ACE Cash, Itron, revamped BMC close $11.2 billion primary week; new Jeld-Wen busy

By Paul Deckelman and Paul A. Harris

New York, Dec. 8 – The high-yield primary market closed out one of its busiest weeks so far this year on Friday with a trio of new deals coming off the forward calendar and generating $800 million of fully junk-rated, dollar denominated paper, although that was down from Thursday’s $2.43 billion in seven tranches.

Financial services concern ACE Cash Express, Inc. did an upsized $350 million of five-year senior secured notes.

Traders said those bonds – which had priced at a steep discount to par – rose solidly when they hit the aftermarket.

Technology and services provider Itron, Inc. priced $300 million of eight-year notes. Those bonds too did well when they were freed for secondary dealings.

And BMC Software brought a $150 million add-on to its existing 2021 paper. That deal had originally started out as a euro-denominated offering, undergoing several subsequent revisions before pricing.

Syndicate sources meantime heard that McGraw-Hill Education, Inc. had withdrawn its planned $250 million $250 million PIK toggle notes offering.

The day’s issues raised the week’s total issuance of new dollar-denominated and junk-rated new paper to some $11.2 billion in 21 tranches, according to data compiled by Prospect News – but as robust as that volume was, it was still down from the even more impressive $13.12 billion which had gotten done the week before, ended Dec. 1.

New-deal issuance and recently priced bonds dominated the secondary market Friday, particularly drugmaker Valeant Pharmaceuticals International, Inc.’s offering from Monday and Thursday’s two-part offering from door and window manufacturer Jeld-Wen, Inc.

Apart from those recent issues, traders saw firmer levels on energy credits like California Resources Corp. and Denbury Resources Inc., in line with a second straight day of firmer crude oil prices.

Statistical market performance measures were higher on Friday after turning mixed on Thursday.

The indicators were mixed on the week versus where they had finished out the previous Friday, their second consecutive mixed week after one higher week.

ACE upsize funds dividend

In Friday’s primary market ACE Cash Express priced an upsized $350 million issue of 12% five-year senior secured notes (S&P: B-) at 98.50 to yield 12.412%.

The deal was increased from $290 million.

The coupon came on top of coupon talk. The reoffer price came in the middle of price talk which specified an original issue discount of 1 to 2 points.

Proceeds will be used to refinance the company’s 11% senior secured notes due 2019. The additional proceeds resulting from the $60 million upsizing of the deal will be used to fund a distribution to shareholders.

Credit Suisse was the lead bookrunner. Jefferies was the joint bookrunner.

Itron atop tightened talk

Itron priced a $300 million issue of eight-year senior notes (B2/BB-) at par to yield 5%.

The yield printed on top of final yield talk, which tightened from earlier official talk that was announced in the 5¼% area.

Wells Fargo was the left bookrunner.

The Liberty Lake, Wash.-based technology and services company plans to use the proceeds, together with cash on hand and new senior secured credit facilities, to fund the acquisition of Silver Spring Networks Inc. and refinance existing debt.

BMC taps 8 1/8% notes

BMC Software priced a $150 million tack-on to BMC Software Finance, Inc.’s 8 1/8% senior notes due July 15, 2021 (Caa2/CCC+).

The reoffer price of 99.5 came cheap to previously expected pricing of 99.75.

The yield to worst is 8.287%.

Meanwhile, a proposed €250 million offering of six-year senior notes (Caa2/CCC+) was withdrawn.

The euro-denominated tranche had been downsized earlier in the week from €380 million, with the announcement of the $150 million tack-on which priced Friday.

As a result of the further downsizing of the debt refinancing effort, $300 million of the Houston-based software company’s holdco notes will remain outstanding.

Credit Suisse was the lead bookrunner.

McGraw-Hill withdraws

McGraw-Hill Education withdrew its proposed $250 million offering of senior PIK toggle notes (Caa1/CCC+) to be issued by MHGE Parent, LLC and MHGE Parent Finance, Inc.

The withdrawal came amid a buzz in the market that there were $100 million to $120 million of reverse inquiry in the deal, an investor said.

Recent news on the offering of toggle notes was characterized by concessions to potential investors. Price talk widened and call protection increased. The most recent talk had the notes coming with a 10% coupon at a reoffer price of 99. Earlier talk was in the 9½% area.

Credit Suisse was the lead bookrunner.

