Six Flags two-parter, upsized Charter add-on pace $4 billion session; funds fall $249 million

By Paul Deckelman and Paul A. Harris

New York, March 30 – The high-yield primary machine kicked into high gear on Thursday, pricing $3.88 billion face amount of new dollar-denominated and fully junk-rated paper in eight tranches, syndicate sources said, all of it from domestic issuers and most of it in the form of opportunistically timed and quickly shopped drive-by offerings.

It was the most new junk issuance seen in two weeks – since $4 billion got done in seven tranches on March 16, according to data compiled by Prospect News – and among the busiest sessions in Junkbondland all year.

Cable and broadband provider Charter Communications Inc. had the day’s biggest deal, an upsized $1.2 billion add-on to its existing 5 1/8% notes due 2027, via a pair of funding subsidiaries.

Theme-park operator Six Flags Entertainment Corp. did a $1.2 billion two-part transaction, consisting of seven- and 10-year notes.

Yogurt producer Chobani LLC whipped up a $530 million eight-year offering, while Exterran Energy Solutions, LP, which provides equipment and services to the oil and natural gas industry, priced an upsized $375 million of eight-year notes. They were the day’s only two deals to come off the forward calendar.

Cardtronics, Inc., a consumer financial services provider, also did an eight-year deal, weighing in at $300 million.

And homebuilder CalAtlantic Group, Inc., priced a $225 million two-part offering of add-ons to existing 2024 and 2026 bonds in its capital structure.

Secondary market traders saw both the new Exterran and Chobani deals, which priced earlier in the session than the drive-bys, quoted at solidly firmer levels when they hit the aftermarket.

Charter’s existing 2027 bonds were seen well down from the levels they held before news of the add-on hit the market.

The traders also saw continued firm trading in Wednesday’s new offerings from Ascent Resources Utica Holdings, LLC and B&G Foods, Inc.

Overall, the market was seen continuing to grind higher during the session, extending Wednesday’s upside momentum.

Statistical market performance measures were stronger for a third consecutive session on Thursday. They had turned higher on Tuesday and stayed there on Wednesday and again on Thursday, after having been lower on Monday and higher last Friday.

But high-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall junk market liquidity trends – turned negative in the latest reporting week, according to numbers released on Thursday, with $249 million more leaving the weekly reporting-only domestic funds in the form of investor redemptions than came into them during the week ended Wednesday. The latest net outflow followed the $736 million net inflow reported last Thursday (see related story elsewhere in this issue).

Charter prices $2.5 billion

Charter Communications priced $2.5 billion of bonds in two transactions, one apiece on the high-yield and high-grade syndicate desks on Thursday.

Both tranches were upsized from the $750 million announced amounts.

Citigroup was the left bookrunner for both tranches.

The company priced an upsized $1.25 billion issue of 5 3/8% split-rated 30-year notes (Ba1/BBB-) at a 235 basis points spread to Treasuries.

The spread came tight to final spread talk in the 240 bps area and inside initial guidance in the 255 bps area.

The order book was three-times oversubscribed.

Charter also priced an upsized $1.25 billon add-on to CCO Holdings, LLC and CCO Holdings Capital Corp.’s 5 1/8% senior notes due May 1, 2027 (B1/BB+/BB+) at 100.5 to yield 5.057%.

The reoffer price came rich to price talk in the 100.25 area.

The issuing entities are subsidiaries of the Stamford, Conn.-based broadband communications company. Proceeds will be used for general corporate purposes including potential buybacks of class A common stock of Charter or common units of Charter Communications Holdings, LLC.

Six Flags’ $1.2 billion deal

Six Flags Entertainment priced $1.2 billion of senior notes (B2/BB-) in two tranches.

A $700 million add-on to its 4 7/8% notes due July 31, 2024 priced at 99 to yield 5.039%. The reoffer price came on top of initial price talk of 99 but cheap to final talk in the 99.25 area.

In addition, Six Flags priced a $500 million issue of new 10-year notes at par to yield 5½%. The yield printed at the wide end of yield talk and initial guidance in the 5 3/8% area.

Wells Fargo Securities LLC was the left bookrunner for the Rule 144A and Regulation S for life deal. BofA Merrill Lynch, Barclays, BBVA, Goldman Sachs & Co., HSBC and JP Morgan Securities LLC were the joint bookrunners.

The Grand Prairie, Texas-based regional theme park operator plans to use the proceeds to fund a tender offer for its 5¼% notes due 2021 and for general corporate and working capital purposes including share repurchases.

