Baffinland, Cirsa price new deals; California Resources in focus; Intelsat drops

By Paul A. Harris and Abigail W. Adams

Portland, Me., June 22 – The busy Friday session for the high-yield primary market was not as busy as anticipated with only one dollar-denominated and one dual-currency deal pricing.

Baffinland Iron Mines Corp. priced an upsized $575 million issue of 8¾% eight-year senior secured notes (Caa1/B-) at 99.282 to yield 8 7/8%. The notes were the most actively traded issue in the secondary space after freeing for trade and were seen well above their issue price.

Cirsa Gaming Corp. SA priced a €1.56 billion equivalent amount of restructured 5.5-year senior secured notes (B2/B+) in three tranches.

While Teekay Offshore Partners LP was expected to price a $500 million offering of five-year senior notes (Caa2/B/B) and PHI, Inc. a $500 million offering of five-year senior secured notes (B3/B/B+), neither of the deals were heard to have priced by press time, sources said.

New issue activity was light throughout the week. However, the June 25 week promises to be an active one with deals from Flex Acquisition Holdings, Inc., doing business as Novolex, Stars Group Holdings BV, Chaparral Energy Inc. and LGI Homes, Inc. on deck.

While the new paper from Baffinland was the most heavily traded issue in the secondary space, California Resources Corp.’s 8% senior notes due 2022 were a close second.

The notes jumped 2 points as the price of West Texas intermediate crude oil for August delivery soared on Friday following OPEC’s meeting.

Energizer Holdings Inc.’s newly priced dollar-denominated tranche of 6 3/8% senior notes due 2026 (B2/BB-) remained in focus and strong on Friday although the notes were little changed from Thursday.

TDC A/S’ newly priced dollar-denominated tranche of 9 3/8% senior notes due 2023 (B3/B-/B-) also continued to perform well in secondary trading with the notes slightly improved.

Intelsat Luxembourg SA’s 8 1/8% senior notes due 2023 gave up much of their gains from earlier in the week on Friday with the notes dropping 3 points in high-volume activity.

Oversubscribed Baffinland upsizes

Baffinland Iron Mines priced an upsized $575 million issue of 8¾% eight-year senior secured notes (Caa1/B-) at 99.282 to yield 8 7/8% on Friday.

The amount was increased from $550 million.

The yield printed in the middle of the 8¾% to 9% yield talk and in line with initial price talk set in the high 8% area to 9%.

The deal was heard to be oversubscribed, according to a trader, who added that orders were 1.5 times the original $550 million deal size.

Morgan Stanley, Goldman Sachs and Citigroup were the joint bookrunners.

The Toronto-based mining company plans to use the proceeds to repurchase its outstanding 2022 notes, to pay down its revolver including associated breakage costs, if any, and for working capital and general corporate purposes.

The additional proceeds resulting from the $25 million increase will also be used for general corporate purposes.

Cirsa restructures, prices

Cirsa Gaming priced a €1.56 billion equivalent offering of restructured 5.5-year senior secured notes (B2/B+) in three tranches.

The deal included €425 million of three-month Euribor plus 575 basis points floating-rate notes with a 0% Euribor floor which priced at 97.698.

The spread to Euribor came inside of the 600 to 625 bps final spread talk. However, that talk widened from initial spread talk of 525 bps.

The company also priced two fixed-rate tranches.

These included €663 million of 6¼% notes which priced at 97.749 to yield 6¾%.

The yield printed at the tight end of the 6¾% to 7% final yield talk. Initial yield talk was in the 6% area.

The sole dollar-denominated tranche came as $550 million of 7 7/8% notes which priced at 95.747 to yield 8 7/8%.

The yield printed at the tight end of final talk in the 9% area. Initial talk was in the 8% area.

Final talk on all three tranches also specified original issue discounts.

The Cirsa deal was fully underwritten by Deutsche Bank, a London-based trader said, and added that an advantage in price negotiations was conferred upon investors because of that fact.

Call protection for the fixed-rate notes was reduced to two years from three years.

A special call provision that would have allowed the issuer to call 10% of the notes annually at 103 during the non-call period was removed.

There were also covenant changes bearing primarily upon how the company may disburse cash and incur additional debt.

Joint global coordinator and joint bookrunner Deutsche Bank will bill and deliver. Barclays and UBS are also joint global coordinators and joint bookrunners. BBVA, Credit Suisse and Jefferies are also joint bookrunners.

Proceeds will be used to help fund the buyout of the Madrid-based gaming company by Blackstone and to repay Cirsa debt.

Dual currency deals

Cirsa was the third of three high-profile dual currency deals to price during the past week.

In another transaction run by Deutsche Bank, Copenhagen-based TDC priced about €1.4 billion equivalent of five-year senior notes (B3/B-/B-) in dollars and euros on Thursday.

Also on Thursday, Energizer Holdings priced about $1.25 billion equivalent of eight-year senior notes (B2/BB-) in dollars and euros, in a transaction led by Barclays.

Stars starts Monday

The final week of June will get underway with a busy active deal calendar.

On Friday, Stars Group Holdings announced a roadshow starting Monday for a $750 million offering of eight-year senior notes (Caa1/B-/B-).

Initial price talk has the deal coming with a yield in the low to mid 7% area, a trader said.

The acquisition financing is expected to price in the middle part of the June 25 week.

