Dollar primary quiets down; sterling deals price; Telesat slates; Tutor Perini spikes deal

By Paul Deckelman

New York, Nov. 2 – The high-yield market took a step backward – and took a breather – on Wednesday, after having seen one of its heaviest new-issuance days in many weeks on Tuesday.

No new dollar-denominated and fully junk-rated issues from domestic or industrialized-country borrowers came to market during the session. That was in sharp contrast to Tuesday, when five issuers combined to price $3.49 billion in seven tranches, the most new paper to get done in nearly two months.

The forward calendar built only modestly on Wednesday, with one new deal announced: Canadian satellite communications company Telesat Canada’s $750 million of eight-year notes.

In fact, the calendar lost an issue, as construction company Tutor Perini Corp. announced that it was postponing its planned $500 million eight-year deal, which had been seen as a possible candidate for pricing on Wednesday.

If not much of substance was going on in the U.S. high-yield market, the same could not be said about the British high-yield sphere on Wednesday.

There, two sterling-denominated deals were heard by syndicate sources to have priced.

Gaming and betting-parlor operator Ladbrokes Group Finance plc priced £400 million of seven-year notes in support of its pending merger with industry rival Gala Coral Group Ltd.

And pub chain operator Enterprise Inns plc priced £250 million of six-year secured bonds to finance its tender offer for a nearer-maturing existing issue.

Looking ahead to Thursday, ServiceMaster Global Holdings, Inc. is expected to price its $1 billion eight-year issue during the session.

In the secondary market, traders saw impressive volume in some of the issues that had priced during Tuesday’s big bond barrage, such as Lamb Weston Holdings, Inc., Jack Ohio Finance LLC, Precision Drilling Corp. and Codere SA.

However, all of those new deals were backpedaling from whatever gains they had notched in Tuesday’s post-pricing aftermarket dealings, in line with Wednesday’s generally lower market.

One exception to the overall negative trend, however, was Valeant Pharmaceuticals International Inc. The Canadian drug maker’s bonds had firmed smartly in Tuesday dealings and added modestly to those gains on Wednesday, the two days’ upside movement fueled by news the debt-laden company is looking to raise cash for deleveraging via asset sales.

But it was a generally down day. Statistical market performance measures were lower across the board for a sixth consecutive session on Wednesday.

Telesat Canada deal slates

One new prospective issue emerged in the dollar-denominated primary market on Wednesday, as Telesat Canada announced plans to issue $750 million of senior notes due 2024, along with co-issuer Telesat LLC.

The timing of the planned offering and the investment banks participating in the transaction have not been announced yet.

Telesat Canada – a wholly-owned subsidiary of Telesat Holdings Inc., an Ottawa-based communications satellite operator – plans to use the anticipated net proceeds from the bond deal and from a planned new credit facility primarily for debt repayment.

It will use those bond-deal and term-loan proceeds, plus cash on hand, to redeem its $900 million of outstanding 6% senior notes due May 15, 2017 and to repay all borrowings outstanding under its existing credit facilities.

It also plans to use some of those proceeds to fund its previously announced cash dividend to its shareholders.

Tutor Perini bows out

A deal that was expected to get done meantime fell by the wayside, as Tutor Perini said that it has decided to postpone its planned $500 million offering of eight-year senior notes (Ba3/BB), citing “adverse market conditions.”

The company said that it “will evaluate the timing for the proposed offering as market conditions develop.”

Tutor Perini, a Sylmar, Calif.-based civil and building construction company, had planned to use the expected proceeds from that deal together with borrowings under a new revolving credit facility that it was concurrently arranging to redeem its existing 7 5/8% senior notes due 2018 and pay existing term loan and revolver borrowings.

But it said Wednesday that “at this time [it] does not intend to redeem its outstanding 7.625% senior notes due 2018 or enter into a new credit facility.”

The postponed deal was to have come to market via left bookrunner Goldman Sachs & Co., along with joint bookrunners SunTrust Robinson Humphrey Inc., BMO Capital Markets Corp. and KeyBanc Capital Markets Inc.

Tutor Perini had announced plans for the notes sale last Monday, Oct. 24, and high-yield syndicate sources thought it might have priced by the end of last week, following a roadshow. However, the offering was carried over from last week on to this week’s forward calendar.

Syndicate sources on Tuesday reported price talk in a 7% to 7.25% range – considerably wider than the 6.375% initial guidance had been.

And while the order books had been scheduled to close at 10:30 a.m. ET on Wednesday, with pricing expected thereafter, the bond issue never did come to market.

Sterling deals price

But deals were getting done on Wednesday in Merry Olde England.

London-based betting and gaming company Ladbrokes Group Finance priced £400 million of 5 1/8% notes due 2023 (/BB/BB) on Wednesday, syndicate sources said.

The notes priced at par after the issue was upsized from the £300 million that the company had earlier elected as the size of its benchmark offering.

The pricing took place in line with price talk envisioning a 5 1/8% yield.

The deal, which surfaced on the radar screens at the end of last week, was brought to market via active bookrunners Barclays, which will handle billing and delivery; Lloyds Bank; MUFG and RBS Securities Inc., plus joint bookrunner Mediobanca SpA.

Ladbrokes plans to use the new-deal proceeds to refinance bank debt facilities put in place to support its planned merger with industry rival Gala Coral Group.

Enterprise Inns upsizes

Also in the British bond market, Enterprise Inns priced £250 million of six-year secured bonds, upsized from an originally announced £150 million.

