Upsized GameStop prices to cap $3.6 billion week; AMC plans bonds; energy leads market higher

By Paul Deckelman

New York, March 4 – The high-yield market was “on fire” Friday a trader said, noting a broad-based advance fueled by ample investor cash being put to work amid an increased tolerance for risk.

The primary market saw one deal price – electronic game retailer GameStop Corp.’s upsized $475 million issue of five-year notes.

Completion of that deal brought the week’s new-issuance total to $3.62 billion in three tranches, up from the $2.00 billion of new U.S. dollar-denominated, fully junk-rated paper which priced in five tranches last week, according to data compiled by Prospect News.

That, in turn lifted year-to-date issuance to just under $16 billion in 26 tranches – although that aggregate figure lagged some 70.4% behind the issuance pace seen last year, when $54.05 billion of such paper from domestic or industrialized-country issuers had priced in 82 tranches by this time on the 2015 calendar, the data indicated.

Syndicate sources meantime heard that movie theater operator AMC Entertainment Holdings Inc. plans to issue $300 million of subordinated notes as part of the financing for its acquisition of industry peer Carmike Cinemas Inc.

Among issues that have recently priced, traders noted the continued upward climb of new bonds from hospital operator HCA Inc. and insurance software provider Solera LLC.

Away from the new deals, Friday was another big day for recently strengthening energy credits such as Continental Resources, Inc., Chesapeake Energy Corp. and California Resources Corp., as well as mining and energy concern Freeport-McMoRan Inc.

Statistical market performance measures were higher across the board for a seventh consecutive session on Friday and for an eighth session in the last 10 trading days. That winning streak started more than a week ago – last Thursday – after the indicators had been lower last Wednesday.

The indicators were meantime all ending higher versus where they had closed out last Friday – the third straight stronger week and fifth such better week in the last seven weeks.

GameStop comes to market

The sole new issue of the day came from GameStop, a Grapevine, Texas-based video game, consumer electronics, and wireless services retailer.

It priced $475 million of 6¾% senior notes due March 15, 2021 (Ba1/BB+) at par after the deal was upsized by $75 million from the $400 million originally announced on Wednesday.

The Rule 144A/Regulation S offering was brought to market via bookrunner Bank of America Merrill Lynch.

The company plans to use the proceeds for general corporate purposes, which will likely include acquisitions and, potentially, dividends and stock buybacks.

GameStop last visited the junk bond market back in 2014, when it sold an upsized $350 million of 5½% senior notes due 2019. The proceeds were used to pay down the company’s asset-based credit facility and for general corporate purposes.

ON Semiconductor in coming week

GameStop was the only new deal that was being actively marketed this week.

Primaryside sources meanwhile look forward in the coming week to the start of the roadshow for ON Semiconductor Corp.’s $400 million note issue. The tenor of that planned offering has not yet been established.

The bonds will be brought to market via Deutsche Bank Securities Inc., BofA Merrill Lynch, HSBC and SMBC Nikko.

The Phoenix-based computer-chip manufacturer will be selling the bonds as part of the financing for its pending acquisition of San Jose, Calif.-based industry peer Fairchild Semiconductor International Inc.

The financing also includes $2.4 billion credit facility that launched this week

AMC plans bond deal

Word of another planned bond deal to help finance an acquisition surfaced in the market on Friday, as AMC Entertainment Holdings disclosed plans in a regulatory filing for a $300 million issue of subordinated notes.

That paper, along with a $325 million incremental senior secured term loan facility, will be used by AMC, a Leawood, Kan.-based movie-theater operator, to finance its planned acquisition of Columbus, Ga.-based sector peer Carmike Cinemas Inc.

According to Friday’s 8-K filing with the Securities and Exchange Commission, the notes are backed by a commitment for a $300 million one-year subordinated bridge loan priced at Libor plus 550 bps with a 1% Libor floor. The spread will increase by 50 bps every three months until it hits a cap.

AMC plans to acquire Carmike for $30 per share in cash. The total cash consideration for the acquisition is $757 million, while the transaction has a total enterprise value of $1.1 billion, including the assumption of Carmike’s net debt.

That deal is expected to close in the fourth quarter.

AMC said that following the closing of the deal, it expects to de-lever to below 3.5 times by the end of next year.

GameStop notes unseen

In the secondary market, traders did not initially report any aftermarket dealings in the new GameStop five-year note issue, given the relative lateness of the hour at which that $475 million offering priced.

Solera, HCA head higher

Also among the recently priced names, a trader saw the new HCA 5¼% senior secured notes due June 2026 continuing to trade in a 102 to 102¼ bid context on Friday.

A second trader quoted the bonds at a wide 102 bid, 103¼ offered, calling them up about ½ point on the session.

And at another shop, a market source pegged those bonds at 102 1/8 bid on Friday, calling them up ½ point on the day, on volume of more than $25 million, making the credit one of the busiest in the junk market.

The giant Nashville-based hospital operator HCA Holdings, Inc. priced $1.5 billion of the notes in a quick-to-market transaction on Tuesday via its wholly owned HCA Inc. subsidiary.

The issue was upsized from the original $1 billion.

A trader meantime said that Solera’s 10½% notes due 2024 “continued to move up,” seeing the bonds get as good as 98¾ bid, 99½ offered.

That was well up from the 95 level at which Solera, a Westlake, Texas-based provider of automobile insurance claims software, had priced $1.73 billion of those notes on Monday to yield 11.47%.

That regularly scheduled forward calendar offering had been a long time coming to market, having actually finished its roadshow at the beginning of the previous week; although it was supposed to price at that time, the process was delayed as investors pushed back, forcing a number of changes.

It was reduced in size from an original $2.03 billion, with $300 million shifted to a term loan financing.

The deal was originally a two-part offering of eight-year dollar- and euro-denominated senior notes, split after the initial downsizing into $1.28 billion of the dollar bonds and $450 million equivalent of the euro paper, but the latter tranche was later dropped and the entire amount was done in dollars, producing the $1.73 billion size.

The issue came wider than the initial price talk, and several covenant changes were made as well.

After pricing late in the day on Monday, the bonds began moving up on Tuesday, firming continually to reach their current levels.

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