Downsized ServiceMaster prices, also Associated Materials, Kissner; funds dive by $4 billion-plus

By Paul Deckelman

New York, Nov. 3 – After a one-day hiatus, pricing activity returned to the domestic high-yield arena on Thursday, syndicate sources said, as a trio of issuers brought $1.83 billion of new U.S. dollar-denominated and fully junk-rated paper to market during the session.

That was a clear improvement over Wednesday, when there had been no pricings from domestic or industrialized-country borrowers, but lagged well behind the monumental issuance seen on Tuesday, when nearly $3.5 billion had gotten done by five issuers bringing seven tranches – the most new-issue activity seen in Junkbondland in nearly two months.

The big deal of the day Thursday came from cleaning and maintenance services provider ServiceMaster Global Holdings Inc. – although that $750 million issue of eight-year notes was not as big as it could have been since the company elected to shift some of what had originally been a $1 billion bond deal into its concurrent term loan financing.

Associated Materials Group Inc. priced $675 million of 7.25-year notes in a deal that largely came in under most market players’ radar screens.

Canadian rock salt producer Kissner Holdings LP brought a $400 million issue of six-year secured paper to market.

Out of Europe came word that Synlab Bondco plc, a debt-pricing unit of German medical and environmental laboratory services provider Synlab Holding GmbH plans to sell €940 million of six-year secured notes.

And Guala Closures SpA, an Italian manufacturer of bottle caps and other bottle-closing products began shopping around a €500 million five-year issue of senior secured floating-rate notes.

Away from the new deals, Valeant Pharmaceuticals International Inc.’s bonds, on a roll over the past two days, seemed to settle back down, buffeted by some negative headlines.

Statistical market performance measures turned mixed on Thursday after being lower across the board for six consecutive sessions.

High-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall junk market liquidity trends – nosedived deep into the red this week, recording their fourth consecutive net outflow, as $4.116 billion more left those weekly reporting domestic funds in the form of investor redemptions than came into them during the reporting week ended Wednesday.

That cash hemorrhage – the biggest seen so far this year and the third biggest cash drain on record – followed three straight weeks of modest outflows (see related story elsewhere in this issue).

Smaller ServiceMaster prices

ServiceMaster Global Holdings had the big deal of the day in the high-yield world, pricing $750 million of eight-year senior notes (B1/BB) on Thursday via subsidiary ServiceMaster Co., LLC as the formal issuer of record.

The notes priced at par to yield 5 1/8%, in the middle of price talk of 5% to 5¼%.

But before the deal came to market, it was downsized from its original $1 billion size, syndicate sources said, with part of the difference shifted onto a term loan financing the company has been concurrently arranging.

The term loan was enlarged to $1.65 billion from an originally planned $1.5 billion.

The decrease in the overall size of the bond and term loan financing to $2.4 billion from $2.5 billion will be reflected in a $100 million reduction in balance sheet cash.

The still-sizable deal came to market via bookrunners Credit Suisse Securities (USA) LLC, J. P. Morgan Securities LLC, Capital One Securities Inc., Goldman Sachs & Co., Morgan Stanley & Co. Inc., Natixis Securities America LLC, Regions Securities LLC and RBC Capital Markets LLC.

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

Associated Materials drops in

Associated Materials priced $675 million of 9% senior secured notes due Jan. 1, 2024 in a deal that came to market with little advance fanfare – the first that many market participants learned of the deal was the company’s press release announcing that it had gotten done.

The notes priced at 97 to yield 9.59% via bookrunners Goldman Sachs and UBS Securities LLC.

Associated Materials, a Cuyahoga Falls, Ohio-based vertically integrated manufacturer and distributor of exterior residential building products in the United States and Canada, including vinyl windows, siding, railings and fencing, and aluminum and steel siding, plans to use the expected new-deal proceeds largely for debt repayment.

It intends to fund a tender offer for its outstanding 9 1/8% senior secured notes due 2017 and to redeem any notes not purchased in the tender as well as to repay borrowings on the company’s asset-based credit facility.

It will also repay a first-lien promissory note held by an affiliate of Hellman & Friedman LLC, a New York-based private equity firm whose affiliated funds own 97% of Associated Materials Group.

The proceeds will first be put into escrow upon settlement of the deal while the company and several of its subsidiaries engage in a round of internal transactions.

Eventually, subsidiary Associated Materials LLC and its wholly owned subsidiary, AMH New Finance, Inc., will assume the obligations under the 9% notes, and the notes will be guaranteed by all of Associated Materials LLC’s direct and indirect domestic subsidiaries, other than AMH New Finance.

Kissner comes to market

The day’s other dollar-denominated pricing came from Kissner Holdings, a Cambridge, Ont.-based vertically-integrated producer and distributor of bulk rock salt and packaged specialty deicing products, as well as salt for culinary use.

It priced $400 million of six-year senior secured notes at par to yield 8 3/8%, at the tight end of the 8½% area price talk.

The company’s Kissner Milling Co. Limited, B.S.C. Holding, Inc. and Kissner USA Holdings Inc. subsidiaries joined the parent company as co-issuers on the deal.

The regularly scheduled forward calendar offering was brought to market via sole bookrunner Jefferies.

Kissner plans to use the proceeds to refinance existing debt and to fund a distribution to its corporate parent.

European issuers gear up

High-yield syndicate sources in Europe meantime reported a pair of prospective new deals emerging and starting to be shopped around.

Synlab Bondco was heard planning to sell €940 million of senior secured notes due 2022 in fixed-rate and floating-rate tranches, although information on the exact timing of timing of the deal and the investment banks that will be involved in the transaction have yet to surface.

The company – a debt issuance vehicle for Synlab Holding GmbH, an Augsburg, Germany-based provider of laboratory services in Europe for human and veterinary medicine and environmental analysis – plans to use the proceeds to redeem its €775 million of senior secured floating rate notes and to repay all outstanding revolving credit facility borrowings.

Remaining proceeds will be used for general corporate purposes, including and primarily financing acquisitions in furtherance of its strategy of pursuing growth opportunities through selective acquisitions in its current markets and in new markets.

From Italy, syndicate sources said that Guala Closures set initial coupon guidance on its €500 million of senior secured floating-rate notes due 2021 at 475 to 500 basis points over Euribor.

The notes were expected to price between 99.5 and par.

The issue will be brought to market via bookrunner Credit Suisse (Europe) Ltd.

The issue will be guaranteed by GCL Holdings SCA, the direct holding company of the issuer, and certain of the guarantor’s subsidiaries.

Guala Closures, a manufacturer of bottle tops and other closures for beverage containers, announced plans for the note offer on Wednesday.

It said that the proceeds will be used to fund a tender offer for its €275 million of floating-rate senior secured notes due 2019 and for parent GCL Holdings’ €200 million of 9 3/8% senior notes due 2018.

Valeant backs off

Away from the new deals, a trader said that Valeant Pharmaceuticals International’s bonds were easier, after two straight days of solid upside.

He quoted the Laval, Que.-based drugmaker’s 6 1/8% notes due 2025 at 80 bid, down 1 point on the day.

He noted that “there are a lot of headlines out there” about the company – some of them positive, such as the news that it will be selling its Salix stomach-medication business for about $10 billion and that it is shopping its eye-surgery equipment business as well. But others were not so positive. Former shareholders of another Valeant acquisition, Sprout Pharmaceuticals, filed suit against Valeant in Delaware, claiming that it had breached the terms of the 2014 merger deal between the two companies.

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