Upsized Aecom megadeal and Gateway Casinos issue price, trade actively; Murray Energy gains continue

By Paul Deckelman and Paul A. Harris

New York, Feb. 15 – The high yield primary sphere saw its first pricings of the week on Wednesday after two straight shut-outs, as some $1.255 billion of new U.S. dollar-denominated and fully junk-rated paper from domestic or industrialized-country borrowers came to market in two single-tranche deals.

Engineering company Aecom had the big deal of the day – an upsized and quickly shopped $1 billion of 10-year notes. Traders saw active dealings in that paper when the new notes hit the aftermarket and posted modest gains.

Canadian gaming operator Gateway Casinos & Entertainment Ltd. priced $255 million of seven-year secured notes in a regularly scheduled transaction off the forward calendar. Those bonds were heard by traders to have jumped several points in very active secondary dealings.

Primaryside players also noted that NGL Energy Partners LP began shopping around a $450 million eight-year offering, which is expected to price on Thursday.

Among recently-priced issues, Post Holdings Inc. and Cliffs Natural Resources Inc. were busy at slightly lower levels.

Away from the new deals, coal producer Murray Energy Corp.’s bonds were solidly higher in heavy trading for a second straight session.

Statistical market performance measures turned mixed – though barely so – on Wednesday, after having posted gains over the previous four consecutive sessions and in seven out of the prior 10 trading days. The indicators had turned higher across the board last Thursday, after having been lower all around last Wednesday and mixed for two straight sessions before that.

Aecom upsizes

The shutters came off the dollar-denominated primary market for the first time this week on Wednesday, as two issuers priced single-tranche deals, raising a combined total of $1.255 billion.

Aecom priced an upsized $1 billion issue of 10-year senior bullet notes (Ba3/BB) at par to yield 5 1/8%.

The issue size was increased from $750 million.

The yield printed in the middle of the 5% to 5¼% yield talk and in line with initial guidance in the low 5% area.

BofA Merrill Lynch was the left bookrunner for the debt refinancing deal. JP Morgan was the joint bookrunner.

Gateway Casinos prices tight

Gateway Casinos & Entertainment priced a $255 million issue of seven-year second priority senior secured notes (Caa1/CCC+) at par to yield 8¼%.

The yield printed at the tight end of the 8¼% to 8½% yield talk and tight to initial guidance in the mid 8% area.

The deal kept tightening while it was in the market, according to a trader who added that it played to a big following.

Pricing on the company's concurrent bank loan also tightened (to Libor plus 375 bps from 425 bps) during the time it was in the market, the trader noted.

Morgan Stanley, SunTrust, BMO, Macquarie, CIBC and National Bank of Canada were the joint bookrunners for the bond deal.

The Burnaby, B.C.-based owner of gaming properties plans to use the proceeds to refinance debt, as well as to fund the acquisition of two “Gaming Bundles” from the Ontario Lottery and Gaming Corp., to fund a dividend to shareholders and for general corporate purposes, including capital expenditures.

NGL for Thursday

NGL Energy Partners LP plans to roll out a $450 million offering of eight-year senior notes (existing B2/confirmed BB-/existing B+) on a global investor conference call scheduled to get underway at 11 a.m. ET on Thursday.

The deal is set to price an allocate Thursday afternoon.

Joint active bookrunner RBC will bill and deliver. Deutsche Bank and TD are also joint active bookrunners.

The Tulsa-based limited partnership plans to use the proceeds, along with its concurrent offering of common units, to reduce borrowings under its senior secured revolving credit facility, and for general corporate purposes.

Jerrold at the tight end

In the sterling-denominated market Jerrold Holdings Ltd. priced a £200 million issue of seven-year senior secured notes (//BB-) at par to yield 6 1/8% on Thursday.

The yield printed at the tight end of guidance in the 6¼% area.

Credit Suisse was the global coordinator and lead left bookrunner. Barclays, Goldman Sachs, HSBC, JP Morgan, Lloyds, Natixis and Natwest were joint bookrunners.

Jerrold, a financial institution based in Cheadle, England, plans to use the proceeds for general corporate purposes.

Tuesday inflows

The dedicated high yield bond funds saw daily cash inflows on Tuesday, the most recent session for which data was available at press time, a trader said.

High yield ETFs saw $89 million of inflows on the day.

Asset managers saw $8 million of inflows on Tuesday.

Dedicated bank loan funds saw more than twice the combined flows of the junk funds: the loan funds took in $219 million of daily inflows on Tuesday.

