Numericable deal leads $8 billion primary, heaviest in a year; Ally, Springleaf, MGM price too

By Paul Deckelman and Paul A. Harris

New York, April 6 – The high-yield market had its heaviest-volume day in more than a year on Wednesday. Over $8 billion of new dollar-denominated, fully junk-rated bonds from domestic or industrialized-country borrowers came clattering down the chute.

Traders saw some of those new issues having moved up in initial aftermarket dealings.

The big deal of the day, from French broadband and mobile telecommunications operator Numericable SFR SA, weighed in at $5.19 billion of 10-year secured notes after having been twice upsized. When the new notes hit the secondary market, traders saw them move up from their issue price and said it was the busiest junk bond of the day.

Two other of the day’s deals topped the $1 billion mark as well. Subsidiaries of gaming giant MGM Resorts International brought a $1.05 billion offering of eight-year notes to market, which were seen by traders to have firmed smartly when they moved into the secondary realm, and consumer finance company Springleaf Finance Corp. priced $1 billion of 4.75-year paper.

Another lender, Ally Financial Inc., rounded out the day’s primaryside activity with $900 million of new notes split into two parts – a tranche of new five-year securities and an add-on to its existing 2025 bonds.

The day’s tally of new junk bonds was not only easily the biggest seen so far this year but also the most going back to March of last year.

Away from the day’s pricings, traders also saw brisk activity in the two issues that priced earlier in the week – Monday’s offering of five-year notes from gasoline marketer Sunoco LP and Tuesday’s eight-year transaction from ATM manufacturer Diebold Inc.

Statistical market performance measures turned higher across the board on Wednesday after having been lower all around on Tuesday and mixed for the two sessions before that. It was indicators’ third upside session in the last six trading days.

Numericable massively upsized

The high-yield primary market saw its biggest session of 2016 to date on Wednesday as four issuers priced a combined five tranches to raise a whopping $8.13 billion, leaving the previous biggest day, March 30's $3.35 billion, in the dust.

Two of the four issuers upsized their deals, and by massive amounts.

Two of the four issuers priced their offerings in drive-by transactions.

Executions bore the earmarks of a red hot market.

Three of the five tranches priced at the tight ends of talk. One priced at the tight end of downwardly revised talk. And one priced inside of price talk.

Numericable priced a massively upsized $5.19 billion issue of 10-year senior secured notes (B1/B+) at par to yield 7 3/8%.

The issue size was increased from $3 billion after having previously increased from $2.25 billion.

The yield printed at the tight end of revised yield talk in the 7½% area. Earlier talk was in the 7¾% area.

Joint bookrunner J.P. Morgan Securities LLC will bill and deliver. BNP Paribas, Deutsche Bank, Barclays, BofA Merrill Lynch, Credit Agricole CIB, Goldman Sachs International and Morgan Stanley were also joint bookrunners for the debt refinancing deal.

MGM Growth

MGM Growth Properties Operating Partnership LP priced a $1.05 billion issue of eight-year senior notes (B2/B+) at par to yield 5 5/8%.

The deal was heard to be three-times oversubscribed at 5¾% late Wednesday morning, a trader said.

The yield printed 12.5 basis points below the tight end of the 5¾% to 6% yield talk.

Talk tightened from earlier guidance in the 6% area. The deal hit the market with pro forma guidance of 6% to 6¼%.

JPMorgan, BofA Merrill Lynch, Barclays, Citigroup Global Markets Inc., Deutsche Bank Securities Inc., BNP Paribas Securities Corp., FT and Morgan Stanley & Co. LLC were joint bookrunners for the deal, which came in relation to the spinoff of MGM Resorts International's gaming properties into a real estate investment trust.

Springleaf upsized and tight

Springleaf Finance priced a massively upsized $1 billion issue of non-callable senior notes due in Dec. 15, 2020 (B3/B) at par to yield 8¼%.

The deal size was increased from $400 million.

The yield printed at the tight end of the 8¼% to 8½% yield talk.

Credit Suisse Securities (USA) LLC, Barclays, Citigroup, Goldman Sachs, Natixis and RBC Capital Markets were the joint bookrunners for the 4.75-year notes issue, which the company brought to market for general corporate purposes and to refinance debt.

Ally prices two tranches

Ally Financial priced $900 million of high-yield notes (BB+/BB) in two tranches.

The deal included a $600 million tranche of new 4¼% five-year senior notes that priced at 99.442 to yield 4 3/8%. The yield printed at the tight end of the 4 3/8% to 4½% yield talk. Initial guidance was 4 5/8%.

In addition, Ally priced a $300 million add-on to its 5¾% subordinated notes due Nov. 20, 2025 at 97.476 to yield 6.1%. The yield printed at the tight end of the 6.1% to 6.15% yield talk. Initial guidance was 6.3%.

BofA Merrill Lynch, Barclays, Citigroup, Deutsche Bank and RBC were the leads for the debt refinancing and general corporate purposes deal.

LKQ talk is 4% area

LKQ Corp. talked its €500 million offering of non-callable eight-year senior notes (Ba2/BB) to yield in the 4% area.

