Giant Altice, revived Presidio price to close out $8 billion week; new Altice bonds move up

By Paul Deckelman

New York, Jan. 30 – The high-yield primary market closed out the week in style on Friday, as one of the largest junk issues in recent memory – European cable and telecom operator Altice International’s $5 billion-plus multi-tranche dollar- and euro-denominated issue priced. Execution was crisp, as all five tranches priced inside of the price talk that had circulated on Thursday.

Traders said that the new Altice bonds firmed smartly right out of the gate as they began trading around, although they had come down a little from their peak levels by the time things wrapped up.

Altice was a regularly scheduled forward calendar transaction that had been talked about and eagerly awaited all week.

However, the day’s other dollar-denominated pricing came as something of a surprise, as Presidio Holdings Inc. – heard by market participants earlier in the week to have shelved the $400 million eight-year offering it had been shopping around due to a lack of investor interest – revived that deal, and restructured it into a two-tranche affair, with some of the original borrowing size now in the form of subordinated notes.

With Altice now having gotten done, syndicate sources saw another new deal almost as big on the horizon, as Italy-based gaming technology company Gtech SpA unveiled plans for a $5 billion equivalent multi-tranche euro- and dollar-denominated offering. It will roadshow the deal this coming week and price the bonds sometime in the week of Feb. 9.

Among recently priced new deals, Thursday’s issues from Micron Technology Inc. and Calpine Corp. shot to the top of the high yield Most Actives list, displacing H.J. Heinz Co.’s deal that had priced on Monday of this week, although Heinz still saw some fairly brisk trading volume.

Statistical measures of market performance were mixed on the day, after having been higher across the board on Thursday. For the week, those measures were also mixed, after having been higher last week.

Issuance total swells

The Altice bond behemoth, as well as big deals earlier in the week from Heinz, Calpine and Micron Technology helped swell previously sedate new-deal issuance.

By the close, some $8 billion of new U.S. dollar-denominated, fully junk-rated paper had priced in eight tranches, according to data compiled by Prospect News – up from the $5.45 billion in 11 tranches that had priced during the previous week, ended Jan. 23.

The week’s new-issuance lifted year-to-date activity totals to $20.23 billion in 29 tranches – just slightly behind the $21.301 billion in 37 tranches that had priced by this point on the calendar in 2014. Last week, there had been fully a 32% gap between last year’s red-hot new-issuance pace and this year’s more moderate level.

Altice does alright

Altice was easily the dominant name of the day in Junkbondland, as the Luxembourg-based telecommunications and cable company brought its long-awaited $4.57 billion equivalent five-tranche dollar- and euro-denominated bond deal to market, consisting of three dollar-denominated tranches and two euro-denominated pieces, issued by three separate subsidiaries.

Altice Financing SA priced $2.06 billion of eight-year senior secured notes (B1/BB-) at par to yield 6 5/8%, inside of pre-deal market price talk set Thursday envisioning a yield in the 6¾% area; that talk had tightened from earlier whispers pegging the bonds in the low-to-mid 7% neighborhood. The spread over comparable Treasuries was 506 basis points.

Altice Financing also priced €500 million of eight-year senior secured notes at par to yield 5¼%, inside of price talk in the 5 3/8% area; whispers had put that yield in by 125 bps from the dollar tranche, or around the low-6% space. The notes priced at a spread of 509 bps over the comparable German Bund.

Both of those tranches will carry three years of call protection.

Altice Finco SA priced $385 million of 10-year senior unsecured notes (B3/B-) at par to yield 7 5/8%, inside of price talk in the 7¾% area, versus earlier whispers of a yield in the mid-to-high 8% range. The spread over Treasuries was 596 bps. The notes carry five years of call protection.

Altice SA priced $1.48 billion – downsized from the originally announced $1.775 billion – of 10-year senior unsecured notes (B3/B) at par to yield 7 5/8%, inside of talk in the 7¾% area. That price talk had tightened from earlier whispers in the market suggesting that the dollar tranche’s yield would likely be somewhere in the mid-8% region. It priced at a spread of 596 bps over Treasuries.

Altice SA also priced €750 million of 10-year senior unsecured notes – upsized from €500 million originally – at par to yield 6¼%, inside of talk set in the 6 3/8% area, and well inside of initial whispers that the euro piece would price 125 bps inside the dollar tranche, or somewhere in the low-7% vicinity. The tranche priced at 592 bps over the comparable Bund.

Both of those 10-year tranches, like the Altice Finco tranche, carry five years of call protection.

The proceeds from the bond deal and concurrent bank financing will be used to back the acquisition of Portugal Telecom assets by Altice from Brazil’s Grupo OI.

When the new Altice bonds hit the aftermarket following their morning pricing, a trader saw both tranches of the company’s unsecured dollar notes that had priced via Altice Finco SA and Altice SA having moved up to 101½ bid, 102 offered from their respective par pricing levels.

He also saw the 6 5/8% senior secured notes from Altice Financing SA having done even better, moving up to 102 5/8 bid, 103 offered.

“Altice traded up right out of the chute,” another trader said, pegging the bonds initially in a 102 to 103 context, “and then they settled back in” at somewhat lower levels.

He quoted the unsecured notes trading between 101¼ and 101½ bid, while the secured paper moved between 102¼ and 102¾ bid.

He said that “there was big volume in them.”

He said that as soon as the deal was freed for secondary trading “guys were trying to buy it, right off the bat.”

