Giant-sized Avolon, Radiate, Pattern deals price to cap $8.5 billion week; Avolon moves up

By Paul Deckelman and Paul A. Harris

New York, Jan. 20 – The high-yield primary arena ended the week on a high note on Friday as three new deals totaling $3.75 billion priced, all of them regularly scheduled forward calendar transactions.

Syndicate sources said that among them was aircraft leasing company Avolon Holdings Ltd.’s $3 billion two-part offering of 5.5-year notes and seven-year notes, which was not only easily the biggest new issue of the year so far but in fact the biggest junk deal seen since last June.

Besides that giant-sized offering, the sources said that Radiate Holdco, LLC priced $400 million of eight-year notes which will help to finance the acquisition of cable and broadband provider RCN Telecom Services LLC.

And Pattern Energy Group, Inc. did a $350 million seven-year deal.

Those deals brought the week’s total of new U.S. dollar-denominated and fully junk-rated paper from domestic and industrialized-country borrowers to $8.47 billion, up slightly from last week’s total.

In the secondary arena, traders saw considerable activity in the new Avolon and Radiate offerings, with Avolon’s bonds in particular seen firming smartly in heavy trading.

There was also continued brisk activity in the three deals which came to market on Thursday, from Ardagh Group, Vector Group Ltd. and Koppers Inc. The latter issue has been particularly strong in the aftermarket.

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

The indicators were meantime lower all around from where they had finished last Friday, when they had been mixed for the second week in the most recent three weeks.

Avolon prices $3 billion

In Friday’s primary market Avolon Holdings priced $3 billion of senior bullet notes (B1/BB-/BB) in two tranches, both of which came on top of downwardly revised talk.

A tranching revision saw $250 million of proceeds shifted to the shorter-maturity tranche from the long tranche.

An upsized $1.75 billion of 5.5-year notes priced at par to yield 5¼%. The tranche size was increased from $1.5 billion. The yield printed on top of yield talk that had been revised from earlier talk in the 5 3/8% area. Initial guidance on the 5.5-year notes was 5% to 5½%.

A downsized $1.25 billion of seven-year notes priced at par to yield 5½%. The long tranche was downsized from $1.5 billion. The yield printed on top of yield talk that had been revised from earlier talk in the 5¾% area. Initial guidance on the seven-year notes was 5½% to 6%.

UBS and Morgan Stanley were the joint physical bookrunners for the acquisition financing.

RCN and Grande price

RCN Telecom Services LLC and Grande Communications Networks LLC priced a $400 million issue of eight-year senior notes (Caa1/CCC+) at par to yield 6 5/8%.

The yield printed at the tight end of yield talk set in the 6¾% area; 7% was the initial guidance.

UBS was the lead left bookrunner for the for the acquisition financing deal.

Pattern Energy’s green deal

Pattern Energy priced a $350 million issue of seven-year senior notes (Ba3/BB-) at par to yield 5 7/8%.

The yield printed in the middle of the 5¾% to 6% yield talk.

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

The San Francisco-based independent power company plans to use the proceeds to partially fund is acquisition of the Broadview Wind power facility in New Mexico and to pay down revolver borrowings related to the acquisition of the Armow Wind power facility in Ontario, with any balance to be used to finance other green projects.

Mixed Thursday fund flows

Cash flows for the dedicated high-yield funds were mixed on Thursday, the most recent session for which data was available at press time, a trader said.

High-yield ETFs saw $29 million of inflows on the day.

However actively managed funds sustained $135 million of daily outflows on Thursday.

The news follows a Thursday report from Lipper US Fund flows that the dedicated high-yield bond funds sustained $887 million of outflows during the week to Wednesday's close.

Avolon tranches take flight

In the secondary realm, traders said that both halves of the new Avolon Holdings bond behemoth moved solidly higher in heavy trading.

One trader said that the Hong Kong and Dublin-based aircraft leasing company’s new bonds – which came to market via its Park Aerospace Holdings Ltd. subsidiary – “were pretty active, both around 102. They traded a fair amount.”

A second trader said that both the 5¼% notes due August 2022 and the 5½% notes due 2024 “came off their highs for the session.”

He pegged the 5.5-year notes at 102 bid going home, which he said was down from their earlier peak levels in the 102¼ to 102½ bid range.

He saw the company’s new 5½% notes ease to a 101 5/8 to 101 7/8 bid context going out, down from 102 bid earlier.

At another desk, a market source said that more than $140 million of the seven-year notes traded, easily the busiest junk issue of the day, ending at 102 bid, while more than $112 million of the 5.5-year notes changed hands, ending at 102½ bid.

Radiate notes firm slightly

A trader said that more than $36 million of new Radiate Holdco 6 5/8% notes traded, mostly around the par level.

A second trader pegged the bonds in a 99 7/8 to 100 3/8 bid range, finally finishing between par and 100¼ bid.

The notes – co-issued by Radiate Finance, LLC – are part of the funding for the acquisition of Princeton, N.J.-based RCN Telecom and Grande Communications Networks.

Pattern notes seen firmer

A trader said that Pattern Energy’s new 5 7/8% notes were trading around the 101½ bid level after pricng at par.

However, unlike the Avolon and Radiate issues, the San Francisco-based independent power company’s new deal did not initially trade around on large volume.

Week’s total passes last week’s

The day’s three new issues brought the week’s total of new U.S. dollar-denominated and fully junk-rated paper from domestic or industrialized-country borrowers to a formidable $8.47 billion in 10 tranches, according to data compiled by Prospect News – and this in a week that had one less trading day due to the market close on Monday in observance of the Martin Luther King Jr. federal legal holiday.

The week’s total topped the $8.29 billion which came to market in 12 tranches last week, ended Jan. 13.

This week thus was the heaviest new-issuance week in more than a month, since the week ended Dec. 9, 2016, which saw $9.60 billion get done in 16 tranches.

The Avolon deal was not only easily the biggest junk bond offering seen this year, outweighing several $1 billion transactions, but according to the data, it was the single biggest deal seen in Junkbondland since June 8 of last year, when Round Rock, Texas-based personal computer manufacturer Dell Inc. priced $3.25 billion in a two-tranche deal consisting of $1.625 billion of 5 7/8% notes due 2021 and an equal amount of 7 1/8% notes due 2024.

This this week’s primary activity brought year-to-date issuance for 2017 so far up to $17.57 billion in 24 tranches – more than 13 times the $1.22 billion which had gotten done in three tranches by this point on the 2016 calendar, the Prospect News data indicated.

Thursday deals remain active

Traders said that the three deals which came to market on Thursday continued to trade actively during Friday’s session.

Ireland-based glass and plastics manufacturer Ardagh Group’s 6% notes due 2025 were seen by a market source to have finished at par bid, down 1/8 point on the day, with over $67 million having traded.

The company priced its quickly shopped $1 billion deal at that same par level.

Vector Group’s 6 1/8% senior secured notes due 2025 gained 1/16 point on the day to finish at 100 7/8 bid, a trader said, on volume of over $38 million.

The Miami-based tobacco and real estate holding company had priced its regularly scheduled $850 million forward calendar deal at par.

Pittsburgh-based Koppers Inc.’s 6% notes due 2025 moved up by 3/8 point on the day, a market source said, going home at 102 3/8 bid, with over $23 million traded.

The producer of treated wood products and wood treatment chemicals had priced its $500 million issue at par, after it was upsized from $400 million originally.

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