Berry Plastics Group, Murray Energy drive by; B/E Aerospace flies on strategic options news

By Paul Deckelman and Paul A. Harris

New York, May 5 - The high-yield primary sphere opened the new week on Monday - the first full trading week in May - with a quickly shopped $500 million issue of eight-year secured notes via a subsidiary of packaging products manufacturer Berry Plastics Group Inc. The new bonds quickly shot to the top of the junk most-actives list, trading up modestly in the aftermarket.

The session also saw coal producer Murray Energy Corp. do a $400 million issue of senior secured notes due in December of 2020, issued to investors who participated in the syndication of a $400 million bridge loan that the company had previously entered into.

Besides those pricings, the Junkbondland forward calendar grew as high-yield syndicate sources heard of several prospective new deals that hit radar screens.

Specialty wood pulp producer Rayonier A.M. Products began a roadshow for a $500 million issue of 10-year notes.

International power generation company ContourGlobal Power Holdings SA was hitting the road to market $400 million of five-year secured notes.

Transfield Services Ltd., an Australia-based provider of operations, maintenance and construction services to the natural resources and energy sectors, among others, began a roadshow for its $300 million issue of 5.five-year notes.

And musical instrument manufacturer Gibson Brands, Inc. launched a $150 million add-on to its existing 2018 secured notes.

In the secondary market, traders said that overall volume flows remained light and activity was lackluster.

While there were some aftermarket dealings in new issues other than Berry Plastics, such as last week's deals from Sirius XM Radio Inc. and Consolidated Minerals Ltd., the name probably generating the most interest was B/E Aerospace Inc., whose 2022 notes jumped in heavy trading on the news that the aircraft cabin interior components producer will undertake a review of strategic options, possibly including the sale of the company or the sale or spinoff of some of its current business units.

Statistical indicators of market performance were mixed on the day for a fifth consecutive session.

Berry at the wide end

The Monday session saw the over-the-counter sale of just one new issue of junk bonds.

Berry Plastics priced a $500 million issue of eight-year second priority senior secured notes (Caa1/B-) at par to yield 5½% in a quick-to-market transaction.

The yield printed at the wide end of the 5¼% to 5½% yield talk.

The issuer, being well-known to the market, may have anticipated more positive momentum than what ultimately materialized from a Standard & Poor's upgrade of the notes to B- from CCC+, a buyside source commented in the aftermath of pricing.

However, investors may have been looking for more yield in an eight-year refinancing deal that, S&P said, action notwithstanding, came with a Moody's rating of Caa1, the investor said.

Credit Suisse, Barclays and Wells Fargo were the joint bookrunners.

Murray places bonds

In what one market source labeled "a blast from the past," participants in the Murray Energy syndicated bridge loan were rolled into notes, the market learned on Monday.

A $400 million issue of senior secured notes due Dec. 5, 2020 (Caa1/B-) was priced at par to yield 9½% via Goldman Sachs and Deutsche Bank.

Bridge syndications have become widespread in the wake of the market's meltdown during the 2007-2008 time period, when the words "hung bridge" echoed roundabout the market. In those days, financing commitments hung up on the balance sheets of the underwriters when, due to highly volatile market conditions, investors were unwilling to take down the loan and bond deals meant to take out the bridges.

In the wake of the hung bridges, underwriters invited some investors to take part in the bridge financings to shoulder some of the bridge risk in exchange for a fee and, some say, for a tacit understanding that bridge participants' prospects would improve when time came to allocate the bonds that would take the bridge out.

And in a high-yield market that has been rallying hard through most of the present decade, the words "hung bridge" had been considered a faded echo of yesterday. That is, until Murray Energy's bridge became hung.

It is likely an isolated incident, sources said on Monday, adding that coal is a sector that is very much out of favor these days, owing to regulatory hurdles and to phenomenal increases in the reserves of cleaner-burning natural gas. Thus there was not too much enthusiasm for Murray Energy bonds that would have taken out the bridge.

However isolated or not, the reality that a bridge can still ultimately become hung - in 2014 - certainly won't have a positive impact on the appetites of prospective bridge participants, one buyside source commented on Monday.

Gibson to tap 8 7/8% notes

Gibson Brands launched a $150 million add-on to its 8 7/8% senior secured notes due Aug. 1, 2018 on Monday.

The acquisition financing deal, via bookrunner Jefferies LLC, is set to price on Tuesday.

No official price talk circulated on Monday. The deal, however, is whispered at 104 to 104.5, a trader said just after the close.

Rayonier starts roadshow

Rayonier A.M. Products began a roadshow on Monday for its $500 million offering of 10-year senior notes.

Initial yield guidance is in the high 5% context.

BofA Merrill Lynch, Credit Suisse and J.P. Morgan are the joint bookrunners for the spinoff deal.

ContourGlobal secured notes

ContourGlobal Power Holdings began a roadshow on Monday for its $400 million offering of five-year senior secured notes (expected ratings B3/BB-).

The roadshow wraps up on Friday, and the deal is set to price on May 12.

Goldman Sachs is the bookrunner for the Rule 144A and Regulation S offer.

Elsewhere, in a deal that launched late last week, Ortho Clinical Diagnostics is whispering its $1.15 billion offering of eight-year senior notes (Caa1/CCC+) with yield in the mid-6% range.

The deal, via left bookrunner Goldman Sachs, is set to price during the present week.

New Berry bonds gain

In the secondary market, activity in the new Berry Plastics five½% notes was brisk.

A market source said that volume in the new issue totaled more than $37 million - tops in the junk world on Monday. All of that was generated in perhaps an hour's trading heading towards the end of the session, following the transaction's late-afternoon pricing.

