Constellium, Century Communities price, Ortho-Clinical shops megadeal; First Data climbs

By Paul Deckelman

New York, April 30 - The high-yield primary arena closed out the month of April - its busiest month so far this year - with a pickup in activity Wednesday versus Tuesday's levels.

High-yield syndicate sources said that two deals totaling $600 million came to market during the day.

Constellium NV, a Dutch manufacturer of aluminum products for the aerospace, automotive and packaging industries, did a €590 million equivalent two-part offering, which included $400 million of 10-year notes as well as a tranche of euro-denominated seven-year paper. Those bonds were quoted having moved up around 2 points when they were freed to trade.

There was also a $200 million eight-year offering from homebuilder Century Communities, Inc. that appeared too late in the day for any aftermarket dealings.

That activity picked up the pace seen on Tuesday, when just one deal worth $250 million - for industrial coke producer SunCoke Energy Partners LP - had gotten done.

The day's deals lifted April's total above the $40 billion mark in terms of fully junk-rated, U.S.-dollar-denominated offerings from domestic or industrialized-country borrowers, the busiest month so far this year and, in fact, the heaviest-volume month since last September, according to data compiled by Prospect News. April's high-intensity bond barrage fattened year-to-date issuance totals - which had badly lagged 2013's pace earlier this year - to some $109 billion, just a shade below the year-ago tally, according to the data.

The syndicate sources meanwhile saw early May's activity kicking off with a big deal on the horizon, as health-care operator Ortho-Clinical Diagnostics got ready to mount a roadshow for a $1.15 billion eight-year note offering that is expected to price sometime next week.

From Europe came word that Britain's Premium Credit Finance, a provider of insurance premium financing to policyholders, will sell £200 million seven-year notes via a subsidiary of its parent company.

Traders meantime said that Tuesday's SunCoke energy deal continued to do well in the aftermarket - but Monday's offering from Clear Channel Communications Inc. continued to struggle.

Away from the new deals, First Data Corp.'s bonds were the busiest credits of the day and among the best performers after the electronic transaction processor reported improved first-quarter results versus a year ago, as well as ample liquidity and no significant near-term debt maturities.

However, Gymboree Corp.'s paper was pummeled after the specialty retailer reported considerably worse quarterly results from a year ago.

Statistical market performance indicators mixed for a second straight session on Wednesday, after having been higher across the board on Monday.

Constellium prices two-parter

The day's big deal, such as it was, came from Amsterdam-based Constellium, a manufacturer of aluminum products for the aerospace, automotive and packaging industries.

High-yield syndicate sources said that the company priced a €590 million equivalent two-part bond deal (Ba3/BB-) of dollar- and euro-denominated notes consisting of $400 million of 10-year senior notes and €300 million of seven-year seniors.

The dollar-denominated bonds priced at par to yield 5¾%, at the tight end of pre-deal market price talk of 5¾% to 6%, while the euro-denominated paper priced at par to yield 4 5/8%, on the tight side of the 4¾% area price talk.

The deal came to market via joint bookrunners Deutsche Bank Securities Inc., which is handling billing and delivery, BNP Paribas Securities Corp., Goldman Sachs & Co., HSBC Securities, Morgan Stanley & Co. Inc., Natixis Securities and SocGen.

The deal was first announced last Wednesday as part of a larger refinancing effort that also includes a new €120 million three-year unsecured revolving credit facility, which the company expects to enter into and be available upon completion of the bond offering. It was marketed to potential investors via a roadshow that began last Thursday in Paris, moved on to London and then on to the United States.

Constellium plans to use the net proceeds from the offering to repay all of its outstanding term loan debt, as well as for general corporate purposes.

Century sells eight-year notes

The day's other pricing came from Century Communities, which brought a $200 million offering of eight-year senior unsecured notes (B3/B) to market.

The syndicate sources said the notes priced at 99.239, for a yield to worst of 7%.

The pricing came via joint bookrunners BofA Merrill Lynch, J.P. Morgan Securities LLC and FBR Capital Markets.

The deal was first announced on Monday and priced after a short roadshow process.

The Greenwood Village, Colo.-based homebuilder said that proceeds from the bond sale will be used to repay all outstanding revolving credit facility debt and for the acquisition and development of land. Any remaining proceeds will be used for general corporate purposes.

Ortho-Clinical's megadeal

While those deals were pricing, the forward calendar got a sizable boost, as Ortho-Clinical Diagnostics was heard by the syndicate sources to be marketing a $1.15 billion offering of eight-year senior notes as part of the financing for the leveraged buyout of the Raritan, N.J.-based provider of medical laboratory testing services.

