Service King add-on, upsized CrownRock price; new CrownRock up; existing energy bonds surge

By Paul Deckelman

New York, Feb. 3 –The high-yield primary market saw a pair of dollar-denominated, junk-rated deals from domestic issuers price on Tuesday, totaling $450 million in two tranches.

CrownRock, LP and its CrownRock Finance, Inc. unit came to market with an upsized $350 million of eight-year notes; that paper priced at a discount to par. The new bonds were heard by traders to have firmed smartly when they were freed for secondary dealings, reflecting, one said, investors’ desire for new energy exploration and production paper.

The day’s other dollar pricing came from Service King Collision Repair Centers, which priced a $100 million add-on to an existing issue.

The only other pricing on the day came out of Europe, where Swiss packaging manufacturer SIG Combibloc came to market with a restructured and downsized notes offering.

The forward calendar grew, with the addition of prospective new deals from American Tire Distributors, Inc. and SS&C Technologies Holdings, Inc., while Western Refining Logistics, LP began a roadshow for a deal expected to price at the week’s end.

Away from the new issues, oil and natural gas E&P names like California Resources Corp. were higher, frequently on sizable volume, coinciding with an upturn in oil prices.

Statistical market performance measures were higher across the board for a second consecutive session.

CrownRock comes to market

The larger of the day’s two dollar-denominated pricings came from CrownRock and its CrownRock Finance subsidiary, which priced an upsized $350 million offering of eight-year senior notes (Caa1/B).

High-yield syndicate sources said the 7¾% notes due 2023 priced at 98.536 to yield 8%, after the offering was increased from the originally announced $300 million.

It priced at the tight end of pre-deal market price talk envisioning a yield between 8% and 8¼% with a roughly 1-point original issue discount.

The Rule 144A/Regulation S for life offering was brought to market via joint bookrunners Credit Suisse Securities (USA) LLC, Wells Fargo Securities LLC, Citigroup Global Markets Inc. and Mitsubishi UFG Securities International plc.

BB&T Capital Markets, a division of BB&T Securities, LLC, BBVA Securities Inc., BMO Capital Markets Corp., Comerica Securities, Inc., Iberia Capital Partners LC and J.P. Morgan Securities LLC acted as co-managers for the transaction.

CrownRock, a Midland, Texas-based oil and gas producing joint venture of CrownQuest Operating and Lime Rock Partners that focuses on operations in the Permian Basin region of western Texas, plans to use the new-deal proceeds to repay revolving credit facility borrowings and for general corporate purposes.

New Crown Rock rises

When the bonds were freed for secondary dealings, a trader saw them in a 101-to-101¼ bid context.

A second trader agreed, and noted that the move upward was particularly notable because “it priced at a discount, so they performed well.”

He opined that Crown Rock “was one of the first E&P names to come this year.”

He said that he had heard that the bonds “came cheap to its comps, and guys took to it.”

Service King brings add-on

Service King Collision Repair Centers, through a pair of special-purpose financing subsidiaries, priced a $100 million add-on Tuesday to the 7 7/8% senior notes due 2022 (Caa1/CCC+) that it sold last September.

Syndicate sources said the notes priced at 96 for a yield to maturity of 8.596%. The issue priced a day after it first surfaced in the market.

The same investment banks that handled the original pricing also brought the Rule 144A/Regulation S add-on issue to market – joint bookrunners JPMorgan, BofA Merrill Lynch, Credit Suisse, Deutsche Bank Securities Inc. and Macquarie Capital (USA) Inc.

Blackstone Capital Markets was co-manager on the transaction.

The issuing entities, Midas Intermediate Holdco II LLC and Midas Intermediate Holdco II Finance Inc., were also the same as on the original September transaction.

Service King, a Richardson, Texas-based auto collision repair shop chain operator, plans to use proceeds from the add-on for, among other things, acquisitions within its business.

The company priced the original $200 million issue of eight-year senior notes at par on Sept. 19, 2014 to yield 7 7/8% after marketing the deal to investors via a roadshow.

In the aftermarket on Tuesday, a trader saw the 7 7/8s having firmed slightly to 96½ bid, 97 offered

Downsized SIG prices

The day’s only other pricing came out of Europe, where Swiss packaging manufacturer SIG Combibloc Group AG came to market with a downsized and restructured €675 million offering of eight-year senior notes (Caa1/B-).

Syndicate sources said that the 7¾% notes due February 15, 2023 priced at par, at the tight end of pre-deal market price talk that had predicted a yield between 7¾% and 8%.

During Monday’s session, that offering had been downsized from an originally announced €700 million equivalent, with the other €25 million shifted to the company’s concurrent bank loan financing. Besides being downsized, the bond transaction was also restructured; it was originally planned as a two-tranche offering, denominated in dollars and euros, but the dollar tranche has been dropped, leaving only the euro portion.

Global coordinator Merrill Lynch International will bill and deliver for the Rule 144A and Regulation S for life offering. Barclays Bank plc and Goldman Sachs were also global coordinators.

