Albertson’s, Jefferies price; secondary mixed; Caesars falls after receiving default notice

By Paul A. Harris and Stephanie N. Rotondo

Portland, Ore., Oct. 8 – The high-yield primary market saw two deals price on Wednesday. Albertson’s Holdings LLC and Jefferies Finance LLC raised a combined $1.55 billion.

Albertson’s downsized its issue of 7¾% eight-year notes to $1,145,000,000, whereas Jefferies upsized its 7½% 6.5-year notes to $425 million.

The secondary high-yield space was mixed Wednesday as investors digested the latest minutes from the Federal Reserve.

Those minutes, which showed the central bank had no immediate plans to raise interest rates, also helped the equity markets recoup Tuesday’s losses.

Of the day’s dealings, Caesars Entertainment Corp.’s 10% second-lien notes due 2018 were under pressure, though this time on news the company has been served with a default notice.

The debt has been drifting lower for weeks but with no news to act as a catalyst.

Meanwhile, Endeavour International Inc. was circling the drain as the company held last-minute negotiations with noteholders to come up with a refinancing plan, lest it should be forced into Chapter 11 protections. The talks come after the company missed a coupon payment in early September.

Albertson's downsizes

After carving away at the size of its deal throughout the week, Albertson's priced a downsized $1,145,000,000 issue of 7¾% eight-year second-lien senior secured notes at 98.55 to yield 8% on Wednesday.

The yield printed at the wide end of yield talk in the 7 7/8% area and also at the wide end of initial guidance of 7¾% to 8%.

The deal, which will help fund the acquisition of Safeway, was downsized from $1,245,000,000 after having been previously downsized from $1,375,000,000 and prior to that $1,625,000,000. The company shifted $300 million of the proceeds to a term loan tack-on. The bond deal size was also reduced because of notes not tendered in a tender offer.

BofA Merrill Lynch was the left bookrunner. Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC, Morgan Stanley & Co. LLC, Barclays and Deutsche Bank Securities Inc. were the joint bookrunners.

Jefferies upsizes

Jefferies Finance priced an upsized $425 million issue of 6.5-year senior notes (B1/B) at par to yield 7½%.

The general corporate purposes deal was upsized from $400 million.

The yield printed on top of yield talk.

Jefferies LLC was the bookrunner.

Breitburn talk 8¼% area

Breitburn Energy Partners LP and Breitburn Finance Corp. talked their $400 million offering of 8.5-year senior notes (expected ratings B3/B-) to yield in the 8¼% area.

The bank debt refinancing deal was announced Wednesday morning, and books were scheduled to close on Wednesday afternoon.

In addition, call protection was extended to 4.25 years from three years. The first call premium will be set at par plus 50% of the coupon.

Citigroup is the left bookrunner. BMO Securities, Credit Suisse, J.P. Morgan Securities LLC, RBC Capital Markets, RBS Securities Inc. and Wells Fargo Securities LLC are the joint bookrunners.

Eco Services talk 8½% area

Eco Services Operations LLC and Eco Finance Corp. talked their $200 million offering of eight-year senior notes (Caa1/CCC+) to yield in the 8½% area.

The deal, via Credit Suisse, Jefferies and Citigroup, is set to price Thursday.

Metaldyne downsizes

Metaldyne Performance Group Inc. downsized its offering of eight-year senior notes (B3/B+) to $600 million from $700 million.

Proceeds were shifted to the company's term loan, upsizing it to $1.35 billion from $1.25 billion.

The bond roadshow is scheduled to wrap up Thursday.

Deutsche Bank, Goldman Sachs, BofA Merrill Lynch, KeyBanc, Morgan Stanley, Nomura and RBC are the joint bookrunners.

GM Financial crossover

In the European market, a former inhabitant of the speculative-grade credit universe, General Motors Financial International BV – lately upgraded to investment grade by Standard & Poor's – priced a €500 million issue of split-rated 1 7/8% senior notes (Ba1/BBB-/BB+) at mid-swaps plus 145 basis points on Wednesday.

