Downsized Diebold prices; new Sunoco still struggling; WDC busy again; Valeant bonds bounce

By Paul Deckelman and Paul A. Harris

New York, April 5 – The Junkbondland new-deal market saw one issue price on Tuesday, as ATM, safe and bank vault manufacturer Diebold Inc. did a downsized $400 million offering of eight-year notes, syndicate sources said.

Traders did not report any immediate initial aftermarket activity in the new Diebold bonds.

The traders meantime said that there was substantial activity in Monday’s sole new deal, from gasoline wholesaler, retailer and convenience store operator Sunoco LP. While topping the high yield Most Actives list, that issue came down from the late levels seen on Monday and struggled at times to stay above its par issue price.

Traders reported continued active dealings in both tranches of last Wednesday’s giant-sized transaction from computer hard-drive manufacturer Western Digital Corp., with both seen among the busiest of junk bonds. The tranches were both lower, in line with a generally easier high yield market.

Away from the new deals, Valeant Pharmaceuticals International Inc.’s bonds bucked the generally negative trend, strengthening across the whole capital structure, after the embattled drug manufacturer announced that its independent board committee investigating various accounting issues sees no need for further restatements of the company’s past financial results beyond those that have been previously announced.

Statistical market performance measures turned lower across the board on Tuesday after having been mixed for the previous two sessions and higher for two sessions before that. It was the indicators’ sixth downside session in the last 10 trading days.

Diebold, downsized and wide

Diebold Inc. priced Tuesday’s sole deal, a downsized $400 million issue of eight-year senior notes (B2/B+) that came at par to yield 8 ½%.

The issue size was decreased from $500 million with the shift of $100 million of proceeds to the term loan.

The yield printed 25 basis points beyond the wide end of the 8% to 8¼% yield talk. That talk widened from recent discussions in the 8% area, a trader said, adding that initial guidance had the notes pricing in the high 7% to low 8% context.

Ultimately, however, Diebold got enough juice into the deal to satisfy the market, said a New York-based trader who spotted the new 8½% notes due 2024 trading at 101 bid, 101½ offered.

J.P. Morgan and Credit Suisse were the joint bookrunners.

Proceeds, along with a portion of the proceeds from the sale of Diebold’s North America electronic security business and borrowings from its senior credit facility, will be used to pay the cash portion of the tender offer for Wincor Nixdorf shares, as well as to purchase additional Wincor Nixdorf ordinary shares, and to refinance a portion of Diebold and Wincor Nixdorf debt.

With the decrease of the bond deal Diebold upsized its concurrent term loan to roughly $1.4 billion equivalent from roughly $1.3 billion equivalent.

Numericable brings $2.25 billion

The Wednesday session in the new deal market promises to be at least somewhat eventful.

On Tuesday afternoon Numericable SFR SA rolled out $2.25 billion of 10-year senior secured notes (existing ratings B1/B+) on an investor call.

Pricing is expected on Wednesday.

The deal is in the market with yield talk in the 7¾% area. However it is expected to tighten, according to a trader who is looking for the notes to ultimately price as low as 7½%.

Joint bookrunner J.P. Morgan will bill and deliver for the debt refinancing deal. BNP Paribas, Deutsche Bank, Barclays, BofA Merrill Lynch, Credit Agricole, Goldman Sachs and Morgan Stanley are also joint bookrunners.

MGM Growth talk tightens

MGM Growth Properties Operating Partnership LP talked a $1.05 billion offering of non-callable eight-year senior notes (B2/B+) to yield 5¾% to 6% on Tuesday.

Talk tightened from earlier guidance in the 6% area, according to sources who added that the deal hit the market with pro forma guidance of 6% to 6¼%.

The buzz in the market is that the order book is 2.5-times oversubscribed, a trader said on Tuesday afternoon.

Books close at 1:30 p.m. ET on Wednesday, and the deal is expected to price thereafter.

Mixed flows on Monday

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

High yield ETFs sustained $52 million of outflows on the day.

However actively managed funds saw $210 million of inflows on Tuesday.

Loans were also in the green on Monday, with $35 million of inflows on the day, the portfolio manager said.

New Diebold bonds unseen

In the secondary market, traders did not initially report any trading in the new Diebold 8½% notes due 2024.

The North Canton, Ohio-based manufacturer of automatic teller machines, safes, bank vaults and financial transaction and security software had priced its regularly scheduled forward calendar offering at par after the deal was downsized from an originally planned $500 million.

Sunoco tops Most Actives list

Traders said that Monday’s issue of 6¼% notes due 2021 from Sunoco LP and its Sunoco Finance Corp. subsidiary was the day’s busiest junk bond, with over $78 million traded.

