United Rentals, Aircastle, Hercules, Mediacom lead $2.7 billion day; Caesars keeps sliding

By Paul Deckelman and Paul A. Harris

New York, March 12 - Activity in the high-yield primary sphere picked up considerably on Wednesday from Tuesday's relatively sedate pace, almost becoming non-stop. By the time the day's dust had settled, six issuers had brought more than $2.7 billion of new dollar-denominated, junk-rated paper to market in seven tranches, most of them quickly shopped same-day offerings.

That represented a considerable escalation from Tuesday, when just a pair of issuers priced $745 million face amount of new paper.

About half of Wednesday's new-issuance total came from just one borrower - United Rentals, Inc. - pricing $1.38 billion in two tranches via a subsidiary, consisting of an add-on to the equipment rental company's existing 2023 notes plus a stand-alone 10-year issue.

That megadeal was one of five such quickly marketed transactions, accounting for much of the day's action.

Aircraft leasing firm Aircastle Ltd. parachuted in with an upsized $500 million of seven-year notes, while energy drilling contractor Hercules Offshore Inc. brought $300 million of eight-year notes. Cable and internet operator Mediacom Broadband LLC priced $200 million of seven-year paper, while boiler-room equipment manufacturer Cleaver-Brooks, Inc. did a $37 million add-on to its existing 2019 secured bonds.

Breakfast cereal maker Post Holdings, Inc. also brought an add-on, upsizing it to $350 million of its existing 2021 bonds, the sole regularly scheduled forward calendar deal.

The Aircastle, Hercules and Mediacom deals were quoted by traders having moved up slightly when they were freed for secondary dealings.

Among recently priced deals, Tuesday's new 10-year bonds from automotive components manufacturer Lear Corp. were among the most actively traded credits in Junkbondland but remained close to their par issue price.

On the other hand, containership owner and lessor Global Ship Lease Inc.'s five-year notes were seen having firmed solidly in aftermarket dealings.

Away from the new deals, gaming giant Caesars Entertainment Corp.'s bonds continued to lose ground for a second straight day following its release of disappointing fourth-quarter numbers.

Statistical market-performance measures were lower across the board on Wednesday after having turned mixed on Tuesday.

United Rentals two-part drive-by

A busy Wednesday session in the high-yield primary market saw six issuers bring a total of seven tranches to raise a combined $2.71 billion.

Executions tended to be less crisp than those seen earlier in the month.

While six of Wednesday's tranches came as quick-to-market deals, only two were upsized. Two priced at the wide end of talk. Three priced on top of talk. And one priced at the rich (or tight) end of talk.

United Rentals (North America), Inc. priced $1,375,000,000 of senior notes (B2/BB-) in two tranches.

A $525 million add-on to the company's 6 1/8% senior notes due June 15, 2023 priced at 105¼ to yield 5.188%. The reoffer price came on top of price talk.

An $850 million tranche of new senior notes due Nov. 15, 2024 priced at par to yield 5¾%. The yield printed on top of yield talk.

Morgan Stanley, BofA Merrill Lynch, Wells Fargo, Citigroup, Barclays, Credit Suisse and Deutsche Bank were the joint bookrunners.

The Greenwich, Conn.-based equipment rental company plans to use the proceeds to partially finance the cash portion of the National Pump acquisition and redeem $500 million of United Rentals 9¼% senior notes due 2019.

Aircastle upsizes

Aircastle priced an upsized $500 million issuer of non-callable seven-year senior notes (Ba3/BB+) at par to yield 5 1/8%.

The deal was upsized from $400 million.

The yield printed at the wide end of the 5% to 5 1/8% yield talk.

Goldman Sachs, BNP, Citigroup, Credit Agricole, Deutsche Bank, J.P. Morgan, Mitsubishi and RBC were the joint bookrunners for the debt refinancing and general corporate purposes deal.

Post prices at the rich end

Post priced an upsized $350 million add-on to its 6¾% senior notes due Dec. 1, 2021 (existing ratings B1/B) at 1053/4.

The deal was upsized from $250 million, according to a market source.

The reoffer price came at the rich end of the 105½ to 105¾ price talk.

Goldman Sachs, Barclays, Credit Suisse, Wells Fargo, JPMorgan, Nomura and SunTrust were the joint bookrunners.

