Wind Tre prices $2 billion dollar deal as part of giant transaction; new notes trade up; Netflix, GSL busy

By Paul Deckelman and Paul A. Harris

New York, Oct .24 – The high-yield primary market saw just one new deal price on Tuesday – but it was a huge one.

Italian telecommunications company Wind Tre SpA did one of the biggest new deals ever seen in Junkbondland – a €7.325 billion equivalent four-part offering of euro- and dollar-denominated paper.

That upsized transaction included a whopping $2 billion of new 8.25-year fixed-rate notes.

The deal was restructured before it finally came to market, with a proposed tranche of dollar-denominated floating-rate notes abandoned.

When those new dollar-denominated bonds hit the market, traders saw brisk demand, with the paper heard to have firmed smartly from its issue price.

Also in the secondary market, traders saw busy activity in the two deals that had priced on Monday, for entertainment company Netflix, Inc. and British containership chartering company Global Ship Lease, Inc.

While the former deal – itself a billion-dollar-plus behemoth – was heard to have clung to a narrow trading range little changed from its issue price, the latter offering continued to trade at a nice premium.

Away from the new deal arena, traders said that Sears Holdings Corp.’s notes fell sharply on the news that the company has parted ways with equally iconic home appliance vendor Whirlpool, whose washing machines, refrigerators and other appliances had been fixtures in Sears stores for over a century – the latest body blow to the venerable but now-struggling retailer whose former empire of far-flung stores and catalog operation once dominated the American retailing scene.

Statistical market performance measures were mixed for a third consecutive session on Tuesday; those indicators had turned mixed on Friday and then stayed that way, after having been higher across the board for three consecutive sessions before that.

Wind upsized and tight

Europe had the new issue spotlight on Tuesday.

Wind Tre SpA priced its megadeal, an upsized €7,325,000,000 equivalent amount of senior secured notes (B1/BB-/BB) in a revised four-part offering from which a proposed dollar-denominated tranche of floating rate notes was withdrawn.

Tuesday's Wind deal, which was upsized from €7.3 billion, included:

• €1,625,000,000 of fixed-rate notes due January 2023, which priced at par to yield 2 5/8%. The yield printed at the tight end of yield talk in the 2¾% area. Initial guidance was in the 3% area;

• €1.75 billion of fixed-rate notes due January 2025, which priced at par to yield 3 1/8%. The yield printed at the tight end of yield talk in the 3¼% area. Initial guidance was in the 3½% area;

• $2 billion of fixed-rate notes due January 2026, which priced at par to yield 5%. The yield printed 12.5 basis points inside of yield talk in the 5¼% area. Initial guidance was in the low-to-mid 5% area; and

• €2.25 billion of Euribor plus 275 bps floating-rate notes due January 2024, which priced at par. The spread came at the tight end of the Euribor plus 275 to 300 bps spread talk. The reoffer price came on top of price talk.

Big book for Wind

Late Monday the Wind deal, then sized at €7.3 billion, was playing to an overall €25 billion of demand, according to an investor who added that although that amount of demand is impressive it is by no means out of line with expectations regarding such a trade, and was perhaps not the blowout seen in 2014's Altice/Numericable €7.9 billion equivalent multi-tranche deal, which was said to be more than 10-times oversubscribed.

Joint global coordinator Deutsche Bank will bill and deliver for the Wind euro-denominated notes.

Joint global coordinator BofA Merrill Lynch will bill and deliver for the dollar-denominated notes.

HSBC was also a joint global coordinator.

The Rome-based telecom plans to use the proceeds, along with drawings under its new senior secured credit facilities, and amounts due to Wind Tre upon termination of derivative hedging instruments related to existing debt, to repay certain intercompany loans to Wind Acquisition Finance, which will use the funds to redeem the existing notes, and repay the existing senior credit facilities. The additional proceeds resulting from the €25 million upsizing of the deal will be used to put cash on the balance sheet.

Takko roadshows €510 million

Elsewhere in the euro-denominated market, German apparel retailer Takko Group started a roadshow on Tuesday for a €510 million two-part offering of senior secured notes due 2023.

The debt refinancing deal is coming in tranches of fixed-rate notes with two years of call protection and floating-rate notes with one year of call protection. Tranche sizes remain to be determined.

Global coordinator and joint bookrunner Deutsche Bank will bill and deliver. Credit Suisse, UniCredit Bank and Credit Agricole CIB are also joint global coordinators and joint bookrunners. Goldman Sachs International is also a joint bookrunner.

CBR Fashion secured deal

Germany-based apparel supplier CBR Fashion is marketing €450 million of five-year senior secured notes (B2/B) on a roadshow set to conclude on Thursday, according to a market source.

Credit Suisse and UniCredit Bank are managing the sale.

Proceeds will be used to refinance debt.

Goeasy debuts

The sole news nugget in Tuesday's dollar-denominated market came from first-time issuer goeasy Ltd. which started a roadshow for a $300 million offering of five-year senior notes (expected ratings Ba3/BB-).

