WhiteWave prices to cap nearly $11 billion week; new California Resources, W.R. Grace deals jump

By Paul Deckelman and Paul A. Harris

New York, Sept. 12 – The high-yield primary sphere closed out its second big week in a row on Friday, serving up an upsized $500 million eight-year issue from WhiteWave Foods Co., a manufacturer of packaged consumer eatables. Those new bonds moved up solidly when they hit the aftermarket.

While that was the only deal to come to market during the session, it left the week’s tally of new issuance at a robust $10.74 billion in 17 tranches, according to data compiled by Prospect News. That was not too far behind the $11.56 billion of new U.S.-dollar denominated, fully junk-rated paper from domestic or industrialized country borrowers which came to market the previous week, ended Friday Sept. 5. That earlier total was all the more notable because it came in a four-session week, taking into account the market shutdown on Labor Day.

Thus, with the first two weeks of the month now in the books, September would seem to be well on its way to living up to predictions made before the holiday break that issuance would drastically ramp up once the traditional late-August lull was past, perhaps even reaching the $40 billion mark for the full month – a psychologically potent milestone that has only been achieved three times in the history of the junk bond market.

However, some contrarian murmurings were heard in Friday’s market, with syndicate sources noting the demise, at least for now, of two deals which were being shopped around – Capstone Mining Corp.’s $400 million of eight-year notes and Vistaprint NV’s $250 million of seven-year notes. Market conditions were cited as the reason for both withdrawals.

But as of Friday’s close, year-to-date issuance, according to the data, stood at $227.98 billion in 434 tranches, running about 5.4% ahead of the pace seen a year ago, when $216.15 billion of new junk paper had priced in 472 tranches by this point on the calendar. That was a pickup from the previous week’s 3.6% year-over-year gap, reflecting this year’s continuing post-Labor Day surge.

Traders meantime saw robust gains in some of the deals that priced on Thursday, notably energy operator California Resources Corp.’s $5 billion three-part issue of 5.5-year, seven-year and 10-year notes, and specialty chemicals maker W.R. Grace & Co.’s $1 billion two-part transaction. All five of those tranches were seen having gained at least 2 or 3 points from their par issue price.

Away from the new deals, bonds of underperforming retailers Gymboree Corp. and RadioShack Corp. were seen by traders ending the week well down from where they had started it, following the release of poor second-quarter results.

Statistical indicators of junk market performance were lower across the board for a second consecutive session on Friday, after having turned mixed on Wednesday. They were also seen down all around versus where they had finished out the previous week on Friday, Sept. 5; it was their second straight down week.

WhiteWave upsized and tight

WhiteWave Foods was the only issuer to cross the finish line on Friday.

The Denver-based consumer packaged food and beverage company priced an upsized $500 million issue of non-callable eight-year senior notes (B1/BB-) at par to yield 5 3/8%.

The deal was increased from $350 million.

The yield printed at the tight end of yield talk that had been set in the 5½% area.

Timing on the offering was moved ahead. On Thursday, the same day that the bonds were announced, the company foreshortened an investor roadshow that had been expected to carry into the Sept. 15 week.

J.P. Morgan, BofA Merrill Lynch, Morgan Stanley, Credit Agricole and Credit Suisse were the joint bookrunners.

Proceeds will be used to repay revolver debt, to support growth initiatives including acquisitions, and for other general corporate purposes.

WhiteWave is a well-liked credit that found a receptive market, commented a debt capital markets banker.

Deals postponed

Elsewhere it was a different story.

As the buyside struggled to digest the Sept. 8 week’s massive calendar, prices backed up and opportunistic issuers who were facing higher than anticipated costs of capital stepped aside.

That’s what happened to Capstone Mining, which announced that due to general market conditions it is discontinuing its previously announced offering of $300 million senior notes due 2022.

The notes, which were rated B2 by Moody’s Investors Service and B+ by Standard & Poor’s, were talked to yield 7¼% to 7½% on Thursday, according to market sources.

“While the $300 million we were looking to raise was available, the proposed interest rate exceeded what we were prepared to pay for that purpose,” Darren Pylot, president and chief executive officer of Capstone stated in a Friday press release.

Elsewhere Vistaprint postponed its $250 million offering of seven-year senior notes (B2/B), also citing market conditions, according to a press release from the company.

Although formal price talk never surfaced, the deal came with early guidance in the low 6% context, according to a market source.

The Venlo, Netherlands-based provider of advertising and marketing merchandise had planned to use the proceeds to repay bank debt.

“While we are interested in adding to and diversifying our capital structure in order to maintain long-term flexibility, we can afford to be patient, as this offering was opportunistic in nature,” Ernst Teunissen, executive vice president and chief financial officer stated in a Friday press release.

Deals delayed

Acosta Sales & Marketing Co. had been expected to price an $800 million offering of eight-year senior notes (Caa1/CCC+) on Friday.

No terms were available at press time and a buyside source said that the deal, via left bookrunner Goldman Sachs, is now Monday’s business.

No official price talk has circulated, a trader said mid-day on Friday.

However pricing appears to have backed up.

Yield guidance is in the 7½% area the trader said, up from the low-to-mid 7% context.

Early guidance is also circulating on deals in the market as business expected to price during the week ahead.

The biggest deal presently on the road is Aecom Technology Corp.’s $1.6 billion two-part offering of senior notes (Ba3/BB-). The eight-year notes have been whispered at 5¾% to 6%, while the 10-year notes have been whispered at 6% to 6 1/8%, according to a market source.

Tower International, Inc.’s $250 million offering of eight-year senior notes (B2/B) is whispered in the low 6% yield context, a trader said.

