Kratos, upsized B&G drive-by price; new Kratos gains; overall market weak; Windstream slide continues

By Paul Deckelman and Paul A. Harris

New York, Nov. 8 – The-high yield primary sphere punched out a pair of new deals totaling some $700 million of dollar-denominated and fully junk-rated paper, syndicate sources said Wednesday, in contrast to Tuesday’s complete shutout.

B&G Foods, Inc. – producer of such iconic consumer food brands as Green Giant, Cream of Wheat, French’s mustard, Old London snacks and its own eponymous line of pickles – served up a quickly shopped and upsized $400 million add-add on to its existing 2025 notes.

And Pentagon contractor Kratos Defense & Security Solutions, Inc. brought a regularly scheduled $300 million eight-year secured issue to market.

The latter issue was among the most actively traded credits of the day in Junkbondland, firming smartly in initial aftermarket action following its pricing.

The new Kratos paper was one of the few high-yield issues seen on the upside on Wednesday with most names lower, including Monday’s offering from Little Rock, Ark.-based telecommunicatiosn company Windstream Holdings Inc., which has struggled since its pricing.

Away from the new deals, a second straight session of lower crude oil prices finally caught up with previously strong energy-related names such as California Resources Corp., Denbury Resources Inc. and undersea oil and natural gas driller Transocean Inc.

Telecommunications names such as Frontier Communications Corp. and CenturyLink, Inc. were off – CenturyLink after having posted lower third-quarter earnings Wednesday and Frontier continuing its recent slide on disappointing results.

Also in the communications sphere, broadcaster and outdoor advertising company iHeart Media Inc. was off after weak numbers.

Retailers Rite Aid Corp. and PetSmart Inc. were also among the weaker issues, as was hospitals operator Community Health Systems Inc.

Statistical market performance measures were down for a second consecutive session on Wednesday; they had turned lower all around on Tuesday, after having been mixed on Friday and again on Monday. Before that, they had fallen across the board on Thursday, after having been mixed over the previous four sessions.

B&G Foods upsizes

In Wednesday's primary market B&G Foods, Inc. priced an upsized $400 million add-on to its 5¼% senior notes due April 1, 2025 (B2/B+) at 101.00 in a drive-by deal that grew from $350 million.

The yield to worst is 5.034%. The yield to maturity is 5.084%.

The reoffer price came at the rich end of the 100.5 to 101 price talk.

Barclays was the left bookrunner. BofA Merrill Lynch, RBC, Credit Suisse, Deutsche Bank, Goldman Sachs, JP Morgan and BMO were the joint bookrunners for the debt refinancing deal.

Kratos prices tight

Kratos Defense & Security Solutions, Inc. priced a $300 million issue of eight-year senior secured notes (B3/B) at par to yield 6½%, at the conclusion of a roadshow.

The yield printed at the tight end of the 6½% to 6¾% yield talk, which had come in right on top of initial guidance.

Goldman Sachs was the lead left bookrunner for the debt refinancing deal. J.P. Morgan and SunTrust were also bookrunners.

Titan International talk 6½% area

Looking ahead, Titan International, Inc. talked its $400 million offering of six-year senior secured notes due 2023 (B3/B-) to yield in the 6½% area.

Books close at 11 a.m. ET Thursday, and the deal is set to price thereafter.

Goldman Sachs is the sole bookrunner.

Platform Specialty pricing Thursday

Platform Specialty Products Corp. plans to price a $550 million offering of eight-year senior notes on Thursday.

Initial guidance is in the high 5% area, a sellside source said.

Credit Suisse, Barclays, Goldman Sachs, Citigroup and UBS Investment Bank are the joint bookrunners.

The West Palm Beach, Fla.-based specialty chemicals producer plans to use the proceeds to refinance its 10 3/8% senior notes due 2021.

Precision Drilling launches $400 million

Precision Drilling Corp. launched a $400 million offering of senior notes due January 2026.

The deal is scheduled to be shopped on an investor conference call slated for 10 a.m. ET on Thursday and price on Thursday afternoon.

Joint bookrunner RBC will bill and deliver. Credit Suisse is also a joint bookrunner.

The Calgary, Alta.-based oilfield services company plans to use the proceeds to fund a concurrent tender offer for 2020 notes and a portion of its 2021 notes.

GNC roadshow

GNC Holdings, Inc. plans to sell $500 million of five-year senior secured notes in the Nov. 13 week, at the conclusion of a roadshow.

BofA Merrill Lynch is leading the deal.

The Pittsburgh-based specialty health, wellness and performance retailer plans to use the proceeds, together with a new term loan and asset-based revolver, to prepay and terminate its existing credit facility, with any remaining proceeds to be used for general corporate purposes.

