AMC Entertainment two-part deal prices to close $7.45 billion week; European market busy

By Paul Deckelman

New York, Oct. 28 – The high-yield primary market saw one dollar-denominated and fully junk-rated deal price on Friday as movie theater owner AMC Entertainment Holdings Inc. priced a two-tranche, dual-currency deal that included an upsized $595 million of 10-year senior subordinated notes.

Secondary market traders said that those new AMC bonds were the easily busiest issue of the day in Junkbondland, although they said that there was not a lot of price movement seen.

The rest of the day’s activity in the primary sphere came out of Europe.

The AMC deal included a £250 million tranche of eight-year notes.

Another U.S.-based company – glass container manufacturer Owens-Illinois Group Inc. – brought €600 million of eight-year notes via a Netherlands-based subsidiary.

British financial services firm Jerrold Holdings Ltd. priced £220 million of five-year senior PIK toggle notes.

And another U.K.-based company – gaming and betting powerhouse Ladbrokes Group Finance plc was heard by syndicate sources to be planning to sell a sterling-denominated benchmark-sized issue of seven-year notes.

The AMC dollar-denominated tranche brought the week’s haul of new dollar-denominated, fully junk-rated paper from domestic or industrialized-country issuers to $7.45 billion, according to data compiled by Prospect News – more than triple the amount of paper that priced the week before.

This week, was, in fact the most active week in the new-deal space since mid-September, the data indicated.

New issues meantime continued to dominate the secondary market’s Most Actives list of Friday, traders said.

Besides the heavy volume in the AMC Entertainment dollar bonds, they reported sizable trading volumes in recently priced deals such as Thursday’s issues from Advanced Disposal Services, Inc. and Cooper-Standard Holdings Inc., as well as deals that priced earlier in the week from the likes of Centene Corp. and Rackspace Hosting Inc.

Away from the new issues, there was continued activity in Community Health Systems Inc. paper, which had gotten clobbered on Thursday after the hospital operator put out disappointing preliminary quarterly numbers.

Statistical market performance measures were lower across the board for a third consecutive session on Friday; they had turned weaker on Wednesday after having been mixed on Tuesday and higher all around on Monday, and they stayed on the downside on Thursday. It was the fourth time in the last 12 sessions that the indicators were universally weaker.

The indicators were also lower across the board from where they had finished last Friday after having been higher that week and mixed over the two weeks before that. It was their third losing week out of the last eight.

Upsized AMC prices

High-yield syndicate sources said that AMC Entertainment priced a two-part, dual-currency offering (B2/B+) consisting of tranches of dollar- and sterling-denominated senior subordinated notes on Friday as a regularly scheduled transaction off the forward calendar.

Both parts of the deal came at the tight end of talk.

The dollar-denominated portion consisted of $595 million of 5 7/8% notes due 2026, which priced at par after the tranche was upsized from $535 million.

Initial yield guidance was in the low 6% area, with subsequent price talk envisioning a yield of around 6%.

The sterling portion consisted of £250 million of 6 3/8%notes due 2024, which priced at par after being downsized from £300 million. The difference was shifted into the dollar-denominated tranche.

Price talk on the sterling bonds indicated a yield of around 6½%.

Citigroup Global Markets Inc. was the left-lead book-running manager on both tranches, with Bank of America Merrill Lynch, Barclays Capital Inc., Credit Suisse Securities (USA) LLC and HSBC Securities (USA) Inc. as joint bookrunners.

AMC Entertainment, a Leawood, Kan.-based movie theater operator, announced the $900 million equivalent two-part bond offering on Oct. 20, along with a concurrent $500 million dollar-denominated term loan B due 2023.

The company plans to use the proceeds from the notes and loan along with cash on hand and other sources of financing to fund the pending acquisitions of Odeon & UCI Cinemas Holdings Ltd. and Carmike Cinemas, Inc., to repay outstanding debt of Odeon & UCI and to fund fees and expenses.

Both of those acquisitions were announced in July and are slated to close by the end of the year.

AMC is buying London-based Odeon & UCI Cinemas, the largest movie theater company in Europe, from private equity firm Terra Firma in a transaction valued at £921 million, or just under $1.2 billion, including assumption of Odeon/UCI’s $407 million of net debt.

It is meantime acquiring Columbus, Ga.-based theater operator Carmike for $250 million in AMC common stock and $585 million in cash.

The transaction’s total $1.2 billion enterprise value includes the assumption of Carmike’s outstanding net debt.

