Upsized, restructured Hexion prices, also Nielsen and Atotech deals; new Hexion paper heads higher

By Paul Deckelman and Paul A. Harris

New York, Jan. 25 – The high yield primary sphere broke the $1 billion barrier for the first time this week on Wednesday, after having racked up more modest new-issuance totals on both Monday and Tuesday.

Syndicate sources said that some $1.64 billion of new U.S. dollar-denominated and fully junk-rated paper had been priced during the session in four tranches brought by three domestic or industrialized-country borrowers.

That represented a pickup over the $775 million of such paper which had gotten done in three tranches on Monday, and Tuesday’s $475 million in two tranches.

Specialty chemical maker Hexion Inc. had the big deal of the day – an upsized $710 million of secured paper, split into two tranches – $510 million of five-year first-lien secured paper, and $225 million of five-year 1.5-lien notes.

Traders saw very brisk aftermarket dealings in the new Hexion paper, which rose smartly in secondary dealings. Several of the company’s existing issues were also seen higher.

German chemicals maker Atotech BV priced $425 million of eight-year notes, which also firmed in the secondary.

Television ratings and performance-management company Nielsen Holdings plc had the day’s lone quick-to-market offering – $500 million of eight-year notes that made their debut late in the session.

Statistical market performance measures were higher across the board for a second consecutive session on Wednesday. They had turned better on Tuesday after having been lower all around on Monday and mixed on Friday. It was the indicators’ third higher session in the last eight trading days.

Hexion restructured deal

Three issuers raised a combined $1.64 billion in four dollar-denominated tranches on Wednesday.

Only one of the three issuers came with a drive-by.

Of the executions, two of the four tranches came at the tight ends of talk, one came in the middle and one came at the wide end.

Hexion Inc. priced an upsized $710 million of secured notes in a restructured two-part transaction.

The deal included $485 million of five-year first-priority senior secured notes (Caa1/CCC+) that priced at par to yield 10 3/8%.

The yield printed at the tight end of yield talk in the 10½% area.

The tranche was initially upsized to $510 million from $460 million, and subsequently downsized to the $485 million final amount, with the shift of $25 million of proceeds to the 1.5-lien notes, the junior tranche of Wednesday's transaction.

The junior tranche featured $225 million of five-year 1.5-lien senior secured notes (Caa3/CCC), which priced at par to yield 13¾%.

The yield printed at the wide end of the 13½% to 13¾% yield talk.

The 1.5-lien tranche was upsized from $200 million, with the shift of proceeds mentioned above.

Hexion was initially in the market with a single $460 million tranche of first-priority notes.

Timing on the deal was walked back twice; it was initially expected to price on Monday.

J.P. Morgan, Citigroup, BofA Merrill Lynch, Citizens, Credit Suisse, Deutsche Bank, Goldman Sachs and Wells Fargo were the joint bookrunners.

Nielsen $500 million drive-by

In drive-by action, Nielsen priced a $500 million issue of eight-year senior notes (B1) at par to yield 5%.

The yield printed on top of yield talk in the 5% area.

JP Morgan was the lead bookrunner.

The New York-based performance management company plans to use the proceeds for general corporate purposes which may include capital expenditures, working capital and redemption or repayment of debt, and if applicable, to fund a portion of the acquisition of Gracenote from Tribune Media Co.

Atotech prices tight

Germany’s Atotech BV priced a $425 million issue of eight-year senior notes (Caa1/CCC+) at par to yield 6¼%.

The yield printed at the tight end of the 6¼% to 6½% yield talk.

J.P. Morgan, Barclays, Citigroup, Credit Suisse, HSBC, Nomura and RBC Capital Markets Corp. were the joint bookrunners for the LBO deal.

Trinidad Drilling roadshow

There was one roadshow announcement in the dollar-denominated primary market.

Trinidad Drilling Ltd. began a roadshow on Wednesday for a $350 million offering of seven-year senior notes (Caa1/BB-).

The deal is set to price on Monday or Tuesday.

Joint bookrunner RBC will bill and deliver. Wells Fargo is also a joint bookrunner.

The Calgary, Alta.-based oilfield services company plans to use the proceeds, along with proceeds from its equity offering, to fund the repurchase and/or redemption of its $450 million of 7 7/8% senior notes due 2019.

Trinidad Drilling has a primary focus on land drilling with operations in the United States, Canada and the United Arab Emirates.

B&M Retail talk 4¼% to 4½%

News from the European high yield primary market slow to a trickle at the midweek point, with just one deal – a sterling-denominated offer – on the active forward calendar, according to a sellside source.

