Restaurant Brands, NextEra megadeals drive by; Restaurant rises; Toys ‘R’ Us off again on Chapter 11 talk

By Paul Deckelman and Paul A. Harris

New York, Sept. 18 – Last week’s robust new-issuance trend continued unabated to start the new week on Monday, as a pair of issuers combined for $2.6 billion in new U.S. dollar-denominated and fully junk-rated paper, which priced in three tranches.

Canadian-American fast-food eateries operator Restaurant Brands International Inc. served up a quick-to-market $1.5 billion add-on to the eight-year secured bonds that it sold a little more than a month ago.

That new issue – upsized from its originally announced amount – was heard by traders to have moved higher when the credit hit the aftermarket.

NextEra Energy Partners, LP, which specializes in clean energy projects, brought a $1.1 billion two-part offering to market, consisting of a pair of $550 million tranches of seven- and 10-year notes. That late-breaking deal was not reported to have generated much in the way of trading following its pricing.

Traders meantime saw continued brisk activity in some of the issues that priced at the tail end of last week, including Wabash National Corp., iStar Inc. and Avolon Holdings Ltd.

Away from the new issues market, participants were watching the continued destruction of Toys ‘R’ Us Inc.’s bonds; that paper – already on the slide since just after Labor Day, continued to cascade lower on Monday amid renewed speculation that the troubled retailer could file for Chapter 11 protection from its bondholders and other creditors, with some news reports predicting such a step was imminent.

Also among the retailers, Rite Aid Corp. noted were up slightly, and its shares up as well, as news reports that bigger sector rival Walgreens Boots Alliance, has expressed a willingness to modify its planned acquisition of more than 2,000 current Rite Aid stores in order to gain approval from federal antitrust authorities.

iHeart Communications Inc. paper moved up in Monday trading, although there seemed to be no fresh news out about the radio and outdoor advertising conglomerate that might explain that rise.

Statistical market performance measures were mixed for a third consecutive session on Monday; they had turned mixed on Thursday and stayed that way on Friday, after having been unchanged-to-higher on Wednesday.

Restaurant Brands upsizes

In Monday's primary market Restaurant Brands International Inc. priced an upsized $1.5 billion add-on to its 5% second-lien senior secured notes due 2025 (expected ratings B3/B-) at 100.50 to yield 4.887%.

The issue size was increased from $1.3 billion.

The reoffer price came at the rich end of the 100 to 100.5 price talk.

JP Morgan Securities LLC, Wells Fargo Securities LLC, Morgan Stanley & Co, RBC Capital Markets LLC and BofA Merrill Lynch were the joint bookrunners.

The Oakville, Ontario-based quick service restaurant company plans to use the proceeds to redeem all of its outstanding 6% second-lien senior secured notes due 2022 and for general corporate purposes.

Big book for NextEra energy

NextEra Energy Partners, LP priced $1.1 billion of senior bullet notes (Ba1/BB/BB+) in two tranches.

The deal included $550 million of seven-year notes that priced at par to yield 4¼%. The yield printed at the tight end of the 4¼% to 4½% yield talk.

It also included $550 million of 10-year notes that priced at par to yield 4½%. The yield printed at the tight end of the 4½% to 4¾% yield talk.

Timing was moved ahead. The deal had originally be announced as Tuesday business.

The combined deal was playing to more than $4 billion of orders, a trader said.

BofA Merrill Lynch, Barclays, Credit Suisse Securities (USA) LLC, Goldman Sachs & Co., JP Morgan Securities LLC, Morgan Stanley & Co., MUFG, Scotia Capital, UBS Investment Bank and Wells Fargo Securities LLC were the joint bookrunners.

The Juno Beach, Fla.-based limited partnership plans to use of portion of the proceeds to pay off its revolving credit facility and the NEP US Holdings' variable rate senior secured term loan, with any remaining proceeds expected to be used for general partnership purposes.

Waste Industries talk 6% to 6¼%

Looking to the Tuesday session Waste Industries talked its $305 million offering of eight-year senior notes (S&P: CCC+) to yield 6% to 6¼%.

Books were scheduled to close on Monday, except for accounts that were to meet with the company on Monday.

The deal is set to price on Tuesday.

Barclays is the left bookrunner. Macquarie Capital and SunTrust Robinson Humphrey Inc. are the joint bookrunners.