York Risk Services’s $270 million offering of eight-year senior notes (Caa2/CCC+) is whispered in the 7½ area.

However in some or all cases that early guidance may have been overtaken by events, sources said on Friday.

“We saw the market go up substantially in August, but on very low volume,” a debt capital markets banker recounted shortly after Friday’s close.

“Now, with the big calendar we saw this week, the market appears to have gotten a little ahead of itself.”

WhiteWave moves up

In the secondary market, a trader saw the new 5 3/8% notes due 2022 from WhiteWave Foods having firmed to a 101½ to 102¼ context.

A second saw them at 102 bid, 102½ offered.

The upsized $500 million offering had priced at par.

California Resources climbs

Thursday’s giant-sized offering from Los Angeles-based oil and natural gas exploration and production company California Resources proved to be the stellar secondary performer of the day.

Traders saw its $1 billion of new 5% notes due 2020 having moved up to a 102 to 102½ context, well up from their par pricing level.

A trader saw its 5½% notes due 2021 having jumped to around the 103 bid region, versus their par issue price. A second market source had the $1.75 billion of notes going home at 102 3/8 bid, 103 offered.

Its 6% notes due 2024 had moved up to a 103 to 103 3/8 context, versus the par level at which at $2.25 billion of paper had priced on Thursday.

“It was a great deal,” one of the traders enthused. “All of the [tranches] were well bid for.”

He said there was heavy volume in all three tranches, citing “big demand.”

Grace does great

A trader said both tranches of the new W.R. Grace junk bonds were in the 102¾ to 103 region.

The Columbia, Md.-based specialty chemicals manufacturer had priced both its $700 million of 5 1/8% notes due 2021 and its $300 million of 5 3/8% notes due 2024 at par on Thursday.

Jupiter notes ease

Thursday’s other megadeal-sized transaction, from Jupiter Resources Ltd., continued to struggle.

A trader saw those 8½% notes due 2022 down about ¼ to 3/8 point on the day to around 95 7/16 bid, 95 9/16 offered, chalking it up to “better sellers.”

A second trader pegged the bonds in a 95¼ to 95 7/8 context.

The Calgary, Alta.-based energy company had priced $1.1 billion of the bonds – slightly downsized from an originally planned $1.125 billion – at 95.805 to yield 9¼%. The bonds traded mostly at or below their issue price late Thursday, and continued in that same vein on Friday.

American Energy improves

American Energy-Woodford, LLC’s 9% notes due 2022 were seen by a trader around 96½ bid, 97 offered.

That was up from the 95.901 level at which the Oklahoma City-based energy company had priced its $350 million deal on Thursday to yield 9¾%, after the transaction was upsized from the original $325 million.

Lagging retailers slide

Away from the primary, a pair of underperforming retailers was seen “getting clobbered,” as one trader put it, after having reported poor second-quarter earnings earlier in the week.

Trading was heavy over several sessions in Gymboree’s 9 1/8% notes due 2018. The San Francisco-based children’s apparel retailer’s paper began the week trading around 62 bid – but after Wednesday’s poor earnings report it plunged to around 37 by Friday afternoon; a trader at another shop saw those bonds in a 35 to 40 context.

Also in retail, RadioShack’s 6¾% notes due 2019 started the week trading around 40 bid, dipped to 33, and were finishing on Friday around 36, though on considerably less volume on the week than Gymboree racked up.

The Fort Worth, Texas-based consumer electronics store chain operator said after it reported earnings on Thursday that was in talks with bondholders and other stakeholders on a hoped-for restructuring deal – but for the first time issued a “going concern” advisory in its 10-Q filing and warned that if those efforts were not successful, it could be pushed into Chapter 11 bankruptcy – or possibly even a Chapter 7 liquidation proceeding.

“I’ve stayed away from that dog for a long time,” a trader said on Friday.

Indicators off on day, week

Statistical indicators of junk market performance were lower across the board for a second consecutive session on Friday, after having turned mixed on Wednesday. It was the third lower session in the last four days.

The indicators had been mixed the week before.

The KDP High Yield Daily Index was down by 11 basis points to end at 72.86, its fourth sizable loss in a row and its 10th downturn in the last 11 sessions. On Thursday, it had plunged by 21 bps, on top of a 24 bps nosedive on Wednesday and Tuesday’s 22 bps swoon.

Its yield meantime rose by 4 bps to 5.46%, its fourth straight widening out and 11th rise in the last 12 sessions. On Thursday, it had been up by 9 bps.

Those levels compared unfavorably to the week-earlier 73.63 index reading and 5.19% yield.

The Markit CDX Series 22 index lost ¼ point on Friday to close at 106 13/16 bid, 106 15/16 offered, its second straight loss and its fourth loss in the last five sessions, On Thursday, it had retreated by 5/32 point, after having risen on Wednesday.

The index was down from the 107 13/16 bid, 107 27/32 offered level at which it had closed out the previous Friday.

The widely followed Merrill Lynch High Yield Master II Index suffered its fourth consecutive loss on Friday and its eight setback in the last nine sessions, easing by 0.06%. On Thursday, it had slid by 0.132%.

That lowered its year-to-date return to 4.677% on Friday, versus 4.74% on Thursday. The cumulative return remained well below its peak level of the year so far, 5.847%, set on Sept. 1, when the index was published even though the junk market was closed for all intents and purposes.

On the week, the index was down by 0.634% – its second consecutive weekly decline. It had been down by 0.438% during the week ended Sept. 5, when its year-to-date return stood at 5.345%.

© 2015 Prospect News.
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