Cequel mega add-on leads $2.5 billion day; new Access, Charter busy; funds add $259 million

By Paul Deckelman and Paul A. Harris

New York, Dec. 13- High-yield primary activity continued at a respectable pace on Thursday, with over $2.5 billion of fully junk-rated, U.S. dollar-denominated paper having priced by the day's end - although that was a step backward from the nearly $5 billion seen the session before, according to syndicate sources.

Cequel Communications LLC led the way with an upsized, quick-to-market $1 billion add-on to its existing 2020 notes. The new deal was heard to have moved up a little in the aftermarket.

Energy operator Magnum Hunter Resources Corp. also priced an add-on to its existing 2020 bonds, tacking on a $150 million drive-by tranche.

Also pricing quickly-shopped deals were financial information services provider Interactive Data Corp., which priced $350 million of five-year PIK toggle notes. Belgian chemical company Taminco Acquisition Corp. did a similar $250 million offering.

The day also saw pricings from Canada's Inmet Mining Corp., which did $500 million of 8.5-year bonds and from European logistics and materials handling company Dematic SA, which upsized its eight-year deal to $265 million.

Traders said there was fairly brisk demand for the different new issues, which were mostly higher in the aftermarket.

They also saw heavy trading in Wednesday's two big deals - Access Midstream Partners LP's $1.4 billion 10.5-year behemoth and Charter Communications Corp.'s $1 billion tranche of new 10-year notes.

New issues once again dominated secondary trading, while statistical performance indicators were mixed.

And flows of cash into and out of high-yield mutual funds and exchange-traded funds - considered a reliable barometer of overall junk market liquidity trends - saw their third consecutive weekly inflow by investors.

AMG sees $259 million inflow

As Thursday's activity was winding down, market participants familiar with the statistics on money flows into and out the junk-rated mutual funds and exchange traded funds generated by AMG Data Services of Arcada, Calif., a unit of ThomsonReuters' Lipper analytics unit, said that in the week ended Wednesday, $259 million more came into those funds than left them.

It was the third consecutive inflow seen by Lipper, although it was considerably smaller than the $653 million cash injection the service had reported last week for the period ended Dec. 5. There was also an inflow of $264 million reported the week before that, ended Nov. 28.

Over that three-week stretch, inflows have totaled $1.176 billion, according to an analysis of the numbers by Prospect News.

Those inflows followed a pair of outflows in the weeks ended Nov. 21 and Nov. 14: $1.1 billion and $1.3 billion, respectively.

That was in line with a recent pattern of choppiness seen since the end of September, in which a week or two of inflows have been followed by a week or two of outflows. Before that, however, there had been a dazzling 15-week winning streak, and inflows have dominated for most of the year.

On a year-to-date basis, inflows have now been seen in 39 weeks so far this year, with outflows in 11 weeks, and the cumulative net inflow stands at an estimated $29 billion, the peak level for the year, according to the analysis.

EPFR: $1.68 billion inflow

Another fund-tracking service - Cambridge, Mass-based EPFR Global - meantime said that $1.68 billion more came into the funds it follows than left them in the week ended Wednesday.

It was the third large weekly inflow reported by EPFR, which had seen inflows of $1.73 billion last week and $1.14 billion the week before that.

Those three inflows, totaling $4.5 billion, followed a pair of outflows over the two weeks before that totaling $2.407 billion - $1.45 billion in the week ended Nov. 21 and $957 million in the week ended Nov. 14.

The patterns of inflows and outflows seen by EPFR are similar to those seen by Lipper, although the numbers for individual weeks and cumulative totals are quite different due to the differing methodologies the two services use in compiling their numbers - EPFR, for instance, includes the results of some non-U.S.-domiciled funds in its tally, while Lipper focuses solely on the domestic funds. However, their respective numbers generally do point in the same direction.

On a year-to-date basis, EPFR's cumulative net inflows have now totaled over $73 billion - the peak level for the year according to a Prospect News analysis of the figures. The agency has seen inflows in 41 weeks so far this year, against nine outflows, the analysis indicated.

Cumulative fund-flow estimates, whether from EPFR or from AMG/Lipper, may be revised upward or downward or be rounded off and could include unannounced revisions and adjustments to figures from prior weeks.

The continued flow of fresh cash into junk - and the mutual funds and ETFs represent but a small, though very observable and quantifiable percentage of the total amount of money coming in - has been seen by analysts as a key element behind the high-yield secondary market's strong performance this year versus other fixed-income asset classes, and its active new-deal pace, which surged past 2011's year-to-date totals some weeks ago.