JPW talk 9% area

JPW Industries, Inc. talked its $220 million offering of seven-year senior secured notes to yield in the 9% area.

Official talk comes wide to initial guidance in the low 8% area, a trader said.

Along with talk came the withdrawal of an issuer friendly special call provision that would have allowed the company to call up to 10% of the issue annually at 103 during the non-call period. The notes become callable after three years at par plus 75% of the coupon.

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

Goldman Sachs & Co. is the left bookrunner. BMO Securities and BNP Paribas Securities Corp. are the joint bookrunners.

Miller Homes roadshow

In the European session Miller Homes Group Holding plc plans to start a roadshow in London City on Tuesday for a £425 million two-part offering of senior secured notes (S&P: BB-/Fitch: BB-).

The deal includes £225 million to £250 million of seven-year fixed-rate notes, which come with three years of call protection. Initial price talk is 5¾% to 6%.

In addition the company intends to sell £175 million to £200 million of six-year floating-rate notes which come with one year of call protection. Initial price talk for the floating-rate notes is Libor plus 525 basis points to 550 bps.

Left lead global coordinator Barclays will bill and deliver. Deutsche Bank and HSBC are also global coordinators.

Proceeds will be used to fund the buyout of the United Kingdom-based homebuilder by Bridgepoint.

Demire taps 2 7/8% notes

Demire Deutsche Mittelstand Real Estate AG priced an upsized €130 million add-on to its 2 7/8% fixed-rate notes due July 15, 2022 (Ba2/BB+) at 101.25, according to a Monday press release from the company.

The issue size was increased from €95 million.

It played to strong demand from institutional investors, the press release stated.

Deutsche Bank and Morgan Stanley were the joint global coordinators.

The Frankfurt-based real estate company plans to use the proceeds in the fourth quarter of 2017 for the early refinancing of its outstanding A/B- notes and for general corporate purposes including the financing of future acquisitions.

The original €270 million issue priced at par on July 12.

Restaurant rises from issue price

In the secondary realm, market participants saw impressive volume in the new Restaurant Brands International 5% second-lien senior secured notes due 2025 add-on tranche.

“It was the top trader of the day,” one source said, seeing more than $60 million of the notes having changed hands.

That deal was upsized from an originally announced $1.3 billion, which was also the size of the original issue of the notes, which priced at par on Aug. 8.

One market source saw the notes going home at 101 bid, 101 3/8 offered, up from their 100.5 issue price.

At another desk, a trader quoted the paper in a 101-to-101¼ bid context.

And a third saw the bonds going home around 101 1/8 bid.

However, yet another participant, who pegged the notes around 100¼, pointed out that the existing bonds had traded almost a full point higher than that prior to news of the new deal.

The company’s existing 4¼% notes due 2024 were meantime “only up minimally,” finishing at 100½ bid, one of the traders said.

NextEra unseen

Traders did not immediately report any initial aftermarket dealings in the new NextEra Energy Operating Partners, LP two-part issue, owing to the relative lateness of the hour at which the megadeal priced.

Recent deals actively traded

A trader said that Wabash National Corp.’s 5½% notes due 2025 were “active today,” seeing the paper up 1/8 point at 101¼ bid.

A second trader agreed, noting that more than $30 million of those notes had traded. He saw them going home in a 101-to-101½ bid context.

The Lafayette, Ind.-based diversified industrial manufacturer had priced $325 million of the notes at par on Friday in a regularly scheduled forward calendar offering.

The traders also saw some dealings in iStar Inc.’s $800 million two- part issue, both $400 million halves of which had priced at par on Thursday in a quick-to-market transaction.

One saw the New York-based financial services company’s 4 5/8% notes due 2020 at 101¾ bid, up ¼ point on the day, while its 5¼% notes due 2022 were “active – but unchanged,” ending at 100¾ bid.

He meantime saw Delphi Powertrain’s 5% notes due 2025 about unchanged at 101 3/8 bid.

The Gillingham, England-based manufacturer of drivetrain systems for automotive and commercial vehicle markets had priced $800 million of those notes at 99.5 to yield 5.077% in a regularly scheduled forward calendar deal on Thursday. The deal was upsized from $750 million originally.

Toys ‘R’ Us trades off

Away from the new issues, a trader said that “the big news of the day was Toys ‘R’ Us. Those bonds have fallen precipitously, since it could file [for Chapter 11 bankruptcy protection] at any moment.”

