Charter two-part, Targa drive by; new West, Parsley, PlastiPak deals busy; oil names push up, Neiman Marcus gains

By Paul Deckelman and Paul A. Harris

New York, Oct 10 – The high-yield primary arena reopened on Tuesday after Monday’s Columbus Day junk market close in the United States – and it didn’t miss a step, continuing the busy pace seen over the last two weeks.

According to data compiled by Prospect News, for a ninth consecutive session, issuance of new U.S. dollar-denominated and fully junk-rated paper topped the $1 billion mark – $2.25 billion to be exact, spread out over three tranches. Friday’s abbreviated pre-holiday session had generated $1.05 billion in two tranches.

Charter Communications, Inc. had the big deal of Tuesday’s session, pricing a quickly shopped $1.5 billion of new junk paper – a $1 billion add-on to the cable-TV, internet and telephone service provider’s existing February 2028 notes, as well as a stand-alone $500 million of new 5.5-year paper.

Midstream energy company Targa Resources Partners LP did a quick-to-market $750 million issue of 10.25-year notes, which were heard by traders to have moved up slightly when they hit the aftermarket.

The traders meantime saw busy dealings in some of the new issues that had priced last week, including the eight-year notes from West Corp. and PlastiPak Holdings Inc. as well as Parsley Energy, LLC’s new 10-year paper.

Away from the new issues, the traders saw good gains in many energy names such as California Resources Corp., MEG Energy Corp. and Denbury Resources Inc., helped by a sharp upturn in world crude oil prices, which had recently been on the slide.

Neiman-Marcus Group’s notes firmed smartly, after the luxury retailer issued fourth-quarter results, including a smaller sales decline than had been seen in recent quarters.

Statistical market performance measures turned higher across the board on Tuesday, after having been lower all around on Friday, which had followed two straight stronger sessions before that.

Charter prices $1.5 billion

In Tuesday's primary market Charter Communications, Inc. priced $1.5 billion of senior notes (B1/BB/BB+) in two tranches in a quick-to-market Tuesday trade, according to market sources.

The deal included $500 million of new notes due March 1, 2023 that price at par to yield 4%. The yield printed on top of yield talk in the 4% area.

It also included a $1 billion add-on to the 5% notes due Feb. 1, 2028 which priced at 98.5 to yield 5.189%. The reoffer price came at the rich end of the 98 to 98.5 price talk.

BofA Merrill Lynch was the left bookrunner. Deutsche Bank Securities Inc., Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC, UBS Investment Bank, Wells Fargo Securities LLC and Goldman Sachs & Co. were the joint bookrunners.

Charter intends to use the proceeds for general corporate purposes including buybacks of the class A common stock of Charter or common units of Charter Communications Holdings, LLC.

Targa prices $750 million

Targa Resources Partners LP and Targa Resources Partners Finance Corp. priced $750 million issue of 10-year senior notes (Ba3/BB-) at par to yield 5% in a quick-to-market Tuesday transaction, according to a syndicate source.

The yield printed on top of yield talk in the 5% area.

Citigroup Global Markets Inc. is the left bookrunner. BofA Merrill Lynch, Deutsche Bank Securities Inc., MUFG, RBC Capital Markets LLC and Wells Fargo Securities LLC were the joint bookrunners.

The Houston-based midstream energy company plans to use the proceeds to repay bank debt and redeem its 5% senior notes due 2018.

Beacon $1.3 billion for Wednesday

Beacon Roofing Supply Inc. and Beacon Supply Escrow Corp. scheduled a conference call with investors at 11 a.m. ET on Wednesday to launch a $1.3 billion offering of eight-year senior notes (B3/B+), according to a syndicate source.

The Rule 144A and Regulation S for life deal is set to price Wednesday afternoon.

Wells Fargo Securities LLC is the left bookrunner. Citigroup Global Markets, BofA Merrill Lynch, JP Morgan Securities LLC and SunTrust Robinson Humphrey are the joint bookrunners.

The notes become callable after three years at par plus 50% of the coupon.

The Herndon, Va.-based distributor of residential and commercial roofing materials and complementary building products plans to use the proceeds to help fund its acquisition of East Rutherford, N.J.-based building products distributor Allied Building Products Corp. and refinance existing debt.

Simmons Foods for Wednesday

Simmons Foods, Inc. plans to price a $550 million offering of seven-year second-lien senior secured notes (expected ratings B3/B) on Wednesday afternoon, according to an informed source.

