Ardagh, Vector, Koppers price, seen firmer; Avaya gains on Chapter 11; funds lose $887 million

By Paul Deckelman and Paul A. Harris

New York, Jan. 19 – High-yield primaryside activity picked up sharply on Thursday, with a trio of new issues totaling $2.35 billion coming to market during the session.

That was well up from the $300 million of new U.S. dollar-denominated and fully junk-rated paper which had gotten done on Wednesday.

Glass and metal packaging products maker Ardagh Group had the big deal of the day – a quickly shopped $1 billion offering of eight-year notes which priced via a pair of financing subsidiaries.

There were also two regularly scheduled deals coming off the forward calendar – tobacco and real estate holding company Vector Group Ltd.’s $850 million of eight-year secured notes and wood products producer Koppers Inc.’s upsized $500 million tranche of eight-year paper.

In the secondary market, traders said there was sizable aftermarket volume in the new Koppers and Vector bonds, with Koppers’ paper especially seen having firmed smartly when it was freed to trade. Vector and Ardagh were also quoted higher.

Away from the credits which have already priced, the syndicate sources heard revised price talk and tranche-size information on aviation leasing company Avolon Holdings Ltd.’s $3 billion two-part offering of 5.5-year and seven-year paper, with pricing now seen possible on Friday.

Price talk was also heard on the pending deals from RCN Telecom Services LLC/Grande Communications Networks LLC and Pattern Energy Group Inc. Both are seen likely to price on Friday.

Apart from the new-deal realm, traders said that Avaya Inc.’s bonds were higher in active trading after the high-tech company filed for Chapter 11 protection in order to restructure its debt.

Statistical market performance measures turned lower across the board on Thursday after being mixed on Wednesday. It was the indicators’ second lower all-around session in the last three trading days.

Another numerical gauge – flows of investor cash into or out of high-yield mutual funds and exchange-traded funds, which are considered a reliable barometer of overall junk market liquidity trends – also turned negative, suffering its first setback of the new year in the latest reporting week.

Some $887 million more left those weekly-reporting-only domestic funds in the form of investor redemptions than came into them during the week ended on Wednesday, in contrast to last week’s $564 million inflow, which was the third straight cash addition (see related story elsewhere in this issue).

Ardagh’s $1 billion drive-by

News volume was heavy during Thursday’s session in the new issue market.

Three issuers priced dollar deals and three others announced roadshows of varying lengths, none of them long.

Also the stage was set for a busy Friday session.

Of Thursday’s trio of single-tranche dollar deals, the combined take was $2.35 billion.

Only one of the three came as an a.m.-to-p.m. drive-by.

One was upsized.

Executions were solid, with two of the three deals coming at the tight end of talk while the third priced on top of talk.

Ardagh Packaging priced a $1 billion issue of eight-year senior notes (B3/CCC+) at par to yield 6%.

The yield printed on top of yield talk that had been set in the 6% area. Initial guidance had the deal coming with a yield in the low 6% area.

Citigroup was the left lead bookrunner for the debt refinancing deal. BofA Merrill Lynch and Deutsche Bank were the joint bookrunners.

Vector prices tight

Vector Group priced an $850 million issue of eight-year senior secured notes (Ba3/BB-) at par to yield 6 1/8%.

The yield came at the tight end of talk for a yield in the 6¼% area.

Jefferies was the sole bookrunner.

The Miami-based holding company plans to use the proceeds, together with about $44 million of new common equity, to refinance its 7¾% notes due 2021 and for general corporate purposes.

Koppers upsized and tight

Koppers priced an upsized $500 million issue of eight-year senior notes (B1/B+) at par to yield 6%.

The yield printed at the tight end of the 6% to 6¼% yield talk.

The notes offer was increased from $400 million. Concurrently a $200 million term loan A was eliminated from the company’s debt refinancing package and a revolver was increased to $400 million from $300 million.

Wells Fargo was the left bookrunner for the notes. PNC, BofA Merrill Lynch and Fifth Third were the joint bookrunners.

Avolon tightens talk

Looking to what promises to be a busy Friday session, Avolon Holdings tightened talk in its $3 billion two-part offering of senior bullet notes (B1/BB-/BB) and shifted proceeds to the shorter maturity notes from the long maturity paper.

An upsized $1.75 billion of 5.5-year notes is talked to yield 5¼%. The tranche is increased from $1.5 billion. Final talk comes tight to earlier yield talk that was announced in the 5 3/8% area.

A downsized $1.25 billion of seven-year notes is talked to yield 5½%. The long tranche is reduced from $1.5 billion. Final talk comes inside of earlier talk for a yield in the 5¾% area.

Early guidance had the 5.5-year notes coming at 5% to 5½% and the seven-year notes at 5½% to 6%, sources said.

Books were scheduled to close Thursday.

UBS and Morgan Stanley are the joint physical bookrunners.

RCN and Grande for Friday

RCN Telecom Services LLC and Grande Communications Networks LLC talked a $400 million offering of eight-year senior notes (Caa1/CCC+) to yield in the 6¾% area.

Official talk comes tight to the 7% initial guidance, a trader said.

Books close at 10:30 a.m. ET on Friday and the deal, via issuing entities Radiate Holdco, LLC and Radiate Finance, Inc., is set to price after that.

UBS is the lead left bookrunner. Credit Suisse, Deutsche Bank and Morgan Stanley are the joint bookrunners.

