Upsized EXCO, four more price to cap busy $12.9 billion week; new Chesapeake bonds active

By Paul Deckelman and Paul A. Harris

New York, April 11 - Five high-yield deals totaling $1.75 billion priced on Friday, syndicate sources said - and those deals capped off the heaviest new-issuance week for the year so far.

Energy operator EXCO Resources, Inc. and FTS International, Inc., a provider of services to the energy industry, shared the honors for the day's biggest deal - each did a $500 million offering of eight-year notes that priced off the forward calendar after an investor roadshow, with EXCO's having been upsized. The EXCO notes were seen by traders to have firmed solidly when they reached the aftermarket.

There were also two more regularly scheduled calendar deals - an upsized $305 million of five-year secured notes from Atrium Windows and Doors, Inc., which manufacturers those items for residential construction, and $300 million of eight-year notes from Quad/Graphics Inc., a printer and media channel integrator.

The day also saw one quick-to-market same-session transaction, from metals recycler and alloy producer Wise Metals Group, which did an upsized $150 million of five-year PIK toggle notes.

The day's primaryside activity lifted the week's new-issuance total of U.S. dollar-denominated, junk-rated paper from domestic or industrialized-country borrowers to $12.9 billion in 20 tranches, easily surpassing the $7.23 billion in 18 tranches that had gotten done last week, ended April 4.

This week's issuance was the most of any week so far this year, according to data compiled by Prospect News - eclipsing the week ended March 7, when $11.75 billion had come to market in 21 tranches.

It was the largest new-issue week since the week ended Sept. 27, 2013, when an astounding $17.05 billion had priced in 27 tranches.

This week brought year-to-date new-issuance up to $86.44 billion in 179 tranches - although that seemingly busy pace still lagged the $99.42 billion that had come to market in 212 tranches by this time last year by 13%, although that year-versus-year gap had narrowed considerably from the 21.5% seen at the end of last week.

Thursday's big new two-part megadeal from Chesapeake Energy Corp. was the day's clear volume leader, traders said, with the five-year floating-rate piece seen having firmed modestly from the gains it had notched in the aftermarket after pricing. But the oil and natural gas company's fixed-rate notes struggled to even get back to their par issue price.

Statistical junk-market performance indicators were down across the board on Friday, after having been mixed on Thursday. However, they were higher on a week-to-week basis than their levels of last Friday.

Hints of weakening

Primary market news volume remained heavy on Friday, as five issuers priced single-tranche dollar-denominated deals, raising a combined total of $1.75 billion.

Although high yield has demonstrated resilience in the face of recent volatility in global stock markets, according to market watchers, Friday executions were not as crisp as had been the tendency in late March.

Of the four of Friday's five tranches that came with widely circulated price talk, two came on top of talk and two priced wide of talk.

Three of the five were upsized, at least to some degree.

Only one of the five was a drive by.

EXCO upsize, prices wide

EXCO Resources priced an upsized $500 million issue of eight-year senior notes (B3/CCC+) at par to yield 8½%.

The deal was increased from an original amount of $400 million.

The yield printed 25 basis points higher than the wide end of the 8% to 8¼% yield talk.

J.P. Morgan, Wells Fargo, BofA Merrill Lynch and BMO were the joint bookrunners.

The Dallas-based oil and gas company plans to use the proceeds to repay a $297.8 million term loan and a portion of the revolver used to fund its acquisition of properties from Chesapeake Energy in July 2013, and for general corporate and working capital purposes.

FTS prices atop talk

FTS International priced a $500 million issue of eight-year senior secured notes (B2/B-) at par to yield 6¼%.

The yield printed on top of yield talk.

Wells Fargo was the left bookrunner for the debt refinancing. BofA Merrill Lynch, UBS and Barclays were the joint bookrunners.

Atrium at a discount

Atrium Windows and Doors priced a $305 million issue of 7¾% five-year senior secured notes (Caa1/B-) at 98.974 to yield 8%.

The deal was increased from $300 million.

The yield printed on top of yield talk. The reoffer price came in line with price talk that specified approximately 1 point of original issue discount.

In a change to the structure, the call protection was increased to 2.5 years from two years. The first call premium was increased to par plus 75% of the coupon from par plus 50% of the coupon. A special call provision that would have allowed the issuer to redeem 10% of the notes annually at 103 during the non-call period was removed.

There were also covenant changes.

The Dallas-based residential window and door manufacturer plans to use the proceeds to refinance debt. The additional proceeds resulting from the $5 million upsizing of the deal will be used to fund the original issue discount.

Quad/Graphics prices wide

Quad/Graphics priced a $300 million issue of non-callable eight-year senior notes (B1/B) at par to yield 7%.

The yield printed 12.5 basis points beyond the wide end of price talk that had been set in the 6¾% area.

J.P. Morgan, BofA Merrill Lynch, U.S. Bancorp, PNC and SunTrust were the joint bookrunners.

The Sussex, Wis.-based printer and media channel integrator plans to use the proceeds for general corporate purposes, including debt refinancing.

Wise Metals PIK toggle

In a quick-to-market transaction Friday, Wise Metals Intermediate Holdings LLC and Wise Holdings Finance Corp. priced an upsized $150 million issue of senior PIK toggle notes due June 15, 2019 (Caa2/CCC) at 99 to yield 10.009%.

The notes pay a 9¾% cash coupon and a 10½% PIK coupon.

The deal was increased from $125 million.

BofA Merrill Lynch and Houlihan Lokey were the joint bookrunners for the dividend deal.