Nomura International, RBC Europe Ltd., Credit Agricole Corporate and Investment Bank, Mizuho International plc, Royal Bank of Scotland plc and UniCredit Bank AG were joint bookrunners.

Proceeds, along with €2.27 billion of bank debt, will be used to fund the leveraged buyout of the Swiss company, a supplier of carton packaging and filling machines for beverages and food, by Onex Corp.

The issuing entity was Onex Wizard Acquisition Co., which is expected to be renamed SIG Combibloc Holdings SCA.

Calendar adds deals

While those deals were graduating from Junkbondland’s forward calendar, other prospective transactions were taking their place.

American Tire Distributors announced plans to sell $805 million of senior subordinated notes due 2022.

There was no immediate information available as to the timing of the offering or investment banks that might be involved, although BofA Merrill Lynch acted as lead arranger on ATD’s recent bank financing.

The bond deal proceeds will be used to fund the redemption of all of the company’s outstanding 11½% senior subordinated notes due 2018. The Huntersville, N.C.-based independent supplier of tires to the North American replacement tire market announced on Jan. 23 that it had called all $425 million of those outstanding notes for redemption at 102 on Feb. 11.

A portion of the Rule 144A/Regulation S proceeds will also be used to pay a cash dividend to ATD’s parent company, American Tire Distributors Holdings, Inc., to enable ATD’s ultimate parent to fund a cash dividend or other payment to some of its security holders.

Last month, ATD completed a $140 million incremental term loan financing due 2018 with BAML as the lead arranger.

Meanwhile, SS&C Technologies Holdings announced that it will bring $500 million of senior unsecured notes via Morgan Stanley Senior Funding Inc. and Deutsche Bank Securities The deal proceeds – along with a

$2.63 billion senior secured credit facility via Deutsche and Morgan Stanley, consisting of a $150 million revolver, a $2.08 billion term loan B-1 and a $400 million term loan B-2 – will be used to help the Windsor, Conn.-based provider of financial services software and software-enabled services acquire Advent Software Inc., a San Francisco-based provider of software and services for the investment management industry for $2.7 billion, including debt assumption.

Western Refining hits the road

Among deals already on the calendar, Western Refining Logistics and its wholly-owned subsidiary, WNRL Finance Corp., were heard by syndicate sources to have begun a roadshow process for the company’s $300 million offering of senior notes due 2023 (B3/B).

The sources said that the deal was being pitched to potential investors on the East Coast of the United States on Tuesday and Wednesday; then, the marketing effort would shift to investors on or near the West Coast, with pricing seen possible as early as Thursday, or perhaps early Friday.

The Rule 144A and Regulation S offering with registration rights is being brought to market via joint global coordinators BofA Merrill Lynch and Wells Fargo and joint bookrunners Credit Agricole, RBS Securities, and Stifel Nicolaus & Co. Inc.

Western Refining Logistics, an El Paso-based operator of pipelines, storage tanks and other midstream energy facilities, intends to use a portion of the net proceeds from the private placement to repay the outstanding balance of its revolving credit facility, with the remaining amount to be used for general partnership purposes.

New Netflix trades actively

A trader said that Monday’s two-tranche deal from Netflix, Inc. “was showing up among the top actives.”

He saw the company’s 5 7/8% notes due 2025 were trading between 100½ and 100¾ bid, on volume of more than $88 million, while its 5½% notes due 2022 were in a 100 5/8 bid, 100 7/8 bid context, with more than $83 million traded.

Netflix, a Los Gatos, Calif.-based distributor of movies, television shows and other entertainment content to its subscribers, priced $700 million of the seven-year bonds and $800 million of the 10-years in a quick-to-market deal on Monday after upsizing the total offering size from an originally announced $1 billion.

Oil names improve

A trader said that away from new or recent deals “oil rallied today and it took the entire energy space higher.”

The bonds, he said, were “very well bid for.”

Another trader said that California Resources’ benchmark 6% notes due 2024 were up more than 2 points, to 86 bid.

A second trader had those bonds up close to 3 points on the day at 86 bid, with over $50 million having changed hands.

Linn Energy LLC’s 6¼% notes due 2019 rose nearly 3 points to 79 5/8 , with over $16 million traded.

Indicators stay strong

Statistical indicators of junk performance were higher for a second straight session on Tuesday. They had turned higher on Monday after having been mixed on Friday for the third session in the previous four days.

The KDP High Yield Daily index rose 12 basis points, to 71.13 after having edged up by 1 bp on Monday.

Its yield on Tuesday came in by 5 bps to end at 5.43% after having tightened by 1 bp on Monday.

The Markit Series 23 CDX North American High Yield index rose for a second consecutive session, pushing upward by 9/16 point to 106 5/16 bid, 106 3/8. The index also gained on Monday, by 5/16 point.

The Merrill Lynch U.S. High Yield Master II index notched its 12th consecutive upside session on Tuesday, 0.301%, on top of Monday’s 0.033%, rise.

The latest gain lifted its year-to-date return to 1.027%, its eighth consecutive new peak level for 2015, up from the previous high point, 0.723% on Monday.

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