Micron, Calpine lead drive-by parade; Altice tweaks deal; Heinz busy; funds jump $2.77 billion

By Paul Deckelman

New York, Jan. 29 – After several sessions of not much activity, the high-yield primary market sprang back to life on Thursday with a trio of opportunistic drive-by pricings, one of them in megadeal territory.

And the much-anticipated, giant-sized multi-tranche offering from European cable and telecom operator Altice International moved closer to completion. The deal is expected to price on Friday as the biggest junk deal so far this year and one of the biggest of any year, with price talk out – considerably tighter than initial estimates – and some tweaking of the tranche sizes.

Semiconductor manufacturer Micron Technology, Inc. priced an upsized $1 billion of 8.5-year senior notes, which were seen having firmed in initial aftermarket dealings.

Power generation company Calpine Corp. came to market with an upsized $650 million of nine-year paper, which was also somewhat firmer in preliminary trading.

Chemical manufacturer Platform Specialty Products Corp. – which visited Junkbondland just last week with a big dollar- and euro-denominated two-part bond offering – came back for seconds on Thursday, pricing a smallish add-on to the dollar tranche. Those bonds, too, were seen at higher levels later in the session.

And for a third consecutive session, food manufacturer H.J. Heinz Co.’s new issue of 10-year notes was easily the most actively traded junk bond of the day.

Traders saw a mostly better market, and statistical performance indicators were higher across the board after having been mixed over the previous two sessions.

And another market measure – flows of investor cash into and out of high-yield mutual funds and exchange-traded funds, considered a reliable barometer of overall junk market liquidity trends – saw its biggest gain in well over a year. The funds posted a net inflow of $2.77 billion, one of the biggest increases on record.

Pricing parade revs up

The junk market had seen two consecutive sessions during which there had been no pricings of any dollar-denominated, fully junk-rated issues from domestic or industrial-country borrowers – between weather-related disruptions in the Northeastern United States and the cautionary effect of waiting to see what the Federal Reserve might decide at its regular monthly meeting – and one session that didn’t even see any pricings come out of Europe, which frequently takes up the slack when things in the States quiet down.

So investors were ready to buy some new junk paper – and the market did not disappoint them. Issuers priced $1.7 billion of new notes in three tranches, all of them quickly shopped offerings that wrapped up within hours of their respective initial announcements.

As an appetizer, the first deal of the day to get done was a $100 million add-on to Platform Specialty Products’ seven-year bond deal (B2/BB-) that the company did only last Friday, less than a week ago.

High-yield syndicate sources said that those new 6½% senior notes due 2022 priced at 101 for a yield to worst of 6.264% and a spread over comparable Treasury notes of 499 basis points.

The Rule 144A/Regulation S for life add-on offering was bought to market via joint book-running managers Credit Suisse Securities (USA) LLC, Barclays, Nomura Securities International and UBS Securities LLC.

They were joined by a hefty roster of co-managers for the deal: BTIG, LLC, Credit Agricole Securities (USA ) Inc., Deutsche Bank Securities Inc., HSBC Securities (USA) Inc., KeyBanc Capital Markets Inc., Macquarie Capital (USA) Inc., SMBC Nikko Securities America, Inc., SunTrust Robinson Humphrey, Inc. and Wells Fargo Securities, LLC.

The notes will be immediately fungible with the $1 billion tranche of such notes priced last week and will have the same indenture provisions.

They’ll be issued by Platform’s PSPC Escrow Corp. unit, which was also the issuer on last Friday’s deal. The dollar portion of that earlier, regularly scheduled forward calendar offering priced at par after being upsized from $500 million. Last week’s offering also included €350 million of 6% senior notes due 2023 that priced at par. The euro tranche had also been a seven-year bond initially. The upsizing of the dollar portion of the deal raised its overall size to $1.42 billion from an originally announced $920 million

Platform, a Miami-based specialty chemical company, will use the add-on proceeds to help fund its acquisition of Japanese agricultural chemicals manufacturer Arysta LifeScience Ltd.