They said the company will begin a roadshow for the deal on Friday. It is expected to run till this coming Wednesday, with pricing to occur sometime after that.

The notes will be brought to market via joint bookrunners Goldman Sachs, Barclays Capital Inc., Credit Suisse Securities (USA) LLC, UBS Securities LLC and Nomura Securities, with SMBC Nikko Capital Markets, Ltd., Jefferies& Co. and RBS Securities Inc. acting as co-managers.

The bonds are expected to carry a Caa1 rating from Moody's Investors Service and a CCC+ rating from Standard & Poor's.

The bond deal is part of the financing for the $4.15 billion leveraged buyout of the company by Carlyle Group from its current owner, Johnson & Johnson.

The LBO funding also includes equity as well as a $2.525 billion senior secured credit facility (B1/B), consisting of a $2.175 billion seven-year term loan B and a $350 million five-year revolving credit line that launched after a bank meeting on Monday.

KCA Deutag notes expected

Junk market sources were also expecting to hear shortly about another bond offering coming from a company shopping a bank loan deal around, Scotch energy drilling contractor KCA Deutag. It launched its new six-year secured term loan (B3) at a bank meeting Monday as part of a $750 million financing package that is expected to also include an issue of senior secured notes.

Goldman Sachs Bank USA, JPMorgan, HSBC and Lloyds Securities LLC are the lead banks on the loan, and some - or perhaps all - of the banks are expected to be among the underwriters for the bond deal when it takes shape.

The size of the respective loan and bond tranches has not been determined yet.

The loan launched with price talk of Libor plus 525 basis points to 550 bps with a 1% Libor floor, an original-issue discount of 98½ to 99 and call protection of 102 in year one and 101 in year two, a market source said.

Commitments on the loan are due on May 12.

Proceeds from the loan and the expected bond financing will be used to refinance existing bank debt and add a small amount of cash to the balance sheet.

Premium Credit sterling deal

Another European issuer expected to hit the junk market is Premium Credit Finance, a British provider of third-party insurance premium financing in the United Kingdom and Ireland.

Market sources said that its ultimate parent holding company, Mizzen Mezzco Ltd. UK, will bring a £200 million issue of seven-year senior notes to market, with one of the sources saying that the deal is likely to price "shortly."

The notes will be issued by Mizzen Bondco Ltd., a wholly owned subsidiary of the holding company.

Proceeds from the bond sale will be used to repay existing debt, redeem preferred equity of Premium Credit's parent, make a distribution to shareholders and pay related fees and expenses.

Moody's Investors Service has assigned the note offering a provisional B2 rating, Standard & Poor's gives it single-B rating, and Fitch Ratings has assigned the issue a B- rating.

Constellium bonds seen higher

In the aftermarket, a trader saw Constellium's new dollar-denominated5 ¾% notes due 2024 bid at 102, up from their par issue price earlier in the session, but said that "there was no follow-through on it at all."

At another desk, though, a trader saw a two-sided market at 102½ bid, 103 offered.

Recent new bonds mixed

Among other recently priced issues, a trader said that SunCoke Energy Partners' 7 3/8% notes due 2020 were at 106 3/8 bid, 106 7/8 offered.

That was down about 1/8 from where he had seen the bonds when they began trading on Tuesday - but still up from the 105¼ level at which the Lisle, Ill.-based industrial coke fuel producer had priced that $250 million add-on to its existing notes off the forward calendar earlier Tuesday.

Service Corp. International's new 5 3/8% notes due 2024 were seen unchanged at 101 bid, 101½ offered; the Houston-based funeral home and cemetery operator's quick-to-market $550 million offering had priced at par on Monday and had moved up from there and held those levels.

Another Monday deal - CGG SA's 6 7/8% notes due 2022 - were seen having eased 1/8 point to 100½ bid, 101 offered.

The Paris-based provider of seismic and geophysical analysis services to the energy drilling industry had priced its quickly shopped $500 million issue at par, and it had gotten up to around 100¾ bid, 101 offered in the aftermarket.

But that slight slippage was child's play, compared to the carnage seen in Clear Channel Communications' underachieving new 10% notes due 2018, which had priced at par on Monday evening, well after the market had pretty much closed up shop.

A trader saw the San Antonio-based diversified media and entertainment company's $850 million drive-by deal having gotten hammered down to 97¾ bid, 98¼ offered - a 1¾ point plunge from the bonds' late levels on Tuesday, when they were already trading below issue.

"The bids on that channel are anything but clear," he quipped.

