Iron Mountain two-parter, Calpine lead busy primary session; Chesapeake gains on debt exchange news

By Paul Deckelman and Paul A. Harris

New York, May 24 – The junk bond juggernaut rolled on on Tuesday, with the high yield primary sphere posting a second straight busy session after Friday’s pause.

Syndicate sources said that some $2.35 billion of new dollar-denominated, fully junk-rated paper priced in six tranches, most opportunistically timed and quickly shopped drive-by offerings.

That topped the $1.225 billion that got done in three tranches on Monday.

Document storage and disposal company Iron Mountain Inc. had the big deal of the day, a $750 million two-part deal consisting of five- and 10-year notes.

Power generation company Calpine Corp. brought an upsized $625 million of 10-year secured notes to market late in the session.

Match Group, Inc., an operator of online dating sites and provider of educational test preparation services, did $400 million of new eight-year notes.

Automotive components manufacturer Dana Holding Corp. priced $375 million of 10-year notes.

The smallest deal of the day – and the only regularly scheduled forward calendar offering – came from oil and natural gas operator Parsley Energy LLC.

Parsley’s new bonds, and those of Match Group, were seen by traders having firmed smartly when they were freed for secondary activity, more so than Iron Mountain and Dana’s new bonds.

Monday’s new deal from Gogo Inc. was also seen doing well in the aftermarket.

Traders said the busy new-deal calendar was the market’s main focus.

Away from the new deals, Chesapeake Energy Corp.’s bonds firmed on the news the oil and gas producer was doing a debt-for-equity swap – its second such transaction in two weeks. It and other energy credits also got a boost from higher crude oil prices, which broke a four-session slump.

Statistical market performance measures turned higher across the board on Tuesday, after having been mixed on Monday. It was the indicators’ second higher session in the last three trading days.

Iron Mountain prices tight

A news-heavy Tuesday session saw five issuers bring a combined six tranches of notes to raise an overall total of $2.35 billion.

Four of the five issuers came with drive-by deals.

Only one of the six tranches was upsized, and a trader remarked that the performance of the new bonds in the secondary market tended not imply astronomical amounts demand.

“Things didn't exactly seem to be screaming out of the gates, especially given the kind of day we saw in the stock market,” the New York-based trader remarked, alluding to big advances posted on the major stock indexes in the United States on Tuesday. The Nasdaq, for example, was up an even 2% on the day.

Whatever the level of demand for Tuesday's bond deals, executions were certainly solid, with five of the day's six tranches pricing at the tight ends of price talk, while the sixth priced on top of talk.

Iron Mountain Inc. priced $750 million of senior notes in two tranches (existing ratings Ba3/BB-).

The deal included $500 million of five-year notes, which priced at par to yield 4 3/8%. The yield printed at the tight end of yield talk in the 4½% area.

In addition Iron Mountain priced $250 million of 10-year notes at par to yield 5 3/8%. The yield printed at the tight end of yield talk in the 5½% area.

The trader spotted both par-pricing tranches trading at 99¾ bid, par ¼ offered late Tuesday.

Left physical bookrunner Goldman Sachs will bill and deliver for the deal which takes out the bridge loan related to Iron Mountain's acquisition of Recall Holdings. BofA Merrill Lynch and JP Morgan were also joint physical bookrunners. Barclays, Wells Fargo, Credit Agricole, HSBC, Morgan Stanley and Citizens were joint bookrunners.

Calpine upsizes

Calpine Corp. priced an upsized $625 million issue of 10-year senior secured notes (existing ratings Ba2/BB) at par to yield 5¼%.

The issue size was increased from $500 million.

The yield printed on top of yield talk.

The deal, at its announced $500 million size, was said to be two-times oversubscribed, said the trader who saw the new 5¼% notes due 2026 trading at par bid, par ½ offered.

Deutsche Bank, Barclays, BNP Paribas, Credit Agricole, Morgan Stanley, MUFG and ING managed the debt refinancing deal.

Match Group drives by

Match Group priced a $400 million issue of eight-year senior notes (expected ratings Ba3/BB-) at par to yield 6 3/8%.

The yield printed at the tight end of yield talk in the 6½% area. Early guidance was 6¼% to 6½%.

