Aramark megadeal drives by; new Sunoco busy and better; Ensco active amid tender, upcoming new deal

By Paul Deckelman and Paul A. Harris

New York, Jan. 10 – The high-yield market saw new issuance for a third consecutive session on Wednesday as the primaryside continued to make up for lost time after having not done any deals in the whole first week of the new year.

Food service and uniform supplier Aramark Services, Inc. priced $1.15 billion of new 10-year notes in a quickly shopped offering.

Traders did not immediately report any initial aftermarket activity in the new bonds.

But they saw plenty of dealings in the three tranches of notes that gasoline and petroleum products distributor Sunoco LP and its Sunoco Finance Corp. funding unit brought to market on Tuesday.

All three tranches of that regularly scheduled forward calendar deal firmed smartly on Wednesday, adding to their initial aftermarket gains from Tuesday.

Traders also saw a fair amount of activity in the new eight-year notes that packaging company Ingevity Corp. priced on Tuesday.

With marine energy drilling company Ensco plc shopping a new deal around for likely pricing on Thursday and announcing a tender offer for some of its existing paper, those established bonds were busy on Wednesday and trading mixed.

Ensco drilling sector peers Noble Holding International Ltd. and Transocean Ltd. were mixed in active trading, but there was only limited activity in oil and natural gas exploration and production names like California Resources Corp.

Away from the energy sphere, traders saw continued weakness in the bonds of domestic cable operator Cablevision and its ultimate corporate parent, Altice NV, ahead of an upcoming new deal from Cablevision unit CSC Holdings, LLC.

Statistical market performance measures were lower across the board for a second straight session on Wednesday; they had turned lower on Tuesday – their first overall negative performance since Dec. 19 – breaking a string of six consecutive sessions before that in which the indicators had been higher all around.

Aramark prices tight

In Wednesday drive-by action Aramark Services, Inc. priced a $1.15 billion issue of 10-year senior notes (Ba3/BB) at par to yield 5%.

The yield printed at the tight end of the 5% to 5 1/8% yield talk. Initial guidance was 5% to 5¼%.

Goldman Sachs was the left bookrunner. JP Morgan, Morgan Stanley, Barclays, BofA Merrill Lynch, Wells Fargo, TD and Capital One were the joint bookrunners,

Proceeds, together with cash on hand, will be used to fund the acquisition of AmeriPride Services, and to repay $150 million of the Amendment No. 2 revolving credit facility.

Ensco eight-year bullet

A couple of Europe-based issuers planned to spend the night in the dollar-denominated junk market and price deals on Thursday.

London-based Ensco plc is expected to price a $500 million offering of non-callable eight-year senior notes.

Initial whisper has the debt refinancing deal coming with a yield of 8% to 8½%.

Ensco's offer comes with an investment grade-style covenant package.

Deutsche Bank and Citigroup are the global coordinators and bookrunners. BNP Paribas, BofA Merrill Lynch, DNB, HSBC and Morgan Stanley are the joint bookrunners.

Ardagh PIK dividend deal

Luxembourg-based Ardagh Group SA is expected to price a $350 million issue of five-year senior secured PIK notes on Thursday, via ARD Securities Finance SARL.

Initial guidance is 9½% to 10%, a trader said.

Citigroup is the left bookrunner for the dividend deal. Credit Suisse is the joint bookrunner.

Zoopla talk 4% area

In the sterling-denominated market Zoopla Property Group plc and ZPG plc talked their £200 million offering of 5.5-year senior notes (Ba3/BB-) to yield in the 4% area.

The debt refinancing deal, in the market via left bookrunner HSBC, is set to price on Thursday.

Tuesday outflows

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

High-yield ETFs sustained $243 million of outflows on the day.

Actively managed high yield funds were essentially flat on Tuesday at negative-$5 million.

With the yield on 10-year Treasuries gapping above 2½% since the beginning of the new year, the buyside may be becoming restive with respect to longer dated new issues, a trader remarked on Wednesday.

Ten-year government paper went out yielding 2.554% at the Wednesday close, a market source said, noting that the 10-year is up 8% since Dec. 1.

Existing Aramark notes

In the secondary sphere, a trader said that “everything started off today with the markets opening up a little weaker,” although he added that “they seemed to settle in, though” as the day wore on.

Neither he nor two other traders immediately reported any initial aftermarket dealings in the new Aramark 5% notes due 2028 that that priced at par during the session.

However, he said that at his shop, “we were trading the existing Aramark 4¾% notes due 2026 in anticipation” of the coming new deal.

He said that the paper traded in a 101 3/8-to-101 5/8 bid context, while the Philadelphia-based business services, foodservice and uniform supply company’s established 5 1/8% notes due 2025 traded between 105 and 105½ bid.