The St. Louis-based ready-to-eat cereal manufacturer plans to use the proceeds, along with the proceeds from the sale of common stock, for general corporate purposes, which could include, among other things, financing the pending PowerBar and Musashi acquisitions and financing additional acquisition opportunities as well as for working capital and capital expenditures.

Hercules at the wide end

Hercules Offshore priced a $300 million issue of eight-year senior notes (expected ratings B3/B) at par to yield 6¾%.

The yield printed at the wide end of the 6 5/8% to 6¾% yield talk.

Deutsche Bank, Credit Suisse, Goldman Sachs, UBS and Capital One were the joint bookrunners for the debt refinancing.

Mediacom on top of talk

Mediacom Broadband priced a $200 million issue of seven-year senior notes (B3/B) at par to yield 5½%.

The yield printed on top of yield talk.

BofA Merrill Lynch, JPMorgan, Wells Fargo, Deutsche Bank, SunTrust, RBC and Credit Suisse were the joint bookrunners for the debt refinancing deal.

Also on Wednesdsay Cleaver-Brooks priced a $37 million add-on to its 8¾% senior notes due Dec. 15, 2019 (B2/B) at 109 to yield 6.51% via sole bookrunner RBC.

CEVA sets price talk

Looking toward the Thursday session CEVA Group plc set price talk for its $825 million two-part offering of secured notes.

A $400 million tranche of first-priority notes due March 1, 2021 (B2/B-) is talked to yield 7% to 7¼%.

A $425 million tranche of first-and-a-half-lien notes due Sept. 1, 2021 (Caa2/CCC) is talked to yield 9% to 9¼%.

Books close at 2 p.m. ET on Thursday, and the deal is set to price thereafter.

Credit Suisse, Deutsche Bank, Goldman Sachs, Morgan Stanley, UBS and Apollo are the bookrunners.

Pactera seven-year deal

A $275 million offering of seven-year senior notes (expected Ba3//) backing the acquisition of Pactera Technology International Ltd. by the Blackstone Group will undergo marketing on a roadshow set to start Thursday.

BofA Merrill Lynch is the lead left bookrunner. Citigroup and HSBC are the joint bookrunners.

Proceeds will be used to fund the acquisition of Pactera by Blackstone.

Pactera is Beijing-based consulting and technology services provider.

New deals firm slightly

In the secondary market, a trader saw Stamford, Conn.-based commercial jet leasing company Aircastle's 5 1/8% notes due 2021 initially quoted at 99 7/8 bid, off a little from the par level at which that upsized quick-to-market deal had priced. He predicted that "I don't think it's going to trade much above its issue price."A little later on, he did see the new notes at 100¼ bid.

A second trader saw two-sided activity in the new bonds, pegging them at 100 1/8 bid, 100 3/8 offered.

A trader saw nothing particularly heroic about the aftermarket performance of Hercules Offshore's 6¾% notes due 2022, quoting the bonds in a par to 100 3/8 bid context, after the quickly shopped $300 million deal had priced at par.

However, a second trader said that the new issue from the Houston-based provider of offshore services "was doing a little bit better," quoting them at 100 3/8 bid, 100½ offered.

He also saw Middletown, N.Y.-based communications company Mediacom Broadband's 5½% notes due 2021 "up a little better" from their par issue price as well, seeing that $200 million drive-by offering at 100½ bid, 101 offered.

Given the relative lateness of the hour at which they priced, traders did not see any aftermarket activity on Wednesday in either tranche of United Rentals' new bonds, nor in Post Holdings' 2021 add-on notes. And nobody saw any dealings in Milwaukee-based boiler room equipment maker Cleaver-Brooks's add-on to its 2019 bonds, which had priced considerably earlier in the day, given that transaction's particularly small and illiquid size - just $37 million.

Global Ship bonds better

Generally speaking, one of the traders said, none of Wednesday's new deals "were moving up dramatically, the way that Global Ship was doing."

He said that "first thing in the morning," the London-based containership owner and leasing company's new 10% first-priority senior secured notes due 2019 were trading as high as 101½ bid, 102 offered.

That was well up from the 98½ level at which that $420 million regularly scheduled forward calendar deal had priced on Tuesday to yield 10.392%, after upsizing from the originally announced $400 million size.

