Primary comes alive as T-Mobile Frontier, Gannett lead $5.8 billion day; Endeavour lower

By Paul Deckelman and Paul A. Harris

New York, Sept. 3 – The long, late summer drought in the high-yield primary market finally came to an end on Wednesday, as syndicate sources saw five quick-to-market deals price, totaling some $5.84 billion of new U.S. dollar-denominated, fully junk-rated paper price in eight tranches.

They were the first pricings seen in Junkbondland since Aug. 14.

The day’s tally of new paper was the most seen in any session since April 10, when $5.99 billion of bonds priced in eight tranches.

A trio of two two-part deals led the way on Wednesday.

Telecom operator Frontier Communications Corp. priced $1.55 billion of new notes, evenly split into seven- and 10-year tranches.

Newspaper publisher and digital media company Gannett Co., Inc. brought $675 million of new notes to market, unevenly split into seven- and 10-year pieces.

On Wednesday evening, well after the market had closed, wireless operator T-Mobile US, Inc. announced partial terms on its own two-part offering, which had been upsized to a gigantic $3 billion from $2 billion originally. The deal consisted of $1.3 billion of 8.5-year notes and $1.7 billion of 10.5-year paper.

There was also a pair of smaller deals, as oil and natural gas exploration and production company WPX Energy, Inc. came along with $500 million of 10-year notes, while Summit Materials, LLC, a producer of concrete, gravel and other building materials, did a $115 million add-on to its existing 2020 notes.

Only the new Gannett and WPX notes priced in time for any kind of aftermarket, traders said, with both quoted somewhat firmer.

Away from the new deals, traders saw considerable activity in Endeavour International Corp.’s bonds, which were lower following the late-Tuesday announcement that the energy operator chose not to make the scheduled Sept. 2 interest payment on several series of junk and convertible bonds.

Statistical market performance indicators turned lower across the board after having been mixed for six consecutive sessions before that.

T- Mobile massively upsizes

As forecast, the primary market poured on the coal on Wednesday.

The session saw a total of $5.84 billion price in eight tranches – the heaviest new-deal action seen in the junk market since April 10, when issuers brought a total of $5.99 billion of new paper in eight tranches, according to data compiled by Prospect News.

The largest deal of the day was the latest, as T-Mobile USA, Inc., a wholly owned subsidiary of T-Mobile US, Inc., upsized its two-part offering of senior notes (expected ratings Ba3/BB) to $3 billion from $2 billion.

The quick-to-market offering had been expected to price during the session, but terms had not been seen by the time things had pretty much wrapped up for the day.

But on Wednesday evening, the company announced partial terms.

T-Mobile will offer $1.3 billion of 6% senior notes due 2023 and $1.7 billion of 6 3/8% notes due 2025.

The registered offering is expected to close on Friday.

Before the deal priced, the 8.5-year notes, which come with four years of call protection, had been talked to yield in the 6 1/8% area.

The 10.5-year notes, which come with five years of call protection, were talked to yield in the 6½% area.

Deutsche Bank Securities Inc. is the left bookrunner for the public offer. Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC and J.P. Morgan Securities LLC are the joint bookrunners.

Barclays, Goldman Sachs & Co. and RBS Securities Inc. are the co-managers.

The notes in both tranches feature three-year 35% equity clawbacks at par plus the coupon and 101% poison puts.

The Bellevue, Wash.-based mobile communications company plans to use the proceeds for general corporate purposes, which may include capital investments, acquisition of additional spectrum and repayment of debt.

The company said that it plans to use about $1 billion of the proceeds from the deal to redeem its outstanding 7 7/8% senior notes due 2018 and to pay related transaction fees and expenses.

Frontier Communications prices

Earlier in the day, Frontier Communications priced $1.55 billion of non-callable senior notes (Ba2/BB-) in two tranches, according to a market source.

A $775 million tranche of seven-year notes priced at par to yield 6¼%. The yield printed at the tight end of yield talk in the 6 3/8% area.

A $775 million tranche of 10.5-year notes priced at par to yield 6 7/8%. The yield printed at the tight end of yield talk in the 7% area.

JPMorgan, Citigroup Global Markets and Morgan Stanley & Co. LLC were the joint bookrunners.

Proceeds, in addition to roughly $200 million of cash on hand, will be used to fund the acquisition of AT&T Inc.’s wireline business and statewide fiber network in Connecticut.

Frontier Communications is a Stamford, Conn.-based wireline telecommunications provider.

Gannet notes come at discounts

Gannett priced $675 million of senior notes (Ba1/BB+) in two discounted tranches on Wednesday, according to a syndicate source.

The deal included a $350 million tranche of 4 7/8% seven-year notes that priced at 98.351 to yield 5 1/8%. The yield printed at the tight end of yield talk in the 5¼% area.

In addition, the company priced $325 million of 5½% 10-year notes at 99.038 to yield 5 5/8%. The yield printed at the tight end of yield talk in the 5¾% area.

