CommScope, Provident, Legacy, Vantage price in $1.8 billion day; US Air makes return flight

By Paul Deckelman and Paul A. Harris

New York, May 22 - The high-yield primary market saw another fairly active session on Wednesday, as nearly $1.8 billion of new dollar-denominated, fully junk-rated paper from domestic or industrialized-nation borrowers priced.

That was well down from Tuesday's nearly $5 billion day, which had been dominated by a giant-sized two-part deal from communications satellite operator Intelsat SA.

With no such mega deal in sight on Wednesday, activity was centered in more moderately-sized offerings.

Communications industry infrastructure provider CommScope Holding Co., Inc. had the day's big deal, with a $550 million issue of seven-year senior PIK toggle notes.

Mortgage lender Provident Funding Associates, LP brought a $500 million issue of eight-year notes to market.

Healthcare provider Vantage Oncology, Inc. priced $250 million of four-year secured notes.

Besides those scheduled forward calendar deals that priced after brief roadshows, there was also a pair of quickly shopped same-day offerings. Energy operator Legacy Reserves LP priced $250 million of eight-year notes.

And US Airways - which had just priced a $500 million bond deal on Tuesday - re-visited the market on Wednesday with a $100 million offering of equipment trust certificates.

Most of the day's deals came to market too late for any kind of secondary activity.

There was meantime some brisk activity in U.S Air's Tuesday deal, as well as another aircraft-oriented name, International Lease Finance Corp., which also priced a deal on Tuesday.

Statistical measures of market performance, which had broken out of rut on Tuesday when they were mostly higher, returned to their previous mixed status on Wednesday

CommScope offers PIK notes

Primary market news volume on both sides of the Atlantic Ocean remained heavy on Wednesday.

In the dollar junk market, five issuers brought single-tranche deals, raising a combined total of $1.79 billion.

CommScope Holding priced a $550 million issue of seven-year senior PIK toggle notes (Caa1/B-) at par, with a cash yield of 6 5/8%.

The notes pay a 6 5/8% cash coupon and a 7 3/8% PIK coupon.

The coupons and reoffer price came on top of price talk.

J.P. Morgan, BofA Merrill Lynch, Deutsche Bank and Goldman Sachs were the joint bookrunners.

Proceeds will be used to fund a shareholder dividend and for general corporate purposes, including potential acquisitions.

Provident Funding upsizes

Provident Funding Associates LP and PFG Finance Corp. priced an upsized $540 million issue of eight-year senior notes (Ba3/B+) at par to yield 6¾%.

The yield printed at the tight end of the 6¾% to 7% yield talk. The amount was increased from $500 million.

BofA Merrill Lynch, Citigroup and Jefferies were the joint bookrunners for the deal.

Proceeds will be used to repurchase all of the company's 10 5/8% senior secured notes due 2017 and for general corporate purposes.

Vantage prices four-year deal

Vantage Oncology priced a $250 million issue of four-year senior secured notes (B2/B) at par to yield 9½%, on top of yield talk.

Jefferies was the left bookrunner for the debt refinancing. SunTrust and BMO were the joint bookrunners.

Legacy drives by

Legacy Reserves LP and Legacy Reserves Finance Corp. priced a $250 million issue of 6 5/8% eight-year senior notes (Caa1/B-) at 98.405 to yield 6 7/8%.

The yield printed on top of yield talk. The reoffer price came in line with discount talk of about 1.5 points.

Wells Fargo was the left bookrunner for the quick-to-market deal.

BofA Merrill Lynch, RBC, UBS, Barclays, Citigroup and J.P. Morgan Securities LLC were the joint bookrunners.

The Midland, Texas-based company plans to use the proceeds to repay revolver debt.

US Airways sells pass throughs

US Airways priced a $100 million issue of its 2012-2C pass through certificates (B3/B/BB-) at par to yield 5.45%.

Goldman Sachs ran the books.

The Tempe, Ariz.-based airline plans to use the proceeds to finance its purchase of seven Airbus aircraft scheduled to be delivered from June 2013 to October 2013 and to use the balance, if any, for general corporate purposes.

Talking the deals

Looking toward what promises to be a busy Thursday session, Midstates Petroleum Co., Inc. and Midstates Petroleum Co. LLC talked their $700 million offering of eight-year senior notes to price with a yield in the 8 7/8% area on Wednesday.

Morgan Stanley, SunTrust, BofA Merrill Lynch, RBC, SG CIB, Citigroup, Goldman Sachs, Natixis and RBS are the joint bookrunners.

And Century Aluminum Co. talked its $250 million offering of eight-year senior secured notes (B3/B) to yield 7¼% to 7½%.

