Cablevision, Olin megadeals price to close out $11.4 billion week; new Iron Mountain trades busily

By Paul Deckelman and Paul A. Harris

New York, Sept. 25 – Cablevision Systems Corp.’s much-anticipated three-part megadeal finally priced on Friday, after having been once again downsized, high-yield syndicate sources said.

The cable operator and newspaper publisher ended up bringing $4.8 billion of new paper to market in three tranches – down from the $6.3 billion originally planned as part of the financing for its planned acquisition by European cabler Altice NV, and down as well from the $5.3 billion figure to which that original deal had been reduced with the shifting of some of the expected proceeds to a concurrent bank financing deal.

Even in its reduced state, the new issue – consisting of seven- and 10-year senior unsecured notes and 10-year senior guaranteed notes – is the third-largest purely high-yield-rated transaction seen so far this year in Junkbondland, according to data compiled by Prospect News, lagging behind only the $8.5 billion three-part transaction that Canadian drug manufacturer Valeant Pharmaceuticals International Inc. did back in March and the $6.6 billion three-parter earlier this month from wireline telecom provider Frontier Communications Corp.

The new bonds came to market late in the session; traders saw them trading a little above their par issue price in light initial dealings.

Cablevision’s existing bonds, meantime, were seen lower across the board, just as they had been when the Altice deal, valued at over $17 billion, was first announced last week.

The Cablevision deal overshadowed the day’s other pricing of a big deal in its own right – chemical maker Olin Corp.’s $1.22 billion two-part transaction, consisting of eight- and 10-year notes.

Olin’s offering – like Cablevision’s – was a downsized regularly scheduled forward calendar offering. The new bonds were quoted at solidly higher levels.

Those two deals, totaling more than $6 billion made Friday the fourth-busiest session of the year in the junk market, volume-wise, according to the Prospect News data.

That, in turn, swelled the week’s new issuance to $11.4 billion in 13 tranches, according to the data – the heaviest new-issuance week seen in the junk market since more than $12.5 billion priced in 19 tranches during the week ended April 10. This week was the third-heaviest of the year so far, with the week ended March 13 still the champion, with some $15.9 billion, the data indicated.

This week’s issuance lifted the year-to-date total of new dollar-denominated, fully junk-rated paper from domestic or industrialized-country issuers to $226.5 billion in 359 tranches – but that still lagged 11.2% behind the new-issuance pace seen last year, when $249.8 billion of new paper had come to market in 471 tranches by this time on the calendar, the data said.

Traders noted brisk dealings in the new Iron Mountain, Inc. notes that priced on Thursday, with the documents and records company’s new bonds up modestly from their issue price.

Statistical measures of junk market performance were meanwhile lower across the board Friday for a fourth straight session and for the fifth time in the last six sessions.

And those indicators were lower versus where they had been the previous Friday for a second consecutive week.

Cablevision sells $4.8 billion

A busy Friday in the primary saw the clearing of two megadeals totaling $6.02 billion, which came in a combined five tranches.

Cablevision Systems priced a downsized $4.8 billion three-part deal.

It included a reduced $1 billion tranche of 10-year senior guaranteed notes (Ba1/BB-) which priced at par to yield 6 5/8%. The yield printed in the middle of the 6½% to 6¾% yield talk. The tranche was cut from $1.5 billion, after having previously been downsized from $2 billion.

Friday’s transaction also incorporated two tranches of senior unsecured notes (B2/B) which were downsized to $3.8 billion from $4.3 billion.

The unsecured tranches included $1.8 billion of 7.25-year notes which priced at par to yield 10 1/8%, in the middle of the 10% to 10¼% yield talk.

The long unsecured tranche saw $2 billion of 10-year notes price at par to yield 10 7/8%, in the middle of the 10¾% to 11% yield talk.

The overall amount of notes issued was downsized from $5.3 billion after having been previously decreased from $6.3 billion.

Proceeds were shifted to the concurrent term loan which was increased to $3.8 billion from a revised amount of $3.3 billion and an initial amount of $2.3 billion.

J.P. Morgan, Barclays, BNP, Credit Agricole, Deutsche Bank, RBC, Scotia, SG Cand TD were the joint bookrunners in the deal to help fund the acquisition of Cablevision by Altice and repay $2.5 billion in existing term loans.