The debt refinancing deal is expected to price on Friday.

Wells Fargo is the left bookrunner. BMO is the joint bookrunner.

Mixed Monday 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, according to an investor.

High-yield ETFs saw $72 million of inflows on the day.

However actively managed high-yield funds sustained $30 million of outflows on Monday.

Dedicated bank loan funds were positive on Monday, posting $25 million of inflows on the day, the investor said.

Wind Tre trades up

In the secondary realm, traders saw brisk demand for the new dollar-denominated Wind Tre 5% notes due in January of 2026, with one pegging those bonds at 100 7/8 bid, up from their par pricing level.

A second trader saw the notes doing even better, quoting them as having jumped to 101 1/16 bid in initial aftermarket dealings on volume of more than $59 million

That put the issue high up on the day’s Most Actives list.

Netflix, GSL bonds seen active

But the busiest credit of the day in the junk bond arena, traders said, was Monday’s big new offering from Netflix, Inc.

One of the traders said that he saw “a bunch” of those 4 7/8% notes due in April of 2028 trading right around par, where the Scotts Valley, Calif.-based streaming internet entertainment company had priced its quickly shopped $1.6 billion transaction on Monday.

At another desk, the bonds were seen having eased marginally to just under that par level, on volume of over $130 million.

Monday’s other deal – London-based containership charter company Global Ship Lease Inc.’s 9 7/8% first-priority senior secured notes due 2022 – were seen by one trader around 101 1/8 bid.

A second located the notes at 101 3/16 bid, calling that a 5/8 point gain, with over $18 million having changed hands.

That regularly scheduled $360 million offering had priced at 99 to yield 10.128% and then firmed solidly when they hit the aftermarket, moving up to around 100 7/8 bid.

Sears on the slide

Away from the new-deal arena, a trader said that Sears Holdings’ 8% notes due 2016 swooned by 6 points on the day, finishing at 60½ bid, though only on round-lot volume of around $5 million.

There were also numerous smaller round-lot trades late in the day as low as 56 bid.

“This was credit related,” the trader said, noting that investors reacted badly on the news of “Whirlpool getting pulled.

Sears, the Hoffman Estates, Ill.-based retailer’s bonds fell on the news that the largest U.S. appliance company, Whirlpool, will no longer be carried in Sears stores, where its Whirlpool, Maytag and Kitchen Aid branded washers, dryers, refrigerators and other appliances had been a mainstay for the previous 101 years.

Whirlpool informed Sears in May that it would no longer supply Sears’ eponymous flagship store chain and the company’s Kmart discount department store operation, with its products, after the two companies could not agree on pricing.

The trader said “we’ll see if other vendors follow suit” and stop supplying the troubled Sears, agreeing with the suggestion that a decision by a high-profile supplier such as Whirlpool could open the floodgates for other vendors to also decide that doing business with Sears is no longer profitable for them.

“That seems to be the thinking,” he said.

Retailing names mixed

Elsewhere within the retailing realm, a market source said that St. Louis-based grocer Fresh Market’s 9¾% notes due 2023 dropped by ¾ point Tuesday, to 58¼ bid, with over $11 million having traded.

Camp Hill, Pa.-based drugstore chain operator Rite Aid Corp.’s 6 1/8% notes due 2023 eased by 1/8 point, closing at 96 1/8, on turnover of more than $17 million.

Hospital names mixed

In the healthcare area, a trader said that Dallas-based hospital operator Tenet Healthcare Corp.’s 8 1/8% notes due 2022 improved by ¾ point to end at 83½ bid, while Franklin, Tenn.-based sector peer Community Health Systems Inc.’s 6¼% notes due 2023 fell back by ¼ point to end at 97½ bid, both on around $10 million of volume.

Canadian drugmaker Valeant Pharmaceuticals International Inc.’s 6 1/8% notes due 2025 were off by 3/8 point on the day at 85 5/8 bid, on volume of over $10 million.

Indicators stay mixed

Statistical market performance measures were mixed for a third consecutive session on Tuesday; those indicators had turned mixed on Friday and then stayed that way, after having been higher across the board for three consecutive sessions before that.

The KDP High Yield Daily Index was unchanged on Tuesday, closing at 72.49, after having gained 3 bps on Monday, in contrast to Friday’s 1 bp loss, which snapped a string of three straight gains.

Its yield came in by 1 bp to 5.14%, after two straight sessions of having been unchanged at 5.15%, where it had finished after narrowing by 1 bp on Thursday.

The Markit CDX Series 29 High Yield Index eased for a second day in a row, edging off marginally to finish at 108 7/16 bid, 108½. On Monday, it had posted its first loss after six successive gains, easing by 1/16 point.

However, the Merrill Lynch North American High Yield Index inched up by 0.003% on Tuesday, its seventh advance in a row. The index had also firmed by 0.107% on Monday.

The latest gain lifted its year-to-date return to 7.636% from 7.632% on Monday, establishing a sixth straight new 2017 year-to-date peak.

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