Upsized Teva megadeal prices; new Ball notes busiest; CIT trades up; Frontier mostly up ahead of deal

By Paul Deckelman and Paul A. Harris

New York, March 7 – Wednesday was another busy day in the high-yield primary market, with some $2.5 billion of new dollar-denominated and fully junk-rated paper heard to have priced.

However, unlike Tuesday’s market, in which slightly more than $2.7 billion had been priced by the close by four separate issuers, Wednesday’s action was all attributable to just one transaction – the two dollar- denominated tranches of Israeli issuer Teva Pharmaceutical Industries Ltd.’s upsized four-part issue, which also included a sizable euro component.

Apart from Teva, Wednesday’s primary saw news from Frontier Communications Corp., which began shopping around $1.6 billion of eight-year second-lien secured notes.

But another prospective new deal bit the dust, as Basic Energy Services, Inc. announced that it had decided not to proceed with its $300 million offering of five-year senior secured notes.

In the secondary market, the new Teva dollar bonds were quoted slightly higher on the session.

But the real action lay in some of the paper which had priced in Tuesday’s junk-bond feast.

Ball Corp.’s big new eight-year issue was easily the busiest credit of the day, moving up slightly.

All three tranches of CIT Group Inc.’s $1.4 billion Tuesday bond behemoth were busy and better, with the longer-date issues doing especially well.

William Lyon Homes’ 5.5-year deal saw a second straight day of aftermarket activity, adding to Tuesday’s initial gains.

The news that Frontier Communications was bringing a big new bond deal to market to finance its previously announced tender offer for a big chunk of its existing bonds caused many of those existing notes to move up in active trading for a second straight session. However, several issues were lower.

Statistical market performance measures moved lower on Wednesday, after having been mixed for three straight sessions before that; they had turned mixed on Friday, and had stayed that way on Monday and Tuesday as well, after having been lower all around last Wednesday and again last Thursday.

Wide audience for Teva

The high-yield primary market continued to do brisk business on Wednesday.

Israel’s Teva Pharmaceutical Industries Ltd. priced an upsized $4.5 billion equivalent amount of non-callable senior notes (Ba2/BB/BB), which came in two currencies across four tranches.

The debt refinancing deal, which was increased from $3.5 billion equivalent, had a wide following that included high yield accounts, investment grade accounts and emerging markets investors, sources said.

It included an upsized $2.5 billion amount of notes in two tranches from Teva Pharmaceutical Finance Netherlands III BV, increased from $2.25 billion:

• $1.25 billion six-year notes priced at par to yield 6%. The yield printed at the tight end of the 6% to 6¼% yield talk; and

• $1.25 billion 10-year notes priced at par to yield 6¾%. The yield printed 25 basis points beneath the tight end of the 7% to 7¼% yield talk.

The deal also included an upsized €1.6 billion of notes in two tranches from Teva Pharmaceutical Finance Netherlands II BV, increased from €1 billion:

• €700 million four-year notes priced at par to yield 3¼%. The yield printed at the tight end of the 3¼% to 3½% yield talk; and

• €900 million seven-year notes priced at par to yield 4½%. The yield printed at the tight end of the 4½% to 4¾% price talk. (See related story in this issue).

Frontier $1.6 billion on deck

Frontier Communications Corp. is expected to price $1.6 billion of eight-year second-lien secured notes on Thursday.

The debt refinancing deal was scheduled to launch on a Wednesday afternoon conference call with investors.

JP Morgan Securities LLC has the lead.

Basic Energy postpones

Basic Energy Services, Inc. announced Wednesday that it decided not to proceed with its $300 million offering of five-year senior secured notes (B3/B).

The company concluded that the current rate and structure available in the market lacked the flexibility to be sufficiently attractive for it to move forward.

Official price talk on the deal never surfaced, sources said on Wednesday.

Yield conversations were taking place in the 9% to 9½% context, traders said.

The most recent buzz in the market had the debt refinancing deal coming with an 8½% to 8¾% coupon at a discount to yield 9¼% to 9½%, a trader said.

Somewhere within that yield range there was demand amounting to twice the size of the offer, a source said.

Arrow Global upsized

In the European market Arrow Global Finance plc priced two tranches of secured notes (Ba3/BB).

The debt refinancing deal included an upsized €285 million amount of three-month Euribor plus 375 basis points eight-year senior secured floating-rate notes, which priced at par. The tranche size was increased from €150 million. The spread came at the wide end of the 350 bps to 375 bps spread talk.

Arrow Global also priced a downsized £100 million add-on to its 5 1/8% senior secured notes due Sept. 15, 2024 at 99.50 to yield 5.216%. The add-on was downsized from £120 million. The reoffer price came at the cheap end of the 99.5 to 99.75 price talk.

HSBC and JPMorgan were the joint global coordinators and physical bookrunners.

