Starwood REIT, Five Point add-on deal drive by; TerraForm on tap; GNC pulls offering; TIME up on buyout news

By Paul Deckelman and Paul A. Harris

New York, Nov. 27 – After the post-Thanksgiving holiday lull at the end of last week, Junkbondland was active on Monday, including pricings from a pair of quick-to-market offerings.

Starwood Property Trust, Inc. was heard by high-yield syndicate sources to have priced $500 million of non-callable 7.25-year notes.

And Five Point Operating Co., LP – a real estate development company which priced an upsized $450 million of eight-year notes on Nov. 17 – came back for seconds on Monday, doing a $50 million add-on issue.

Beyond the issues actually pricing, the primary was also hopping behind the scenes, with renewable energy company TerraForm Power Operating, LLC getting ready to bring a $1 billion two-part issue to market on Tuesday following an investor call.

Boiler-room equipment manufacturer Cleaver- Brooks, Inc. was hitting the road to market a $395 million of five-year notes to investors.

And vitamin and nutrition supplements retailer GNC Holdings, Inc. was heard to have withdrawn its planned $500 million five-year note offering, shifting the proceeds instead to a concurrent bank loan deal the company is structuring.

In the secondary sphere, traders reported little initial aftermarket activity in the day’s two new issues, both of which priced fairly late in the session.

And they likewise saw not much going on in such recently priced names as Williams Scotsman International, Inc. and Bombardier Inc.

But there was intense trading activity going on in Time, Inc.’s paper, on the news that the iconic publishing company is to be acquired by sector peer Meredith Corp., which meanwhile has lined up some $3.55 billion in debt financing to help fund its purchase of Time and refinance existing debt.

Statistical market performance measures turned mixed on Monday after four consecutive sessions before that in which those indicators had been higher across the board.

The high yield primary market reopened to heavy news volume on Monday, following the extended Thanksgiving Day holiday weekend in the United States.

In drive-by action, Starwood Property Trust, Inc. priced a $500 million of issue of 4¾% 7.25-year senior bullet notes (Ba3/BB-) at 99.249 to yield 4 7/8%.

The yield printed in the middle of yield talk in the 4 7/8% area.

JP Morgan, Credit Suisse, Barclays, BofA Merrill Lynch, Citigroup, Deutsche Bank, Goldman Sachs, Morgan Stanley and Wells Fargo managed the deal.

The Greenwich, Conn.-based commercial mortgage real estate investment trust plans to use the proceeds to pay down existing repurchase agreements, with any remaining net proceeds for other general corporate purposes which may include debt repayment under its warehouse facilities and other debt, the origination and purchase of additional commercial mortgage loans and other target assets and investments, payment of other liabilities and other working capital needs.

Five Point taps 7 7/8% notes

Also in a quick-to-market issue, Five Point Operating Co., LP priced a $50 million add-on to its 7 7/8% senior notes due Nov. 15, 2025 (B3/B) at par.

Citigroup managed the sale.

The Aliso Viejo, Calif.-based planner and developer of mixed-use, master-planned communities plans to use the proceeds for general corporate purposes, which may include funding development activities at its communities.

TerraForm $1 billion pricing Tuesday

TerraForm Power Operating, LLC launched $1 billion of senior notes (existing ratings B2/BB-) in two bullet tranches on Monday.

The Rule deal features notes that mature in 2023, with initial guidance in the low to mid 4% area, and in 2028, with initial guidance in the low 5% area.

An investor conference call is scheduled to start at 10 a.m. ET on Tuesday, and the deal is set to price later on Tuesday.

Joint bookrunner RBC will bill and deliver. BMO, HSBC, Natixis, Scotia and SMBC are also joint bookrunners.

The Bethesda, Md.-based owner and operator of a renewable power portfolio of solar and wind assets plans to use the proceeds to redeem its notes due in 2023.

Cleaver-Brooks roadshow

Cleaver-Brooks, Inc. began a roadshow on Monday for a $395 million offering of five-year senior secured notes (S&P: B).

The roadshow continues in New York on Tuesday and moves to Boston on Wednesday.