Books close at 5 a.m. ET on Thursday, and the deal is set to price thereafter.

Global coordinator BofA Merrill Lynch will bill and deliver. HSBC is also a global coordinator.

The talk on LKQ's euro-denominated offer seemed tight to some investors, a trader said, adding that the Chicago-based company's dollar-denominated notes traded higher because of it. The LKQ 4¾% senior notes due May 15, 2023, which had been trading with a 5% yield, were up a point at 98 bid, the trader said.

There will be additional euro-denominated business over the course of the coming fortnight, according to a London-based debt capital markets banker who added that euro-denominated new issue volume is not expected to be exceptionally high during that period.

The only other deal on the active forward calendar is Quorum Health Corp.'s $400 million offering of seven-year senior notes (Caa1/CCC+).

The spinoff-related deal, which is being led by Credit Suisse, is set to price late this week.

The market awaits final price talk.

Early guidance is in the 11% area, a market source said.

Biggest day in over a year

According to data compiled by Prospect News, Wednesday’s session was not only easily the heaviest-volume session seen so far this year but also the biggest new-issuance day since March 13, 2015 when $8.78 billion of new junk bonds got priced. As was the case on Wednesday, one deal accounted for the lion’s share of that year-ago paper – two tranches of $3.25 billion each and a third of $2 billion from Canadian drug manufacturer Valeant Pharmaceuticals International, Inc.

Numericable’s big deal Wednesday was also the largest single offering seen in Junkbondland since Sept. 11, 2015, when Stamford, Conn.-based wireline telecommunications operator Frontier Communications Corp. priced $6.6 billion of new junk paper in three tranches.

And the $5.19 billion that the St. Denis, France-based broadband and wireless operator issued was one of the largest, if not the single-largest tranche of junk bonds priced at one time – certainly within the last five years, according to the data.

Numericable moves up

Traders said the giant-sized Numericable deal was the most active junk issue on the day, with one source estimating that over $63 million of the notes changed hands before the close.

He saw the bonds going out at 100¾ bid, up from their par issue price.

A second trader said that the new Numericable paper initially traded up to 101¼ bid on the break but then came back in to end at 100¾ bid.

The company’s existing paper was meanwhile also active, with its 6% notes due 2022 seen up 1 point at 98 bid, on volume of more than $34 million.

MGM paper up smartly

Traders saw the new MGM 5 5/8% notes due 2024 up a deuce on the day shortly after pricing.

That was well up from the par level at which the Las Vegas-based gaming giant priced its bonds via subsidiaries MGP Escrow Issuer, LLC and MGP Escrow Co-Issuer, Inc., which will be merged into MGM Growth Properties, a real estate investment trust being spun off from MGM Resorts.

One trader saw the new bonds at 102¼ bid, 102½ offered.

A second had them at 102¼ bid, 102¾ offered.

MGM’s existing 6% notes due 2023 likewise gained 2 points on the day, finishing at 103¾ bid, with over $17 million traded.

Ally add-on up

A trader said that Ally Financial’s 5¾% senior subordinated notes due November 2025 were going out at 98 1/8 bid, on volume of over $29 million.

That was up from the 97.476 level at which the Detroit-based automotive and residential lender and online banking concern had priced its add-on but was down by 1/8 point from where the existing 2025 bonds had been trading before that drive-by deal came to market.

He did not see any immediate aftermarket activity in the other half of that deal, the new 4¼% notes due 2021.

Nor did he see any initial trading Wednesday in Evansville, Ind.-based lender Springleaf Finance’s new 8¼% notes due 2020.

Diebold, Sunoco gain

Among recently priced offerings, Diebold’s 8½% notes due 2024 were seen at 102 3/8 bid, up 1¼ point from the levels at which the bonds finished in initial aftermarket dealings Tuesday after the issue priced at par.

Sunoco’s 6¼% notes due 2021, which priced at par on Monday, gained 9/16 point to end at 100 9/16 bid.

Indicators turn lower

Statistical market performance measures turned higher across the board on Wednesday after having been lower all around on Tuesday and mixed for the two sessions before that. It was indicators’ third upside session in the last six trading days.

The KDP High Yield Daily index rose by 16 bps on Wednesday to end at 65.81, versus Tuesday’s loss of 13 bps, its first setback after four straight sessions of gains. Wednesday was thus the index’s fifth advance in the last six sessions.

Its yield came in by 3 bps to finish at 65.63, its second narrowing in the last three sessions. On Tuesday, it had risen by 1 bp.

The Markit Series 26 CDX North American High Yield index improved by 21/32 point on Wednesday, its first gain after two straight losses, including Tuesday’s 17/32 point retreat. It was the index’s third gain in the last six sessions.

And the Merrill Lynch North American High Yield Master II index moved up by 0.331%, versus Tuesday’s 0.253% setback. It was the index’s second gain in the last three sessions and lifted its year-to-date return to 3.497% from 3.155% on Tuesday.

© 2015 Prospect News.
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