Tuesday outflows

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

High-yield ETFs sustained $168 million outflows on the day.

Actively managed funds saw $86 million of outflows on Tuesday.

The dedicated bank loan funds, meanwhile, were positive on Tuesday with $46 million of inflows on the day, the trader said.

New Teva issues seen better

In the secondary market, Teva Pharmaceutical’s two new issues of dollar-denominated paper were seen by a trader having moved up slightly from their respective par issue prices, though on only relatively light trading, given the relative lateness in the day at which those bonds had priced.

He saw just $2 million of the 6¾% notes due 2028 traded, with the bonds in a 100½-to-100¾ bid context.

And he saw Teva’s 6% notes due 2024 moving around between 100 1/8 and 100¾ bid, with around $10 million having changed hands.

At another desk, a trader saw the 2024 notes in a par-to-100¼ bid range, while the 2028s moved between 100 3/8 and 100 5/8 bid.

Ball tops ‘em all

Looking at Tuesday’s new deals, a trader said that Ball Corp.’s 4 7/8% notes due 2026 was the clear volume leader on the day, with over $87 million having circulated by the close.

He quoted the notes at 100¼ bid, calling that up around 3/16 point.

The Broomfield, Colo.-based maker of packaging products had priced its quick-to-market $750 million deal at par, after upsizing it from an originally announced $500 million.

CIT stars in secondary

A trader said that CIT Group’s big new three-part, quickly shopped $1.4 billion bond deal was a standout performer on Wednesday.

He saw the New York-based banking company’s 4 1/8% notes due 2021 trading around between 100¼ and 101½ bid, “but they were mainly in a 100 7/8 to 101 area.”

He saw more than $77 million of those notes having traded.

CIT had priced $500 million of those notes at par.

The trader said that the two longer-dated pieces of the deal did even better, with the5¼% notes due 2025 going home in a 102¾-to-103 bid context, on volume of over $57 million.

CIT had priced $500 million of those notes at par.

And its $400 million of 6 1/8% senior subordinated notes due 2028 jumped to levels as high as 104 bid, he said, before the last prints in a 103 5/8 to 103 7/8 bid context, well up from the notes’ par issue price.

More than $70 million of those notes traded.

William Lyons continues climb

William Lyons Home’s new 6% notes due 2023 were briskly traded for a second straight session, a market source said, seeing the Newport Beach, Calif.-based builder’s firming slightly to around 100 13/16 bid, with about $10 million of volume.

On Tuesday, those notes had pushed up to 100¾ bid from the $350 million drive-by deal’s par issue price, with around $24 million of initial aftermarket volume.

Frontier mostly firm on new deal

The news that Frontier Communications – which on Tuesday announced it would tender for up to $1.6 billion of its existing bonds – plans to sell the same amount of new bonds to finance that tender offer (see related story elsewhere in this issue), helped send the Norwalk, Conn.-based wireline telecommunications service provider’s existing issues mostly higher Wednesday.

A trader saw the company’s 10½% notes due 2022 gain 1¾ points to end at 86¾ bid, with over $42 million having traded.

He saw its 8¾% notes due 2022 up 1½ points, at 79 bid, on $12 million of volume.

However, not all Frontier debt gained; its 7 5/8% notes due 2024 were down more than a deuce on the day, ending at 60¾ bid, with about $15 million of volume.

Indicators turn lower

Statistical market performance measures moved lower on Wednesday, after having been mixed for three straight sessions before that; they had turned mixed on Friday, and had stayed that way on Monday and Tuesday as well, after having been lower all around last Wednesday and again last Thursday.

The KDP High Yield Daily Index lost 4 basis points on Wednesday to close at 70.52, in contrast to Tuesday’s 9 bps rise, which had been its first such improvement after four straight losses. On Monday, it had fallen by 4 bps, while on Friday, it had slid by 17 bps.

Its yield moved by 1 bp to 5.79%, its sixth straight widening; on Tuesday, the yield had also risen, by 3 bps, even though the index reading was also up, an atypical move since the yield and the index reading usually move inversely, with one rising as the other falls and vice versa.

The Markit CDX Series 29 High Yield Index eased for a second straight session on Wednesday, ending off about 1/16 point at 106½ bid, 106 9/16 offered. On Tuesday, it had retreated by almost 5/32 point after two straight sessions before that on the upside.

The Merrill Lynch High Yield Index also ended lower Wednesday, closing off 0.129%, after having gained 0.222% on Tuesday and 0.184% on Monday to break a four-session losing streak.

Wednesday’s setback widened the index’s year-to-date deficit to 0.555% from 0.426% on Tuesday.

Those loss levels were still in from the 1.248% cumulative red ink posted on Feb. 9, its second straight new widest deficit level for the year.

Its peak cumulative gain for the year so far was 0.936%, established on Jan. 26.

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