Charter pays a return visit; Carrols, Wave Division also price; Tuesday deals busy; Linn gains

By Paul A. Harris and Paul Deckelman

New York, April 15 – High-yield market participants could be forgiven for thinking that Wednesday was Monday, as familiar junk bond borrower Charter Communications, Inc. paid a surprise return visit to the primary sphere, just 48 hours after having priced an upsized two-part drive-by offering. This time around, the cable, internet and phone service provider did a single-tranche $800 million issue of 12-year notes, also upsized. In the secondary realm, the new Charter bonds traded a little bit above their par issue price – just like Monday’s deal did.

Wednesday also saw quick-to-market pricings from two other issuers who had not brought deals to market on Monday.

Big Burger King franchise operator Carrols Restaurant Group, Inc. served up $200 million of seven-year secured notes that were gobbled up by hungry investors, while Wave Division Holdings, LLC – like Charter, a cable and broadband service provider – weighed in with a $125 million add-on to its existing 2020 notes.

Those deals added up to a total of $1.13 billion of new dollar-denominated, fully junk-rated paper from domestic or industrialized-country borrowers, down from the more than $3 billion of such paper that had come to market on Monday, and again on Tuesday, according to data compiled by Prospect News.

Those Tuesday issues – from Level 3 Communications, Inc., DaVita HealthCare Partners Inc. and Carrizo Oil &Gas Inc. – were meanwhile the most actively traded credits in Junkbondland. As had been the case on Tuesday, Level 3 and DaVita were trading modestly above their respective issue price levels, while Carrizo’s new bonds were solidly higher.

New-deal activity was seen as the market’s main driver for a third consecutive session. Away from that, Linn Energy LLC’s bonds were seen to have firmed smartly, along with the oil and natural gas company’s shares.

Statistical indicators of junk market performance turned higher on Wednesday after having been mixed for a fifth straight session on Tuesday.

Charter returns with 12-years

Amid a brisk news volume, the dollar-denominated new issue market put up $1.13 billion in three tranches from three issuers on Wednesday.

All three deals came as drive-bys.

One was upsized.

Executions appeared solid, with one deal pricing at the tight end of talk, one at the rich end and one on top of talk.

Just two days after tapping high-yield investors for $1.9 billion with a two-part senior notes transaction, Charter Communications returned on Wednesday to price an upsized $800 million issue of 12-year senior notes (B1/BB-) at par to yield 5 7/8%.

The deal, via issuers CCO Holdings, LLC and CCO Holdings Capital Corp., was upsized from $500 million.

The yield printed on top of yield talk.

Credit Suisse, Deutsche Bank, Goldman Sachs and BofA Merrill Lynch were the joint bookrunners for the debt refinancing and general corporate purposes deal.

Carrols comes tight

Carrols Restaurant Group priced a $200 million issue of seven-year senior secured second-lien notes (B3/B-) at par to yield 8%.

The yield printed at the tight end of the 8% to 8¼% yield talk.

Wells Fargo was the left bookrunner. Stephens was the joint bookrunner.

The Syracuse, N.Y.-based Burger King franchisee plans to use the proceeds to repurchase $150 million of its 11¼% senior secured second-lien notes due 2018 via a tender offer, to repay its senior credit facility, for working capital and for general corporate purposes including possible future acquisitions and for potential capital expenditures to remodel restaurants.

WaveDivision taps 8 1/8% notes

WaveDivision Holdings, LLC and WaveDivision Holdings Corp. priced a $125 million add-on to its 8 1/8% senior notes due Sept. 1, 2020 at 106 to yield 6.769%.

The reoffer price came at the rich end of the 105.5 to 106 price talk.

Deutsche Bank was the left bookrunner. Wells Fargo, RBC and SunTrust were the joint bookrunners.

The Kirkland, Wash.-based owner and operator of broadband cable systems plans to use the proceeds to pay down its revolver and for general corporate purposes including acquisitions.

CSAL downsizes, launches

Communications Sales & Leasing, Inc. downsized its two-part offering of high-yield notes to $1.51 billion from $1.65 billion, shifting $140 million of proceeds to its concurrent term loan.

The now includes a downsized $400 million tranche of eight-year senior secured notes (Ba3/BB) that come with three years of call protection.

The secured notes, downsized from $540 million, launched at 6%; yield talk in the 6¼% area surfaced earlier in the day.

