Gray Television, Dubai price; McDermott rebounds; Newfield jumps; funds lose $1.04 billion

By Abigail W. Adams

Portland, Me., Nov. 1 – The domestic primary market saw an uptick in activity on Thursday with two deals pricing as market conditions improved.

In drive-by action, Gray Television Inc. priced an upsized $750 million in long eight-year senior notes at par to yield 7% (B3/B+/BB-).

In a reversal of a previous trend, a concurrent term loan was downsized with proceeds shifted to the senior notes offering.

Dubai Aerospace Enterprise Funding LLC priced a downsized $1 billion two-tranche offering of three-year and five-year senior notes (Ba2/BB+). The deal was largely marketed to high-yield investors.

HC2 Holdings, Inc. remains in the market with its $535 million offering of senior secured notes, although there were no updates on pricing as of press time.

Victoria plc remains in the market with its €450 million offering of five-year senior secured notes (BB-/BB) with pricing expected on Friday, according to a market source.

While the latest round of volatility subsided on Thursday, new deal activity in the domestic primary market is expected to remain muted until after the Nov. 6 mid-term election, sources said.

While improved, the market will remain unstable until the election is sorted out and there are some answers to questions about the political climate moving forward, the source said.

Meanwhile, the secondary space was active as investors continued to digest earnings announcements and company news.

McDermott International Inc.’s 10 5/8% senior notes due 2024 (B2/B-) remained the most actively traded issue in the secondary space with the notes rebounding slightly after a 10-point plunge on Wednesday.

Newfield Exploration Co.’s junk bonds jumped on Thursday after Encana Corp. announced it would acquire the shale oil producer.

Meanwhile, high-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall liquidity trends in the junk market – saw $1.043 billion in outflows for the week ended Oct. 31, according to fund-flow statistics generated by AMG Data Services Inc.

The week marked the second consecutive week of outflows and the third billion-dollar outflow in October.

Funds saw $2.364 billion of outflows for the week ended Oct. 24.

While funds saw inflows of $447 million for the week ended Oct. 17, the week was preceded by an outflow of $4.928 billion for the week ended Oct. 10.

The cumulative outflow for the year now totals $25.473 billion, according to a Prospect News analysis of the reports by the Arcata, Calif.-based unit of Thomson Reuters Corp.’s Lipper analytics division.

Gray upsizes

Gray Television sold an upsized $750 million of long eight-year senior notes at par to yield 7% (B3/B+/BB-) in a quick-to-market Thursday trade, according to market sources.

The deal size was increased from $500 million.

Pricing came on top of revised talk of 7%.

Price talk was previously 7% to 7½%, which came on top of early guidance in the low 7% area, according to market sources.

Wells Fargo Securities LLC is the left lead for the Rule 144A and Regulation S for life offering.

BofA Merrill Lynch, Deutsche Bank Securities Inc., J.P. Morgan Securities LLC and RBC Capital Markets LLC are joint bookrunners.

The concurrent term loan was downsized to $1.4 billion from $2.15 billion with proceeds shifted to the senior notes offering.

The shifting of proceeds to the senior notes was a reversal in recent deals where senior notes offerings have been downsized or canceled with proceeds shifted to a concurrent term loan.

GFL Environmental Inc. recently withdrew a $400 million offering of senior unsecured notes and shifted the proceeds to its concurrent bank loan, lifting the size of the incremental term loan to $1.71 billion from $1.31 billion.

There was no clear reason for the shifting of the proceeds in Gray’s acquisition financing deal, a market source said.

However, the issuer may have wanted to increase its first-lien capacity or was sensitive to the floating rate aspect of the loan, the source said.

Dubai downsizes

Dubai Aerospace sold a downsized $1 billion two-tranche offering of three-year and five-year senior notes on Thursday (Ba2/BB+), according to a market source.

The deal included $500 million of three-year notes that priced at par to yield 5¼% and $500 million of five-year notes that priced at par to yield 5¾%.

The initial size of the deal was $1.25 billion.

Pricing came in line with talk in the 5¼% area for the three-year notes and the 5¾% area for the five-year notes.

Morgan Stanley, BNP Paribas, Credit Agricole CIB, Deutsche Bank, Goldman Sachs, HSBC, Mizuho, Natixis and SunTrust Robinson Humphrey were joint bookrunners for the Rule 144A for life and Regulation S offering.

Proceeds will be used for the repayment of debt and for general corporate purposes.

While based in Dubai, the deal was marketed to high-yield accounts. The company is a strong credit from a well-regarded sector, and its investor base was the standard high-yield investor, a market source said.

HC2 still out there

HC2 Holdings remains in the market with its $535 million offering of senior secured notes, albeit with a revised structure and widened price talk.

Talk remained the same on Thursday with the deal whispered to come with a coupon of 10% and a discounted offering price for a yield of 12½% to 13%.

Initial guidance had the deal coming with a yield in the low-to-mid 9% area, a source said.

The maturity was also shortened to three years from five years with the notes callable after 1.5 years.

There were no updates on timing as of press time, sources said.

Victoria on tap

Victoria remains in the market with its €450 million offering of five-year senior secured notes (BB-/BB) with pricing expected on Friday, according to a market source.

The London-based flooring maker’s stock plunged on the London Stock Exchange in response to the bond offering announcement, prompting the company to issue a press release on Oct. 31.

The company sought to “address misleading rumor and speculation,” about its capital structure following the bond announcement, it said in the release.

Proceeds from the bond offering would solely be used to refinance its two-year credit facilities, the company said.

Margins were expected to be 1 point to 1.5 points lower than consensus estimates. However, margins would still exceed the prior year, the company said.

McDermott rebounds

McDermott’s 10 5/8% senior notes due 2024 remained the focus of trading activity on Thursday with the notes rebounding after a sell-off during the previous session.

The 10 5/8% notes gained 2½ points to close the day at 92½, a market source said. More than $52 million of the bonds were on the tape by the late afternoon.

The notes dropped 10 points on Wednesday after the company announced third-quarter earnings and the divestiture from its storage tank and U.S pipe fabrication business.

Newfield jumps

Newfield Exploration’s junk bonds were on the rise after news broke the Calgary-based energy producer Encana Corp. would acquire the company in an all-stock transaction valued at $5.5 billion.

Newfield’s 5 3/8% senior notes due 2026 were up about 1½ point to 102½, a market source said. More than $29 million of the bonds were on the tape in the late afternoon.

The shale oil producer’s 5 5/8% senior notes due 2024 gained 1¼ point to 104½. More than $18 million of the bonds changed hands during Thursday’s session.

Indexes gain

Indexes saw their second consecutive day of gains on Wednesday after a mixed Monday and Tuesday and steep losses last week.

The KDP High Yield Daily index was up 2 basis points to close the day at 69.05 with the yield now 6.35%.

The index was up 5 basis points on Wednesday after a 12 bps drop on Tuesday and 14 bps drop on Monday. The index was down 60 bps last week.

The ICE BofAML US High Yield index climbed 6.4 bps with the year-to-date return now 0.904%. The index gained 26.8 bps on Wednesday after a 23.4 bps drop on Tuesday and a 4.4 bps gain on Monday.

The index slid 74.5 bps on the week last week, dropping below the 1% year-to-date return threshold on Friday.

The CDX High Yield 30 index saw its fourth consecutive day of gains on Thursday after a significant drop last week. The index was up 30 bps to close the day at 105.57.

The index was up 32 bps on Wednesday, 11 bps on Tuesday and 5 bps on Monday after a 92 bps drop last week.

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