The spread came at the tight end of the 145 bps to 150 bps spread talk. Initial guidance was 155 bps to 160 bps.

The announced deal size was €500 million maximum.

Joint bookrunner BNP Paribas will bill and deliver. JPMorgan, Commerzbank and Royal Bank of Scotland were also joint bookrunners.

Indexes finish mixed

Market indicators turned mixed Wednesday following the release of minutes from September’s Federal Reserve meeting.

The minutes indicated that the central bank is in no hurry to raise interest rates, especially given that there are signs that the global economy is slowing down.

The KDP High Yield index fell to 72.17 with a 5.6% yield from Tuesday’s reading of 72.4 with a 5.56% yield.

But the Markit CDX Series 22 index gained almost half a point, ending at 106.8 bid, 106.9 offered, according to a market source.

Caesars slips on default notice

Caesars Entertainment received a notice of default late Thursday from holders of the 10% second-lien notes due 2018, weighing further on the debt that has been steadily declining of late.

One market source pegged the bonds at 21½ bid, down 1½ points. At another desk, the paper was quoted at 20 3/8 bid, 20½ offered, compared with levels around 22 previously.

Wilmington Savings Fund Society, a trustee acting on behalf of holders of the $3.7 billion of 10% notes, issued the default notice, alleging that a transfer of assets to more senior bondholders and bank lenders – without giving them any claims as well – was the basis for the action.

The Las Vegas-based casino operator has 60 days to cure the action before being in full-on default.

Caesars has been in talks with senior creditors to reduce its $24.2 billion debt load. This follows the company’s sale earlier this year of four properties to an affiliate – the said transfer of assets to which the 10% bondholders are referring.

Endeavour on borrowed time

Endeavour International’s forbearance with noteholders was slated to expire at the end of Wednesday, leaving investors wondering if a deal will get hammered out or if the company will be forced to file for bankruptcy.

The Houston-based oil and gas exploration and development company missed a roughly $33 million interest payment on Sept. 2, triggering a 30-day grace period that was slated to end Oct. 1.

But holders of the company’s 12% first-priority notes due 2018, 12% second-priority notes due 2018 and 6½% convertible senior notes due 2016 granted the company a minor reprieve on Tuesday, giving it until 11:59 p.m. ET on Wednesday.

However, there were no assurances that a deal would get done.

On the heels of that news, one trader said the 12% first-priority notes were “down a touch” at 65, though he noted that he had not seen much in the 12% second-priority notes, which have been “offered at 20 for the past couple of trading days,” albeit with no bids.

Another source deemed the first-priority debt unchanged at 65.

As for the company’s equity, trading was halted Tuesday, leaving the stock at 15.65 cents (NYSE: END).

Mining names mixed

Elsewhere in the mining space, the results were mixed for the day, echoing the trend of the overall market.

MolyCorp Inc.’s 10% notes due 2020 were seen inching higher, ending around 72½, a trader said.

But coal producer Alpha Natural Resources Inc. saw its 6¼% notes due 2021 dive 2½ points to 52½ bid.

Quicksilver Resources Inc.’s bonds were softer on the day. The 9 1/8% notes due 2019 were seen around 58, while the 7 1/8% notes due 2016 finished around 32.

Fannie, Freddie weaken further

There continued to be weakness in Fannie Mae and Freddie Mac paper. The preferreds have been trending toward the downside since Sept. 30, when a federal judge dismissed investors’ lawsuits claiming the government’s taking of a majority of profits was illegal.

Fannie’s 8.25% series S fixed-to-floating-rate noncumulative preferreds (OTCBB: FNMAS) traded down a nickel, or 1.47%, to $3.35. Freddie’s fixed-to-floating-rate noncumulative perpetual preferreds (OTCBB: FMCKJ) declined 16 cents, or 4.55%, to $3.36.

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