Indeed, CNBC – quoting “sources familiar with the matter – reported on Monday that the troubled Wayne, N.J.-based retailer of children’s toys and games and other child-oriented products “could file for bankruptcy as soon as this week.”

And a Bloomberg news story Monday afternoon indicated that the company “is preparing a bankruptcy filing as soon as today,” [i.e., Monday], although as of late Monday evening, no news of any official filing of bankruptcy papers had surfaced.

The debt-laden retailer’s bonds have fallen sharply since just after Labor Day, when news that it had hired the law firm of Kirkland and Ellis – known for its work in restructuring debt, sometimes via bankruptcy proceedings – sparked speculation that such a filing to deal with its $400 million of bond debt due Oct. 15, 2018 might be on the horizon.

Those 7 3/8% notes due 2018, which had started off the month trading in the upper 90s, fell around 20 points on Sept. 6, and continued to slide further in the days that followed. They ended that week just under 71 bid, and had deteriorated to around 44 bid by the end of last week.

On Monday, those notes nosedived further, tumbling down to a closing price of 18 bid – although a trader said that “it was all small retail investors” making numerous odd-lot transactions in the bonds to chop them down to that level. He saw “at most, one or two” sizable round-lot trades during the day.

Another trader said the only Toy’s issue to generate any kind of real round-lot volume was the company’s TRU Taj 12% senior secured notes due 2024; those bonds were off by more than 4½ points on the day, ending at around 83½ bid, with over $10 million traded.

Rite aid rises

Elsewhere in the retailing sector, traders saw Rite Aid Corp.’s bonds slightly higher, helped by the news that larger sector peer Walgreens-Boots Alliance has expressed a willingness to government regulators to modify its planned deal to buy more than 2,000 Rite Aid stores, if that is what it will take to make the deal pass muster with federal anti-trust regulations.

Walgreens had originally planned to acquire Rite Aid outright for around $11 billion, but abandoned that plan in June on fear that Washington could turn thumbs down on the deal for competitive reasons. It instead offered to purchase some 2,186 of Rite Aid’s more than 4,000 nationwide stores, for $5.2 billion in cash. Rite Aid plans to use at least some of any sale proceeds for debt repayment.

The Camp Hill , Pa.-based drugstore chain operator’s most actively traded issue, its 6 1/8% notes due 2023 edged up by 1/8 point, a trader said, to 100 7/8 bid, on volume of over $14 million.

He saw “just a handful” of its 7.70% notes due 2027, perhaps $4 million, having traded. They gained ¼ point, ending at 98¼ bid.

Rite Aid’s New York Stock Exchange-traded shares improved by 10 cents, or 3.80%, ending at $2.23, on volume of over 50 million shares, nearly twice the norm.

iHeart heard higher

Traders said that iHeart Communications’ 9% notes due 2022 moved up by 3 points on the day, to 72 bid, on volume of over $9 million.

One said “that was the only one” of the San Antonio, Texas- based broadcasting and outdoor advertising company’s bonds seen moving around, with its other bonds “Moving in only dribs and drabs.”

There was no fresh news out on the company that might explain the gain the 9% bonds saw.

iHeart’s over-the-counter shares jumped by 17 cents on Monday, or 11.89%, to end at $1.60, though on smaller-than-normal volume.

Indicators stay mixed

Statistical market performance measures were mixed for a third consecutive session on Monday; they had turned mixed on Thursday and stayed that way on Friday, after having been unchanged-to-higher on Wednesday.

The KDP Daily High Yield Index was unchanged on Monday, ending at 72.28. On Friday, it had lost 6 bps to fall to that level, after having risen by 8 bps on Thursday and after having been was unchanged on Wednesday.

Its yield narrowed by 4 bps, to 5.12%, after widening on Friday by 3 bps. The yield had also come in by 2 bps on Thursday and finished unchanged on Wednesday.

The Markit CDX Series 28 High Yield Index lost 3/23 point Monday to close at 107 5/32 bid, 107 3/16 offered, after having edged up by 1/16 point Friday. It had also retreated by nearly 7/32 point on Thursday.

The Merrill Lynch North American High Yield Index, though, made it six advances in a row on Monday, firming by 0.112% on top of Friday’s 0.004% gain.

The latest upturn raised the index’s year-to-date return to 6.614% from 6.494% on Friday, thus establishing a sixth straight new 2017 year-to-date peak level.

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