Primary roars back to life with $3.85 billion priced; issues firmer; AMD gains on tender plan

By Paul Deckelman and Paul A. Harris

New York, Sept. 7 – The high-yield primary sphere resumed new-deal activity with a vengeance on Wednesday as five issuers brought a total of $3.85 billion of new dollar-denominated and fully junk-rated paper to market in six tranches, most of them opportunistically timed and quickly shopped drive-by offerings.

The big deal of the day was aluminum products producer Novelis Corp.’s $1.5 billion of 10-year notes.

Packaging products maker Ardagh Group SA priced $770 million of seven-year secured notes as part of a two-part offering that also included a tranche of euro-denominated paper.

Broadcaster Gray Television, Inc. hit the tape with $725 million of new junk split into two tranches, a new eight-year issue and an add-on to its existing 2026 bonds.

Oil and gas operator SM Energy Co. priced $500 million of 10-year notes, while building materials manufacturer Louisiana-Pacific Corp. chimed in with a $325 million eight-year offering.

Traders said that all of the new issues firmed when they hit the secondary market, some generating active volume.

Away from the new issues, Advanced Micro Devices, Inc.’s paper was higher across that company’s capital structure, on the news that the semiconductor manufacturer will tender for some of its existing bonds using the proceeds from offerings of equity and convertible notes.

Statistical market performance measures were mixed for a third straight day on Wednesday.

Ardagh upsizes

Five issuers brought six tranches of dollar-denominated junk bonds on Wednesday, raising a combined total of $3.85 billion.

Four of the five issuers came with drive-bys.

Executions appeared razor sharp, as all six dollar-denominated tranches came at the tight or rich ends of talk, with most blowing through initial guidance.

Ardagh Group priced an upsized $1.72 billion equivalent two-part issuance of seven-year senior secured toggle notes (Caa2/CCC+).

The debt refinancing deal included €845 million of notes that priced at par to yield 6 5/8%. The notes have a 6 5/8% cash coupon and a 7 3/8% PIK coupon. The yield printed at the tight end of yield talk in the 6¾% area.

In addition, Ardagh priced $770 million of notes at par to yield 7 1/8%. The dollar-denominated notes have a 7 1/8% cash coupon and a 7 7/8% PIK coupon. The yield printed at the tight end of yield talk in the 7¼% area.

The issue size was increased from $1.57 billion equivalent.

Citigroup was the left bookrunner. Barclays was the joint bookrunner.

Novelis $1.5 billion drive-by

Novelis priced $1.5 billion of 10-year senior notes (B2/B) at par to yield 5 7/8%.

The yield printed at the tight end of yield talk in the 6% area; initial guidance was 6% to 6 1/8%.

Joint bookrunner Morgan Stanley & Co. LLC was the global coordinator. Barclays, BofA Merrill Lynch, Citigroup Global Markets Inc., Deutsche Bank Securities Inc., HSBC, J.P. Morgan Securities LLC and Standard Chartered were also joint bookrunners.

Gray Television two-part deal

Gray Television priced $725 million of senior notes (B2/B+) in two tranches.

The deal included $525 million of new eight-year notes that priced at par to yield 5 1/8%.

The yield printed at the tight end of yield talk in the 5¼% area; initial guidance was 5 3/8%.

In addition, Gray Television priced a $200 million add-on to its 5 7/8% senior notes due 2026 at 103 to yield 5.398%. The reoffer price came at the rich end of the 102.5 to 103 price talk; initial guidance was 102.5.

Wells Fargo Securities LLC was the left bookrunner for the debt refinancing deal. BofA Merrill Lynch, RBC Capital Markets and Deutsche Bank were joint bookrunners.

SM Energy 10-year notes

SM Energy priced a $500 million issue of 10-year senior notes (B3/B+) at par to yield 6¾%.

The yield printed at the tight end of the 6¾% to 7% yield talk. Initial guidance had the deal coming with a yield in the low 7% context.

BofA Merrill Lynch was the left bookrunner. Wells Fargo, JPMorgan, Barclays, BBVA and RBC were joint bookrunners.

The energy company plans to use the proceeds to finance 100% of the membership interests in JPM EOC Opal, LLC and for general corporate purposes.

Louisiana-Pacific prices

Louisiana-Pacific priced a $350 million issue of eight-year senior notes (Ba3/BB) at par to yield 4 7/8%.

The yield printed at the tight end of yield talk in the 5% area.

BofA Merrill Lynch was the left bookrunner for the drive-by debt refinancing deal. RBC and Goldman Sachs & Co. were the joint bookrunners.

Crown euro/dollar bullet deal

The Wednesday session saw a buildup of the forward calendar.

Crown Holdings, Inc. kicked off a $700 million equivalent two-part offering of senior bullet notes.

Books close Thursday, and the deal is set to price thereafter.

Crown European Holdings SA is selling €310 million of eight-year notes. Joint bookrunner Deutsche Bank will bill and deliver for the euro-denominated notes.

In addition, Crown Americans LLC and Crown Americas Capital Corp. are selling $350 million of 10-year notes. Joint bookrunner Citigroup will bill and deliver for the dollar-denominated tranche.

The Philadelphia-based packaging company plans to use the proceeds to repay a portion of its term loan A facilities and for general corporate purposes.

Beazer 5.5-year deal

Beazer Homes USA, Inc. plans to price a $300 million offering of senior notes due March 2022 late this week.

