Upsized Sprint, iHeart drive-bys price; new PetSmart heavily traded; funds gain $1.64 billion

By Paul A. Harris and Paul Deckelman

New York, Feb. 19 – Thursday was drive-by day in the high-yield primary arena. Issuers brought big, opportunistically timed and quickly shopped deals to market, all of which priced after being upsized.

Wireless operator Sprint Corp. did a $1.5 billion offering of 10-year bullet notes, and diversified media company iHeartCommunications, Inc. came in with $950 million of eight-year secured notes.

Also driving by was British luxury vehicle maker Jaguar Land Rover Automotive plc, which brought an upsized £400 million of eight-year paper to market.

Back in the dollar realm, both Sprint and iHeart priced fairly late in the session, and neither was seen immediately trading around, though iHeart’s existing bonds rose in active trading on the news of the deal and the company’s report of more favorable fourth-quarter numbers, including a smaller loss versus a year ago.

Traders saw very heavy volume in Wednesday’s new offering from pet food and supplies retailer PetSmart, Inc. Those bonds continued to trade well north of their par issue price.

Away from the new deals, Ball Corp.’s bonds rose in busy trading after the packaging company announced plans to call two issues of its bonds while also acquiring European beverage-can maker Rexam plc.

Statistical indicators of junk market performance were mixed for a fourth straight day on Thursday.

Another numerical gauge – flows of money into and out of high-yield mutual funds and exchange-traded funds, considered a key barometer of Junkbondland liquidity trends – posted a fourth big net inflow in as many weeks, as $1.64 billion more came into those funds than left them during the latest reporting period.

Sprint upsizes bullet

Two issuers priced single-tranche drive-by deals in Thursday's dollar-denominated primary market, raising a combined total of $2.45 billion.

Both issuers came to market looking to upsize their deals, a trader said, and succeeded in doing so.

And in spite of big upsizings, both deals priced in line with talk.

Sprint priced an upsized $1.5 billion 10-year bullet (B2/B+) at par to yield 7 5/8%.

The deal was upsized from $1 billion.

Price talk was in the 7 5/8% area.

Citigroup Global Markets Inc., BofA Merrill Lynch, Goldman Sachs & Co., J.P. Morgan Securities LLC, Barclays, Credit Agricole CIB, Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., Mizuho Securities, MUFG, RBC Capital Markets, Scotia Capital and SMBC Nikkowere the joint bookrunners.

The Overland Park, Kan.-based telecom plans to use the proceeds for general corporate purposes, which may include, among other things, working capital, retirement or service of outstanding debt and network expansion and modernization.

iHeart secured notes drive-by

iHeartCommunications priced an upsized $950 million issue of eight-year senior secured priority guarantee notes (Caa1/CCC+/CCC) at par to yield 10 5/8%.

The deal was upsized from $550 million.

The yield printed in the middle of the 10½% to 10¾% yield talk.

Goldman Sachs was the left bookrunner. Citigroup, Morgan Stanley & Co. LLC, Credit Suisse, Deutsche Bank and Wells Fargo Securities LLC were the joint bookrunners.

The San Antonio-based media and entertainment company, formerly known as Clear Channel Communications, plans to use the proceeds, including those resulting from the $400 million upsizing of the deal, to prepay at par the entire amount outstanding of its term loan B and term loan C asset sale facility and for general corporate purposes including debt repayment.

Jaguar Land Rover upsizes

In the European primary market, Jaguar Land Rover Automotive priced an upsized £400 million issue of non-callable eight-year senior notes (Ba2/BB/BB-) at par to yield 3 7/8% in a quick-to-market Thursday transaction.

The deal was upsized from £300 million.

The yield printed at the tight end of yield talk in the 4% area.

Joint bookrunner Deutsche Bank will bill and deliver. BNP Paribas, Goldman Sachs, Royal Bank of Scotland, Credit Agricole, ING, Lloyds and SG CIB were the joint bookrunners.

The Graydon, England-based automobile manufacturer plans to use the proceeds to take out its 8¼% notes via a tender offer and for general corporate purposes.

Dean Foods expected

Dean Foods Co. has the sole deal on the active calendar, a $700 million offering of eight-year senior notes (/B+/), and it is expected to price on Friday, sources say.

Official price talk had not surfaced by press time on Thursday.

However, early guidance on this debt refinancing deal is 6½% to 6¾%, according to a trader.

Morgan Stanley, BofA Merrill Lynch, JPMorgan, Credit Agricole and SunTrust are the joint bookrunners.

New Sprint, iHeart unseen

In the secondary sphere, traders did not see any initial aftermarket dealings in either the new Sprint 7 5/8% notes due 2025 or iHeart’s new 10 5/8% senior secured priority guarantee notes due 2023 owing to the relative lateness of the hour at which both of those deals priced.

However, a trader saw Sprint’s existing bonds as a mixed bag.

Its legacy Sprint Nextel Corp. 6% notes due 2022 gained 1¼ point to end at 97¾ bid, although its Sprint Corp. 7 7/8% notes due 2023 closed off by 1 3/8 points, just shy of 103½ bid.

But iHeart’s existing bonds were better, with a market source seeing its 14% notes due 2021at 83 3/8 bid, up 1 1/8 points, on volume of more than $23 million, putting those bonds among the session’s Most Actives.

