Vivint prices add-on, Avolon megadeal on tap, Vector Group slates; new Terex bonds jump

By Paul Deckelman and Paul A. Harris

New York, Jan. 18 – High yield new-deal activity slackened on Wednesday, as syndicate sources reported that a single U.S.-dollar-denominated and fully junk-rated offering had come to market – home security services company Vivint’s quickly shopped $300 million add-on to its existing 2022 secured notes, which came to market via the company’s corporate parent entity, APX Group Holdings, Inc.

That volume was down from the $2.05 billion which had gotten done in three tranches – also drive-by offerings – during Tuesday’s session.

The sources meantime said that aircraft leasing company Avolon Holdings Ltd. was set to touch down in Junkbondland on Thursday with what is expected to be the biggest new issue seen so far this year – $3 billion of new paper, split into two evenly sized tranches of 5.5-year and seven-year notes. Price talk on the big deal emerged on Wednesday.

Also during the session, tobacco and real estate company Vector Group Ltd. announced plans for an $850 million issue of eight-year secured notes.

Secondary market traders saw active interest in the three deals that had priced during Tuesday’s session – from broadband and cable operator Charter Communications, Inc., builder William Lyon Homes, Inc. and materials handling equipment manufacturer Terex Corp.

While the Charter megadeal traded around its issue price and William Lyon slightly above the level at which it came to market, the traders reported that Terex had firmed smartly from its issue level and in fact easily topped the day’s Most Actives list.

Statistical market performance measures turned mixed on Wednesday after having been lower across the board on Tuesday and higher all around on Friday; it was the indicators’ fifth mixed session in the last nine trading days.

Vivint prices rich

Home security company Vivint priced Wednesday's sole dollar-denominated deal, a $300 million add-on to its 7 7/8% senior secured notes due Dec. 1, 2022 (B1/B) which came at 108.25.

The price came at the rich end of price talk in the 108 area, and rich to initial guidance of 107.5 to 108, sources said.

BofA Merrill Lynch was the lead left bookrunner for the drive-by debt refinancing deal.

Avolon tranche sizes, talk

Looking to Thursday, Avolon Holdings Ltd. set tranche sizes and price talk in its $3 billion two-part offering of non-callable senior notes (B1/BB-/BB).

The short-maturity tranche features $1.5 billion of 5.5-year notes talked to yield in the 5 3/8% area.

The long-maturity tranche features $1.5 billion of seven-year notes talked to yield in the 5¾% area.

Official talk on both tranches comes in line with early guidance: 5% to 5½% on the 5.5-year notes and 5½% to 6% on the seven-year notes.

The deal, which is expected to price Thursday, is going pretty well, according to a trader who added that the order book was heard to be at deal-size on Wednesday morning.

UBS and Morgan Stanley are the joint physical bookrunners.

Vector conference call

Vector Group Ltd. plans to sell $850 million of eight-year senior secured notes (existing ratings Ba3/BB-).

The deal, via sole bookrunner Jefferies, will be shopped by means of an investor conference call scheduled to get underway at 10:30 a.m. ET Thursday, and is set to price thereafter.

The Miami-based holding company plans to use the proceeds together with approximately $44 million of new common equity, to refinance its 7¾% notes due 2021 and for general corporate purposes.

Virgin Media prices tight

There was Wednesday drive-by action in the sterling denominated high yield primary.

Virgin Media priced a £675 million issue of senior secured notes due April 15, 2027 (Ba3/BB-/BB+) at par to yield 5%.

The yield printed at the tight end of yield talk in the 5 1/8% area.

Joint bookrunner Deutsche Bank will bill and deliver for the debt refinancing deal. Barclays, Citigroup, Credit Suisse, HSBC, Banca IMI, Mediobanca, Nomura, RBC, NatWest and UBS were also joint bookrunners.

Hapag-Lloyd prices through talk

Hapag-Lloyd AG priced an upsized €250 million issue of five-year senior notes (Caa1/B-) at par to yield 6¾%, through official yield talk in the 7% area.

The deal size was increased from €150 million.

Berenberg, Deutsche Bank and Credit Suisse were the joint global coordinators.

The Hamburg, Germany-based container shipping company plans to use the proceeds to fund the early redemption of its dollar-denominated notes issued in 2010 and for general corporate purposes, including further repayment of debt.

Mixed flows

The cash flows of the dedicated high yield bond funds were mixed on Tuesday, the most recent session for which data was available at press time, according to a trader.

