Western Refining, upsized Dollar Tree cap $7.8 billion week; Peabody up on credit amendment

By Paul A. Harris and Paul Deckelman

New York, Feb. 6 – For a second consecutive week, the high-yield primary closed out the week in stellar fashion with a giant-sized multi-tranche pricing.

But while last week’s bond behemoth from units of European cabler Altice International included both dollar- and euro-denominated secured and unsecured paper, Friday’s big deal from deep-discount retailer Dollar Tree, Inc. consisted of only two tranches of dollar-denominated senior unsecured notes. The $3.25 billion offering had been restructured from its original one tranche, and was upsized when the second piece of paper was added. Traders said the bonds firmed smartly when they reached the aftermarket.

The day’s other pricing was a more normal-sized $300 million issue from energy storage and transportation operator Western Refining Logistics, LP. Like Dollar Tree, it was a regularly scheduled forward calendar offering, and it also rose in secondary trading.

The day’s $3.55 billion of proceeds brought the week’s tally of new fully junk-rated, dollar-denominated bonds from domestic or industrialized-country borrowers up to $7.8 billion in 13 tranches, according to data compiled by Prospect News, lagging a little behind last week’s $8.78 billion in nine tranches.

The week’s new issuance, in turn, brought this year’s issuance up to $28.38 billion in 44 tranches – a statistical dead heat with the $27.73 billion that had priced in 51 tranches by this time on the calendar last year, according to the data.

Traders saw Thursday’s new issue from Acadia Healthcare Co. Inc. holding on to the robust levels seen in initial aftermarket dealings.

Away from the new deals, Peabody Energy Corp.’s bonds firmed after the coal company amended its credit facility agreement.

Statistical market performance indicators turned mixed on Friday, after having been higher across the board on Thursday. However, those indicators were better all around versus where they had closed on the previous week on Friday, Jan. 30, after having been mixed the week before.

Dollar Tree sees huge demand

Two issuers priced a combined three tranches of junk on Friday, raising a $3.55 billion of total proceeds.

All three tranches came at the tight end of talk.

Dollar Tree priced an upsized $3.25 billion two-part senior notes transaction (Ba3/B+).

The deal included a $750 million tranche of five-year notes that priced at par to yield 5¼%. The yield printed at the tight end of yield talk that had been set in the 5 3/8% area.

Dollar Tree also priced $2.5 billion of eight-year notes at par to yield 5¾%. The yield printed at the tight end of the 5¾% to 6% yield talk.

Prior to upsizing, the bond deal was in the market as a single $2.5 billion tranche of eight-year notes.

The eight-year notes saw $15 billion of demand, according to an investor who was in the deal. The five-year notes played to $6 billion of demand.

Meanwhile the $3.95 billion term loan B, which was expected to see significant participation from CLOs, played to $14 billion to $15 billion of demand, the buysider said.

“Loans caught a bid this week,” commented the investor, who plays both high-yield bonds and leveraged loans.

J.P. Morgan, Wells Fargo, BofA Merrill Lynch, RBC and U.S. Bank were the joint bookrunners for the Dollar Tree deal that came to market to help fund the acquisition of Family Dollar Stores Inc.

Western Refining prices tight

Western Refining Logistics priced a $300 million issue of eight-year senior notes (B3/B) at par to yield 7½%.

The yield printed at the tight end of the 7½% to 7¾% yield talk.

The deal came to market via joint global coordinators BofA Merrill Lynch and Wells Fargo, and joint bookrunners Credit Agricole, RBS and Stifel Nicolaus.

Western Refining Logistics, an El Paso, Texas-based operator of pipelines, storage tanks and other midstream energy facilities, intends to use a portion of the net proceeds to repay the outstanding balance of its revolving credit facility, with the remaining amount to be used for general partnership purposes.

Gtech fixes sizes and talk

Gtech targeted tranche sizes and set price talk for its five-tranche dual-currency offering of non-callable senior secured notes on Friday, according to a syndicate source.