The Rule 144A and Regulation S for life deal, via sole bookrunner Wells Fargo Securities LLC, was scheduled to be shopped on a late Tuesday morning conference call with investors.

The notes become callable after three years at par plus 50% of the coupon.

The Siloam Springs, Ark.-based poultry processor and pet food producer plans to use the proceeds to tender or redeem its 2021 notes, pay down its senior secured credit facility, and for general corporate purposes.

Catalent roadshow

Catalent Pharma Solutions, Inc. began a roadshow on Tuesday for a $450 million offering of eight-year senior notes, according to a syndicate soure.

The Rule 144A and Regulation S for life deal is expected to price on Friday.

Morgan Stanley & Co., JP Morgan Securities LLC, RBC Capital Markets LLC and BofA Merrill Lynch are the joint bookrunners.

The notes become callable after three years at par plus 50% of the coupon.

The Somerset, N.J.-based provider of advanced delivery technologies and development solutions for drugs, biologics and consumer health products plans to use the proceeds to finance the acquisition of Cook Pharmica.

Vine Oil roadshow

Vine Oil & Gas LP and Vine Oil & Gas Finance Corp. started a roadshow on Tuesday for a $530 million offering of 5.5-year senior notes, according to a syndicate source.

The Rule 144A and Regulation S for life notes, set to mature in April 2023, are expected to price on Friday.

Morgan Stanley & Co., Credit Suisse Securities (USA) LLC, HSBC, Natixis and SG CIB are the joint bookrunners.

The notes become callable after three years at par plus 75% of the coupon.

The Plano, Texas-based oil and gas exploration and production company plans to use the proceeds to refinance debt.

Tekni-Plex roadshow

Tekni-Plex, Inc. started a roadshow for a $260 million offering of eight-year senior notes on Tuesday, according to a market source.

The roadshow for the Rule 144A and Regulation S for life deal is scheduled to wrap up on Friday, and the deal is set to price late in the Oct. 9 week.

Jefferies LLC, Credit Suisse Securities (USA) LLC and BMO Securities are the joint bookrunners.

The notes come with three years of call protection.

Proceeds will be used to fund the buyout of the King of Prussia, Pa.-based provider of specialty packaging solutions by Genstar Capital Partners, LLC

Yellow Pages Digital C$310 million

Yellow Pages Digital & Media Solutions Ltd. scheduled an investor conference call for 3 p.m. ET on Tuesday to roll out a C$310 million offering of five-year senior secured first-lien notes, according to a syndicate source.

The deal is formatted as a Rule 144A for life offer in the United States and a private placement in Canada, and is set to price in the middle part of the Oct. 9 week.

BMO Capital Markets Corp. is the left bookrunner. NBF is the joint bookrunner. Canaccord, RBC Capital Markets LLC, Beacon and Casgrain are the co-managers.

The notes will immediately become callable at 103. They feature a 100% excess cash flow sweep, stepping down to 75% when the consolidated leverage ratio is no greater than 1.50:1.00 subject to $20 million minimum cash and cash equivalents balance. There is an asset sale provision which specifies 100% of the proceeds from asset sale are to be automatically applied to redeeming the new notes on the following mandatory redemption date.

The Verdun, Quebec, Canada-based provider of printed, digital and mobile business directories plans to use the proceeds to refinance its existing 9¼% secured notes.

Dufry for Wednesday

Switzerland-based travel retailer Dufry started a roadshow on Monday for €500 million of seven-year senior notes (expected ratings Ba2/BB), according to a market source.

The roadshow wraps up on Wednesday.

BBVA, BNP Paribas, Deutsche Bank, ING, Santander, UniCredit, BLKB, BofA Merrill Lynch, Credit Agricole, Credit Suisse, Goldman Sachs, HSBC, LBBW, NatWest and RBI are managing the Regulation S only transaction.

The notes feature a make-whole call at Bunds plus 50 basis points for the first three years, then become callable at a premium. They also feature a three-year 40% equity clawback.

The company, which is headquartered in Basel, plans to use the proceeds to refinance €500 million of senior notes due 2022.

Empark two-part deal

Empark started a roadshow on Monday for a €475 million two-part offering of senior secured notes (expected ratings Ba3/BB), according to a market source.

The deal features €300 million minimum of seven-year fixed-rate notes with three years of call protection and a to-be-determined amount of six-year floating-rate notes with one year of call protection.