Welltec launches $340 million

Denmark-based oilfield services provider Welltec A/S launched a $340 million offering of five-year senior secured notes (expected ratings B2/B-) on Wednesday.

An international roadshow is scheduled to begin on Thursday and wrap up on the West Coast of the United States late in the Nov. 13 week.

Joint bookrunner Goldman Sachs will bill and deliver. DNB and Credit Suisse are also joint bookrunners.

The company, which is headquartered in Allerod, Denmark, plans to use the proceeds to repay $325 million of its 8% senior secured notes due 2019, and also to repay its European Investment Bank finance contract.

CMC di Ravenna prices €325 million

Among other Europe-based bond-sellers, on Wednesday, Italy-based cement maker CMC di Ravenna priced a €325 million issue of 5.25-year senior notes (B2/B) at par to yield 6%.

The yield printed on top of yield talk in the 6% area and tight to initial talk of 6% to 6¼%.

Joint global coordinator and joint bookrunner BNP Paribas will bill and deliver. UniCredit Bank was also a joint global coordinator and joint bookrunner.

The Ravenna, Italy-based company plans to use the proceeds to refinance its 7½% senior notes due 2021.

Titan Cement talk 2½% area

Italy's Titan Cement Co. SA talked a €250 million offering of seven-year senior notes (S&P: BB+) to yield in the 2½% area.

The debt refinancing deal is expected to price Thursday.

Joint global coordinator and joint bookrunner HSBC will bill and deliver. SG is also a joint global coordinator and joint bookrunner. ABN Amro and Raiffeisen are also joint bookrunners.

New Kratos climbs in trading

In the secondary market, the new Kratos 6½%senior secured notes due 2025 were heard by traders to have pushed solidly higher after pricing earlier in the session at par.

The new deal “flew right out of the chute, up around 3 points,” one said, quoting it in. a 102½-to-103 bid range.

Another trader saw the San Diego-based defense contractor’s new issue at 102½ bid, while a third market source pegged the bonds at 102¾ going home.

He said it was one of the busiest credits in the junk realm on Wednesday, with over $64 million trading hands.

A trader meantime said that he had seen no initial aftermarket activity in Parsippany, N.J.-based packaged food products maker B&G’s new add-on to its 5¼% notes due April 1, 2025.

Windstream issue continues decline

Among the recently priced issues, traders said that Windstream Holdings’ 8 5/8% first-lien senior notes due 2025 continued to lose ground on Wednesday, with one seeing the bonds “pretty active and down another ¼ point,” trading around the 96 bid level – this on top of the losses notched in aftermarket trading on Monday and again on Tuesday.

“They came at a discount, and they’ve just kept going lower,” another trader said, seeing the notes fall even below the 96 bid level, in to a high 95ish handle.

Another market source saw the bonds finishing the day at 95 13/16 bid, down more than ½ point on the session, on turnover of more than $43 million.

The $400 million offering – structured as an add-on to new notes that the company intends to issue as part of an exchange offer for some of its existing bonds that it is currently pursuing – priced at 99 bid on Monday, yielding 8.802%, after the regularly scheduled forward calendar transaction was upsized from an originally announced $250 million.

They immediately fell below their issue price in Monday’s first aftermarket trading and then continued to slide on Tuesday.

Most issues weaker

Away from the new deal, a trader said that “a lot of things were weak today,” citing a generalized feeling of market uncertainty due to a number of factors, including weakness in other financial markets, and continued daily outflows from high-yield mutual funds and exchange-traded funds – he noted that “we saw over $1 billion of outflows last week, and we’re tracking the same for this week,” with flow numbers for the reporting week ended Wednesday scheduled to be released on Thursday afternoon.

On top of that, he noted “some anxiety about the tax bill” now being worked on in Congress, particularly in regards to how “it might affect how some companies deduct interest payments – for higher yielding companies, that could be a significant blow,” depending on what the final bill coming out of the congressional sausage factory will look like.

Add to that concern about the direction the Federal Reserve may take with a new chairman and possibly several new governors, and “there’s uncertainty in the market.”

Communications names lower

Even as the new Windstream issue is already struggling, established telecom names were doing no better, particularly Stamford, Conn.-based wireline and broadband provider Frontier Communications, whose bonds have been moving lower ever since reporting disappointing quarterly earnings last week.

A trader said its notes were “pretty weak all day, although they rebounded a little off their lows” for the session.