The deal includes $500 million to $750 million of five-year notes talked to 5½% to 5¾%, $1 billion to $1.25 billion of seven-year notes talked to yield 6% to 6¼% and $1 billion to $1.25 billion of 10-year notes talked to yield 6¼% to 6½%.

Euro-denominated tranches include a €600 million to €800 million tranche of five-year notes talked to yield in the 4¼% area, and €800 million to €1 billion of eight-year notes talked to yield in the 4¾% area.

A proposed dollar-denominated tranche of three-year notes has been withdrawn, with proceeds shifted to the euro-denominated tranches.

Unofficially the overall amount of issuance is expected to be the equivalent of around $4.85 billion to $5 billion, sources say.

Books for the euro-denominated tranches close at 4:30 a. m. ET on Monday, while those for the dollar tranches close at 9:30 a.m. ET Monday, and the deal is set to price subsequently.

The offering is in the market via joint lead bookrunners Credit Suisse, Barclays and Citigroup.

Citgo ups talk, restructures

Citgo Holding, Inc. hiked price talk and moved back timing on a restructured $1.5 billion offering of senior secured notes on Friday, according to a market source.

New talk has the deal coming with a yield in the 12% area inclusive of a 5 point original-issue discount.

Previous talk was in the 11¾% area inclusive of 4 to 5 points of OID.

The deal came with initial guidance in the 11% area.

In addition to talk, the maturity is decreased to five years from 5.5 years and call protection is increased to the life of the bond; the previous structure featured just two years of call protection.

The security package has been enhanced, and covenants have been tightened, the source added.

New timing keeps the order books open until noon ET on Monday; they had previously been scheduled to close on Friday.

Amira Nature Foods sets talk

Amira Nature Foods Ltd. talked its $225 million offering of five-year second-lien senior secured notes (B3/B-) with an 11% coupon with two points to three points of original issue discount and an all-in yield of 11½% to 11 7/8%, according to a market source.

There were also covenant changes.

The books close at 2 p.m. ET on Monday and the deal is set to price shortly thereafter.

Deutsche Bank, JPMorgan, Barclays, Jefferies and Key Bank are the bookrunners.

Northwest Hardwoods plans tap

Northwest Hardwoods, Inc. plans to price a $150 million non-fungible add-on to its 7½% senior secured notes due Aug. 1, 2021 early in the week ahead.

Morgan Stanley is the sole bookrunner for the acquisition-related offer.

Casella Waste to bring add-on

Casella Waste Systems, Inc. held a Friday conference call with investors to discuss a proposed $60 million add-on to its 7¾% senior subordinated notes due Feb. 15, 2019 (existing ratings Caa1/CCC+).

The deal is set to price on Monday.

BofA Merrill Lynch and J.P. Morgan are the joint bookrunners for the debt refinancing deal.

Sunrise plans CHF 500 million

Sunrise Communications Holdings SA will participate in investor meetings on Monday and Tuesday to discuss a proposed CHF 500 million equivalent offering of senior secured notes due 2022 (expected ratings Ba2/BB+/BBB-).

Joint global coordinator Deutsche Bank will bill and deliver for the debt refinancing. UBS is also a joint global coordinator. BNP Paribas, DNB Markets, Morgan Stanley and UniCredit Bank are joint bookrunners.

Dollar Tree does well

In the secondary market, traders saw strong investor interest in both tranches of the new Dollar Tree issue.

One trader saw the Chesapeake, Va.-based deep-discount retailer’s 5¼% notes due 2020 at 102½ bid shortly after they had priced at par.

He saw two-sided markets in the other part of the deal, the 5¾% notes due 2023, quoting the bonds in a 102 to 103 bid context, in “quite busy” dealings.

Another trader pegged the 5¼% notes at 102½ bid, 103 offered, while the 5¾s were finishing up at 102¾ bid, 103¼ offered.

Western Refining pushes up

The day’s other deal – from the El Paso, Texas-based pipeline and energy storage facilities operator Western Refining Logistics – also did well in the secondary realm, with the bonds seen by one trader at 100¾ bid, 101¼ offered, up from their par issue price.