The unsecured tranche is still comprised of $1.11 billion of 8.5-year senior notes (B3/B) that come with four years of call protection. The unsecured notes launched at 8¾% on Wednesday afternoon. They were talked earlier in the day to yield 8¾% to 9%.

Books closed Wednesday afternoon, and the deal is set to allocate on Thursday.

BofA Merrill Lynch is the left bookrunner. J.P. Morgan, Barclays, Citigroup Credit Suisse, Goldman Sachs, Morgan Stanley, RBC, SunTrust, Wells Fargo, BNP, Deutsche Bank and MUFG are joint bookrunners.

Orange prices CHF 2 billion

In the European high yield, Orange Switzerland SA priced a CHF 2.01 billion equivalent four-tranche, dual-currency notes transaction on Wednesday.

The final structure saw a massive upsizing of the euro-denominated tranche of fixed-rate secured notes, while all other tranches were downsized.

Three secured tranches were issued via special purpose vehicle Matterhorn Telecom SA.

An upsized €1 billion tranche of seven-year fixed-rate senior secured notes priced at par to yield 3 7/8%. The tranche was upsized from €445 million.

A downsized CHF 450 million tranche of seven-year fixed-rate senior secured notes priced at par to yield 3 5/8%. The tranche was downsized from CHF 750 million.

A downsized €265 million tranche of seven-year senior secured floating-rate notes priced at par to yield three-month Euribor plus 375 basis points. The floating-rate tranche was downsized from €480 million. The notes come with one year of call protection.

The sole unsecured tranche is in the market via Matterhorn Telecom Holding SA, the ultimate parent of Orange.

A downsized €250 million tranche of eight-year senior unsecured notes priced at par to yield 4 7/8%. The unsecured tranche was downsized from €290 million.

The notes in all four tranches priced on top of price talk.

Global coordinator Credit Suisse will bill and deliver. BNP Paribas, JPMorgan, SC CIB, Goldman Sachs and Natixis were joint bookrunners.

The telecommunications company, which has headquarters in Luxembourg, plans to use the proceeds, together with cash on its balance sheet, to redeem in full all the existing notes issued by various entities of the Matterhorn group, terminate or amend existing hedging obligations and make a distribution to the Matterhorn group’s shareholder.

Floerger at the tight end

SPCM SA, the holding company for France-based SNF Floerger, priced a €550 million issue of eight-year senior notes (expected BB+) at par to yield 2 7/8% on Wednesday, according to a market source.

The yield printed at the tight end of yield talk in the 3% area.

Lead left bookrunner BNP Paribas will bill and deliver. Credit Agricole CIB and SG CIB were joint bookrunners.

The Andrezieux, France-based producer of polyacrylamide plans to use the proceeds to refinance its 5½% notes due 2020 in full, as well as to repay revolver debt and for general corporate purposes.

Mixed flows

The cash flows of the dedicated high-yield funds were mixed on Tuesday, the most recent session for which data was available at press time, a market source said.

However the aggregate weekly flows are tracking strongly positive.

High-yield ETFs saw $119 million of daily outflows on Tuesday, while actively managed funds saw $295 million of inflows.

For the week to Tuesday's close, the aggregate picture, combining both ETFs and real money accounts, stood at positive $821 million, the source added.

Déjà vu for Charter

In the secondary market, a trader quoted the new Charter Communications 5 7/8% notes due 2027 moving around in a 100¼-to-100¾ context, up from their par issue price.

A market source at another desk saw the notes going home trading between 100 3/8 bid and 100 5/8 bid.

That wasn’t too far from the levels at which the Stamford, Conn.-based cable, phone and internet service provider’s “old” new bonds were trading. Those were the 5 1/8% notes due 2023 and the 5 3/8% notes due 2025 that the company had priced on Monday. Charter priced $1.15 billion of the former and $750 million of the latter, both at par, after its quickly shopped two-part offering was upsized to $1.9 billion total from $1.5 billion originally.

One of the traders said that “both of them were wrapped around 100¼” bid in Wednesday’s trading.

Another market source pegged the 5 1/8% notes at 100¼, down 1/8 point, on volume of over $15 million.

He also saw the 5 3/8% notes closing at par, down 3/8 point on the day, with over $8 million having changed hands.