B&M European Value Retail SA talked its £250 million offering of five-year senior secured notes (Ba3/BB-) to yield 4¼% to 4½%.

The deal is set to price Thursday.

BofA Merrill Lynch and HSBC are the joint global coordinators. Barclays, BNP Paribas, Goldman Sachs and Lloyds are the joint bookrunners.

Hexion heads higher

In the secondary market, Hexion’s new 10 3/8% first priority senior secured notes were seen by a market source having moved solidly higher after pricing at par.

He saw that paper having jumped to 102¾ bid going home, with some $19 million having changed hands.

Traders did not immediately report any initial trading levels on the other portion of that deal, the 13¾% 1.5-lien secured notes due 2022.

Hexion’s established 8 7/8% notes due 2018 improved by more than 5/8 point, going out just over par, on turnover of some $14 million, a market source said.

Atotech trades up

A trader said that new-deal issuer Atotech’s 6¼% notes due 2025 initially were moving around in a 100¾ to 101½ bid context, before pushing up to around a 101 to 102 bid range.

At another desk, the Berlin-based specialty chemicals and plating equipment manufacturer’s new notes were seen among the day’s busiest in Junkbondland, with over $43 million having traded. A market participant there pegged the notes at 101¾ bid, well up from their par issue price.

Split-rated deal trades actively

A trader noted that there was heavy volume in Smithfield Foods, Inc.’s new three-part split-rated issue (Ba/BBB-/BBB) of senior notes, which had priced during the session.

However, he said that it was probably more due to high-grade investors reaching for yield playing in the day than traditional junk accounts, given the relatively sparse coupons, by usual high yield standards.

He said that the Smithfield, Va.-based hog producer and meat processor’s 3.35% notes due 2022 gained a little more than ¼ point on the day, after the $400 million issue had priced at a spread-versus Treasuries roughly equivalent to par.

More than $100 million of the new notes traded around.

Over $80 million of its new 4¼% notes due 2027 traded, as that $600 million issue rose nearly 1 point on the day, ending around 100 7/8 bid.

Smithfield’s $400 million of 2.7% notes due 2020 gained a little more than ¼ point from their issue price, on turnover of more than $43 million.

Avolon gains more altitude

Among recently priced deals, both halves of Avolon Holdings Ltd.’s massive $3 billion bond offering from last Friday continued to firm on Wednesday.

A trader quoted its 5½% notes due 2024 at 102¾ bid, calling that up ½ point on the day.

More than $20 million of those notes traded.

The other half of that deal – the company’s 5¼% notes due in August of 2022 – were also ½ point higher, going home at 102 5/8 bid, on volume of more than $13 million.

Avolon, a Hong Kong and Dublin-based aircraft leasing company, priced $1.75 billion of the 5¼% notes and $1.25 billion of the 5½% notes, both at par on Friday as a regularly scheduled forward calendar deal via its Park Aviation Holdings Ltd. subsidiary.

Both tranches had immediately firmed to around the 102 bid level when the issue moved over to the aftermarket and have stayed around there since then.

That Avolon offering was the biggest bond deal seen in the high yield space last June, when Round Rock, Texas-based computer manufacturer Dell Inc. had done a $3.25 billion offering of five-year and eight-year notes.

Indicators stay firm

Statistical market performance measures were higher across the board for a second consecutive session on Wednesday. They had turned better on Tuesday after having been lower all around on Monday and mixed on Friday. It was the indicators’ third higher session in the last eight trading days

The KDP High Yield index rose by 10 basis points on Wednesday to close at 71.91– its first gain after having been unchanged on Tuesday and having recorded losses in each of the four sessions before that, including Monday’s 9 bps retreat. It was the index’s second advance in the last eight sessions.

Its yield came in by 3 bps, to 5.17%, its second straight narrowing after four successive sessions of widening out. On Tuesday, the yield had declined by 1 bp, following Monday’s 1 bp rise. It was the third such tightening in the last nine sessions.

The Markit Series 27 CDX index finished up 5/16 point on Wednesday at 106 23/32 bid, 106 25/32 offered, its second upturn in a row and third in the last four sessions. On Tuesday, it had gained 3/32 point, versus a similar-sized loss on Monday.

And the Merrill Lynch High Yield index rose for a second straight session Wednesday, after having snapped a five-session losing streak on Tuesday. It was up by 0.225%, on top of Tuesday’s 0.107% improvement. Wednesday was the fourth gain in the last nine sessions.

That raised its year-to-date return to 1.26% from Tuesday’s 1.032% and established a new peak level for the year so far, eclipsing the old mark of 1.127%, set last Monday.

© 2015 Prospect News.
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