SunCoke, three other deals close out $4 billion week; Dynegy jumps on Vistra takeover buzz

By Paul Deckelman and Paul A. Harris

New York, May 19 – The high-yield primary market put on a big finish to the week on Friday, with syndicate sources seeing four deals get done, generating $1.31 billion of new paper.

The big deal of the day came from SunCoke Energy Partners, LP, a producer of metallurgical coke for the steel industry.

Its issue of eight-year notes, a regularly scheduled forward calendar offering, was downsized to $630 million.

The session’s other three pricings were all in the $200 million neighborhood – from broadband service provider Xplornet Communications, Inc., precious metals miner Coeur Mining, Inc. and energy operator Callon Petroleum Co., with the latter deal being a quickly shopped add-on to the company’s existing notes.

The day’s four transactions brought the week’s total of new dollar-denominated and fully junk-rated issues up to just under $4 billion in nine tranches, according to data compiled by Prospect News – down from the $5.5 billion which gotten done in 12 tranches last week.

In the secondary market, traders saw solid gains in the new Xplornet, SunCoke and Coeur Mining issues, with the latter actually generating some decent trading volume.

There was also continued upside activity in Thursday’s new deal from pawnshop proprietor FirstCash, Inc.

Away from the new deals, Dynegy Inc.’s bonds jumped in active trading on the news of a possible takeover bid from rival Texas electric power generation company Vistra Energy Corp. – the post-reorganization successor company to the old TXU Corp. and its various component companies.

Intelsat SA’s bonds were seen slightly easier, coming off the big gains which those notes had notched on Thursday after the communications satellite company sweetened the terms of its pending exchange offer for a big chunk of its bonds, part of its planned merger with sector peer OneWeb.

Statistical market performance measures turned higher across the board on Friday after being mixed on Thursday and lower all around on Wednesday.

The indicators were meantime mixed versus where they had finished out last Friday, May 12. It was their second straight mixed week.

SunCoke downsizes

The primary market was busy on Friday as four issuers priced single-tranche deals to raise a combined total of $1.31 billion.

Two deals upsized while one downsized.

Two of the four came as drive-by transactions. The roadshow for one of the remaining two deals was truncated.

The remaining deal, from SunCoke Energy Partners came at the conclusion of a roadshow.

SunCoke priced a downsized $630 million issue of 7½% eight-year senior notes (B2/BB-) at 98.513 to yield 7¾%.

The debt refinancing deal was reduced from $675 million.

Yield discussions were taking place in the 7½% to 8% context on Friday morning, according to a trader who recounted that initial price talk was 6¾% to 7%.

BofA Merrill Lynch, ABN Amro, Citigroup, Credit Suisse, Goldman Sachs, J.P. Morgan and TD were the joint bookrunners.

Coeur Mining drives by

Coeur Mining priced a $250 million issue of seven-year senior notes (B1/BB-) at par to yield 5 7/8%.

The yield printed on top of yield talk set in the 5 7/8% area.

Goldman Sachs was the sole bookrunner.

The Chicago-based precious metals company plans to use the proceeds to take out the entire $178 million amount of its outstanding notes maturing in 2021 and for general corporate purposes.

Upsized Xplornet beats talk

Xplornet Communications priced an upsized $230 million issue of five-year senior PIK notes (Caa2/CCC) at par to yield 9 5/8%.

The amount was increased from $225 million.

The issue pays a 9 5/8% cash coupon which steps up by 100 bps to 10 5/8%, when the issuer pays interest by means of the PIK option, which is permitted during the first two years, at the issuer’s discretion.

The yield printed 12.5 basis points beneath the tight end of the 9¾% to 10% yield talk.

Timing on the transaction was accelerated, as it had previously been expected to remain in the market into the week ahead.

SunTrust was the left bookrunner. BMO and Jefferies were joint bookrunners.

The Woodstock, New Brunswick-based rural-focused broadband service provider plans to use the proceeds, along with a $75 million term loan add-on, to refinance its 13% senior PIK notes and finance the acquisition of Canadian satellite capacity on the ViaSat-2 satellite.

Callon upsizes

Callon Petroleum priced an upsized $200 million add-on to its 6 1/8% senior notes due 2024 at 104.125.

The issue size was increased from $150 million.

Initial talk had the deal coming at 103.5 to 104, a trader said, adding that the existing Callon 6 1/8% notes were trading at 104 bid, 105 offered on Thursday.

JP Morgan led Friday’s quick-to-market add-on deal.

The Natchez, Miss.-based independent energy company plans to use the proceeds to fund pending acquisitions in the Delaware Basin and for general corporate purposes.

Nova Chemicals roadshow

Looking to the week ahead, NOVA Chemicals Corp. plans to start a roadshow on Monday in New York for a $2.1 billion offering of non-callable senior notes in two benchmark tranches (expected ratings Ba2/BB+/BBB-).