The notes priced at par with a 6 3/8% coupon.

The deal was brought to market via joint global coordinators and joint bookrunners BNP Paribas and Lloyds, along with joint bookrunners Deutsche Bank and Royal Bank of Scotland.

Enterprise – a leased and tenanted pub company based in Solihull, England – plans to use the proceeds to fund its previously announced tender offer for a portion of its £350.48 million of 6½% secured bonds due 2018 remaining outstanding from the originally issued £600 million.

ServiceMaster up next

Looking ahead to Thursday’s session, syndicate sources said they would be watching for ServiceMaster Global Holdings’ $1 billion of eight-year senior notes, which are expected to price after a short roadshow.

A source said that price talk on the deal was likely to be issued on Thursday morning.

The issuer will be the company’s ServiceMaster Co. subsidiary.

The megadeal will come to market via Credit Suisse Securities (USA) LLC, J.P. Morgan Securities LLC, Capital One Securities, Goldman Sachs & Co., Morgan Stanley & Co. LLC, CIB Natixis, Regions Securities and RBC Capital Markets Corp.

ServiceMaster, a Memphis-based provider of janitorial, cleaning, pest-control and systems maintenance services to commercial and residential customers, plans to use the expected new-deal proceeds to refinance existing debt and for general corporate purposes.

Jack gets whacked

Looking at the deals that came to market during Tuesday’s hectic session, a trader noted that the new Jack Ohio $1.05 billion two-part issue “was trading below par after opening up that way.”

He saw its 6¾% first-lien senior secured notes due 2021 around 99¼ bid and its 10¼% second-lien notes due 2022 around 98¼ bid.

A second trader said that the Detroit-based gaming company’s first-lien notes traded between 98¾ and par bid, with their last prints around 99 to 99 3/8, with over $27 million having changed hands.

He saw only about $2 million of the second-lien notes moving around, pegging them between 98¼ and 98 3/8 bid.

Both tranches of the regularly scheduled forward calendar deal – the $750 million of first-lien paper and the $300 million of second-lien notes – had priced at par on Tuesday.

Recent deals retreat

Among Tuesday’s other new issues, both tranches of Lamb Weston Holdings’ $1.67 billion bond behemoth, which had traded up above 101 bid on Tuesday on robust volume after pricing at par, gave up about half of those gains on Wednesday.

A trader saw the frozen potato products company’s $833 million of 4 5/8% notes due 2024 off ½ point, at 100 5/8 bid, with over $44 million traded.

Its $833 million of 4 7/8% notes due 2026 lost 9/16 point, ending at 100 7/16 bid, with over $55 million traded.

A trader saw Precision Drilling’s 7¾% notes due 2023 “wrapped around par” on Wednesday, off from Tuesday highs around 100 7/8 bid, with more than $20 million of volume. The Calgary, Alta.-based energy drilling contractor had priced $350 million of those notes at par.

Spanish gaming company Codere’s 7 5/8% senior secured notes due 2021 moved between 99¾ and 100½ bid, with “most of the prints at par,” a trader said. That was where the $300 million issue had priced on Tuesday, as part of a larger two-part offering that also included a euro-denominated secured five-year piece.

One of the traders saw Midcontinent Communications’ 6 7/8% senior notes due Aug. 15, 2023 trading in a 106 1/8-to-106¾ bid context, with around $6 million traded.

The Sioux Falls, S.D.-based regional cable operator had priced a quickly shopped $125 million add-on to the original $300 million of the bonds at 105.5 on Tuesday, yielding 5½%.

Valeant rise continues

Away from the new deals, traders saw continued strength in Valeant Pharmaceuticals’ bonds, which had shot up between 6 and 8 points on Tuesday in active dealings pretty much across the board on the news that the debt-laden Laval, Que.-based drug maker is looking to improve its financial position by selling its Salix stomach-drug business for as much as $10 billion and using the proceeds to chop down its $30 billion debt load.

On Wednesday, the Wall Street Journal reported that Valeant is also looking to unload its eye-surgery equipment operations for around $2.5 billion.

That helped push its bonds further up, with the 5 7/8% notes due 2023, the day’s busiest, gaining another ¼ point to 81¼ bid, with over $44 million traded.

Valeant’s 5 3/8% notes due 2020 rose ¼ point to 90¼ bid, with over $25 million traded.

The biggest gainer was Valeant’s 7% notes due 2020, which zoomed by more than 6 points on Wednesday to 93½ bid, as over $11 million changed hands.

Indicators stay negative

Statistical market performance measures were lower across the board for a sixth consecutive session on Wednesday; it was the seventh time in the last 13 sessions that the indicators were universally weaker.

The KDP High Yield index lost 27 basis points on Wednesday to close at 70.33, on top of its 31 bps plunge on Tuesday. It was the index’s seventh straight loss.

Its yield rose for a seventh consecutive session, widening by 7 bps to 5.71%, after having increased by 11 bps on Thursday.

The Markit Series 27 CDX index lost 5/32 point on Wednesday to end at 102 29/32 bid, 102 15/16 offered, its seventh straight loss. It had eased by around 9/32 point on Tuesday.

And the Merrill Lynch High Yield index, retreated by 0.333%, its sixth straight setback. It had also lost 0.403% on Tuesday.

The latest downturn cut the index’s year-to-date return to 14.829% from 15.213% on Tuesday – its first time back below the 15% mark since Sept. 28, when it ended at 14.889%.

© 2015 Prospect News.
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