Caesars, upsized Tronox, Univision lead $3 billion day; new DaVita holds gains in busy trading

By Paul Deckelman and Paul A. Harris

New York, Aug. 15 - The high-yield new-deal sector kept up its torrid pace on Wednesday, pushing out seven new issues totaling some $3 billion - the primaryside's third straight day of that kind of volume and, going back a week, its fifth super-sized session out of the last six.

Very familiar issuer Caesars Entertainment Corp. priced a $750 million issue of eight-year notes, after first restructuring that drive-by deal, which was originally envisioned as an add-on to the gaming giant's existing 2020 notes.

The biggest transaction of the day was chemical company Tronox Finance LLC's upsized $900 million of eight-year notes.

Other deals being upsized before they priced included Spanish-language media company Univision Communications Inc.'s $625 million of 10-year secured notes, casino and lottery technology company Scientific Games International, Inc.'s $300 million issue of eight-year subordinated notes, and homebuilder Taylor Morrison Communities, Inc.'s $125 million add-on to its eight-year notes. All of those were quick-to-market offerings.

Concert promoter Live Nation Entertainment Inc. brought a $225 million of eight-year notes, while IDQ Acquisition Corp., a maker of automotive air-conditioning products, did $45 million of five-year PIK paper; neither quickly shopped deal was upsized.

All of the day's deals finally came to market very late in the session and were not seen trading on Wednesday.

As has been the case both this week and last week, secondary market players were primarily involved with trading in the new issues.

There was heavy volume in Tuesday's $1.25 billion issue of 10-year notes from healthcare company DaVita Inc., topping the Junkbondland most-actives list and holding on to the solid gains it had notched in initial aftermarket dealings Tuesday.

Other recent new deals racking up sizable trading volume include the offerings from Sprint Nextel Corp., Charter Communications Inc. and Community Health Systems Inc.

Statistical junk-market performance measures were meantime lower across the board.

Tronox upsizes

The hard-charging primary market continued to crank on Wednesday, as seven issuers, each one bringing a single tranche, raised $2.97 billion.

However Wednesday's executions were not quite as tight as those seen earlier in week.

Only two of the seven tranches came at the tight end of price talk. Two came in the middle of talk. Two came at the wide end. And one came without talk.

However five of the seven were upsized.

And in keeping with the summer primary market's trend, six of the seven deals were drive-bys.

Tronox Finance priced an upsized $900 million issue of eight-year senior notes (B1/BB-) at par to yield 6 3/8%, in the middle of the 6¼% to 6½% yield talk.

The deal had been whispered in the mid-6% range and was originally planned at $650 million.

Market sources said that the Tronox transaction went well.

Goldman Sachs, Credit Suisse and UBS Investment Bank were the joint bookrunners.

About $400 million of the proceeds will be used to return capital to shareholders, including via share buybacks. The remainder of the proceeds will be used for general corporate purposes and possible returns of capital to shareholders from time to time.

Caesars restructures deal

Caesars Entertainment priced a restructured $750 million issue of senior secured notes due Feb. 15, 2020 (B2/B) at par to yield 9%.

The yield printed at the wide end of the 8¾% to 9% yield talk.

The quick-to-market deal was announced early on Wednesday as an add-on to the company's existing 8½% senior secured notes due Feb. 15, 2020 but before pricing the deal was converted into an entirely new offering..

Citigroup was the left bookrunner. Bank of America Merrill Lynch, Credit Suisse, Deutsche Bank, Goldman Sachs, J.P. Morgan and Morgan Stanley were the joint bookrunners.

The issuing entities were Caesars Operating Escrow LLC and Caesars Escrow Corp., which will be assumed by Caesars Entertainment Operating Co., Inc., a Las Vegas-based gaming and entertainment company.

Upon release from escrow, the proceeds will be used to repay a portion of Caesars Entertainment's senior secured credit facilities, depending on how many of the existing term loan lenders participate in the company's extension offer, and/or for general corporate purposes.