A trader said that those new Platform notes, and the now-relatively older existing notes, were trading generically in a 101½-to-102 bid context after pricing at 101.

He last saw the notes at around the 102 bid mark.

A second trader saw “small trading” between 101½ and 102 bid.

A third trader pegged those bonds at 101¼ bid, 101¾ offered.

Calpine comes to market

After that add-on, the market saw a pair of new standalone deals.

Familiar junk issuer Calpine priced an upsized $650 million issue of nine-year senior notes (B3/B) at par to yield 5½%.

The Houston-based independent power generation company’s quick-to-market issue was upsized from an originally announced $500 million and priced at the tight end of pre-deal market price talk that envisioned a yield between 5½% and 5 5/8%.

The SEC-registered public offering was brought to market via joint book-running managers Credit Suisse, Citigroup Global Markets Inc., BofA Merrill Lynch, Credit Agricole, Deutsche Bank, Morgan Stanley & Co. LLC and UBS Securities LLC.

ING Financial Markets, LLC was co-manager on the deal.

Calpine plans to use the net proceeds from the deal to replenish cash on hand that it used for the acquisition of Fore River Energy Center in the fourth quarter of 2014 and for general corporate purposes.

Announcing the upsizing, Calpine said that the additional $150 million of proceeds from the upsizing would be used to repurchase a portion of its outstanding 7 7/8% senior secured notes due 2023.

A trader saw the new Calpine paper trading at 100¼ bid, 100¾ offered.

Micron also upsizes

The day’s other quickly shopped and upsized standalone deal came from Boise, Idaho-based semiconductor solutions company Micron Technology, which priced an upsized $1 billion of 8.5-year senior notes (Ba3/BB).

That deal was increased from an originally announced $750 million and priced at par to yield 5¼%, right at pre-deal market price talk.

The drive-by Rule 144A/Regulation S deal, offered with registration rights, came to market via joint-lead and book-running managers Goldman Sachs & Co., Morgan Stanley and Credit Suisse.

Citigroup, HSBC, J.P. Morgan Securities LLC and BofA Merrill Lynch were also joint-lead managers for the transaction.

BNP Paribas Securities Corp., DBS Bank Ltd., ING, Mitsubishi UFJ Securities (USA), RBS Securities Inc., Standard Chartered Bank and Wells Fargo were co-managers.

Micron plans to use the new-deal proceeds for the retirement or repurchase of convertible notes and debt and for general corporate purposes.

A trader saw the new Micron notes at 100¾ bid, 101¼ offered late in the day.

Altice tweaks deal

While those pricings were going on, what is expected to be the week’s biggest deal – and certainly one of the biggest to come to market any time this year – was getting closer and closer. Luxembourg-based telecommunications and cable company Altice International was heard by junk market sources to have set price talk on its big five-tranche dollar- and euro-denominated bond deal.

They also said that the company had done some tweaking on the size of at least two of the tranches while leaving the others as originally announced.

That $4.57 billion equivalent bond behemoth, a regularly scheduled forward calendar offering, consists of three dollar-denominated tranches and two euro-denominated pieces issued by three separate subsidiaries, with pricing on all tranches expected at the opening of business in New York on Friday.

Altice SA will bring $1.48 billion – downsized from $1.775 billion – of 10-year senior notes (B3/B), with talk set in the 7¾% area.

It is also doing €750 million of such notes – upsized from €500 million – with talk set in the 6 3/8% area.

That price talk had tightened from earlier whispers in the market suggesting that the dollar tranche’s yield would likely be somewhere in the mid-8% region, with the euro piece seen pricing 125 bps inside the dollar tranche, or somewhere in the low 7% vicinity.

Altice Finco SA will bring $385 million of 10-year notes (B3/B-), also talked in the 7¾% area, versus earlier whispers of a yield in the mid-to-high 8% range.