New Suns shine in secondary

Tuesday’s big three-part deal from deal from Sunoco, meantime, was seen having strengthened all around in heavy trading.

“Those new Suns were active pretty much all day today,” one of the traders said, estimating that more than $200 million of the new paper changed hands during the session.

He saw “tons of trades” in the new 4 7/8% notes due 2023, calling them up by 5/8 point on the day at 101½ bid.

The new 5½% notes due 2026 were seen up by around 7/8 point, finishing at 101 3/8 bid, while the 5 7/8% notes due 2028 were up 1 point to close at 102 bid.

A market source estimated that more than $80 million of the five-year notes had traded, over $70 million of the eight-year notes and over $65 million of the 10-year notes had traded around.

Sunoco, a Dallas-based supplier of gasoline and other motor fuels and petroleum products, priced $2.2 billion of the new notes in a regularly scheduled forward calendar offering, upsized from an originally announced $1.75 billion.

The deal consisted of $1 billion of the five-year notes, $800 million of the eight-year notes and $400 million of the 10-years, all of which had come to market at par and then had moved up modestly in active initial aftermarket dealings.

Ingevity issue trades off

Tuesday’s other new deal – the $300 million of 4½% notes due 2026 from North Charleston, S.C.-based packaging company Ingevity Corp. – was also seen trading actively on Wednesday, with a market source estimating volume on the deal at over $40 million.

However, he saw those notes give up most of the gains they had notched in light initial aftermarket dealings Tuesday, quoting them just above par – down nearly ½ point on the day.

The bonds had moved up on Tuesday after the scheduled forward calendar offering had priced at par.

L Brands eases off

Also among this week’s newly priced issues, a trader said that L Brands, Inc.’s 5¼% notes due 2028 were down around 3/8 point on the day, at 99 7/8 bid.

At another desk, a trader pegged the notes about ½ point lower, in a 99½-to-par bid context.

The first trader said that there was not really much activity in the credit, just “a handful of trades” amounting to maybe $10 million on a round-lot basis.

Columbus, Ohio-based retailer L Brands had priced $500 million of the new bonds at par on Monday in a quick-to-market transaction – the first recorded junk bond deal of the new year.

The notes had initially traded around or slightly above their par issue price.

One of the trader meantime said that “there was some activity in the [company’s existing] long ones” – its 6 7/8% notes due 2035, which he saw up about 1/8 at 103¼ bid on “a couple of trades.”

He said L Brands’ 5 5/8% notes due 2022 were down 7/8 point at 106 3/8, while its 5 5/8% notes due 2023 were unchanged to perhaps up by ¼ point, going out at 108 bid.

Ensco existing bonds mixed

With global energy drilling company Ensco plc expected to bring its new eight-year notes to market, perhaps as early as Thursday, the company’s existing paper was seen mixed on the day.

A market source said that Ensco’s 4½% notes due 2024 were off by around ½ point on the session, closing at 89 bid, with more than $24 million of turnover.

However, the company’s 5¾% long bonds due 2044 were seen having held their own and then come, gaining 1 point on the day to close at 74½ bid, on volume of more than $19 million.

Ensco meantime announced plans to tender for a portion of three series of its outstanding 2019, 2020 and 2021 paper, funding that offer with the proceeds from the new deal (see related story elsewhere in this issue).

Other drillers mixed, E&P easier

Elsewhere among the energy names, a trader opined that “oil was a little bit better – but I don’t think all that much was going on.”

He saw Swiss-based offshore drilling company Transocean’s 7½% notes due 2026 down 1/8 point on the day at 105 3/8 bid, with over $13 million having traded.

But Cayman Islands-based sector peer Noble Holding’s 7¾% notes due 2024 were seen having firmed by 3/16 point, ending at 93 3/8 bid, while its 6.05% long bonds due 2041 closed at just under 71 bid, up nearly ¾ point on the day. Around $15 million of each issue changed hands.

Among the exploration and production names, a market source said that Los Angeles-based California Resources’ 8% second-lien senior secured notes due 2022 – considered a sector bellwether issue – eased by ¼ point, closing at 87 bid, but on volume of only around $6 million.

There was a little more activity in Oklahoma City-based E&P operator Continental Resources, Inc.’s’ 4 3/8% notes due 2028, which lost ½ point Wednesday to end at 101¾ bid, on volume of around $12 million.

The energy names eased despite continued firmness Wednesday in the world crude oil markets, helped by news of a larger-than-expected 4.9 million-barrel drawdown in U.S. crude oil stockpiles during the latest reporting period.

Key domestic grade West Texas Intermediate for February delivery rose by 61 cents per barrel in New York Mercantile Exchange dealings, settling at $63.57, while the main international grade, March-contract North Sea Brent crude was up by $38 cents per barrel in London futures trading, ending at $69.20.

