Downsized Ellucian, upsized Tempur Sealy price, along with split-rated Corrections Corp.

By Paul Deckelman and Paul A. Harris

New York, Sept. 21 – Junkbondland opened the new week on Monday by pricing a pair of purely high-yield-rated deals plus one split-rated offering, as several other prospective new deals were heard making their way through the pipeline.

Higher education software provider Ellucian priced a downsized $490 million regularly scheduled issue of eight-year notes at a sizable discount to par.

Bedding manufacturer Tempur Sealy International, Inc. came to market with an upsized and quickly shopped $450 million eight-year credit, which was later quoted up around 1 point on the day

Corrections Corp. of America did $250 million split-rated seven-year issue, which moved up modestly after pricing

Meanwhile, syndicate sources said that price talk emerged on several pending issues, including the $1.5 billion two-part megadeal that chemical manufacturer Olin Corp. is doing, Building Materials Corp. of America’s $1.1 billion 10-year offering and rocket systems manufacturer Orbital ATK, Inc.’s $400 million of eight-year notes.

The sources also said that business services and information technology company Unisys Corp. had launched a $350 million five-year secured notes issue, with pricing expected on Tuesday.

Out of Europe came word that British information communication technology Interoute had begun a roadshow for a two-part €590 million secured offering.

Among recently priced new deals, wireline telecom operator Frontier Communications Corp.’s big three-part offering continued to trade actively and was seen having moved up a little from the post-pricing lows at which they had been trading last week.

Cablevision Systems Corp.’s bonds remained under pressure for a third straight session Monday in the wake of Thursday’s surprise announcement that the media company had agreed to sell itself to Europe’s Altice NV in a largely debt-funded more than $17 billion transaction.

Statistical measures of junk market performance turned mixed on Monday after having been lower across the board on Friday. It was the eighth mixed session in the last nine trading days and the ninth in the past 12.

Downsized Ellucian prices

Two junk-rated issuers raised a combined total of $923 million on Monday, as the news flow in the primary market intensified.

Ellucian (Sophia LP) priced a $490 million issue of 9% senior notes due Sept. 30, 2023 (Caa2/CCC+) at 96.568 to yield 9 5/8%.

The coupon came on top of coupon talk. The yield came in the middle of the 9½% to 9¾% yield talk.

The deal was downsized by $100 million and the company shifted those proceeds to its term loan B, which was upsized to $1.56 billion from $1.46 billion.

Morgan Stanley, BofA Merrill Lynch, J.P. Morgan, Barclays, BMO, Deutsche Bank and Jefferies were the joint bookrunners for the buyout deal.

Tempur Sealy upsizes

In drive-by action, Tempur Sealy International priced an upsized $450 million issue of eight-year senior notes (B1/BB-) at par to yield 5 5/8%.

The deal-size was increased from $350 million.

The yield printed at the tight end of yield talk that had been set in the 5¾% area and tight to early guidance that had the deal coming with a yield in the high 5% to low 6% context.

The debt refinancing deal appeared to be going very well, traders said.

BofA Merrill Lynch, J.P. Morgan, Wells Fargo and Fifth Third Bank were the joint bookrunners.

Split-rated Corrections prices

In the crossover space Corrections Corp. of America priced a $250 million split-rated issue of seven-year senior bullet notes (Baa3/BB+) at par to yield 5%.

The yield printed on top of yield talk and tight to early guidance of 5¼%.

The deal, which was priced on the high-yield desk, went very well, an informed source said, adding that both high-yield and investment-grade accounts were in the book.

Wells Fargo was the left bookrunner. BofA Merrill Lynch, J.P. Morgan, SunTrust, PNC and US Bancorp were the joint bookrunners.

The Nashville, Tenn.-based company plans to use the proceeds to repay a portion of the outstanding balance under its $900 million revolver and for other general corporate purposes and working capital, which may include investments.

Olin talks $1.5 billion

Olin Corp. set price talk for a $1.5 billion two-part offering of senior notes (expected ratings Ba1/BB+).

The deal is coming in tranches of eight-year notes talked to yield in the 6½% area, and five-year notes talked to yield in the 6¾% area.

