Rosetta Resources, Ceridian drive by in calm primary; new Rosetta notes firm in heavy trading

By Paul Deckelman and Paul A. Harris

New York, May 21 - The high-yield primary market quieted down substantially on Wednesday following Tuesday's boisterous bond barrage that had seen more than $6 billion of new fully junk-rated, dollar-denominated paper come to market in eight mostly quickly shopped tranches.

In contrast, Wednesday's activity was notably calmer, with two single-tranche drive-by deals pricing for a total of some $1.35 billion.

Ceridian LLC, a Minneapolis-based provider of human resources software and services, had the larger of the two transactions with an $855 million issue of 3.5-year notes. But that paper priced too late in the session for any kind of aftermarket activity.

Rosetta Resources, Inc., on the other hand, priced $500 million of 10-year notes, upsized from an originally announced $400 million. The Houston-based oil and natural gas exploration and production company's new issue proved to be quite popular in the secondary market, easily topping the day's Most Actives list, while firming by more than 1½ points above issue.

Traders meantime reported continued brisk trading in Tuesday's best-received new deal, from Denver-based oil and gas E&P operator Cimarex Energy Co., whose upsized $750 million of 10-year notes had surged as much as two points in initial aftermarket trading and then went home a little off its day's highs but still holding most of those gains. It was pretty much the same story on Wednesday, those market sources said.

The traders saw other names on Tuesday's long list of new issuers staying pretty much on Wednesday where they had finished on Tuesday, including satellite telecommunications operator Inmarsat plc, data storage technology manufacturer Seagate HDD Cayman, cable TV operator Cablevision Systems Corp. and electronic manufacturing services provider Sanmina Corp.

Tuesday's late-pricing deals that had not seen any secondary trading after coming to market - from aircraft parts manufacturer TransDigm Inc. and gaming technology producer Scientific Games Corp. - finally began trading around on Wednesday. But while the former's two-part deal did respectably well in the aftermarket, the latter's single-tranche offering struggled.

Statistical junk performance indicators were seen by market sources as having been mixed for a fourth consecutive session on Wednesday.

Ceridian 3.5-year with par call

The primary market saw just two dollar-denominated deals price on Wednesday.

Both were sizable, single-tranche trades that raised an overall total of $1.35 billion.

Both came as drive-bys.

And both came in line with price talk.

Ceridian and Comdata Inc. priced an $855 million issue of 8 1/8% senior notes due Nov. 15, 2017 (Caa2/CCC) at 99.75 to yield 8.207%.

The quick-to-market debt refinancing deal via sole bookrunner Deutsche Bank priced in line with price talk that specified an 8¼% to 8½% yield range at 99.75.

The 3.5-year notes are prepayable at par.

Taking note of that par call, one trader remarked that because of it Ceridian came with plenty of juice.

"This could effectively be just a bridge financing," the trader said, adding that investors were being paid handsomely, and understood they could be taken out of the bonds sooner than later but would be keeping their fingers crossed that such would not be the case.

The deal, which came discounted to 99.75 quite late on Wednesday, was pretty active on the break, trading in a par 5/8 bid, 101 3/8 offered context, the trader added.

Rosetta upsizes

Rosetta Resources priced an upsized $500 million issue of 10-year senior notes (B1/B+) at par to yield 5 7/8%.

The deal was upsized from $400 million.

The yield printed in the middle of the 5¾% to 6% yield talk.

J.P. Morgan, Wells Fargo, BMO and Mitsubishi were the joint bookrunners for the debt refinancing and general corporate purposes deal.

Talking the deals

Looking to the Thursday session as well as the Friday session, which will be abbreviated because of the recommended early bond market close ahead of the three-day Memorial Day weekend in the United States, the forward calendar still contains $2.13 billion of dollar-denominated business expected to clear ahead of the weekend.

Talk surfaced on two of the deals on Wednesday, both of which are set to price Thursday.

Post Holdings, Inc. talked its $630 million offering of senior notes due Dec. 15, 2022 (/B/) to yield in the 6¼% area.

Joint bookrunner Barclays will bill and deliver. Credit Suisse, Wells Fargo, Goldman Sachs, BMO and Nomura are also joint bookrunners.

