Giant-sized Dell plus drive-by DISH, Cheniere megadeals price; new bonds up in active trading

By Paul Deckelman and Paul A. Harris

New York, June 8 – The high-yield primary market pulled out all of the stops on Wednesday, producing one of the biggest-volume new-deal days of the year so far.

By the time the dust had settled, $6.75 billion of new dollar-denominated and fully junk-rated paper had come to market in four tranches. It is the second-heaviest new-deal volume seen so far this year in Junkbondland, topped only by the $8.13 billion of such paper from domestic or industrialized-country borrowers that had priced in five tranches back on April 6, according to data compiled by Prospect News.

Wednesday’s tally eclipsed the previous second-largest total, the $5.44 billion of new junk bonds that had gotten done in seven tranches on May 25, the data indicated.

The big deal of the day was the $3.25 billion two-part offering of five- and eight-year notes from computer giant Dell Inc. – the third-largest high-yield deal to price so far this year, according to the data.

Those bonds were seen by traders to have firmed smartly when they hit the aftermarket.

Dell’s deal was a regularly scheduled transaction off the forward calendar. There was also a pair of drive-by megadeals, satellite TV broadcaster DISH Network Corp.’s sharply upsized $2 billion of 10-year notes and liquid natural gas company Cheniere Energy Partners LP’s upsized $1.5 billion of 10-year secured paper.

The Cheniere bonds traded modestly higher in the secondary.

Traders did not immediately report any dealings in the new DISH paper, which priced late in the day, but they said the company’s existing bonds were all lower.

There was also busy trading in the three issues that had priced on Tuesday from Gray Television, Inc., Zekelman Industries and Six Flags Entertainment Corp.

Statistical market performance measures were higher for a fourth consecutive session on Wednesday, their sixth stronger session out of the last 12. They had first turned upward Friday after having been mixed last Thursday and lower last Wednesday and remained strong subsequently.

Dell prices $3.25 billion

It was Megadeal Day on Wednesday in the high-yield primary market. Three issuers bought four tranches of junk to raise an overall total of $6.75 billion.

Two of the three issuers came with drive-bys.

Two of the three made big increases in the sizes of their deals.

All of Wednesday's business played to phenomenal demand, which saw pricing grind tighter as transactions unfolded, market sources said.

In Wednesday's sole roadshow deal, Dell priced $3.25 billion of senior notes (Ba2/BB/BB+) in two tranches.

It included $1,625,000,000 of five-year notes that priced at par to yield 5 7/8%. The yield printed 50 basis points below the tight end of yield talk in the 6¼% area. Early guidance was 6½% to 7%.

Dell also priced $1,625,000,000 of eight-year notes talked at par to yield 7 1/8%. The yield printed 25 bps below the tight end of yield talk in the 7½% area. Early guidance was 7½% to 8%.

J.P. Morgan Securities LLC, Credit Suisse Securities (USA) LLC, BofA Merrill Lynch, Barclays, Citigroup Global Markets Inc., Goldman Sachs & Co., Deutsche Bank Securities Inc. and RBC Capital Markets managed the sale.

The Round Rock, Texas-based technology and services company plans to use the proceeds to fund its acquisition of EMC Corp.

The Dell unsecured notes are the second portion of the acquisition financing undertaken in the bond markets.

On May 17 Dell priced $20 billion of investment-grade secured notes (Baa3/BBB-/BBB-) in six tranches.

DISH massively upsizes

DISH Network priced a massively upsized $2 billion issue of non-callable 10-year senior notes (Ba3/BB-) at par to yield 7¾%.

The issue size was increased from $750 million.

The yield printed on top of yield talk. Initial guidance had the deal pricing to yield 8% to 8¼%.

The deal played to a significant amount of reverse inquiry, a market source said.

Deutsche Bank ran the books.

The Englewood, Colo.-based satellite broadcasting company plans to use the proceeds for strategic transactions, which may include wireless and spectrum-related transactions.

Cheniere prices tight

Sabine Pass Liquefaction, LLC, a wholly owned subsidiary of Cheniere Energy Partners, priced an upsized $1.5 billion issue of non-callable 10-year senior secured notes (Ba2/BB+) at par to yield 5 7/8%.

The quick-to-market issue was increased from $1 billion.

The bullet deal came at the tight end of both yield talk and initial guidance, 5 7/8% to 6%.

Credit Suisse, Scotia Capital, SG CIB, MUFG, Lloyds, Mizuho Securities, RBC Capital Markets, Morgan Stanley & Co. LLC, Credit Agricole CIB, ING, BBVA, BofA Merrill Lynch, SMBC Nikko, Santander, HSBC, Goldman Sachs, JPMorgan and ABN Amro were the joint bookrunners.

The Cameron Parish, La.-based developer and operator of natural gas liquefaction facilities plans to use the proceeds to repay bank debt. The additional proceeds resulting from the $500 million upsizing of the deal will also be used to repay debt.

Weatherford’s $1 billion ahead

Fallen angel oilfield services company Weatherford International Ltd. will market $1 billion of senior notes (expected ratings B2/BB-) on an investor roadshow.

The debt refinancing deal is expected to price during the week ahead.

It is coming in two tranches: five-year notes and seven-year notes.

Deutsche Bank and Wells Fargo Securities LLC are the joint global coordinators and bookrunners.

Monier prices tight

In the European market, Braas Monier Building Group priced a €435 million issue of five-year senior secured notes (Ba3/BB-) at par to yield 3%.

The yield printed at the tight end of yield talk in the 3 1/8% area.