The deal is set to price late in the Nov. 27 week.

Joint bookrunner RBC will bill and deliver. SunTrust and Credit Suisse are also joint bookrunners.

The Thomasville, Ga.-based designer and manufacturer of boiler room systems plans to use the proceeds to refinance its 8¾% senior secured notes due 2019 and 9¾% senior secured notes due 2019.

Mountain Province starts roadshow

Mountain Province Diamonds Inc. began a roadshow on Monday for a $325 million offering of five-year senior secured second lien notes.

The debt refinancing is set to price late in the Nov. 27 week.

Credit Suisse and Scotia are the joint bookrunners.

Matthews eight-year deal

Matthews International Corp. plans to price $300 million of eight-year senior notes late in the week of Nov. 27.

JP Morgan is leading the offer.

The Pittsburgh-based designer, manufacturer and marketer of memorialization products and brand services said it intends to use the proceeds generally to repay debt under its revolving credit facility.

GNC pulls bonds

GNC Holdings Inc. withdrew its $500 million offering of senior secured notes due 2022 and shifted the proceeds to a concurrent bank loan deal.

The notes offer, which was being managed by BofA Merrill Lynch, had been struggling, market sources said. Early guidance was 10%.

As a result of the restructuring, the debt refinancing transformed into a $300 million term loan B-1 and a $905 million term loan B-2. The bank deal was initially in the market as a $705 million term loan B.

Busy ahead

Aside from the raft of announcements on Monday primary market activity should remain vigorous for the next three weeks, sellside sources said on Monday.

More deal announcements are expected on Tuesday, a banker said.

One mitigating factor in the Nov. 27 week will be the 2017 Bank of America Merrill Lynch Leveraged Finance Conference, set to get underway on Nov. 29 in Palm Beach, Fla., the banker said.

However, while some of the high profile conferences tend to mute junk issuance, the Merrill Lynch conference is more likely to generate new issue news, the source said.

CeramTec LBO deal

In the European market, CeramTec started a roadshow on Monday for a €406 million offering eight-year senior notes.

The roadshow wraps up on Thursday.

BofA Merrill Lynch, Morgan Stanley, Deutsche Bank, Nomura and UBS are managing the sale.

Proceeds will be used to help fund the buyout of the Plochingen, Germany-based developer and manufacturer of advanced ceramic components by BC Partners from Cinven.

Lowen Play starts Tuesday

Lowen Play GmbH plans to start a roadshow on Tuesday for a €350 million offering of five-year senior secured notes (B2/B).

The roadshow wraps up on Friday.

JPMorgan and ING are leading the deal.

The Bingen am Rhein, Germany-based casino operator plans to use the proceeds to repay existing notes and shareholder loans.

Elsewhere Thomas Cook Group plc announced in a Monday press release that it intends to raise €400 million by issuing guaranteed senior notes due 2023.

The London-based travel company plans to use the proceeds to redeem its guaranteed senior notes due June 2021.

Pinewood Studios

In the sterling-denominated new issue market Pinewood Studios started a roadshow on Monday for a £240 million offering of six-year senior secured notes (expected ratings Ba3/B+/BB).

The roadshow wraps up on Thursday.

Credit Suisse, Goldman Sachs, Barclays, HSBC and Lloyds are managing the sale.

The Buckinghamshire, England-based film and television studio plans to use the proceeds to refinance debt, fund an equity release and for general corporate purposes.

Sources continue to forecast limited new issue activity for the remainder of the record-setting year of 2017.

Amid those forecasts, however, the deals keep coming.

A generally quiet session

In the secondary market, a trader said that he had seen “light volume across the board today.”

He suggested that even though the market had technically been open on Friday for a lightly traded, abbreviated session following Thursday’s full market close in the United States for the Thanksgiving holiday observance, a lot of people on Monday “were just getting back in after the long holiday weekend.”

And he further predicted that “it’s going to be a light week this week” – especially with Bank of America Merrill Lynch’s annual leveraged finance conference slated to start on Tuesday in Boca Raton, Fla., and continue throughout the week.

