Berry, Paramount, Plantronics price; Hilcorp busy; Altice, Cequel down; funds up $1.35 billion

By Paul A. Harris and Paul Deckelman

New York, May 21 – The high-yield primary universe saw another moderately busy session Thursday that was on pace with Wednesday, syndicate sources said.

Consumer packaging products maker Berry Plastics Corp. had the big deal of the day, a quick-to-market $700 million offering of eight-year secured notes, which traded actively around their issue price when they reached the aftermarket.

There was also a pair of regularly scheduled transactions that came off the forward calendar.

Communications equipment manufacturer Plantronics, Inc. did $500 million of eight-year notes, and Canadian energy operator Paramount Resources Ltd. priced an upsized $450 million of eight-year notes. The latter deal was seen firming when it moved into the secondary sphere.

The day’s $1.65 billion of new dollar-denominated and fully junk-rated paper from domestic and industrialized-country borrowers in three tranches was only slightly behind Wednesday’s total of $1.7 billion of new junk bonds, also in three tranches, according to data compiled by Prospect News.

In the secondary arena, besides the aforementioned new issues, Wednesday’s offering from Hilcorp Energy I LP was the day’s volume leader among the purely junk issues.

Away from the new deals, bonds of European cable operator Altice SA and Cequel Communications LLC were lower in busy dealings for a second consecutive session as investors reacted to the news that Altice will acquire 70% of Cequel and its Suddenlink Communications operation in a leveraged buyout transaction.

Statistical market performance indicators turned higher across the board on Thursday after having been lower all around over the previous three sessions.

And high-yield mutual funds and exchange-traded funds saw a big net inflow of fresh cash, snapping a four-week losing streak, as $1.35 billion more came into those funds than left them during the most recent trading week.

Berry Plastic drives by

Dealers cleared the active forward calendar on Thursday, the final full session heading into the three-day Memorial Day holiday weekend in the United States.

Three dollar-denominated issuers raised $1.65 billion by pricing single-tranche deals.

One was upsized.

One came as a drive-by.

One deal priced at the tight end of talk, one came toward the tight end, and one priced on top of talk.

Berry Plastics priced the day's sole drive-by, a $700 million issue of second-priority senior secured notes due July 15, 2023 (B3/B-) at par to yield 5 1/8%.

The yield printed on top of price talk and also came in line with early whispers in the low 5% area, according to sources.

Citigroup Global Markets Inc., Barclays, BofA Merrill Lynch, Deutsche Bank Securities Inc., Goldman Sachs & Co. and Wells Fargo Securities LLC were the joint bookrunners for the debt refinancing deal.

In very thin trading, the new Berry Plastics notes were a little weaker at Thursday's close, a trader said, spotting them at 99¾ bid, par offered.

There was very little trading activity taking place, the source said, adding that people headed toward the exits shortly after noon in order to get a jump on Memorial Day weekend travel.

“Today was quiet, and tomorrow is going to be dead,” said the trader, who expressed doubt about any primary market activity taking place during Friday's abbreviated session.

The Securities Industry and Financial Markets Association recommends an early 2 p.m. ET market close for the Friday ahead of Memorial Day weekend, the trader pointed out.

Plantronics prices tight

Plantronics priced a $500 million issue of eight-year senior notes (Ba2/BB) at par to yield 5½%.

The yield printed at the tight end of the 5½% to 5¾% yield talk.

The upsized deal was trading at par bid, par ¼ offered at the close, according to a trader.

Morgan Stanley & Co. LLC and Goldman Sachs were the joint bookrunners.

The Santa Cruz, Calif.-based manufacturer plans to use the proceeds for general corporate purposes, including share repurchases and repayment of debt under its revolver.

Upsized Paramount at discount

Paramount Resources priced an upsized $450 million issue of 6 7/8% eight-year senior notes (B3/BB-) at 99.533 to yield 6.95%.

The deal was upsized from $400 million.

The yield printed five basis points below the mid-point of yield talk in the 7% area and tight to earlier guidance that had the deal coming with a yield in the low 7s, according to sources.

