Multi-Color delayed; DriveTime, Michaels Stores, Sirius Computer on tap; Sprint in focus; Dish gains

By Paul A. Harris and Abigail W. Adams

Portland, Me., June 17 – While no new deals priced on Monday, the domestic high-yield primary market was active with four deals joining the forward calendar.

Multi-Color’s two-tranche senior notes offering was revised with price talk widened on Monday.

However, pricing, which was initially expected last Friday, was again delayed with the unsecured tranche experiencing some pushback.

The deal is now expected to price on Tuesday when DriveTime Automotive Group, Inc. is also expected to price a $350 million offering of seven-year senior secured notes (expected ratings B3/B-).

Michaels Stores, Inc. began a brief roadshow for a $500 million offering of eight-year senior notes (B1/B).

Sirius Computer Solutions, Inc. plans to start a roadshow on Wednesday for a $300 million offering of eight-year senior notes (Caa1/CCC+).

Alpha Auto Group is also expected to price $225 million of five-year notes during the June 17 week.

Meanwhile, the secondary space was quiet on Monday with light trading volume as last week’s deals faded from focus.

Sprint Corp.’s junk bonds were active on news the Department of Justice’s decision regarding the wireless network provider’s merger with T-Mobile was near at hand.

While some of Sprint’s issues posted gains on Monday, the most active issue in the capital structure was flat.

Dish Network Corp.’s 7¾% senior notes due 2026 also saw high-volume activity with the notes making gains as the satellite broadcaster eyes the acquisition of some of Sprint’s and T-Mobile’s assets to help facilitate the merger.

Multi-Color held over

The saga of Multi-Color’s $1.39 billion offering of high-yield notes will likely continue one more day, sources said.

The deal was expected to clear the market late last week and subsequently launched Monday in a revised form with wider price talk on the unsecured paper.

Substantial issues remain regarding the downsized tranche of senior unsecured notes, a trader said late Monday.

Although the dealer limited circulation of the specific document changes announced earlier Monday, the points of contention were heard to be covenants bearing upon the restricted payments basket.

The specific language in the definition of “earnings before interest payments, tax deductions and amortizations” (EBITDA), as it applies to the Multi-Color deal were also focal points, the trader said.

Structural and price revisions heard earlier on Monday saw $50 million of proceeds shifted to the secured notes from the unsecured notes and a widening of price talk on the unsecured notes.

The deal, as revised, features an upsized $700 million tranche of seven-year senior secured notes (B2/B).

The tranche size increased from $650 million. Price talk remains unchanged in the 7% area; initial talk was in the low 7% area.

Talk on a downsized $690 million tranche of eight-year unsecured notes (Caa2/B-) widened to 10¼% to 10½% versus earlier talk of 10% to 10¼%; initial talk was in the low 9% area.

The unsecured tranche was decreased from $740 million.

Books were scheduled to close at 12:30 p.m. ET Monday and the deal had been expected to price thereafter.

However, subsequent to those announcements, negotiations on bond covenants were heard to be ongoing, and the unsecured tranche, at least, appeared poised to remain in the market until Tuesday, the trader said.

The deal remained in the market over the past weekend as the unsecured tranche engendered pushback from investors objecting to earlier price talk, as well as a covenant package that was perceived to afford too little protection for lenders, market sources said.

The secured tranche, on the other hand, has been oversubscribed since early in the roadshow, sources say.

Were it not for the upsizing of the secured tranche, talk on that tranche might have wound as tight as the 6¾% area, a trader opined.

Michaels Stores starts roadshow

Away from Multi-Color, the active forward calendar saw a substantial build on Monday.

Michaels Stores began a brief roadshow on Monday for a $500 million offering of eight-year senior notes (B1/B).

BofA, Barclays, Goldman Sachs, JP Morgan, Morgan Stanley and Wells Fargo are the joint bookrunners for the debt refinancing deal.

DriveTime to price Tuesday

DriveTime Automotive Group plans to price a $350 million offering of seven-year senior secured notes (expected ratings B3/B-) on Tuesday afternoon.

Initial price talk is in the 8% to 8½% area.

A New York investor lunch and conference call were scheduled to begin at 12:30 p.m. ET on Monday.

Wells Fargo is the left bookrunner for the debt refinancing and general corporate purposes deal.

Sirius Computer roadshow

Sirius Computer Solutions plans to start a roadshow on Wednesday in New York and New Jersey for a $300 million offering of eight-year senior notes (Caa1/CCC+).

The roadshow wraps up early in the June 24 week on the West Coast of the United States.

Citigroup is the left bookrunner for the deal backing the LBO of Sirius Computer Solutions, a San Antonio-based provider of mission-critical IT infrastructure solutions, by Clayton, Dubilier and Rice from Kelso & Co.

Elsewhere, Canada's Alpha Auto Group is expected to price $225 million of five-year notes during the June 17 week.

JP Morgan will lead the deal.

Sprint in focus

Sprint’s junk bonds received a fresh round of scrutiny amid media reports that a Department of Justice decision regarding its merger with T-Mobile was near at hand.

The 7 7/8% senior notes due 2023 were among the most actively traded issues in the secondary space on Monday with more than $21 million in reported volume by the late afternoon.

However, the notes were largely unchanged at 108, according to a market source.

While less active, Sprint’s 7 5/8% senior notes due 2026 and 6% senior notes due 2022 were making gains.

The 7 5/8% senior notes were up about 2 points to 107 3/8, according to a market source. However, there were only about $2.5 million of the bonds on the tape by the late afternoon.

The 6% senior notes due 2022 rose 1 point to 103¾ with more than $8 million of the bonds on the tape.

The New York Times reported Friday that Sprint’s merger with T-Mobile could be approved as early as the coming week, provided Sprint and T-Mobile sell some assets to create another wireless service provider to boost competition.

Some analysts have expressed pessimism over the merger’s approval.

Sprint’s capital structure took a hit last week after the attorneys general of nine states and the District of Columbia filed suit to prevent the merger’s approval.

Dish gains

Dish’s junk bonds were posting gains on Monday with the satellite broadcaster a benefactor of the Sprint and T-Mobile merger saga.

Dish’s 7¾% senior notes due 2026 were up 1 point to 97¾, according to a market source. More than $16.5 million of the bonds were on the tape by the late afternoon.

The DOJ’s approval of the Sprint/T-Mobile merger may require the companies to divest some assets to create another wireless service provider.

Dish is one of the companies that is considering buying some of those assets, which may include Sprint’s Boost Mobile and some of Sprint’s airwaves, The New York Times reported.

Apollo Global Management is reportedly in talks with Dish to finance the company’s bid for those wireless assets.

Mixed Friday flows

The daily cash flows of the dedicated high-yield bond funds were mixed on Friday, the most recent session for which data was available at press time, a market source said.

High yield ETFs saw $79 million of inflows on the day.

However, actively managed high yield funds sustained $60 million of outflows on Friday, the source said.

Indexes mixed

Indexes were mixed on Monday with two largely flat and another down after all saw cumulative gains on the week last week.

The KDP High Yield Daily index shaved off 1 basis point to close Monday at 70.14 with the yield now 5.70%.

The index saw a cumulative gain of 35 bps on the week.

The ICE BofAML US High Yield index dropped 2.1 bps with the year-to-date return now 8.979%.

The index was up 44.2 bps on the week last week and crossed the 9% year-to-date return threshold on Tuesday only to fall below it on Wednesday.

The CDX High Yield 30 index dropped 8 bps to close Monday at 106.18. The index gained 40 bps on the week last week.

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