Endurance Int’l prices, does not syndicate; Solera hits the road; new Manitowoc paper firms slightly

By Paul Deckelman and Paul A. Harris

New York, Feb. 9 – Endurance International Group Holdings Inc. became the late latest high yield credit to price a bond deal, doing $350 million of eight-year notes on Tuesday.

However, syndicate sources said that – unlike virtually every other junk deal to have priced so far this year – the online marketing company’s new issue did not syndicate, with the dealers unable to place the bonds with investors, at least for now.

Something similar happened in the first new deal to hit the junk bond market, for Kraton Polymers LLC back in early January.

The syndicate sources meantime heard auto insurance software provider Solera, LLC about to hit the road with a more than $2 billion equivalent dollar- and euro-denominated offering.

Among bonds that have already priced traders saw a little bit of firming in the bonds of both Manitowoc Cranes Escrow Corp., which priced on Monday, and Manitowoc Food Service Escrow Corp., which came to market on Friday – but neither saw any substantial trading volume.

Away from the new deals, there was continued active volume trading in the bonds of Chesapeake Energy Corp.; for a second straight session, those credits fell by multiple points on rumors – denied by the company – it was considering a possible bankruptcy filing.

Statistical measures of junk market performance turned mixed on Tuesday, after having been lower across the board Monday; it was their fourth mixed session in the last five trading days.

Endurance priced, no syndicate

In an otherwise sidelined primary market Endurance International Group Holdings Inc. announced in a Tuesday press release that it has priced $350 million of 10 7/8% senior notes due February 2024 at 98.065.

However the dealers were unable to place the bonds with investors, market sources say.

Goldman Sachs is the left bookrunner. Credit Suisse and Jefferies are the joint bookrunners.

Proceeds, along with a $735 million incremental term loan and cash on hand from the balance sheets of Constant Contact Inc. and Endurance, will be used to refinance Endurance’s existing revolving credit facility and to fund the acquisition of Constant Contact.

The incremental term loan also has not been syndicated sources said on Tuesday.

The Endurance bond deal is at least the second so far in 2016 to be priced but not syndicated, as dealers converted the bridge loan to bonds that could not subsequently be placed.

Early in the new year bridge lenders converted the Kraton Polymers LLC bridge loan into $440 million of 10½% senior notes due April 15, 2023 (B3/CCC+), which were priced 96.225.

The notes in these “hung up” bridge deals are expected to be sold to investors as market conditions permit, sources say.

Thin calendar

Tuesday's news on Endurance whittled the active calendar down to offerings from just two issuers, both of whom are marketing sizable dual-currency offers.

Solera, LLC and Solera Finance, Inc. plan to start an international roadshow on Wednesday in London for a $2.03 billion equivalent offering of eight-year senior notes coming in tranches of euro-denominated and dollar-denominated notes, with tranche sizes to be determined.

The proposed dollar-denominated notes are coming with yield guidance in the 10% area, a trader said.

The full roadshow will continue in the United States during the week of Feb. 15, and the deal is set to price during the week of Feb. 22.

Meanwhile vehicle leasing company LeasePlan Corp. NV began a cross-border roadshow last week in Europe for its €1.55 billion three-part offering of senior secured notes (B1/BB+).

It is coming in tranches of euro-denominated and dollar-denominated five-year notes, and euro-denominated seven-year notes, with tranche sizes to be determined.

Early guidance on the dollar-denominated five-year notes was 7¼% to 7½%, said the trader who added that this guidance may have been overtaken by events, as ongoing market volatility continues to erode the appetite for risk.

Outflows on Monday

The cash flows of the dedicated high yield bond funds were negative on Monday, the most recent session for which data was available at press time, a trader said.

High yield ETFs sustained $359 million of outflows on the day.

Actively managed funds was $25 million of outflows on Monday.

Manitowoc paper up slightly

In the secondary market, Manitowoc Cranes Escrow Corp.’s new 12¾% senior secured second-lien notes due in August of 2021 were seen to have firmed a little from the deeply discounted 95.321 level at which the notes had priced on Monday to yield 14%.

During the morning, a market source saw the new bonds in a context of 95½ to 96½ bid.

Later on in the day, a trader opined that the new issue was “definitely pretty volatile,” moving around between 95½ and 95¾ bid, which he said was “a touch better” than Monday’s late levels, but in “not a lot of activity, just a few times on those.”

At another desk, a market source said that the bonds were about unchanged on the day, at 95½ bid, on volume of around $4 million. He said that several million had changed hands late Monday in initial aftermarket activity at that same 95½ bid level.

The company – a unit of the Manitowoc Co. Inc., a maker of cranes and industrial lifting equipment based in the eponymous lakefront Wisconsin city about 85 miles north of Milwaukee – brought its $260 million offering to market on Monday as a regularly scheduled forward calendar deal, but not without a struggle.

The deal had to price at a deep discount to par in order to get done, despite the already very generous coupon, the company and its underwriters had to cut the tenor of the deal back to 5.5 years from the originally planned eight years, and certain changes were made to the notes’ covenants, restricting managements’ borrowing ability.

The deal was upsized from an originally planned $250 million.