Olin prices $1.2 billion notes

Olin Corp. priced a downsized $1.22 billion of senior notes (Ba1/BB+) in two tranches.

The deal included $720 million of eight-year notes that priced at par to yield 9¾%. The yield printed at the tight end of the 9¾% to 10% revised yield talk. That talk was massively increased from earlier formal yield talk in the 6½% area.

Olin also sold $500 million of 10-year notes at par to yield 10%. The yield printed at the tight end of the 10% to 10¼% revised yield talk which had also massively increased from earlier formal talk in the 6¾% area.

The overall size of the deal was decreased from $1.5 billion.

As a result of the downsizing of the bond offer, the company intends to raise the difference in proceeds by means of term loan debt and a draw upon its revolver, a source said.

In addition to the downsizing, the deal also underwent changes to the asset sales, debt limitations and restricted payments covenants, as well as amendments to the liens language, a trader said.

J.P. Morgan, Wells Fargo, Barclays, Goldman Sachs, BofA Merrill Lynch, Citigroup and PNC were the joint bookrunners for the acquisition financing.

Both went well

Although both of Friday’s super-sized deal were said to be weighing upon the market throughout the week – especially the Olin deal – both appeared to go well, a New York-based trader remarked after Friday’s close.

The trader saw all three Cablevision bonds trade to 101½, in the gray market.

All three were going out at par bid, par ½ offered, the source said.

As to the Olin bonds, both of which came in a transaction that saw phenomenal increases in price talk – with dealers said to be in “price discovery” mode through the latter part of the week – those were showing strong secondary market performances at the end of the Friday session as well, the trader said.

The Olin 9¾% notes due 2023 were at 101¾ bid, 102¼ offered, the source said.

The 10% notes due 2025 were at 101½ bid, 102 offered.

Unisys withdraws

Unisys Corp. has withdrawn its $350 million senior secured notes due 2020 (Ba2/BB) from the market, according to a Friday press release from the company.

“Current terms and conditions available in the market were not attractive for the company to move forward,” Unisys stated in the release.

The deal had been talked early in the week in the 8% area.

Wells Fargo was the left bookrunner. BofA Merrill Lynch was the joint bookrunner.

The Blue Bell, Pa.-based IT services provider had planned to use the proceeds for general corporate purposes.

Interoute’s €590 million

In the European market Interoute launched and priced a resized €590 million two-part offering of five-year senior secured notes (B1/B+).

The London-based information technology company priced an upsized €240 million tranche of floating-rate notes at par to yield Euribor plus 625 bps.

Interoute also priced a downsized €350 million tranche of fixed-rate notes at par to yield 7 3/8%.

The transaction saw €25 million of proceeds shifted to the floating-rate tranche from the fixed-rate tranche.

Timing was moved ahead, as the original timetable had the roadshow running into the week ahead.

Credit Suisse was the left bookrunner. Barclays and Morgan Stanley were joint bookrunners.

Proceeds, along with a €75 million equity contribution, will be used to finance the acquisition of European managed services provider Easynet and repay Easynet debt, repay Interoute’s outstanding term loan and revolver, and put cash on the balance sheet.

NN next week

Only one deal remained on the active forward calendar at Friday’s close.

NN, Inc. has been roadshowing a $300 million offering of eight-year senior notes (Caa1/B).

The roadshow is scheduled to conclude on Monday in the Midwest and price thereafter.

Earlier in the week preliminary guidance was in the 8½% area, a market source said.

SunTrust is the left bookrunner for the acquisition financing. KeyBanc and Regions are the joint bookrunners.

Cablevision comes to market

In the secondary arena, a trader quoted the new Cablevision bonds “all around the same price” – 100¼ to 100½ bid, after having priced at par late in the session.

Given the lateness of the hour at which Cablevision had priced – and the fact that it was a Friday afternoon, causing some market participants to make an early exit – he said that he had seen “just a couple of trades,” for instance, in the 10 1/8% notes due 2022 at that 100¼ to 100½ level.

Existing Cablevision notes off

With the Cablevision deal finally becoming a reality, holders of the Bethpage, N.Y.-based cable systems operator and newspaper publisher’s existing bonds took that paper lower, just as they had on the initial news, back on Sept. 17, that Luxembourg-based Altice would acquire Cablevision in a transaction valued at more than $17 billion.

