Upsized Virgin Media, Pinnacle deals price, trade actively, Virgin gains; Chesapeake, other oils up

By Paul Deckelman and Paul A. Harris

New York, April 12 – The high yield deal machine continued to crank out new issues on Tuesday, with some $1.125 billion of new junk paper getting priced.

Virgin Media Inc., which provides broadband, television, landline and mobile phone service in the United Kingdom, drove by with an upsized $750 million of 10.5-year secured notes via a financing subsidiary.

Those new bonds firmed smartly, on heavy volume, when they hit the aftermarket.

Gaming operator Pinnacle Entertainment, Inc. meantime brought an upsized $375 million of eight-year paper to market, also via a financing subsidiary, in a regularly scheduled forward calendar offering.

Those new bonds were the day’s most active issue in the secondary realm, although they were seen unchanged from their pricing level.

Traders also saw brisk activity in Monday’s 10-year issue from corrections and treatment facility real estate investment trust and services provider the GEO Group, Inc., which added to the initial aftermarket gains notched after that pricing.

They saw both halves of Monday’s other offering – from casino and racetrack REIT Gaming & Leisure Properties, Inc., – trading well above issue price, though on somewhat limited volume.

Away from the new deals, a continued surge in world crude oil prices was giving a boost to energy names such as Continental Resources, Inc., Whiting Petroleum Corp., Oasis Petroleum Inc. and California Resources Corp.

And another oil and natural gas issuer – Chesapeake Energy Corp. – was also strongly on the upside, helped both by the overall energy strengthening and by its own good news after having negotiated favorable terms with its credit facility lenders.

Statistical market performance measures were higher across the board for a third straight session on Tuesday, their fourth such rise in the last five trading days.

Virgin Media upsizes

The high yield primary market saw two issuers complete single-tranche drive-by deals to raise a combined total of $1,125,000,000 on Tuesday.

Both deals were upsized.

One came at the tight end of talk while the other came on top of talk.

However both came significantly tight to initial guidance, sources said.

Virgin Media priced an upsized $750 million issue of 10.5-year first-lien senior secured notes (expected ratings Ba3/BB-) at par to yield 5½%.

The issue size was increased from $500 million.

The yield printed on top of yield talk. Initial guidance had the notes coming with a yield in the high 5% range.

J.P. Morgan, BNP, Barclays, HSBC, BofA Merrill Lynch, Credit Agricole and Mediobanca were the joint bookrunners for the debt refinancing and general corporate purposes deal.

Pinnacle upsized and tight

Pinnacle Entertainment, Inc. priced an upsized $375 million issue of eight-year senior notes (B2/BB-) at par to yield 5 5/8%.

The issue size was increased from $300 million.

The yield printed at the tight end of yield talk in the 5¾% area. Initial guidance was in the low 6% context.

J.P. Morgan, Goldman Sachs, BofA Merrill Lynch, Fifth Third, US Bancorp, Credit Agricole, Deutsche Bank and Wells Fargo were the bookrunners.

The Las Vegas-based gaming company plans to use the proceeds to refinance Pinnacle's obligation with a subsidiary of Gaming and Leisure Properties, Inc. and the related spin-off of PNK Entertainment to stockholders of Pinnacle.

Deals ahead

The active forward calendar was empty at the Tuesday close. However the primary market is expected to remain active, sources say.

ADT Corp. is expected to kick off a notes offer later this week.

The deal is expected to price during the April 18 week.

Deutsche Bank is expected to lead the bond offer backing the buyout by Apollo Funds and merger with Protection 1.

As reported, the Boca Raton, Fla.-based company stated that it would bring an expected $1.89 billion of notes, which are to come in an offering marketed to qualified institutional investors.

Also at least $1.25 billion of additional notes are to be sold to an affiliate of the company's sponsor, Apollo, and certain other investors, in a private placement.

Elsewhere SunOpta Foods Inc. announced in a Tuesday press release that it plans to sell $300 million of senior secured second lien notes due 2023.

No timing or syndicate names were disclosed.

However last October the company postponed a $330 million offering of seven-year senior secured second-lien notes (B3/B) due to market conditions.

As reported, the deal at that time was talked to price at a discount, and to yield 10%.