High yield ETFs saw $38 million of inflows on the day.

Actively managed funds sustained $40 million of outflows on Tuesday.

Dedicated bank loan funds saw $125 million of inflows on Tuesday.

Terex takes off

In the secondary arena, traders said that Terex Corp.’s new 5 3/8% notes due 2025 were sharply higher in heavy trading on Wednesday, a day after the Westport, Conn.-based manufacture of construction cranes and vehicles and other materials handling equipment had priced its quick-to-market $600 million offering at par, following an upsize from the originally announced $550 million.

A market source said those bonds had moved up to 101½ bid in initial aftermarket trading, though only around $3 million traded at that time due to the relative lateness of the hour at which the deal came to market.

But there were no such constraints seen on Wednesday, with the source pointing out that volume in the new deal topped the $100 million mark – more than twice the turnover seen in the next busiest issue.

The source pegged those notes at 101¾ bid going home, a ¼ point gain on the day.

Another trader saw the bonds in a 100¾ to 102 bid context.

William Lyon, Charter busy

The next-busiest bond, meantime was another Tuesday deal – Newport Beach, Calif.-based builder William Lyon Homes’ 5 7/8% notes due 2025, with over $47 million changing hands on Wednesday.

A trader pegged those notes at 99½ bid, which he called off by 1/8 point on the day.

A second saw them around unchanged at 99 5/8 bid, noting that this was still up from the discounted issue price of 99.215 at which the quickly shopped offering had priced to yield 6%.

At another shop, a third market source located the notes in a 99½ to par bid range.

Tuesday’s other deal – Stamford, Conn.-based broadband and cable provider Charter Communications’ 5 1/8% notes due 2027 – was seen anchored right around the par level at which that unscheduled $1 billion offering had priced via the company’s CCO Holdings, LLC and CCO Holdings Capital Corp. subsidiaries.

One trader saw the bonds get as good as 100¼ bid, calling that up 1/8 point on the session from its initial aftermarket gains.

Two others each located the new Charter paper straddling par at 99 7/8-to-100 1/8.

At the Gimme Credit independent advisory group, senior analyst Kim Noland said in a Wednesday research note that Charter is in the process of becoming the nation’s second-biggest cable provider with its acquisitions of rivals Time Warner Cable and BrightHouse, a combination which she calls “strategically positive, expanding its scope and improving its competitive position.”

Although the combined company’s leverage is likely to increase to a debt level of more than four times earnings, “we think however, the acquisitions should result in credit quality improvement over the longer term.”

Noland also raised the possibility that telecommunications giant Verizon “may be interested in acquiring a large cable company.”

Pearson problems hurt Cengage

Away from the new issues, a trader noted that investment-grade educational publishing company Pearson plc issued lower guidance and cut its dividend, warning that changes in the market for educational materials – notably, a shift to digital-based media and away from traditional textbooks – would cause its profits to underperform over the next two years. The company’s stock slid 30%.

He said that caused the junk bonds of sector peer Cengage Learning to likewise take a tumble; the Boston-based publishing company’s 9½% notes due 2024 slid by 7 points on the day to end at 85½, although he said that there was “not a lot of volume” in the notes – “but it was a topical story.”

Indicators turn mixed

Statistical market performance measures turned mixed on Wednesday after having been lower across the board on Tuesday and higher all around on Friday; it was the indicators’ fifth mixed session in the last nine trading days.

The KDP High Yield index fell by 6 basis points Wednesday to close at 72.01, after having improved by 5 bps on Friday and then been unchanged on Tuesday. Friday’s gain was its first after four straight losses. The index was not published on Monday due to the market close for the Martin Luther King Jr. legal holiday.

Its yield rose by 1 bps to 5.15%, after having been unchanged over the previous two sessions and having come in by 2 bps before that.

But the Markit Series 27 CDX index rebounded after two straight losses, rising by 3/16 point on Wednesday to end at 106 3/8 bid, 106 7/16 offered. On Tuesday, it had ended down 3/32 point.

However, the Merrill Lynch High Yield index made it two losses in a row on Wednesday, declining by 0.039%, on top of Tuesday’s 0.001% easing. It had risen by 0.069% on Friday, bouncing back from two straight losses, and had also firmed by 0.053% on Monday, when it published despite the market close.

Wednesday’s loss cut its year-to-date return to 1.086% from its close of 1.126% on Tuesday, which in turn was down marginally from Monday’s 1.127% – its new peak level for the year so far.

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