Upsized BWAY two-part deal prices; new Dana, KCA deals trade actively; market digests London news

By Paul Deckelman and Paul A. Harris

New York, March 22 – The high-yield primary sphere showed only one pricing on Wednesday – but it was a big one, as rigid plastic and metal container maker BWAY Holding Co. came to market late in the session with an upsized $2.68 billion two-part offering, after some tinkering with the originally announced tranche sizes.

On Tuesday, a trio of domestic or industrialized-country issuers had priced $1.09 billion of new U.S. dollar-denominated and fully junk-rated paper.

Traders said that two of those new deals were actively traded on Wednesday, though little changed from where they had originally come to market – Scotch energy drilling contractor KCA Deutag UK Finance plc’s five-year secured notes and automotive components manufacturer Dana Corp.’s eight-year unsecured notes.

Elsewhere, traders noted some weakness in the market in response to the news of a terrorist attack in London, although levels were seen to have improved later in the day after the alarming initial news had been digested.

They also noted some activity in healthcare names such as Community Health Systems Inc. ahead of Thursday’s scheduled vote on the Republican congressional replacement for the current Obamacare law.

Statistical market performance measures were lower on Wednesday for a third consecutive session and for the fifth time in the last eight trading days. They had turned lower on Monday and stayed there on Tuesday and again on Wednesday after having been mixed on Friday and higher on Thursday, after two consecutive mixed sessions before that.

Oversubscribed BWAY upsizes

News volume in the primary market slowed dramatically on Wednesday.

Nevertheless, the one dollar-denominated deal that did price was oversubscribed and upsized.

BWAY Holding Co. priced an upsized $2.68 billion two-part high-yield notes transaction which saw an upsize in the shorter maturity secured tranche and a downsize in the longer maturity unsecured tranche.

The two-part acquisition financing deal, which was upsized from $2.63 billion, featured an upsized $1.48 billion amount of seven-year senior secured notes (B2/B-), which priced at par to yield 5½%. The tranche was upsized from $1.38 billion. The yield printed at the wide end of yield talk in the 5 3/8% area.

In addition BWAY priced a downsized $1.2 billion amount of eight-year senior unsecured notes (Caa2/CCC) at par to yield 7¼%. The tranche size was decreased from $1.25 billion. The yield printed 12.5 basis points beyond the wide end of yield talk in the 7% area.

In addition to the $50 million shift of proceeds to the secured tranche from the unsecured tranche, the secured tranche was further grown by another $50 million, rendering a net upsize of the secured tranche of $100 million and a net downsize of the unsecured tranche of $50 million.

Hence the net upsize across both tranches was $50 million.

The order books for both tranches were said to be about 1.5-times the respective offering sizes, according to a trader who added that a couple of big accounts figured prominently in the deal.

Goldman Sachs, BofA Merrill Lynch, BMO and Citigroup were the joint bookrunners.

BofA Merrill Lynch as the left bookrunner for 5½% senior secured notes due April 15, 2024.

Goldman Sachs was the left bookrunner for the 7¼% senior unsecured notes due April 15, 2025.

Ascent roadshowing $1.5 billion

Ascent Resources Utica Holdings, LLC plans to market $1.5 billion of senior notes (B3/B-) in two tranches early next week.

The debt refinancing deal features five-year notes and eight-year notes which come with three years of call protection. Tranche sizes remain to be determined.

JP Morgan Securities LLC, Barclays, BofA Merrill Lynch, Credit Suisse, Goldman Sachs and Natixis are managing the sale.

Aramark prices tight

During the European primary market session Aramark priced a €325 million issue of eight-year senior notes (Ba3/BB+) at par to yield 3 1/8%.

The yield printed at the tight end of yield talk in the 3¼% area.

Joint bookrunner Goldman will bill and deliver. Credit Suisse, Barclays, J.P. Morgan, BofA Merrill Lynch, Morgan Stanley and Wells Fargo were also joint bookrunners for the debt refinancing deal.

Adler Pelzer roadshow

Elsewhere Germany-based Adler Pelzer Group plans to run a Thursday-Friday roadshow for its €350 million offering of seven-year senior secured notes (B1).