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

The Luxembourg-based building materials supplier plans to use the proceeds, together with cash on its balance sheet and a draw on its revolver, to pay off its existing senior facilities agreement, redeem in full its outstanding senior secured floating-rate notes due 2020 and to fund certain hedging agreements.

Elsewhere in the European market, Cemex SAB de CV generated significant interest among high-yield accounts with its €400 million issue of eight-year notes (expected ratings: /B+/BB-), which priced at par to yield 4 5/8%.

Although the deal priced on top of final talk, Cemex hit the market with guidance of 5% to 5¼%, according to an informed source who added that orders for the €400 million issue exceeded €3 billion.

Tuesday inflows

The cash flows of the dedicated high-yield bond funds were positive on Tuesday, the most recent session for which data was available at press time, a sellside source said.

High-yield exchange-traded funds saw $360 million of inflows on the day.

Actively managed accounts saw $15 million of inflows on Tuesday.

Dedicated bank loan funds were also positive on the day. They saw $20 million of inflows on Tuesday, the sellsider said.

Dell deal dominates

In the secondary market, the new Dell bonds were seen having firmed solidly when they reached the aftermarket.

A trader said that the company’s 5 7/8% notes due 2021 were easily the most actively traded junk bond issue on Wednesday, racking up more than $156 million of trades.

He saw the bonds having gone home at 101¼ bid, up from their par issue price.

A second trader said that both the 5 7/8% notes and the other half of that Texas-sized deal, the 7 1/8% notes due 2024, were trading around 101½ bid, 101¾ offered.

At another desk, both tranches of bonds were quoted in a 101½-to-102 bid context.

Dell’s $3.25 billion deal was the third-largest junk bond offering to come to market so far this year, according to data compiled by Prospect News. It was exceeded only by the year’s largest offering – French telecommunications and cable operator Numericable SFR-SA’s $5.19 billion of 7 3/8% notes due 2026, which priced at par back on April 6 – and Irvine, Calif.-based computer hard-drive manufacturer Western Digital Corp.’s $3.35 billion of 10½% notes due 2024, which priced at par on March 30.

Cheniere up in aftermarket

The new Cheniere Energy Partners 5 7/8% senior secured notes due 2026 also rose in very active trading, a market source said, pegging the bonds at 100¾ bid, up from their par issue price, with over $76 million having changed hands.

A second trader located the bonds in a 100½-to-100¾ bid context, while a third saw them trading between 100½ and 100¾ bid.

DISH bonds retreat

The day’s other new deal, DISH Network’s 7¾% notes due 2026, came to market fairly late in the day, a trader said.

He had not seen any immediate aftermarket activity.

However, the satellite broadcaster’s existing notes were seen having lost some altitude on the news of the big new deal.

Its 5 7/8% notes due 2024 were down 1 1/8 points on the day at 93¾ bid, on volume of over $25 million.

Its 5 7/8% notes due 2022 lost nearly ½ point to close at 98 bid, with over $13 million having traded.

Tuesday deals active

Traders saw continued brisk activity on Wednesday in the new issues that had priced during Tuesday’s session.

Gray Television’s 5 7/8% notes due 2026 were 1/8 point better at 101 1/8 bid, on volume of over $43 million.

The Atlanta-based television station ownership group had priced $500 million of the notes at par in a drive-by deal on Tuesday after upsizing from $425 million. The new bonds rose a point in initial aftermarket dealings.

Zekelman Industries’ 9 7/8% senior secured notes due 2023 tacked on another 3/8 point on Wednesday to end at 102 3/8 bid, on volume of over $28 million.

The Chicago-based maker of steel tubular products had priced $375 million of the notes at par on Tuesday after the forward calendar deal was downsized from $425 million, and the new bonds jumped 2 points in initial aftermarket action.

Six Flags’ 4 7/8% notes due 2024 eased half a point to end at par, with over $14 million traded.

The theme park operator had priced $300 million at par in a Tuesday drive-by deal, which firmed slightly in the aftermarket.

Rising indicators roll on

Statistical market performance measures were higher for a fourth consecutive session on Wednesday, their sixth stronger session out of the last 12. They had first turned upward last Friday after having been mixed last Thursday and lower last Wednesday, and remained strong subsequently.

The KDP High Yield Daily index jumped by 24 bps on Wednesday to close at 68.12 – the first time the index has closed above 68.00 so far this year. It was the index’s third straight gain and its seventh such advance in the last 11 sessions, including a recent four-session winning streak. On Tuesday, it had zoomed by 26 bps, on top of Monday’s 16 bps rise.

Its yield, accordingly, came in by 5 bps to 5.97%, its fifth narrowing in the last six sessions. The yield had also eased by 8 bps on Tuesday and by 5 bps on Monday.

The Markit Series 26 CDX North American High Yield index posted its fourth straight gain on Wednesday, firming by almost 5/32 point to end at 103 19/32 bid, 103 5/8 offered, after having risen by nearly 7/32 point on Tuesday and by about 9/32 point on Monday. Those recent gains, in turn, had followed six straight losses.

The Merrill Lynch North American High Yield Master II index rose by 0.401% on Wednesday. It was its fifth gain in a row after one loss, which in turn had followed eight straight upside sessions before that.

On Tuesday, it had gained 0.367%, on top of Monday’s 0.377% improvement.

Wednesday’s gain raised the index’s year-to-date return to 9.433% – a fourth straight new peak level for the year so far, up from the previous zenith of 8.996%, seen on Tuesday.

It marked the first time this year that the year-to-date return had closed above 9.00%.

In fact, Wednesday’s year-to-date return was the index’s highest closing level since Dec. 31, 2012, when it had finished out the year with a 15.583% return.

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