Downsized DJO, Trinseo deals, Virgin Media add-on price; Peabody pops; funds lose $162 million

By Paul A. Harris and Paul Deckelman

New York, April 23 – The high-yield primary market had a busy Thursday with a trio of deals pricing, two of them after having been downsized.

Those would be the regularly scheduled forward-calendar offerings from medical devices maker DJO Global Inc., which brought $1.05 billion of six-year secured notes to market, and from industrial materials producer Trinseo SA, whose $300 million offering of seven-year notes was part of a larger two-tranche dual-currency offering.

Broadband, cable and phone operator Virgin Media did a quickly shopped $500 million add-on to its existing 2026 secured notes, which were quoted higher in the aftermarket.

The Trinseo dollar bonds were meantime seen having firmed solidly.

Apart from the deals that actually priced, syndicate sources said drug maker Horizon Pharma Inc. upsized its eight-year notes offering, which is expected to come to market on Friday.

Chemours Co., being spun off from chemicals giant DuPont, was heard to be getting ready to hit the road to market a $2.5 billion equivalent three-part offering of dollar- and euro-denominated notes to investors in Europe and the United States.

Traders meantime saw good upside activity in Wednesday’s megadeal from Fortescue Metals Group, while that day’s other deal, from Seven Generations Energy Ltd., held on to its initial aftermarket gains.

Away from the new deals, Peabody Energy Corp.’s bonds rose after the coal company reported quarterly earnings and its executives talked about possible asset sales on their conference call.

Statistical indicators of junk market performance were mixed for a second consecutive session on Thursday.

Another numerical road marker – high-yield mutual funds and exchange-traded funds, considered a reliable barometer of overall junk market liquidity trends – turned downward for the first time in five weeks, suffering a $162.2 million outflow in the week ended Wednesday.

DJO comes inside of talk

Dollar-denominated issuance came to $1.82 billion on Thursday. Three issuers priced deals.

One of the three came as a drive-by.

Two of Thursday's three dollar-denominated issuers downsized their deals, shifting proceeds to bank loans. There were no upsizings.

Executions came in nearly all varieties, with one deal pricing inside of talk, one at the tight end and one at the cheap end.

DJO Global priced a downsized $1,015,000,000 issue of senior secured notes due June 15, 2021 (Caa1/CCC+) at par to yield 8 1/8%.

The debt refinancing deal was downsized from $1,045,000,000, with $30 million of proceeds shifted to the concurrent bank loan.

The yield printed 12.5 basis points below the tight end of the 8¼% to 8½% yield talk.

Credit Suisse was the lead left bookrunner. Wells Fargo, Goldman Sachs, UBS, RBC, Macquarie and Natixis were the joint bookrunners.

Virgin Media taps 5¼% notes

Virgin Media Secured Finance plc priced a $500 million add-on to its 5¼% senior secured notes due Jan. 15, 2026 (expected ratings Ba3/BB-) at 101 to yield 5.123%.

The reoffer price came at the cheap end of the 101 to 101.5 price talk.

Goldman Sachs was the left bookrunner. Barclays, BNP Paribas and Deutsche Bank were the joint bookrunners.

The Hook, England-based provider of digital cable, broadband internet, fixed-line telephone and mobile services plans to use the proceeds to fund its April 2015 refinancing, with any remaining proceeds to be used for general corporate purpose, which may include loans, distributions or other payments to Virgin Media and its direct or indirect parent companies.

Trinseo prices tight

Trinseo priced a downsized $700 million equivalent dual-currency seven-year senior notes deal (B3/B-).

It included $300 million of notes that priced at par to yield 6¾%, at the tight end of the 6¾% to 7% yield talk.

In addition Trinseo priced €375 million of the notes at par to yield 6 3/8%, at the tight end of yield talk in the 6½% area.

The overall size of the debt refinancing deal was decreased from $750 million equivalent, with $50 million of proceeds shifted to the concurrent term loan.