Cequel massively upsizes

The pace of the primary market remained intense on Thursday, as six issuers, each bringing a single tranche of notes, raised $2.54 billion.

Cequel Communications Holdings I, LLC and Cequel Capital Corp. priced a massively upsized $1 billion add-on to their 6 3/8% senior notes due Sept. 15, 2020 (B3/B-) at 103.00 to yield 5.751%.

The deal was upsized from $750 million.

The reoffer price came in the middle of the 102.5 to 103.5 price talk. The yield printed in line with yield talk set in the 5¾% area.

J.P. Morgan, Bank of America Merrill Lynch, Citigroup, Credit Suisse and RBC were the joint bookrunners for the quick-to-market deal.

Proceeds, including those resulting from the $250 million upsizing of the deal, will be used to fund a tender for $750 million of the company's 8 5/8% senior notes due 2017, to make a capital contribution to Suddenlink that will be used to fully repay its revolver, to provide working capital and for general corporate purposes.

Inmet at the tight end

Inmet Mining Corp. priced a $500 million issue of 8.5-year senior notes (B1/B+/) at par to yield 7½%, at the tight end of yield talk set in the 7 5/8% area.

Global coordinator and joint bookrunner Credit Suisse will bill and deliver. J.P. Morgan was also a global coordinator and joint bookrunner.

The Toronto-based copper and zinc mining company plans to use the proceeds to fund capital expenditures in connection with its Cobre Panama project and for general corporate purposes.

Igloo brings PIK holdco deal

Interactive Data Corp., issuing through its holding company, Igloo Holdings Corp., priced a $350 million issue of five-year PIK toggle notes at 99 to yield 8½%.

The yield printed at the wide end of the 8¼% to 8½% yield talk. The reoffer price came on top of price talk.

Goldman Sachs, Barclays, Credit Suisse and UBS were the joint bookrunners for the PIK holdco dividend deal.

Dematic at the tight end

Dematic priced an upsized $265 million issue of eight-year senior notes (Caa1/CCC+) at par to yield 7¾%, at the tight end of the 7¾% to 8% yield talk.

The amount was increased from $250 million.

J.P. Morgan, Credit Suisse and Barclays were the bookrunners for the LBO deal.

Taminco sells PIK toggle deal

In a second PIK toggle deal on Thursday, Taminco priced a $250 million issue of five-year senior PIK toggle notes at 99 to yield 9.381%.

The yield printed near the tight end of yield talk set in the 9½% area. The reoffer price came on top of price talk.

Credit Suisse and Citigroup were the joint bookrunners for the dividend deal.

Magnum Hunter taps 9¾% notes

Magnum Hunter priced a $150 million add-on to its 9¾% senior notes due May 15, 2020 (Caa1/CCC) at 102 to yield 9.268%.

The reoffer price came at the rich end of the 101.5 to 102 price talk.

Citigroup and BMO were the joint physical bookrunners for the quick-to-market deal.

Deutsche Bank, Goldman Sachs, Capital One and RBC were bookrunners.

The Houston-based independent exploration and production company plans to use the proceeds to repay revolver debt.

Talking the deals

Friday also figures to be a big day in the primary market.

Rain CII Carbon LLC and Rain CII Carbon Corp. set price talk for their $675 million equivalent two-part offering of eight-year senior secured second-lien notes, which are expected to price Friday.

A $400 million tranche is talked to price with a yield in the 8½% area.

A €210 million tranche is talked to price with a yield 12.5 basis points to 25 bps behind the dollar-denominated tranche.

Citigroup is the left bookrunner and Goldman Sachs is the joint bookrunner.

Compass Investors, Inc., the parent of USI Holdings Corp., talked its $630 million offering of eight-year notes with an all in yield in the 7¾% area.

The deal is set to price on Friday.

Morgan Stanley, Merrill Lynch, Citigroup, Goldman Sachs, RBC and UBS are the joint bookrunners.

And Ancestry.com talked its $300 million offering of eight-year senior notes (Caa1/CCC+) to yield 10½% to 10¾%.

The books close at noon ET on Friday.

Morgan Stanley, Barclays, Credit Suisse, Deutsche Bank and RBC are the joint bookrunners.

Day's deals up a little

When the issues which priced on Thursday were freed for secondary market dealings, a trader said that at his shop, they traded some of Inmet Mining's 7½% notes in a context of 100 7/8 to 101¼ bid.