The offer includes $750 million minimum of seven-year notes and $750 million minimum of 10-year notes.

Barclays and HSBC are the joint active bookrunners for the acquisition financing.

Also on Friday PetSmart, Inc. announced that it intends to offer $2 billion of notes due 2025.

The acquisition financing deal includes $1.35 billion of senior first lien notes and $650 million of senior notes.

Mixed Thursday flows

Daily cash flows for dedicated high-yield bond funds were mixed on Thursday, according to a trader.

High-yield ETFs saw $146 million of inflows on the day.

However actively managed funds sustained $70 million of outflows on Thursday.

The daily fund flow news trails a Thursday report from Lipper US Fund Flows that dedicated high-yield bond funds saw $650 million of inflows for the week to last Wednesday's close.

Busy day but less busy week

While Friday’s primary market session was certainly busy and productive, it still only capped a generally less busy week.

Friday’s $1.31 billion of new dollar-denominated and fully junk-rated paper from domestic or industrialized-country borrowers brought to $3.98 billion the amount of such paper which had priced in nine tranches throughout the week, according to data compiled by Prospect News.

That was down from the $5.5 billion which priced in 12 tranches last week, ended May 12, as well as down from the $4.99 billion which priced in nine tranches the week before that, ended May 5.

This week’s primary activity, such as it was, did boost year-to-date issuance for 2017 so far to $114.63 billion in 214 tranches – considerably more than the $79.78 billion which had priced in 110 tranches by this point on the 2016 calendar, the Prospect News data indicated.

Full-year issuance in 2016 finished at $226.78 billion in 359 tranches –which ran 12.9% behind the $260.02 billion which had gotten done in 408 tranches in 2015.

Day’s deals move up

In the aftermarket, traders saw generally firmer levels on the day’s new issues when they began trading around.

A trader said that the new Xplornet Communications 9 5/8%/10 5/8% PIK toggle notes “traded up a lot,” quoting that paper in a 102½ to 103 bid context, well up from their its issue price.

However, he said that there had been “just a couple of trades” in the credit.

He said that Lisle, Ill.-based industrial coke producer SunCoke Energy’s new 7½% notes were “going to trade up at least 1 point” from their discounted 98.513 issue price and he quoted the notes at 99½ bid.

The new Coeur Mining 5 7/8% notes were probably the busiest of the new credits, with one market source seeing more than $21 million having changed hands.

He saw the notes move up to 101¼ bid from their par issue price.

A second trader quoted the bonds “up a point and change” when they began trading around.

The traders did not immediately report any initial aftermarket activity in the new Callon Petroleum 6 1/8% add-on notes due September 2024.

FirstCash continues to firm

Among other recently priced issues, a trader said that FirstCash’s new deal “continues to do very well,” seeing those 5 3/8% notes due 2024 in a 101¾ to 102 bid context.

A second trader said that the issue had moved up by ½ point on the day to the 102 bid level, with more than $10 million changing hands, the most of any of the issues which came earlier in the week.

The Arlington, Texas-based operator of various pawnshop chains priced $300 million of the notes at par on Thursday as a regularly scheduled calendar offering. The new bonds shot up to a 101½ to 101¾ bid range in initial aftermarket dealings.

Elsewhere among the Thursday deals, a trader saw Great Lakes Dredge & Dock Corp.’s 8% notes due 2022 trading between 101 and 101¼ bid, about where the bonds had finished the day on Thursday.

The Oak Brook, Ill.-based global maritime dredging contractor priced $325 million of the notes at par on Thursday in a scheduled offering.

Delek Logistics Partners LP’s 6¾% notes due 2025 were seen in a 100½ to 101 bid context, up slightly from where they had finished the day on Thursday. The Brentwood, Tenn.-based energy master limited partnership priced $250 million of those notes at 99.245 to yield 6 7/8% in a regularly scheduled offering.

A trader said that while all of those new issues stayed firm or even improved a little, “all these deals are small. They are not very active.”

Among existing bonds, PetSmart’s 7 1/8% notes due 2023 gained ½ point at 93 bid on volume of over $13 million against the backdrop of the San Diego-based pet-oriented specialty retailer’s planned issuance of as much as $2 billion of new notes to help finance its planned acquisition of Chewy, Inc., a Dania Beach, Fla.-based online retailer of pet food and other pet-related products.

Dynegy soars on takeover talk

Away from the new or recently priced issues, or bonds connected with prospective new deals, a trader said “the biggest news of the day was probably the potential Dynegy takeover by Vistra.

The bonds were “all flying and very active.”

He estimated that “all of the stuff was up, some by as much as 7 or 8 points on the day, though they came off their highs later on.”

He saw the Houston-based power-generating company’s 7 5/8% notes due 2024 with “tons of trades, it was almost like it was a new issue, with 60 [round-lot] trades, plus.”

