Pinnacle Foods does downsized eight-year deal; Sprint swoons on acquisition offer from DISH

By Paul Deckelman and Paul A. Harris

New York, April 15 - The high-yield primary market began the new week on Monday on a relatively quiet note with just one new dollar-denominated, junk-rated deal heard by syndicate sources to have priced.

Pinnacle Foods Finance LLC, a unit of the company that produces such familiar consumer food products as Birds Eye frozen vegetables, Mrs. Paul's frozen fish sticks, Duncan Hines cake mixes and Vlasic pickles, served up a downsized $350 million of eight-year notes. However, that deal came too late in the session for any kind of an aftermarket.

There was one other very small transaction, from U.S. Well Services, LLC, which did a $12 million add-on to its existing 2017 notes, although that issue was a private placement.

The primaryside also saw two announcements of prospective deals, with energy operator Rosetta Resources Inc. planning a $700 million issue of eight-year notes and Canadian telecommunications company Cogeco Cable Inc. scheduling a $400 million seven-year offering. Both are expected to price later this week.

In the non-dollar market, Elior Finance & Co. SCA, a unit of the French food-service company, was heard by syndicate sources to be hitting the road onTuesday with a €300 million offering of secured notes.

Sources said that German media and marketing group Constantin Medien AG, which had been expected to sell €65 million of five-year bonds around the latter part of the week, moved up its timetable, called an early end to the subscription period and priced the already well-oversubscribed issue on Monday.

Away from the new-deal realm, news developments caused some notable price movements on Monday in familiar names.

Sprint Nextel Corp.'s bonds - and those of its Sprint Capital Corp. subsidiary - tumbled, although the wireless operator's stock soared on the announcement that satellite television broadcaster DISH Network Corp. had made a surprise offer to buy Sprint, presumably in order to get hold of its valuable airwave spectrum space. DISH's own bonds also weakened, as the company indicated it would fund a big chunk of the total $25 billion purchase price through the issuance of new debt.

J.C. Penney Co. Inc. was also a topical name, its bonds taking a hit on the news that the underperforming department store retailer had drawn down $850 million from a credit facility in order to ensure liquidity going forward.

Statistical indicators of secondary market performance, which had finished last week on a strong note, weakened across the board on Monday.

Pinnacle downsizes

A single deal priced during the Monday primary market session.

Pinnacle Foods priced a downsized $350 million issue of eight-year senior notes (B3/B-) at par to yield 4 7/8%.

The quick-to-market deal was downsized from $400 million, as the company shifted $50 million of proceeds to its term loan.

The yield printed in the middle of the 4¾% to 5% yield talk.

The deal went well and was well-oversubscribed, according to an informed source.

Barclays will bill and deliver.

Barclays, BofA Merrill Lynch, Credit Suisse, Goldman Sachs, Morgan Stanley, UBS, Macquarie and Blackstone were the joint bookrunners.

The Mountain Lakes, N.J.-based diversified packaged food company plans to use the proceeds to refinance its existing credit facility and 8¼% senior unsecured notes.

Rosetta sets investor call

The active forward calendar grew on Monday, with new deal announcements from North America and Europe.

Rosetta Resources plans will take part in an investor call on Tuesday to discuss its proposed $700 million offering of eight-year senior notes.

The deal is expected to price late in the present week.

J.P. Morgan, Morgan Stanley and Wells Fargo are the joint bookrunners.

The Houston-based independent producer and developer of oil and gas properties plans to use the proceeds, together with proceeds from the concurrent equity offering, to fund a portion of the acquisition of the Permian Basin assets from Comstock Resources.

Rosetta Resources also intends to use part of the proceeds to repay its revolver in its entirety and for general corporate purposes.

Cogego brings $400 million

Montreal-based Cogeco Cable plans to price a $400 million offering of eight-year senior notes (expected ratings /BB-/BB+/DBRS BB) late this week.

BofA Merrill Lynch and Scotia are the joint bookrunners.

The cable operator plans to use the proceeds to repay a portion of the bank debt incurred in making the acquisition of web hosting services provider Peer 1 Network Enterprises, Inc.

Elior starts Tuesday

France's Elior Finance plans to begin marketing its €300 million offering of seven-year senior secured notes (expected ratings B3/BB-) on Tuesday in London.

The roadshow moves on to Amsterdam and Paris on Wednesday and to Frankfurt on Thursday.

Joint bookrunner JPMorgan will bill and deliver. Credit Agricole, HSBC and Nomura are also joint bookrunners.

The Paris-based contracted food and support services company plans to use the proceeds to repay debt.

The Monday primary session also saw news generated from the off-the-run segment of the market.

