Upsized Netflix drive-by prices; calendar builds; Altice busy; Alta Mesa dives as asset sale fails

By Paul Deckelman

New York, Feb. 2 – Netflix Inc. opened the new month on Monday by bringing an upsized and quickly shopped $1.5 billion two-part offering to market. The movie and television content distributor’s deal was the day’s sole pricing seen in the dollar space.

High-yield syndicate sources also heard of a smallish pricing out of Europe, as Norwegian paper producer Norske Skogindustrier ASA did an upsized €290 million offering of four-year secured notes.

Elsewhere in the primary sphere, the forward calendar was building, slating deals from prospective issuers Western Refining Logistics LP, Service King Collision Repair Centers and CrownRock LP.

Meanwhile, a deal already on the calendar – for Swiss packaging manufacturer SIG Combibloc Group AG via Onex Wizard Acquisition Company II SCA – was restructured and downsized, with a planned dollar-denominated tranche dropped, leaving just a euro-denominated piece of paper.

Among deals that have already come to market, Friday’s behemoth offering from European cable and telecom company Altice International was easily the busiest name in Junkbondland, although traders saw both the secured and the unsecured dollar-denominated tranches trading off from Friday’s initial post-pricing gains.

Away from the new issues, traders said that energy operator Alta Mesa Holdings LP’s notes were down sharply, although not on very much actual volume, in response to the company’s announcement of the cancellation of a planned $210 million asset sale because of an alleged material breach of the sale agreement by the other party.

Statistical market performance indicators were firmer after having been mixed on Friday.

Netflix drives by

The high-yield market, which on Friday had seen a staggering $5.305 billion come to market in four tranches, was operating within more normal parameters on the first trading day of February. Most of Friday’s volume was attributable to just one deal, the giant-sized dollar- and euro-denominated offering from Luxembourg-based cable and telecom operator Altice.

Monday’s market saw some $1.5 billion of new dollar-denominated, fully junk-rated paper from domestic or industrialized-country borrowers, in this case all of it coming from one issuer in a quick-to-market two-part offering.

Netflix, the Los Gatos, Calif.-based distributor of movies, television shows and other entertainment content to subscribers, priced $1.5 billion of new seven- and 10-year senior notes (B1/B+) in the middle of pre-deal market price talk on both tranches, high-yield syndicate sources said.

The issue was upsized from the originally announced $1 billion.

It consisted of $700 million of senior notes due 2022 that priced at par to yield 5½%, in the middle of yield talk of 5 3/8% to 5 5/8%, and $800 million of senior notes due 2025 that priced at par to yield 5 7/8%, in the middle of talk of a 5¾% to 6% yield.

The Rule 144A/Regulation S offering was brought to market via joint bookrunners Morgan Stanley & Co. Inc., J.P. Morgan Securities LLC and Goldman Sachs & Co., along with co-manager Allen & Co. LLC.

The company plans to use the net proceeds of the offering for general corporate purposes, which may include content acquisitions, capital expenditures, investments, working capital and potential acquisitions and strategic transactions.

Norske Skog upsizes euro deal

The day’s only other pricing was heard to have come out of Europe, where Norske Skog priced €290 million of 11¾% senior secured notes due 2019, (/CCC/), according to a company announcement.

The notes were priced at 97.5 after the issue was upsized from an originally announced €250 million.

Goldman Sachs and Citigroup Global Markets Inc. were the joint global coordinators for the Rule 144A and Regulation S offering.

The Oslo-based newsprint and magazine paper producer plans to use the proceeds to facilitate a debt exchange for all of its existing bonds, which would extend maturities of all but its bonds due in 2033.

SIG Combibloc to price

The European sources also heard that Swiss packaging producer SIG Combibloc is expected to price a downsized and restructured €675 million offering of eight-year senior notes (Caa1/B-) on Tuesday.

They said the deal would come to market during the European afternoon, which would be morning for market participants in the United States.

The offering was downsized from an originally announced €700 million equivalent and was restructured. It was originally planned as a two-tranche offering, denominated in dollars and euros, but the dollar tranche has been dropped.

Pre-deal market price talk envisions a yield of between 7¾% and 8%.

Global coordinator Bank of America Merrill Lynch will bill and deliver for the Rule 144A and Regulation S for life offering. Barclays Capital Inc. and Goldman Sachs are also global coordinators.

Proceeds, along with €2.27 billion of bank debt, will be used to fund the leveraged buyout of the company by Onex Corp.

CrownRock, Service King expected

Back in the dollar market, sources said that two Texas-based companies would likely be pricing deals on Tuesday.

Energy operator CrownRock LP and its CrownRock Finance, Inc. subsidiary are in the market with a $300 million offering of senior notes due 2023.

The sources said that the issue is expected to price on Tuesday afternoon following a 10 a.m. ET investor call.

The Rule 144A/Regulation S for life offering will be brought to market via bookrunners Credit Suisse Securities (USA) LLC, Wells Fargo Securities LLC, Citigroup and Mitsubishi UFG Securities International plc.

CrownRock, a Midland, Texas-based oil and gas producing joint venture of CrownQuest Operating and Lime Rock Partners focused on operations in the Permian Basin, plans to use the new deal proceeds to repay revolving credit facility borrowings and for general corporate purposes.