JP Morgan, BofA Merrill Lynch, BMO, BNP Paribas, Goldman Sachs, Barclays and Deutsche Bank were the joint bookrunners for the debt refinancing deal.

Dana drive-by

Dana Financing Luxembourg Sarl, a subsidiary of Dana Holding Corp., priced a $375 million issue of 10-year senior notes (B1/BB+) at par to yield 6½%.

The yield printed at the tight end of yield talk in the 6 5/8% area.

The deal was reported to be two-times oversubscribed, the trader said.

Citigroup was the lead bookrunner. Goldman Sachs, BofA Merrill Lynch, Barclays, JP Morgan, UBS, RBC and Citizens were the joint bookrunners for the debt refinancing deal.

Parsley prices tight

Parsley Energy, LLC priced a $200 million issue of eight-year senior notes (B3/B-) at par to yield 6¼%.

The yield printed at the tight end of the 6¼% to 6½% yield talk.

Credit Suisse, BMO, RBC and Scotia were the bookrunners.

The Austin, Texas-based oil and gas exploration and production company plans to use the proceeds to fund the acquisition of mineral rights and a working interest in the Delaware Basin and for general corporate purposes.

Hertz brings $1.1 billion

Away from Tuesday's done deals there was news bearing upon the active forward calendar of business expected to clear before the extended Memorial Day holiday weekend ahead.

Hertz Equipment Rental Corp. plans to sell $1.1 billion of senior secured second priority notes in tranches maturing in 2022 and 2024 on Wednesday or Thursday.

BofA Merrill Lynch, Goldman Sachs, Barclays, BMO, BNP Paribas, Citigroup, Credit Agricole, JP Morgan and RBC are managing the spinoff-related deal.

MuliPlan downsizes bonds

MultiPlan Inc. downsized its offering of eight-year senior notes (Caa1/B-) to $1.1 billion from $1.3 billion, shifting $200 million of proceeds to its concurrent term loan.

The shift of proceeds increases the size of the loan to $3.47 billion from $3.27 billion.

The notes offer began an investor roadshow on Monday. That roadshow wraps up on Wednesday, and the deal is set to price thereafter.

Elsewhere PennyMac Financial Services, Inc. cited market conditions as it announced the postponement of its planned $300 million offering of five-year senior notes (expected B2/confirmed B+).

The JP Morgan-led deal, which set out on an investor roadshow on May 16, came with early guidance in the low-to-mid 9% yield context.

Match, Parsley move up

In the secondary arena, a trader said that new issues were “definitely the focus for the market today” – no big surprise, given the heavy volume of new paper that priced, on top of Monday’s fairly active primary session.

One of the strongest performers was Match Group’s new 6 3/8% notes due 2024.

The Dallas-based operator of popular on-line dating services – as well as the tonier Princeton Review academic test preparation and counseling service – brought its quickly shopped offering of 6 3/8% notes due 2024 to market at par, and a trader saw them get as good as 102 bid, 102½ offered.

A second trader saw them in a 101 7/8-to-102 3/8 bid context, while at another shop, the bonds were seen going home at 102½ bid, 102¼ offered.

Another strong performer was Parsley Energy’s 6¼% notes due 2024.

A trader said the bonds initially traded up to 102 bid before coming off those highs and settling into a 101¼ to 101½ bid range, still well up from their par issue price.

A second trader had the regularly scheduled forward calendar offering at 101½ bid, 102 offered. While yet another saw the bonds ranging from 101¼ to 102¼.

Iron Mountain, Dana gain modestly

Those strong secondary gains far outclassed the performance of two of the day’s other issues.

Maumee, Ohio-based automotive components manufacturer Dana Holding Corp.’s $375 million drive-by offering was seen by traders to be mostly spinning its wheels in the aftermarket following its par pricing.

One of them saw the bonds trading between 100¼ and 100¾ bid.

But another two pegged the bonds in a range between 100 and 100½ bid.

The traders also did not see very much in the way of secondary market gains in Boston-based record and document storage company Iron Mountain’s quickly shopped two-part offering.

One trader saw its 4 3/8% notes due 2021, which had priced at par, trading between 100¼ and 100 5/8 bid – and a second trader didn’t even see them get that high, pegging the new notes between 99¾ and 100¼ bid.