Later on during Wednesday's session, he said, "they came off their highs," and late in the afternoon were seen locked at 1003/4, but "by far, that one outperformed anything else that's been priced in the last couple of days."

Lear volume stays strong

Tuesday's other deal - Lear's quickly-shopped $325 million offering of 5 3/8% notes due 2024 - meanwhile stayed not too far from its par issue price, but on high volume for a second consecutive session.

A market source saw the Southfield, Mich.-based automotive components manufacturer's new deal racking up over $21 million of trading volume on Wednesday, putting it right near the top of the Most Actives list. That was on top of the more than $29 million of the bonds that changed hands in initial aftermarket dealings after the bonds priced on Tuesday.

He saw the Lear paper trading at 100¼ bid, calling that up about 3/8 point from the levels just below par at which he had seen those notes at the end of the day on Tuesday.

A second trader called Lear's notes "a little better, as Treasuries rallied," quoting them in a 100¼ to 100½ context.

Overall, he characterized Wednesday's junk market session as "new-issue focused," adding that the tone was "a little heavier than we've felt the last couple of days, a little heavier than it's been for a while."

Caesars seen off on numbers

Away from the new deals, Caesars Entertainment's bonds were knocked lower on heavy volume for a second consecutive session following the release of the Las Vegas-based gaming giant's fourth-quarter numbers.

Its 9% notes due 2020 were again the busiest bond in the capital structure, falling 1 full point to 89 bid on volume of over $22 million, on top of the 5/8 point retreat seen Tuesday, when over $11 million of the bonds traded.

Its 10% notes due 2018 swooned by nearly 1½ points on the day to end at 42¾ bid, with over $19 million changing hands. On Tuesday, they had lost 5/8 point, on volume of over $9 million.

Its 8½% notes due 2020 were down 7/8 point for a second consecutive session to end at 87 3/8 bid, on volume of over $13 million, on top of Tuesday's more than $8 million.

Caesars' 9% notes due 2020 dropped 1½ points on Wednesday, to 88½ bid, with over $17 million seen having traded, while its 11¼% notes due 2017 eased by ½ point to 94½ bid, on turnover of more than $16 million.

On Tuesday, Caesars had reported a fourth-quarter loss of $1.76 billion, or $12.83 a share - more than triple its year-earlier red ink of $480 million, or $3.84 a share. Revenue rose 3.2% to $2.08 billion, but that came in below the $2.1 billion analysts' average estimate.

Caesars last week announced plans to sell four of its hotel-casino properties - three of them in Las Vegas and one in New Orleans - to a separately structured affiliate for a net cash consideration to Caesars of $1.8 billion.

But while that will boost liquidity at its operating company level, senior analyst Kim Noland of the Gimme Credit independent investment research service cautioned in a note that the operating company is "being divested of Vegas assets and left with Atlantic City and other assets that were underperforming."

Noland also noted that with the whole gaming industry generally seeing some hard times, Caesars additionally continues to stagger under the mountain of debt it took on due to its leveraged buyout several years ago, and she warned that now "it looks like bondholders at the operating company might be faced with another distressed debt exchange."

"The company has hired financial advisors to advise it on restructuring, and this could involve complex capital structure revision that results in a principal haircut for affected holders," Noland concluded.

Market indicators turn lower

Statistical junk-market performance indicators turned lower on Wednesday after having been mixed on Tuesday. They have now been on the downside in four out of the last five sessions.

The Markit Series 21 CDX North American High Yield index lost 3/16 point on Wednesday to close at 107½ bid, 107 5/8 offered, its fifth consecutive setback, after having eased by 3/32 point on Tuesday.

The KDP High Yield Daily index posted its fifth loss in a row, dropping by 6 basis points to 74.93, after having retreated by 3 bps on Tuesday.

Its yield, meanwhile, was unchanged for a second straight session on Wednesday at 5.23%, after having risen by 4 bps on both Friday and on Monday.

The widely followed Merrill Lynch High Yield Master II index was once again lower, ending Wednesday down 0.063%, in contrast with Tuesday's 0.036% rise, which had snapped a three-session losing streak. The index has now posted losses in four out of the last five sessions.

Wednesday's setback dropped its year-to-date return to 2.507%, down from Tuesday's 2.572% and down as well from last Wednesday's 2.812% reading, its 2014 peak level.

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