Chobani prices tight

Chobani, LLC and Chobani Finance Corp. priced a $530 million issue of eight-year senior notes (Caa2/CCC+) at par to yield 7½%.

The yield printed at the tight end of the 7½% to 7¾% yield talk.

BofA Merrill Lynch and J.P. Morgan Securities LLC, TD Securities, and KeyBanc Capital Markets were the joint bookrunners.

The Norwich, N.Y.-based yogurt maker plans to use the proceeds to repay bank debt.

Exterran upsizes

Exterran Energy Solutions, LP and EES Finance Corp., wholly owned subsidiaries of Exterran Corp., priced an upsized $375 million issue of eight-year senior notes (B3/B+) at par to yield 8 1/8%.

The amount was increased from $300 million.

The yield printed in the middle of the 8% to 8¼% yield talk.

Wells Fargo Securities LLC was the left bookrunner. Credit Agricole CIB, BofA Merrill Lynch, Citigroup Global Markets Inc. and RBC Capital Markets LLC were the joint bookrunners.

The Houston-based company plan to use the proceeds to repay term loan debt, to pay down its revolving credit facility and for general corporate purposes.

Exterran provides compression, production and processing products to the oil and natural gas industry.

Cardtronics at the tight end

Cardtronics, Inc. and Cardtronics USA, Inc. priced a $300 million issue of eight-year senior notes (Ba3/BB+) at par to yield 5½% on Thursday.

The yield printed at the tight end of the 5½% to 5¾% yield talk.

Wells Fargo Securities LLC was the left bookrunner for the Rule 144A and Regulation S for life offer. BofA Merrill, JP Morgan Securities LLC and BBVA were the joint bookrunners.

The consumer financial services provider plans to use the proceeds to repay approximately $294.5 million on its revolving credit facility.

CalAtlantic taps two bullets

CalAtlantic Group priced an upsized $225 million of senior notes (Ba2/BB/BB) by tapping two of its existing bullet issues.

The deal, which was increased from $200 million, included a $125 million add-on to the 5 7/8% senior notes due Nov. 1 2024 that were originally issued by Standard Pacific Corp. The tap priced at 104.5 to yield 5.152%. The price richer than the 103 to 104 initial price talk.

In addition CalAtlantic priced a $100 million add-on to its 5¼% senior notes due June 1, 2026 at 98.5 to yield 5.459%. Again the reoffer price was richer than initial guidance, for this tranche, in the 98 area.

Mizuho Securities USA Inc. was the bookrunner.

The Irvine, Calif.-based home builder plans to use the proceeds to refinance its 8.4% senior notes due May 2017 and for general corporate purposes, which may include land acquisition and development, home construction, repurchases of common stock and debt repayment.

CalAtlantic Group was formed through a combination of Standard Pacific Corp. and Ryland Group, Inc.

Talen sets roadshow

Talen Energy Supply, LLC plans to kick off a $500 million offering of five-year senior guaranteed notes on a Thursday investor conference call.

The deal is set to roadshow on Friday in New York and on Monday in Boston.

Morgan Stanley & Co. is a joint bookrunner, with other joint bookrunners and co-managers to be announced later.

The Allentown, Pa.-based energy and power generation company plans to use the proceeds to refinance debt.

Nets upsizes

In the European market, Nets A/S priced an upsized €400 million issue of 2 7/8% seven-year senior notes (Ba2/BB+) at a 250 basis points spread to mid-swaps.

The spread came inside the initial mid-swaps plus 275 bps spread talk.

The amount was increased from €350 million.

The reoffer price was 99.648, rendering a yield of 2.93%.

Deutsche Bank and Nordea were the joint global coordinators. DNB Markets, Mizuho Securities, Nykredit Bank and SEB were joint bookrunners.

Deutsche Bank will bill and deliver.

Proceeds from the Rule 144A and Regulation S offering would be used to refinance a portion of Nets Group’s three-year term loan.

Nets is a financial services and technology company based in Ballerup, Denmark.

K+S prints at 2 5/8%

German chemical company K+S AG priced a €400 million issue of six-year senior notes (expected BB+) at par to yield 2 5/8%.

Joint bookrunner Santander will bill and deliver. Barclays, LBBW and RBC Capital Markets were also joint bookrunners.

The Kassel, Germany-based company plans to use the proceeds for general corporate purposes.

Motor Oil brings unrated deal

Greece-based Motor Oil (Hellas) Corinth Refineries SA priced a €350 million issue of unrated 3¼% five-year senior notes at 99.433 to yield 3 3/8%.