Its 10% notes due 2018 also gained more than 1 point on the day, finishing at 88¾ bid, with over $16 million changing hands.

The broadcasting, digital media and outdoor advertising company reported fourth-quarter results that included a narrower net loss versus a year ago – $68 million, versus the year-earlier red ink of $309 million.

Revenues meantime came in at $1.8 billion, a 1% gain on the year. That beat analysts’ expectations of $1.7 billion.

On its post-earnings conference call, company executives touted iHeart’s progress last year in refinancing its near-term maturities, including all of its remaining 2014 and 2015 debt, and in whittling down its more than $2 billion of 2016 bank debt to less than half of that, which will be repaid from the new bond deal’s proceeds. (See related story elsewhere in this issue.)

PetSmart bonds busiest

Wednesday’s new 7 1/8% notes due 2023 from Argos Merger Sub Inc. – which will be merged with and into PetSmart as part of the leveraged buyout of the Phoenix-based pet food, supplies and accessories retailer – were clearly the busiest bonds in the junk space on Thursday, continuing the trend begun on Wednesday, when the offering was heavily oversubscribed by investors wishing to get a piece of the deal.

More than $161 million of the bonds changed hands, with a market source seeing them at 101¾, actually calling that level down about ¼ point from Wednesday’s late levels.

A second trader said that the bonds opened in a 101 3/8-to-101 7/8 bid context, later settling in between 101½ and 101¾.

“They were clearly the most active, volume-wise,” he said.

Some $1.9 billion of the new bonds priced at par on Wednesday in a regularly scheduled forward calendar offering. Traders saw them get as good as a 101½-to-102½ bid context when they hit the aftermarket.

Oshkosh, USG do well

In the deals that came to market on Tuesday, a trader said that Oshkosh Corp.’s new 5 3/8% notes due 2025 continued to firm, gaining 3/8 point on the day to go out at 102 bid, though volume had dwindled to about $6 million versus the more than $20 million that traded on Wednesday.

The Oshkosh, Wis.-based manufacturer of trucks, military vehicles, fire engines and ambulances priced its quick-to-market $250 million issue at par on Tuesday, and it firmed slightly to the 100¼ level afterward. On Wednesday, the bonds had pushed up to around 101 7/8 bid, a gain of 1 1/8 points on the day.

Tuesday’s other deal, the 5½% notes due 2025 from Chicago-based drywall building products manufacturer USG Corp., also continued their rise on Thursday, ending at 101 7/8 bid, up 3/8 point, with over $9 million traded.

USG’s quickly shopped $350 million offering had priced at par on Tuesday. The bonds were seen having shot up to around the 100½ bid mark in robust initial trading of over $22 million, moving up a little further on Wednesday as another $15 million changed hands.

Ball bonds better

Away from the new deals, the news that Ball issued a call for its $500 million principal amount of 6¾% senior notes due 2020 and its $500 million principal amount of 5¾% senior notes due 2021 helped push the company’s bonds higher, along with the news that the Broomfield, Colo.-based maker of beverage cans and other packaging products has agreed to buy European can maker Rexam in a cash-and-stock deal valued at $6.8 billion.

“It’s definitely a positive,” a trader said. “The credit liked the story.”

He saw the 5¾% notes trading at 106 3/8 bid Thursday, up from Wednesday’s locked market at 104¾. More than $23 million changed hands.

“The whole structure was better,” he said, quoting Ball’s 4% notes due 2023 up ½ point at 97½ bid, with over $11 million traded.

Indicators stay mixed

Statistical indicators of junk market performance were mixed for a fourth straight day on Thursday.

The KDP High Yield Daily index rose by 1 basis point, finishing at 71.69. It was the index’s fourth gain in the last five sessions, its fifth in the last seven and 10th such advance in the last 12 sessions.

It had lost 1 bp on Wednesday.

Its yield came in by 1 bp for a second straight session, ending at 5.23%, its third consecutive narrowing.

The Markit Series 23 CDX North American High Yield index, which on Wednesday had gained 1/32 point to break out of a two-session rut, was back to its losing ways on Thursday, retreating by 7/32 point to close at 106 9/32 bid, 106 11/32 offered. It was the index’s third setback in four days.

While the KDP and Markit indexes have recently been choppy, there was no such uncertainty seen in the Merrill Lynch U.S. High Yield Master II index, which rose by 0.014% on Thursday – its 24th straight daily gain, going back a month to Jan. 19. It had been up by 0.135% on Wednesday.

The latest improvement lifted its year-to-date return to 2.192%, its 20th straight new peak level for 2015.That was up from 2.178% on Wednesday.

Funds gain $1.64 billion

High-yield mutual funds and ETFs, considered a reliable barometer of overall junk market liquidity trends, saw their fourth giant-sized inflow in as many weeks, market sources said Thursday, as $1.64 billion more came into those funds than left them during the week ended Wednesday.

That followed the massive $2.94 billion cash injection reported last Thursday and two other inflows, both north of $2 billion, over the two weeks before that.

The latest gain extended and strengthened the flows’ already-solidly positive footing for the year to date.

It brought the year-to-date net inflow total up to $9.73 billion from the previous week’s $8.09 billion inflow for 2015. (See related story elsewhere in this issue.)

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.