Credit Suisse and Wells Fargo are the joint bookrunners.

Integrated Dental prices

News volume from the European high yield also remained heavy on Wednesday.

Integrated Dental Holdings and IDH Finance plc priced £400 million of high-yield notes in three secured tranches.

The deal included a £200 million tranche of senior secured fixed-rate notes due Dec. 1, 2018 (B2//) that priced at par to yield 6%.

In addition the company priced a £125 million tranche of senior secured floating-rate notes due Dec. 1, 2018 (B2) at par to yield Libor plus 500 basis points.

The junior tranche was comprised of £75 million of senior secured second-lien fixed-rate notes due June 1, 2019 (Caa1//), which priced at par to yield 8½%.

Bookrunner Credit Suisse will bill and deliver. JPMorgan, ING, Lloyds TSB, Mizuho, SG CIB and UBS were also bookrunners.

The Kearsley, England-based dental services provider plans to use the proceeds to refinance debt.

Big Thursday on tap for Europe

Looking to the Thursday session in Europe, four European issuers have deals on tap to price.

Ireland's Elan Corp. talked its $800 million offering of eight-year senior notes (confirmed Ba3/expected BB-) to yield in the 6¼% area.

Morgan Stanley has the books.

England's Thomas Cook Group talked its €525 million offering of seven-year senior notes to yield 7 5/8% to 7 7/8%.

Barclays, BNP, Credit Suisse, DNB, Jefferies, Lloyds, Royal Bank of Scotland and SG CIB are managing the sale.

Transportation services provider Avanza Spain SAU set price talk for its €490 million two-part offering.

A €315 million tranche of five-year senior secured notes (B1/B+), which comes with two years of call protection, is talked to yield 7½% to 7¾%. The secured notes are being sold via special-purpose financing unit AG Spring Finance Ltd.

Meanwhile AG Spring Finance II Ltd. is offering €175 million of six-year senior unsecured notes (B2/B-), which come with three years of call protection and are talked to yield 9½% to 9¾%.

Goldman Sachs, JPMorgan and UniCredit are the lead managers.

And English financial services provider Equiniti set price talk for its £440 million two-part offering of 5.5-year notes (B3/B).

A tranche of floating-rate notes, targeted in size at £175 million to £200 million, is talked at a 550 bps spread to Libor. The floating-rate notes come with one year of call protection.

The remainder of the deal is expected to come in the form of fixed-rate notes, which are talked to yield 6¾% to 7%. The fixed-rate notes come with two years of call protection.

JPMorgan, Lloyds and Citigroup are the leads.

Look for the run rate from Europe to remain notably vigorous, a London-based debt capital markets banker advised on Wednesday.

The European high-yield sector is expected to churn out about four deals per week, the source added.

Floaters invigorate CLOs

A recent resurgence in floating-rate notes issuance points up a healthy bid from a re-invigorated European CLO market, a sell-side source said on Wednesday.

Senior secured floating-rate notes, such as the above-mentioned Integrated Dental deal that priced on Wednesday, are being taken down by the CLOs for two reasons, the source said.

First of all, there is not a sufficient amount of bank loan paper to absorb all the cash that needs to be put to work.

Second, senior secured notes represent a means of circumnavigating European banks' historical resistance to covenant-lite loans. With notes, the issuer avoids cumbersome bank loan covenants while still providing CLOs with the secured paper that they require.

As for the recent spate of multi-tranche deals out of Europe (see Integrated Dental, Equiniti and Avanza, above), chalk that trend up to the success of European underwriters in wrangling the accounts into less liquid deals than the buyside there has traditionally demanded, the source said.

Now, instead of looking at tranche sizes, accounts are more apt to measure an issuer's deal using the sum of tranches being offered, the banker added.

Vantage trades near issue

In the secondary market, a trader said that Vantage Oncology's new 9½% senior secured notes due 2017 were quoted late in the session at 100 1/8 bid, 100 7/8 offered.

That was just slightly above the par level at which the Manhattan Beach, Calif.-based owner and operator of radiation oncology centers had priced its deal earlier in the session.

None of the day's other deals were seen immediately trading around, having priced fairly late in the day.

At another desk, a trader quipped that with the junk market feeling softer in line with a slide in stocks, "maybe they [the issuers and their underwriters] were waiting for everyone to leave before they priced - so their deals wouldn't trade down."

He saw the junk secondary weaker by anywhere from 1/8 to ¼ point, pretty much across the board.