Owens-Illinois taps euro market

Another U.S-based company was making waves in the European high-yield sector as Owens-Illinois Group priced €600 million of senior notes (Ba3/BB) due 2024 on Friday.

High-yield syndicate sources said that those notes – to be issued through the company’s OI European Group BV wholly-owned indirect subsidiary – priced at par to yield 3 1/8%, at the high end of price talk in the 3% area.

The deal was brought to market via J.P. Morgan Securities LLC, the global coordinator, responsible for billing and delivery. The syndicate also includes fellow global coordinator Credit Agricole Corporate and Investment Bank, as well as joint bookruners BNP Paribas Securities Corp., Merrill Lynch International and Deutsche Bank AG London Branch.

Owens-Illinois, a Perrysburg, Ohio-based glass container manufacturer, and O-I European Group, subsidiary based in Schiedam, The Netherlands, announced the offering on Thursday and priced it on Friday.

Proceeds will be used to pay down the company’s term loan B, which had $568 million outstanding as of Sept. 30, 2016, and for general corporate purposes;

Jerrold prices sterling deal

Elsewhere on the European high-yield scene, Jerrold Holdings priced £220 million of five-year senior PIK toggle notes on Friday.

The syndicate sources said that those notes priced at a coupon of 10½% cash interest and 11¼% PIK interest.

Price guidance on the deal was 10¾% to 11%

The issue was brought to market via Credit Suisse Securities (Europe) Ltd.

The roadshow for the offering began on Thursday. Timing was moved up, with pricing – which had been expected during the upcoming week – instead taking place on Friday.

The notes are being issued by Bracken MidCo 1 plc.

Jerrold – a financial institution based in Cheadle, England - plans to use the new-deal proceeds to help finance the purchase of equity interests in Jerrold held by Equistone and Standard Life Investments, as well as to repurchase 30,000 class D shares held by members of Jerrold’s management, to lend £25.1 million to Jerrold for repayment of shareholder debt, to make payments related to Jerrold’s staff incentive plan and to pay expenses related to the transactions.

Ladbrokes slates benchmark

Also in Britain, Ladbrokes Group Finance was heard to be planning to sell a sterling-denominated benchmark-sized issue of seven-year notes.

The offering is expected to carry BB ratings from both Standard & Poor’s and Fitch Ratings.

The deal will be brought to market via active bookrunners Barclays Capital, which will handle billing and delivery, Lloyds Bank, MUFG and RBS Securities Inc. plus joint bookrunner Mediobanca SpA.

Ladbrokes – a London-based betting and gaming company – plans to use the proceeds to refinance bank debt facilities put in place to support its planned merger of industry rival Gala Coral Group plc, based in Nottingham, England.

Tutor Perini unseen

Back in the domestic new-deal market, syndicate sources said they had seen no fresh activity in Tutor Perini Corp.’s planned $500 million issue of senior notes due 2024.

The Sylmar, Calif.-based civil and building construction company had been marketing its deal to potential investors via a roadshow that began on Monday and which was scheduled to wrap up on Thursday, with pricing expected thereafter, but no sign of the deal has emerged.

The issue was being guided in the 6% to 6 3/8% area.

Goldman Sachs is the left bookrunner on that offering, with SunTrust Robinson Humphrey Inc., BMO Capital Markets Corp. and KeyBanc acting as joint bookrunners.

The company plans to use the expected proceeds, together with borrowings under its revolving credit facility, to redeem existing senior notes and repay existing term loan and revolver borrowings.

Week’s activity picks up

Including Friday’s $595 million dollar-denominated offering from AMC Entertainment, a total of $7.45 billion of new U.S. dollar-denominated and fully junk-rated paper from domestic or industrialized-country borrowers priced in nine tranches this week, according to data compiled by Prospect News.

That was more than triple the $2.20 billion which had priced in five tranches last week, ended Oct. 21, and well up from the $770 million which got done in only two tranches during the week ended Oct. 14.

This week was, in fact, the busiest the primaryside has seen since the week ended Sept. 16, when $9.85 billion of new paper came to market in 12 tranches, the data indicated.

This week’s new deals meantime pushed the year-to-date issuance total up to $192.22 billion in 292 tranches.

That was running some 16.6% behind the new-deal pace seen at this time last year, when $229.71 billion had priced in 364 tranches by this point on the calendar, the Prospect News data showed.

That was narrower than the 18.9% gap between this year’s and last year’s issuance which had been seen last week.

