Manitowoc brings upsized 5.5-year secured deal, new food service bonds busy; market lower; Chesapeake dives

By Paul Deckelman and Paul A. Harris

New York, Feb. 8 – The Manitowoc Co. Inc. priced its second junk bond deal in as many days on Monday, with high yield syndicate sources reporting that the maker of cranes and other industrial lifting machinery did an upsized $260 million of 5.5-year secured notes.

However, unlike other recently priced new issues – including Friday’s offering from the company’s Manitowoc Food Service Inc. unit – Monday’s deal priced at a considerable discount to par in order to get done, even with a relatively generous coupon to begin with. Additionally, the tenor was considerably shortened from the eight years originally shopped around, and covenant changes had to be made.

Traders meantime saw heavy activity in the new food service bonds that had priced on Friday. They were down from initial trading levels, in line with an overall junk market retreat, which in turn took its cue from sagging equities.

Other recent new deals were also actively traded – Thursday’s offering from Acadia Healthcare Co. Inc. and from Charter Communications, Inc. They too were easier versus last week’s closing levels.

Away from the new deals, Chesapeake Energy Corp.’s bonds were under stiff pressure on the news that the oil and natural gas company had hired restructuring advisers – which touched off a frenzy of speculation that it might be considering a bankruptcy filing, a conclusion that Chesapeake strenuously denied.

Statistical measures of junk market performance turned lower across the board Monday, after having been mixed over the previous three sessions. It was the third lower session in the last six trading days.

Manitowoc Cranes yields 14%

The Feb. 8 week got off to a slow start in the primary market, as global capital markets turbulence continues to forestall opportunistic new issue business, sources say.

However there was news on Monday.

Manitowoc Co., Inc. (Manitowoc Cranes) priced the session’s sole deal, an upsized and restructured $260 million issue of 12¾% 5.5-year senior secured second-lien notes (B1/B+) which came at 95.321 to yield 14%.

The deal size was increased from $250 million.

The maturity was decreased to 5.5 years from eight years.

The coupon, price and yield all came in line with price talk that set out a 12¾% coupon at approximately 95.3, resulting in a 14% all-in yield.

There were also covenant changes (see related story in this issue).

The new bonds were not being actively traded in the secondary market, said a trader who spoke within an hour of deal terms being circulated.

The new Manitowoc Cranes 12¾% notes were wrapped around the issue price, the trader added.

Goldman Sachs was the left bookrunner. J.P. Morgan, Citigroup and Wells Fargo were joint bookrunners.

Solera $2.03 billion roadshow

Elsewhere Solera, LLC and Solera Finance, Inc. plan to start an international roadshow on Wednesday in London for a $2.03 billion equivalent offering of eight-year senior notes.

The buyout deal is coming in tranches of euro-denominated and dollar-denominated notes, with tranche sizes to be determined.

The full roadshow will continue in the United States during the week of Feb. 15, and the deal is set to price during the week of Feb. 22.

Goldman Sachs is the left bookrunner.Citigroup, Jefferies, Macquarie, Nomura and UBS are the joint bookrunners.

Solera is one of two issuers presently roadshowing dual-currency high yield bond offers.

Vehicle leasing company LeasePlan Corp. NV began a cross-border roadshow last week in Europe for its €1.55 billion three-part offering of senior secured notes (B1/BB+).

It is coming in tranches of euro-denominated and dollar-denominated five-year notes and euro-denominated seven-year notes, with tranche sizes to be determined.

A roadshow in the United States is set for the present week, and marketing wraps up on Thursday.

There is one other deal on the active calendar.

Endurance International Group Holdings Inc. marketed a $350 million offering of eight-year senior notes on a roadshow that was scheduled to conclude last week. That deal continues to face headwinds, market sources said on Monday.

Friday outflows

The cash flows of the dedicated high yield bond funds were decidedly negative on Friday, the most recent session for which data was available at press time, a trader said.

High yield ETFS saw $406 million of outflows on the day.

Actively managed funds sustained $205 million of outflows on Friday.

Dedicated bank loan funds, meanwhile, saw $140 million of outflows on the session.

New Manitowoc issue not seen

In the secondary market, traders did not report any initial dealings in the new Manitowoc Co. 12¾% senior secured second-lien notes due in August of 2021.

Manitowoc Food Service active

However, they saw considerable activity in the new 9½% senior notes due 2024 that the company’s Manitowoc Food Service unit had priced at par on Friday.

In the morning, the new bonds were quoted trading in a 100¼ bid context.

Later on in the session, a trader pegged them at par to 100½.

A second trader said that more than $46 million of those notes changed hands, putting the issue almost at the top of the day’s Most Actives list. He saw the bonds going out at 100¼, calling that down 5/8 point from the levels around 100¾-to-100 7/8 bid hit late Friday, when about $11 million of the notes traded.

The New Port Richey, Fla.-based maker of commercial stoves and ovens, ice makers and refrigeration units and beverage dispensing equipment brought its $425 million deal to market as a regularly scheduled forward calendar offering via Manitowoc Food Service Escrow Corp. as part of the coming spinoff of the food service operation from the Manitowoc, Wis.-based parent company, which makes cranes and other industrial lifting equipment.

The latter’s existing 5 7/8% notes due 2022 gained 1 1/8 point on Monday, closing at 100 3/8 bid, on volume of over $8 million. Those notes have steadily risen from their recent bottom around 99 bid in mid-January.