DriveTime Automotive Group, Inc. talked its $400 million offering of seven-year senior secured notes (expected B3/confirmed B) to price with a yield in the 8% area.

Wells Fargo the left bookrunner. Citigroup and Deutsche Bank are the joint bookrunners.

Meanwhile, talk has yet to surface on the Enova International, Inc. $500 million offering of seven-year senior notes (B3/B) via sole bookrunner Jefferies LLC. The deal has been discussed in a yield context of 8¾% to 9%, market sources said.

Brakes Bros' dual-tranche deal

In Wednesday's European session, Brakes Bros Ltd. priced a two-part offering of senior secured notes due Dec. 15, 2018 (expected ratings B3/B-).

The debt refinancing deal included a £257 million add-on to the Brakes Capital 7 1/8% senior secured notes due Dec. 15, 2018, which priced at 101.5 to yield 6.735%. The reoffer price came at the rich end of the 101.25 to 101.5 price talk. The original £200 million issue priced at par on November 20, 2013.

The deal also included €150 million of new senior secured floating-rate notes, which priced at par to yield Euribor plus 500 basis points. The reoffer price came on top of price talk. The spread came at the wide end of the Euribor plus 475 to 500 bps spread talk.

Joint bookrunner Barclays will bill and deliver. HSBC and JPMorgan were also joint bookrunners.

Xella spread comes tight

Elsewhere Xella International SA priced a €325 million issue of five-year senior secured floating-rate notes (Ba3/BB-) at par to yield three-month Euribor plus 375 bps.

The reoffer price came on top of price talk. The spread came at the tight end of the Euribor plus 375 to 400 bps spread talk.

Joint global coordinator BNP Paribas will bill and deliver. Goldman Sachs was also a joint global coordinator. Credit Agricole, Morgan Stanley and UniCredit were joint bookrunners.

The Duisburg, Germany-based building materials company plans to use the proceeds to take out its 8% senior secured notes due 2018.

Northern Frontier roadshow

Aside from Wednesday's drive-by business (see above), the session saw only one deal announcement.

Northern Frontier Corp. is marketing a C$75 million offering of five-year senior secured second-lien notes (/expected B-/) on a Toronto-based roadshow.

The deal is expected to price at the end of the present week.

GMP and BMO are the joint bookrunners.

Proceeds will be used to help finance the acquisition of Central Water & Equipment Services Ltd. as well as to repay bank debt, to fund capital expenditures and for general corporate purposes.

Rosetta runs up

In the aftermarket, a trader declared that the new Rosetta Resources 5 7/8% notes due 2024 "was doing very well," seeing the bonds having firmed to a 100 5/8 to 100 7/8 context, well up from the par level at which the quick-to-market deal had priced after having been upsized from an originally announced $400 million.

A second trader saw those bonds at 101½ bid, 102 offered.

At another shop, a market source said that the energy company's new deal was clearly the volume powerhouse of the session, seeing over $79 million having changed hands by the end of the day. He quoted the bonds at 101¾ bid.

Wednesday's other pricing - Ceridian LLC's 8 1/8% notes due 2017 - came too late in the session for any kind of aftermarket dealings, a market participant reported.

Cimarex stays strong

Among the deals that came to market during what one trader called Tuesday's "onslaught" of new issues totaling over $6 billion, Cimarex Energy's 4 3/8% notes due 2024 continued to stand out in secondary dealings on Wednesday, just as it had on Tuesday.

The trader saw those bonds circulating in a bid context of 101 5/8 to 101 7/8 on Wednesday, ultimately tightening a little to around 101¾ to 101 7/8, while a second saw the notes between 101½ and 102.

That quickly shopped issue had priced at par Tuesday after having been upsized to $750 million from the originally announced $600 million. After initially moving as high as 102 bid when they were first freed for secondary dealings, the bonds had come down from those peak levels to finish in a 101¼ to 101¾ offered range.

On Wednesday, another trader said, the bonds were also a little off their highs; he saw them going out at 101 5/8 bid, calling that down 1/8 point. He said Cimarex was one of the day's volume leaders, with over $49 million of those notes having changed hands.

