Beazer brings add-on, Alliance One, Virgin Australia slate; Caesars moves on bankruptcy deal

By Paul Deckelman and Paul A. Harris

New York, Sept. 27 – The high yield primary market remained mostly quiet on Tuesday, although syndicate sources did report a pricing on one small deal – a quickly shopped $100 million add-on by Beazer Homes USA, Inc. to the 5.5-year issue that the builder had sold in Junkbondland less than three weeks ago.

Traders said those bonds subsequently resumed trading at the level where they had previously been – somewhat above the new deal’s issue price.

The syndicate sources meantime heard of two more prospective issues having hit the road for marketing to potential investors – tobacco-seller Alliance One International, Inc.’s $275 million of 4.5-year secured paper and Down Under airline operator Virgin Australia Holdings Ltd.’s U.S.-dollar-denominated five-year issue, the size of which is still to be determined.

Among recently priced new deals, Alcoa, Inc.’s two-part offering of eight and 10-year notes were once again among the busiest bonds on the day.

There was also a fair amount of activity in last week’s 10-year secured issue from Dutch cable and telecommunications operator Ziggo Holding BV

Away from the new or recently priced deals, Caesars Entertainment Corp.’s bonds were seen mostly better on the news that the giant gaming company and its “major creditor groups” had reached a deal on a restructuring agreement that would improve the recovery for second-lien noteholders of its bankrupt Caesars Entertainment Operating Co. unit.

Statistical market performance measures remained mixed on Tuesday, their third straight mixed session and their fourth in the last six trading days. They had turned mixed on Friday and stayed that way on Monday and Tuesday, after having previously been firmer across the board last Wednesday and again on Thursday.

Beazer prices rich

In a new issue market that is somewhat sidetracked by an earnings blackout, Beazer Homes USA, Inc. priced Tuesday's sole deal, a $100 million tack-on to its 8¾% senior notes due March 15, 2022 (existing ratings B3/B+/B-), which came at 104.25 to yield 7.608%.

The reoffer price came at the rich end of the 103.75 to 104.25 price talk. Initial guidance was 104.

Credit Suisse, Deutsche Bank and Goldman Sachs were joint bookrunners for the debt refinancing.

Alliance One first lien deal

Alliance One International, Inc. is shopping a $275 million offering of 4.5-year senior secured first lien notes.

The deal comes with early guidance in the 9% area and is expected to price in the Oct. 3 week.

Deutsche Bank has the books.

The Morrisville, N.C.-based leaf tobacco merchant plans to use a portion of the proceeds to off its revolver, with remaining proceeds to be used for general corporate purposes.

Virgin Media Australia roadshow

Virgin Australia Holdings Ltd. plans to start a roadshow on Wednesday for a dollar-denominated offering of non-callable five-year senior notes.

The size of the offering remains to be announced.

Initial guidance has the deal coming together with a yield of 8%.

UBS is the left lead bookrunner. Goldman Sachs is the joint bookrunner.

Proceeds will be used for general corporate purposes, and to fund capital needs and improve the diversity and tenor of the company's funding profile.

Sizable calendar

Tuesday's close left a sizable calendar of deals set to clear before the week, the month and the quarter conclude at Friday's close.

Official talk is pending. However there is guidance on some of the offerings, sources say.

Steak n Shake, Inc. is in the market with $400 million. Early guidance is 8¼% to 8½%.

inVentiv Health, Inc.'s $700 million has early guidance of 8% to 8¼%.

Vertiv $750 million early guidance is high 7% to 8%.

Mohegan Tribal Gaming $500 million early guidance is mid-to-high 7%.

Crescent Communities, LLC is marketing $400 million with low 9% early guidance.

Quality Care Properties Inc.'s $750 million offer is being guided in the mid 8% context.

Monday inflows

The dedicated high yield bond funds saw cash inflows on Monday, the most recent session for which data was available, a trader said.

High yield ETFs were strongly positive on the day with $391 million of inflows.

Actively managed funds saw $60 million of inflows on Monday.

Dedicated bank loan funds, meanwhile, saw $35 million of inflows on Monday.

Beazer firms after pricing

In the secondary market, a trader quoted Beazer Homes’ 8¾% notes due 2022 at 105 bid, “even though they priced below that,” with the add-on deal coming to market earlier in the session at 104.25.

He said that the 105 level was “about where” the Atlanta-based homebuilder’s existing 2022 bonds had been trading before the new issue was announced and priced.

Beazer sold $400 million of those notes earlier this month in a regularly scheduled forward calendar offering that priced at par on Sept., 8 after the issue was upsized from an originally announced $300 million.

The new notes will be immediately fungible with those earlier notes.

Proceeds from the add-on will be used to refinance the company’s remaining 9 1/8% senior notes due 2019.

Alcoa stays active

A trader said that the new Alcoa two-part megadeal that came to market last Thursday “traded on good volume” for a relatively quiet session such as Tuesday’s.

