TransDigm two-parter, Inmarsat, split-rated Seagate lead $6 billion-plus drive-by bond binge

By Paul Deckelman and Paul A. Harris

New York, May 20 - The high-yield primary market saw one of its biggest days so far this year on Tuesday, in sharp contrast to Monday's sedate session.

High-yield syndicate sources said that seven issuers priced eight tranches of new fully junk-rated, U.S. dollar-denominated paper totaling just over $6 billion, almost all of it opportunistically timed and quickly shopped drive-by offerings. On top of that, another issuer did a split-rated $1 billion deal that attracted interest from both junk players and high-grade investors crossing over to pick up a little yield.

The day's giant-sized tally was the biggest seen since May 8, when eight tranches totaling $6.3 billion were priced, according to data compiled by Prospect News; if you count the crossover megadeal, Tuesday was second this year only to the record $11.25 billion that got done in five tranches on April 23, the data indicates. Either way, issuance volume totaled well more than 10 times the amount of new paper generated in Monday's two deals.

Most of the transactions priced fairly late in the session, and several of them were not seen in aftermarket trading.

The big deal of the session came from aircraft parts manufacturer TransDigm Inc., which did $2.35 billion in two-parts - $1.15 billion of eight-year notes and $1.2 billion of 10-year paper.

Also doing $1 billion deals were satellite telecommunications operator Inmarsat plc, whose eight-year offering came to market via a financing subsidiary, and data storage technology manufacturer Seagate HDD Cayman, whose split-rated crossover issue was doubled from its originally announced size.

There was also a slew of more moderately sized offerings. Oil and natural gas concern Cimarex Energy Co. and cable-TV company Cablevision Systems Corp. each did an upsized $750 million of 10-year notes.

Silicon Valley electronic manufacturing services provider Sanmina Corp. did an upsized $375 million of five-year senior secured notes, while gaming technology producer Scientific Games Corp. placed its bet with a downsized $350 million of seven-year senior subordinated paper.

Besides those deals, all of them drive-bys, there was one regularly scheduled offering that priced off the forward calendar - health club operator 24 Hour Fitness Worldwide Inc.'s $500 million of eight-year notes.

Of those new bonds that did see some aftermarket activity, most traded around their respective issue prices, or in the case of Seagate, slightly lower, but Cimarex was the major exception; its bonds moved up sharply right out of the gate, tacking on a couple of points. They subsequently came down from those initial highs but still ended the day trading well above their issue price.

Traders said that the new deals and some other recent issues dominated the secondary market, although there was some brisk activity in several issues of Caesars Entertainment Corp. paper.

Statistical market performance indicators were mixed for a third consecutive session on Tuesday.

TransDigm prices $2.35 billion

A massive Tuesday session in the primary market saw a parade of super-sized drive-by deals.

Seven issuers combined to price eight tranches of high-yield notes, with seven of those eight tranches coming in a.m.-to-p.m. drive-by deals.

The combined take was $6 billion.

Executions tended to be tight, but there were exceptions.

Five of the eight tranches came at the tight end of talk. Two came at the wide end. And one came well wide.

Three of the eight tranches were upsized, and one was downsized.

The day's biggest issuer was TransDigm, which brought $2.35 billion of senior notes (Caa1/CCC+) in two tranches.

The deal included a $1.15 billion tranche of eight-year notes which priced at par to yield 6%, at the tight end of the 6% to 6 1/8% yield talk.

TransDigm also priced a $1.2 billion tranche of 10-year notes at par to yield 6½%, at the tight end of the 6½% to 6 5/8% yield talk.

Morgan Stanley, Credit Suisse, UBS, Citigroup, Barclays, RBC and HSBC were the joint bookrunners.

The Cleveland-based manufacturer of commercial and military aerospace components plans to use the proceeds to refinance debt, to fund a dividend and for general corporate purposes.

Inmarsat at a discount

Inmarsat Finance plc priced a $1 billion issue of 4 7/8% eight-year senior notes (Ba2/BB+) at 99.191 to yield 5%.

The yield printed at the wide end of the 4 7/8% to 5% yield talk.

Credit Suisse and Barclays were the global coordinators for the quick-to-market transaction.

Credit Agricole, RBC and RBS were the joint bookrunners.

The London-based satellite telecommunications company plans to use the proceeds to refinance its 7 3/8% senior notes and for general corporate purposes.

Cablevision upsized and tight

CSC Holdings LLC, a subsidiary of Cablevision Systems, priced an upsized $750 million issue of non-callable 10-year senior notes (Ba2/BB) at par to yield 5¼%.

