Levi Strauss drives by to open week, new bonds busy, higher; European issuers step up

By Paul A. Harris and Paul Deckelman

New York, April 20 – The high-yield primary market saw one dollar-denominated deal price on Monday to open the new week – familiar junk issuer Levi Strauss & Co.’s quickly shopped and upsized $500 million of 10-year notes.

Traders said the iconic blue jeans manufacturer’s new issue seemed to be a good fit for investors, who took the bonds higher in heavy aftermarket trading.

They also noted considerable activity in some of the new deals that priced last week, including issues from Charter Communications, Inc., Air Medical Group Holdings, Inc., Communications Sales & Leasing Inc. Inc. and DaVita HealthCare Partners Inc.

Away from the deals that have actually priced, syndicate sources said that medical device maker DJO Global Inc. was getting ready to hit the road to market a $1,045,000,000 offering of six-year secured paper to potential investors.

San Diego-based DJO’s plans and the Levi deal were the only two nuggets of news heard coming out of the domestic high-yield market – but the European wing of Junkbondland saw busy activity on Monday, including a sizable euro-denominated pricing from German auto parts manufacturer ZF Friedrichshafen AG, price talk on a pending deal from German packaging company Kloeckner Pentaplast and roadshows for upcoming issues from German wind turbine company Senvion and German containerboard manufacturer Progroup AG, as well as Irish biopharmaceutical company Horizon Pharma Inc. – the latter a dollar-denominated transaction.

Statistical indicators of junk market performance were trending higher on Monday, after having turned mixed on Thursday and lower across the board on Friday.

Levi drive-by

The news volume was heavy in the new issue market on Monday.

Levi Strauss & Co. priced the session’s sole dollar-denominated deal, an upsized $500 million issue of 10-year senior notes (Ba2/BB/BB-) that came to market at par to yield 5%.

The yield printed at the tight end of talk for a yield in the 5 1/8% area. Early guidance had the deal coming in the low-to-mid 5% yield context.

BofA Merrill Lynch was the left bookrunner. Goldman Sachs and J.P. Morgan were the joint bookrunners.

The San Francisco-based apparel maker plans to use the proceeds in combination with a to-be-determined amount of cash on hand and/or a draw on its amended and restated revolver to purchase its 7 5/8% senior notes due 2020 and for general corporate purposes, which may include repayment of other debt.

DJO lines up roadshow

DJO Global Inc. plans to start a roadshow on Tuesday for a $1,045,000,000 offering of senior secured notes due June 15, 2021.

Credit Suisse is the lead left bookrunner for the debt refinancing deal set to price later this week.

Horizon Pharma starts

Horizon Pharma, Inc. began a roadshow on Monday for a $300 million offering of eight-year senior notes (expected ratings B2/B-).

Citigroup and Jefferies LLC are the joint bookrunners for the acquisition-financing deal that is expected to price on Friday.

Friedrichshafen prices, plans

Germany-based auto parts manufacturer ZF Friedrichshafen AG grabbed a hefty portion of the primary market spotlight on Monday.

The company priced €2.25 billion of non-callable senior notes (Ba2/BB) in two tranches.

The deal included €1.15 billion of 2¼% four-year notes that priced at 99.529 to yield 2 3/8%. The yield printed at the tight end of yield talk that had been set in the 2½% area.

The company also priced €1.1 billion of 2¾% eight-year notes at 99.118 to yield 2 7/8%. The yield printed at the tight end of the 3% area yield talk.

Barclays, BNP Paribas, Commerzbank and Deutsche Bank managed the sale.

Later in the day the company rolled out a dollar-denominated benchmark-sized deal.

A roadshow starts on Wednesday for those non-callable senior notes (expected ratings Ba2/BB).

The deal, which is expected to be sized at $3.5 billion, is coming in tranches of five-, seven- and 10-year notes, with tranche sizes to be determined.

Joint active bookrunner Citigroup will bill and deliver. BofA Merrill Lynch, HSBC Bank and J.P. Morgan are also joint active bookrunners.

Proceeds from all the dollar- and euro-denominated bonds are being used to help fund the merger with Livonia, Mich.-based supplier of automotive systems, modules and components, TRW Automotive Holdings Corp.

Senvion green deal

Senvion plans to start a roadshow on Tuesday for a €400 million offering of senior secured notes due 2020.

Joint physical bookrunners Deutsche Bank bill and deliver for the “green” offering. JP Morgan is also a joint physical bookrunner.

Proceeds will be used to help fund the acquisition of the Hamburg, Germany-based wind turbine company by Centerbridge Partners from Suzlon Energy Ltd.

Progroup three-part deal

Germany-based containerboard producer Progroup AG began a roadshow on Monday for a €400 million offering of seven-year senior secured notes.

The offer is coming in tranches of fixed-rate notes with three years of call protection and floating-rate notes with one year of call protection. Tranche sizes are to be determined

In addition, JH-Holding Finance SA, the parent company, is offering €125 million of 7.5-year PIK toggle notes which come with three years of call protection.

The roadshow wraps up on Thursday.

Global coordinator Deutsche Bank will bill and deliver. HSBC is a joint bookrunner. Commerzbank is a joint bookrunner for the Progroup notes only.

Proceeds will be used to refinance debt.

Kloeckner unveils price talk

German plastic packaging company Kloeckner Pentaplast talked a €300 million offering of five-year senior notes (expected ratings Caa1/CCC+) to yield in the 7¼% area.

The deal is set to price Tuesday.

Credit Suisse is the left lead. Barclays, Deutsche Bank and Jefferies are the joint bookrunners.

The Montabaur, Germany-based company plans to use the proceeds to fund tenders for Kleopatra Holdings 1’s €264.74 million of 10¼%/11% senior PIK notes due 2017 and the KP Germany Erste GmbH’s €255 million of 11 5/8% senior secured notes due 2017.