Carrols bonds climb

Away from Charter, Wednesday’s new issue of 8% senior secured second-lien notes due 2022 from fast-food operator Carrols Restaurant Group appeared to live up to the company’s clever stock ticker symbol “TAST,” i.e., “tasty,” at least in the opinion of high-yield investors.

A trader said that the new bonds were finishing as high as a 103½ -to-104½ context. That was well up from their par issue price.

Market participants meanwhile saw no immediate aftermarket dealings in the smallish add-on issue of 8 1/8% notes due 2020 from Wave Division Holdings, LLC. They cited the deal’s small size ($125 million) and the lateness of the hour at which it had priced.

Tuesday issues trade around

A trader said that for a third straight session the junk market was “largely new-issue focused.”

Easily the most active credit on the day was DaVita HealthCare Partners’ new 5% notes due 2025.

“DaVita traded a lot,” one of the traders said, quoting the bonds at 100½ bid, 100¾ offered.

A market source at another desk located the bonds closing at 100 5/8 bid, which he called about unchanged on the day, on volume of more than $102 million.

Denver-based DaVita, a provider of kidney dialysis services, priced $1.5 billion of the notes at par on Tuesday after the quickly shopped offering was upsized from $1.25 billion originally.

Carrizo Oil & Gas’ 6¼% notes due 2023 were “doing well,” a trader said, seeing those notes at 102 bid – well up from the par level at which the Houston-based exploration and petroleum company had priced its $650 million of notes on Tuesday, after upsizing the drive-by deal from $600 million originally.

Another trader had them finishing at 101 7/8 bid, 102 3/8 offered.

Yet another trader sent the bonds home at 101 7/8 bid, up ¼ point on the day. He said that more than $54 million of the notes changed hands on Wednesday, although that was a little quieter than the $72 million that had traded on Tuesday.

There was also heavy volume in both halves of Level 3 Communications’ $1.5 billion two-part quick-to-market deal. A market participant said its 5 1/8% notes due 2023 ended up 3/8 point at 100¼ bid on volume of more than $52 million.

Its 5 3/8% notes due 2025 were ½ point better, at 100 5/16 bid. More than $50 million of the bonds traded on the day.

The Broomfield, Colo.-based fiber-optic network service provider priced $700 million of the 5 1/8% notes and $800 million of the 5 3/8% notes on Tuesday, both at par via its Level 3 Financing Inc. subsidiary, after upsizing its offering from an originally announced $1.2 billion. Both tranches of bonds had traded a little below those par issue levels in initial aftermarket dealings.

Linn bonds are liked

Away from the new deals, traders saw considerable activity in Houston-based Linn Energy’s notes with its 8 5/8% notes due 2020 quoted up some 1¼ points on the day at 91 5/16 bid on volume of more than $17 million.

Its 7¾% notes due 2021 did even better, gaining 2 points on the day to finish at 87¼ bid, with over $32 million traded.

Linn’s New York Stock Exchange-traded shares meantime rose by 58 cents, or 4.68%, to end at $12.98, on volume of more than 4.4 million shares, almost double the norm.

There was no fresh news seen out about the company on Wednesday that might explain the rise.

Indicators turn higher

Statistical indicators of junk market performance turned higher on Wednesday after having been mixed for five straight sessions before that.

The KDP High Yield Daily index gained 7 bps on Wednesday to end at 71.81, its fourth straight rise, which was also its 11th such advance in the last 12 sessions and its 16th rise in the last 18 sessions. On Tuesday, the index had moved upward by 4 bps.

Its yield declined by 3 bps to 5.14%, its fourth straight narrowing and eighth such tightening in the last nine sessions. On Tuesday, the yield had eased by 2 bps.

The Markit Series 24 CDX North American High Yield index got back in the black after three straight losses and four downturns in the previous five sessions. It gained 7/32 point to close at 107 11/16 bid, 107¾ offered. On Tuesday, the index had been marginally easier.

And the Merrill Lynch U.S. High Yield Master II index was back on the upside on Wednesday after having suffered a rare loss, improving by 0.176%, after having fallen back on Tuesday by 0.011%.

Tuesday’s loss had been its first such downturn after 11 straight sessions on the upside, going back to March 27, and after 16 such improvements in the previous 17 sessions.

Wednesday’s rise lifted its year-to-date return to 3.7% from Tuesday’s 3.517%. Wednesday’s finish was a new peak-level for the year so far, eclipsing the previous zenith of 3.528%, set on Monday.

© 2015 Prospect News.
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