Heinz prices $2 billion secured deal as blizzard quiets market; Regency jumps on buyout deal

By Paul Deckelman and Paul A. Harris

New York, Jan. 26 – A huge approaching Northeast snowstorm threw a soggy white blanket over the high-yield market on Monday, as many market participants in the area took the advice of the mayor and the governor of New York and made an early exit ahead of a scheduled mass-transit operations wind-down.

But if there wasn’t exactly a blizzard of new deals in Junkbondland – two offerings, in fact, were pulled due to varying market conditions – the day did see the biggest new high-yield offering of the year so far. Pittsburgh-based packaged foods giant H.J. Heinz Co. opened up a $2 billion drive-by offering of 10-year secured notes.

That issue priced late in the day, with no immediate aftermarket activity seen. However, traders said existing Heinz paper softened.

There was considerable activity in Friday’s eight-year issue from TerraForm Operating LLC, which was essentially unchanged.

Friday’s other new deal, from Platform Specialty Products Corp., traded at firmer levels.

Away from the new-deal arena, Regency Energy Partners LP’s bonds were sharply higher on the news that 22% owner Energy Transfer Partners will acquire the remainder of Regency in an $18 billion cash and stock deal.

Cliffs Natural Resources Inc. gained as the coal and iron ore company announced plans to eliminate its dividend in order to pay down debt.

Statistical indicators of junk market performance were higher across the board for a fourth consecutive session on Monday. They had turned higher on Wednesday and stayed that way on Thursday and Friday as well, after having been mixed for the previous four consecutive sessions.

Heinz $2 billion drive-by

Heinz priced the only deal to clear the market on Monday, as severe weather beset the East Coast of the United States, sending some market participants scrambling early to ensure successful commutes.

In a drive-by, Heinz priced a $2 billion issue of 10-year senior secured second-lien notes (B1/BB/BB) at par to yield 4 7/8%.

The yield printed at the tight end of the 4 7/8% to 5% yield talk.

Wells Fargo was the left bookrunner for the debt refinancing deal. J.P. Morgan and Barclays were joint bookrunners.

Big books for Altice

When it launched, the massive Altice International $4.57 billion-equivalent notes offer backing the acquisition of Portugal Telecom assets from Brazil's Grupo OI was expected to remain in the market through most of the present week, sources said.

However, that is beginning to appear unlikely as the deal is playing to big demand, according to sources on the buyside and sellside.

Some color surfaced Monday on two of the three dollar-denominated tranches.

The Altice SA $1,755,000,000 10-year senior notes (expected ratings B3/B) had initial guidance of 8½% to 8¾% and will almost certainly come tighter than that, an investor said, adding that the order book for the tranche was reported at $4.5 billion on Monday morning.

The Altice Financing SA $2.06 billion of eight-year senior secured notes have been guided in the low to mid 7s, the investor said, and added that the buzz in the market has the book for the dollar-denominated secured tranche 2.5 times oversubscribed.

Last April, when Altice and its 40%-owned Numericable Group AG combined to bring a record-setting €12 billion-equivalent of high-yield bonds in seven tranches, the deal went well, the investor recounted, adding that the new Altice offering appears to be benefiting from the success of the earlier transaction.

“Right now, although you're seeing some inflows, the technicals are not all that great,” the investor remarked.

High-yield bond buyers, as always, are looking for big liquid issues from quality companies.

Any deal lacking either of those two factors – size or quality – will almost certainly extract a significant premium from the issuer, the investor said.

No word on when Altice official talk will surface or when the deal will actually price – and whether the weather on the East Coast might factor in – sources said on Monday.

In addition to the above-mentioned tranches, Altice SA is selling €500 million of 10-year unsecured notes, Altice Financing SA is selling €500 million of eight-year secured notes and Altice Finco SA is selling $385 million of 10-year unsecured notes.

The calendar

In addition to Altice, there are several smaller deals on the active calendar expected to clear before Friday's close.

TTM Technologies, Inc. has been roadshowing a $350 million offering of eight-year senior secured second-lien notes (Caa1/B-).

