Junk primary quiets; bonds weak again; steel stays in focus; Frontier, Cablevision rebound

By Paul A. Harris and Stephanie N. Rotondo

Portland, Ore., Sept. 23 – No new issues priced in the dollar-denominated high-yield market on Wednesday, though Beacon Roofing Supply Inc. released and then tightened talk on its $300 million of eight-year notes.

The secondary high-yield space continued to be on the softer side, though sources were mixed on just how much.

And even with the generally weaker tone, “some stuff that got whacked yesterday [amid a broader market sell-off] came back” in midweek trading, according to one trader.

The trader also noted that volume was lower given that “a good part of our trading brethren were out” for the Yom Kippur holiday.

In the world of commodities, AK Steel Holdings Corp. paper traded all over the place following the previous day’s declines. Sector peer Arcelor Mittal was meantime seen ending lower.

In the telecommunications space, Frontier Communications Corp.’s recently priced $6.6 billion three-part issue staged a comeback, as did Cablevision Systems Corp.

“Even iHeart [Media Inc.] bounced today,” a trader reported.

But on the down side of things, Intelsat SA bonds were coming in after it was reported that the company had hired advisers to explore potential asset sales.

Beacon Roofing tightens talk

In the primary market, Beacon Roofing Supply tightened the yield talk on its $300 million offering of eight-year senior notes (B3/B+) on Wednesday afternoon.

Talk is now 6 3/8% to 6½%, revised from the 6½% to 6¾% official yield talk that circulated Wednesday morning.

Books close at 10 a.m. ET Thursday, and the acquisition deal is set to price thereafter.

Wells Fargo Securities LLC is the left bookrunner. Citigroup Global Markets Inc., BofA Merrill Lynch, J.P. Morgan Securities Inc. and SunTrust Robinson Humphrey Inc. are the joint bookrunners.

Beacon also tightened pricing on its $450 million seven-year covenant-light senior secured term loan B (B2/BB+) on Wednesday.

Talk is Libor plus 300 basis points, revised from earlier talk of Libor plus 325 bps to 350 bps.

Both segments of the financing are going well, market sources say.

The loan is heard to be four-times oversubscribed, according to a bank loan trader.

Arrow taps floating-rate notes

In the European primary market, Arrow Global Finance plc priced a €110 million add-on to its Euribor plus 525 bps floating-rate notes due Nov. 1, 2021 at par.

The reoffer price came on top of price talk, according to a market source.

Joint bookrunner Goldman Sachs will bill and deliver. JPMorgan was also a joint bookrunner.

The Manchester, England-based purchaser of consumer debt and provider of receivables management solutions plans to use the proceeds to repay bank debt.

Soho House talk is 8¾% area

Soho House Bond Ltd. talked its £200 million offering of five-year senior secured notes (Caa1/B-) to yield in the 8¾% area.

European books close at 7 a.m. ET on Thursday. Books for accounts in the United States close at 8:30 a.m. ET Thursday. The debt refinancing deal is set to price and allocate thereafter.

Physical bookrunner Barclays will bill and deliver. Jefferies is a bookrunner.

Mixed cash flows

The cash flows of the dedicated high-yield funds were mixed on Tuesday, the most recent session for which data was available at press time, a portfolio manager said.

High-yield exchange-traded funds saw $228 million of outflows on the day.

However, actively managed funds were positive, with $40 million of inflows on Tuesday.

In the current reporting period, last Thursday's open to Monday's close, aggregate weekly flows were positive $575 million, a trader said.

Steel sector stays busy

Traders gave mixed reviews of AK Steel debt on Wednesday following a decline on Tuesday that was spurred by a drop in commodity prices.

One trader said the 7 5/8% notes due 2021 finished up over a point at 75¼. However, a second market source pegged the 7 5/8% notes due 2020 at 55½, a loss of 3 points on the day.

At another desk, the 2021 paper was called “about where it was,” trading in a 54 to 55 range.

Elsewhere in the steel space, Arcelor Mittal’s 5¼% notes due 2017 were called half a point weaker at 101½, while the 6¼% notes due 2021 were seen falling nearly a point to 95½ bid.

On Tuesday, the World Steel Association put out a report that showed global steel output had declined 3% in August, the fourth consecutive month of decline. Among domestic producers, output was off 10%, due in part to cheaper imports flooding the market.

Telecoms rebound

Frontier Communications’ $6.6 billion three-part deal that priced Sept. 11 “obviously remained fairly active,” a trader said Wednesday.

The issues not only continued to be busy but also managed to rally a bit from the previous day’s lows.

The trader said the $3.6 billion of 11% notes due 2025 ended “a little bit better” around 98½.

A second trader called that issue up a quarter-point – also at 98½ – while the $2 billion of 10½% notes due 2022 improved about half a point to par.

Cablevision bonds were also deemed better, as a trader said the 5 7/8% notes due 2022 gained 1 to 1½ points, ending around 80. “So a little bit of a rebound there,” he said.

Cablevision’s debt has been weakening since Altice announced a takeover of the company on Thursday. The merger partners are currently conducting a roadshow for $6.3 billion of new notes, the proceeds from which would be used for the acquisition.

Even iHeart – a high-beta name that tends to fluctuate with the broader market trends – was moving back up.

One trader saw the 14% notes due 2021 rising over 3 points to 44¾. The 10% notes due 2018 were meantime almost a point better at 60¾.

Another trader saw the 14% notes ending at 45, up from the lower-40s on Tuesday. The 10% notes closed “around 60,” compared with previous levels in the high-50s.

Intelsat exploring sales

Intelsat has reportedly hired Goldman Sachs & Co. to look into potential asset sales, according to various news reports.

A trader said the name was “a little more active” on the news, seeing the 7¾% notes due 2021 trading in a 69 to 70 context.

“It looked like they kind of popped initially on the news and then kind of drifted back in some,” the trader said.

Another market source placed the 6 5/8% notes due 2022 at 84½, which was deemed 1½ points higher.

Intelsat is the world’s largest commercial satellite operator in terms of revenue – estimated at about $2.4 billion – but is laboring under a mountain of debt of roughly $14 billion. The potential asset sales are one way is the company is reportedly considering hacking away at that debt load.

Tronox trades lower

The bonds of Tronox, Inc. traded lower on Wednesday, sources said.

The Tronox 6 3/8% notes due 2020 were 68¾ bid, 70 offered on Wednesday afternoon, down from 70¼ bid, 71 on Tuesday and 72½ bid, 73½ offered at the beginning of the week, according to an asset manager who added that the market for titanium dioxide pigment, the company's principal product, is struggling.

The Tronox bank loan was also beaten up on Wednesday, a bank loan trader said, spotting that loan at 91 bid, 92 offered late in the afternoon, down from 93 bid in the morning.

From the same sector, bonds of Chemours Co. were getting crushed on Wednesday, a trader said, spotting them at 71½ bid, 71¾ offered, down a couple of points on the day. They were trading at 85 bid, 86 offered at the beginning of September, the trader said.

Market remains soft

High-yield market sources agreed Wednesday that bonds continued to be weak, but they disagreed on just how much the market was off for the day.

The KDP High Yield Daily index, for instance, hit a new 52-week low, closing at 67.29 with a 6.54% yield. The previous low was 67.32.

On Tuesday, the index ended lower as well at 67.45 with a 6.49% yield.

The CDX North American Series 24 High Yield index was meantime off just a touch, according to a source, at 104.08 bid, 104.16 offered.

© 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.