A second trader pegged the bonds at 97 3/8 bid, 97 7/8 offered, calling that down 1¼ points on the day.

There was a little bit of activity in Numericable Group AG's several new issues of dollar-denominated bonds, which had priced last week as part of a humongous $16.6 billion equivalent seven-tranche dollar- and euro-denominated offering from the French cable, broadband and telecommunications company and its Luxembourg-based parent, Altice Group - the biggest junk bond offering ever.

A trader saw Numericable's 6% senior secured first-lien notes due 2022 and its 6¼% first-lien paper due 2024 both trading up 5/8 point on the day at 102½ bid, 102 7/8 offered. The company had priced $4 billion of the former and $1.35 billion of the latter, both at par, last Wednesday.

Numericable's 4 7/8% first-lien notes due 2019 gained 1/8 point, to 100 7/8 bid, 101 1/8 offered. It had priced $2.4 billion of those notes at par last Wednesday.

Altice's 7¾% senior unsecured notes due 2022 were seen up ½ point on the day at 104 3/8 bid, 104 7/8 offered; the parent company had priced $2.9 billion of those notes at par last Wednesday via its Altice SA subsidiary. They had firmed smartly in initial aftermarket dealings after pricing and held onto those lofty levels ever since then.

First Data firms up

In the non-new-deal secondary market, First Data stood out amid what was otherwise a fairly bland session.

Its bonds were better in heavy trading after the Atlanta-based processor of credit card and other electronic financial transactions reported better first-quarter numbers versus a year ago.

A market source said that its 11¾% notes due 2021 jumped by more than 2 points, to 106 7/8 bid on volume of more than $86 million, making it easily the day's busiest bond in Junkbondland.

Second-most active, with over $27 million having changed hands, was First Data's 12 5/8% notes due 2021, which gained ½ point to end at 120¼ bid.

First Data reported a 2% year-over-year first-quarter gain in consolidated revenue, to $2.6 billion, while adjusted EBITDA zoomed by 18% to $614 million. The company's EBITDA margin expanded by some 500 bps.

While the company still lost money, its $201 million of red ink represented a 41% improvement over the bloodbath seen a year earlier.

First Data also reported ample liquidity between cash on hand and its undrawn revolver and no significant debt maturities coming due for several years.

Gymboree in a jam

While First Data sizzled, Gymboree - which also reported numbers Wednesday - fizzled.

A trader saw its 9 1/8% notes due 2018 down over 6 points at 751/2. Another trader echoed that level.

A third trader called the issue off 6 to 7 points on the day, seeing them at 75 bid, 76 offered.

"They were down a bunch," he said.

For the fourth quarter ended Feb. 2, the San Francisco-based children's clothing retailer reported net sales of $351 million, which compared to sales of $397.6 million for the same quarter of fiscal 2012. However, the previous quarter was positively impacted by an additional week, which resulted in an added $19 million.

Same-store sales fell 9%, including online sales.

Gross profit came to $124.5 million, versus $144.8 million the year before. Net loss was $169.8 million and included a $157.2 million non-cash goodwill and intangible asset impairment charge.

Net loss for the same quarter of fiscal 2012 was $5.4 million.

Adjusted EBITDA was $25 million, versus $47.7 million previously.

For the fiscal year, net sales were $1.24 billion, down from $1.28 billion in fiscal 2012. Same-store sales dropped 6%.

Gross profit was $476 million, down from $481.4 million previously. The company reported a wider net loss of $206.4 million, which compared to $10.4 million in fiscal 2012.

Adjusted EBITDA narrowed to $119.7 million from $161.8 million.

Indicators stay mixed

Statistical junk performance indicators were mixed for a second straight session on Wednesday. They had turned mixed Tuesday after having firmed across the board on Monday.

The Markit Series 22 CDX North American High Yield index rose by 1/8 point Wednesday to end 107 bid, 107 1/16 offered, after having dipped by 3/32 on Tuesday.

The KDP High Yield Daily index, though, suffered a second straight loss, dropping by 4 bps to close at 74.9; on Tuesday, it had eased by 1 bp.

Its yield rose by 1 bp to 5.21% after having been unchanged on Tuesday.

However, the widely followed Merrill Lynch High Yield Master II index posted its third straight gain, rising by 0.084%, on top of Tuesday's 0.041% advance.

Wednesday's improvement raised the index's year-to-date return to 3.71%, its third consecutive new peak level for the year, surpassing the previous high of 3.623% seen on Tuesday.

Sara Rosenberg and Stephanie N. Rotondo contributed to this review.

© 2015 Prospect News.
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