Pattern talks green deal

Pattern Energy Group Inc. talked its $350 million offering of seven-year green senior notes (Ba3/BB-) to yield 5¾% to 6%.

The deal is set to price on Friday.

Morgan Stanley, BofA Merrill Lynch, BMO, Citigroup and RBC are the joint bookrunners.

Hexion starts roadshow

Hexion Inc. started a roadshow on Thursday for a $460 million offering of five-year first-priority senior secured notes.

Initial guidance has the debt refinancing and general corporate purposes deal coming with a yield in the high 10% to 11% area.

The offer is expected to price on Monday.

JP Morgan, Citigroup, BofA Merrill Lynch, Citizens Bank, Credit Suisse, Deutsche Bank, Goldman Sachs and Wells Fargo Securities LLC are the joint bookrunners.

Atotech starts Monday

Germany’s Atotech BV plans to start a roadshow on Monday for a $425 million offering of eight-year senior notes.

The LBO deal is set to price late in the week ahead.

JP Morgan, Barclays, Citigroup, Credit Suisse, HSBC, Nomura and RBC are the joint bookrunners.

Airxcel roadshow

Airxcel, Inc. started a roadshow on Thursday in Los Angeles for a $300 million offering of five-year senior secured notes.

The debt refinancing and dividend deal is set to price on Tuesday via left bookrunner Jefferies and joint bookrunner Deutsche Bank.

Jaguar prints at 2¾%

In the lately bustling sterling-denominated primary market, Jaguar Land Rover Automotive plc priced a £300 million issue of four-year notes (Ba1/BB+) at par to yield 2¾% on Thursday.

Initial price talk was 3%.

Global coordinator HSBC will bill and deliver. BofA Merrill Lynch and Citigroup were also joint global coordinators.

Koppers climbs in aftermarket

In the secondary sphere, traders noted the standout performance of the new Koppers 6% notes after the Pittsburgh-based provider of treated wood products, wood treatment chemicals and carbon compounds priced its upsized offering at par.

One trader said that Koppers was “among the day’s most active names,” with over $52 million of the new notes changing hands when they reached the aftermarket. He pegged the issue around the 102¼ bid level.

Another trader initially located the notes around 101½ bid but later said that they had moved up to a 102 to 102¼ bid context.

And a third saw them trading between 101½ and 102½ bid.

Vector, Ardagh issues firmer

Among the day’s other two deals, a market source saw some busy trading in Vector Group’s new 6 1/8% senior secured notes, with over $14 million traded. He saw the notes going home at 100¾ bid, up from the par level at which the tobacco and real estate holding company had priced its deal.

At another desk, a trader said the new bonds had gotten as good as a 101 to 101½ bid context.

The company’s existing 7¾% notes due 2021 – which will be refinanced using some of the proceeds from the new offering – meantime moved marginally higher, ending at around 104 7/16 bid, with over $20 million traded,

The new Ardagh 6% notes were seen by one trader to be in a 100½ to 101¼ bid context while at another desk they were quoted at 100¼ to 101¼ .

The Ireland-based glass and metal packaging products company’s outstanding 7¼% notes due 2024 were heard to have gained 1/8 point to go home at 107 bid, with over $14 million traded.

Hexion active ahead of deal

Elsewhere, with Hexion busy shopping a new deal around, the Columbus, Ohio-based specialty chemicals manufacturer’s existing bonds were actively traded on Thursday.

Its 8 7/8% notes due 2018, some of which will be redeemed using the new-deal proceeds, firmed to around the 99¼ bid level on volume of around $13 million.

Its 6 5/8% notes due 2020 were even busier, with over $30 million moving around.

A trader said the notes finished at just under 92 bid, which he called a 3 point gain on the day.

A second likewise saw the bonds at 91 15/16 bid, calling that a gain of just under 3 points.

Avaya gets bankruptcy boost

A trader said that Avaya’s bonds “were all over the place” in busy trading after the Santa Clara, Calif.-based communications systems maker filed a Chapter 11 petition with the U.S. Bankruptcy Court in Manhattan.

Its 7% notes due 2019, which had ended Wednesday around 83 bid, got as good as 86 bid, a trader said, “then they came off a little,” ending between 85 and 86.

“A fair amount of those bonds traded,” he said.

At another shop, a market source put a number on it, estimating that over $75 million had changed hands.

He saw the notes up around 1 3/16 points on the day at just under 85 bid.

Avaya’s 9% notes due 2019 gained 2 3/8 points to close at 86 1/8 bid, with more than $14 million of turnover.

Indicators head south

Statistical market performance measures turned lower across the board on Thursday after being mixed on Wednesday. It was the indicators’ second lower all-around session in the last three trading days.

The KDP High Yield Index fell by 5 basis points on Thursday to close at 71.96, its second consecutive loss. On Wednesday, the index ended off by 6 bps.

Its yield rose by 2 bps to 5.17%, its second straight widening. It moved up by 1 bp on Wednesday.

The Markit Series 27 CDX Index retreated after two straight gains, ending down 5/32 point at 106 7/32 bid, 106 9/32 offered, in contrast to tis 3/16 point gain on Wednesday.

And the Merrill Lynch High Yield Index made it three losses in a row on Thursday, declining by 0.094%, on top of Wednesday’s 0.039% downturn and Tuesday’s 0.001% easing.

The latest loss cut its year-to-date return to 0.991% from its close of 1.086% on Wednesday. It was also down from Monday’s 1.127% – its peak level for the year so far.

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