A trader saw the bonds trading initially at bid levels between 100¼ and 1003/4, but said later on that he saw them retreat to a 99¾ to 100¾ context, "so it didn't do so well."

However, several other traders were quoting the bonds around that same time in a 100¼ to 100½ context.

Recent issues firm

Apart from the new Berry bonds, traders said there was some trading - albeit on relatively restrained volume - in some of the other recently-priced issues.

For instance, one pegged Friday's deal from Consolidated Minerals "a little better," quoting its 8% senior secured notes due 2020 at 98¼ bid, 98 5/8 offered.

The manganese ore mining company, based on the British crown dependency of Jersey in the Channel Islands and with mining operations in Australia and Ghana, priced $400 million of those bonds in a scheduled forward calendar offering on Friday at a steeply discounted 97.684 to yield 8½%.

The trader also saw better levels for Sirius XM's 6% notes due 2024, quoting them at 101 bid, 101¼ offered around mid-day, although he saw no levels after that.

That was about, or maybe a little better than, the levels seen on Friday. The New York-based satellite radio broadcaster priced $1.5 billion of those notes at par in a quickly shopped drive-by offering on Thursday, after radically upsizing its deal from an originally announced $750 million to meet investor demand for the paper.

A second trader saw the new Sirius issue at 101 1/8 bid, 101 5/8 offered, calling that a gain of 5/8 of a point from where the bonds had been late last week.

He also saw LifePoint Hospitals, Inc.'s 5½% senior notes due 2021 up ½ of a point at 104 bid, 104½ offered. The Brentwood, Tenn.-based health care facilities operator had priced a $400 million add-on to its existing notes at 103 to yield 4.876% in a quick-to-market deal on Thursday.

Clear Channel churning

Among other recently priced new deals, a trader saw Constellium NV's 5¾% notes due 2024 up 3/8 of a point on the session at 102 3/8 bid, 102 7/8 offered. That was up from the levels around 102 bid to which the Amsterdam-based aluminum products manufacturer's notes had moved after pricing at par on Wednesday.

That $400 million of notes was part of a regularly scheduled €590 million-equivalent two-part transaction that also included a tranche of euro-denominated seven-year notes.

But Clear Channel Communications Inc.'s new 10% notes due 2018 failed to show the same kind of strength. A trader saw those already struggling bonds get hammered further on Monday, sliding to 96¼ bid, 97¼ offered - down some 1½ points.

The San Antonio, Texas-based radio broadcasting and outdoor advertising company had priced $850 million of those notes at par via its CCU Escrow Corp. subsidiary in a quickly shopped offering last Monday that was more than doubled in size from an originally announced $400 million.

But those bonds did not hold their issue price for very long, easing to around 99½ bid, 99¾ offered in initial aftermarket dealings and then getting progressively worse as the week wore on. They had gone home on Thursday at 97¾ bid, 98 offered, were quiet on Friday and slid again in Monday's dealings.

B/E bonds gain altitude

One of the traders, though, opined that "there was nothing in the new issues that was jumping out at you."

Instead, he said that most of the trading he had seen took place in B/E Aerospace's 5¼% notes due 2022, which jumped more than 3 points, to 106½ on over $27 million traded - over $22 million of that in big-block round-lot trading.

That followed the news that Wellington, Fla.-based B/E, a maker of aircraft cabin interior components, will explore various strategic alternatives, possibly including the sale of the company or a merger with another company, or the potential sale, spinoff or other separation of selected businesses within B/E or other strategic transactions.

B/E has hired Citigroup as its financial advisor and Shearman & Sterling LLP as its legal advisor in connection with this process.

Another trader said that the B/E bonds were "all over the place," seeing the 51/4s ending around 106¼ bid, 106¾ offered, well up from levels around 102 5/8 bid, 103 5/8 offered at the tail end of last week.

While those bonds sizzled, another B/E issue fizzled - its 6 5/8% notes due 2020. Those bonds had been trading in a 109 context before the news, but then fell as low as 107 bid, before coming off those lows to end around 108 7/8 bid, which traders said was down about 3/8 to 5/8 of a point. Volume was only about $9 million - one-third of the turnover in the 2022 paper.

One of the traders theorized that the 6 5/8% notes "are trading to a much shorter call" - Oct. 1, 2015, versus April 1, 2017 for the 5¼% bonds.

"There's no upside on the 6 7/8s," he continued. "They're trading into an October 2015 call, and they were already trading up at a pretty good premium, so they can't go much higher, while the other ones have a lot of room to run."

At the Gimme Credit independent advisory service, senior analyst Evan Mann said in a research note that the company's sudden change of strategic direction was "surprising."

However, he said, given the fact that its various business segments are "firing on all cylinders, benefiting from a robust new aircraft delivery cycle, strong global airline traffic growth, and a recovery in aftermarket demand," he remains "constructive on the BEAV credit story," maintaining a buy recommendation on the paper.

Indicators stay mixed

Statistical junk performance indicators remained mixed on Monday for a fifth consecutive session.

The Markit Series 22 CDX North American High Yield index lost 3/32 of a point on Monday, its third straight setback, ending at 106¾ bid, 106 7/8 offered. It had been down by 1/32 of a point on Friday.

The KDP High Yield Daily index eased by 1 basis point on Monday, ending at 74.93. On Friday, it had risen by 5 bps, its first gain after three straight losses. Its yield was, meanwhile, unchanged at 5.18%, after having come in by 1 bp on Friday, its second consecutive narrowing.

The widely followed Merrill Lynch High Yield Master II index rose for a sixth session in a row on Monday, gaining 0.039%, on top of Friday's 0.045% improvement.

Monday's gain raised the index's year-to-date return to 3.845%, marking its sixth consecutive new peak level for 2014 so far. The prior high point had been Friday's 3.804%.

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