Gray TV, Six Flags drive by, Zekelman also prices, new bonds busy, higher; Valeant gyrates at lower levels

By Paul Deckelman and Paul A. Harris

New York, June 7 – The pace of primary activity in the high yield market picked up on Tuesday as syndicate sources saw a trio of new deals totaling more than $1.1 billion getting done.

TV station group owner Gray Television, Inc., priced a quickly shopped $500 million of new 10-year notes, after the issue was upsized.

Also seen doing a same-day drive-by deal was theme park operator Six Flags Entertainment Corp., which priced $300 million of eight-year notes.

Steel pipe and tubing maker Zekelman Industries, Inc. had the day’s sole regularly scheduled bond offering, a downsized $375 million of seven-year secured paper.

Traders saw busy aftermarket activity at higher levels for the new deals.

They also saw continued brisk activity in recent issues from Tenneco Inc., CVR Partners, LP and Yum! Brands Inc.

Away from the new deals, Valeant Pharmaceuticals International Inc.’s bonds were getting smacked around, in active trading, after the embattled company slid into the red during its fiscal first quarter versus a year-ago profit and issued reduced guidance. However, the bonds came off their lows for the day, as Valeant executives said the company’s liquidity was solid and that it was continuing to cut debt.

Statistical market performance measures were higher for a third consecutive session on Tuesday, their fifth stronger session out of the last 11. They had turned upward on Friday and had stayed up there on Monday and Tuesday, after having been mixed last Thursday.

Gray Television upsizes

Primary market news volume remained heavy on Tuesday, with both Europe and the United States generating steady streams of new issue headlines.

In the dollar market three issuers raised $1.18 billion, each bringing a single-tranche offer.

Two of the three came as drive-bys.

One was upsized and one was downsized.

Executions were tight, with all three deals coming at the tight ends of official talk, and two coming inside of initial guidance.

Demand for all three issues was heavy, sources said.

Gray Television, Inc. priced an upsized $500 million issue of 10-year senior notes (B3/B+) at par to yield 5 7/8%.

The yield printed at the tight end of yield talk in the 6% area, and inside of the 6% to 6¼% initial guidance.

The deal played to orders topping $3 billion, sources said.

Wells Fargo was the left bookrunner. BofA Merrill Lynch, RBC and Deutsche Bank were the joint bookrunners.

The Atlanta-based owner and operator of TV stations plans to use the proceeds to repay approximately $423.9 million of its outstanding term loan entered into in February. The remaining net proceeds, including the proceeds from the increase in the deal size, will be used for general corporate purposes which may include, among other things, debt repayment from time to time, capital expenditures, the financing of possible future business expansions and acquisitions, working capital and the financing of ongoing operating expenses and overhead.

Zekelman downsized

Zekelman Industries, Inc. priced a downsized $375 million issue of seven-year senior secured notes (Caa2/B) at par to yield 9 7/8%.

The yield printed at the tight end of yield talk in the 10% area.

The offer played to $2.1 billion of orders, sources said.

The deal soared into the secondary market where one trader saw it 102 bid, 102½ offered.

The deal was downsized from $425 million. In conjunction with the $50 million decrease in the bonds the company upsized its term loan by $25 million and made a $25 million draw on its ABL facility.

Goldman Sachs was the left bookrunner. J.P. Morgan was the joint bookrunner.

The Chicago-based company plans to use the proceeds, together with its term loan and cash on hand, to take out all of its outstanding 2018 notes and for general corporate purposes and working capital purposes.

Six Flags prices tight

Six Flags Entertainment Corp. priced a $300 million issue of eight-year senior notes (B3/BB-) at par to yield 4 7/8%.

The yield printed at the tight end of yield talk in the 5% area and inside of initial guidance of 5% to 5¼%.

Wells Fargo was the left bookrunner for the debt refinancing deal. BofA Merrill Lynch, J.P. Morgan, Barclays, BBVA, Goldman Sachs and HSBC were the joint bookrunners.

In the wake of Tuesday's dollar-denominated transactions two deals are parked on the calendar as business for the present week.

Look for Dell Inc. to price its $3.25 billion two-part deal on Wednesday, a day earlier than the timing appeared on the announced schedule, sources said.

The deal is coming in tranches of five-year notes and eight-year notes, with tranche sizes to be determined.

Early guidance has the five-year notes coming with a yield of 6½% to 7%, and the eight-year notes with a yield of 7½% to 8%.

However, look for pricing to be cranked in by around 25 basis points on each tranche, a portfolio manager warned on Tuesday, adding that the five-year notes could come around 6¼% and the eight-year notes at 7½% to 7 5/8%.