The yield at the tight end of yield talk that had been announced in the 3½% area.

Joint bookrunner HSBC Bank plc was the global coordinator. Alpha Bank AE, Citigroup Global Markets Ltd., Credit Suisse Securities (Europe) Ltd., Goldman Sachs International, ING Bank NV, National Bank of Greece SA and Piraeus Bank SA were also joint bookrunners.

The Athens-based refiner plans to use the proceeds, together with cash on hand, to redeem all €350 million of its 5 1/8% senior notes due 2019.

Charter chopped down...

In the secondary sphere, a trader said there had been considerable activity in Charter Communications existing 5 1/8% notes due in May of 2027, the issue to which the company did an add-on.

He saw those notes trading a little above the tap’s 100.5 issue price – but said that was down by at least 1 full point from where the existing bonds had gone home on Wednesday, before the news of the big new add-on deal hit the market.

He estimated volume at more than $60 million, easily topping the day’s high yield Most Actives list.

That issue has been sliding all month since opening March trading just a little below 104 bid.

...but Chobani churns higher

One of the day’s other new issues, Chobani LLC’s 7½% notes due 2025, was seen to have firmed smartly when it reached the aftermarket.

A trader pegged the yogurt maker’s new notes in a 101 to 101½ bid context, while a second saw them get as good as 101¾ bid, well above their par issue price.

More than $28 million changed hands.

Exterran issue improves

One of the traders also saw the new Exterran Energy Solutions 8 1/8% notes due 2025 trading around 101½ bid on Thursday afternoon, after the issue had priced at par earlier in the session.

Wednesday deals add to gains

A trader said that Wednesday’s two new issues – from Ascent Resources Utica Holdings and B&G Foods – “were trading fairly well” on Thursday after initially moving higher following their respective pricings.

He saw volume in the two issues at “pretty good levels.”

Oklahoma City-based oil and natural gas operator Ascent Resources’ 10% notes due 2022 were up to 103¾ bid, he said, a little higher than they had finished on Wednesday, when the new bonds had jumped into a 102 to 103 bid context after the $1.5 billion regularly scheduled forward calendar offering had priced at par.

A second trader quoted the new notes at 103¾ bid, 104¼ offered.

And a market source at another desk saw the notes going out Thursday at just under 104 bid on volume of over $24 million.

A trader meantime said that Parsippany, N.J.-based packaged foods processor B&G – known to shoppers for brands such as Green Giant canned and frozen vegetables and Cream of Wheat cereals – was also doing well a day after pricing. He saw its new 5¼% notes due 2025 trading around at 101¼ bid.

That quickly shopped $500 million offering had priced Wednesday at par and then had moved up to around 100¾ bid in initial dealings.

Another trader had seen the bonds finishing on Wednesday above the 101 bid mark.

Indicators stay positive

A trader said that investors “were mostly focused on new issues” but added that the market in general “was grinding higher all around.”

Statistical market performance measures were stronger for a third consecutive session on Thursday. They had turned higher on Tuesday and then stayed there on Wednesday and again on Thursday, after being lower on Monday and higher last Friday.

The KDP High Yield Daily Index zoomed by 22 basis points on Thursday to end at 71.78, its third straight gain, including Wednesday’s 16 bps jump. It had also risen by 4 bps on Tuesday, after being unchanged on Monday. The index had been lower for most of last week, including four straight losses.

Its yield came in by 9 bps, to 5.29%, its fifth consecutive tightening, including Wednesday’s 4 bps narrowing.

The Markit CDX Series 27 High Yield Index was better for a third day in a row on Thursday, ending at 107 3/16 bid, 107 7/32 offered, a gain of nearly 1/8 point on the session, on top of Wednesday’s more than 9/32 point rise. On Tuesday, it had moved up by more than 5/16 point, rebounding from Monday’s retreat.

The Merrill Lynch High Yield Index also rose for a third successive session on Thursday, ending up by 0.291%. It had also advanced by 0.365% Wednesday, on top of Tuesday’s 0.272% upturn. The index had retreated by 0.85% on Monday.

The latest improvement lifted the index’s year-to-date return to 2.616% from 2.363% on Wednesday, which had been the index’s first time back above the psychologically potent 2% level since March 8, when it closed at 2.156%, only to slide below 2% subsequently.

Those levels still remain well down from the index’ 2017 peak cumulative return of 3.19%, reached on March 1.

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