He pegged those bonds going home at 98½ bid, calling that a 6 point rise on the day.

He said its 7 3/8% notes due 2022 were up 3½ points on the day at 92 bid.

Dynegy’s 8% notes due 2025 and 5 7/8% notes due 2023 were “both very active,” with the 8s finishing at 98 bid and the 5 7/8s at 95 bid, both up 5½ points on the day.

“They were rockin’ and rolling pretty good,” he declared.

Besides notching powerful gains, the Dynegy bonds were the clear volume leaders, with a market source seeing volume in the 7 5/8% issue topping $63 million, the 7 3/8s turning over more than $50 million, the 8% notes with over $49 million traded and the 5 7/8% paper with over $28 million changing hands.

The Wall Street Journal reported that Dallas-based Vistra – the company which emerged from the wreckage of what used to be TXU Corp. – was making a bid to acquire Dynegy in hopes of being able to diversify beyond its own home base in Texas, since Dynegy has extensive operations elsewhere, including the Midwest.

Vistra is the corporate survivor from the 2014 Chapter 11 reorganization of the former Energy Future Holdings Corp., the name under which TXU operated after its 2007 leveraged buyout by private equity firms KKR, TPG Capital and Goldman Sachs Capital Partners.

The buyout left Energy Future Holdings and its affiliate, Texas Competitive Electric Holding Corp., saddled with over $40 billion of debt, which ultimately proved to be unsustainable and the company wound up in the bankruptcy courts – one of the largest corporate reorganizations in history.

The company was renamed Vistra from TCEH Corp. following its emergence from Chapter 11 last fall. Its units include TXU Energy, which provides electricity to retail customers, and power generator Luminant.

Intelsat eases off

Elsewhere Intelsat’s various issues of bonds were seen a little easier on Friday, having backed off the highs they hit in heavy trading on Thursday after the Luxembourg-based communications satellite company improved the terms of its pending debt exchange offer and extended the offer to run through the end of the month.

But unlike Thursday, when much of the capital structure had traded actively, a market source said that only one Intelsat issue – its 5½% notes due 2023 – actually generated a lot of volume, with over $16 million traded.

He saw the bonds down 1 point on the day, ending at 83 bid.

At another shop, they were seen going home at 84, down just ¼ point on the day.

On Thursday, those notes had surged more than 2½ points higher on volume of over $48 million, with the company’s other notes, such as its 7¾% notes due 2021 and 8 1/8% notes due 2023 following similar trajectories.

Trading in the Intelsat paper has been volatile all week against the backdrop of the big bond exchange offer that the company hopes will get rid of more than $3 billion of its current nearly $15 billion debt load.

Intelsat mounted the exchange offer as part of its planned pending merger with sector peer WorldVu Satellites Ltd., better known as OneWeb. That transaction, if consummated, would also see OneWeb’s corporate parent, Japanese technology company Softbank Group, make a $1.7 billion investment in Intelsat.

However, early in the week, Intelsat’s notes retreated. News reports suggested that Softbank, seeing the difficulty Intelsat has been having with its bond exchange effort, might reconsider.

But the bonds rebounded by multiple points on Thursday after Intelsat sweetened the terms of its exchange offer and extended the expiration to May 31 from May 18. The offer had originally been scheduled to expire on April 30, but the company has extended it several times in hopes of getting enough noteholders to agree to the swap to meet the required 85% threshold.

Prior to the sweetened terms, few noteholders had chosen to participate in the transaction.

Indicators turn better

Statistical market performance measures turned higher across the board on Friday, after having been mixed on Thursday and lower all around on Wednesday, the latter being the first down day in nearly two weeks, since May 4.

The indicators were meantime mixed versus where they had finished out last Friday, May 12. It was their second straight mixed week, following one lower week and one higher trading week before that.

The KDP High Yield Daily Index jumped by 10 basis points on Friday to close at 72.42, its first gain after two consecutive losses, including Thursday’s 6 bps setback.

Its yield came in by 4 bps to end at 5.07%, after having widened out over the previous two sessions, including Thursday’s 2 bps rise.

Those levels compared favorably with the 72.27 index reading and 5.11% yield a week ago.

The Markit CDX Series 28 Index improved by almost ¼ point on Friday, its second straight gain, ending at 107 5/16 bid, 107 3/8 offered. On Thursday, it had gained more than 3/32 point.

But it was down on the week from last Friday’s 107 9/16 bid, 107 5/8 offered close.

The Merrill Lynch North American High Yield Index rebounded after two straight setbacks, rising by 0.239% on Friday, versus Thursday’s 0.098% retreat.

That upturn lifted the index’s year-to-date return to 4.339% from Thursday’s 4.09%.

It also set a new high point for the year, surpassing the previous zenith of 4.311%, set this past Tuesday.

For the week, the index gained 0.278%, its second straight weekly advance. It had firmed by 0.351% last week.

© 2015 Prospect News.
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