The roadshow wraps up on Thursday.

Global coordinator JPMorgan will bill and deliver for the Rule 144A and Regulation S offer. BNP Paribas, Macquarie Capital, NatWest Markets and Santander are joint bookrunners.

Proceeds will be used fund the acquisition of Empark, an Iberian parking infrastructure company, by Macquarie European Infrastructure Fund 5, a fund managed by Macquarie Infrastructure and Real Assets, and to repay Empark debt.

Targa seen firmer

In the secondary market, traders saw the new Targa Resources 5% notes due in January of 2028 modestly better after that 10.25-year paper priced at par.

One market source quoted a 100¼ midpoint between the new issue’s bid and offered levels.

Two other traders saw the new notes in a 100¼-to100½ bid range.

One trader said he “did not see a lot of volume” initially in the quickly shopped issue.

Existing Charter trades off

A trader noted that the existing Charter Communications 5% notes due in February 2028 were going home at 99 1/8 bid, on volume of around $17 million.

But while that was up from the 98.5 level at which the Stamford, Conn.-based cable, internet and phone-service provider’s drive-by add-on notes had priced, it was still down around 1 point from the levels seen on Friday, when the notes had closed at 100 1/8 bid.

Traders meantime did not immediately report any initial aftermarket dealings in the new Charter 4% notes due in March 2023.

Both those 5.5-year notes and the 2028 add-on notes will be issued by the company’s CCO Holdings, LLC and CCO Holdings Capital Corp. financing subsidiaries.

Charter sold the original $1.5 billion of its outstanding 5% 2028 notes this summer; the quick-to-market issue, upsized from an originally announced $1 billion, priced at par on Aug. 3.

Recent deals trade actively

The traders saw a fair amount of activity in some of the new bonds which had priced last week.

One trader saw West Corp.’s 8½% notes due 2025 “pretty busy,” trading at 98 7/8 bid.

A second trader agreed with that level, estimating Tuesday volume on the credit at over $28 million, tops in Junkbondland on the day.

The Omaha-based provider of communications and infrastructure services priced its $1.15 billion of those notes at 98.579 to yield 8¾% last Tuesday, after that regularly scheduled forward calendar deal was downsized from an originally announced $1.3 billion.

The new Parsley Energy 5 5/8% notes due 2027 “were active” around the 101 7/8 bid level, a trader said, while a second pegged them at 101 13/16 bid, on volume of over $25 million.

At another desk, a market source quoted them in a 101½-to-101 7/8 bid context.

The Houston-based independent oil and natural gas exploration and production company priced $700 million of those notes at par on Thursday, after the drive-by deal was upsized from an originally planned $600 million.

PlastiPak’s new 6¼% notes due 2025 were seen going home around 102 bid on volume of around $15 million.

A market source called that up by ¼ point from the initial aftermarket gains notched on Friday, when the bonds finished at 101¾ bid after the regularly scheduled forward calendar offering was freed to trade.

A trader at another desk quoted the notes at 101½ bid, 102 offered.

The Plymouth, Mich.-based maker of rigid plastic packaging containers had priced $500 million of the notes on Friday at par.

Energy credits improve

Away from the new deals, a trader said that energy names were doing well after having traded down at the end of last week, as names like California Resources Corp. were “bouncing back smartly,” in line with a surge in world crude oil prices.

He saw Los Angeles-based E&P operator CalRes’s benchmark 8% notes due 2022 up by some 1¼ points on the day, ending at 64 bid, “the biggest bounce in the space.”

More than $10 million of those notes changed hands.

Elsewhere among the oil names, Plano, Texas-based Denbury Resources’ 5½% notes due 2022 were ending at 59¼ bid, up ¾ point, while Calgary, Alta-based oil sands producer MEG Energy’s 7% notes due 2024 gained 1 point to close at 87 bid.

Those credits were all helped by the fact that “oil was up big today,” a trader said, with November-delivery West Texas Intermediate crude jumping $1.34 per barrel, or 2.7% on the day, in trading on the New York Mercantile Exchange, finishing at $50.92

It was the second straight day of gains, with the benchmark U.S. crude grade having gained 29 cents on Monday, when trading went on despite Columbus Day. It was bouncing back from Friday’s $1.50 per barrel plunge.

Key international grade North Sea Brent for December delivery followed a similar trajectory in London futures trading, nosediving by $1.38 per barrel on Friday, bouncing 17 cents on Monday and rebounding by another 82 cents per barrel on Tuesday.