The New York-based provider of education materials had planned to use the proceeds to refinance its MHGE HoldCo notes.

The refinancing also includes a $150 million term loan. The company intends to go forward with the loan, which priced and allocate on Friday, an informed source said.

The high volume of post-Thanksgiving new issue business may have dampened investor interest in deals that are aggressively structured, and/or come with triple C ratings, a sellside source said on Friday.

The week ahead

The Dec. 11 week will continue to see vigorous new deal activity, sources said on Friday.

Look for around $5 billion in a week that could see much of that volume concentrated in the Monday to Wednesday timeframe, a banker said.

Churchill Downs Inc. is expected to bring $300 million of high-yield notes to market during the Dec. 11 week, according to a buyside source.

Initial guidance has the deal coming with a yield in the low 5% area, the source added.

JP Morgan Securities will lead the debt refinancing.

Meanwhile Par Petroleum, LLC is in the market with a $300 million sale of senior secured notes due 2025 (B1/BB-), set to price in the Dec. 11 week.

Early guidance has the deal coming in the 8% area.

And in the Canadian dollar-denominated market, Tidewater Midstream and Infrastructure Ltd. is selling C$100 million of five-year senior notes via CIBC.

Beyond the Dec. 11 week, most (but not all) market watcher expect the drumbeat of new issuance to be drowned out by sleigh bells.

The Dec. 18 week could come and go without any primary activity, some say, while others suggest that with Christmas Eve falling on a Sunday, new issue activity could continue deeper into the year.

Burger King two-part deal

In the European market Burger King France SAS priced €260 million of notes on Friday.

The deal saw €10 million shifted to an add-on tranche from a PIK toggle notes tranche.

The deal included an upsized €60 million add-on to the issuer’s Euribor plus 525 basis points senior secured floating-rate notes due May 1, 2023 which priced at 101.75. The add-on was increased from €50 million. Credit Suisse was the left bookrunner for the add-on.

Meanwhile NewCo GB, the holding company, priced a downsized €200 million issue of PIK toggle notes at par. The tranche was cut from €210 million. The notes pay a cash coupon of 8% which steps up to 8¾% for in-kind coupon payments. Goldman Sachs was the left bookrunner for the PIK toggle notes.

Proceeds from both issues will be used to help fund the acquisition of BDBK, a company indirectly wholly owned by Groupe Bertrand, Burger King France’s controlling shareholder and biggest franchisee. Some of the proceeds from the floating-rate notes may be used as cash on the balance sheet for general corporate purposes.

Thursday outflows

Daily cash flows for dedicated high-yield bond funds were negative on Thursday, the most recent session for which data was available at press time, according to a buyside source.

High-yield ETFs sustained $121 million of outflows on the day.

Asset managers saw $125 million of outflows on Thursday.

Despite a Thursday report from Lipper US Fund Flows that the dedicated junk bond funds saw $217 million of net inflows in the week to the Wednesday, Dec. 6 close, the most recent flows have been negative, the buysider said.

The Tuesday-Wednesday period saw high-yield ETFs sustaining nearly $1 billion of outflows: negative $505 million on Tuesday and negative $444 million on Wednesday.

Second straight strong week

Friday’s three deals brought the amount of new dollar-denominated and fully junk-rated paper from domestic or industrialized-country borrowers that had priced during the week up to $11.21 billion in 21 tranches, according to data compiled by Prospect News.

As robust as it was, that was actually down from the $13.12 billion which had priced in 23 tranches the week before, ended Dec. 1 – the second heaviest new-issuance week so far this year, lagging only the week ended March 10, which saw an astounding $17.53 billion of new junk paper come to market in 26 tranches, the biggest new-issuance week ever for the junk market, the data indicated.

The latest week’s issuance and the week before’s were a quantum improvement on the meager $3.38 billion which priced in seven tranches during the previous week, ended Nov. 24 when there had been a full market close on the Thursday for Thanksgiving, sandwiched in between shortened pre- and post-holiday sessions.

This week’s slew of new deals raised year-to-date issuance for 2017 to $277.62 billion in 513 tranches, running 27.4% ahead of the $217.89 billion which had priced in 341 tranches by this point on the 2016 calendar, the Prospect News data indicated.

ACE trades up

In the secondary market, a trader said that once again, the story of the day was “all new issues – that’s all it is.”

