Giant-sized Altice/Numericable multi-tranche offering prices, firms smartly; Antero drives by

By Paul Deckelman and Paul A. Harris

New York, April 23 - What is being called the biggest junk bond pricing ever finally came to market on Wednesday - after a round of restructuring and numerous tranche size changes - as affiliated European broadband and cable operators Altice Group and its 40% owned Numericable Group AG combined to bring €12 billion equivalent of new bonds to market, structured in two deals consisting of seven separate tranches, including four U.S.-dollar-denominated issues totaling some $10.65 billion.

It was the first junk deal to come to market since last Thursday; market holidays in the United States and Europe on Friday and Monday, respectively, had stilled activity, and no deals had priced on Tuesday, as all eyes were on the process by which the super-deal was being shaped and fine-tuned, including the dropping of one originally planned euro-denominated piece and a round of downsizings and upsizings of the various other remaining tranches.

When the massive megadeal finally did price, traders said that demand for the new paper was brisk, and they quoted the dollar-denominated bonds as having moved solidly higher.

The traders said there was not very much else going on in Junkbondland, with investors mostly sitting around waiting for Altice and Numericable to get their respective deals done.

There was, however, one other dollar-market pricing seen - though completely overshadowed - as Denver-based oil and natural gas operator Antero Resources Corp. did an upsized and quickly shopped $600 million issue of eight-year notes. Those bonds were quoted trading near their issue price when they hit the aftermarket.

All of the day's other primaryside news came out of Europe - a pricing for Amsterdam-based data center services provider InterXion Holding NV and prospective new deals from mining concern Consolidated Minerals and aluminum products manufacturer Constellium NV joining the forward calendar.

Away from the new deals, there was busy upside activity in Caesars Entertainment Corp., helped by the news that the Las Vegas-based casino giant is submitting an application for one of four available gaming licenses being put up for grabs by authorities in New York State.

Overall, statistical junk performance indicators were mixed for a third straight session - and the sixth day out of the last seven - on Wednesday.

Numericable/Altice deal "groundbreaking"

Records fell Wednesday in the high-yield primary market as Numericable Group and Altice SA combined to price €12 billion equivalent of high-yield bonds in seven tranches.

The deal was part of an overall €15.8 billion equivalent of debt financing that played to orders topping $100 billion, according to informed sources.

Sources close to the deal characterized the combined orders for the Numericable and Altice bonds as the biggest high-yield order book ever, rivaling, if not topping, the biggest order books ever seen for a corporate bond - investment or speculative grade.

The Numericable deal alone, at €7.9 billion equivalent, represents a record from a single issuer, according to one market source who pointed the TXU Corp. $7.5 billion hung bridge deal that came in October 2007 as the new runner-up.

The transaction was characterized as "groundbreaking" by sell-side sources who expressed the belief that it paves the way for more large-scale merger and acquisition financings to come with big high-yield components.

"The market showed us today that it can take down a deal this size with no problem," remarked one source close to the deal.

Numericable €7.9 billion equivalent

To recount the details, Numericable Group priced €7.9 billion equivalent of senior secured first-lien notes (Ba3/B+) in five tranches.

The deal included an upsized $2.4 billion tranche of five-year notes that priced at par to yield 4 7/8%. The tranche was upsized from $1.8 billion after having previously been upsized from $920 million. The yield printed on top of yield talk that was revised from earlier talk in the 5% area. A proposed €500 million tranche of five-year notes was withdrawn.

A €1 billion tranche of eight-year notes was priced at par to yield 5 3/8%. The tranche was downsized from €1.6 billion after having been upsized from €1 billion. The yield printed on top of yield talk that was revised from earlier 5½% to 5¾% talk.

A $4 billion tranche of eight-year notes was priced at par to yield 6%. The tranche was downsized from $4.2 billion after having upsized from $2 billion. The yield printed on top of yield talk that was revised from earlier 6% to 6¼% yield talk.

A €1.25 billion tranche of 10-year notes was priced at par to yield 5 5/8%. The tranche was upsized from €915 million after having been downsized from €1 billion. The yield printed on top of yield talk that was revised from earlier talk that had the euro-denominated 10-year notes price 3/8% behind the euro-denominated eight-year notes, or 5¾%.

And a $1,375,000,000 tranche of 10-year notes priced at par to yield 6¼%. The tranche was downsized from $2 billion. The yield printed on top of yield talk that was revised from earlier talk that had the dollar-denominated 10-year notes pricing 3/8% behind the dollar-denominated eight-year notes, or 6 3/8%.