Its 8½% notes due 2020 were unchanged Monday at 104½ bid, with only one large-sized trade seen. Those bonds have risen from around 101¼ bid in mid-January.

Proceeds from the food service unit’s bond deal and a concurrent new term loan will be used to pay a $1.388 billion dividend to the parent company in connection with Manitowoc Food Service’s spinoff. That dividend, and the proceeds of the parent’s new secured bond deal, will, in turn be used to repay its existing bonds and bank debt and for general corporate purposes.

Recent issues trade off

A trader said that there was “overall weakness” in Junkbondland on Monday “on the heels of what equities were doing.”

Stocks plummeted, led by financial issues, as investors fretted over global growth and uncertainty over whether the Federal Reserve will continue to raise interest rates in the United States this year.

The bellwether Dow Jones Industrial Average lost 177.92 points or 1.10% closing at 16, 027.05, its second straight loss after two consecutive gains and fourth downturn in the last six sessions. Other, broader market indexes followed similar trajectories.

Back among junk bonds, weakness was evident across the board, even among recently priced credits.

One of the day’s busiest names was Charter Communications’ new 5 7/8% notes due 2024.

A trader called those notes down ¼ point on the day, at 99¼ bid, 99¾ offered.

A second located the bonds at 99 1/16 bid, calling them down almost ¾ point, on volume of more than $24 million.

The Stamford, Conn.-based cable operator’s COO Holdings, LLC and COO Holdings Capital Corp. priced that $1.7 billion issue – last week’s biggest – at par on Thursday in a quick-to-market transaction that was upsized from an originally announced $1.5 billion.

For a third consecutive session, Acadia Healthcare’s new 6½% notes due 2024 were among the day’s busiest issues.

A trader on Monday said that the notes slid 1 full point, to 99 bid, 99½ offered.

At another desk, a market source had them going home at 99¼ bid – down 7/8 point on the day, with over $21 million having traded.

The Franklin, Tenn.-based behavioral healthcare services provider priced $390 million of the notes at par on Thursday after shopping them to investors via a roadshow.

Chesapeake gets chopped down

Away from the new deals, Chesapeake Energy Corp.’s bonds had a “wild ride,” a trader said, as rumors circulated that the company was contemplating filing for bankruptcy.

The trader said the company’s shortest maturity, the 3¼% notes coming due on March 15, fell 20 points to the mid-70s. The debt then “rebounded when the company said they weren’t planning on filing,” trading into the mid-80s.

A second trader called the notes, “really active,” with over $44 million traded, going out at 85 bid, which he said was down 10 points on the day.

Chesapeake’s 8% second-lien notes due 2022 were also active, seen falling to 36 before rallying back to 40, with a trader calling that down “only about a point.”

More than $64 million of the notes traded, the most active junk issue of the day.

At yet another desk, a trader confirmed the trajectory of the 3¼% notes – falling 20 points at the open, then roaring back to end just 10 points weaker at 85.

However, he saw the 8% notes rising a deuce to 40¼.

The 6½% notes due 2017 dropped 14 points, he said, to end at 30. The 7¼% notes due 2018 declined 10 points to 24.

The rumors of bankruptcy came ahead of the $500 million maturity of the 3¼% notes due next month, thus the flurry of activity in that particular issue.

The Oklahoma City-based oil and gas producer has already been looking at ways to reduce debt as oil prices have fallen about 70% in the last year and a half. In December 2015, the company did a debt exchange, swapping $3.8 billion of 10 series of old notes for about $2.4 billion of the new 8% second-lien notes.

The company referenced said exchange in its statement out Monday. It also said that reports it had hired Kirkland & Ellis LLP to look into restructuring options were overblown, given that the firm has been advising Chesapeake since 2010.

“Chesapeake currently has no plans to pursue bankruptcy and is aggressively seeking to maximize value for all shareholders,” the statement read.

Indicators in retreat

Statistical measures of junk market performance turned lower across the board Monday, after having been mixed over the previous three sessions. It was the third lowest session in the last six trading days.

The KDP High Yield Daily Index plunged by 71 basis points on Monday to close at 61.81 – its sixth straight loss, after having risen for seven consecutive sessions before that, including on Friday, when the index had eased by 2 bps.

Its yield ballooned out by 22 bps on the day, to 7.51%, its first widening after having come in over the previous two sessions – even though the yield normally does not decline when the index falls but instead generally moves inversely to the index reading. It had declined on 4 bps on Thursday despite a falling index reading, and then narrowed by another 3 bps on Friday.

The Markit Series 25 CDX North American High Yield Index slid by 13/16 point on Monday, dropping to 97 1/8 bid, 97 5/32 offered. It was the index’s third straight session on the decline after one gain and its fifth loss on the last six sessions. It had also lost 13/16 point on Friday.

The Merrill Lynch North American High Yield Master II Index nosedived by 1.224% on Monday – its second-biggest one-day loss so far this year, exceeded only by the yawning 1.416% plunge the market measure suffered back on Jan. 20.

It was the index’s second straight loss after one gain and its fifth loss in the last six sessions. On Friday, the index had finished off by 0.323%.

Monday’s downturn caused its year-to-date deficit to gap out to 3.879% from Friday’s 2.688%. The cumulative loss for the year so far, though, remains well down from the index’s worst red-ink level for the year so far, the 4.095% deficit seen on Jan. 20.

Stephanie N. Rotondo contributed to this review.

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