The second trader saw the other half of the Iron Mountain deal – its 5 3/8% notes due 2026 – also in a 99¾ to 100¼ bid context, although another market source later said the bonds were trading between 100½ and 101 bid.

Traders did not immediately report any aftermarket levels on Calpine Corp.’s 5¼% senior secured notes due 2026, noting that the Houston-based power generation company’s upsized $625 million deal priced fairly late in the session.

Gogo bonds on the go

Looking at the deals that priced during Monday’s session, a trader said that Gogo Inc.’s new 12% senior secured notes due 2022 “really were go-going.”

He saw the notes on Tuesday at 101¼ bid, 101½ offered – well up from the par level at which the Chicago-based provider of communications services to the commercial and business aviation markets had priced its scheduled forward calendar offering on Monday via its Gogo Intermediate Holdings LLC subsidiary, after upsizing the deal to $525 million from an originally announced $500 million.

A trader saw Monday’s U.S. Concrete Inc. 6 3/8% notes due 2024 in a par to 100 3/8 bid context, calling that down ½ point on the day.

The Euless, Texas-based supplier of ready-mixed concrete and concrete-related products had priced its $400 million forward calendar offering at par after upsizing the issue from $350 million originally.

A trader saw TRI Pointe Group, Inc.’s 4 7/8% notes due 2021 at 99¾ bid, 100¼ offered.

Another quoted the issue “right around par.”

The Irvine, Calif.-based homebuilder had priced its quick-to-market $300 million issue on Monday at 99.437, to yield 5%.

Debt swap boosts Chesapeake

Away from the new deal, Chesapeake Energy Corp. was buoyed by news out late Monday regarding yet another debt-for-equity swap.

A trader said the company’s 8% second-lien notes due 2022 gained “almost 3 points” to close at 77 1/8, on “a slug of trades.”

Another market source placed the 6 5/8% notes due 2020 at 62 bid, up 4 points.

In a regulatory filing Monday, the Oklahoma City-based oil and gas producer said it was exchanging $166 million of upcoming maturities and puts for approximately 37 million shares of equity, or 5.2% of its outstanding shares.

That transaction follows a similar exchange less than two weeks ago in which the company took out a big chunk of debt in return for about 4% of its shares.

Philip C. Adams, an analyst with Gimme Credit LLC, said in an afternoon comment published Tuesday that while the exchange “would seem helpful to [the company] from a liquidity perspective,” the overall strength of the company would mostly depend on how commodity prices fare in the near term.

“We suspect there are limits to the amount of debt that can be retired via additional private transactions,” Adams wrote.

Chesapeake and other energy companies’ bonds also got a boost from better oil prices, which broke out of a four-session slide.

July West Texas Intermediate, the new front month, settled up 54 cents at $48.62 per barrel on the New York Mercantile Exchange.

July Brent crude settled up 26 cents at a nearly identical $48.61 per barrel on the London ICE Futures Exchange.

Indicators turn northward

Statistical market performance measures turned higher across the board on Tuesday, after having been mixed on Monday. It was the indicators’ second higher session in the last three trading days.

The KDP High Yield Daily index rose by 17 basis points on Tuesday, ending at 67.24, after having retreated by 10 bps on Monday. It was the index’s second such advance in the last three sessions.

Tuesday’s yield, accordingly, came in by 6 bps to 6.29%, after having widened out by 4 bps on Monday. It was the yield’s second narrowing in the last three sessions.

The Markit Series 26 CDX North American High Yield index posted its third consecutive gain after three successive losses and its fourth gain in the last seven sessions. It jumped to 102 5/8 bid, 102 11/16 offered, up 25/32 point on the day, on top of Monday’s 3/32 point improvement.

The Merrill Lynch North American High Yield Master II index also saw its third straight advance on Tuesday, following two successive setbacks – its fifth gain in the last seven sessions. The index firmed by 0.257%, on the heels of Monday’s 0.107% strengthening.

The latest gain lifted its year-to-date return to 7.55% – a new peak level for the year. That was up from Monday’s 7.274% return and from the previous high year-to-date return of 7.389%, which had been set back on May 2.

Stephanie N. Rotondo contributed to this review.

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