €700 million

In the European session, CNH Industrial NV launched and priced a €700 million issue of 2 7/8% eight-year senior notes (B2/BB+) at 99.22 to yield 3%.

The yield printed on top of yield talk.

The deal played to more than €1.5 billion of orders, a source said.

Joint bookrunner Deutsche Bank will bill and deliver. BBVA, Citigroup, Natixis, Rabobank and UniCredit are also joint bookrunners.

Abengoa green bond

Abengoa SA rolled out a €500 million-equivalent offering of non-callable five-year notes (expected ratings B2/B/B+) on Monday.

The deal, which is coming in dollar- and euro-denominated tranches, represents the inaugural offering of green high-yield bonds from a European issuer, according to a company press release issued on Monday.

The notes will be offered to eligible traditional high-yield investors as well as dedicated socially responsible investments buyers who have a specific mandate or portfolio for buying green bonds, the release stated.

Global coordinator and joint physical bookrunner HSBC will bill and deliver for the euro-denominated notes. Joint physical bookrunner BofA Merrill Lynch will bill and deliver for the dollar-denominated notes. Credit Agricole CIB is also a joint physical bookrunner.

The Seville, Spain-based conglomerate plans to use the proceeds to finance eligible green projects that meet specified environmental and social criteria.

Keepmoat starts Tuesday

Keepmoat Group plans to start a roadshow on Tuesday for a £260 million offering of five-year secured notes.

Joint physical bookrunner Lloyds TSB will bill and deliver. JPMorgan is also a joint physical bookrunner. RBC is also a bookrunner.

The Doncaster, South Yorkshire, United Kingdom-based home builder plans to use the proceeds, along with equity and cash on its balance sheet, to finance the acquisition of the company by TDR Capital and Sun Capital, and to repay debt.

GEO Group gains

In the aftermarket, a trader said that the new Geo Group 5 7/8% notes due 2024 were trading inside a 100 3/8 to 100½ context, after pricing at par. He said about $10 million of the new paper chad changed hands.

A second trader pegged the quickly shopped new notes in a range of 100¼ to 100 5/8 bid, while a third located them at 100½ bid.

iHeart a little higher

A trader said that he had “not seen very much” activity in either the new Geo issue or in the $250 million quick-to-market add-on from iHeart Communications to its existing 9% priority guarantee notes due 2022 – the $750 million of bonds that the company had brought to market not even three weeks ago, back on Sept. 5, when it was still known as Clear Channel Communications.

However, he quoted the add-on in a 101-to-102 context, versus its 101 issue price.

Split-rated Trinity improves

A market source said that a split-rated (Ba1/BBB-/BBB-) $400 million tranche of 4.55% senior notes due 2024 from Trinity Industries Inc. had moved up in active initial aftermarket dealings.

He said that more than $16 million of the notes had traded, moving as high as 100 11/16 bid.

The Dallas-based industrial manufacturing conglomerate had priced its offering off the investment-grade desks at 200 basis points over comparable Treasuries, equivalent to 99.88, yielding 4.564%, after it was upsized from originally planned $300 million.

New GameStop is busy

Among the issues that priced on Friday, a trader said that GameStop Corp.’s 5 ½% notes due 2019 were trading at bid levels between 100 ½ and 101, after having priced at par.

A second trader saw turnover of more than $30 million of the new bonds, in a 101-to101½ context.

However, yet another market source, who also saw brisk trading in the Grapevine, Texas-based electronic game retailer’s new issue, said the bonds had finished around 100¾ bid, which he said was down 7/8 of a point from its earlier highs.

The deal had priced late in the session on Friday, after having been upsized to $350 million from an original $250 million.

Service King hangs in

Friday’s other offering, from Service King Collision Repair Centers, was seen having pretty much held onto the gains notched in initial aftermarket dealings, after the Richardson, Texas-based company had priced its 7 7/8% notes due 2022 at par via its Midas Intermediate Holdco II LLC/Finance Inc. subsidiaries.

A trader said that that he had seen “not much” in the way of trading in the Service King paper, quoting them at 101¼ offered, which he said probably meant that they had traded between 100¼ and 101¼.