Altice Financing SA will bring $2.06 billion of eight-year senior secured notes (B1/BB-), with talk set in the 6¾% area, versus earlier whispers pegging the bonds in the low-to-mid 7% neighborhood.

It is also doing €500 million of such notes, with talk set in the 5 3/8% area; whispers had put that yield in by 125 bps from the dollar tranche, or around the low-6% space.

The Rule 144A/Regulation S deal is coming to market via a hefty roster of joint bookrunners that includes Goldman Sachs, JPMorgan, Credit Suisse, Deutsche Bank, Morgan Stanley, BNP Paribas, Credit Agricole, ING, Banka IMI, Citigroup, HSBC, Nomura Securities International, RBC Capital Markets Corp., SG CIB and UniCredit Group.

Goldman Sachs is acting as the left lead bookrunner for the two Altice Financing SA tranches and the Altice Finco SA tranche, while JPMorgan will be the left lead on the two Altice SA tranches.

Altice is also doing an €825 million equivalent seven-year first-lien term loan B financing split into $500 million and €400 million tranches.

The proceeds from the bond and bank financing will be used to back the acquisition of Portugal Telecom assets by Altice from Brazil's Grupo Oi.

Heinz continues at high volume

In the secondary market, Monday’s new deal from H.J. Heinz was the busiest bond of the day for a third consecutive session.

Traders said that more than $64 million of those 4 7/8% senior secured second-lien notes due 2025 changed hands – down a little from Wednesday’s more than $80 million and well down from Tuesday’s over $100 million but still far and away the most actively traded high-yield issue.

The bonds continued to hover a little above the par level at which the Pittsburgh-based packaged foods giant priced $2 billion of the bonds at par on Monday.

“There were a lot trading between 100¼ and 100 3/8,” a trader said.

A second trader saw the notes having firmed a little to 100 3/8 bid.

A market source saw the bonds at that same level and said that they were up between 1/8 and 3/8 on the day.

Indicators get better

A trader said the market had a firmer tone to it – a change borne out in the statistical indicators of junk performance. They were higher across the board after having been mixed for two consecutive sessions, which had followed four straight sessions before that on the upside.

The KDP High Yield Daily index gained 3 bps to finish at 71.03, its second straight advance. It had risen by 11 bps on Wednesday.

Its yield meanwhile came in by 2 bps to 5.48%, its second straight narrowing. The yield had been down by 4 bps on Wednesday.

The Markit Series 23 CDX North American High Yield index broke out of a two-session slump, gaining 3/16 point to close at 105¾ bid, 105 25/32 offered. It had retreated by 13/32 point on Wednesday.

The Merrill Lynch U.S. High Yield Master II index made it nine upside sessions in a row, gaining 0.009% on top of Wednesday’s 0.212%.

The latest gain lifted its year-to-date return to 0.671%, its fifth consecutive new high point for the year, up from the previous peak of 0.662% set on Wednesday.

Funds jump by $2.77 billion

High-yield mutual funds and ETFs – considered a reliable barometer of overall junk market liquidity trends – posted a giant-sized net inflow for the latest reporting week as $2.77 billion more came into those funds than left them during the week ended Wednesday.

That was in sharp contrast to the $241.3 million outflow reported last Thursday.

This week’s inflow was not only easily the biggest seen so far this year – there has been only one other net cash injection in 2015, $879.5 million during the week ended Jan. 14 – but also the fourth-largest weekly cash surge seen since the company began tracking the funds, according to a Prospect News analysis of the data. It was the largest inflow seen since the net $3.1 billion that came into the funds in the week ended Sept. 25, 2013, the third-biggest all-time inflow. This week’s cash cascade surpassed the net $2.44 billion that had come into the funds during the week ended Nov. 15, 2014 – last year’s biggest inflow, according to the data. (See related story elsewhere in this issue.)

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