Food Service bonds firmer

A trader meantime said that the new 9½% senior notes due 2024 from the company’s Manitowoc Food Service unit were trading around 100 3/8 to 100½ “first thing this morning.”

He said the Food Service bonds “kind of stayed right there,” moving around in a 100 3/8 to 100 5/8 context by the day’s end, “so they were a touch better since they came – they were hanging in there, up maybe ½ point from where they issued them.”

At another shop, a trader said that the bonds were up around 3/8 point on the session versus Monday’s close, rising to 100 5/8 bid.

Round-lot volume was only about $7 million – a far cry from Monday, when volume was over $46 million, putting the bonds among Junkbondland’s busiest issues.

The New Port Richey, Fla.-based maker of commercial stoves and ovens, ice makers and refrigeration units and beverage dispensing equipment brought its $425 million deal to market on Friday at par as a regularly scheduled forward calendar offering.

The bonds initially moved as high as 100 7/8 bid when they were freed for aftermarket dealings after pricing, with about $11 million changing hands, but they came back down from that peak in Monday’s dealings.

The Food Service bonds were issued as part of the financing for the coming spin-off of the food service operation from its parent. Proceeds from that bond deal and from a concurrent new term loan will be used to pay a $1.388 billion dividend to the parent company; that dividend, and the proceeds of the parent’s new secured bond deal, will, in turn be used to repay its existing bonds and bank debt and for general corporate purposes.

Existing Manitowoc

Traders meantime did not see very much activity in those existing Manitowoc Co. bonds on Tuesday.

Its existing 5 7/8% notes due 2022 were seen trading around 107 ¾ bid, well down from their Monday close at 110 3/8 bid, but only on a handful of smallish odd-lot trades, versus Monday’s respectable volume of over $8 million.

The bonds had risen by 1/18 point on Monday, continuing a solid rise from the levels around 99 bid at which the bonds had traded in late January.

Its 8½% notes due 2020 lost 3/16 point on Tuesday, closing around 104 5/16 bid, on volume of about $2 million. On Monday, they had been unchanged around 104½ bid, with only one large-sized trade seen.

The 8½% bonds have risen from around 101¼ bid in mid-January.

A “strange day”

Away from the Manitowoc issues, one of the traders characterized Tuesday’s session as “a little bit strange.

“We were definitely weaker this morning.”

He said that “as the day went along, we definitely had a firmer tone, for sure.”

He said that this was “not by a large margin, but we definitely kind of stabilized. I would say that we ticked back up, pretty much across the board.”

He continued that early in the day “the ETFs were out with their sell lists, pretty much across the board.”

At his shop “we bid on a few items,” particularly shorter, non-callable issues.

“We got a few things done there, at pretty good prices.”

One name that stood out, he said, was Ally Financial Inc. – particularly its 2¾% notes due 2017. The Detorit-based online banking concern and automotive loan provider’s issue had recently been at the 99½ bid.

Early on, he said, they were around 98¼-to-98 3/8.

But later on he said, “as we were exiting the day, the tone certainly got a little better, surely stabilized.

Chesapeake churn continues

Traders saw continued weakness in Cheasapeake Energy Corp.’s bonds on Tuesday, extending the downside momentum generated on Monday by the news that the Oklahoma City-based oil and natural gas exploration and production company had hired advisers to help it restructure some of its debt; some investors leaped to the conclusion that the company was considering a bankruptcy filing, which Chesapeake vehemently denied.

Its 8% notes due 2022 were the most actively traded junk paper on Tuesday, falling 4 points to 36 bid, with over $36 million traded.

It shortest paper – the 3¼% notes slated to come due a little more than a month from now, on March 15, lost 1½ points, finishing at 82½ bid. Over $18 million traded.

Indicators turn mixed

Statistical measures of junk market performance turned mixed on Tuesday, after having been lower across the board Monday; it was their fourth mixed session in the last five trading days.

The KDP High Yield Daily Index fell by 40 basis points on Tuesday, ending at 61.42 – just barely above its low point for both 2016 so far and for the past 52 weeks, 61.41, set back on Jan. 20.

It was the index’s seventh straight downturn, including Monday’s 71 bps plunge; before those losses, it had risen for seven straight sessions.

Its yield rose by 9 bps to 7.6%, after having ballooned out by 22 bps on Monday. Those were the yield’s first widenings after having come in over the previous two sessions.

The Markit Series 25 CDX North American High Yield Index, on the other hand, edged upward by 1/32 point on Tuesday to 97 5/32 bid, 97 3/16 offered. That broke a three-session losing streak, including Monday’s 13/16 point slide and was its second gain in the last five sessions.

The Merrill Lynch North American High Yield Master II Index backtracked by 0.505% on Tuesday, its third straight loss after one gain and sixth loss in the last seven sessions. On Monday, it had nosedived by 1.224% – its second biggest one-day loss so far this year, exceeded only by the yawning 1.416% plunge the market measure suffered on Jan. 20.

Tuesday’s downturn caused its year-to-date loss to gap out to 4.364% from 3.879% on Monday – a new peak cumulative loss for the year, surpassing the index’s previous worst red-ink level for the year so far, the 4.095% deficit seen on Jan. 20.

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