Levi moves up

In the secondary market, traders saw busy activity in the new Levi Strauss 5% notes due 2025.

After the deal priced, a trader initially quoted them around 100¼ bid.

A little later on, another trader said they had traded as high as a 101 to 101¼ bid context, before being left at 100¾ bid.

Yet another market source pegged the bonds up 1 full point from their par issue price at 101 bid on volume of over $50 million – tops on the junk Most Actives list.

Senior analyst and high yield research director Kim Noland of the Gimme Credit independent investment advisory service said in a research note on Monday that “we have been impressed by the company’s turnaround over the last two years and believe that a strict focus on profitability and cash flow generation will keep credit quality stable despite challenges facing the business that are likely to put pressure on sales growth.”

While Noland noted declining sales and said these could “mute operating results,” there should be no “significant decline in credit quality.”

She also pointed out that the new deal proceeds will be used to help fund a tender offer for existing higher-coupon bonds, producing nearly $15 million of annual interest-cost savings.

Air Medical loses altitude

Looking at the deals that priced on Friday, a trader said that Air Medical Group’s 6 3/8% notes due 2023 were trading around par – down from the 100½ to 101 bid context at which they had initially traded following the pricing at par of the Lewisville, Texas-based airborne ambulance company’s $370 million regularly scheduled forward calendar offering.

Another trader saw the bonds off by ¾ point on the session at 99½ bid, with over $19 million having changed hands.

And a third trader saw two-sided markets at 99½ bid, par offered, calling them down a full point.

A trader saw Friday’s other deal – Boston-based loan provider NewStar Financial Inc.’s 7¼% notes due 2020 around the 101¼ bid mark.

Another saw them at 101 3/8 bid, 101 7/8 offered, up 1/8 point on the day.

NewStar priced $300 million of the notes at par off the forward calendar and they moved up to around a 101 to 101½ bid context in initial aftermarket dealings.

Charter stays busy

Going back a little further, a trader said that Charter Communications’ several tranches of new paper “were fairly active today,” trading around the lower levels seen at the end of last week.

He saw its new 5 1/8% notes due 2023 as well as its 5 7/8% notes due 2027 both trading around 99 bid.

A second trader saw the bonds even lower, locating the 5 1/8s at 98 7/8 bid, 99 3/8 offered, while seeing the 5 7/8s and Charter’s new 5 3/8% notes due 2025 at 98 7/8 bid, 99 1/8 offered. He called the tranches down 3/8 point, down 1 3/8 points and down 3/8 point, respectively.

Yet another trader said the 5 1/8% notes were down 1/8 point at 99 1/8 bid, on volume of more than $20 million.

But he saw the company’s existing bonds better, including its 5¾% notes due 2024, up 1 point at 101¾ bid, with more than $15 million traded, while its 5¼% notes due 2022 were going out were going out about unchanged at 101 bid, with $12 million of turnover.

Stamford, Conn.-based cable, internet and phone service provider Charter priced $1.15 billion of the 5 1/8s and $750 million of the 5 3/8s, both at par, in an upsized quick-to-market transaction last Monday via its CCO Holdings, LLC subsidiary. It returned to the junk market two days later, on Wednesday, to price $800 million of the 5 7/8s at par via CCO Holdings and the latter’s CCO Holdings Capital Corp. subsidiary, after the drive-by issue was upsized.

A trader meantime called Communications Sales & Leasing’s two-part issue “fairly active,” seeing its 6% senior secured notes due in April 2023 at 101½ bid, while its 8¼% senior unsecured notes due in October 2023 were around 101¾ bid.

A second market source saw the 8¼s up 3/8 point at 101¾ bid, with more than $18 million traded.

The Little Rock, Ark.-based telecommunications industry real estate investment trust, which invests in fiber-optic and copper-wire networks and other telecom infrastructure, priced $400 million of the 6% notes and $1.11 billion of the 8¼% notes on Thursday, pricing the former at par and the latter at 97.055 to yield 8¾%. That regularly scheduled forward calendar offering was downsized from an originally announced $1.65 billion.

DaVita’s 5% notes due 2025 were ½ point better, at 101¼ bid, on volume of more than $15 million.

The Denver-based kidney dialysis provider priced $1.5 billion of the notes at par last Tuesday, after the quick-to-market deal was upsized from $1.25 billion.

Indicators show improvement

Statistical indicators of junk market performance were trending higher on Monday after having turned mixed on Thursday and lower across the board on Friday.

The KDP High Yield Daily Index was unchanged on Monday at 71.83. On Friday, it had lost 4 basis points – its first downturn after five straight gains, 12 gains in the previous 13 sessions and 17 gains in the prior 19 sessions.

Its yield edged upward by 1 bp for a second consecutive session Monday, closing at 5.14%. Those two widenings were the first after five straight sessions during which it had narrowed and nine such tightenings in the previous 10 sessions.

The Markit Series 24 CDX North American High Yield Index broke out of a two-session rut Monday, moving up by 3/16 point to end at 107 3/8 bid, 107 7/16 offered. On Friday, it had backtracked by 9/32 point – its second consecutive loss, fifth loss in the previous six sessions and six such losses in the prior eight sessions

The Merrill Lynch U.S. High Yield Master II Index rose by 0.106% on Monday, in contrast to Friday’s 0.092% loss – which had been the index’s first setback after two consecutive gains, 13 gains in the previous 14 sessions and 18 gains in the previous 20 sessions.

Monday’s improvement lifted its year-to-date return to 3.735%, up from 3.645% on Thursday, although it remains below Thursday’s 3.74% return, which was its second consecutive new peak level for the year so far.

© 2015 Prospect News.
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