AMC deal tops actives

In the secondary market, traders said that the AMC Entertainment 5 7/8% senior subordinated notes were easily the most active issue on the session, with one trader estimating that at least $93 million of the bonds had changed hands, including some $86 million in round-lot trades.

But those bonds – which had priced at par – “didn’t appear to be off to the races” in terms of any price movement, another trader said, seeing them moving around between 100¼ and 100¾ bid.

“A lot traded today between 100¼ and 101,” a trader said – but he added that “the bulk of the trading took place between 100 3/8 and 100½.”

Recent deals busy

The traders saw considerable activity in some of the new deals which came to market this week – although nowhere near the kind of volume levels AMC Entertainment’s paper was racking up.

A market source said Advanced Disposal Services’ 5 5/8% notes due 2024 up 1/8 point at 100 5/8 bid, with over $30 million moving around.

The Ponte Vedra, Fla.-based solid-waste-management company had priced $425 million of the notes in a regularly scheduled forward calendar offering on Thursday.

That session’s other pricing – Novi, Mich.-based automotive systems manufacturer Cooper-Standard’s 5 5/8% notes due 2026 – was seen off ¼ point on the day at 100½ bid, with over $27 million traded.

That $400 million regularly scheduled deal had priced at par on Thursday and had firmed to around 100¾ bid in initial aftermarket dealings.

Centene’s 4¾% notes due January 2025 edged up by 1/8 point Friday to 100 1/8 bid on more than $23 million of turnover.

The St. Louis-based managed healthcare provider had priced a quick-to-market $1.2 billion of those notes at par on Wednesday after the issue was upsized from an originally planned $1 billion.

And Rackspace’s 8 5/8% notes due 2024 eased by ¼ point on Friday to 100 5/8 bid, with over $19 million traded.

The San Antonio, Texas-based managed cloud company priced $1.2 billion of the notes at par on Tuesday in a regularly scheduled deal; they initially got as good as 101½ when they hit the aftermarket but have gradually declined since then.

Community Health still under pressure

Away from the new deals, a trader said that Community Health Systems’ bonds were still being pushed around, although their losses Friday were nowhere near the 5 to 8 point plunge across the whole of their capital structure suffered on Thursday after the Franklin, Tenn.-based hospital operator issued disappointing preliminary third-quarter results.

Its 6 7/8% notes due 2022 – more than 8 point losers on Thursday – eased by another 5/8 point on Friday to close at 76 1/8 bid on more than $24 million traded.

Its 8% notes due 2019 were unchanged around 89 3/8 bid, with about $21 million traded; those bonds had swooned by more than 7 points on Thursday.

The company saw a 10% decrease in operating revenue year-over-year, from $4.85 billion to $4.38 billion, according to a release. The results were lower because of lower-than-expected volume – and therefore revenue – as well as increased costs in health insurance and other health-related expenses.

Indicators stay negative

Statistical market performance measures were lower across the board for a third consecutive session on Friday; they had turned weaker on Wednesday after being mixed on Tuesday and higher all around on Monday, and they stayed on the downside on Thursday. It was the fourth time in the last 12 sessions that the indicators were universally weaker.

The indicators were also lower across the board from where they had finished last Friday after being higher that week and mixed over the two weeks before that. It was their third losing week out of the last eight.

The KDP High Yield Index lost 19 basis points on Friday to close at 71.23, on top of its 27 bps plunge on Thursday. It was the index’s fourth straight loss. Those four losses followed seven sessions in a row on the upside.

Its yield rose for a fourth consecutive session, widening by 5 basis points to 5.43%, after having increased by 9 bps on Thursday. Those four wider levels followed six straight days of narrowings.

Those levels compared unfavorably against the 71.76 index reading and 5.27% yield recorded last Friday.

The Markit Series 27 CDX Index lost almost 3/8 point on Friday to end at 103 15/32 bid, 103 17/32 offered, its fourth straight loss. It had eased by around ¼ point on Thursday. Those four losses follow two straight days of gains before that.

The index was also down from 104 7/16 bid, 104½ offered, where it had closed last Friday.

And the Merrill Lynch High Yield Index retreated by 0.203%, its third straight setback. It lost 0.199% on Thursday while on Wednesday it was down by 0.237%, its first loss after two consecutive gains.

Friday’s downturn cut the index’s year-to-date return to 16.024% from 16.26% on Thursday, which itself was down from Tuesday’s finish at 16.768% – the index’s second consecutive new 2016 peak cumulative level.

For the week, the index was down by 0.522% – its first weekly loss after five weekly gains, including last week’s 0.613% advance.

© 2015 Prospect News.
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