Deutsche Bank, Citigroup, Barclays, Goldman Sachs, HSBC, Mizuho, Scotia and SMBC Nikko were the joint bookrunners.

Horizon upsizes, sets talk

Horizon Pharma upsized its offering of eight-year senior notes (B2/B-) to $475 million from $300 million.

Official price talk comes in the 6¾% area.

The order book was scheduled to close late Thursday, and the notes are set to price and allocate on Friday.

Citigroup Global Markets Inc. and Jefferies LLC are the joint bookrunners.

Chemours starts Friday

Chemours plans to start a European roadshow on Friday for a $2.5 billion three-part offering of senior notes.

The deal includes $1,125,000,000 and €350 million of eight-year notes that come with three years of call protection and $1 billion of 10-year notes that come with five years of call protection.

A roadshow in the United States is scheduled to get underway on Wednesday.

The deal is set to price early in the week of May 4.

Credit Suisse, JPMorgan, BofA Merrill Lynch, Barclays, Citigroup and Goldman Sachs are the joint bookrunners.

Proceeds from the notes will be used to partially fund a dividend to DuPont and for general corporate purposes.

Ineos prices tight

In addition to the above-mentioned euro-denominated tranche from Trinseo, the euro-denominated primary market saw Ineos Finance plc price a €770 million issue of eight-year senior secured notes (Ba3/BB-) at par to yield 4%.

The yield printed at the tight end of the 4% to 4¼% yield talk.

JPMorgan and Barclays were the global coordinators for the debt refinancing deal.

Progroup secured deal

Germany-based containerboard producer Progroup AG priced a €400 million two part offering of seven-year senior secured notes (B1/B+).

The deal included €250 million of fixed-rate notes that priced at par to yield 5 1/8%, at the tight end of yield talk in the 5¼% area.

In addition Progroup priced €150 million of floating-rate notes at par to yield Euribor plus 450 bps, at the tight end of the 450 to 475 bps spread talk.

Global coordinator Deutsche Bank will bill and deliver. HSBC and Commerzbank were joint bookrunners.

The market was also expecting terms on a related €125 million of 7.5-year PIK toggle notes (Caa1/B-) in the market via JH-Holding Finance SA, the parent of Progroup.

Proceeds will be used to refinance debt.

Those notes had been talked to yield 8¼% to 8½% on Thursday; however, no final terms were available at press time, a market source said.

Day’s deals head higher

In the secondary market, a trader said that the new Trinseo Materials Operating SCA/Trinseo Materials Finance Inc. dollar-denominated 6¾% notes due 2022 had moved up to a 101½-to-101¾ bid range.

That was up from the par level at which the Berwyn. Pa.-based manufacturer of industrial materials such as plastics, latex and rubber priced the offering, part of a larger two-part deal that also included a euro-denominated tranche.

A trader meantime quoted Virgin Media’s add-on to its 5¼% senior secured notes due 2026 in a par-to-101 context “generically” but said he had not seen any actual dealings in the bonds, which had priced at 101.

San Diego-based medical devices maker DJO Global’s downsized $1.02 billion of 8 1/8% senior secured notes due 2021 priced too late in the session for any kind of a real aftermarket, one of the traders said.

New FMG bonds better

Going back a day, a trader said that “a lot of FMG Resources’ bonds were trading,” particularly its new 9¾% senior secured notes due 2022.

“They were pretty heavily traded,” he said, pegging the issue at around the 102½ bid level.

The company, a subsidiary of Australian iron ore miner Fortescue Metals Group, priced an upsized $2.3 billion of those notes on Wednesday at 97.608 to yield 10¼%. The quick-to-market offering had been enlarged from an originally planned $1.5 billion.

The bonds had priced too late in Wednesday’s session for any kind of an aftermarket, the trader said.

A second trader saw two-sided markets in the deal at 102 3/8 bid, 102½ offered.

The first trader, meantime, saw the company’s established 8¼% notes due 2019 “kind of all over the place,” gyrating around between lows around 84-85 and highs around 88.