The quick-to-market deal was upsized from $500 million.

The yield printed at the tight end of yield talk in the 5 3/8% area.

Citigroup, BofA Merrill Lynch, Barclays, BNP Paribas, Credit Agricole, Credit Suisse, Deutsche Bank, J.P. Morgan, Natixis, RBC, RBS, Scotia, SunTrust, U.S. Bancorp, Guggenheim and ING were the joint bookrunners.

The Town of Oyster Bay, N.Y.-based cable television company plans to use the proceeds, including those resulting from the $250 million upsizing of the deal, to repay bank debt.

Cimarex upsized and tight

Cimarex Energy priced an upsized $750 million issue of non-callable 10-year senior notes (Ba1/BB+) at par to yield 4 3/8%.

The quick-to-market deal was upsized from $600 million.

The yield printed at the tight end of yield talk in the 4½% area.

Well Fargo was the left bookrunner. Deutsche Bank, JPMorgan, Mitsubishi and U.S. Bancorp were the joint bookrunners.

The Denver-based oil and gas exploration and production company plans to use the proceeds for general corporate purposes, which include paying down its revolver.

24 Hour Fitness $500 million

In the only Tuesday deal to have run a roadshow, 24 Hour Fitness Worldwide priced a $500 million issue of eight-year senior notes (Caa1/CCC+) at par to yield 8%.

The yield printed at the tight end of the 8% to 8¼% yield talk.

JPMorgan, Deutsche Bank and Morgan Stanley were the joint bookrunners for the LBO financing.

Sanmina upsizes

Sanmina priced an upsized $375 million issue of non-callable five-year senior secured notes (Ba2/BB) at par to yield 4 3/8%.

The quick-to-market deal was upsized from $350 million.

The yield printed at the wide end of the 4¼% to 4 3/8% yield talk.

BofA Merrill Lynch, Goldman Sachs and Deutsche Bank were the joint bookrunners for the debt refinancing deal.

Scientific Games downsized and wide

Scientific Games priced a downsized $350 million issue of 6 5/8% seven-year senior subordinated notes (B3/B) at 99.321 to yield 6¾%.

The deal was downsized from $375 million.

The yield printed 25 basis points beyond the wide end of the 6¼% to 6½% yield talk.

BofA Merrill Lynch, Credit Suisse, JPMorgan, RBS, UBS and Goldman Sachs were the joint bookrunners for the debt refinancing.

Seagate's crossover deal

In the crossover space, Seagate HDD Cayman priced a $1 billion split-rated issue of senior notes due Jan. 1, 2025 (Ba1/BBB-/BBB-) at par to yield 4¾%.

The deal doubled from the announced size of $500 million.

The yield printed at the tight end of the 4¾% to 4 7/8% yield talk.

Morgan Stanley was the sole bookrunner for the general corporate purposes deal.

Moy Park starts roadshow

In Tuesday news from the European high-yield primary Ireland-based poultry producer Moy Park (Bondco) plc began a roadshow for a £250 million two-part offering of senior notes.

The deal includes a £50 million tranche of three-year senior floating-rate notes and a £200 million tranche of seven-year fixed-rate notes.

Barclays, Deutsche Bank and Goldman Sachs are the lead managers.

Proceeds from the Rule 144A and Regulation S deal will be used to fund a distribution to Marfrig Group for repayment of certain of its debt, to pay a deferred consideration for the purchase of the Keystone Foods assets in Europe and for general corporate purposes.

New issues dominate

In the secondary market, a trader said that "it was all new issues today."

Noting that almost all of Tuesday's pricing activity took place "in the last hour" of the day, he said that junk market participants mostly sat around all day, listening to new-deal conference calls and waiting for the floodgates to open on the deluge of fresh paper.

Cimarex shows strength

Probably the most interesting deal in the aftermarket was by no means the largest - far from it, as Cimarex Energy's $750 million of 4 3/8% notes due 2024 initially firmed smartly when they were freed for secondary dealings, with one trader seeing them having gotten as good as a 102 to 102½ context.

"Then they came in," he said, but still ended the day trading between 101¼ and 101 5/8 bid.

A second trader also saw the energy company's paper hit a robust 102 bid peak level, after the quick-to-market offering was upsized from the originally announced $600 million and priced at par. He saw the bonds going home trading between 101½ and 1013/4.

At another shop, a trader quoted the bonds at 101¾ bid, 102¾ offered.

New deals near issue price

Aside from that Cimarex surge, traders said that the day's new issues mostly traded near where they had priced.