In private placements, U.S. Well Services and USW Financing Corp. announced in a Monday press release that they have placed a $12 million add-on to their 14½% notes due Feb. 15, 2017.

Global Hunter was the placement agent.

The Houston-based oilfield services provider plans to use the proceeds to acquire a third hydraulic fracturing fleet, consisting of fracturing pumps and associated heavy equipment from various vendors.

And Germany's Constantin Medien AG announced that it elected to close the order books early on its oversubscribed €65 million offering of 7% five-year corporate bonds.

A subscription period lasting until Friday had initially been planned.

Close Brothers Seydler Bank AG was the global coordinator and bookrunner for the debt refinaning.

Quiet start to the week

A high-yield secondary trader described Monday's session as "a really quiet day," apart from the new deals and specific news-driven established issues.

He noted that equities "were trading off quite a bit," especially with commodity names getting clocked in the wake of weaker-than-expected Chinese economic numbers, which imply slower global economic activity.

The terrible news out of Boston about the deadly explosions at the Boston Marathon finish line, with several people killed and more than 100 wounded, gave already skittish stocks further jitters and Wall Street suffered its worst day since Nov. 7, the day after the U.S. presidential and congressional elections.

The bellwether Dow Jones industrial average lost sank 265.86 points on Monday, or 1.79%, to close at 14,599.20.

Back in Junkbondland, the trader said, "our market was off, but I wouldn't say it was down that much."

He added, "The new issues seemed to be staying somewhat firm," holding onto most, though by no means all, of the gains they had racked up after having priced last week.

Pinnacle comes too late

Market participants noted that Pinnacle Foods' new $350 million quickly shopped offering of 4 7/8% notes due 2021 hit the tape too late in the afternoon for any meaningful aftermarket dealings.

The Mountain Lakes, N.J.-based producer of various major frozen- and packaged-foods brand names had downsized the issue from an originally announced $400 million before pricing the bonds at par.

Memorial gives up some gains

Among the names which priced on Friday, Memorial Production Partners LP's $300 million issue of 7 5/8% notes due 2021 was quoted by a trader as having come down from the peak levels, which those bonds had reached after the Houston-based energy partnership's deal came to market.

But they were still trading at a solid premium to their discounted issue price.

A trader pegged those bonds at 100½ bid, 101¼ offered on Monday. That was down from the issue's peak aftermarket level around 101½ bid, 102 offered on Friday - still well up from the issue price earlier Friday of 98.521 to yield 7 7/8%.

Among the other transactions that priced on Friday, Athlon Holdings LP's 7 3/8% notes due 2021 were trading on Monday at 100 7/8 bid, 101½ offered - down just a little on the bid side from the 101 peak level seen on Friday.

Fort Worth, Texas-based Athlon, an independent oil and natural gas exploration and production company, had priced $500 million of the bonds at par after upsizing the deal from the originally planned $400 million.

NES Rentals Holdings Inc.'s 7 7/8% senior secured second-lien notes due 2018 were seen trading in a par to 101¼ bid context. The Chicago-based construction equipment rental company had priced $300 million of the notes at par, after the deal was upsized from the original $275 million size.

Three traders at different shops reported seeing no trace at all of any trading in New Cotai LLC's 10 5/8% senior PIK notes due 2021. The Macau-based gaming concern had priced $380 million of that paper on Friday at par after the deal had been upsized from an original $360 million.

The deal was not seen trading around on Friday either.

Deals hold most gains

Going back a little further, a trader saw Thursday's offering of 7¾% notes due 2020 from Affinia Group Inc. at 101 3/8 bid, 102 3/8 offered on Monday.

That was down from peak aftermarket levels of 102 5/8 bid, 103 1/8 offered that had been reached after the deal had priced, but it was still up from the par level at which Affinia, an Ann Arbor, Mich.-based provider of aftermarket automotive and industrial filters, had priced its $250 million drive-by issue earlier Thursday.

Taylor Morrison Communities, Inc.'s 5¼% notes due 2021 were trading at 101 bid, 102 offered on Monday, a market source said, while a second located the bonds at 100 ¾ bid, 101 5/8 offered.

The Scottsdale, Ariz.-based homebuilder had priced $550 million of the notes at on Thursday in a quick-to-market transaction, after upsizing the deal from an originally announced $500 million. The bonds traded at 101 bid, 101¾ offered when they hit the aftermarket late Thursday, improving to 101½ bid, 102 offered on Friday.

A trader quoted Penn Virginia Corp.'s 8½% notes due 2020 at 100 3/8 bid, 101 offered.

The Radnor, Pa.-based independent oil and gas company had priced its $775 million issue at par on Wednesday, after nearly doubling the transaction in size from its originally announced $400 million.

After that, a trader said, "the bonds were mostly draped around par," not venturing far from their issue price.

