IronGate Energy closes $2.5 billion primary week; Barry Callebaut bonds up, Quicksilver off

By Paul Deckelman and Paul A. Harris

New York, June 14 - IronGate Energy Services, LLC was heard by high-yield syndicate sources to have priced $180 million of five-year secured notes on Friday - the sole dollar-denominated, purely junk-rated issue from a domestic or industrialized-country issuer.

The deal closed out a week that had seen $2.59 billion of such bonds come to market in 12 tranches, according to data compiled by Prospect News, down from the $3.27 billion in eight tranches that had priced during the previous week, which ended June 7.

This week was the third slowest so far this year, according to the data, topping only the week ended May 31, when $2.37 billion had priced in eight tranches, and the first week of 2013, ended Jan 4, when just one deal totaling $800 million, got done.

This week was also the third straight week in which new issuance finished in the sedate $2 billion-to-$3 billion range, following three straight weeks in which issuance had sizzled at a better than $13 billion-per-week average pace.

The day's lone deal lifted year-to-date new issuance to $164.4 billion in 367 tranches, according to the Prospect News data - running about 23.8% ahead of the pace seen a year ago, when $132.75 billion had priced by this point on the calendar.

Away from the dollar deals, Israeli cable operator Altice Group priced a euro-denominated offering of 10-year notes via a finance subsidiary.

Among recently priced issues, Thursday's downsized offering from Barry Callebaut Services NV continued to show strength, but Wednesday's downsized two-part transaction from Quicksilver Resources, Inc. continued to struggle, traders said.

Statistical measures of market performance were mixed on the session but ended off across the board from week-earlier levels.

IronGate comes atop talk

One dollar-denominated deal priced on Friday.

IronGate Energy Services priced a $180 million issue of non-rated 11% five-year senior secured notes at 98.132 to yield 11½%.

The yield printed on top of yield talk. The reoffer price came in line with discount talk of about 2 points.

Jefferies LLC was the placement agent for the deal, which was formatted as a Regulation D private placement. However, the notes will be automatically exchanged into Rule 144A and Regulation S notes upon closing.

Proceeds will be used to help fund the leveraged buyout of Archer Rental Tubular Division from Archer Ltd. by Clearlake Capital Group.

Altice at the tight end

Altice Finco SA priced a €250 million issue of 10-year senior notes (B3/B-) at par to yield 9%, at the tight end of the 9% to 9¼% talk.

Global coordinator Goldman Sachs will bill and deliver. Morgan Stanley was also a global coordinator. Credit Agricole, Credit Suisse and Deutsche Bank were joint bookrunners.

Proceeds will be used to refinance debt and fund acquisitions.

Luxembourg-based Altice operates Hot Mobile, a wireless telecommunications company in Israel, and Israeli cable television company Hot.

Gibson Energy starts Monday

Gibson Energy Inc. plans to start a roadshow on Monday for its $750 million equivalent two-part offering of senior notes.

Global coordinator and lead bookrunner RBC will bill and deliver. J.P. Morgan is also a global coordinator and lead bookrunner.

The deal is coming in the form of a dollar-denominated tranche of eight-year notes for which BMO, CIBC, Citigroup, Credit Suisse and Nomura are the joint bookrunners.

In addition, the company plans to sell Canadian dollar-denominated seven-year notes for which BMO, CIBC, Citigroup and Credit Suisse are the joint bookrunners.

Tranche sizes remain to be determined.

The Calgary, Alta.-based independent midstream operator plans to use the proceeds to repay its term loan B and for general corporate purposes.

The week ahead

Closer at hand, the June 17 week will get underway with just three dollar-denominated deals on the forward calendar that are expected to price before the end of the week.

National Financial Partners Corp. is roadshowing a $337 million offering of eight-year senior notes (Caa2/CCC+) via Deutsche Bank, Morgan Stanley, UBS, Credit Suisse, MCS and RBC.

France's Technicolor is marketing $330 million of seven-year notes (expected ratings B3/B) via JPMorgan, Goldman Sachs and Morgan Stanley.

And Pacnet Ltd. plans to price a $350 million offering of five-year senior secured notes (B2//BB) via Deutsche Bank, Goldman Sachs, Standard Chartered and DBS.

Apart from those offerings already in the market, dealers are holding their cards close to their chests, a trader said on Friday.

Are we coming into an old-fashioned summer in high yield, with deal volume dropping off to a trickle? Prospect News wanted to know.

Unlikely, the trader said, adding that once the market stabilizes and finds its level, there are still issuers intending to tap the junk market.

Even though there was news on Thursday of another massive weekly outflow from high-yield funds of negative $3.28 billion, the market had priced in an even bigger outflow, said the trader, noting that heading into Thursday there was an expectation that Lipper-AMG would report an outflow possibly surpassing the previous week's history-making $4.63 billion outflow.

Therefore, the fact that the most recent outflow came in substantially below $4 billion was generally taken as a positive by a market that was poised to begin pricing in something worse.

Nevertheless the market is still seeing better sellers, the trader said.

However the selling appears to be orderly.

Dealers are in with bids that they don't expect to be hit.

And some accounts are in with lowball bids that are not being hit.