Univision at the wide end

Univision Communications priced an upsized $625 million issue of 10-year senior secured notes (B2/B+) at par to yield 6 ¾%, at the wide end of the 6 5/8% to 6¾% yield talk.

The deal was increased from $500 million.

Deutsche Bank, Bank of America Merrill Lynch, Barclays, Credit Suisse, Morgan Stanley and Wells Fargo were the joint bookrunners for the quick-to-market debt refinancing deal.

Scientific Games at tight end

Scientific Games priced an upsized $300 million issue of eight-year senior subordinated notes (B1/BB-) at par to yield 6¼%, at the tight end yield talk that was set in the 6 3/8% area.

The quick-to-market deal was raised from the original $250 million amount.

Bank of America Merrill Lynch, Credit Suisse, J.P. Morgan, RBS, UBS, Deutsche Bank, Jefferies and Goldman, Sachs were joint bookrunners.

The New York-based provider of services to lottery and gaming organizations plans to use the proceeds to redeem or repurchase all of its outstanding 7 7/8% senior subordinated notes due 2016 and for general corporate purposes.

Live Nation yields 7%

Live Nation priced a $225 million issue of eight-year senior notes (B3/B) at par to yield 7%, at the tight end of the 7% to 7¼% yield talk.

J.P. Morgan, Bank of America Merrill Lynch, Deutsche Bank, Goldman Sachs, Morgan Stanley and Wells Fargo were the joint bookrunners for the quick-to-market debt refinancing deal.

Taylor Morrison tack-on

Taylor Morrison Communities, Inc. and Monarch Communities Inc. priced an upsized $125 million tack-on to their 7¾% senior notes due April 15, 2020 (B2/BB-) at 105.50.

The reoffer price, which came on top of price talk, rendered a 6.567% yield to worst.

Credit Suisse, Deutsche Bank and HSBC Securities were the joint bookrunners for the quick-to-market issue, which was upsized from $100 million.

The Scottsdale, Ariz.-based homebuilder plans to use the proceeds to repay bank debt and put cash on its balance sheet. The additional proceeds, resulting from the upsizing of Wednesday's transaction, will be used for growth capital and general corporate purposes, including land acquisition and development, home construction and other related purposes.

The original $550 million issue priced at par on March 30, 2012.

IDQ's PIK notes

Finally IDQ Acquisition Corp. priced a $45 million issue of five-year senior secured notes at par to yield 14%.

The notes pay a cash coupon of 14% or a PIK coupon of 14¾%.

There was no official price talk.

Jefferies was the bookrunner for the quick-to-market non-rated dividend deal.

American Gilsonite plans deal

The Wednesday session saw a single deal entered on the active forward calendar.

American Gilsonite Co. will begin a brief roadshow on Thursday for its $260 million offering of five-year senior secured notes (confirmed B3/expected B).

The deal is set to price on Friday.

Bank of America Merrill Lynch and KeyBanc are the joint bookrunners.

The Bonanza, Utah-based miner and processor of uintaite plans to use the proceeds to repay all of its existing debt and to fund a special dividend to shareholders.

Meanwhile market sources, pausing to mop their brows amid August's feverish pace, continue to forecast a slowdown in primary market volume.

What's the reason for the perspiration?

The first two weeks of August have seen the biggest dollar amount of issuance, for that period, in the history of the market.

Since the beginning of the month, high-yield issuers have raised $26.8 billion in 45 dollar-denominated tranches, according to Prospect News data.

That's $5.4 billion higher than the next biggest August to mid-month, August 2010, which saw $21.4 billion. However in terms of deal volume August 2012 and August 2010 are tied at 45 tranches each.

True to the old saw that August tends to be a slow month, the average dollar amount for the first fortnight in August is $8.3 billion, going back to the first two weeks of August 2001.

