Upsized CenturyLink megadeal, Boyd, Aleris deals price, all firm; Monday deals trade actively

By Paul Deckelman and Paul A. Harris

New York, March 22 – The high yield primary realm was a busy place on Tuesday – one of the biggest-volume sessions of the year, in fact, as some $2.3 billion of new U.S. dollar-denominated and fully junk-rated paper was said by syndicate sources to have priced during the day.

All three of the day’s new deals were upsized to meet additional demand for the bonds.

Telecommunications operator CenturyLink, Inc. had the big deal of the day – $1 billion of eight-year notes.

Casino company Boyd Gaming Corp. brought $750 million of 10-year notes to market.

And aluminum products producer Aleris International Inc. did $550 million of five-year secured notes.

All three of the day’s new deals were high up on the junk bond Most Actives list. All were up from their respective issue prices.

Traders also saw intense activity in the two new issues that had come to market on Monday – communications satellite company Intelsat SA’s eight-year secured notes, with aircraft leasing company Aircastle Ltd.’s seven-year notes.

Statistical market performance measures turned lower across the board on Tuesday after having been better all around on Monday. It was their second lower session in the last six trading days.

CenturyLink doubles size

For only the third time this year daily issuance in the dollar-denominated high yield new issue market topped the $2 billion mark, as the Tuesday session saw three issuers raise a combined $2.3 billion.

Two of the session’s three deals came as drive-bys, and timing was accelerated on the only one of the session’s deals that had been in the market overnight.

All three were upsized, with one of them doubling in size.

Executions were tight, as two of the three came at the tight end of talk while the third came on top of talk.

CenturyLink, Inc. doubled the size of its offering of eight-year senior bullet notes (Ba3/BB/BB+) to $1 billion from $500 million and priced the notes at par to yield 7½%.

The yield printed at the tight end of the 7½% to 7¾% yield talk. Early guidance had the bonds coming in the mid-to-high 7% yield context.

J.P. Morgan, Barclays, Mizuho and SunTrust were the joint bookrunners for the deal to help refinance Embarq Corp.’s notes maturing on June 1.

Boyd upsizes

Boyd Gaming Corp. priced an upsized $750 million issue of 10-year senior notes (B3/B-/B-) at par to yield 6 3/8%.

The issue size was increased from $500 million.

The yield printed at the tight end of yield talk in the 6½% area; early whisper had the deal coming with a yield in the mid 6% range.

It appeared to go well, according to a trader who saw Boyd Gaming’s new 6½% notes trading on either side of 102 in the secondary market late Tuesday afternoon.

Deutsche Bank, BofA Merrill Lynch, J.P. Morgan, Wells Fargo, UBS, BNP Paribas, Credit Suisse and Nomura were the joint bookrunners.

The Las Vegas-based gaming and entertainment company plans to use the proceeds, including the additional $250 million resulting from the upsizing of the deal, for working capital and general corporate purposes, which may include, without limitation, reducing or refinancing debt, consolidating Peninsula Gaming, LLC into the Boyd Gaming’s restricted group, expansion efforts including acquisitions of assets or businesses and general capital expenditures.

Aleris upsizes, accelerates

Aleris International, Inc. priced an upsized $550 million issue of five-year senior secured notes (B2/B) at par to yield 9½%.

The issue size was increased from $450 million.

The yield printed on top of yield talk.

Timing was accelerated, as the roadshow had earlier been expected to continue through the Tuesday session. In fact, the deal was said to be done early Tuesday morning, with 20 accounts taking down the entire amount, a portfolio manager said.

It went well, according to the trader who saw the new Aleris 9½% bonds at 102 bid, late Tuesday.

Credit Suisse, J.P. Morgan, BofA Merrill Lynch, Barclays, Deutsche Bank, Goldman Sachs and Citigroup were the joint bookrunners.

The Beachwood, Ohio-based producer of aluminum products plans to use the proceeds, including the additional $100 million resulting from the upsizing of the deal, to complete a cash tender offer for its $434.9 million of 7⅝% senior notes due 2018 or redeem and discharge any of those notes not purchased in the tender, and for general corporate purposes, which may include working capital and/or capital expenditures.

In the wake of Tuesday’s action, just one domestic issuer remains aboard the active calendar with a deal expected to price before Thursday’s close ahead of the extended Easter holiday weekend.

Constellium NV has been roadshowing a $400 million offering of five-year senior secured notes (B2/B+). Guidance has shaped up at 7½% to 8%, according to a portfolio manager, who added that the book is done at 8%. The deal is expected to price Wednesday.

Monday inflows

The cash flows of the dedicated high yield accounts were positive on Monday, the most recent session for which data was available at press time, according to a portfolio manager.