He said at his shop, people were asking around for the notes, but “we weren’t much involved” due to the crush of investors looking to get in on the big, very liquid deal, as well as the fact that “the underwriters were in tight control of the trading.”

Presidio comes back

Apart from the excitement generated by Altice, both for its sheer size as well as the implications of such a big deal pricing so tightly relative to talk and performing well in the aftermarket, there was a surprise development when Presidio Holdings – which earlier this week was heard to have postponed its planned eight-year senior note offering – unexpectedly returned to the primary market on Friday, pricing a restructured version of its original deal, syndicate sources said.

The originally planned $400 million senior note offering (Caa1/CCC+) came back as a deal split into two tranches – $250 million of senior notes and $150 million of senior subordinated notes, both carrying a 10¼% coupon and both pricing at substantial discounts to par.

Via special-purpose financing vehicle Aegis Merger Sub, Inc., Presidio priced $250 million of the 10¼% senior notes due 2023 at 91.25 to yield 11.973%.

It also priced $150 million of 10¼% senior subordinated notes due 2023 at 80.00, yielding 14.54%, without giving effect to any applicable high yield discount obligation (AHYDO) catchup payments.

Presidio, a New York-based IT infrastructure solutions provider, is being acquired by Apollo Global Management LLC for $1.3 billion, with the proceeds from the bond deal as well as a $600 million term loan slated to help fund that transaction.

The initial bond deal was shopped around to investors earlier in January and was talked at a discount to yield 10¾% to 11%.

It had been expected to price last Friday, Jan. 23, but never showed up; the following Monday, market sources heard that the issue had been postponed until a later date due to insufficient demand at price talk.

There had been no prior specific indication that the deal would be brought back and priced on Friday.

Betting on Gtech

The forward calendar built as Italian gaming technology company Gtech SpA was heard by high yield syndicate sources to be ready to begin a roadshow this coming week for a $5 billion equivalent multi-tranche offering of dollar- and euro-denominated senior secured notes.

The deal will be marketed in Europe and the United States, with pricing expected during the week of Feb. 9, the sources said Friday.

The Rome-based provider of technology to the gaming industry will sell a total of $3.5 billion and €1.25 billion of the notes, split into six tranches.

It plans to sell dollar-denominated notes in three-, five-, seven- and 10-year maturities, and euro-denominated notes in five- and eight-year maturities. Tranche sizes are to be determined, but the minimum tranche sizes will be $500 million and €500 million. All of the notes will be non-callable for life.

Proceeds will be used to finance the company’s acquisition of slot-machine maker International Game Technology for a total of $6.4 billion, including $4.7 billion in cash and $1.7 billion in assumed debt. A part of the proceeds will be used to repay certain existing debt of Gtech and International Game.

Calpine, Micron bonds trade

Among recently priced issues, traders said that there had been considerable activity during the day in the new bonds of Micron Technology and Calpine, both of which had priced opportunistically timed drive-by offerings in Thursday’s junk market.

“Micron and Calpine were clearly the volume leaders,” one said, noting that the two companies finally displaced Monday’s H.J. Heinz deal from the role of volume leader it had played for three consecutive sessions though Thursday.

A market source said that Micron Technology’s new 5¼% notes due 2023 had knocked down at least $74 million in trades, seeing the bonds at 100 1/8 bid, which he called down 5/8 points from the peak level the notes had seen after the Boise, Idaho-based semiconductor company had priced its $1 billion offering – doubled in size from an originally announced $500 million.

He saw Houston-based power generation company Calpine’s new 5½% notes due 2024 down 1/8 point at 100¼ bid on volume of over $58 million. Calpine had priced $650 million of the notes at par on Thursday, after upsizing the deal from $500 million originally.

The heavy trading in the two new issues displaced Heinz’s 4 3/8% notes due 2025 their position as busiest trader on Tuesday, Wednesday and Thursday, on volumes of $102 million, $80 million and $64 million, respectively.

Heinz was still among the Most Actives on Thursday, even if it was no longer in the top slot; over $18 million traded, with the bonds going home at 100¼ bid, down 1/8 point.

Indicators turn mixed

A trader said the market overall did relatively well, considering that stocks were selling off.

Meanwhile, statistical indicators of junk performance turned mixed after having been higher across the board Thursday. It was the third mixed session in the last four days.

The indicators were also mixed compared with where they had been the previous Friday, after having firmed on the week last week.

The KDP High Yield Daily Index saw its first loss after two straight gains, dipping by 3 basis points to an even 71.00, after having gained 3 bps on Thursday.

Its yield on Friday rose 1 bp to 5.49% the first widening after two declines, including Thursday, when

It had come in by two bps.

But those levels compared favorably to the previous week’s 70.87 index reading and 5.55% yield.

The Markit Series 23 CDX North American High Yield Index lost 9/32 point on Friday, after having gained 3/16 point on Thursday. It was the index’s third loss in four sessions, and left it at 105 7/16 bid, 105 9/16 offered.

The index was also down from the 106 1/16 bid, 106 3/16 offered levels seen the previous Friday.

But the Merrill Lynch U.S. High Yield Master II Index notched its 10th consecutive upside session on Friday, rising by 0.017%, on top of Thursday’s 0.009% advance.

The latest gain lifted its year-to-date return to 0.688%, its sixth consecutive new high point for the year, versus the old peak level of 0.671% on Thursday.

On the week, the index rose 0.343%, its third weekly gain so far this year against one weekly loss.

Last week, the index had risen by 0.408%, lifting its year-to-date return as of that point to 0.344%.

© 2015 Prospect News.
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