Citigroup Global Markets, JPMorgan, Barclays, RBC Capital Markets, MUFG, Mizuho Securities, SunTrust Robinson Humphrey and US Bancorp are the joint bookrunners.

The McLean, Va.-based media and marketing solutions company plans to use the proceeds to help fund the acquisition of full ownership of Cars.com, a Chicago-based digital company in the automotive space.

Proceeds will be escrowed until the acquisition closes.

WPX Energy drives by

WPX Energy priced a $500 million issue of non-callable 10-year senior notes (Ba1/BB+) at par to yield 5¼% on Wednesday, according to a syndicate source.

The yield printed at the tight end of the 5¼% to 5½% yield talk.

Wells Fargo Securities LLC was the left bookrunner. Citigroup Global Markets, RBS Securities, BofA Merrill Lynch, Barclays and JPMorgan were the joint bookrunners.

The Tulsa, Okla.-based natural gas and oil exploration and production company plans to use the proceeds to repay bank debt and for general corporate purposes.

Summit Materials taps 10½% notes

Summit Materials priced a $155 million add-on to its 10½% senior notes due Jan. 31, 2020 (Caa1/B-) at 110 to yield 6.528% on Wednesday, according to a syndicate source.

The reoffer price came at the rich end of the 109.5 to 110 price talk.

BofA Merrill Lynch was the left bookrunner.

Citigroup Global Markets, Barclays, UBS Investment Bank, Credit Suisse, Deutsche Bank Securities Inc. and Blackstone were the joint bookrunners.

Proceeds will be used to finance the acquisition of Mainland Sand & Gravel Ltd., to pay down Summit's revolver and for general corporate purposes.

The issuer is a Washington, D.C.-based acquirer of heavy-side building materials companies in the aggregates, ready-mix concrete, cement, asphalt paving and construction industries.

APN News & Media roadshow

Apart from the deals that actually priced, Australia-based APN News & Media Ltd. and its wholly owned subsidiary, Biffin Pty Ltd., began a roadshow on Wednesday for a $250 million offering of seven-year senior notes, according to a syndicate source.

The Rule 144A and Regulation S for life deal is expected to price early in the week ahead.

Credit Suisse Securities, Deutsche Bank Securities Ltd. and HSBC are the joint bookrunners.

The notes become callable after three years at par plus 75% of the coupon and feature a three-year 35% equity clawback and a 101% poison put.

Proceeds will be used to repay revolver debt and for general corporate purposes.

The prospective issuer is a Sydney, Australia-based diversified media company with radio, newspaper and outdoor businesses across Australia, New Zealand and Hong Kong.

Tiene Energy starts Thursday

Tiene Energy Ltd. plans to start a roadshow on Thursday in New York for its $350 million offering of eight-year senior notes (expected ratings B3/CCC+).

The roadshow moves to Boston on Friday, then to the West Coast of the United States on Monday and Tuesday, and the deal is set to price thereafter.

Joint bookrunner Barclays will bill and deliver. JPMorgan is also a joint bookrunner.

BMO Securities, TD Securities, NBC and RBC Capital Markets are the co-managers.

The Rule 144A and Regulation S for life notes become callable after three years at par plus 75% of coupon.

The notes feature a three-year 35% equity clawback at par plus the coupon and a 101% poison put.

The Calgary, Alta.-based oil and gas exploration, development, and production company plans to use the proceeds to repay and retire its second-lien term loan (including a 1% prepayment premium) as well as to repay all outstanding revolver borrowings and for general corporate purposes.

American Energy roadshow

American Energy – Woodford, LLC began a roadshow on Wednesday for a $325 million offering of eight-year senior notes, according to a syndicate source.

The deal is expected to price early in the week ahead.

Credit Suisse Securities, Deutsche Bank Securities and Morgan Stanley & Co. are the joint bookrunners for the Rule 144A and Regulation S for life offer.

The notes become callable after three years at par plus 75% of the coupon and feature a three-year 40% equity clawback and a 101% poison put.

The Oklahoma City-based energy company plans to use the proceeds to repay its revolver, fund future acquisitions and capital expenditures and return capital to the sponsor.

New deals come to the fore

After 12 straight sessions in which no new deals had been seen to have priced in the market, Wednesday’s flood of new paper, understandably, was the major focus of the session, a trader said.

“New issues seems to be the theme,” he said, noting that it had been expected that the logjam that had kept any deals from pricing during the traditional late-August lull would be broken sooner or later.

However, there was not much aftermarket activity seen in the new paper, owing to the fact that most of it was heard to have priced later in the day, with the T-Mobile terms not announced until well into the evening.

A trader saw Gannett’s new 4 7/8% notes due 2021 trading around 98¾ bid versus the 98.351 at which the McLean, Va.-based newspaper and digital website publisher’s bonds had priced. He had not seen any activity in the other half of that deal, the 5 5/8% notes due 2024, which had priced at 99.038.