Tuesday deals 'languish'

Apart from the super-strong secondary showing in Cimarex, though, the first trader said that it seemed like the rest of Tuesday's issues "were languishing," up perhaps 1/8 to ¼ point from their respective issue prices, or perhaps even 3/8 point to 1.2 points at the most.

"The accounts were complaining because they were all priced on the tight side," he said.

"And that, coupled with the nervousness in the stock market, contributed to them not going up too well."

He also pointed out that there seemed to be a glut of new paper having coming to market, not just on Tuesday but recently in general - last week's more than $9 billion of new bonds, preceded by the over $10 billion of junk that had priced the week before, ended May 9 - making digestion difficult.

"What an onslaught," he marveled. "It feels like everybody's trying to get in," almost as if everyone is trying to get their deals done before Memorial Day and then take the summer off.

"That's what it feels like," he re-iterated. "And we've got a lot coming [Thursday] and Friday morning."

Deals doing okay

At another shop, a trader took the opposite view.

He opined that for the most part, Tuesday's new deals "all seemed to do pretty well" - except for Scientific Games' new 6 5/8% senior subordinated notes due 2021.

The New York-based provider of technology to the gaming industry had driven by the new-deal market on Tuesday with its $350 million issue fairly late in the session on Tuesday, pricing the bonds at 99.321 to yield 6¾%. They came too late in the session for any aftermarket dealings at that time.

"It sounded like it got kind of jammed; it wasn't allocated too well," he theorized.

When the bonds freed on Wednesday, he said, "they traded down immediately to 98, off by 1¼ to 1 3/8 points. Then it came back - they stabilized down there and rallied back to 99," going out at 98¾ to 99, still down about ½ point from its already discounted pricing level.

But all of the day's other issues, he said, traded very well.

Beside the robust showing in the new Cimarex bonds, he said, the new Seagate HDD deal "is right around par - it's not really doing much, but it's hanging in there, after it was priced a little on the tight side."

The Dublin-based maker of data storage technology had priced its $1 billion split-rated (Ba1/BBB-/BBB-) offering of 4¾% notes due Jan. 1, 2025 at par after doubling the size of the quickly shopped issue from the original $500 million. The bonds had initially traded around 99½ to 99 ¾ on Tuesday before firming to around par on Wednesday.

He said that TransDigm's new 6% notes due 2022 had moved to 100¾ bid, 101¼ offered, as did its 6½% notes due 2024.

The Cleveland-based aircraft components manufacturer had parachuted in on Tuesday with its two-part $2.35 billion deal, divided into $1.15 billion of the eight-year notes and $1.2 billion of the 10-years, both of which had priced at par. They had come too late in the session Tuesday for any trading at that time.

At another desk, the eight-years were being quoted between 100½ and 100¾ bid, with the 10-years between 100 5/8 and 100 7/8.

The trader meantime said that although there had been "a flood of deals - over $6 billion of issuance - most everything seems to be trading very well."

He continued that Wednesday's market "had a nice feel to it today; after a couple of days of weakness across the board, it firmed up a little bit."

He noted that the bellwether Markit Series 22 CDX North American High Yield index had gained 1/8 to ¼ point from Tuesday's levels.

Indicators remain mixed

Statistical junk performance indicators were seen by market sources as having been mixed for a fourth consecutive session on Wednesday.

The Markit Series 22 index rose by 5/32 point on Wednesday to end at 106 23/32 bid, 106¾ offered, its first gain after two straight losses. On Tuesday, it had retreated by ¼ point.

The KDP High Yield Daily index was down by 3 basis points, finishing at 74.93, after having been unchanged on Tuesday. It had risen by 3 bps on Monday.

Its yield meanwhile was unchanged at 5.09%, after having moved up by 1 bp on Tuesday.

The widely followed Merrill Lynch High Yield Master II index lost 0.038%, its first downturn after three straight session on the upside including Tuesday, when the index had improved by 0.047%.

The loss dropped its year-to-date return to 4.404% from 4.443% on Tuesday, which had been its second consecutive new peak level for 2014 so far.

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