It was the third straight gain and the fifth in the last six sessions, for both crude oil grades.

However, Houston-based E&P company EP Energy Corp.’s 8% notes due 2025 bucked the generally negative sector trend, firming by 3/16 point to end at 79 3/8 bid, with about $12 million traded.

Cablevision, Altice continue easing

Away from the energy arena, a trader said that “there’s CVC [i.e. Cablevision] news with Altice and all of that kind of telecom stuff was a little weaker,” continuing the negative trend also seen on Tuesday.

He saw Netherlands-based cable giant Altice’s 6 5/8% notes due 2023 trading down ¾ point to about 104 bid, with over $19 million traded.

The company’s ATCNA 7 5/8% notes due 2025 were down almost 1½, at 94¾, while its 7¾% notes due 2022 were down 1½ points to 98, both on volume of more than $17 million.

The trader said that Cablevision’s 5 7/8% notes due 2022 traded down ¼ point to 99½, while its 5¾% notes due 2024 were down 1½ points to 98 bid.

Bethpage, N.Y.-based domestic cable operator Cablevision – which was bought by Altice in 2016 and folded into the latter’s Altice USA Inc. division – is shopping around a $500 million offering of 10-year guaranteed senior notes, expected to price on Friday via its CSC Holdings, LLC subsidiary

The CSC offering’s proceeds will be used to fund a dividend to corporate parent Cablevision, which in turn will fund a dividend to its corporate parent, Altice USA, which will in turn use those proceeds to fund a dividend to its stockholders immediately prior to and in connection with the separation of Altice USA from Altice NV, announced on Monday by the parent company.

Intelsat retreat continues

Also in that communications area, a trader said that Luxembourg-based communications satellite operator

Intelsat SA’s various bonds were weaker for a second straight session Wednesday, although there was no fresh negative news that might explain that drop.

“They were all generally a little weaker today,” he said. He saw the Intelsat Connect Finance SA 12½% notes due 2022 down ½ point on “a handful of trades,” finishing at 83 bid.

Its Intelsat Jackson Holdings SA 7¼% notes due 2020 were down ½ point at 92½ bid, while its 9¾% notes due 2025 were off by 5/8 point at 95¼ bid.

He also saw the company’s more distressed Intelsat (Luxembourg) SA 8 1/8% notes due 2023 down 1½ points to 45 bid, while its 7¾% notes due 2021 were down 2¼ points, “on just one trade,” to 46½ bid.

Rite Aid on the rise

Bucking the overall easier market trend, Camp Hill, Pa.-based drugstore chain operator Rite Aid Corp.’s

Paper was seen better in active trading Wednesday.

Its 6 1/8% notes due 2023 edged up by 1/16 point to end at 91 11/16 bid, on brisk volume of more than $40 million.

Its 6¾% notes due 2021gained 3/8 point to end at 100¾ bid, on volume of more than $14 million.

Company executives gave a well-received presentation Wednesday at the 36th annual J.P. Morgan Healthcare Conference in which they touted the benefits – including substantial deleveraging – that will accrue from the pending nearly $4 billion sale of almost half of their stores to larger rival Walgreens Boots Alliance.

They unveiled what they called “the new Rite Aid,” – smaller but more nimble and able to operate with more flexibility and efficiency.

Indicators remain easier

Statistical market performance measures were lower across the board for a second straight session on Wednesday; they had turned lower on Tuesday – their first overall negative performance since Dec. 19 – breaking a string of six consecutive sessions before that in which the indicators had been higher all around.

The KDP High Yield Daily Index dropped by 10 basis points Wednesday to end at 72.12, its second successive loss after eight straight gains. It had also eased by 1 bp on Tuesday, in contrast to Monday’s 1 bps rise and Friday’s 6 bps improvement.

Its yield rose by 5 bps to 5.20%, its first widening out after two unchanged sessions and five tighter sessions in a row, including Friday, when the yield had come in by 2 bps.

The Markit CDX Series 29 index lost 5/32 point on Wednesday to end at 108½ bid, 108 17/32 offered – its second loss in as many days after six consecutive gains before that. It had also eased by 9/32 point on Tuesday, versus Monday’s 1/32 point gain and Friday’s 3/16 point improvement.

And the Merrill Lynch High Yield Index was also on the downside for a second straight session Wednesday, retreating by 0.247%, after having backtracked by 0 .011% on Tuesday. Before that, the index had firmed over five straight sessions including Monday, when it had closed up by 0.057%.

Wednesday’s loss dropped its year-to-date return to 0.602% from 0.851% on Tuesday and from 0.862% recorded on Monday, its peak level for the year so far.

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