A second trader agreed, quoting the bonds in a 100¾-to-101 context, about where they had finished in Friday’s aftermarket action, but he said that ironically “a whopping $2 million traded,” terming the $200 million transaction “one of those small, dinky deals.”

Alcoa holds steady

Among some of the larger deals that came to market last week, a trader said that Alcoa Inc.’s 5 1/8% notes due 2024 were last trading around 101½ bid, about unchanged on the day, with over $20 million having changed hands.

The Pittsburgh-based aluminum producer’s $1.25 billion split-rated (Ba1/BBB-/BB+) deal had priced off the investment- grade desks on Wednesday at par, but was trading off the high yield desks with considerable interest from junk market investors.

A second trader also saw the bonds unchanged on Monday around 101½ bid.

American is active

More than $11 million of the new American Airlines Group, Inc. 5½% notes due 2019 traded on Monday, a market source said, seeing those bonds off ¼ of a point at 100½ bid.

A second source quoted them in a 100¼-to-100 5/8 context.

The Fort Worth, Texas-based airline giant had priced its $750 million fly-by issue at par on Thursday, after having upsized the deal from $500 million originally.

Another Thursday offering – the 7 7/8% senior secured second-lien notes due 2021 from Fayetteville, Ark.-based Simmons Foods Inc., a poultry processor and pet-food manufacturer – was down 3/8 of a point a trader said, going out at 101¼ bid, 101¾ offered.

Those bonds had gotten as good as around the 102 bid level by Friday, after the $415 million deal had priced at par on Thursday.

Quicksilver in a quandary

Away from the new deals, one of the more active issues on a not very active day overall was Quicksilver Resources, whose bonds had peaked last week, then slid badly on Friday and continued to decline on Monday.

A trader opined that he had heard that “someone raised covenant questions” about the Denver-based independent oil and gas operator.

“Deutsche Bank and RBC were sellers in the morning, Citi and J.P. Morgan in the afternoon,” he said.

A second trader noted that the company has a $12 million interest payment coming due on Oct. 1 on its $350 million of 7 1/8% notes due 2016.

Those bonds had been trading as high as the 58 bid level about a week ago, eased to around 54 bid on Thursday, then swooned 9 points on Friday to close around 45. On Monday, a trader said, they fell to 44.

A second trader saw the company’s 9 1/8% notes due 2019 down 2 points on the day at 70 bid, with over $30 million having changed hands; on Friday, those bonds had dropped about 6 points to the 72 bid level.

And its 11% notes due 2021 dipped about 2 points to 72 ¾ bid, with over $10 million traded. Those bonds had recently been as high as 83½ bid.

“Quicksilver has been under pressure,” yet another trader said. “The 9 1/8s were trading at 80 last week, so they have been stressed.

“It’s not like they were at par and fell to 70.”

The company’s New York Stock Exchange-traded shares fell 12 cents, or 11.54%, to close at 92 cents, on volume of 3.7 million shares, about 10% more active than usual.

Indicators turn weaker

A trader said that “there was definitely market weakness across the board today,” estimating that things were generically down ¼ to ½ of a point.]

Statistical indicators of junk market performance were mostly lower on Monday, after having been higher across the board on Friday for a third consecutive session.

The KDP High Yield Daily index eased by 3 basis points to close at 72.95, after having risen by 6 bps on Friday, its third straight advance.

However, its yield, which normally moves inversely to changes in the index reading and thus would typically rise on a lower index, instead came in by 2 bps, to 5.37%, its fourth straight narrowing. On Friday, it had declined by 6 bps.

The Markit CDX Series 22 index lost 13/32 on Monday to finish at 106 15/16 bid, 107 1/16 offered – its first loss after four successive gains, including Friday’s 5/32 point advance.

The widely followed Merrill Lynch High Yield Master II index moved down by 0.067% on Monday, its first setback after three gains in a row, including Friday’s 0.083% improvement.

Monday’s retreat left its year-to-date return at 4.829%, down from Friday’s 4.9% level, and down as well from its peak level of the year so far, 5.847%, set on Sept. 1, when the index was published even though the junk market was closed for all intents and purposes due to the Labor Day holiday break.

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