Building Materials, Orbital price; market tanks amid broader sell-off; commodity names decline

By Paul A. Harris and Stephanie N. Rotondo

Portland, Ore., Sept. 22 – Two issuers brought single-tranche deals to the high-yield market on Tuesday, raising a combined total of $1.5 billion.

Building Materials Corp. of America priced $1.1 billion of 6% 10-year notes, and Orbital ATK, Inc. priced a $400 million issue of 5½% eight-year notes. Both priced at par.

The high-yield market took a hefty hit Tuesday as investors across the board sought safety.

Commodity-linked names in particular got pushed down amid weakening materials prices. For its part, domestic crude oil dropped 1.47% on the day.

“Commodities were down all across the board,” one trader said.

A trader also noted that ZF North America Capital Inc. bonds were “so active” and “trading off,” though he wasn’t clear why. He opined that the price drop was due to Volkswagen’s recent emissions scandal.

Another sector getting shocked was telecommunications. Frontier Communications Corp.’s recently priced deals came in, as did Cablevision Systems Corp. paper, which has been coming in since it was announced last week that Altice NV was taking over the company.

Building Materials prices

Both of Tuesday’s new deals had been in the market at least overnight.

Neither was upsized.

And in a session that saw substantial selling, one of the two deals came at the wide end of yield talk, and the other came on top of talk that had been upwardly revised.

Building Materials priced $1.1 billion of 10-year senior notes (Ba2/BB+) at par to yield 6%.

The yield printed on top of revised price talk.

Talk widened from the 5½% area, which was also the early guidance on the deal.

Deutsche Bank Securities Inc., BofA Merrill Lynch, Citigroup Global Markets Inc., J.P. Morgan Securities LLC and Wells Fargo Securities LLC were the joint bookrunners for the debt refinancing deal.

Orbital ATK’s $400 million

Orbital ATK priced a $400 million issue of eight-year senior notes (Ba3/BB/BB+) at par to yield 5½%.

The yield printed at the wide end of the 5¼% to 5½% yield talk and on top of early guidance in the 5½% area, a trader said.

Wells Fargo was the left bookrunner for the debt refinancing deal. BofA Merrill Lynch, Citigroup and JPMorgan were the joint bookrunners.

Altice/Cablevision megadeal

There were roadshow announcements on Tuesday.

Cablevision Systems began a roadshow on Tuesday for a $6.3 billion two-part offering of high-yield notes backing the acquisition of the company by Altice.

The deal includes $2 billion of 10-year senior guaranteed notes, which come with preliminary yield guidance of 6½% and are expected to garner double B credit ratings.

In addition there are $4.3 billion of 10-year senior notes, which come with preliminary yield guidance of 9¾% to 10% and are expected to be rated in the mid single Bs.

The deal is expected to price Friday. However, timing might be moved ahead to Thursday, a trader said.

JPMorgan, Barclays, BNP, Credit Agricole, Deutsche Bank, RBC, Scotia, SG and TD are the joint bookrunners.

Altice/Cablevision comes into a market that has already seen a conspicuous amount of issuance from the technology, media and telecommunications space and is likely to see a lot more.

On Sept. 11, Frontier Communications priced $6.6 billion of bullet notes in three tranches.

And soon – likely before the end of the month, sources say – Charter Communications Inc. is expected to roll out $3.5 billion of senior notes, and Dish Network Corp. is expected to come with $3.3 billion.

The going for prospective issuers in the sector has been made a little more difficult due to the downgrade Sprint Corp.'s senior unsecured credit rating to Caa1 from B2, with a negative outlook, by Moody's, sources say.

NN starts Wednesday

NN, Inc. plans to start a roadshow on Wednesday in New York for a $300 million offering of eight-year senior notes (Caa1/B).

The offer is set to price early in the week ahead.

Preliminary guidance is in the 8½% area, a portfolio manager said.

SunTrust is the left bookrunner for the acquisition financing. KeyBanc and Regions are the joint bookrunners.

Unisys talk is 8% area

Unisys Corp. talked its $350 million offering of five-year senior secured notes (Ba2/BB) to yield in the 8% area.

Books were scheduled to close at 2 p.m. ET on Tuesday.

Meanwhile, Olin Corp. was expected to price its $1.5 billion two-part offering of senior notes (expected Ba1/confirmed BB+) on Tuesday.

However, no terms were available at press time, sources said.

Talk is heard to be widening, a trader said late Tuesday.