The traders said that the new notes were mostly lower than the levels at which they had initially traded on Monday.

One market source pegged the bonds at par on the nose – calling them down by as much as 1¼ points from Monday’s late levels.

A second trader, when asked how the bonds were doing, answered with a coarse scatological expletive, in quoting the paper in a 99 7/16 bid, 101 1/8 bid context.

Sunoco, a Houston-based gasoline wholesaler, retailer and service station convenience store operator, priced $800 million of those notes at par on Monday in a quickly shopped issue that was upsized from an originally announced $500 million.

The new bonds initially traded as well as a 100½ to 101 bid context on Monday, but then fell back from those peaks to finish somewhere between par and 100¼ bid.

Western Digital softens

Elsewhere, last Wednesday’s big deal from Western Digital Corp. remained active on Tuesday, though at somewhat lower levels.

A trader said that the split-rated (Ba1/BBB-/BBB-) 7 3/8% senior secured notes due 2023were down ¼ point on the day, quoting the bonds at 101 7/8 bid, 102 3/8 offered. He called that a ¼ point loss.

A source at another desk saw the bonds going out at 102 bid, which he called a ¼ point loss. Over $50 million of the notes changed hands.

The other half of the giant-sized two-part transaction, the company’s fully junk—rated (Ba2/BB+BB+) 10½% senior unsecured notes due 2024, were busier, a source said, seeing over $53 million changing hands. He quoted the notes at 99¾ bid, down ¼ point on the day, while a second trader saw them at 99 5/8 bid, 100 3/8 offered, down by 3/8 point on the day.

The Irvine. Calif.-based computer disk-drive manufacturer priced a total of $5.255 billion in two tranches in a regularly scheduled forward calendar deal on Wednesday, consisting of $1.875 billion of the 7 3/8% notes and $3.35 billion of the 10½% notes, with both tranches pricing at par.

The overall size of the offering was reduced from an originally planned $5.6 billion, with the $375 million difference going instead to the company’s concurrent term loan borrowing.

The size of the split-rated secured offering was upped by $375 million, from an originally planned $1.5 billion.

The difference was made up by downsizing the purely junk unsecured tranche by $750 million from $4.1 billion originally – $375 million shifted to the secured notes and $375 million shifted out of the junk offering to the term loans.

On Thursday, a trader saw more than $330 million of the 10½% unsecured bonds having changed hands, and estimated that over $200 million of the 7 3/8% secured bonds had traded.

Activity remained brisk on Friday, with over $89 million of the 10½% notes and over $30 million of the 7 3/8% notes having traded around. Heavy trading continued on Monday, with over $55 million of the secured paper and $40 million of the unsecured notes changing hands.

Valeant bonds better

A trader said that away from the new or recently priced deals, “Valeant was up by a couple of points across their [capital] structure.”

He explained that the Laval, Que.-based drug manufacturer – under market and regulatory agency scrutiny of some of its accounting practices related to its former relationship with a controversial specialty pharmacy operator, Philidor – “said it won’t have to restate any further earnings,” beyond the late 2014 and 2015 results already scheduled for a re-statement.

“That caused its equity to go up pretty well today, and that helped push the bonds up.”

Valeant’s VRX Escrow Corp. 6 1/8% notes due 2025, for instance, rose 1¾ points, ending at 79 bid, while its 6¾% notes due 2018 jumped nearly 2 points, finishing just under 93 bid, with both bonds seeing more than $32 million having traded.

The company’s New York Stock Exchange-traded shares meantime zoomed by $2.62, or 10.03%, closing at $28.73. Volume of 48 million shares was nearly 2½ times the norm.

Indicators turn lower

Statistical market performance measures turned lower across the board on Tuesday after having been mixed for the previous two sessions and higher for two sessions before that. It was the indicators’ sixth downside session in the last 10 trading days.

The KDP High Yield Daily index lost 13 basis points on Tuesday to end at 65.65 – its first setback after four straight sessions of gains, including Monday’s 4 bps improvement. It was the index’s sixth setback in the last 10 sessions.

The index’s yield rose by 1 bp to 65.66, its second widening in the last three sessions. On Monday, it had come in by 1 bp.

The Markit Series 26 CDX North American High Yield index posted its second straight loss on Tuesday, retreating by 17/32 point, on top of Monday’s 5/16 point loss. Those two losses follow one unchanged session and before that, two straight gains, after the company’s new Series 26 index began trading a week ago.

The Merrill Lynch North American High Yield Master II index fell back by 0.253% on Tuesday, in contrast to Monday’s 0.178% rise. It was the index’s second loss in the last three sessions.

The latest loss pulled the index’s year-to-date return down to 3.155% from 3.417% on Monday.

© 2015 Prospect News.
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