Dean Foods, Nielsen drive-by price to cap nearly $6.5 billion week; new bonds trade busily

By Paul A. Harris and Paul Deckelman

New York, Feb. 20 – The high-yield primary market closed out a holiday-shortened week on Friday with a trio of pricings. Most of those bonds proved to be actively when they moved into the aftermarket, as were some of the other new issues that had priced earlier in the week.

Dairy products supplier Dean Foods Co. served up $700 million of eight-year notes in a regularly scheduled offering off the forward calendar.

There was also a pair of quick-to-market add-ons to existing bonds.

TV and radio ratings and consumer information company Nielsen Holdings NV priced an upsized $750 million add-on to its existing 2022 notes via a pair of financing subsidiaries.

American Tire Distributors, Inc. did a $50 million addition to the big issue of seven-year subordinated notes that the supplier of tires to the North American replacement market sold earlier this month.

The day’s $1.51 billion of new paper brought the week’s total of new dollar-denominated, fully junk-rated paper to $6.46 billion in eight tranches, according to data compiled by Prospect News – down from the $10.17 billion that got done in 18 tranches last week. This week had one less trading session, due to this past Monday’s Presidents Day holiday.

This week’s pricings, in turn, raised year-to-date junk bond issuance to $44.26 billion in 70 tranches – running nearly 27.2% ahead of the $34.81 billion of new paper that had priced in 67 tranches by this time on the calendar last year, according to the data.

Traders saw brisk aftermarket dealings in the Nielsen and Dean Foods issues, with both new deals firming modestly from their respective issue prices.

They also saw very heavy trading in Thursday’s issue of new bonds from wireless provider Sprint Corp. and respectably active trading in Thursday’s other new deal, from broadcasting and billboard company iHeart Communications, Inc., as well as Wednesday’s offering from specialty retailer PetSmart, Inc. While the latter two issues were both seen well up from their respective pricing levels, Sprint’s new bonds were unchanged to only slightly better, the traders said.

They said dealings in the new bonds was the main feature of Friday’s secondary market.

Statistical indicators of junk market performance turned higher across the board on Friday after four consecutive mixed days before that.

And the indicators were up from where they had finished out the previous Friday for a third consecutive week, and for a fourth week out of the last five.

Nielsen upsizes add-on

The Friday primary market saw a trio of single-tranche issues cross the finish line, raising a combined total of $1.51 billion.

Two of the three deals came as drive-bys and one was upsized.

Of the two deals that priced on the back of widely circulated price talk, both executions appeared tight, with one upsizing and pricing at the rich end of price talk, while the other priced at the tight end of yield talk.

Nielsen Finance LLC and Nielsen Finance Co., wholly owned subsidiaries of Nielsen, priced an upsized $750 million add-on to their 5% senior notes due April 15, 2022 today at 100.75 to yield 4.832%.

The deal was increased from $650 million.

The reoffer price came at the rich end of price talk that had been set in the 100.5 area.

J.P. Morgan, Citigroup, Goldman Sachs and Morgan Stanley were the joint bookrunners for the quick-to-market deal.

Dean at the tight end

Coming at the conclusion of a roadshow, Dean Foods priced a $700 million issue of eight-year senior notes (B2/B+) at par to yield 6½%.

The yield printed at the tight end of the 6½% to 6¾% yield talk. That official talk, which came on top of early guidance, was announced earlier on Friday.

Morgan Stanley, BofA Merrill Lynch, J.P. Morgan, Credit Agricole and SunTrust were the joint bookrunners for the debt refinancing deal.

American Tire taps 10¼% notes

Also in Friday drive-by action, American Tire Distributors priced a $50 million add-on to its 10¼% senior subordinated notes due March 1, 2022 (Caa1/CCC+) at 103 to yield 9.484%.

BofA Merrill Lynch was the sole bookrunner.

Empty active calendar

The Feb. 23 week will get underway to an empty active forward calendar, sources say.

Earnings blackouts are one of the forces constraining new issue activity, sources say.

Deal tips were hard to come by on Friday.

However some market observers are expecting Riverbed Technology Inc. to show up in the week ahead with $625 million of senior notes (Caa1/CCC+) via Citigroup.

Riverbed’s $1.53 billion term loan, which is being led by Credit Suisse, launched at a bank meeting last week, with commitments due on Wednesday in the week ahead.

The debt is being used to help fund the LBO of the company.

Market technicals are presently robust and should pave the way for a substantially bigger calendar in the month ahead on the other side of the earnings blackout, sources say.

Dedicated high yield funds saw $1.64 billion of inflows for the week to Wednesday’s close, according to a report from Lipper-AMG.

For Thursday, the first day of a new reporting period, funds remained strongly positive, according to a market source, who added that high-yield ETFs saw $242 million of daily inflows for Thursday, while actively managed funds saw $155 million of daily inflows.