On Monday, the company talked a tranche of eight-year notes to yield in the 6½% area and a tranche of five-year notes to yield in the 6¾% area.

That talk had widened substantially from earlier guidance, sources said on Monday.

The eight-year notes had earlier been discussed in the 5¾ area, and the 10-year notes had been discussed in the 6% area, the source added.

Tranche sizes remain to be determined.

Commodity bonds driven down

Commodity prices were under pressure Tuesday across the board. In turn, bonds related to anything commodity were getting hit.

With oil prices down 1.47% – prices were down well over 2% earlier in the session – oil and gas names were getting squashed.

Consol Energy Inc.’s 5 7/8% notes due 2022 were seen off 1½ points at 70, according to one trader. Another market source pegged the company’s 8% notes due 2023 at 74½ bid, off 4 points.

California Resources Corp.’s 6% notes due 2024 were also lower, dipping over half a point to 64.

In emerging market names, Pacific Exploration and Production Corp., more commonly known as Pacific Rubiales, was again weaker, with a trader seeing the 5 5/8% notes due 2025 declining “6 and change” points to 35½.

There has been no credit-specific news to cause such a huge drop, though worries about the state of the global economy have caused such names to wane of late.

In the coal arena, Peabody Energy Corp. bonds were quite heavy.

A trader said the 6¼% notes due 2021 declined 2¾ points to 21¾, as the 6% notes due 2018 fell 3½ points to 29½.

A second source called the 6½% notes due 2020 off over 2 points at 22¼ bid.

“Steels were lower too,” a trader said, due in part to dwindling prices and in part to a recent report that showed production capacity utilization rates were down 3.6% year over year.

United States Steel Corp.’s 7 3/8% notes due 2020 ended 3 points weaker at 83¼, the trader said, while the 7% notes due 2018 weakened over 2 points to 94¾.

In AK Steel Holdings Corp. paper, the trader said the 7 5/8% notes due 2020 dropped over 2 points to 56 and the 7 5/8% notes due 2021 declined over 3 points to 55.

At another desk, U.S. Steel’s 2018 bonds were seen off 2¾ points at 94¾ bid. AK Steel’s 2020 maturity were deemed down over 2 points at 58½ bid.

ZF busy, lower

A trader said ZF North America bonds were trading actively and weaker on the day, though he noted that he was “trying to wrap my head around why.”

He opined that Volkswagen’s recent emissions scandal – the German carmaker was found to be lying about its engine emissions, particularly on its diesel models – might be playing a role.

The trader said the 4¾% notes due 2025 fell almost 2½ points to 93¼ and the 4½% notes due 2022 dropped a like amount to 95¾.

The trader also saw the 4% notes due 2020 losing nearly 3 points to end at 97½.

“It was very widely traded,” he said of the name.

ZF North America is the domestic subsidiary of the Germany-based ZF, an automotive components supplier.

Telecoms tank

The telecommunications space also did not weather the day’s storm all that well.

Frontier Communications’ $6.6 billion three-part deal from Sept. 11 ended weaker, according to a trader.

The trader said the $3.6 billion of 11% notes due 2025 fell about 1½ points to 97½, as the $2 billion of 10½% notes due 2022 declined almost a point to 99¼, on “pretty heavy volume.”

The trader did not see the $1 billion of 8 7/8% notes due 2020.

Cablevision, a name that has been topical of late, remained on the radar.

“That has been going down” since Altice announced a takeover of the company on Thursday, he said.

He saw the 5¼% notes due 2024 losing over 2½ points, closing at 79¾. The 7¾% notes due 2018 slipped just a quarter-point, he said, to 99¾.

A second source placed the 8% notes due 2020 at 94, off over 3 points.

Meanwhile, Charter Communications’ 5½% notes due 2022 were deemed a point lower at 98¾.

iHeart Media Inc. also continued to lose ground, despite any credit-specific news.

A trader said the 14% notes due 2021 were down “another 3 points” at 44½. The 10% notes due 2018 slipped over 1½ points to 60.

Market sentiment sours

The high-yield bond market was in retreat Tuesday as investors continued to worry about the global economy.

“Prices down hard,” one market source said.

The KDP High Yield Daily index fell to 67.45, as yields widened to 6.49%. That compared with Monday’s reading of 67.8, with a 6.38% yield.

The CDX North American Series 24 High Yield index meantime fell over half a point to 104.05 bid, 104.13 offered, according to a market source.

© 2015 Prospect News.
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