BMO Securities, Jefferies LLC and Rabobank were the joint bookrunners for the October offering.

Mixed flows

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

High yield ETFs saw $119 million of inflows on the day.

However actively managed funds sustained $290 million of outflows on Monday.

Dedicated bank loan funds, meanwhile, saw $25 million of inflows on Monday.

Heavy trading in new issues

In the secondary realm, the new PNK Entertainment, Inc. and Virgin Media Secured Finance bonds were seen to have dominated the day’s Most Actives list.

A market source said that more than $68 million of the new PNK 5 5/8% notes due 2024 changed hands. He saw the notes going out at par, unchanged from their issue price.

Earlier, a source at another desk had pegged the gaming company’s bonds in a 99 7/8 to 100 1/8 bid context.

Virgin Media’s 5½% secured notes due in August of 2026 were almost as busy, the first source said, estimating turnover at more than $63 million.

But unlike the essentially static PNK bonds, New York-based UK telecom provider Virgin’s paper seemed to have caught a bid, moving up to 101 1/8 in initial aftermarket dealings, versus their par issue price.

Monday deals trade up

A trader said that both halves of the new the new Gaming & Leisure deal were well up from their respective par issue prices.

He saw its 4 3/8% notes due 2021 around the 101¾ bid level, and its 5 5/8% notes due 2026 were in the 102 vicinity.

Despite expectations that the big deal would have generated considerable trading activity, he opined that the volume in the GLPI paper “wasn’t that big, actually.”

The Wyomissing, Pa.-based gaming-oriented REIT brought a quickly shopped $1.375 billion two-part issue to market on Monday via its GLP Capital, LP and GLP Financing II, Inc. subsidiaries.

It priced $400 million of 4 3/8% notes due 2021 and $975 million of 5 3/8% notes due 2026, both at par.

The deal priced too late in the day on Monday for any kind of appreciable aftermarket dealings at that time.

A trader meanwhile, saw “a fair amount of volume” in the new GEO Group 6% notes due 2026, seeing the bonds around 101¼ bid.

Another trader said the bonds were at 101 1/8 bid, up 1/8 point on the day, on volume of more than $27 million.

GEO, a Boca Raton, Fla.-based owner and operator of correction, detention, treatment and re-entry facilities in the United States, Australia, South Africa and the UK, priced $350 million of the notes at par on Monday in a quick-to-market transaction, after the deal was upsized from $300 million originally.

They traded up to around the 101 bid level in initial aftermarket dealings, with over $26 million of turnover.

Numericable, WDC, Charter busy

Also among the recently priced deals, a trader saw French broadband and wireless provider Numericable SFR SA’s 7 3/8% senior secured notes due 2026 up 3/8 point at 101 5/8 bid.

“They were one of the most active names,” he said.

Another trader agreed, seeing more than $32 million of the notes moving around on Tuesday.

He quoted them up ¼ point at 101½ bid.

Numericable priced the biggest junk bond deal of the year this past Wednesday, when it brought $5.19 billion of those notes to market, pricing the super-sized issue at par.

The bonds traded intensely all during the remainder of last week, particularly on Thursday when turnover was an astounding $450 million.

The bonds had firmed to around the 100 ¾ level on Friday and had moved up above the 101 mark by Monday, setting the stage for Tuesday’s further gains.

Western Digital Corp.’s 10½% notes due 2024 were seen by a trader to have “traded up, on pretty solid volume.” He estimated the bonds were at 99 5/8 bid, which he called up 5/8 point on the day.

Another trader, though, saw the bonds off slightly, at 99 3/8 bid, with over $28 million traded.

The Irvine, Calif.-based computer hard-drive manufacturer priced $3.35 billion of those unsecured and fully junk-rated notes at par in a forward calendar deal back on March 30, along with $1.875 billion of split-rated 7 3/8% senior secured notes due 2023, which also priced at par.

Since then, the secured bonds have traded around the 102 bid level, but the unsecureds have consistently traded below their par issue price.

A trader saw Charter Communications, Inc.’s 5½% notes due 2026 up 5/8 point, at 101 bid, with over $19 million of those notes traded,’

The Stamford, Conn.-based cable and broadband service provider priced $1.2 billion of those notes at par in a quickly shopped transaction last Thursday via its CCO Holdings, LLC and CCO Holdings Capital Corp. subsidiaries, after upsizing that deal from $1billion originally.