That talk was substantially wider than earlier guidance, a trader said, adding that the eight-year notes had previously been discussed in the 5¾% area and the 10-year notes had been discussed in the 6% area.

Tranche sizes remain to be determined and the deal is expected to price on Tuesday.

J.P. Morgan, Wells Fargo, Barclays, Goldman Sachs, BofA Merrill Lynch, Citigroup and PNC are the joint bookrunners.

Building Materials sets talk

Building Materials Corp. of America talked its $1.1 billion offering of 10-year senior notes (Ba2/BB+) to yield in the 5½% area.

Formal talk came on top of early guidance.

The deal was expected to price in a quick-to-market Monday trade but no terms were available at press time, according to market sources.

Deutsche Bank, BofA Merrill Lynch, Citigroup, J.P. Morgan and Wells Fargo are the joint bookrunners for the debt refinancing.

Orbital talk is 5¼% to 5½%

Orbital ATK talked its $400 million offering of eight-year senior notes (confirmed Ba3/expected BB/confirmed BB+) to yield 5¼% to 5½%.

Official talk comes at the tight end of earlier guidance in the 5 ½% area, a trader said.

Books close at noon ET Tuesday and the debt refinancing deal is set to price thereafter.

Wells Fargo is the left bookrunner for the deal that was announced on Monday.

BofA Merrill Lynch, Citigroup and J.P. Morgan are the joint bookrunners.

Unisys pricing Tuesday

Unisys held an investor conference call late Monday morning for its $350 million offering of five-year senior secured notes (expected ratings Ba2/BB).

The deal is set to price Tuesday.

Early yield guidance is in the 7½% area, a trader said.

Wells Fargo is the left bookrunner. BofA Merrill Lynch is the joint bookrunner.

The Blue Bell, Pa.-based provider of technology services plans to use the proceeds for general corporate purposes.

Interoute starts roadshow

Interoute began a roadshow on Monday for a €590 million two-part offering of secured notes.

The roadshow wraps up on Friday and the deal is set to price during the Sept. 28 week.

The London-based information communication technology company is selling €215 million of five-year floating-rate notes and €375 million of five-year fixed-rate notes.

Credit Suisse is the left bookrunner. Barclays and Morgan Stanley are joint bookrunners.

Proceeds, along with a €75 million equity contribution, will be used to finance the acquisition of European managed services provider Easynet and to repay Easynet debt, repay Interoute’s outstanding term loan and revolver, and to put cash on the balance sheet.

Mixed flows on Friday

Cash flows for dedicated high-yield funds were mixed on Friday, the most recent session for which data was available at press time, a trader said.

High-yield ETFs saw $304 million of inflows on the day.

However actively managed accounts sustained $5 million of outflows on Friday.

News issues up modestly

Owing to the relative lateness of the hour at which they priced, the day’s new deals did not see much real aftermarket action on Monday, traders said.

A trader saw the new Corrections Corp. of America 5% notes trading in a 100 5/8 to 101 context, up from their par issue level, though on light volume.

He pegged Lexington, Ky.-based mattress-maker Tempur Sealy’s new 5 5/8% notes as moving around “on either side of 101,” in light trading, after pricing at par.

He saw no immediate aftermarket action in the Fairfax, Va.-based higher education software provider Ellucian’s new 9% notes.

Frontier bonds stay busy

Traders did see continued sizable volume in the recently priced Frontier Communications three-part issue; the Stamford, Conn.-based wireline telecom and internet broadband service provider’s deal once again dominated the Most Actives chart on Monday.

One of the traders said that the company’s 10½% notes due 2022 were “almost unchanged” at 99¾ bid, but saw its 11% notes due 2025 having “popped up” by around ¼ point to end at 99 bid.

He did not see much activity in the third leg of that tri-partite deal, the 8 7/8% notes due 2020.

A second trader confirmed those levels in asserting “looks like they moved up.”

At another desk, a trader said a little later that the notes were “going out mostly higher.”

He quoted the 10½% notes finishing at par right on the nose, calling that up ¼ point on the day on volume of over $36 million.