Even so, its benchmark 11% notes due 2025 fell by another 11/16 point, ending at 77¼ bid, with over $34 million having traded, while its 10½% notes due 2022 did even worse on the day, swooning by 1½ points to close at 80 1/8 bid, with over $27 million of volume.

Frontier’s 8½% notes due 2020 were likewise 1½-point losers on the session, ending at 93½ bid, as over $18 million traded.

Fellow wireline operator CenturyLink’s 7½% notes due 2024 plunged by more than 3 points, to 97 3/8 bid, with over $21 million traded. The Monroe, La.-based company reported that its third-quarter net earnings declined to $228 million, or 42 cents per share, from $305 million, or 56 cents per share, a year ago. The per-share figure came in below analysts’ expectations.

And its revenues also slid to $4.03 billion from $4.38 billion in the year-earlier quarter.

CenturyLink’s 5.8% notes due 2022 cascaded down to 93½ bid, a nearly 4-point loss on the day, with over $18 million traded.

Sprint Corp.’s notes continued to slide in the aftermath of the recently announced end of its merger talks with sector peer T-Mobile (US) Inc.

“Those talks blew up – and everything has been weaker,” a trader said.

Its 8¾% due 2032 ended off by 1¾ points, at 112 bid, on volume of over $16 million, while the Overland Park, Kan.-based wireless carrier’s 7 5/8% notes due 2025 fell by ¾ point, to 105 bid, on $11 million of volume.

He also saw the company’s 6 7/8% notes due 2028 finishing “just south of par,” in a 99-to-100 bid context, down 1 point on the day.

iHeart off on losses

Struggling iHeart Media “put up weaker numbers than expected, a trader said, in seeing the San Antonio, Texas-based radio broadcaster and outdoor advertising company’s notes losing ground.

Its 9% notes due 2019 ended at 71 3/8 bid, down 5/8 point, while its 9% notes due 2021 lost more than ½ point to end at just over 69 bid, with around $19 million of each traded.

iHeart lost $248.2 million in the third quarter, far more red ink than the $35 million that it lost a year ago at this time. Revenues fell to $1.54 billion from $1.57 billion in the 2016 third quarter.

The company continues to wrestle with its more than $20 billion of accumulated debt, warning on Wednesday that “our current forecast indicates we will continue to incur net losses and generate negative cash flows from operating activities as a result of our indebtedness and significant related interest expense.”

It was evaluating whether it can continue as a “going concern.”

Hospitals, retailers retreat

Elsewhere, Franklin, Tenn.-based hospital operator Community Health Systems, Inc.’s notes fell again, a trader said, after a ratings downgrade.

“They’ve been under pressure for weeks, down around 10 or 12 points since August.”

One Wednesday, its 6 7/8% notes due 2022 lost more than 1¾ points to end at 64¾, on over $29 million of volume.

In the retailing sphere, a trader saw Phoenix-based pet food and supplies seller PetSmart’s 7 1/8% notes due 2023 down more than ½ point at 71½ bid, on volume of over $27 million, while its 5 7/8% notes due 2025 likewise lost ½ point to close at 84¾ bid with over $20 million changing hands.

Camp Hill, Pa.-based drugstore operator Rite Aid’s 6 1/8% notes due 2023 were down 1 1/8 points on the day at 89 bid, on volume of over $12 million.

Indicators continue lower

Statistical market performance measures were down for a second consecutive session on Wednesday; they had turned lower all around on Tuesday, after having been mixed on Friday and again on Monday. Before that, they had fallen across the board on Thursday, after having been mixed over the previous four sessions.

The KDP High Yield Daily Index plunged by 16 basis points on Wednesday to close at 72.07, its second consecutive loss. The index had finished on Tuesday down 4 bps, after having gained 2 bps each on both Friday and again on Monday.

Its yield widened out for a third consecutive session, rising by 6 bps to 5.23%, after having widened by 3 bps on Tuesday and by 1 bp on Monday, following Friday’s 7 bps tightening.

The Markit CDX Series 29 High Yield Index saw its second loss in a row, retreating by 3/16 point to close at 107 25/32 bid, 107 27/32 offered, after having lost nearly 9/32 point on Tuesday. On Monday. It had risen by 1/8 point, its first gain after three straight downside sessions.

And the Merrill Lynch North American High Yield Master II Index saw a fifth straight loss, dropping by 0.338%, on top of Tuesday’s 0.079% easing.

The latest loss dropped the index’s year-to date return to 6.992% from 7.354% on Tuesday – the first time the index has closed below the psychologically potent 7% mark since Sept. 28, when it finished at 6.954%.

The year-to-date return also remains well down from the 7.636% posted on Oct. 24 – the peak cumulative return for 2017 so far.

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