New issues actively traded

In the secondary market, traders said that the major focus of the day was dealings in new or recently priced issues.

A trader said that he saw “a multitude” of the new Dean Foods bonds were trading around a 100¼ to 100 3/8 bid context.

A second trader said that the Dallas-based company’s new bonds were one of the most actively traded credits on the day – “second or third on the list” – with over $77 million having moved around after those 6½% notes due 2023 had priced at par.

Yet another market source saw them going out at 100 3/8 bid.

Friday’s other sizable deal – the Nielsen Holdings 5% add-on notes due 2022 – was also fairly actively traded, although not quite to the same extent as Dean Foods, with around $25 million changing hands.

A trader said that the bonds had moved up to 101 3/8, after having priced at 100.75 earlier in the session.

A second said that the notes began trading shortly after their pricing “but seemed to have died out after 3:30, as people started to trade the Dean bonds.” He saw the New York-based TV and radio ratings and consumer information company’s new bonds going home at 101¼ bid, 101 3/8 offered.

Traders did not see any activity Friday in either the new add-on bonds of the American Tire Distributors or the original 10¼% senior subordinated notes due 2022 that the Huntersville, N.C. supplier of tires to the North American replacement market had priced on Feb. 10.

Sprint dominates actives list

By far the most actively traded bond of the session was Sprint Corp.’s new 7 5/8% notes due 2025, which came to market on Thursday.

A trader noted that the Overland Park, Kan.-based Number-Three U.S. wireless carrier’s issue had priced late in the day on Thursday, “so they were active early.” He did say, however, that activity trailed off later in the day – although not before more than $200 million of the notes had changed hands.

“They were active up till around 2:30 p.m. ET, and then they faded into the sunset,” going out at 100 3/8 bid, 100 5/8 offered.

A second trader pegged the bonds right around their par issue price, while a third put them in a par to 100½ bid context.

iHeart heads higher

That trader said that “most of the recent deals have been fairly active – and depending on the credit, some stall out and just trade around the deal price – while others move up.”

He called Sprint an example of the former – while the new iHeart Communications 10 5/8% senior secured priority guarantee notes due 2023 that priced on Thursday were an example of the latter.

Like Sprint, those bonds priced at par in a quick-to-market transaction late in the day and began trading on Friday on sizable volume.

But there the similarity ended.

A market source said that more than $85 million of those bonds changed hands after they were freed to trade and they moved up to 101½ bid.

A second trader said that the San Antonio, Texas-based radio broadcaster, digital media and outdoor advertising company’s new notes went home trading between 101¼ and 101½ bid.

PetSmart continues climb

For a second straight session, there was considerable trading in the new 7 1/8% notes due 2023 from Argos Merger Sub Inc. – which will be merged with and into PetSmart, Inc. as part of the leveraged buyout of the Phoenix-based pet food, supplies and accessories retailer. The new debt priced on Wednesday.

A market source said that over $58 million of the notes traded on Friday, although that was considerably less than the $161 million that had moved around on Thursday, the busiest bonds in the junk space that day.

Those notes had priced late Wednesday at par as a regularly scheduled forward calendar offering, after being heavily oversubscribed by investors wishing to get a piece of the deal. They then moved up solidly in initial aftermarket trading to around a 101½ to 102 context.

On Thursday they were a little off those highs but still well above their issue price.

On Friday the bonds climbed again, with a market source seeing them at 102 1/8 bid, up ½ point on the day.

Indicators turn better

Statistical indicators of junk market performance turned higher across the board on Friday after having been mixed over the previous four days.

They were also higher all around on the week versus where they had finished the previous Friday – the third consecutive weekly improvement and the fourth in the last five weeks.

The KDP High Yield Daily Index gained 3 basis points on Friday to end at 71.72, its second straight rise and the fifth in the last six sessions, including Thursday, when it had risen by 1 bp.

Its yield was unchanged at 5.23%, after having narrowed over the previous three sessions. On Thursday it had come in by 1 bp for a second straight session.

Those levels compared favorably to the 71.63 index reading and 5.28% yield seen at the close of last week, on Friday, Feb. 13.

The Markit Series 23 CDX North American High Yield Index was up by 21/32 point on Friday, in contrast to Thursday’s 7/32 loss, its third setback in four days. It ended at 107¼ bid, 107 5/16 offered.

That was up from the previous Friday’s level of 106 5/8 bid, 106 21/32 offered.

The Merrill Lynch U.S. High Yield Master II Index rose by 0.095% on Friday, its 25th straight gain in a winning run that goes back more than a month to Monday, Jan. 19. It was up by 0.014% on Thursday.

The latest improvement lifted its year-to-date return to 2.289%, its 21st straight new peak level for 2015. That was up from 2.192% on Thursday.

For the week, the index rose 0.376%, its fifth straight weekly gain. It had also risen by 0.244% last week to end at 1.906%.

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