Early guidance was 8% to 8¼%, according to a buyside source.

Look for it to come wider than that, the source added.

J.P. Morgan and Barclays are the joint bookrunners.

Switzerland-based SIG Combibloc is in the market with a €700 million equivalent offering of eight-year senior notes (Caa1/B-) in dollar- and euro-denominated tranches, the sizes of which remain to be determined.

The dollar-denominated tranche is shaping up in the low 9s, an investor said

In addition to those, Belgium-based Sarens Group is marketing an offering comprised of between €75 million and €150 million of seven-year subordinated notes.

That deal is shaping up with a 5 3/8% coupon at par, according to a London-based sellside source.

Silk Bidco/Hurtigruten notes

The European high-yield primary generated news on Monday and is expected to continue to do so throughout the present week, sources said.

Look for two or three deals to be announced over the course of the next two days, a London-based debt capital markets banker advised.

Silk Bidco AS, a joint venture indirectly owned by Home Capital AS, Periscopus AS and investment funds managed by TDR Capital LLP, plans begin a roadshow on Tuesday for a €455 million offering of seven-year senior secured notes.

Silk Bidco plans to use the proceeds to finance its acquisition of Hurtigruten ASA, a Narvik, Norway-based transport company.

Goldman Sachs is the bookrunner.

MEIF Renewable’s £190 million

In the sterling-denominated primary market, MEIF Renewable Energy UK plc began a roadshow for a £190 million offering of five-year senior secured notes due 2020 (expected ratings Ba2/BB).

Joint bookrunner Deutsche Bank will bill and deliver. Credit Suisse is also a joint bookrunner.

The London-based generator of renewable energy plans to use the proceeds to repay its credit facilities in full and to partially repay the Parent Subordinated Shareholder Funding Instrument.

Postponed deals

The Monday session also came with announcements of two postponed deals.

Presidio postponed its $400 million offering of eight-year senior notes (Caa1/CCC+) until a later date due to insufficient demand at price talk.

Last week, the deal was talked at a discount to yield 10¾% to 11% with pricing targeted for last Friday.

And Techniplas BV withdrew from the market its €135 million offering of five-year senior secured notes (B3/B), citing a number of factors including, among others, adverse foreign exchange movements.

Both pulled deals saw Barclays on the left.

Blizzard quiets market

With Winter Storm Juno barreling toward the Northeastern United States on Monday amid predictions of near-historic snow levels in New York, junk market activity fell off.

The Finra/Bloomberg High Yield index volume slipped to $3.054 billion from Friday’s $3.365 billion level.

With the governor of New York State and the city’s mayor both urging people to not go to work if they could avoid doing so, to work from home if possible or to leave work early, a trader based in the city said that “a lot of people came in, but they cleared out early – maybe by 1 p.m. or 2 p.m. ET,” which threw a damper on late-day activity.

With the storm expected to intensify and keep up overnight and the status of mass transit up in the air, he projected, “[Tuesday] will see just skeleton crews at many desks.”

New Heinz not seen

The day’s sole pricing – the Heinz 10-year secured megadeal – came sufficiently late in the session, a trader said, so there was little or no immediate aftermarket activity seen.

The canned-beans and ketchup king’s $2 billion offering was the biggest junk bond offering seen so far this year, topping the $1.2 billion of 6% notes due 2025 that Dublin, Ireland-based specialty pharmaceuticals and medical devices maker Endo International plc brought to market at par last Tuesday via several subsidiaries. That quick-to-market offering was upsized from an originally announced $1 billion.

It was, in fact, the largest high-yield offering to hit the market since last fall, when Scientific Games Corp., a New York-based provider of technology and services to the gaming industry, priced $3.15 billion of new paper via a subsidiary in a two-part deal off the forward calendar on Nov. 14. The transaction, which consisted of $950 million of 7% senior secured notes due 2021 and $2.2 billion of 10% senior unsecured notes due 2022, was upsized from an originally announced $2.9 billion.