A market source said that the busiest Cablevision bonds were its 5 7/8% notes due 2022, which were seen ending down a deuce at 76 bid, with more than $17 million having changed hands during the session, putting it high up on the junk market’s Most Actives list.

The company’s 8% notes due 2020 dropped to 90 bid, a 4 point loss on the day, with over $7 million traded.

There was also some downside activity in the notes issued by Cablevision’s CSC Holdings LLC special-purpose financing subsidiary. The trader saw over $17 million of those bonds moving around, losing 2½ points on the day to close at 77½ bid, while its 6¾% notes due 2021 were likewise down by 2½ points at the close, dipping to 89½ bid, on volume of over $6 million.

Olin quoted higher

A trader saw the new notes from the day’s other pricing – Clayton, Mo.-based chemicals and ammunition manufacturer Olin Corp’s eight- and 10-year notes – having firmed after pricing at par.

He saw its 9¾% notes due 2023 opening at 100¾ bid, then moving up to a 101¼ to 101¾ bid context, but “then they traded down, they hit their bids.”

He saw over $27 million of the notes having traded in the aftermarket between lows just a little over par and highs around 101¾, with most of the day’s trades “north of 101.”

The last prints he saw were between 101 3/8 and 101 5/8.

The other half of that deal – the 10% notes due 2025 – were also trading around 100¾ when they opened.

He saw those bonds trading between 100½ bid on the low side and 101¼ on the high end, with around $7 million changing hands.

Iron Mountain trades up

There were busy dealings, meanwhile, in the new Iron Mountain 6% notes due 2020, with a market participant seeing more than $58 million of that paper trading around.

He quoted the bonds in a 100½ to 101½ range, with most of the day’s late trades being “a little below 101.”

Earlier in the day, a market source at another desk said that the bonds were moving around between 101 and 101½.

Iron Mountain, a Boston-based document and records storage, management and disposal company, priced $1 billion of those notes at par on Thursday in a quick-to-market transaction.

The bonds were quoted late Thursday between 100¾ and 101 bid.

Indicators slide again

Away from the new deals, most junk issues were quoted lower on the day.

One of the trader suggested that with the current market volatility, “people didn’t want to be owning paper over the weekend.”

Statistical measures of junk market performance were seen lower across the board for a fourth consecutive session on Friday and for a fifth lower session out of the last six.

And those indicators were lower versus where they had been the previous Friday for a second consecutive week. Those two down weeks follow one week in which they had been higher, which in turn followed a mixed week.

The KDP High Yield Daily Index suffered its 11th straight loss on Thursday, retreating by 17 basis points to end at 66.72, recording its lowest close since Sept. 9, 2009, when it had finished at 66.65. That loss followed a 40 bps plunge on Thursday that pulled the index below the psychologically significant 67.00 level for the first time this year.

Its yield, meanwhile, rose by 3 bps to end at 6.68%, after having ballooned out by 11 bps on Thursday. It was the yield’s eighth straight widening, as well as its ninth in the last 10 sessions and its 10th in the last 12 trading days.

Those levels compare unfavorably with the 67.94 index reading and 6.36% yield seen at the close last Friday, Sept. 18.

The Markit Series 24 CDX North American High Yield Index posted its fourth straight loss, and its fifth downturn in the last six sessions, falling by 5/32 point on Friday, on top of its 5/16 point loss on Thursday, to end at 103½ bid, 103 9/16 offered.

The index was also down on the week from last Friday’s close at 104 19/32 bid, 104 5/8 offered.

And the Merrill Lynch North American Master II High Yield Index made it an even dozen days on the downside on Friday with a 0.181% loss, on top of Thursday’s 0.562% setback.

Friday’s loss swelled its year-to-date loss to 1.312%, its worst level of the year, surpassing the previous cumulative loss figure of 1.136% set on Aug. 24. It was the biggest loss for the index since Oct. 11, 2011, when it showed a 1.745% year-to-date deficit.

The recent losses stand in sharp contrast to the positive 4.062% reading recorded on May 29, the index’s peak level for the year so far.

For the week, the index lost 1.445%, its second straight weekly downturn and its fifth in the last eight weeks. It was the biggest weekly loss seen so far this year, eclipsing the 1.01% loss seen in the week ended July 24. Losses have now been seen in 16 weeks so far this year, versus 22 weeks in which the index turned higher.

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