The entire five-tranche transaction was downsized from €8.8 billion equivalent after having earlier been upsized from the €6.04 billion equivalent.

JPMorgan, Deutsche Bank and Goldman Sachs International were the joint global coordinators.

Barclays, BNP Paribas, Credit Agricole CIB, Credit Suisse, Morgan Stanley and ING were joint lead bookrunners.

Mediobanca, Natixis, SG CIB and UniCredit Bank AG were joint lead bookrunners for the euro-denominated tranches only.

Altice €4.15 billion equivalent

Altice priced €4.15 billion equivalent of eight-year senior notes (B3/B) in two tranches.

The deal included €2,075,000,000 of notes that priced at par to yield 7¼%. The tranche was upsized from €1.9 billion. The yield came on top of yield talk that was revised from earlier talk in the 7½% area.

Altice also priced a $2.9 billion tranche of notes at par to yield 7¾%. The tranche was downsized from $3.15 billion. The yield priced on top of yield talk that was revised from earlier talk in the 8% area.

Goldman Sachs was the left joint global coordinator. Deutsche Bank and JPMorgan were also joint global coordinators. Barclays, BNP Paribas and Credit Agricole CIB were joint bookrunners. Natixis and SG CIB were joint bookrunners for the euro-denominated tranche only.

The executions

So great was the demand for the Numericable and Altice bonds that early in the week buy-side sources became resigned to disappointing allocations.

Various factors drove the massive demand, sources said.

Interest in the merger and acquisition financing, in which Altice is acquiring a stake in Numericable Group AG and Numericable is acquiring Societe Francaise de Radiotelephone SA (SFR) from Vivendi SA, began ballooning as soon as the merger was announced, a sell-side source said.

Because of the size of both deals the bonds will loom large in the index.

Also the deal played to high-yield investors' well-known appetites for liquidity.

And the bonds were priced to move, market sources said throughout the week.

However the holding company bonds (Altice) were more generously priced than the operating company's notes (Numericable), according to sources who pointed to late Thursday levels that saw the Altice paper trading in the secondary far above the Numericable bonds.

The new dollar-denominated Altice 7¾% notes due 2022 were 104 bid, 104½ offered late Thursday, according to a portfolio manager.

The Numericable dollar-denominated paper, however, saw a much more modest amount of appreciation in the secondary market, a sell-side source said.

The Numericable 4 7/8% notes due 2019 were 101¼ bid, 101½ offered, following the close.

The 6% notes due 2022 were 102 bid, 102¼ offered.

The 6¼% notes due 2024 were 102 bid, 102¼ offered.

InterXion upsizes

Elsewhere in Wednesday's euro-denominated primary market InterXion Holding priced an upsized €150 million add-on to its 6% senior secured notes due July 15, 2020 (B2/B+) at 106¾ to yield 4.731%.

The deal was upsized from €125 million.

The reoffer price came on top of price talk.

Barclays was the sole bookrunner for the capital expenditures and general corporate purposes deal.

Antero drive-by

The session saw one all-dollar issuer.

Antero Resources priced an upsized $600 million issue of senior notes due Dec. 1, 2022 (B1/BB-) at par to yield 5 1/8% in a quick-to-market Wednesday transaction.

The deal was upsized from $500 million.

The yield printed at the tight end of the 5 1/8% to 5¼% yield talk.

JPMorgan, Citigroup, Wells Fargo, Credit Agricole, Barclays and Capital One South Coast were the joint bookrunners for the debt refinancing deal.

Constellium two-part deal

Netherlands-based Constellium plans to start a roadshow on Thursday in Paris for a €590 million equivalent two-part offering of senior notes.

The deal is coming in tranches of euro-denominated notes due in 2021, non-callable for three years, and dollar-denominated notes due in 2024, non-callable for five years.

Joint bookrunner Deutsche Bank will bill and deliver. BNP Paribas, Goldman Sachs, HSBC, Morgan Stanley, Natixis and SG CIB are also joint bookrunners.

The Amsterdam-based company plans to use the proceeds to repay its existing term loan in full and for general corporate purposes.

Consolidated Minerals Thursday

Consolidated Minerals plans to begin a roadshow on Thursday in London for a $400 million offering of six-year senior secured notes.

Deutsche Bank Securities Inc. has the books for the debt refinancing deal.

Altice and Numericable trade up

In the secondary market, traders said the twin megadeals from Altice Group, via its Altice SA unit, and from Altice subsidiary Numericable were easily the dominant feature of the day's activity.