While the new bonds had yet to make their appearance, Heinz’s existing 4¼% notes due 2020 were seen trading at around 101 bid, with over $13 million traded, a market source said.

At another desk, a trader pegged the bonds “off maybe ½ of a point versus where they were on Friday, which with a big new issue coming, kind of makes sense.”

Altice up ahead of deal

However, existing bonds slipping in the face of a large new deal was by no means a universal phenomenon – at least not on Tuesday.

A market source quoted Luxembourg-based cable operator Altice SA’s existing 7¾% notes due 2022 at 101½ bid ahead of that company’s pending huge new deal – a two-point gain on the session.

TerraForm trades actively

Among recently priced issues, a trader said that TerraForm Power Operating’s new 5 7/8% notes due 2023 “were the volume leader, the big trader today,” with over $40 million of the bonds having changed hands during the otherwise fairly quiet session.

He saw the notes trading around a 101½ to 102 context, which was largely unchanged from where they had finished on Friday.

The Beltsville, Md.-based clean energy company had priced $800 million of the notes on Friday at 99.214 to yield 6% in a scheduled forward-calendar offering.

The trader also saw Friday’s other new deal – the $1 billion of 6½% notes due 2022 brought by Miami-based specialty chemicals manufacturer Platform Specialty Products Corp. – wrapped around the 101¾ level on “pretty decent volume.”

A second trader quoted the bonds at 101¾ bid, 102¼ offered, which he called up ¾ of a point from Friday’s close.

The company priced those bonds at par Friday in a scheduled $1.42 billion-equivalent two-part forward-calendar transaction that also included a tranche of eight-year euro-denominated notes.

Regency rallies on buyout news

Away from the new deals, one of the most notable names of the day was Regency Energy Partners, whose 5% notes due 2022 rose to 104½ bid, a gain of nearly 9 points on the day on volume of over $9 million. At one point, those bonds got as good as 105 3/8 bid.

The company’s 4½% notes due 2023 jumped 9½ points, to 102½ bid,

The bonds went up on the news that Energy Transfer Partners LP – like Regency, a Dallas-based midstream energy company that owns and operates pipelines and storage facilities – will buy the roughly 78% of Regency that it does not already own in a cash-and-stock transaction valued at $18 billion.

Cliffs up on debt plan

Also in the energy world, Cliffs Natural Resources’ bonds rose as the Cleveland-based coal and iron ore company unveiled plans to cut its debt.

A trader said that pretty much all of the company’s capital structure was up 2 to 2½ points on the news, with its most actively traded issue – the 3.95% notes due 2018 – ending at 82 bid.

Cliffs said it cut its net debt by more than $400 million in the fourth quarter and was scrapping its 15-cent quarterly dividend and putting the $92 million it would thus save towards further debt reduction.

The company’s chairman and chief executive officer, Lourenco Goncalves, said in a statement: “We see accelerated debt reduction as a more effective means of protecting our shareholders than continuing to pay a common share dividend.”

Indicators again extend gains

Statistical indicators of junk market performance were higher across the board for a fourth consecutive session on Monday. They had turned higher on Wednesday and stayed that way on Thursday and Friday as well, after having been mixed for the previous four consecutive sessions.

The KDP High Yield Daily index rose by 3 basis points Monday to end at 70.9, its fourth straight gain and sixth gain in the last seven sessions. It had risen by 10 bps on Friday.

The yield came in by 1 bp to 5.54%, its third straight narrowing. On Friday, it had declined by 4 bps.

The Markit Series 23 CDX North American High Yield index saw its fourth straight gain after two straight losses, advancing by 5/32 point on Monday to finish at 106¼ bid, 106 5/16 offered. On Friday, it had gained 1/8 of a point.

And the Merrill Lynch U.S. High Yield Master II index gained 0.105% on Monday, its sixth straight advance. It had gained 0.14% on Friday.

The latest gain lifted its year-to-date return to 0.449%, its second consecutive new high point for the year, up from the previous zenith, Friday’s 0.344% reading.

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