Avantor sells $4.1 billion; new Allison, Cincinnati Bells active; Sprint up on T-Mobile news

By Paul A. Harris and Stephanie N. Rotondo

Seattle, Sept. 22 – The high-yield primary saw just two deals price in the United States market – but one of them was a giant.

Avantor, Inc. priced a downsized $4.1 billion equivalent of high-yield notes in three tranches on Friday.

However terms were only set after the transaction stayed in the market an extra day to allow changes to the covenants and structure in the face of pushback from potential buyers, sources said.

The two dollar tranches came wide of initial talk although the euro piece priced at the tight end of talk.

Also pricing on Friday was a $350 million issue of eight-year senior notes (B3/B-) from Cincinnati Bell Inc., which came at par to yield 8%.

Those notes firmed in trading.

The two deals brought issuance for the week to $8.70 billion, down from the very strong $12.38 billion the week before but still well above typical levels.

Away from the new issues, Sprint Corp. was “very active” on reports the wireless telecommunications company was nearing a merger agreement with T-Mobile.

The two companies have reportedly been having frequent discussions about a pair-up that would marry the third- and fourth-largest wireless carriers in the United States. A deal could come to fruition by the end of October, according to sources familiar with the matter.

But Sprint’s good news didn’t do much to help struggling telecom names like Windstream Holdings Inc. or Frontier Communications Corp., both of which have been declining in recent sessions and continued to weaken on Friday.

Avantor downsizes

Avantor priced a downsized $4.1 billion equivalent of high-yield notes in three tranches on Friday.

An upsized $1.5 billion tranche of seven-year senior secured notes (B2/B/BB) priced at par to yield 6%. The tranche was increased from $1,401,000,000. The yield printed at the wide end of the 5¾% to 6% yield talk.

A €500 million offering of seven-year senior secured notes (B2/B/BB) priced at par to yield 4¾%, at the tight end of the 4¾% to 5% price talk.

A downsized $2 billion of eight-year senior unsecured notes (Caa2/CCC+/B-) priced at par to yield 9%. The tranche was decreased from $2.25 billion. The yield printed at the wide end of the 8¾% to 9% yield talk. Fitch lowered its rating on the unsecured notes to B- from B.

The overall size of the three-part deal decreased from $4.25 billion.

Earlier in the week the deal underwent extensive covenant changes in response to resistance from investors.

The call protection was modified to include one extra year of premium protection for the secured and unsecured tranches.

Other revisions affected the disposition of collateral and the manner in which cash may be disbursed.

The official talk on the dollar-denominated tranches blew out from initial price talk, according to market sources.

The dollar-denominated first lien notes, officially talked at 5¾% to 6% had been in the market with initial talk of 5 ¼% to 5½%.

The unsecured notes, officially talked at 8¾% to 9%, had been introduced with initial price talk of 7 3/8% to 7 5/8%.

Goldman Sachs & Co. was the left lead. Barclays, J.P. Morgan Securities LLC and Jefferies LLC were also leads.

Proceeds, together with preferred equity financing of Vail Holdco, as well as $5.5 billion of senior secured credit facilities and cash on hand at VWR International LLC, will be used to finance the acquisition of VWR and fund a distribution to equity holders of Avantor and the issuer’s subsidiaries.

Cincinnati Bell matches talk

Cincinnati Bell priced a $350 million issue of eight-year senior notes (B3/B-) at par to yield 8% on Friday, according to a syndicate source.

The yield printed on top of yield talk that had been set in the 8% area.

Morgan Stanley & Co. LLC, PNC Capital Markets, Regions Bank, Barclays, Citigroup Global Markets Inc. and Citizens Bank were the joint bookrunners.

The Cincinnati-based provider of integrated communications solutions plans to use the proceeds to fund the cash portion of its acquisition of Honolulu-based Hawaiian Telcom HoldCo, Inc. and to refinance Hawaiian Telcom’s existing credit agreement.

Stada upsizes

In the European primary market, Stada Arzneimittel AG priced an upsized €1,075,000,000 of high-yield notes in two tranches.

The issuing entities were two special-purpose vehicles.

The deal included an upsized €735 million of 3½% seven-year senior secured notes (expected ratings B2/B+/BB-) issued by Nidda Healthcare Holding AG. The tranche was increased from €485 million.

