Dominion, Plastipak cap $10 billion week; junk soft after jobs data; recent deals dip

By Paul A. Harris and Stephanie N. Rotondo

Seattle, Oct. 6 – Another strong week for new issuance ended with two deals as offerings from Dominion Diamond Corp. and Plastipak Holdings Inc. pushed the week’s total to just over $10 billion.

It was the third week this year to break through that barrier.

Dominion Diamond’s offering was $550 million of five-year senior secured second-lien notes at a discount while Plastipak brought $500 million of eight-year senior notes at par.

Plastipak was active in trading and firmed significantly to end the session at 101¾.

Overall Friday’s trading activity was “a lot of new issues again,” a high-yield bond trader reported.

“Away from that, there weren’t a lot of real active movers,” he said. “It was just a quiet Friday before a holiday. You’re not going to see a lot of price moves unless there is a catalyst.”

Overall, there was a somewhat softer feel to the market, as a weak jobs report made investors a bit skittish.

The recent spate of hurricanes that have battered the southern portion of the country were partly blamed for the job losses.

Market indicators verified that the market experienced a bit of a dip.

Oil-linked bonds were certainly heavy on Friday as domestic crude oil prices fell nearly 3% – falling under the $50 mark again – in response to reports that Tropical Storm Nate was entering the Gulf of Mexico and threatening to hit hurricane status.

Dominion Diamond at discount

In Friday’s new issue market Dominion Diamond priced a $550 million issue of 7 1/8% five-year senior secured second-lien notes (Ba3/BB-/BB) at 98.963 to yield 7 3/8%.

Price talk was for a yield of 7½% to 7¾%.

Covenant changes were made while the deal was in the market.

Credit Suisse Securities (USA) LLC, Citigroup Global Markets Inc., Natixis and UBS Investment Bank were the joint bookrunners.

Proceeds will be used to help fund the leveraged buyout of the Calgary, Alta.-based producer of rough diamonds by Washington Cos.

Plastipak prints at 6¼%

Plastipak Holdings priced a $500 million issue of eight-year senior notes (B3/B) at par to yield 6¼%.

J.P. Morgan Securities LLC was the lead.

The Plymouth, Mich.-based designer, manufacturer and supplier of rigid plastic packaging containers plans to use the proceeds to refinance its 6½% senior notes due 2021 as well as to repay bank debt and partially redeem Goldman Sachs’ $650 million equity stake.

Altice upsizes

In Europe, Altice Finco SA priced an upsized €675 million of 10.25-year senior notes at par to yield 4¾%.

The issue size was increased from €500 million.

J.P. Morgan Securities plc, Barclays, BNP Paribas, Credit Suisse, Goldman Sachs and Morgan Stanley are the stabilization managers.

Afflelou brings two-parter

Paris, France-based optical and eyewear products and services provider Afflelou priced €425 million of six-year senior secured notes (B3/B/B+) in two tranches.

The deal included €250 million of fixed-rate notes that priced at par to yield 4% and €175 million of floaters with a coupon of Euribor plus 412.5 basis points that also priced at par.

Global coordinator JPMorgan will bill and deliver. BNP Paribas, Credit Agricole CIB and UniCredit are the joint bookrunners.

Proceeds will be used to redeem Afflelou’s senior secured notes due 2019 and Lion/Seneca France 2’s senior notes due 2019.

Issuance tops $10 billion

With the day’s two new deals counted, volume for the week was $10.11 billion of dollar-denominated debt sold in the U.S. market in 15 tranches.

That was up nearly 50% from the $7.12 billion that priced the previous week and the biggest total since the $12.38 billion seen in the Sept. 11 week.

The only other week this year to top the $10 billion mark was the giant week beginning March 6 when $17.53 billion was priced.

Year-to-date issuance is now $217.21 billion in 399 tranches, up 20.2% from the $180.64 billion in 276 tranches for the comparable period of last year.

Oil names weak

In secondary trading, Ensco plc’s 5.2% notes due 2025 couldn’t even trade up in the soft market, despite news out late Thursday that shareholders had approved the company’s merger with Atwood Oceanics Inc.

In fact, a trader said the bonds dipped ½ point to 84¼.

Elsewhere in the energy space, Navios Maritime Partners LP’s 7 3/8% notes due 2022 slipped a shade to 81 7/8, according to a trader.

Another source saw California Resources Corp.’s 8% second-lien notes due 2022, a benchmark credit in the sector, waning 1¼ points to 63¼.

Oil-related issues were generally trading downwards on Friday as domestic crude oil prices fell under the $50 mark again, registering a drop of nearly 3%. The impetus was the approach of Tropical Storm Nate which threatened to hit hurricane status.

Despite the day’s overall downward trend, there were a couple of non-natural resources names that managed to trend higher, even without any news to act as a catalyst.

Petsmart Inc.’s 5 7/8% notes due 2025, for instance, traded up “almost a point” to 88, a trader said.

Another trader said that Windstream Holdings Inc.’s bonds were “continuing to creep higher.”

The trader said the 7¾% notes due 2020 added “about a point” to end around 86½.

He noted that the longer-dated issues were “moving a bit higher as well,” trading up to the mid-70s.

Another trader saw the 6 3/8% notes due 2023 ending half a point better at 75¾.

New issues reign supreme

Newly priced high-yield bonds continued to dominate trading on Friday.

A trader said there were “a multitude of trades” in the Plastipak’s new 6¼% notes, which ended at 101¾.

That compared to the issuance price of par.

From Thursday’s business, Parsley Energy LLC’s $700 million of 5 5/8% notes due 2027 were seen holding steady at 101 3/8, according to one trader.

Another trader said the paper closed “around 101½.”

The second trader noted that Brinks Co.’s $600 million of 4 5/8% notes due 2027 were “struggling.

“Most of the trades occurred right around the par level,” he said.

Among deals priced Wednesday, Transocean Inc.’s $750 million of 7½% notes due 2026 were “still active,” a trader reported.

Another trader said the bonds were slightly lower on the day, trading at 102, which was still well above their par pricing level.

Time Inc., another deal priced Wednesday, meantime saw its $300 million of 7½% notes due 2025 slipping similarly to Transocean, ending at par 5/8, still up from the par price at which they came to market.

Going back to Tuesday’s session, West Corp.’s $1.15 billion of 8½% notes due 2025 waned over half a point, closing at 98¼.

That issue – which was downsized from $1.35 billion – came discounted at 98.579.

Market indicators show dip

The market’s soft feel was verified by the performance of market indicators.

Triggering the weakness was the morning release of employment data.

The Bureau of Labor Statistics said that 33,000 jobs were lost in September, though the unemployment rate fell to 4.2%, its lowest level since February 2001.

The market had been expecting the unemployment rate to hold steady at 4.4%, while nonfarm payrolls were expected to increase by 80,000.

The recent spate of hurricanes that have battered the southern portion of the country were partly blamed for the job losses.

The KDP High Yield Index fell to 72.42, with a 5.11% yield, versus Thursday’s reading of 72.46, with a 5.09% yield.

The CDX North American Series 29 High Yield Index was down over an eighth of a point at 108.005 bid, 108.105 offered, according to a market source.

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