Credit Suisse, Deutsche Bank and Goldman Sachs are the joint bookrunners for the debt refinancing deal.

KIK to tap 9% notes

KIK Custom Products Inc. plans to price a $235 million add-on to its 9% senior notes due Aug. 15, 2023 (expected ratings Caa2/CCC) on Thursday.

Barclays, BMO, Nomura and Macquarie are the joint bookrunners for the debt refinancing.

Schaeffler €2.5 billion deal

IHO Verwaltungs GmbH announced a €2.5 billion equivalent six-part offering of senior secured PIK toggle notes.

The entire offering is coming in dollar-denominated and euro-denominated tranches.

The deal includes five-year notes, seven-year notes and 10-year notes, with tranche sizes to be determined.

Early guidance on the dollar-denominated notes has the five-year notes coming with a 4½% yield, the seven-year notes with a 5% yield and the 10-year notes with a 5¼% yield.

Citigroup will bill and deliver for the dollar-denominated notes. Deutsche Bank will bill and deliver for the euro-denominated notes.

BofA Merrill Lynch and HSBC are bookrunners.

Pending registration, the company is currently named Schaeffler Verwaltung Zwei GmbH.

The Herzogenaurach, Germany-based supplier of automotive and industrial components plans to use the proceeds to repay IHO Holding bonds, including the make-whole premium, and partially prepay the Schaeffler AG loan note.

Biggest session in weeks

The deals that came to market on Wednesday were the first seen in Junkbondland since Aug. 24, when Boca Raton, Fla.-based tabloid newspaper and magazine publisher American Media Inc. priced $670 million principal amount of new paper in a two-part deal: $136 million of 5½% senior secured notes due 2021 and $534 million of zero-coupon notes due in March 2022, although that deal was a Rule 144A-formatted private placement offering that came in largely under the radar rather than a traditional junk-bond deal.

That most recent one of those the market had seen was the $400 million offering of 5½% notes due 2024 from Tallgrass Energy Partners LP, a Leawood, Kan.-based energy master limited partnership company, which priced its regularly scheduled forward calendar offering at par back on Aug. 18.

The more than $3.8 billion of new paper that priced Wednesday was the heaviest new-issuance day the junk market had seen since June 13, when $3.91 billion priced in seven tranches, according to data compiled by Prospect News.

New deals trade up

When the new issues were freed for aftermarket trading, they were well-received by investors, traders said.

A market source said that the new Gray Television 5 1/8% notes due 2024 were the busiest of the bunch, with over $38 million changing hands in a 100 3/8-to-100¾ bid context.

Louisiana-Pacific’s 4 7/8% notes due 2024 gained around 1 point in secondary dealings, to 101 bid, with over $37 million traded.

The Novelis 5 7/8% notes due 2026 firmed smartly to 101¾ bid, a source said, on volume of more than $30 million.

And SM Energy’s 6¾% notes due 2026 moved up to 101 5/8 bid, on $25 million of turnover.

Also among the new deals, a trader saw the dollar portion of the new Ardagh offering of seven-year notes at 101¼ bid, 101½ offered.

Its existing 7¼% notes due 2024 gained 3/8 point, ending at 106 7/8 bid.

AMD gains on tender news

Away from the new deals, Advance Micro Devices’ 6¾% notes due 2019 shot up by more than 4½ points, ending at 107 bid, on volume of more than $16 million, while its 7½% notes due 2022 likewise firmed by several points to end at 104¼ bid, with over $12 million traded.

The Sunnyvale, Calif.-based semiconductor manufacturer’s paper improved on Tuesday’s announcement that it will repay up to $226 million of borrowings under its loan agreement and will tender for its 6¾% notes, 7½% notes, 7¾% notes due 2020 and 7% notes due 2024, according to a filing with the Securities and Exchange Commission.

The company will fund the note repayment and the tender offer with the proceeds of a $450 million offering of convertible senior notes due 2026 and a $600 million offering of common stock.

Indicators stay mixed

Statistical market performance measures were mixed for a third straight day on Wednesday, having also been that way on Tuesday and on Monday – when, although the junk market was not formally in session due to the Labor Day holiday, the indexes that did publish turned mixed, after having been higher across the board on Friday.

Wednesday was the fifth mixed session in the last seven days.

The KDP High Yield index rose by 8 basis points on Wednesday to 70.73, its second gain in the last three sessions; it had lost 1 bp on Tuesday, was not published on Monday and had gained 4 bps on Friday.

Wednesday’s 70.73 index reading was tied for the highest year-to-date and 52-week levels with Aug, 30, which had shot up to 70.73 on an intraday basis before dropping back later to close a little below that.

It also established new high year-to-date and 52-week closing levels, surpassing the old mark of 70.67, set on Aug. 31.

Its yield came in by 3 bps to 5.21%, after rising by 4 bps on Tuesday.

The Markit Series 26 CDX index lost nearly 5/32 point on Wednesday to finish at 104 21/32 bid, 104 11/16 offered, after having risen by about ¼ point on Tuesday.

The Merrill Lynch High Yield index improved by 0.087%, its fourth straight upturn. That followed Tuesday’s 0.154% gain.

The index had published on Monday, rising by 0.054%, on top of Friday’s 0.72%, which was its first advance after two straight retreats.

Wednesday’s improvement upped its year-to-date return to 14.931% – its third straight new 2016 peak cumulative level, eclipsing the old mark of 14.831%, set on Tuesday.

© 2015 Prospect News.
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