Joint global coordinator and lead bookrunner Barclays will bill and deliver. RBC Capital Markets was also a joint global coordinator and lead bookrunner.

BMO Capital Markets Corp., HSBC Securities (USA) Inc. and Scotia Capital (USA) Inc. were joint bookrunners.

The Calgary, Alta.-based oil and natural gas exploration, development and production company plans to use the proceeds to fund the conditional call of its 8¼% senior notes due 2017 at 102.75, to repay debt under its revolving credit facility and for general corporate purposes, including capital expenditures.

The additional $50 million of proceeds resulting from the upsizing of the deal will be used for general corporate purposes.

Novacap €95 million tap

In the European primary market, Novacap International SAS priced a €95 million add-on to its Euribor plus 500 basis points senior secured floating-rate notes due May 1, 2019 at par to yield Euribor plus 500 bps.

The reoffer price came on top of price talk.

Goldman Sachs was the bookrunner.

The Paris-based chemical company plans to use the proceeds, along with cash on its balance sheet, to finance the acquisition of CU Chemie Uetikon GmbH, a Germany-based pharmaceutical manufacturer, and to repay some CU Chemie Uetikon debt.

Berry around issue price

In the secondary arena, traders saw what one called “a very quiet session” on the last full trading day of the week ahead of the coming Memorial Day holiday break, which will see an early close on Friday and a full market shutdown on Monday.

Some participants were seen making an early exit Thursday afternoon (ET).

While there were reduced activity levels, the new Berry Plastics 5 1/8% second-priority senior secured notes due 2018 saw a fair amount of initial aftermarket dealings after their pricing. One market source estimated that over $24 million of the Evansville, Ind.-based plastic packaging producer’s new bonds changed hands, seeing them holding right around their par issue price.

A second trader pegged the bonds in a 99 5/8-to-100 1/8 bid context.

At yet another desk, a trader quoted the bonds offered at 100¾.

He said that the notes initially were seen as low as 99¾ but then there were “a couple of larger trades at par, $1 million plus kind of stuff, so they’re pushing up a little bit.”

Berry’s existing 9¾% notes due 2021 were seen trading just below the 110½ mark, about unchanged on the day, on volume of over $12 million.

A trader meanwhile said that he had not yet seen the new Paramount Resources 6 7/8% notes due 2023.

However, at another shop, those bonds were being quoted having firmed to a 100 3/8 bid level after coming to market at a discounted price of 99.533. More than $16 million of the Canadian oil and gas company’s bonds had traded by the close.

There was no immediate aftermarket activity noted in the day’s other issue, the Plantronics 5½% notes due 2023.

Hilcorp heads Most Actives

Among the deals that priced earlier in the week, traders said that the new Hilcorp Energy 5¾% notes due 2025 were probably the busiest, with over $32 million of the Houston-based oil and gas exploration and production company’s paper seen having traded.

One market source saw the bonds going home at 99 15/16 bid, down about 3/16 from where that $500 million drive-by offering had finished on Wednesday, slightly above their par issue price.

Another trader said that “it looks like they started off today in a 100-to-100 3/8 price context, then weakened a little bit.”

He saw a final print of the day around 99 7/8 but said that that was on a somewhat smaller trade, in the 500 bonds (i.e., $500,000) range. “The bigger pieces were largely going through at 100 1/8, on better size.”

He also saw “a decent amount” of trading in the new 5¾% notes due 2025 from Greeley, Colo.-based beef, pork and lamb processor JBS USA LLC, a quick-to-market $900 million deal that had priced at par on Wednesday after being upsized from an originally announced $600 million.

Unlike Hilcorp, those notes had come to market too late in the session on Wednesday for any secondary dealings immediately after pricing.

He said those bonds “were pushing a bit higher” when they began trading on Thursday; initially, they had been around 100 7/8-to-101 bid and then “were inching up during the day,” going out around a 101¼-to-101 3/8 neighborhood.