A second trader was also involved in Inmet, pegging the bonds between 100½ and 1011/2.

At yet another desk, Inmet was seen having gotten as good as 101 bid, 101½ offered.

The first trader saw the day's big deal - Cequel's upsized 6 3/8% notes - at 103½ bid, 103¾ offered, versus their 103 pricing level earlier in the day.

Another had them at 103 3/8 bid, 103 5/8 offered.

A trader said that he "did not see a whole bunch of re-trading" in any of the new deals. "A deal would come, and maybe the underwriter got involved in it for a little bit, but it was like 'price it - and then move on'.

"There was nothing exciting."

He said that as big as it was, the Cequel mega-deal "just got put away."

He added that "most of these deals are just getting put away" within a relatively short time after pricing.

Among the other deals that came during the session, he said that Taminco Acquisition's 9 1/8%/9 7/8% PIK notes "didn't do so well." He said that after the chemical manufacturer's deal priced at 99, "they traded north of par, but then went back down again to end right around their issue price."

However, he said, "everything else did OK."

Another trader quoted Taminco going out at 99 5/8 bid, par offered.

And he saw the Interactive Data/Igloo Holdings 8¼%/9% PIK notes ending at 101 bid, 101½ offered, after pricing at 99.

Access, Charter volumes soar

Among the deals which had priced on Wednesday, a trader described most of them as "up smartly - if they traded."

He mentioned that Charter Communications' 5 1/8% notes due 2023 were trading around the 100½ bid level, up from par where the St. Louis-based cable operator's $1 billion drive-by transaction had priced after having been solidly upsized from an originally announced $750 million.

Another trader said that Charter - a very well-known name to junk players - "usually issues in size." He saw the bonds last "inching up" to a 100¼ to 100 3/8 context.

A market source at another desk saw those bonds - which were officially issued by Charter's CCO Holdings LLC and CCO Holdings Capital Corp. subsidiaries - as having moved way up on the high-yield most-actives list, with over $68 million having changed hands by mid-afternoon and over $81 million having traded by the close. He saw the bonds ending at 100¼ bid, down 1/16 point on the day from Wednesday's initial aftermarket dealings.

Other Charter bonds were also busy, with the company's 6½% notes due 2021 trading at 107¼ bid, on volume of over $10 million, and its 7% notes due 2019 at 108 bid, down ¼ on the day, on over $8 million of volume.

Charter's new deal - as busy as it was - did not clock in as the busiest in Junkbondland on Thursday. That singular honor went to the new Access Midstream Partners 4 7/8% notes due 2023, $1.4 billion of which priced at par in a quick-to-market transaction on Wednesday.

A trader saw the new bonds having firmed solidly, moving up to 102½ bid. Some $94 million of the Oklahoma City-based midstream natural gas company's deal was seen having traded by the close, ending up 1/8 point from Wednesday's aftermarket at 102 3/8 bid.

Another recent issue that was among the day's busier names was AMC Networks Inc.'s 4¾% notes due 2022. A market source saw over $9 million of the bonds traded at 101 7/8 bid - well up from the par level at which the New York-based cable network operator's $600 million issue had priced in a quick-to-market deal on Monday.

Indicators turn mixed

Traders said that there was little real secondary market trading other than in the new-deal names and in crossover credits, as has been the pattern over the previous several sessions. Away from that, statistical junk market performance indicators turned mixed after having been flat to higher on Wednesday and higher across the board for the six sessions before that.

The Markit Series 19 CDX North American High Yield index saw its first loss in eight sessions on Thursday, dropping 3/8 point to end just below 101; on Wednesday, it had been unchanged, and it had been up for six sessions before that.

However, the KDP High Yield Daily Index notched its 18th consecutive gain on Wednesday, although just barely, inching up by 1 basis point to end at 75.30, after having gained 11 bps on Wednesday. Its yield came in by 1 bp to end at 5.72% after having been unchanged on Wednesday, which broke a string of 17 straight sessions during which it had come in each day.

The widely followed Merrill Lynch High Yield Master II index meantime was the only measure not either lower or barely higher; it rose by 0.042% on Thursday - its 19th consecutive improvement - on top of the 0.138% rise reported on Wednesday.

That lifted its year-to-date cumulative return to 15.353% - its 10th consecutive new peak level for 2012, eclipsing the old mark of 15.305%, which had been set on Wednesday.

© 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.