JP Morgan is leading the offer.

The Bad Durrenberg, Germany-based producer of automotive acoustic systems and trim parts plans to use the proceeds to refinance debt.

BWAY prices late

Traders noted that Atlanta-based rigid-container BWAY Holding’s big two part deal priced late in the day on Wednesday.

Consequently, they did not immediately report any initial aftermarket activity in the big new two-tranche transaction.

New Dana, KCA trade actively

Traders did see considerable activity in two of the new deals that had come to market during Tuesday’s session.

A trader said that nearly $30 million of KCA Deutag’s 9% senior secured notes due 2022 traded, seeing the notes in a 99 3/8 to 100¼ bid context, with most of the activity around the 99 5/8 bid level.

“All of the bids were below par,” he noted.

That was up from the 98.566 level at which the $535 million regularly scheduled forward calendar offering had priced late in the day on Tuesday, yielding 10.25%

The Aberdeen. Scotland-based driller’s existing 9 5/8% notes due 2018, which are being redeemed using the new-deal proceeds, moved up by nearly a point to above the 105 bid level, with over $14 million having traded.

Dana Corp.’s 5¾% notes due 2025 were seen in a 99¾-to par bid, a trader said, with over $18 million having changed hands.

Two other traders saw the Maumee, Ohio-based automotive components maker’s new deal ending right at par.

The quickly shopped $400 million deal had priced at par on Tuesday.

Market digests London news

Overall, a trader said that the junk market “was weak this morning – but then came back,” at least part of the way.

He said that initially, things “had sold off,” in line with lower equities, as the financial markets weighed the impact of the news coming out of London, where at least four people were killed and many others wounded in what authorities there were terming an automobile and knife terrorist attack near the Parliament building, which ended with the assailant being shot dead by police.

However, the trader said that the sell-off was limited – he called it “not a real sell off, with people just dropping bids” and trying to buy at lower levels.

“Things pretty much came back soon after London was deemed essentially a one-off event,” he said.

Another trader, meantime, said that “we saw some redemptions today.”

He noted that “a lot of yield-to-call debt was for sale.”

Healthcare awaits vote

With the House of Representatives set to take its long-awaited vote on the possible repeal and replacement of the current healthcare law passed under the previous Obama administration, some positioning was seen in some of the healthcare names whose fortunes could be affected.

Community Health Systems’6 7/8% notes due 2022 were seen by a trader down ¼ point, at 83½ bid, on volume of over $10 million.

The Franklin, Tenn.-based hospital operator’s chief financial officer meantime said during an investment conference presentation that the company was proceeding with planned asset sales as a means of improving its debt structure (see related story elsewhere in this issue).

Indicators stay lower

Statistical market performance measures were lower on Wednesday for a third consecutive session and for the fifth time in the last eight trading days. They had turned lower on Monday and stayed there on Tuesday and again on Wednesday after having been mixed on Friday and higher on Thursday, after two consecutive mixed sessions before that.

The KDP High Yield Daily Index plunged by 25 basis points on Wednesday to end at 71.38, its third straight loss after two consecutive gains, which in turn had followed nine consecutive setbacks. On Tuesday, it had retreated by 7 bps.

It yield rose by 5 bps on Wednesday to end at 5.44%, its second straight widening after having been unchanged on Monday. On Tuesday, it had risen by 3 bps.

The Markit CDX Series 27 High Yield index saw its third loss in a row on Wednesday, after three straight advances before that, easing by a little over 1/32 point to 106 11/16 bid, 106¾ offering. On Tuesday, the index had lost almost 7/16 point.

And the Merrill Lynch High Yield index retreated by 0.312% Wednesday, its fourth successive loss; it had also declined by 0.151% on Tuesday. The four losses followed gain for two straight sessions before that.

Wednesday’s downturn dropped its year-to-date return to 1.418% from Tuesday’s 1.736% close.

Those levels remain well down from the index’s 2017 peak level of 3.19%, which was established on March 1.

© 2015 Prospect News.
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