Superior Plus C$150 million

In the Canadian dollar-denominated market, Superior Plus LP plans to hold a roadshow June 21 to 25 for a C$150 million offering of senior notes due 2020 (/BB-/DBRS: BB).

Scotia Capital Inc. and TD Securities Inc. are the bookrunners.

Proceeds will be used to redeem the company's 8¼% senior debentures due 2016 and for general corporate purposes.

Junk market hangs in

In the secondary arena, a trader opined that even in the face of Wall Street's Friday slide on lingering concern over whether the Federal Reserve and the world's other major central banks will soon start to trim their stimulus programs, "strangely, the [junk] market, considering everything else, was fairly firm, but quiet."

Even though he said that he was "shocked" by the size of the outflow from high-yield mutual funds and exchange-traded funds that was reported Thursday, which was "pretty substantial," he said that high yield "overcame the stock market and the uncertainty and held its own in a lot of areas."

With that having been said, though, he cautioned that "it's becoming item by item now," rather than the broad trend of buying all of the new deals and most of everything else that had seemed to be powering Junkbondland during the frothier days earlier this year.

"The deals that are coming are going to come at a spread more favorable to buyers, obviously, and covenants [limiting the kinds of potentially unfavorable actions company mangers might take vis a vis bondholders] are going to be tighter, too."

He suggested that the deals that would be coming probably would not be "major deals" in terms of either size or being done by large, well-known issuers.

In the meantime, he also said that "the corporations are sniffing around, buying back some of their own debt on the [price] pullbacks" in quiet open-market transactions in the $10 million or $20 million range.

IronGate unseen

Traders did not see the day's sole dollar-denominated pricing for IronGate Energy Services in the aftermarket.

Barry Callebaut climbs

However, traders did see some activity in Thursday's deal from Swiss chocolate maker Barry Callebaut Services.

The Zurich-based confectioner's 5½% notes due 2023 were seen by a trader in a 99¼ to 99¾ bid context including some trades during the morning at 99¾% bid.

"That seemed to be doing well," he said. "People like the name."

Another trader saw the bonds get as good as 100½ bid, 101½ offered, versus 99½ bid, 100½ offered going home on Thursday.

Barry Callebaut had priced its $400 million of the bonds on Thursday, bringing them to market at 98.122 to yield 5¾% after the deal had been downsized from an original $600 million.

Emerald does excellently

Going back a little further, a trader said that Emerald Exposition Holdings' 9% notes due 2021 "held up pretty well," seeing them on Friday morning at 101½ bid, 102 offered.

The San Juan Capistrano, Calif.-based organizer of business trade shows had priced $200 million of the notes at par on Wednesday.

The trader also saw Wednesday's deal from Summit Midstream Partners LP in a context of 100 7/8 to 101½ on the bid side, and at 101 bid, 101¼ offered towards the end of the day.

The Dallas-based natural gas master limited partnership had priced $300 million of 7½% notes due 2021 at par via its Summit Midstream Holdings, LLC and Summit Midstream Finance Corp. subsidiaries.

Quicksilver doesn't glitter

However, Wednesday's other transaction - Quicksilver Resources' downsized $525 million two-part deal - "can't get out of its own way," he declared.

He saw the bonds about unchanged from where they were on Thursday, when they were trading below their issue price on both tranches.

The Fort Worth-based energy operator had priced $200 million of senior secured second-lien floating-rate notes due 2019 at 97 to yield 575 basis points over Libor, and these traded at 96½ bid, 97 offered.

It also came to market with $325 million 11% notes due 2021, which priced at 94.928 to yield 12%, and was trading on Thursday and again on Friday at 94½ bid, 95 offered.

The latter tranche was downsized to $325 million from an originally announced $675 million, cutting the total deal size to $525 million from $875 million originally, and covenant changes were made, including increasing the eight years' call protection.

Market indicators mixed

Away from the new deals, statistical junk performance indicators were mixed for a third consecutive session on Friday but were down across the board on the week from where they had finished the previous Friday, June 7.

The Markit Series 20 CDX North American High Yield index lost 7/16 point on Friday to end at 103¾ bid, 103 13/16 offered. On Thursday, it had jumped by 1 3/16 - one of the biggest gains seen so far this year.

The index finished down on the week versus its 104 3/32 bid, 104 11/32 offered level the prior Friday.

But the KDP High Yield Daily Index broke a three-session skid on Friday as it moved up by 13 bps to 74.11. It had lost 4 bps on Thursday its third consecutive setback.

Its yield meantime came in by 5 bps to 5.97%, its first such tightening after three sessions of higher yields. It had risen by 2 bps on Thursday.

Despite those gains, the numbers compared unfavorably to the previous Friday's 74.59 index reading and 5.76% yield.

And the widely followed Merrill Lynch High Yield Master II index was also a winner on Friday as it finished up by 0.338%, versus Thursday's 0.182% loss.

Friday's gain raised its year-to-date return to 2.92% from 2.57% on Thursday.

However, it lost 0.48% on the week - its fifth straight weekly downturn.

During the June 7 week, it had fallen by 0.8% to end at a year-to-date 3.41% return.

© 2015 Prospect News.
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