Meanwhile Direct ChassisLink, Inc. has a New York group lunch and global conference call set to get underway at 11 a.m. ET on Wednesday for its $325 million offering of seven-year senior secured second-lien notes.

eircom upsized and inside of talk

In the European primary market eircom Finance DAC launched and priced an upsized €500 million issue of six-year senior secured notes (B2/B/B+) at par to yield 4½%.

The debt refinancing deal was upsized from €350 million

The yield printed 25 basis points beneath the tight end of the 4¾% to 5% yield talk.

Joint global coordinator and joint bookrunner Deutsche Bank will bill and deliver. Credit Suisse is also a joint global coordinator and joint bookrunner. Barclays, BNP Paribas, DNB Markets, Goldman Sachs, JPMorgan and Morgan Stanley were also joint bookrunners.

Stora Enso prints 2 1/8% coupon

Finland-based Stora Enso Oyj priced a €300 million issue of 2 1/8% seven-year fixed-rate at a 200 basis points spread to mid-swaps.

The deal was talked at a 230 bps spread to mid-swaps.

The notes came at a reoffer price of 99.711 to yield 2.17%.

Deutsche Bank AG, London Branch, JP Morgan and Nordea managed the sale.

The pulp and paper manufacturer, based in Helsinki, plans to use the proceeds to make share repurchases and address near-term maturity debt.

Tereos starts roadshow

A well-populated European active calendar took aboard a new issuer on Tuesday.

France based sugar producer Tereos began a roadshow for a €400 million offering of seven-year bonds.

BNP Paribas, Natixis and Rabobank are the global coordinators for the debt refinancing deal.

Tereos joins Braas Monier Building Group with €435 million of five-year senior secured notes (BB-), Outokumpu with €200 million of five-year fixed-rate senior secured notes, ContourGlobal Power Holdings with €550 million of five-year senior secured notes, and Titan Cement Co. with €250 million of five-year senior notes.

Look for price talk on most of those deals to surface on Wednesday, a London-based debt capital markets banker said.

Also look for two new European high yield deals to be announced, the banker added.

Monday inflows

The cash flows of the dedicated high yield bond flows were positive on Monday, the most recent session for which data was available at press time, according to a portfolio manager.

High yield ETFs saw $286 million of inflows on the day.

Asset managers saw $20 million of inflows on Monday.

The dedicated bank loan funds were negative on Monday, however. They saw $35 million of outflows on the day, the manager said.

Day’s deals trade higher

In the secondary market, traders saw all three of Tuesday’s new deals actively trading above their respective issue prices.

Six Flags was the busiest of the trio, a market source said, seeing more than $47 million of the Grand Prairie, Texas-based regional theme part operator’s quick-to-market 4 7/8% notes due 2024 having changed hands and going out at 100½ bid, up from their par issue price.

Another trader saw the bonds get as good as 101 bid shortly after pricing – but then the issue fell back, finishing the day in a 100¼ to 100½ context.

Another trader also saw the issue higher earlier on, but said “the 100¼ bid just got hit, leaving the issue at 100¼ bid, 100 5/8% offered.

A trader said that Gray Television’s unscheduled 5 7/8% notes due 2026 pushed up to a 101 to 101½ bid context from their par issue price.

A second market source saw the bonds rise to 101 bid, with over $30 million having traded.

Zekelman Industries’ 9 7/8% notes due 2023 jumped out to 101¾ bid, 102¼ offered when they were freed for secondary market activity, a trader said.

A second trader quoted the notes at 102 bid, on volume of more than $33 million.

That was well up from the par level at which that regularly scheduled forward calendar deal had priced after the Chicago-based manufacturer of industrial steel pipe and tubular products formerly known as JMC Steel, downsized its offering.

Tenneco climb continues

A trader said that Tenneco’s new 5% notes due 2026 “were up slightly,” quoting the bonds at 101 bid.

“Tenneco was busy,” a second trader said, seeing more than $29 million of the notes having moved around during the session.

He said that the bonds traded in a 100¾ to 101¼ bid context, “with most of the last prints around 101.” The Lake Forest, IIl.-based automotive components manufacturer’s $500 million quick-to-market offering had priced at par on Monday, and was seen going home later on in Monday’s session at 100¾ bid, on volume of more than $35 million.

Recent deals on the rise

Among other recently priced offerings, the new CVR Partners 9¼% senior secured notes due 2023 were seen by a trader ½ point better on Tuesday at 100¾ bid, with over $13 million of the notes having traded.