"Most of the day was spent waiting around for those guys to come," one trader observed.

Then once the deal had finally priced, a second trader said, the two companies' new bonds were the most actively traded junk credits - but since the Rule 144A issues are not on Trace, he said it was impossible to estimate just how active.

He said he did not have any idea how much of the deal was taken down by international-oriented investors and how much by American buyers, how much by hedge funds and how much by traditional mutual funds.

Suffice it to say, "this was one monstrous deal," he said.

He quoted Altice's 7¾% notes due 2022 at 103¼ bid, 103½ offered, well up from their par issue price. A second trader pegged those bonds at 103 7/8 bid, 104 1/8 offered.

Numericable's 4 7/8% senior secured first-lien notes due 2019 traded in a 101 to 101½ context after pricing at par; its 6% second-lien notes due 2022 were seen by several traders having gotten up to101 7/8 to 102 1/8 bid, versus their par pricing level. Its 6¼% notes due 2024 moved up to 102 bid, 102 3/8 offered after pricing at par.

Antero issue improves

Traders saw the day's other new deal - Antero Resources' 5 1/8% notes due 2022 - up slightly from their par issue price.

One located the bonds at 100¼ bid, 100 5/8 offered, although at another desk, the bonds were seen at 100¼ bid, 101¼ offered.

Recent deals little traded

Away from that, "it's been pretty dead," a trader said. "It's just been new-issue trading."

Even recently priced offerings didn't see very much activity, with a trader estimating most as unchanged on the day.

One of the few recently priced deals seen trading around on any kind of size was Denbury Resources Inc.'s 5½% senior subordinated notes due 2022.

The Plano, Texas-based independent oil and gas exploration and production company's $1.25 billion drive-by deal priced at par last Wednesday after having been upsized from $1.1 billion originally, and the credit has been among the most active issues every day since then.

On Wednesday, a market source saw the bonds at 100 13/16 bid, a gain of 1/16 point. Over $8 million of the notes changed hands.

Caesars seen busy

Away from the new deals, traders noted some sizable activity in Caesars Entertainment bonds, in line with the news that Caesars is among about 15 companies vying for four gaming licenses to run casinos in upstate New York. Caesars is the only major Las Vegas gaming concern interested in such a New York State project; cross-town rivals like MGM Resorts International, Wynn Resorts Ltd. or Boyd Gaming Corp. have chosen not to take part.

A trader saw Caesar's 8½% operating company notes due 2020 up 2¼ points at 85 bid, with almost $20 million having traded, while its 9% notes due 2020 gained 1½ point to end at 86, with over $12 million trading.

SuperValu gains on results

A trader saw SuperValu Inc.'s 6¾% notes due 2021 up by ½ point, at 102 1/8 bid, on volume of over $5 million.

The Eden Prairie, Minn.-based retail supermarket operator and wholesale grocery supplier reported greatly improved results for its fiscal 2014 fourth quarter - net earnings of $26 million, or 10 cents per diluted share, on sales of $3.953 billion, versus a year-earlier net loss of $1.412 billion, or $6.65 per share, on sales of $3.899 billion.

Earnings from continuing operations came to $40 million, or 15 cents per share, versus year-earlier red ink of $174 million, or 82 cents per share. SuperValu radically reinvented itself last year, selling off a number of its well-known store chains for the relatively modest sum of $100 million, in order to get the buyers to also assume some $3.3 billion of debt.

SuperValu cut debt sequentially by $240 million versus fiscal third-quarter levels and said that its interest costs were lower, driven by reduced overall debt on its books as well as more favorable interest rates following several capital markets transactions in the past year. (See related story elsewhere in this issue.)

Indicators stay mixed

Statistical junk performance indicators were mixed for a third straight session on Wednesday, their sixth such session out of the last seven.

The Markit Series 22 CDX North American High Yield index lost 3/16 point to finish at 107 3/32 bid, 107 5/32 offered - its first loss after two straight gains, including Tuesday's 3/16 point gain.

The KDP High Yield Daily index posted its third consecutive loss on Wednesday, easing by 1 basis point to 74.96, after having also edged downward by 1 bp on Monday and Tuesday as well.

Its yield rose by 1 bp to 5.2%, after having come in by 1 bp on Tuesday.

However, the widely followed Merrill Lynch High Yield Master II index posted its third consecutive advance, gaining 0.045%, on top of Tuesday's 0.036% improvement.

Wednesday's firming raised the index's year-to-date return to 3.495%, its third straight new peak level for 2014. That was up from Tuesday's 3.448%, the index's previous high-water mark.

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