Nidda Bondco GmbH priced €340 million of 5% eight-year senior unsecured notes (expected ratings Caa1/B-/B-). Price talk was in the 5¼% area.

Global coordinator Citigroup was the left lead for the secured tranche. Global coordinator JPMorgan was the left lead for the unsecured tranche.

Barclays, Commerzbank, Deutsche Bank, ING, Jefferies, Nomura, SG CIB and UBS were the bookrunners.

Proceeds will be used to refinance the bridge loan backing the buyout of Stada by Bain Capital and Cinven.

Ovako upsized

Ovako Group AB issued €310 million of 5% senior secured notes due 2022.

The deal was increased from €300 million.

Carnegie Investment Bank AB, Nordea Bank AB and Pareto Securities AB were the joint bookrunners.

Proceeds will be used to refinance Ovako’s existing €300 million of notes maturing in June 2019, which will be redeemed on Oct. 15, and for general corporate purposes.

“We are very pleased with the great interest we have met from investors in the transaction,” Ovako chief financial officer Johan Ryrberg stated in Thursday’s press release.

“The offering was quickly oversubscribed and we can now access financing at significantly lower levels than a couple of years ago” Ryrberg added.

Issuance passes $200 billion

The new deals brought the week’s total for issuance in the U.S. market to $8.70 billion, down from the $12.38 billion seen in the Sept. 10 week but, apart from that exceptional surge, still the biggest week since the $9.44 billion of the May 21 week.

With Friday’s deals counted, year-to-date issuance passed the $200 billion level and now totals $201.23 billion.

That is running 15.5% ahead of the $174.24 billion at the same point in 2016.

New issues busy

New high-yield bond issues continued to be all the rage on Friday.

One trader said Allison Transmission Inc.’s new $400 million of 4¾% notes due 2027 were “the biggest trader of the day,” after coming upsized from $300 million on Thursday.

The deal priced at the tight end of yield talk in the 4 7/8% area.

However, the issue was slightly lower than the levels seen on Thursday after the deal had priced, when it rose in initial trading.

The trader called the issue a shade lower on Friday at par ½.

Meanwhile, Cincinnati Bell was already trading above their par issue price on the break.

A trader saw the notes gaining to 101 1/8.

Sprint active, higher

Among existing issues, Sprint’s bonds got a boost on Friday on reports it was nearing a merger deal with Deutsche Telekom’s T-Mobile.

One trader called the bonds up 1 1/8 to 1¼ points, placing the 6 7/8% notes due 2028 at 111½, the 8¾% notes due 2032 at 127 and the 7 5/8% notes due 2025 at 114 1/8.

Another trader said the debt was “better on the headlines.

“The long ones were definitely trading up,” he added.

He placed the 6 7/8% notes around 111½, which he said was “up a good point.” The 8¾% notes were at 127, up 1 to 1½ points.

News outlets were reporting on Friday that under the proposed deal, Japan’s SoftBank – the majority owner of Sprint – would retain ownership of 40% to 50% of the company. T-Mobile’s parent, Deutsche Telekom would become the majority owner in the stock-for-stock deal.

The deal would face the usual regulatory approval process, which could prove tricky: SoftBank mixed a plan to acquire T-Mobile in 2014 due to pressure from antitrust regulators.

Other telecoms slip

The rest of the telecommunications sector, particularly Frontier and Windstream, which have been moving steadily downwards in recent sessions, did not see any benefit from the Sprint news.

A trader said that Frontier’s 9% notes due 2031 were holding around 75.

Another trader said Windstream’s debt was “still weak,” with its longer-dated issues – such as the 6 3/8% notes due 2023 – slipping to “around 68.”

“They keep sliding a little bit,” the trader said.

Windstream’s Uniti Group Inc.-linked debt was also lower, according to a trader.

The trader called the 8¼% notes due 2023 almost ½ point lower at 90 1/8.

California Resources gains

In the oil and gas arena, California Resources Corp.’s 8% second-lien notes due 2022 were “active and higher too,” a trader said.

The trader saw the notes rising 1½ points to 63.

Another trader said the paper traded as high as 63½, though he added that the bonds were “probably going out straddling 63.

“They were definitely better on the day,” he added.

California Resources’ recent gains have come as domestic crude oil prices have slowly edged up over the $50 mark this week. The gains in crude have been attributed to growing geopolitical tensions as well as hopes that OPEC will extend its production cut agreements.

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