That pullback coincided with a stock slide as investors fretted about the possibility that the Federal Reserve might begin tapering off its long-held campaign of large-scale asset buying, according to the minutes of the central bank leadership's most recent meeting. Both the Dow Jones Industrial Average and the Standard & Poor's 500 gave up robust early gains to end lower, with the latter index posting its biggest decline in three weeks.

U.S. Air seen active

Back in Junkbondland, volume levels on U.S. Air's new 6 1/8% notes due 2018 were seen flying high on Wednesday, with a market source estimating that over $41 million of those notes had changed hands by mid-afternoon, with final volume on the day likely to top that. He saw the bonds get as good as 102 bid, although another trader saw them ending considerably below that peak.

He had the bonds going home at straddling Tuesday's par issue price, at 99 7/8 bid, 100 1/8 offered.

That was off from the 100¼ bid, 100¾ offered level at which he had seen the airline operator's upsized $500 million quick-to-market issue finish in Tuesday's initial secondary dealings.

ILFC trades up

Another fairly active issue on Wednesday was the new International Lease Finance Corp. floating-rate notes due 2016, with well over $20 million of the bonds having traded.

A market source saw those bonds having gotten as good as 101¼ bid, up from the par level at which the Los Angeles-based aircraft teasing company had priced its quickly shopped $550 million deal on Tuesday.

Although the split-rated (Ba3/BBB-/BBB) offering was seen mostly of interest to high-grade accounts playing the crossover market to pick up a little yield, a junk trader said that he did see some levels in it among junk participants.

He saw the bonds at 100¾ bid, 101¼ offered on Wednesday afternoon.

A second junk trader also saw the bonds going out there, calling that unchanged on the day.

Intelsat trades off

Among other deals which had come to market on Tuesday, a trader saw both halves of Intelsat's $2.635 billion behemoth having lost ground from their initial trading levels after their pricing.

He quoted its 5½% guaranteed senior notes due 2023 at 99 5/8 bid, 100 1/8 offered, calling that down 5/8 point on the day.

The Luxembourg-based communications satellite operator's Intelsat-Jackson Holdings SA subsidiary had priced $2 billion of those notes at par on Tuesday in a drive-by deal, and they were seen having initially firmed a little to a 100¼ to 100¾ bid range.

The trader also saw the other part of that deal - the $635 million add-on to the company's existing 6 5/8% non-guaranteed senior notes due 2022 - having lost 7/8 point on the day, going out at 105½ bid, 106 offered. Intelsat-Jackson had priced that piece of the deal on Tuesday at 106.25 to yield 5.596%, and they had initially traded up to 106 3/8 bid, 106 7/8 offered.

At another shop, a trader saw the 5½% notes finishing at 100 3/8 bid, 100 5/8 offered on Wednesday, but he had not seen any activity in the 6 5/8s.

Springleaf slips

Back on terra firma, a trader saw Springleaf Finance Corp.'s 6% notes due 2020 trading around 99 7/8 bid, 100 1/8 offered during the morning.

But then, he said, "they started to fade," and were going out in a bid range of 99¾ to 99 7/8.

That was down from the levels seen Tuesday, when the Evansville, Ind.-based consumer loan company formerly known as American General Finance Inc. had priced its $300 million issue at par, after having upsized it from an originally announced $250 million. They had traded around par bid, 100¾ offered in initial aftermarket action, but "they weren't doing that great" on Wednesday, the trader said.

A second trader agreed, pegging the bonds on Wednesday at 99¼ bid, 99¾ offered, which he called off by ¾ point.

Market indicators turn mixed

Overall, a trader saw little secondary market activity away from the new deals, which have been the market's dominant focus over the previous several sessions.

Statistical junk performance indicators turned mixed on Wednesday after having been mostly better on Tuesday. They had also been mixed over the two sessions before that.

The Markit Series 20 CDX North American High Yield Index continued its recent pattern of choppy day-to-day activity, losing 15/32 point on Wednesday to go home at 106½ bid, 106¾ offered. It had posted a gain of 1/8 point on Tuesday, bouncing back from a fall on Monday.

However, the KDP High Yield Daily Index meantime saw its fourth consecutive gain Wednesday, rising by 3 basis points to close at 76.49. On Tuesday, it had been up by 1 bp for a third straight session.

Its yield eased by 1 bp Wednesday to 5.02% after having been unchanged over the two prior sessions.

The widely followed Merrill Lynch High Yield Master II Index saw its third straight advance on Wednesday, as it gained 0.005%, on top of Tuesday's 0.027% rise.

The latest gain raised its year-to-date return to 5.485% from Tuesday's 5.48%. However, it remained below its peak level for the year of 5.835%, set on May 9.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.