Time sets talk at 5¾% area

Looking to the week ahead, Time Inc. talked its $500 million offering of eight-year senior notes (B1/BB) to price with a yield in the 5¾% area.

The deal, via Barclays, Citigroup, BNP, BofA Merrill Lynch, J.P. Morgan, Morgan Stanley and Wells Fargo, is set to price Monday.

Rice roadshow for Monday

Rice Energy Inc. plans to start a roadshow on Monday in Boston for a $750 million offering of eight-year senior notes.

Pricing is set for Thursday.

Barclays is the lead left bookrunner. Wells Fargo, Goldman Sachs, Citigroup and RBC are the joint bookrunners.

The Canonsburg, Pa.-based oil and gas exploration and production company plans to use the proceeds to repay its second lien term loan and for general corporate purposes, including capital expenditures.

Alain Affelou plans deal

In what figures to be another busy week in the European primary market - a week that gets underway with a €1.19 billion active deal calendar - France-based eyewear retailer Alain Affelou plans to start a roadshow on Monday for a €440 million two-part offering of five-year notes.

The debt refinancing deal is offered in a €365 million tranche of senior secured notes and a €75 million tranche of senior unsecured notes.

The roadshow wraps up on Thursday, and the deal is set to price after that.

Global coordinator JP Morgan will bill and deliver.

Credit Suisse, UniCredit, Credit Agricole CIB and BNP Paribas are the joint bookrunners.

EXCO bonds trade up

In the secondary market, a trader said that EXCO Resources' new 8½% notes "were well-received."

He called the company "a fairly well respected name."

The oil and natural gas company's upsized offering was seen trading at 100 5/8 bid, 101 offered on the break, up from its par issue price.

A trader who saw the bonds at 100¾ bid, 101 offered noted that they had moved up, even after having come at the wide end of pre-deal price talk.

The company's existing 7½% notes due 2018 were meantime seen among the most actively traded issues on Friday, with over $19 million having changed hands. The bonds were little moved on the day, at 101½ bid.

Among the day's other issues, FTS International's new 6¼% senior secured notes had moved up to 100½ bid, 100¾ offered from their par issue price, although a trader said that there was "not a lot of activity," in the new issue.

Chesapeake trades actively

That was definitely not the case with Chesapeake Energy's big new deal, which had priced in two parts on Thursday.

A market source said that the Oklahoma City-based oil and natural gas company's $1.5 billion of floating-rate notes due 2019 "were doing well," gaining ¼ point on the day, on top of the 1 point gain seen in initial aftermarket dealings on Thursday after the bonds had priced at par.

On the other hand, he said, the $1.5 billion of new 4 7/8% notes due 2022 "were trading a little below issue price" seeing them at 99 7/8 bid, down 3/8 point on the day. Those bonds too had priced at par, and had moved up modestly initial aftermarket dealings.

Chesapeake "was definitely the volume leader today," another trader said, noting that the floaters had racked up nearly $80 million of volume on Friday.

The fixed-rate notes, meanwhile, were not far behind, with over $65 million having changed hands.

BMC a bit easier

A trader said that while most of the recent new deals seemed to be more than holding their own in terms of trading above their respective issue prices - and in some cases, as much as a point or two above them - the lone exception to the rule among the recent new-deal names was BMC Software Inc.

The Houston-based information technology management software company priced $750 million of 9%/9¾% senior contingent cash-pay notes due 2019 in a drive-by deal on Tuesday. The bonds - issued by corporate parent Boxer Parent Co. Inc. - came to market at 99.5 to yield 9.118%, after the issue was upsized from an original $500 million.

The trader said "they traded up nicely" initially, getting as high as 100¼ bid, 101 offered - but had come off their highs by the end of the week, settling in on Friday at 99 1/8 to 99½ bid, just under their issue price.

"It's about the only new deal that's been weaker," he declared.

Signs of strength?

One of the traders noted the continued weakness seen in equities - stocks fell again on Friday, continuing a run of bad luck that's lasted most of the week, with the bellwether Dow Jones Industrial Average surrendering 143.47 points, or 0.89%, to end at 16,026.75.

"With the equity market being off," he opined, "you would think that our market would be softer again - but we did not feel that at all."

He continued that he was "waiting for bids to be hit - but I didn't even see any bids hit, I saw them just still filling in.

"So, our market's still very strong. There's no direct correlation to the equity market."

However, at another shop, a trader was more cautious, saying that he was seeing "a lot of bid-wanted lists from the ETFs."

People, he said, "are getting a little nervous."

Indicators head lower

Statistical junk performance indicators turned lower across the board on Friday, after having been mixed on Thursday and higher on Wednesday.

The Markit Series 22 CDX North American High Yield Index dropped by 9/16 point on the session to close at 106½ bid, 106 5/8 offered, its second straight drop. On Thursday, it had lost ½ point.

The KDP High Yield Daily Index dropped by 7 basis points to 75.03, after having risen by 4 bps on Thursday, its second straight upside ride.

Its yield, meanwhile, rose by 1 bp to 5.21%, after having come in by 2 bps on Thursday - its second straight improvement.

And the widely followed Merrill Lynch High Yield Master II Index also was on the minus side, easing by 0.133%, its first loss after 2 straight gains, including Thursday, when the index had risen by 0.099%, its second consecutive upturn.

Friday's loss dropped its year-to-date return to 3.262%, versus Thursday's 3.399%, its peak level for 2014 so far.

However, the index still rose by 0.024% on the week - its fourth consecutive weekly gain. Last week, it had risen by 0.265%, for a year-to-date reading of 3.238%.

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