Another trader estimated that each tranche would be “about a half a point or so bid higher” than their respective pricing levels. He said that he had only seen bids, with no offered levels, “so they could be bid up another point or so before something trades.”

The only other deal that priced in time for any kind of aftermarket activity was WPX Energy’s 5¼% notes due 2024.

A trader saw them in a par-to-101 context versus their par pricing levels, but said there was “not a lot of trading just yet” in the credit, “but bids are firm.”

At another desk, a trader saw a market in the new WPX bonds at 100 3/8 bid, 100 7/8 offered.

Existing T- Mobile notes off

With T-Mobile bringing a huge, new, quickly shopped deal, a trader said, “guys [who were holding the company’s existing paper] kind of backed away” in reaction to the company’s morning new-deal announcement.”

For instance, he saw its 6½% notes due 2024 “wrapped around 103½” from prior levels around the 104 bid area.

A market source at another desk also saw the existing T-Mobile notes in retreat, some of them pretty actively traded.

He pegged the 6½% notes going home at 103¼ bid, a loss of ¾ point from their previous levels, on volume of over $10 million.

The most active bond in the structure, the 6 5/8% notes due 2023, dropped by 1 3/8 points to 103 7/8 bid from prior levels above 105, with over $14 million having changed hands.

Its 6.731% paper due 2022 lost 1½ points to end at 104½, with over $11 million having traded.

Frontier Communications’ paper was also easier in busy trading on the news the telecommunications company was bringing a big new deal.

Its 7 5/8% notes due 2024 – which had been trading in a 107 to 110 context late last week – dropped as low as 105 5/8 bid versus Tuesday’s close at 107, although the credit bounced off its lows to only end down about ¼ point or so on active volume of over $15 million.

Endeavour loses ground

Away from the new deals or new-deal-related movements in existing bonds, Endeavour International’s debt dropped quite a bit in Wednesday trading after the company said as the market was closing on Tuesday that it was skipping coupon payments on its 12% first-lien notes due 2018, its 12% second-priority notes due 2018 and its 6½% convertible bonds due 2017.

The total payment came due Sept. 1 and would have equaled $33.5 million.

“Endeavour had a lot of volume,” a trader said, seeing the 12% first-lien notes down about 3 points on the day to a context of 89½-to-90, with over $27 million having changed hands.

A second trader said that the 12% first-lien notes were “down a couple points, trading in the high-80s.”

At another desk, a trader said the 12% second-priority notes were down 5 points from their levels at the end of August, trading at 42½.

Another market source pegged the issue at 42 bid, 42½ offered, down from previous levels with a 48 handle.

The source also saw the 5½% notes due 2016 dropping to 25. The rarely traded issue last moved in round-lots back in June at levels around 46.

“We believe it is in the best interest of all stakeholders, debt and equity, to expeditiously address the company’s capital structure with the goal of reducing debt and the cost of capital to position the company for the future,” the company said in a prepared statement.

Endeavour has now entered a 30-day grace period. During that time, the company is hoping to come up with a plan to deal with its debt structure. If it should fail to get a plan in place within the 30 days, creditors can force an acceleration of the debt.

Navistar eases on numbers

Elsewhere, Navistar International Corp.’s 8¼% notes due 2021 eased about ¼ point to 103 7/8 bid, with over $10 million traded.

The notes eased even though the Lisle, Ill.-based maker of trucks, school buses and diesel engines reported that fiscal third-quarter losses had been sharply reduced from year-ago levels, and the company actually showed a profit from continuing operations – the first such quarterly operating earnings it has posed since 2011.

Its executive also said that once cash flow improves on a sustainable basis, they hope to begin de-leveraging the company (see related story elsewhere in this issue).

Indicators head south

Statistical indicators of junk market performance were seen lower across the board on Wednesday after having been mixed on Tuesday for a sixth consecutive day and a ninth mixed session in the last 10 days.

The KDP High Yield Daily index lost 6 basis points to close at 73.89, its fourth straight loss. On Tuesday, it was down by 5 bps.

Its yield rose by 2 bps for a second straight day, to 5.07%, its fifth consecutive widening.

The Markit CDX Series 22 index moved down by 1/8 point to 107 15/16 bid, 108 offered. On Tuesday, it had posted its first gain after five straight losses before that, firming by 1/16 point.

The widely followed Merrill Lynch High Yield Master II index saw its second consecutive downturn, retreating by 0.08% on top of Tuesday’s 0.038% loss, which had been the first such setback after 16 consecutive sessions before that on the upside.

The latest downturn dropped the index’s year-to-date return to 5.722%, down from 5.806% on Tuesday and down as well from 5.847% on Monday, its new peak level for the year so far.

Stephanie N. Rotondo contributed to this review.

© 2015 Prospect News.
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