High yield ETFs saw $271 million of inflows on the day.

Asset managers saw $90 million of inflows on Monday.

Those numbers were reported by Lipper-AMG, the manager said, adding that another fund flow tracker, EPFR, saw more than $300 million of outflows from asset managers on Monday, with most of it coming out of a single account.

Tuesday’s new deals gain

All three of the day’s new deals priced early enough in the session to see considerable secondary market activity late in the day Tuesday.

Several traders saw CenturyLink’s new7½% notes due 2024 trading at least 1 point above the par level at which the Monroe, La.-based wireline telecom operator’s big new megadeal had priced.

One saw the notes at 101¼ bid, 101¾ offered, while a second trader saw them in a 101 to 101½ bid context.

At another shop, a trader said that the bonds had firmed to 101 3/16 bid, with over $117 million of trading volume.

Boyd Gaming’ new 7½% notes due 2024 “traded at a big premium” to their par issue price.

He saw the bonds going out at 102¼ bid, with volume a brisk $31 million.

The Aleris International 9½% senior secured notes due 2021 moved up to 101½ bid, a market source said, on turnover of more than $19 million.

Existing CenturyLink paper lower

The news that CenturyLink was bringing a big new deal pushed some of that company’s existing paper lower.

A trader said that its most active established issue, the 5.80% notes due 2022, lost 1¼ points on the session, ending at 97¼ bid.

At another shop, a trader pegged those bonds at 96¾ – but said that only represented a ¼ point loss on the day versus Monday’s round-lot close. He saw over $20 million of the bonds change hands.

It was the same story for CenturyLink’s 5 5/8% notes due 2020, which were seen having dropped by ¾ point to 102 bid, on more than $14 million of volume.

Boyd Gaming’s outstanding 6 7/8% notes due 2023 meantime lost 1½ points on the day to end at 105¾ bid, even as the company was doing its new drive-by deal. More than $12 million of the existing bonds traded.

New Intelsat bonds busy

Monday’s big new issue of Intelsat Jackson Holdings SA’s 8% senior secured first-lien notes due 2024 was Junkbondland’s busiest credit of the day on Tuesday, with over $143 million having changed hands.

A trader quoted those bonds at 102½ bid.

A second trader also located them there – but called them down by 3/16 point from where they had finished up in initial aftermarket dealings after pricing at par on Monday.

The company – a subsidiary of Luxembourg-based communications satellite operator Intelsat SA – came to market on Monday with its quickly shopped $1.25 billion offering, which was upsized from the originally announced $1 billion.

Traders on Monday saw the new bonds gain altitude smartly, with one seeing them finishing that session in a 102¼ to 103 bid context.

For a second straight session, there was also some active trading in existing Intelsat paper. Its 7¼% notes due 2020 were about unchanged at 66 bid, with over $18 million traded.

But its 8 1/8% notes due 2023 lost 1 3/8 points, closing at 29 1/8 bid, with over $13 million traded.

New Aircastle notes firmer

Monday’s other bond deal – the 5% notes due 2023 from Stamford, Conn.-based aircraft leasing company Aircastle Ltd. – were seen by several traders in the 100¾ bid area late Tuesday.

One said that was a ¼ point gain on the day.

Activity was intense, he said, with over $75 million having changed hands.

Aircastle’s quick- to-market deal priced at par Monday after being upsized to $500 million from $400 million originally.

The bonds initially traded as high as 100½ to 101 before coming off their peak levels to end around 100½ bid, with over $39 million having traded.

Indicators lower on day

Statistical market performance measures turned lower across the board on Tuesday after having been better all around on Monday. It was their second lower session in the last six trading days.

The KDP High Yield Daily index lost 7 basis points on Tuesday to end at 66.02, after having risen by 9 bps on Monday.

It was the index’s first loss after four straight upside sessions and its second loss in the last six trading days off.

However, the index’s yield, which normally moves inversely with the index reading, customarily rising as the index is falling and vice versa, was atypically tighter on Tuesday, coming in by 2 bps to 6.56%, on top of Monday’s 4 bps narrowing.

Tuesday was the fifth such yield- reduction in a row and its seventh such tightening in the last eight sessions.

The Markit Series 25 CDX North American High Yield Index retreated by 12/32 point on Tuesday to close at 102 19/32 bid, 102 21/32 offered – its first loss after one gain and second loss in the last three sessions. On Monday, it had moved up by 7/32 point.

The Merrill Lynch North American High Yield Master II index fell back on Tuesday after having posted three consecutive improvements before that.

It was down by 0.113%, versus Monday’s 0.162% advance.

Tuesday’s fallback softened the index’s year-to-date return to 3.65% from 3.767% on Monday, its third straight new peak year-to-date gain.

© 2015 Prospect News.
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