Cequel drives by with $1.05 billion; Mattel, First Quantum trade; funds lose $1.17 billion

By James McCandless and Paul A. Harris

San Antonio, March 21 – Cequel Communications Holdings I, LLC broke the week’s drought for dollar-denominated issuance with a quickly marketed sale of $1.05 billion of 10-year senior notes.

But the transaction came wider than initial talk as volatility in the broader markets provided an unhelpful backdrop.

As has been the case for most of the week, the European high-yield arena was busier than its U.S. counterpart.

Meanwhile traders reported a light day in the high-yield secondary market as activity focused on news-driven newer issues.

Mattel, Inc. notes became active again after downward pressure last week caused by the news that Toys “R” Us will liquidate.

First Quantum Minerals Ltd. saw its newer issues trade heavily again. On Wednesday, the company announced that it would dispute a $7.9 billion tax bill from the government of Zambia.

United States Steel Corp.’s new paper continued its stretch of activity, having started the run on Tuesday when the company announced the results of a tender offering.

Intelsat SA and Frontier Communications Corp. added to the day’s volume.

$1.17 billion outflows

Weekly cash flows for dedicated high-yield bond funds returned to the red in the most recent week, according to information reported by Lipper US Fund Flows on Thursday.

The funds sustained $1.174 billion of net outflows in the week to Wednesday's close.

The outflow follows the modest $11 million of inflows seen in the previous reporting period which ended Wednesday, March 14.

The most recent outflow is the ninth negative flow in the past 10 weeks.

Retail cash, as opposed to institutional cash, is thought to be represented in the weekly fund flow numbers that Lipper reports, sources say.

Still the weekly number continues to be closely watched in the market as an indication of sentiment regarding the high yield bond asset class, they add.

Cequel drives by

Cequel Communications Holdings I, LLC completed the first dollar-denominated drive-by deal of the week on Thursday.

The cable company priced a $1.05 billion issue of 10-year senior notes (Caa1/B) at par to yield 7½%.

Pricing widened during the time that the drive-by deal was in the market, as volatility in the broader capital markets on Thursday provided an unsupportive backdrop.

The yield printed at the wide end of the official 7¼% to 7½% yield talk and beyond the wide end of the 7 1/8% to 7 3/8% initial talk, a trader said.

Goldman Sachs was the left bookrunner for the debt refinancing deal. Barclays, BNP Paribas, Credit Suisse, JP Morgan, RBC and TD were the joint bookrunners.

KCA Deutag talk at 9¾% area

KCA Deutag UK Finance plc talked its $375 million offering of five-year senior secured notes (Caa1/B-) to yield in the 9¾% area.

The notes are expected to price on Friday.

Citigroup is the left bookrunner. HSBC, First Abu Dhabi Bank, Goldman Sachs and J.P. Morgan are the joint bookrunners.

The Aberdeen, United Kingdom drilling and engineering contractor for onshore and offshore oil, gas and geothermal markets plans to use the proceeds to fund its acquisition of certain of Dalma Energy LLC’s subsidiaries and rigs located in Saudi Arabia and other assets, and to refinance Dalma Energy debt.

LKQ prices €1 billion

In the euro-denominated new issue market, LKQ Corp. priced €1 billion of senior notes (Ba2/BB) in two tranches.

The acquisition financing deal included €750 million of eight-year notes which priced at par to yield 3 5/8%. The yield printed in the middle of 3½% to 3¾% yield talk.

In addition the Chicago-based company priced €250 million of 10-year notes at par to yield 4 1/8%. The yield printed in the middle of the 4% to 4¼% yield talk.

Global coordinator HSBC will bill and deliver. BofA Merrill Lynch was also a global coordinator.

TeamSystem’s floating deal

TeamSystem Holding SpA priced €750 million of senior secured floating-rate notes (expected ratings B3/B+) with coupons of Euribor plus 400 basis points at par.

The spread came at the tight end of the Euribor plus 400 to 425 bps spread talk.

Of the overall amount priced, a €550 million tranche of five-year notes was placed on Thursday. A €200 million amount of seven-year notes, with the same coupon, was pre-placed, a source said.

Joint physical bookrunner Goldman Sachs will bill and deliver. UniCredit was also a joint physical bookrunner.

The business software producer plans to use the proceeds to redeem TeamSystem Holding’s outstanding €150 million of senior floating-rate notes due 2023 and €570 million of senior secured floating-rate notes due 2022.

Mattel trades

El Segundo, Calif.-based toy manufacturer Mattel saw its newer issues active again, traders confirmed, as Wayne N.J.-based bankrupt toy retailer Toys “R” Us began the process of liquidating its U.S. assets. The notes have faced downward pressure amid reports of missed payments from the retailer and ratings downgrades.

“Mattel notes have been quiet for a few days but they were really flying around today,” a trader said.

Its 4.35% notes due 2020 edged up about ¼ point to close at 97¼ bid. The 6¾% notes due 2025 dropped 2 points to close at about 97¾ bid.

First Quantum active

Market sources said that Vancouver, B.C.-based mining company First Quantum saw part of its $1.85 billion February deal trading heavily again on Thursday.

At the beginning of the week, the company was hit with a $7.9 billion bill for alleged unpaid import duties by the government of Zambia, which the company promised shareholders it would dispute.

The 6½% issue due 2026 gained ¼ point to close at 94¼ bid.

U.S. Steel in high volume

Pittsburgh-based integrated steel producer U.S. Steel’s new issues continued a run of activity on Thursday, traders reported.

On Tuesday, the company announced that it had received $483,912,000 of its $780 million of 8 3/8% senior secured notes due July 1, 2021 by Monday’s deadline.

Priced at $650 million last week, the new 6¼% paper due 2026 was seen by traders being pushed down to par.

Volume names active

Norwalk, Conn.-based wireline telecom name Frontier Communications saw more downward pressure in its recent $1.6 billion issue of eight-year second-lien secured notes.

Traders saw the 8½% notes due 2026 drive back down to where they started the week at about 96 bid.

Elsewhere in telecom, Luxembourg-based satellite communications company Intelsat provided more volume.

The Intelsat Jackson Holdings SA 5½% notes due 2023 fell about ½ point to close under 80½ bid. The 7¼% issue due 2020 fell 2¼ points to close at 92 bid.

Indexes trend lower

The KDP High Yield Daily Index fell by 9 basis points to end the day at 70.24. Its yield rose by 3 bps to end at 5.90%.

The Markit Series 29 CDX Index fell by 35.3 basis points to end at 106.487.

The Merrill Lynch High Yield Index lost 13.3 basis points to close at a return of negative 0.912% for the year so far.

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