“That always takes some of the focus away” from day-to-day market activity, “with many accounts out of the office.”

New deals little traded

Market participants saw little real trading in either of the two issues which priced on Monday – from Starwood Property Trust and from Five Point Operating Co.

One source quoted the latter right at their par issue price, though on not much trading.

A second market source also said that such other recently priced credits as the Williams Scotsman 7 7/8% secured notes due 2022 and the Bombardier 7½% notes due 2024 “were fairly quiet today,” with little or no activity.

Baltimore-based Williams Scotsman, a maker of modular storage containers, temporary structures and portable offices, priced $300 million of its five-year paper at par last Tuesday in a regularly scheduled forward calendar offering, and the bonds had pushed up to around or above the 103 bid level by the middle of last week.

Montreal-based aircraft and railroad transportation equipment manufacturer Bombardier priced $1 billion of its seven-year notes, up from an originally announced $900 million, at par last Monday in a quick-to-market transaction. Those bonds had firmed to around a point above their pricing level.

Another market source said about the only recently priced issue to have generated any real activity on Monday was MultiPlan Inc.’s 8½%/9¼% senior PIK toggle notes due 2022, seen up around 3/16 point on the day at around 103 11/16, with over $10 million having changed hands.

The New York-based provider of healthcare cost management solutions priced $1.3 billion of that paper at 99 on Nov. 16 to yield 8.751%. Those notes quickly moved up to and then above par in aftermarket dealings, ultimately reaching their current lofty levels.

Time trades actively

Away from the new deals, traders observed heavy volume in Time Inc.’s two issue of bonds – its 5¾% notes due 2022 and its 7½% notes due 2025, the latter issue having been sold just last month in a regularly scheduled deal which priced at par on Oct. 4.

A market source said that “both were extremely active, very good volume on both.”

“There were tons of trading in them,” another trader said, seeing the 5¾% notes up ¼ point on the day at 104 1/8 bid, on volume of over $50 million.

And he saw the 7½s do even better, jumping by as much as 6 points from their recently traded round-lot levels, ending at 115¼ bid, on turnover of more than $43 million.

He said that those latter bonds, after their Oct. 4 par pricing, had stayed around their issue price through the end of October and on into November before “starting to drift up” around Nov. 15, “to 105, then 107, 108.”

They had pushed up to around 109 bid a week ago, then went silent, only to shoot up on Monday on the news that Meredith Corp., a Des Moines, Iowa-based publisher of such magazines as Better Homes & Gardens and Family Circle, will acquire New York-based Time – which publishes the eponymous Time magazine news weekly as well as Fortune, People and Sports Illustrated.

“So that’s a home run if you had bought that deal a month ago,” the trader said.

Meredith will pay $1.84 billion for Time’s shares; including debt assumption, the deal is valued at around $2.8 billion.

Meredith has received financing commitments totaling $3.55 billion for the deal and associated debt refinancing; besides bank debt, the financing package is also expected to include senior unsecured notes as well (see related story elsewhere in this issue).

Indicators turn mixed

The KDP High Yield Daily Index rose by 6 basis points on Monday to end at 71.82, its seventh consecutive gain after seven straight losses. It had also been up by 3 bps on Friday.

Its yield meantime came in by 2 bps to 5.32%, after having also tightened by 2 bps on Friday. Monday was the yield’s fourth straight narrowing after one unchanged session and two tightenings before that – which had followed eight straight sessions in which the yield had widened out.

But the Markit CDX Series 29 index lost more than ¼ point on Monday to end at 107 23/32 bid, 107 25/32 offered – its first loss after four straight gains, which followed two other losses. On Friday, the index had edged upwards by just under 1/32 point.

However, the Merrill Lynch North American High Yield Master II Index continued its winning ways, firming for a seventh successive session after 10 consecutive losses before that.

It advanced by 0.093%, on top of Friday’s 0.027% rise.

The latest improvement lifted the index’s year-to date return to 7.139% from Friday’s 7.039% close, although the year-to-date return still remains down from the 7.636% posted on Oct. 24 – the peak cumulative return for 2017 so far.

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