VistaJet Holding SA’s 7¾% notes due 2020 were seen trading in a 98¾-to-99 bid range, right around the 98.982 level at which the Swiss airline operator’s VistaJet Malta Finance plc subsidiary had priced its $300 million issue late Wednesday to yield 8%. There had been no initial aftermarket dealings seen on Wednesday in that regularly scheduled forward calendar deal, which had been downsized from an originally planned $400 million.

Altice, Cequel slide continues

Away from the new deals, traders said that Altice’s bonds were lower for a second consecutive session on the news that the Luxembourg-based provider of cable, broadband and phone service to various European markets will acquire control of St. Louis-based Cequel Communications, which does business as the ninth-largest U.S. cable operator under the name Suddenlink Communications.

Cequel’s own bonds – which fell even more sharply than the Altice paper on Wednesday on the prospect that the leveraged buyout deal will load more debt onto the company – were also lower for a second straight day.

A market source said that Cequel’s 5 1/8% notes due 2020 issued in May 2013 lost 1 1/8 point to end the day at 98 1/8 bid, with over $17 million traded. That follows the issue’s 1¼-point loss on Wednesday, on volume of over $37 million.

Cequel’s 6 3/8% notes due 2020 lost 1 point to end at 103, with over $13 million traded, following Wednesday’s loss of 1 3/8 points on over $16 million of turnover.

Altice’s 7 5/8% notes due 2025 were also down 1 point on the day, at 98¾ bid, with over $25 million having changed hands. On Wednesday, the issue was down ¾ point on volume of over $31 million.

Its 7¾% notes due 2022 dropped by 1 1/8 point Thursday to 100¼ bid, with over $10 million having traded. On Wednesday, the bonds dipped by 5/8 point on volume of over $28 million.

Under the terms of the transaction announced Wednesday, Altice will buy 70% of Cequel/Suddenlink, but the latter expects to issue $1.76 billion of new debt and keep $5.06 billion of existing debt to help fund that acquisition, with Altice kicking in $1.19 billion of cash.

Both Standard & Poor’s and Moody’s Investors Service warned of a possible downgrade to Cequel’s ratings, with S&P estimating that pro forma leverage is expected to increase to the mid-7x range in 2015 from about 5.8x in 2014.

Indicators turn higher

Statistical market performance indicators turned higher across the board on Thursday after having been lower all around over the previous three sessions.

The KDP High Yield Daily index rose by 6 basis points on the session to go home at 71.43, its first gain after three consecutive losses, including Wednesday’s 5 bps retreat, which had also been its fourth downturn in the last five sessions and fifth in the last seven trading days.

Its yield, meantime, came in by 1 bp, its first narrowing after two consecutive sessions of having widened out, including Wednesday’s 1 bp rise.

The Markit Series 24 CDX North American High Yield rose by 7/32 point on Thursday to end at 107 1/8 bid, 107 3/16 offered, versus its 1/16 point easing on Wednesday, which had been its third consecutive loss.

The Merrill Lynch North American Master II high yield index also moved into the win column on Thursday after three successive sessions on the downside, firming by 0.12%. On Wednesday, it had been off by 0.059%.

Thursday’s gain lifted the index’s year-to-date return to 3.887% from Wednesday’s 3.762%, although it remained below its peak level for the year of 3.952% set on April 27.

Junk funds gain $1.35 billion

Another numerical gauge – flows of investor cash into or out of high-yield mutual funds and ETFs, considered a reliable barometer of overall junk market liquidity trends – turned strongly positive this week, snapping a losing streak that had seen outflows in each of the previous four weeks, market sources said Thursday.

Some $1.35 billion more came into those weekly-reporting-only funds than left them during the week ended Wednesday, consisting of a net $906 million flowing into traditional high-yield managed mutual funds and another $445 million seen having gone into the ETFs.

The big gain, the first seen since the week of April 15, strengthened the already solidly positive year-to-date net inflow position, although it remains below its high point for the year so far. (See related story elsewhere in this issue.)

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