He finally saw the bonds coming to rest in an 86-to-87 bid neighborhood, with the last trade at 86, with “a fair amount” having traded.

That was up from the 85 area where the bonds had ended on Wednesday, when they rose 1½ points in busy dealings, pushed higher by news of the new deal, since the proceeds will be used to address its 2017, 2018 and 2019 note maturities, as well as a sharp rise in iron ore prices.

Seven Generations holds gains

The new Seven Generations 6¾% notes due 2023 were being quoted on Thursday trading between 101¼ and 101½ bid.

A trader said that was about even with where the bonds had gone home on Wednesday after the Calgary, Alta.-based oil and natural gas exploration and production company had priced its $425 million drive-by issue, upsized from an originally planned $400 million.

Peabody pops on asset sale talk

Away from the new deals, a trader said that Peabody Energy’s bonds were higher across the board, quoting the St. Louis-based coal producer’s 6% notes due 2018 up 2 points versus Wednesday at 80½ bid, 81 offered.

He saw its 6¼% notes due 2021 a point better at 63½ bid.

Another trader who saw the 6% notes at 80 said that volume was brisk, with over $20 million of the notes having changed hands. He called them up 2¼ points on the day.

He said that the 6¼% notes gained about 7/8 point to end at 63¼ bid, on volume of over $16 million.

The first trader said that the bonds rose after the company reported first-quarter earnings and put out guidance.

With coal prices remaining weak, the first-quarter results were nothing to write home about. Peabody lost $176.6 million, or 65 cents per share, the red ink widening from $48.5 million, or 18 cents per share, a year earlier.

On an adjusted basis, the loss per share was 62 cents, more than triple the 19 cents-per-share deficit posted a year ago.

But the trader noted that “they made some comments about possible asset sales, and that gave the bonds a bid.”

On the company’s conference call with analysts following release of the quarterly data, its chief financial officer and incoming chief executive officer did indeed note that Peabody expects to generate some cash via asset sales and also raised the possibility that it was looking at possibly splitting off some assets into a master limited partnership format, although they said this was still just in the talking stages.

And they noted strong liquidity of more than $2.2 billion at the end of the quarter following a big junk bond deal that Peabody had dome last month, which also pushed out its closest significant debt maturities to more than three years from now. (See related story elsewhere in this issue.)

Indicators stay mixed

Statistical indicators of junk market performance were mixed for a second consecutive session on Thursday; they had turned mixed on Wednesday after having been higher on Monday and Tuesday.

The KDP High Yield Daily index lost 4 bps to end Thursday at 71.79, its second straight fall. On Wednesday, it had finished off by 2 bps. The index had gained 2 bps on Tuesday after having been unchanged on Monday.

Its yield was unchanged at 5.14% after having risen by 1 bp on Wednesday, its third widening in the previous four sessions. On Tuesday, it had narrowed by 2 bps.

The Markit Series 24 CDX North American High Yield index eased by 1/32 point on Thursday, closing at 107 7/16 bid, 107 15/32 offered, its first loss after three straight gains. On Wednesday, it had edged up by 1/32 point.

The Merrill Lynch U.S. High Yield Master II index advanced by 0.010% on Thursday, its third such improvement in the previous four sessions. On Wednesday, it had retreated by 0.023%, its first loss after two straight gains, including Tuesday’s 0.059% advance.

Thursday’s rise lifted the index’s year-to-date return to 3.804% from Wednesday’s 3.793%, although it remained below Tuesday’s 3.817%, its peak level for the year so far.

Junk funds lose ground

Another numerical road marker – high-yield mutual funds and ETFs, considered a reliable barometer of overall junk market liquidity trends – turned downward for the first time in five weeks, market sources said.

Some $162.2 million more left those weekly-reporting-only funds than came into them during the week ended Wednesday.

That setback followed four consecutive weekly gains totaling $3.31 billion of net inflows.

The downturn slightly dented the funds’ still-robust year-to-date net inflow position, which came off its 2015 high seen last week but remained above $11 billion since the start of 2015. (See related story elsewhere in this issue.)

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.