Morning Commentary: Altice, Cablevision active on M&A news; Berry Plastics, Fresenius notes busy

By Paul A. Harris

Portland, Ore., Sept. 17 – News that Cablevision has agreed to be acquired by European telecommunications giant Altice triggered downward movement in the junk bonds of both companies, according to a trader in New York.

Cablevision's unsecured debt was getting hit hard on the news, the trader said.

The CSC Holdings, LLC (Cablevision Systems Corp.) 5¼% senior notes due June 1, 2024 were 86 bid heading into mid-morning on the East Coast of the United States, down 7 points. They were 93 bid, 94 offered on Wednesday, the source said.

The nearer-to-maturity Cablevision Systems Corp. 8% senior notes due April 15, 2020 were down around 6.5 points, the trader said.

The secured bonds of Altice were not getting hurt nearly as much, the source said, adding that they were down half a point to a point.

The acquisition of Cablevision by Altice represents an enterprise value of $17.7 billion, according to a news release from Altice.

In a press release from Cablevision, the transaction, which is expected to close in the first half of 2016, is to be financed with $14.5 billion of new and existing debt at Cablevision, cash on hand at Cablevision and $3.3 billion of cash from Altice.

Altice has received full financing commitments from JPMorgan, BNP Paribas and Barclays.

Altice intends to raise equity by issuing class A shares in connection with funding its portion of the acquisition.

Altice advised Cablevision that up to $5.8 billion of Cablevision and CSC Holdings debt will remain outstanding after the transaction is completed.

Berry Plastics active

Dollar-denominated junk bonds that priced on Wednesday were trading at premiums to their new issue prices heading into mid-morning.

Berry Plastics’ (Berry Plastics Escrow Corp.) 6% second priority senior secured notes due Oct. 15, 2022 (B3/B) were very active, according to the trader, who said that they got as high as 101 bid, 101½ offered in the secondary market but settled to par ½ bid, 101 offered heading into mid-morning.

The $400 million issue, downsized from $600 million as the company shifted $200 million to its concurrent term loan, priced at par.

The new Fresenius (Fresenius US Finance II, Inc.) 4½% senior bullet notes due Jan. 15, 2023 (expected ratings Ba1/BB+/BB+) were also active, the trader said. The notes were trading at par ¼ bid, par ¾ offered heading into mid-morning.

However the massive $6.6 billion of issuance, which came last Friday from Frontier Communications Corp. – the 8 7/8% notes due 2020, the 10½% notes due 2022 and the 11% notes due 2025 – were all below par on the bid side after beginning the week above their par issue prices, the trader said.

Quiet in the primary

The Thursday session began quietly in the primary market, with no new deal announcements.

A pair of issuers are on the road.

Olin (Blue Cube Spinco Inc.) is marketing a $1.5 billion two-part offering of senior notes (expected ratings Ba1/BB+).

The deal includes eight-year notes that come with early guidance of 5¾% and 10-year notes, which come with guidance of 6% and are expected to price Tuesday.

And Ellucian (Sophia LP) is in the market with $590 million of eight-year senior notes (Caa2/CCC+) being guided in the low 8% context, according to the trader. The buyout deal could price Friday or Monday.

The high-yield ETFs were moderately lower heading into mid-morning on Thursday.

The iShares iBoxx $ High Yield Corporate Bd (HYG) was 11 cents lower at $85.91 per share.

SPDR Barclays High Yield Bond ETF (JNK) was trading at $36.83, down 6 cents.

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