For instance, a trader saw Sanmina's 4 3/8% senior secured notes due 2019 at 100¼ bid, 100½ offered late in the day. The San Jose, Calif.-based provider of manufacturing services to electronics and other high-tech firms had priced its quickly shopped $375 million offering at par after upsizing the transaction for the originally announced $350 million.

Cablevision's new CSC Holdings 5¼% notes due 2024 were trading between par and 100 1/8, a trader said, with a second seeing the cable system operator's paper at 99 5/8 bid, 100 1/8 offered; the $750 million same-day deal had priced at par after having been upsized from an original $500 million.

"They traded into a par bid multiple times," yet another market source suggested.

The 24 Hour Fitness 8% notes due 2022 firmed a little to the 100¼ bid mark, as trader said, while a second saw the San Ramon, Calif.-based exercise club operator's $500 million deal at 100 1/8 bid, 100½ offered, after having priced at par off the forward calendar.

A trader said Seagate's 4¾% notes due 2025 "have been trading under par" ever since the Dublin-based data storage technology manufacturer's $1 billion offering of split-rated paper had first priced at par after the deal was doubled in size from an originally announced $500 million. He quoted the notes at 99½ bid, 99¾ offered.

"Seagate just went out with the tide," he quipped.

Another trader had the drive-by bonds going home at 99½ bid, par offered.

Inmarsat's 4 7/8% notes due 2022 were also seen trading below par, although it should be noted that the satellite telecommunications company's $1 billion quick-to-market deal had also priced at a discount - 99.191 to yield 5%.

Traders saw no immediate aftermarket dealings in TransDigm's two-part $2.235 billion offering, or in New York-based gaming technology provider Scientific Gaming's 6 5/8% senior subordinated notes due 2021.

Monday deals trade

A trader saw Monday's offering of 5 3/8% notes due 2022 from Live Nation Entertainment, Inc. begin trading after having priced late in the session on Monday.

"We traded some right out of the gate this morning," he said, with the bonds having been quoted in a par to 100 3/8 bid context around noon ET.

Later on in the afternoon, he said that the bonds had tightened to between 100 1/8 and 1001/4.

The Los Angeles-based producer of music concerts and other forms of live entertainment events had sold $250 million of the notes in a quickly shopped deal on Monday.

That session's other junk bond transaction - Berwyn, Pa.-based aircraft components manufacturer Triumph Group, Inc.'s $300 million of 5¼% notes due 2022 - were seen on Tuesday as having firmed up to the 100 7/ 8 bid, 101 3/8 offered level, up from their par issue price. They were around where they had finished up in initial aftermarket dealings, and about where they had gone out in initial aftermarket dealings on Monday.

Caesars seen busy

A trader said that the day's activity "has either been yield-to-call paper or recent new deals," although he said that Las Vegas-based gaming giant Caesars Entertainment dominated the junk most-actives list.

"Only about 10 or 11 companies had more than $10 million traded on Trace," he opined, "and it was mostly Caesars," even though there seemed to be no real news to act as catalyst, as the bonds finished the day mixed.

A trader said there was "pretty good volume" in both the 9% and 8½% notes due 2020, with over $19 million of the former and $17 million of the latter issue seen having traded. The 9% notes ended down over half a point at 803/4, while the 8½% notes declined nearly 1½ points to 80.

The 10% notes due 2018 were unchanged at 42, he said, on turnover of over $13 million.

The trader also saw the 12¾% notes due 2018 falling almost a point to 481/4.

On the upside, the 6½% notes due 2015 rose 1½ points to 871/2, and the 10¾% notes due 2016 gained a point to 851/2.

A second market source pegged the 10% notes at 42¼ bid, up half a point on the day.

Indicators remain mixed

Statistical junk performance indicators were seen by market sources as having been mixed for a third consecutive session on Tuesday. They had turned mixed on Friday and remained that way on Monday and again on Tuesday, after being lower across the board last Thursday.

The Markit Series 22 CDX North American High Yield index lost ¼ point on Tuesday to end at 106½ bid, 106 5/8 offered, its second downturn in a row. On Monday, it had eased by 1/32 point.

The KDP High Yield Daily index was unchanged at 74.96 after having risen by 3 bps on Monday.

Its yield meanwhile moved up by 1 bp to close at 5.09% after having come in by 1 bp in each of the previous two sessions.

The widely followed Merrill Lynch High Yield Master II index improved by 0.047% on Tuesday to close with a year-to-date return of 4.443%, yet another new peak level for 2014 so far.

Stephanie N. Rotondo contributed to this review.

© 2015 Prospect News.
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