He saw its 6¾% notes due 2024 unchanged to perhaps up 1/8 point at 102 3/8 bid, while its 7% notes due 2026 were ½ point better on the day at 101 5/8 bid.

At another desk, a market source also saw the 7s at 101 5/8, on volume of more than $24 million.

He pegged the 6¾% paper unchanged at 102¼ bid, with over $17 million having changed hands.

The New York-based aluminum and aluminum products company priced $750 million of the 6¾% notes last Thursday at par in a regularly scheduled forward calendar deal, along with $500 million of the 7% notes, which also priced at par.

The two-part megadeal came to market via the company’s Alcoa Nederland Holding BV subsidiary after having been upsized to $1.25 billion from $1 billion originally, and restructured with the addition of the 10-year tranche to what was originally just a single-tranche deal.

Ziggo notes busy

Another recently priced issue seen in the secondary on Tuesday was Ziggo Holding’s 5½% senior secured notes due in January of 2027.

A trader said that more than $14 million of those notes traded and were unchanged at 99¼ bid, after having fallen by ¾ point in Monday’s action.

Netherlands-based telecom and cable operator Ziggo had priced $2 billion of those notes at par in a scheduled forward calendar deal on Sept. 16 via its Ziggo Secured Finance BV subsidiary, along with €775 million of 4¼% senior secured notes due in January 2027, which also priced at par.

The deal also included a $625 million tranches of 6% senior unsecured notes due January 2027, which priced at par via Ziggo Bond Finance BV.

Caesars inks deal

Away from the new-deal realm, major creditors of bankrupt Caesars Entertainment Operating have agreed to new terms of a restructuring agreement, the gaming company and its Las Vegas-based parent said Tuesday, and the unit’s bonds “got some relief” on the news, according to a trader.

He saw the 11¼% notes due 2017 rising almost 2 points to 104, while the 11% notes due 2021 added a deuce to close at 107 3/8.

The 9% notes due 2020 improved nearly 3 points to 104½.

However, the trader said the 10% notes due 2018 slipped a touch to 63. They were the most actively traded piece of the company’s capital structure, with over $21 million changing hands on Tuesday.

But at another desk, the 10% notes were called almost a point better at 63¼ bid.

A third market source pegged the 10% notes at “64-ish.”

Under the terms of the new plan, second-lien bondholders will receive 66 cents on the dollar, an increase of about 27 cents from previous proposals.

Unsecured creditors will also see their recoveries rise to 66 cents on the dollar.

First-lien bankers will get about 115 cents on the dollar, a slight reduction to the previous proposals. First-lien noteholders will receive about 109 cents on the dollar, unchanged from before.

The latter group will also get a fixed cash payment of $142 million in exchange for waiving their right to certain excess cash sweeps. That is a reduction of $79 million.

Equity sponsors Apollo Global Management and TPG Capital have also agreed to give up their 14% equity stake. In exchange, creditors agree to drop certain claims levied against them.

Charter paper active

Charter Communications Inc.’s 8 3/8% notes due 2033 – which the Stamford, Conn.-based cable, broadband and telecom operator inherited when it acquired larger rival Time Warner Cable Inc. earlier this year – was up nearly 1 full point on the day, at 136¾ bid, on volume of more than $30 million.

Charter’s legacy 4.908% notes due 2025 were slightly better at just under 110½ bid, with over $18 million traded.

The company’s chief financial officer told an investor conference on Tuesday that Charter is pleased with its current capital structure, despite the large addition of debt it took on earlier this year to fund the acquisition, and expects considerable organic deleveraging as a result of its enhanced EBITDA and cash flow (see related story elsewhere in this issue).

Indicators stay mixed

Statistical market performance measures remained mixed on Tuesday, their third straight mixed session and their fourth in the last six trading days. They had turned mixed on Friday and stayed that way on Monday and Tuesday, after having previously been firmer across the board last Wednesday and again on Thursday.

The KDP High Yield index gained 4 basis points on Tuesday at 70.64, its seventh straight gain after six consecutive losses before that. That followed two session on Friday and Monday when the index had firmed by 2 bps each day.

Its yield was unchanged on Tuesday at 5.30%, after having risen by 2 bps on Monday, its first widening after four successive narrowings.

The Markit Series 27 CDX index began trading on Tuesday at 103¾ bid, 103 13/16 offered. The company “rolls” its index, or begins a new series with a slightly different roster of companies followed, every six months.

The Merrill Lynch High Yield index fell by 0.033% on Tuesday, its second straight loss, having also declined by 0.084% on Monday. Those losses were its first after five straight gains before that.

That dropped its year-to-date return to 14.708% on Tuesday from Monday’s 14.746% level.

It also remained down from the 14.992% cumulative return set on Sept. 8, its peak level for 2016 so far.

Stephanie N. Rotondo contributed to this review.

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