CVR, a Sugar Land, Texas-based producer of nitrogen-based fertilizer, and its wholly-owned CVR Nitrogen Finance Corp. subsidiary had priced $645 million of those notes on Friday at 97.499 to yield 9¾ points, after the regularly scheduled offering was upsized from an originally announced $625 million.

More than $30 million of the new bonds had traded in initial aftermarket dealings on Friday, gaining more than 2 points from their deeply discounted issue price, to finish around 99¾ bid.

The bonds continued to rise on Monday, going out up by around ¼ point at 100¼ bid, a trader said, with some $12 million of turnover.

Yum! Brands’ 5¼% notes due 2026 edged up by 1/8 point on Tuesday, with a market source quoting the notes at 101½ bid, with about $17 million traded.

The Louisville, Ky.-based corporate parent of the KFC, Pizza Hut and Taco Bell fast-food restaurant chains had that $1.05 billion of those bonds, along with $1.05 billion of 5% notes due 2024 in a regularly scheduled offering on Thursday, Junkbondland’s first new deal in a week. Both tranches of the notes had priced at par after the two-part deal was downsized from an originally announced $2.3 billion.

Investors showed a healthy appetite for the new bonds from the get-go.

A market source said that more than $46 million of the 5% notes traded during the relatively short time between their pricing and Thursday’s market close, and more than $55 million of 5¼% notes. Most of the trades in both were in a 100½ to 101 bid context.

On Friday, demand for the notes increased, with over $105 million of 5¼% notes having traded, easily topping the day’s Most Actives list and going home somewhere between 100 7/8 and 101 bid.

More than $75 million of the company’s new 5% notes were also changing hands, trading in a 100 3/8 to 101 1/8 bid context.

On Monday, more than $35 million of the 5% notes traded, gaining ½ point on the session to 1 3/8 bid, while the 5¼% paper was 3/8 point better, also at 101 3/8 bid, with over $29 million having traded.

Valeant gyrates after numbers

Away from the new deals, a trader said that Valeant Pharmaceuticals’ bonds “fluctuated by as much as 2 points” after the beleaguered Laval, Que.-based drugmaker reported disappointing first quarter results and lowered its guidance for 2016 from the levels it had put out several months ago.

He saw the company’s flagship 6 1/8% notes due 2025 going home down between ½ and ¾ point on the day around the 82 mark, although he noted that earlier, “they had fallen as low as 81, or maybe even lower.”

He saw “some buying on weakness” after the initial morning drop, cutting the early losses.

He said the overall Valeant capital structure was down by ½ to ¾ point on the day.

Valeant, a second trader said, “was the busiest name.”

For instance, he said that over $109 million of the 6 1/8% notes had traded, easily topping the Most Actives list.

“They began the day down 2 points,” he said, “but then they were bouncing back” off the lows.

The company’s 5 7/8% notes due 2023 closed down 1 point at 82½ bid, with over $36 million traded.

Valeant’s liquidity remains “solid,” company executives said on Tuesday, adding that it expects to remain in compliance with its credit facility covenants.

Even though the company released reduced full-year guidance versus the projections that it made on its last conference call, three months ago, it remains committed to its previous prediction that it will reduce its overall debt levels by $1.7 billion this year (see related story elsewhere in this issue).

Indicators continue rise

Statistical market performance measures were higher for a third consecutive session on Tuesday, their fifth stronger session out of the last 11. They had turned upward on Friday and again on Monday and Tuesday, after having been mixed last Thursday.

The KDP High Yield Daily index jumped by 26 bps on Tuesday to close at 67.88, its second straight gain and sixth such advance in the last 10 sessions, including a recent four-session winning streak. The index had firmed by 16 bps on Monday after having been unchanged on Friday and lower by 6 bps points on Thursday.

Its yield came in by 8 bps on Tuesday to 6.02%, its fourth narrowing in the last five sessions. The yield had also eased by 5 bps on Monday.

The Markit Series 26 CDX North American High Yield index posted its third straight gain on Tuesday, firming by almost 7/32 point to end at 103 7/16 bid, 103½ offered. It had risen by almost 9/32 point on Monday.

The Merrill Lynch North American High Yield Master II index rose by 0.367% on Tuesday – its fourth gain in a row after one loss, which in turn had followed eight straight upside sessions before that. On Monday, it had improved by 0.377%.

Tuesday’s gain raised the index’s year-to-date return to 8.996% – a third straight new peak level for the year so far. It was up from the previous zenith of 8.598%, reached on Monday.

Tuesday’s year-to-date return is the index’s highest closing level since Dec. 31, 2012, when the index had closed out the year with a 15.583% return.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.