Gateway does great

In the secondary arena, traders saw Gateway Casinos’ new 8¼% senior secured second-priority notes due 2024 up around two points in very active dealings after that regularly scheduled issue had priced earlier in the session at par.

One trader pegged the bonds in a 102 to 102½ bid context, while at another shop, a market source likewise saw them up a deuce on the day at 102 bid.

More than $54 million of the notes were seen changing hands, including at least $48 million in round-lot trades, putting the credit high up on the day’s Most Actives list.

One of the traders noted that this was “a lot [of volume] relative to the issue’s size” of $255 million – a modest-sized offering by the junk market’s usual standards.

Aecom comes up

A trader saw the day’s other new issue – Los Angeles-based engineering company Aecom’s 5 1/8% megadeal due 2027 – having moved up around ½ point from the par level at which that quick-to-market issue had priced.

He estimated that more than $20 million of those bonds had traded.

Recent deals active

Some of the recently priced issues were among the day’s more active names, notably Post Holdings’ 5½% notes due 2025. A trader saw that paper down 5/32 point on the day, ending at 101 23/32 bid, with over $21 million of volume.

At another desk, a market source located the bonds at 101 5/8 bid, 101 7.8 offered, calling them down 1/8 point on the day.

Post, a St. Louis-based producer of consumer food products such as breakfast cereals, dried pasta, peanut butter and packaged snack foods, priced $1 billion of those notes at par on Feb. 6 as part of a $1.75 billion two-part drive-by offering, upsized from an originally announced $1.5 billion.

The other half of that megadeal – its $750 million of 5¾% senior notes due 2027, which had also priced at par – was being quoted on Wednesday at 101 3/8 bid, unchanged on the day, on about $9 million of turnover.

Also among the Most Actives, Cliffs Natural Resources’ 5¾% notes due 2025 “were just hanging around the par level, about unchanged,” a trader said, with volume of some $10 million of the notes.

“I saw nothing doing with Cliffs,” a second trader agreed.

At another shop, a market source – also seeing the bonds right at par – called them down 1/8 point on the day.

Cliffs, a Cleveland-based iron ore producer, priced $500 million of the notes at par in a quick-to-market offering last Friday. Traders saw the bonds little changed from that issue price during several subsequent sessions, although they were actively traded.

Murray Energy red hot

Away from the new deals, traders said that Murray Energy’s 11¼% notes due 2021 were both big winners on the day and the most actively traded credit in Junkbondland for a second straight session.

“They were up a lot,” a trader said, estimating a better-than 3-point gain to around the 82 bid level.

Another trader said the bonds were up by more than 3½ points, finishing at 82½ bid, with over $52 million having changed hands Wednesday.

That sizable rise followed the even bigger gains seen on Tuesday, when the notes shot up by around 4 points on the day, ending at 79 bid, with over $63 million having traded.

The bonds zoomed after the St. Clairsville, Ohio-based coal producer got a lift from preliminary quarterly results released by Foresight Energy LP, a St. Louis -based thermal coal producer in which Murray Energy holds about a 50% limited- partnership interest.

Foresight reported fourth-quarter adjusted EBITDA of approximately $98 million, more than double the year-earlier $42.3 million.

As of Dec. 31, 2016, Foresight and its subsidiaries had $103.7 million of unrestricted cash and cash equivalents on hand and $1.4 billion of total debt, including $352.5 million drawn on its revolving credit facility, which has total commitments of $450 million and outstanding letters of credit of $7 million.

Indicators turn mixed

Statistical market performance measures turned mixed – though barely so – on Wednesday, after having posted gains over the previous four consecutive sessions and in seven out of the prior 10 trading days. The indicators had turned higher across the board last Thursday, after having been lower all around last Wednesday and mixed for two straight sessions before that.

The KDP High Yield index notched its fifth straight gain on Wednesday, rising by 2 bps for a second day in a row to end at 72.30. It was the index’s 10th such upturn in the last 11 sessions.

Its yield was unchanged for the second time in three sessions to close at 5.07%, after having come in by 1 bp on Tuesday.

However, the Markit CDX Series 27 High Yield index edged downward for the first time after four consecutive gains, losing around 1/32 point to go out at 107 11/16 bid, 107 23/32 offered. On Tuesday, it had inched up by around the same amount, its seventh upturn advance the previous 10 sessions.

But the Merrill Lynch High Yield index moved up for a fifth successive session on Wednesday, gaining 0.054%, on top of Tuesday’s 0.049% improvement – the index’s 10th gain in the last 11 sessions.

That raised its year-to-date return to 2.124% from 2.069% on Tuesday, establishing a third successive new peak level for the year.

© 2015 Prospect News.
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