Chesapeake climb continues

Away from the new deals, a trader said that Chesapeake Energy “was a very active name today,” following Monday’s announcement of the company’s amendment with its credit facility lenders, “all positive news.”

He said that “the [capital] structure is up anywhere from 5 to 8 points or so.”

He said the most active Chesapeake bonds were the 8% notes due 2022, up 5 points at 61½ bid, matching Monday’s gain.

More than $18 million traded.

At another desk, those bonds were seen up by 4 3/8 points, at 60 7/8 bid.

Its 5¾% notes due 2023 climbed by 6½ points to end at 44, with over $11 million traded.

And its 6 7/8% notes due 2020 zoomed by 9 points, to 51 bid.

Chesapeake’s New York Stock Exchange-traded shares rocketed up by $1.55, or 34.44%, ending at $6.05. Volume of over 183 million shares was more than four times the norm.

Chesapeake’s bonds and shares climbed on Monday and again on Tuesday after the company announced that it had amended its $4 billion secured revolving credit facility agreement maturing in 2019 with its bank syndicate group.

Key gains for Chesapeake included having its borrowing base reaffirmed at $4 billion, in line with current availability under that facility and postponement of the next scheduled semi-annual redetermination of the borrowing base until June 2017.

The Oklahoma City-based natural gas and oil company was granted senior secured leverage ratio covenant relief until September 2017.

And its interest coverage ratio covenant was reduced to 0.65 times through March 2017.

In return, Chesapeake agreed to put up most of its assets as collateral on the facility.

Oil names up

Aside from Chesapeake, a trader said that “a lot” of the more recently challenged names in the energy sector were better on Tuesday.

“News out of Russia that the Saudis and the Russians had agreed to curb oil production sent oil up $1.85, and a lot of the distressed high yield E&P or oil related companies were up 3 to 6” points, the trader said.

Among the big gainers were Continental Resources’ 4½% notes due 2023, seen up 1¼ points at 89 bid and its 5% notes due 2022, up 1 5/8 points at 92 3/8 bid, on volume of $25 million and $21 million respectively.

Whiting’s 5¾% notes due 2021 rose more than 2¼ points, to 71 bid, with over $19 million traded, while its 5% notes due 2019 jumped 6 points, ending at 77½ bid, as over $18 million changed hands.

California Resources’ 8% notes due 2022 were 8-point winners, closing at 49 bid, on volume of over $15 million.

Oasis Petroleum’s 6 7/8% notes due 2022 closed at 81½ bid, up 3 5/8 points on the day, on volume of over $13 million.

The energy sector got a boost from higher oil prices, which hit their highest level in more than four months amid expectations that oil producers Saudi Arabia and Russia were going to be able to negotiate production freezes to alleviate the current global oil market glut.

The Benchmark U.S. crude grade, West Texas Intermediate, for May delivery rose $1.81, or 4%, to $42.17 per barrel, in trading on the New York Mercantile Exchange.

Indicators stay higher

Statistical market performance measures were higher across the board for a third straight session on Tuesday, their fourth rise in the last five trading days.

The KDP High Yield Daily index zoomed by 24 basis points on Tuesday to end at 66.16, its third straight rise; it had also gained 4 bps on Tuesday and 8 bps on Friday.

Its yield, however, was unchanged at 6.58%, after having come in by 1 bp on Monday.

The Markit Series 26 CDX North American High Yield index advanced by 11/32 bid on Tuesday, its third consecutive upturn, to end at 102 9/16 bid, 102 19/32 offered. On Monday it was up by 7/32 point, after having gained 3/16 point Friday.

And the Merrill Lynch North American High Yield Master II index made it three gains in a row on Tuesday as it improved by 0.361%, on top of gains of 0.223% Monday and 0.272% on Friday.

That lifted its year-to-date return to4.32%, its second consecutive new peak level of the year, surpassing the old mark of 3.994% set on Monday.

It was not only the index’s first time above the psychologically significant 4.0% total return mark this year – it was the first time the index had finished above 4% since June 1. 2015, when it had closed at 4.05%.

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