Service King Collision Repair Centers is meanwhile expected to price a $100 million add-on to the 7 7/8% senior notes that it sold last September.

The sources said that the same investment banks that handled the original pricing will bring the add-on issue to market. Joint bookrunners are JPMorgan, BofA Merrill Lynch, Credit Suisse, Deutsche Bank and Macquarie Capital.

Service King, an auto collision repair shop chain operator based in the Dallas suburb of Richardson, Texas, priced the original $200 million issue of eight-year senior notes (Caa1/CCC+) at par on Sept. 19, 2014 to yield 7 7/8% after marketing the deal to investors via a roadshow.

The yield on that deal printed at the tight end of yield talk set in the 8% area.

The issuing entity was special-purpose vehicle Midas Intermediate Holdco II LLC/Finance Corp.

Proceeds of the offering were slated to help fund the Blackstone Group LP’s acquisition of a 55% stake in Service King from the Carlyle Group.

Western Refining joins calendar

Yet another Lone Star State borrower – El Paso-based midstream energy pipeline and storage facilities company Western Refining Logistics, LP and its wholly owned subsidiary, WNRL Finance Corp., were heard by sources to be shopping a $300 million offering of senior notes due 2023 (B3/B) to potential investors.

The Rule 144A and Regulation S offering with registration rights is expected to price later this week.

The deal will be brought to market via joint global coordinators BofA Merrill Lynch and Wells Fargo and joint bookrunners Credit Agricole, RBS Securities Inc. and Stifel Nicolaus & Co. Inc.

The company intends to use a portion of the net proceeds from the private placement to repay the outstanding balance of its revolving credit facility, with the remaining amount to be used for general partnership purposes.

Quiet start to a new month

Away from the new deals, traders said that the secondary market seemed a little dull on Monday.

One of them attributed the lack of any real verve to a combination of things: weather, the Super Bowl hangover and the primary, which monopolized the attention of many investors.

A second agreed, noting that just like last Monday, snowy winter conditions in the Northeastern U.S. caused at least some participants to stay home “casting a chill over a hot market,” he quipped.

He also noted the impact that Sunday’s Super Bowl may have had – not only in terms of some people probably still recovering from game-related parties, but the fact that at least some big financial firms probably had sets of tickets to the game itself, which was played in Arizona.

Key executives and other decision makers may have attended, “so there’s no way that they would have been able to get back [to New York or other East Coast points]. They’ll probably be straggling in all week long,” he added.

New Altice eases

There was, however, at least a fair amount of activity in a few names, chief among them being Altice International, which brought a $5.47 billion-equivalent dollar- and euro-denominated, five-part issue to market on Friday.

Traders said that the dollar tranches, which had firmed smartly to the 102 to 103 bid level in initial aftermarket dealings following that Friday morning pricing, had backed off those highs.

One market source quoted the company’s 7 5/8% senior unsecured notes due 2025 at 101 3/8 bid, which he called down ½ of a point, on volume of more than $48 million, making it easily the most actively traded junk credit.

He saw its 6 5/8% notes due 2023 having lost 1 full point to end at 102 bid, on volume of over $30 million, putting those notes in the No. 2 slot on the most-actives list.

One of the traders saw Friday’s other deal, Presidio Holdings Inc.’s 10¼% senior notes due 2023, moving up a little after pricing at a heavily discounted 91.25 to yield 11.973%.

He pegged the bonds as high as 94 bid on “small pieces,” although he saw more trading around the 92 area.

He did not see any trace of the other half of that $400 million deal – the $150 million of 10¼% senior subordinated notes due 2023 that had priced at 80 to yield 14.54%.

Alta Mesa takes a dive

Away from new or recent deals, a trader said that Alta Mesa Holdings’ 9 5/8% notes due 2018 “took a pretty big hit,” falling into the upper 50s from prior levels in the 80s,

The trader said that the bonds may have been down as much as 28 points at one point.

A second trader also said that the Houston-based energy operator’s paper had suffered a “pretty significant drop,” down to the mid-to-lower 50s from prior levels in the high 70s and lower 80s.

He noted the company’s Friday afternoon announcement that it had terminated its agreement to sell some of its holdings in the Eagle Ford Shale formation in Texas for $210 million, claiming the prospective buyer of that asset, ReOil Eagle I, LLC, had failed to make a required escrow deposit on the purchase and had otherwise breached the sale agreement.

Indicators turn better

Statistical indicators of junk performance turned higher on Monday after having been mixed on Friday for the third session in the previous four days.

The KDP High Yield Daily index edged up by 1 basis point, to 71.01, after having dipped by 3 bps on Friday.

The yield on Friday tightened by 1 bp to 5.48%, after having risen by 1 bp on Friday, its first widening after two declines before that.

The Markit Series 23 CDX North American High Yield index gained 5/16 of a point on Monday to end at 105¾ bid, 105 13/16 offered, after losing 9/32 of a point on Friday.

The Merrill Lynch U.S. High Yield Master II index notched its 11th consecutive upside session on Monday, gaining 0.033% on top of Friday’s 0.017% rise.

The latest gain lifted its year-to-date return to 0.723%, its seventh consecutive new peak level for 2015, up from the previous high point of 0.688% on Friday.

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