The average deal volume, for the period, is 22 tranches, less than half the volume seen the first two weeks of August 2012.

Perhaps not surprisingly, the smallest first fortnight of August occurred in 2007, during which issuers raised just $500 million in two tranches.

Day's issues are a no-show

While a pretty fair volume of new paper priced on Wednesday, traders said that none of it saw any kind of aftermarket activity.

"They're pricing everything very late today," a trader said, noting that even the two issues which were the first to price - Live Nation's $225 million of 7% notes due 2020 and Caesars' restructured $750 million of eight-year secured notes - had not been freed for secondary dealings by the time it was 4:30 to 5 p.m. ET and market trading activity was winding down.

DaVita deal the busiest

That left investors no choice but to turn their attention to the new deals which had priced on Tuesday or earlier - and none was more heavily traded Wednesday than Denver-based kidney-treatment company DaVita Inc's new $1.25 billion of 5¾% notes due 2022.

"Oh yeah, that thing was well received," one trader said. "It's a well-respected company. Their outstanding debt was fine."

He saw the new notes closing at 101 1/8 bid, 101¼ offered.

A second trader pegged the bonds at par bid, 100¼ offered, and said that over $67 million had traded Wednesday, easily tops among the purely junk-rated issues.

A market source at another desk estimated that as much as $75 million of the new paper had traded on Wednesday, quoting it at 101½ bid.

DaVita's big deal had actually long been expected; as far back as late May, investors were figuring that the company would do a multi-billion-dollar financing package of secured and unsecured debt to fund the cash component of its nearly $4 billion cash-and-stock acquisition of HealthCare Partners.

However, things did not crystallize until Tuesday, when it announced that it would be selling $1 billion of new 10-year notes, which was subsequently upsized to $1.25 billion. The deal priced at par within hours of the initial announcement, and bonds were seen having hit the 101 bid level in initial aftermarket dealings, staying in that context on Wednesday as well.

Senior analyst Vicki Bryan of the Gimme Credit independent research service correctly predicted in a Tuesday note to investors that the deal would likely be heavily oversubscribed, and opined that "we still would buy the new notes - if you can get 'em."

Bryan further declared that DaVita "is reaping the benefits of acquisitions and healthy, sustainable core growth in patient care, delivering some of its strongest results ever in patient care metrics and clinical outcomes," and projected continued robust operating margins and cash flow.

DaVita's 6 5/8% notes due 2020 were meantime seen up ½ point at 106¾ bid.

Tuesday deals trade around

Away from the wildly popular and well-received DaVita issue, traders saw some activity in other bonds which had come to market during Tuesday's $3.5 billion session, some of which had priced too late that day for an aftermarket and did not begin trading till Wednesday.

Graton Economic Development Authority's $450 million issue of 9 5/8% senior secured notes due 2015 - which in fact had priced earlier in Tuesday's session, even before DaVita and which was quoted around a little late Tuesday - was seen doing better on Wednesday. A trader said that the Rohnert Park, Calif.-based Native American gaming outfit's bonds had moved up to 103 bid, 103¼ offered. Those bonds had priced at par on Tuesday and then were quoted having gotten as good as 1021/2-103, although traders said they really had not seen much activity in it.

But on Wednesday, the trader said, "I would have to imagine that if there was a quarter-point market, that some trading was going on."

Among the bonds which had actually priced too late on Tuesday to trade, a trader saw Concho Resources Inc.'s 5½% notes due 2023 at 101 1/8 bid, 101 3/8 offered; the Midland, Tex.-based energy exploration and production company's quickly shopped $700 million 10.5-year deal had priced at par, after upsizing from the originally announced $400 million.

Penske Automotive Group, Inc.'s $550 million of 5¾% senior subordinated notes due 2022 were seen by a trader "first thing this morning" at 101½ bid, 102¼ offered, although he did not have any subsequent levels. The Bloomfield Hills, Mich.-based vehicle retailer and repair-shop operator's quick-to-market deal had priced at par Tuesday after having been upsized from the originally announced $400 million.