Morgan Stanley, Deutsche Bank, Goldman Sachs, Macquarie, Barclays, BMO and JP Morgan are the joint bookrunners.

Novolex roadshow

Novolex plans to roadshow a $500 million offering of eight-year senior notes (Caa1/CCC+) in the early part of the week ahead.

The acquisition deal is expected to price Wednesday.

JP Morgan Securities LLC is the lead.

Novolex and Stars board an already busy calendar of previously announced deals that includes Chaparral Energy’s $300 million five-year senior notes (Caa1/B-) with initial guidance in the high 7% area.

Enterprise Development Authority plans to price $440 million five-year senior secured notes (S&P: expected B-) on Tuesday. Initial talk is in the high 9% to low 10% area.

LGI Homes is marketing $400 million of eight-notes (S&P: BB-), a deal that roadshows through Thursday.

Teekay Offshore Partners’ $500 million offering of five-year senior notes (Caa2/B/B), with initial price talk in the low to mid 8% area, and PHI’s $500 million offering of five-year senior secured notes (B3/B/B+), with initial talk mid 8% area to 9%, are also potential business for the final week of June.

Both Teekay and PHI had been expected to price before the Friday, June 22 close.

And in Europe, Barclays is set to kick off a European pre-deal roadshow Monday on behalf of a to-be-announced credit in the chemicals sector. That issuer is then expected to bring a euro-denominated offering of notes.

Issuance continues trend

With Friday’s deals included, the week saw $2.35 billion price in the U.S. high-yield market in five tranches.

That figure was almost the same as the $2.47 billion in four tranches that priced the week before and generally in line with the recent trend.

Preceding weeks registered $2.95 billion, $0.90 billion and $2.49 billion – although before that activity was significantly higher.

Year-to-date volume is now $104.15 billion in 198 tranches, lagging 2017’s pace of $141.28 billion in 258 tranches by 26%.

Baffinland dominates

Baffinland’s new 8¾% senior notes due 2026 dominated activity in the secondary space after breaking for trade.

The notes were seen changing hands more than 2 points above their 99.282 issue price. The notes were seen at 101 1/8 bid, 101 ½ offered late in the afternoon.

They were seen trading between 99½ and 101½ and were set to close the day at 101½, sources said. More than $63 million of the bonds were on the tape by late in the session.

Sources attributed the strong performance of the new paper to supply and demand with the high-yield space seeing a dearth of new paper.

Thursday’s deals

Energizer’s newly priced 6 3/8% notes due 2026 remained active in the secondary space although the notes were little changed from their previous levels.

The 6 3/8% notes were seen at 101¾ bid, 102 1/8 offered and were trading between 101 5/8 and 101 7/8 with more than $30 million of the bonds on the tape by late afternoon.

Issuing vehicle Energizer Gamma Acquisition, Inc. priced $500 million of the notes at par on Thursday as part of a dual-currency deal, which also saw Energizer Gamma Acquisition BV price €650 million of eight-year notes at par to yield 4 5/8%.

The dollar denominated tranche of TDC’s dual-currency deal also remained strong in the secondary market. The 9 3/8% notes due 2023 were seen slightly improved on Friday.

They were quoted at 101¼ bid, 102 offered and were seen changing hands between 101¼ and 101¾. The notes were trading between 101 and 101 3/8 on Thursday.

TDC priced $410 million of notes at par in a dual-currency deal that also saw €1.05 billion of five-year notes price at par to yield 7%.

California Resources in focus

California Resources 8% senior notes due 2022 were second only to Baffinland in terms of trading volume.

The notes gained about 2 points on Friday as the price of crude oil soared. They were seen at 90½ bid, 91 offered with most trades around 91, sources said.

More than $60 million of the bonds had traded by late afternoon.

The rise of the 8% notes followed the price of crude oil which jumped more than $4 after OPEC agreed to raise production levels.

While the price of crude oil and California Resource’s 8% notes previously dropped on speculation OPEC’s and Russia’s production levels would increase, the increased levels are not believed to be enough to disrupt the supply-demand imbalance which is keeping prices high.

After previously settling around $65, crude oil prices shot up to $69 on Friday. California Resources 8% notes were down 1 point on Thursday in the run up to the meeting.

Intelsat drops

Intelsat’s 8 1/8% senior notes due 2023 gave up much of their previous gains on Friday.

The notes were down more than 3 points to trade at 78½, a market source said. They are now just 1 point above their previous level of 77½.

Intelsat jumped more than 4½ points to 82 on Wednesday as most of its asset classes, including its common stock and convertible bonds rose after an analyst upgrade of Intelsat stock.

The rise was short-lived with Intelsat pulling back ½ point on Thursday and dropping close to its previous levels on Friday.

Indexes mixed

Benchmarks for the high-yield secondary market closed the week mixed after a flat to down day on Thursday.

The KDP High Yield index was flat for the second consecutive trading day on Friday. The index again closed the day at 70.81 with the yield also flat at 5.75%, unchanged from Thursday.

The Merrill Lynch High Yield index saw slight losses on Friday. The index was down 0.1 basis point on Friday with the year-to-date return now 0.6%. The index was down 7.1 bps on Thursday.

The index broke into positive territory on June 5 for the first time since May 15 and has remained there since.

The CDX High Yield 30 index closed the week with gains after a significant drop on Thursday. The index was up 17 bps to close Friday at 106.64. The index was down 25 bps on Thursday.

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