The oil prices shot up on reports that Saudi Arabia will cut its November crude oil allocations to customers by 560,000 barrels a day.

Also helping hold down supply – and thus prop up prices – was the fact that about 85% of the energy production facilities along the U.S. Gulf Coast remained shuttered on Monday after having been closed down ahead of Hurricane Nate, which blew through the Gulf over the weekend.

Apart from oil credits, a trader said that Murray Energy Corp. paper “has been all over the place, seeing the St. Clairsville, Ohio-based coal company’s 11¼% notes due 2021 up ½ point on the day at 62 bid.

Neiman Marcus moves up

Traders said that Dallas-based luxury retailer Neiman Marcus Group’s recently beleaguered bonds were big gainers on the day, with its 8% notes due 2021 jumping to 57 bid, a gain of 4 points.

“They were active,” he said, with over $19 million having changed hands.

The company’s other bonds were also seen better, with its 8¾% notes due 2021 firming to 52 5/16 bid.

The bonds firmed after the company reported fiscal fourth-quarter numbers that, relatively speaking, were not as bad as recent results had been.

It said sales were off by 0.5% for the quarter, a much smaller decline than it has suffered in recent quarters.

Its loss for the quarter was $366.3 million on sales of $1.12 billion, compared with a loss of $407 million on sales of $1.13 billion a year ago.

During the company’s conference call, chief executive Karen Katz declared that management saw "positive momentum for our business in the first quarter,” and was especially enthusiastic about its prospects for online sales, noting that “our online business will continue to outperform our store business, and at 30% of total sales, it will continue to grow in importance.”

Separately, the company, which is trying to conserve cash as it tries to improve its financial performance, said in a regulatory filing that it has decided to make payment-in-kind interest payments for its $600 million of 8¾%/9½% senior PIK toggle notes due 2021 for the interest period of Oct. 15 through April 14, 2018.

It elected to make PIK coupon payments instead of cash payments to enhance its liquidity, according to an 8-K filing with the Securities and Exchange Commission.

The company delivered notice to U.S. Bank NA, trustee under the indenture governing the notes, that it will pay PIK interest at the rate of 9½% for the period beginning Oct. 15.

Following the payment of the PIK interest on the notes for the interest period ending Oct. 14, there will be $628.5 million aggregate principal amount of outstanding notes, the filing said.

The company has around $700 million of available liquidity, which Gimme Credit senior analyst Kim Noland calls “adequate.”

However, Noland said in Tuesday research note that “balance sheet repair without a debt restructuring is still problematic given fiscal year end leverage of over 10x.”

Noland further cautioned that “a distressed exchange offer for the bonds is unlikely near term but in the longer term, the company's capital structure is unsustainable even with improved results in 2018.”

Other retailers off

While Neiman Marcus bonds were bouncing, other retailers were seen off on the day.

These included J.C. Penney, whose 6 3/8% bonds due 2036 were down more than a deuce on the day to 68¾ bid, druggist Rite Aid, whose 6 1/8% notes due 2023 fell by 1¼ points to 96¼, and supermarket operator Fresh Market, whose 9¾% notes due 2023 retreated by ½ point to 63 bid.

Indicators turn upward

Statistical market performance measures turned higher across the board on Tuesday, after having been lower all around on Friday, which had followed two straight stronger sessions before that.

The KDP Daily High Yield Index gained 1 basis point on Tuesday to end at 72.43, after having lost 3 bps on Friday. The index was not published on Monday due to the Columbus Day holiday.

Its yield, however, atypically rose by 3 bps to 5.14%, its second straight widening, following a 1 bp rise on Friday. The yield usually declines when the index reading rises, and vice versa.

The Markit CDX Series 29 High Yield Index ended at 108 3/32 bid, 108 5/32 offered, a gain of almost 1/16 point. On Friday, the index had eased by nearly 7/32 point, and had been unchanged on Monday, when it did publish despite the holiday.

And the Merrill Lynch North American High Yield Index firmed by 0.027% on Tuesday, its second straight improvement. On Friday, it had lost 0.021%, its first downturn after six straight advances, but on Monday, when it did publish despite the holiday, the index had firmed by 0.052%.

The latest gain lifted its year-to-date return to 7.278% from 7.194% on Friday and 7.217% on Monday, establishing a second consecutive new 2017 peak level.

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