Upsized MSCI prices to open month; SBA launches; calendar builds with Axalta deal on tap; CalRes volatile

By Paul Deckelman

New York, Aug. 1 – The high yield market opened the month of August on Monday with a burst of activity in the primary sphere.

At least one new dollar-denominated junk deal was definitively heard to have priced, as MSCI, Inc., a provider of research and analytical services to the financial community, came to market with an upsized $500 million of 10-year notes.

A second offering was being shopped around the market with an eye toward a possible Monday pricing – an eight-year deal from wireless antenna tower operator SBA Communications Corp. While traders saw that prospective transaction upsized to $1.1 billion and launched, pricing had not been seen by the end of the day.

A deal out of Europe was heard to have priced, – a €750 million tranche of 7.5-year notes from another communications tower operator, Spain’s Cellnex Telecom SA.

An $875 million equivalent dual-currency transaction, consisting of dollar- and euro-denominated eight-year notes from industrial coatings manufacturer Axalta Coating Systems Ltd., is meanwhile expected to price on Tuesday.

Looking a little further ahead, mortgage insurer MGIC Investment Corp. was heard by high yield syndicate sources to have begun a short roadshow for a planned $350 million issue of seven-year notes expected to price sometime around the middle of the week.

And beauty-care products company Avon Products, Inc. unveiled plans to sell $400 million of six-year paper as part of the financing for Avon’s separately announced tender offer for some of its existing bonds.

Away from the new-deal realm, California Resources Corp.’s different series of bonds were moving around in response to the energy company’s announcement that it would pay up to $565 million in cash in a tender offer for four series of notes.

Statistical market performance measures were mixed for a second consecutive session on Monday. They had turned mixed on Friday after having been lower across the board on Thursday. It was the third mixed session in the last four trading days.

Upsized MSCI prices

The day’s sole dollar-denominated pricing came from MSCI Inc., which came to market with $500 million of 10-year senior notes (Ba2/BB+), high yield syndicate sources said.

The quick-to-market issue was upsized from the $400 million originally announced earlier in the session.

The notes priced at par to yield 4 ¾%, at the tight end of pre-deal price talk in the 4.75%-to-5% area.

The Rule 144A/Regulation S issue was brought to market via bookrunners J.P. Morgan Securities LLC, Goldman Sachs & Co. and Morgan Stanley & Co. Inc.

The New York based provider of analytics and research to money managers and other investors plans to use the proceeds from its bond deal for general corporate purposes, including buybacks of its common stock and potential acquisitions.

Secondary market traders did not immediately report any initial aftermarket activity in the new MSCI notes.

SBA launches upsized offering

SBA Communications launched an upsized $1.1 billion offering of eight-year notes.

A high yield syndicate source said that the issue – upsized from an originally announced $800 million – was launched with a coupon of 4 7/8%.

He said it was expected to price at 99.178 to yield 5%, in line with price talk envisioning a yield between 4 7/8% and 5%.

As of Monday evening, there had been no word on whether the deal had actually priced.

High yield syndicate sources said that the Rule 144A/Regulation S offering would be coming to market via Deutsche Bank Securities Inc.

SBA, a Boca Raton Fla.-based wireless telecom infrastructure company, plans to use the net proceeds from the offering, along with cash on hand, to redeem its outstanding 5¾% senior notes due 2020.

Cellnex euro deal is priced

Another communications antenna operator – Spain’s Cellnex Telecom SA – priced €750 million notes due in January of 2024, European high yield sources said Monday.

Those bonds carry a 2 3/8% coupon.

The issue came to market via bookrunners Morgan Stanley, Banca IMI, ING Bank, Natixis Capital Markets, Royal Bank of Scotland, Santander Bank and Societe Generale.

Madrid-based Cellnex, which operates more than 15,000 antenna towers in Spain, Italy, France and the Netherlands, plans to use the bond-deal proceeds for future growth opportunities.

Dual-currency deal on tap

The syndicate sources said that a deal denominated in both dollars and euros could be pricing during Tuesday’s session, as Axalta Coating Systems Ltd. – a Philadelphia-based maker of paints, varnishes and other industrial coating products – is expected to price $875 million equivalent of new paper.

The company set price talk on its issue of eight-year senior notes (B2/B+) on Monday, with the dollar-denominated portion of the deal in the 5% area, while the euro-denominated tranche was talked in a 4.25% to 4.5% range.

Tranche sizes on the deal will be announced.

The order books on the deal are scheduled to close at 9 a.m. ET on Tuesday, with pricing expected thereafter.

The deal will be brought to market via left bookrunner Barclays Capital Inc., which will handle billing and delivery, plus bookrunners Deutsche Bank, Goldman Sachs, Bank of America Merrill Lynch, Citigroup Global Markets, Inc.,Credit Suisse Securities (USA) LLC and J.P. Morgan.

PNC Capital Markets LLC and SunTrust Robinson Humphrey Inc. will be the co-managers.

Axalta plans to use the new-deal proceeds to refinance its 7 3/8% senior notes due 2021, pay related fees and expenses and for general corporate purposes, including adding cash to the company’s balance sheet. .