He saw the11% notes gain ½ point to end at 98 7/8 bid, with over $33 million having traded.

But the 8 7/8s were unchanged at par, with around $13 million having changed hands.

Frontier priced $1 billion of the five-years, $2 billion of seven-years and $3.6 billion of the 10-years, all at par, in a regularly scheduled forward calendar offering on Sept. 11.

The long-awaited $6.6 billion deal was the second-biggest offering the junk market has seen so far this year according to data compiled by Prospect News, taking a back seat only to Canadian drug manufacturer Valeant Pharmaceuticals International Inc.’s $8.5 billion three-part transaction on March 13.

The new bonds initially firmed smartly when they were freed to trade after pricing, with the five-years pushing above 101½ bid and the seven- and 10-years topping the 102 bid mark – but they quickly came off those highs in trading last week, with all three tranches at one point dipping back below their par pricing level.

Cablevision carnage continues

For a third straight session, traders saw Cablevision’s bonds retreating, with several of those issues falling in active dealings as investors continued to show their apparent dismay over the news that the Bethpage, N.Y.-based cable systems operator and publisher of New York suburban newspaper Newsday has agreed to be acquired by Luxembourg-based cabler Altice NV in a largely debt-funded transaction valued at more than $17 billion.

A trader characterized the bonds as weaker by between ½ and 1 point, coming on the heels of similar-sized easing on Friday and bigger losses when the news first came out of Thursday.

A trader said that the company’s 5 7/8% notes due 2022 were down another 1¾ points to 81¼ bid on volume of over $12 million. Those bonds had first plunged over 11 points on Thursday, with over $40 million traded, and lost an additional 3 points on Friday, though on considerably lesser volume.

Its 8% notes due 2020 were down by 3 points on Monday to end at 97¼ bid. They had first dropped by more than 7 points on Thursday and then another 1 1/8 point on Friday.

Energy bonds gyrate

A trader said that volatile energy seemed to be doing better on Monday.

For instance, he said that the sector’s benchmark credit – California Resources Corp.’s 6% notes due 2024 – had pushed up to a 64 to 66 bid context.

Those bonds had recently traded as high as around 70-71, but tumbled last week in line with oil price gyrations.

“They got as low as 65, then bounced up,” moving as high as 68-69.

But them “there was huge selling pressure,” and the Los Angeles-based exploration and production company’s paper sank back down to around 65-66.

On Monday, he said the high tick was around 66 while the low was around 64 5/8 bid, late in the session.

However, a second trader said that the California Resource notes were finishing up more than 1 point at 65 13/32, on volume of over $9 million.

Indicators turn mixed

A trader said that activity on Monday was mostly muted as “a lot of guys were just focused on the new-issue calendar.

Statistical measures of junk market performance turned mixed on Monday after having been lower across the across the board on Friday. It was the eighth mixed session in the last nine trading days and the ninth in the past 12.

The KDP High Yield Daily Index suffered its seventh straight loss on Monday, falling by 13 basis points to end at 67.81. On Friday, it had dipped by 6 bps as it fell below the psychologically significant 68.00 mark for the first time since Sept. 4. The current string of losses follows a six-session winning streak that was snapped on Sept. 11.

Its yield, meanwhile, rose by 2 bps on Monday for a third consecutive session to end at 6.38%, its fourth widening in a row, fifth in the last six sessions and sixth rise in the last eight sessions.

The Markit Series 24 CDX North American High Yield Index, though, gained 3/32 point on Monday to end at 104 11/16 bid, 104 23/32 offered, bouncing back from Friday’s 11/32 point loss, which had been its first loss after six straight gains. Monday’s advance was thus its seventh upturn in the last eighth session, its eighth gain in the previous 10 sessions and its ninth in the previous 14 trading days.

However, the Merrill Lynch North American Master II High Yield Index continued to languish for an eighth straight session on Monday, losing 0.084% on top of Friday’s 0.136% retreat.

Monday’s loss brought its year-to-date return down to 0.051% from 0.135% on Friday. Those levels remain well down from the 4.062% reading recorded on May 29, the index’s peak level for the year so far.

© 2015 Prospect News.
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