A trader said that Mediacom Broadband LLC/Mediacom Broadband Corp.'s 6 3/8% notes due 2023 "just hung around their issue price" all day, while a second trader likewise saw the Middletown, N.Y.-based broadband and cable operator's $300 million issue in a narrow 100 to 100¼ context.

Nobody saw any aftermarket dealings in M*Modal Inc.'s 10¾% notes due 2020. That $250 million issue from special-purpose vehicle Legend Acquisition Sub Inc. priced late Tuesday at 98.694 to yield 11%, but was not seen trading around on Wednesday. Proceeds from the deal will be used to fund the acquisition of M*Modal, a Franklin, Tenn.-based provider of clinical documentation and speech understanding services.

Busy trading in older deals

Several of the very liquid mega-offerings that came to market last week were actively trading around on Wednesday.

Sprint Nextel's $1.5 billion of 7% notes due 2020 were seen by a market source on Wednesday trading up around the 101 bid area, with over $22 million of those bonds trading hands. That was enough to put it near the top of the junk most-actives list, just a few notches down from the heavily traded DaVita paper.

The Overland Park, Kan.-based wireless carrier had priced those bonds at par in a quick-to-market deal last Thursday.

Charter Communications' 5¼% notes due 2022 - brought to market by the CCO Holdings LLC/CCO Holdings Capital Corp. units of the St. Louis-based cable operator - were seen having knocked down more than $17 million in volume by late in the afternoon, with the bonds quoted at 99¼ bid.

"That one just can't get out of its own way," said a trader who quoted the $1.25 billion deal at 99 bid, 99 1/8 offered. The bonds priced at 99.026 last Wednesday to yield 5 3/8%, after the drive-by deal was upsized from $1 billion originally, but were unable to advance much beyond that.

An even bigger bust, another trader said, was ServiceMaster Co.'s 6 1/8% notes due 2020. "People were really disappointed with that one," he said, quoting the Memphis-based residential cleaning and lawn care service's $1 billion issue as continuing to languish down around 99 bid. It priced its unscheduled deal -sharply upsized from $300 million originally - at par last Wednesday, but the paper struggled from the get-go, ending that session having slipped to 99½ bid, and continuing to struggle after that. A second trader saw the bonds even worse on Wednesday, pegging them at 98 3/8 bid, 98 7 /8 offered.

But Community Health Systems Inc.'s $1.6 billion of 5 1/8% senior secured notes due 2018 had no such troubles, seen trading on Wednesday at 102¼ bid, 102½ offered. The Franklin, Tenn.-based hospital operator, like Charter and ServiceMaster, came to market with a quickly-shopped offering last Wednesday. The deal priced at par, after having been upsized from the originally scheduled $1.25 billion, with the new bonds quickly jumping to levels above 102 bid, and "hanging in there," a trader said.

Indexes off across the board

Away from the trading in the new deals, traders said that not much was going on. One called it "a pretty lackluster day."

Statistical indicators of junk market performance meantime were lower across the board on Wednesday.

A trader saw the Markit Group CDX North American Series 18 High Yield Index down by 1/8 point to end at 97 9/16 bid, 97 13/16 offered - its third straight loss. On Tuesday, it was down about 1 or 2 basis points on the session.

The KDP High Yield Daily Index posted a fourth straight loss Wednesday, dipping by 5 bps to 73.76, after having fallen by 4 bps Tuesday.

Its yield rose by 4 bps, to 6.23%, after having been unchanged on Tuesday.

And the widely followed Merrill Lynch U.S. High Yield Master II Index lost 0.084% on Wednesday, its second straight retreat. On Tuesday it had been down 0.039%.

That left its year-to-date return at 9.652% on Wednesday, down from 9.744% on Tuesday. It was also off from its peak level for the year of 9.838%, set last Wednesday.

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