While another trader saw the new bonds get as good as the 101¼ bid level in initial dealings, after that, he said, "they sort of fell back" to around a 100½ bid context on "pretty decent volume."

He further theorized that "there was a massive upsize for this. I think guys were just full."

Sprint stumbles on news

Away from the new-issue market, the major development of the session was probably the sharp slide in Sprint Nextel's bonds and those of its Sprint Capital Corp. subsidiary, after DISH Network announced that it has offered to buy the Overland Park, Kan.-based No. 3 U.S. wireless operator for $25 billion in cash and stock.

Sprint, which had previously agreed to sell a majority stake to Japanese telecommunications operator SoftBank Corp., said it would study the unexpected and unsolicited bid from DISH, an Englewood Colo.-based satellite television broadcasting company.

Analysts speculated that DISH's interest in Sprint probably stems from the latter's holding of valuable airwave spectrum space that DISH would like to get hold of in order to expand its core business.

Sprint's shareholders were overjoyed at the news - its New York Stock Exchange-traded equity jumped by as much as 17.8% intra-day, before finishing up 84 cents, or 13.50% on the session, at $7.06. Volume of 440.7 million shares was 121/2-times the norm.

But while Sprint's stock sizzled, its bonds fizzled.

A market source said that parent Sprint's 6% notes due 2022 opened down a deuce at 1031/2, and by the end of the day had fallen to 101¾ bid, down 3¾ points on the session.

Meanwhile, Sprint Capital's 6 7/8% notes due 2028 tumbled 3 5/16 points on the day to close at 102¼ bid. Both issues saw more than $24 million in round-lot trades, putting them high on the list of the most active junk issues of the day.

Dish's own bonds also did not fare well. Its DISH DBS 7 7/8% notes due 2019 dropped by more than 3 points on the day, closing above the 111 bid mark.

The 5 7/8% notes due 2022 ended down more than 1½ points at 101 bid, with more than $9 million of each issue changing hands.

Dish said in its letter to Sprint's management that it intends to fund the $17.3 billion cash portion of the transaction using $8.2 billion of cash on its balance sheet and additional debt financing.

"We have a proven track record in raising capital to fund strategic initiatives and have received a 'Highly Confident Letter' from our financial advisor, Barclays, confirming our ability to raise the required financing," DISH declared.

Draw weighs on J.C. Penney

Elsewhere, a trader saw J.C. Penney's 6.9% notes due 2036 fall to 74¼ bid, 74¾ offered on Monday following news the company had drawn $850 million from a credit facility.

However, the 7 1/8% notes due 2023 were up "a couple points" to 99 bid, par offered, he said.

"It's a different indenture," he said of the mixed trading. "Clearly people are angling somehow."

Another market source called the 5.65% notes due 2020 off a touch at 82½ bid.

The Plano, Texas-based retailer said it had drawn down its $1.85 billion credit facility in order to fund capital expenditures and working capital.

The draw "provides more than its current funding needs to ensure our continued liquidity," said Ken Hannah, chief financial officer, in a statement.

But such a massive draw has many wondering what the scenario is. Gimme Credit LLC analyst Carol Levenson pointed out in an afternoon comment that the draw meant there was obviously no equity investor ready to ink a deal, though J.C. Penney has said it is looking into other financing options and several private equity firms are reported to be considering injection cash into the struggling company.

Levenson also noted that the company said the funds could be used for operations, which would indicate that cash flows are currently negative - typical at this time of year for retailers, she said.

"It's good that the company has the flexibility to do this, but it also demonstrates that the 'internally financed transformation' envisioned by previous management was a pipe dream," she wrote in her report.

Market indicators head south

Overall, statistical junk performance indicators were lower across the board on Monday, breaking a three-session winning streak.

The Markit Series 20 CDX North American High Yield index lost three-quarters of a point to end at 103¾ bid, 103 13/16 offered. That snapped a string of seven consecutive gains, including on Friday, when the index rose by 1/32 of a point.

The KDP High Yield Daily index, meanwhile, fell by 10 basis points on Monday to end at 76.69. That was its first loss after three straight gains before that, including Friday, when the index had risen by 3 bps. Its yield rose by 4 bps on Monday to 5.44%, its first such widening after three straight sessions before that on the decline.

On Friday, the yield had come in by 2 bps for a second consecutive session.

And the widely followed Merrill Lynch High Yield Master II index posted its first loss on Monday after five consecutive gains before that, dipping by 0.095%. On Friday, it had advanced by 0.072%.

The loss left its year-to-date return at 3.611%, down from Friday's 3.71%, which had been its fifth consecutive new peak level for 2013.

Stephanie N. Rotondo contributed to this review

© 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.