A second trader located the bonds at 101¼ bid, 101¾ offered.

Acadia holds gains

A trader saw Thursday’s new deal from Acadia Healthcare Co. unchanged on the session at 101¼ bid, 101½ offered.

That was about where he had seen the Franklin, Tenn.-based behavioral services provider’s bonds after that $375 million deal, upsized from $300 million originally, had priced at par

D.R. Horton down

D.R. Horton, Inc.’s 4% notes due 2020 dipped to 100½ bid, 101¼ offered, a market source said. He called it down ¼ point on the day.

The Fort Worth, Texas-based homebuilder priced $500 million of the notes at par in a drive-by transaction on Wednesday, after upsizing the issue from an originally announced $350 million.

Energy names on the upside

Away from the new deals, a trader said that “oil prices were up by more than a dollar” – the March contract for West Texas Intermediate crude actually gained $1.86 on the day, or 3.68%, finishing at $52.34 per barrel.

With oil and gas names mostly better, “CalRes led the charge volume-wise” among junk and distressed oil and natural gas names, he said.

He saw the Los Angeles-based exploration and production company’s benchmark 6% notes due 2024 firming to 87½ bid, 87¾ offered.

A second trader saw those bonds at 87¾ bid, 88½ offered, up from 86½ bid, 87½ offered on Thursday.

Another name seen doing better was Houston-based Linn Energy. Its 7¾% notes due 2021were up by as much as 3 points on the day at 82½ bid.

The trader saw “a bunch” of Energy XXI 9¼% notes due 2017 “up a good 1½ points,” trading between 63 ½ and 64 bid.

Besides the overall rise in the energy sector in line with higher oil prices, he said that he had “seen a headline out that they may buy back some bonds.”

A second trader put those bonds at 64 bid, up 1¾ points on the day, on volume of about $6 million.

He saw the company’s 6 7/8% notes due 2024 up 2 points at 49¼ bid, though only on volume of $4 million.

Peabody gets credit boost

Also in the energy sphere, a trader said that Peabody Energy “was fairly active on their credit facility revisions, so the bonds in that name were up by a bunch.”

However, he said that “they came off their highs of the day.”

He saw the St. Louis-based coal producer’s 6½% notes due 2020 get as good as 82-83 before finishing around an 80-81 context, “but they had been in the upper 70s, so they definitely were up on the day.” Over $13 million traded.

He saw the 6% notes due 2018 finishing at 86-87, “a little off their highs,” but still up from prior levels around 82-83, on volume of around $11 million.

Indicators turn mixed

Statistical indicators of junk performance were mixed on the day Friday, after having been better across the board on Thursday for the third time in the last four sessions. However, they were higher all around versus where they had closed out the previous week.

The KDP High Yield Daily Index soared by 18 basis points to end at 71.54, its fifth straight gain, on top of Thursday’s 15-bp jump.

Its yield came in by 6 bps for a second consecutive session to end at 5.30%, its fifth straight tightening.

Those levels compared favorably with the 71.00 index reading and 5.49% yield seen last Friday, Jan. 30.

The Markit Series 23 CDX North American High Yield Index, however, eased by 3/32 point, ending at 106 11/32 bid, 106 3/8 offered. On Thursday, it had improved by 15/32 point.

But the index was up on the week from the previous Friday’s 105 7/16 bid, 105 9/16 offered.

The Merrill Lynch U.S. High Yield Master II Index posted its 15th consecutive gain Friday, pushing upwards by 0.274%, on top of Thursday’s 0.22% rise.

The latest gain lifted its year-to-date return to 1.659%, its 11th consecutive new peak level for 2015, up from the previous high point, 1.381%, on Thursday.

The index rose by 0.964% on the week, its third successive weekly advance. The previous week, it had gained 0.343%, to finish with a year-to-date return of 0.688%.

© 2015 Prospect News.
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