MGIC hits the road

Also going in in the suddenly busier primary on Monday, MGIC Investment Corp. began a short roadshow

for the company’s planned $350 million issue of seven-year senior notes (Ba3/BB).

That marketing campaign opened on Monday in New York with a group investor luncheon and conference call and moves on to Boston on Tuesday.

The roadshow is scheduled to continue on Wednesday, but no details on that session have yet been made available.

The deal is expected to price at mid-week following the roadshow.

The SEC registered offering is being brought to market via sole bookrunner Goldman and co-manager Morgan Stanley.

MGIC, a Milwaukee-based mortgage insurance company, plans to use the net proceeds from the offering, together with, in certain cases, shares of common stock, to purchase a portion of its 2020 convertible notes and may use a portion of the net proceeds to purchase a portion of its 2063 convertible debentures owned by holders other than MGIC.

It also plans to use some of the proceeds to purchase common shares to offset the shares used as partial consideration in the purchase of the 2020 convertible notes.

Any remaining net proceeds will be used for general corporate purposes.

Avon plans note sale

Avon Products, the New York-based maker and marketer of beauty-care products, announced on Monday that a company subsidiary will sell $400 million of senior secured notes due 2022 as part of the financing for Avon’s separately announced tender offer for some of its existing bonds.

There was no immediate information available in the market Monday on the timing of the Rule 144A/Regulation S notes offering or official confirmation of the underwriting banks – although Bank of America’s Merrill Lynch, Pierce, Fenner & Smith Inc. subsidiary, Citigroup Global Markets Inc. and Goldman, Sachs & Co. will be the dealer managers on the related tender offer.

Avon is tendering for up to $650 million total principal amount of its $1.35 billion of existing 2018, 2019 and 2020 senior notes.

The tender offer expires on Aug. 26, with an early tender deadline of 5 p.m. ET on Aug. 12.

Avon plans to fund the tender offer with cash on hand and proceeds from the new secured bond deal.

California Resources plans tender

Away from the primary market, a trader said that there was not much going on in recently priced issues such as NXP Semiconductors NV, FAGE International SA and Post Holdings Inc., which had been among the issues dominating the Most Actives lists last week.

Instead, the focus switched to existing credits such as California Resources, whose bonds traded mixed on Monday after the company announced a tender offer for its four series of notes.

A trader said the 8% notes due 2022 dropped “about 5 points” to the high-50s. He noted that the 5% notes due 2020 moved up 8 to 10 points on the day, “since they were the first priority of the tender issues.”

Another trader said the 8% notes were “very active,” declining 6½ points to 57½.

He noted that the 5½% notes due 2021 were “virtually unchanged” at 48¾.

With the 5% notes at the first priority level, the 5½% note and 6% notes due 2024 are the second level of priority, with the 8% notes making up the last level. For each $1,000 of notes tendered, holders of the 5% notes will receive $560 in cash, while holders of the 5¼% notes will get $540 and the 6% notes will get $510.

The 8% notes will receive $510 per each $1,000 of notes.

There is an early tender premium of $50 if holders tender by the early deadline of 5 p.m. ET on Aug. 12.

The offer expires 11:29 P.m. ET on Aug. 26.

The Los Angeles-based oil and gas producer is seeking a $700 million five-year first-lien second-out term loan to pay for the offer.

The company held a lender call in the morning to launch the loan that is guided in the mid-to-high 11’s type yield and is non-callable for three years, then with half the coupon in year four, according to a market source.

The debt is a secured financing being done in loan form but with total return characteristics consistent with bonds, the source explained.

Pricing is expected on Friday.

Goldman Sachs Bank USA is leading the deal that will pay down existing term loan and revolver debt.

The company is also seeking an amendment to its existing first-lien secured credit agreement to allow for tender offers for its 5% senior notes due 2020, 5¼% senior notes due 2021, 6% senior notes due 2024 and 8% second-lien secured notes due 2022 that can be purchased with $525 million in cash, reduce revolver commitments to $1.4 billion from $1.6 billion and grant a lien on assets not currently pledged to secure the existing facilities.

Indicators stay mixed

Statistical market performance measures were mixed for a second consecutive session on Monday. They had turned mixed on Friday after having been lower across the board on Thursday. It was the third mixed session in the last four trading days.

The KDP High Yield index gained 14 basis points on Monday to end at 69.14, its first improvement after five straight losses, including Friday’s 6 bps downturn.

However, even though the index reading rose, the yield – which typically moves inversely to the index, raising when the index level falls and vice versa – continued to move upward on Monday. It rose by 3 bps to 5.71% – its third straight widening and fifth in the last six sessions.

But Markit Series 26 CDX index plunged by 21/32 point on Monday to end at 103¾ bid, 103 25/32 offered, its second loss in the last three sessions. On Friday, it had gained 3/8 point.

The Merrill Lynch High Yield index suffered its fifth consecutive loss after six straight advances. It was down by 0.048%, after having fallen by 0.087% on Friday.

That loss lowered the index’s year-to-date return to 12.027% from 12.059% on Friday, which itself was down from last Monday’s close at 12.546%, the index’s fifth consecutive new peak year-to-date return.

Stephanie N. Rotondo contributed to this review

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