At another desk, a market source observed that “most of these [new] deals are not coming out of the gate raging higher” but have rather been trading at or just a little above their respective issue prices or, in a few cases, even lower.

“That seems to be a pattern,” he declared.

But one exception to that rule was Friday’s new offering from ACE Cash Express.

A market source said that those 12% senior secured notes due 2022 – which had priced at a steeply discounted 98.5 – shot up to around 101¼ bid when they were freed for trading, with more than $23 million changing hands.

A market source at another desk saw the Irving, Texas-based nontraditional financial services provider’s regularly scheduled forward calendar deal paper in a 101¼ to 102 bid context.

Itron issue improves

Another new deal seen doing well was Itron’s 5% notes due Jan. 15, 2026.

That regularly scheduled offering priced at par and then was seen by a trader firming to 100¾ on volume of more than $35 million.

Another trader saw those notes going home in a 100 5/8 to 101 1/8 bid context.

BMC existing bonds fall

A trader said that he had not seen any trading in the new BMC Software add-on notes – but did see the existing 8 1/8% notes due 2021 trading in a 100 5/8 to 101 3/8 bid context.

And at another shop, a trader saw those latter bonds eventually going home at 99 7/8 bid, calling that a 1 1/8 point slide from their levels before the new deal was announced.

Valeant, Jeld-Wen active

A trader said that the recently priced new offering from Valeant Pharmaceuticals was the most actively traded junk bond of the day, with over $41 million seen having traded.

He said that those 9% notes due 2025 finished the day at 100¾ bid, calling that a 1¼ point jump from prior levels.

The Laval, Que.-based drug manufacturer priced $1.5 billion of the notes at 98.611 this past Monday, to yield 9.25%.

Valeant’s existing 5 7/8% notes due 2023 meantime firmed to 90½ bid, a gain of 1¾ points.

After Valeant, the new bonds from Jeld-Wen that priced Thursday were the most active credits, on volume in the $37 million to $38 million area for each tranche.

The company’s 4 5/8% notes due 2025 were seen finishing at 100 5/8 bid, up from their par pricing level but down from initial aftermarket peaks around 101 bid.

Its 4 7/8% notes due 2027 followed the same trajectory, trading up from their par issue price to around 100¾ bid in fairly light initial aftermarket dealings and then back down to around 100½ in Thursday’s activity.

Energy credits climb

Apart from the new deals, traders said that the energy sector was stronger, in line with renewed strength in world crude oil prices, which rose for a second straight session.

California Resources’ 8% notes due 2020 gained ¾ point to close at 77 ¼ bid. Jones Energy Holdings LLC’s 6¾% notes due 2022 gained 1¼ points, ending at 73.

Denbury Resources’ 9% notes due 2021 ended at 100 1/8 bid, up 7/8 point on the session.

The rise coincided with a second straight gain in world crude prices, with January-delivery West Texas Intermediate ending the day up 67 cents per barrel on the New York Mercantile Exchange dealings to settle at $57.36.

February-delivery North Sea Brent jumped by $1.20 per barrel in London futures trading, finishing at $63.40.

Indicators turn better

Statistical market performance measures were higher on Friday after turning mixed on Thursday, which followed Wednesday’s lower all around performance, the first losing session since Nov. 15.

The indicators were mixed on the week versus where they had finished out the previous Friday, their second consecutive mixed week after one higher week.

The KDP High Yield Daily Index was unchanged on Friday at 71.83. On Thursday, it had lost 5 bps to finish there after being unchanged on Wednesday.

Its yield meantime came in by 1 bp to 5.28% after rising by 2 bps on Thursday.

Those levels compared to last Friday’s 71.86 index reading and 5.31% yield.

The Markit CDX Series 29 index was up 7/32 point Friday to 107 15/16 bid, 108 offered after edging up by almost 1/16 point on Thursday, following losses in two straight sessions before that.

It was up for the week from the prior Friday’s 107 13/16 bid, 107 7/8 offered finish.

The Merrill Lynch North American High Yield Master II Index was up 0.036% on Friday, its first gain after two straight sessions on the downside, including Thursday’s 0.045% drop.

That gain raised the index’s year-to date return to 7.219% Friday from Thursday’s 7.18%. The year-to-date return also remains off from the 7.636% posted on Oct. 24 – the peak cumulative return for 2017 so far.

For the week, the index was up by 0.032%, its fourth straight weekly improvement.

© 2015 Prospect News.
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