Hilcorp, JBS, VistaJet price; Tuesday deals busy; Altice, Cequel off on Suddenlink deal

By Paul A. Harris and Paul Deckelman

New York, May 20 – The high-yield primary arena continued to churn out new deals on Wednesday, with syndicate sources seeing a trio of single-tranche offerings getting done.

The big deal of the day was a quickly shopped and upsized $900 million of 10-year notes from meatpacker JBS USA LLC.

Also driving by was oil and natural gas exploration and production company Hilcorp Energy I LP, with $500 million of 10.5-year notes.

One regularly scheduled offering priced off the forward calendar – Swiss airline operator VistaJet Holding SA’s downsized $300 million of five-year paper, via a financing subsidiary.

The session’s $1.7 billion of new dollar-denominated and fully junk-rated paper from domestic or industrialized-country borrowers was down from the $2.27 billion that priced on Tuesday, according to data compiled by Prospect News.

Traders saw the new Hilcorp notes trading around their issue prices, with the day’s other two deals unseen.

They also saw busy activity in the trio of deals that had come to market on Tuesday from EP Energy Corp. and Energy Transfer Equity, LP, the day’s volume leader and runner-up, respectively, and from Blue Coat Holdings, Inc.

Away from the new deals, the news that European cable operator Altice SA will gain a foothold in the U.S. cable market by buying control of No. 9 operator Suddenlink for $9.1 billion pushed Altice’s bonds lower in busy trading, with even bigger losses seen in the bonds of Suddenlink corporate parent Cequel Communications, as major ratings agencies warily scrutinized the deal and forecast an increase in the company’s leverage.

Statistical market performance indicators were lower for a third consecutive session on Wednesday. They had lost ground on Monday and stayed down across the board on Tuesday after having been higher all around on Friday.

JBS, upsized and tight

Primary market news flow remained vigorous on Wednesday as three issuers completed single-tranche deals, raising a combined total of $1.7 billion.

Two of the three were drive-by deals.

One was upsized, and one was downsized.

One priced at the tight end of talk, and the other two came in line with price talk.

JBS USA LLC priced an upsized $900 million issue of 10-year senior notes (Ba2/BB+) at par to yield 5¾%.

The deal was upsized from $600 million.

The yield printed at the tight end of the 5¾% to 5 7/8% yield talk.

BofA Merrill Lynch was the left bookrunner for the debt refinancing deal. BMO, Deutsche Bank, Morgan Stanley and Wells Fargo were the joint bookrunners.

Hilcorp drives by

Hilcorp Energy I LP priced a $500 million issue of senior notes due Oct. 1, 2025 (Ba3/BB+) at par to yield 5¾%.

The yield printed on top of yield talk.

J.P. Morgan, Barclays, Deutsche Bank, BMO and BofA Merrill Lynch were the joint bookrunners for the debt refinancing.

VistaJet downsized, restructured

Returning to the market with a deal that had been sidelined, according to market sources, VistaJet Malta Finance plc priced a downsized $300 million issue of 7¾% five-year senior notes (B-/B) at 98.982 to yield 8%.

The coupon, price and yield came in line with price talk that specified a 7¾% coupon at a one-point discount to yield 8%. The deal priced well wide of early guidance in the 6½% area, according to market sources.

Call protection was increased to three years from two years.

J.P. Morgan and Jefferies were the joint bookrunners.

The Baar, Switzerland-based airline plans to use the proceeds to repay debt and fund aircraft purchases.

Thursday's deals

Two deals will be on deck when the final full session of the pre-Memorial Day week gets underway on Thursday.

Paramount Resources Ltd. talked its $400 million offering of eight-year senior notes (B3/BB-) to price with a yield in the 7% area on Wednesday.

Joint global coordinator Barclays will bill and deliver. RBC is also a joint global coordinator. BMO, HSBC and Scotia are bookrunners.

Plantronics, Inc. is also expected to price its $500 million offering of senior notes due May 31, 2023 (Ba2/BB) on Thursday.

Official talk had yet to circulate at Wednesday's close, but the deal has been whispered at 6% to 6¼%, sources say.

Morgan Stanley and Goldman Sachs are the joint bookrunners.

Rexel prices tight

In the European session, Rexel SA priced a €500 million issue of 3¼% seven-year senior notes (Ba3/BB/BB) at 99.22 to yield 3 3/8%.

The yield printed at the tight end of the 3 3/8% to 3½% yield talk.

Credit Agricole, HSBC and SG were the joint global coordinators and joint lead bookrunners.

BofA Merrill Lynch, CM-CIC, ING and JPMorgan are joint bookrunners.

The Paris-based provider of electrical services and equipment plans to use the proceeds to redeem its dollar-denominated 6 1/8% senior notes due December 2019 and for general corporate purposes.

Mixed cash flows

The cash flows of the dedicated high-yield funds were mixed on Tuesday, the most recent session for which data was available at press time, according to a market source.

High-yield exchange-traded funds saw $50 million of outflows on the day, while actively managed funds saw $20 million of inflows.

For the week to Tuesday's close, the funds were tracking $455 million of aggregate inflows, the source added.

Hilcorp around issue price

In the secondary sphere, traders said that the new Hilcorp Energy 5¾% notes due 2025 hung around their par issue price when they moved into the aftermarket.

One trader quoted the Houston-based oil and gas E&P company’s deal at “right around par,” while a second saw them in a bid range of 99 7/8 to 100 1/8.

The traders did not see any meaningful aftermarket dealings in the day’s other two bond offerings – Greeley,Colo.-based beef, pork and lamb processor JBS USA’s 5¾% notes due 2025 and Swiss airline company VistaJet’s 7¾% notes due 2020, given the relatively late hour at which they had gotten done.

EP Energy tops actives

They meanwhile saw heavy trading in EP Energy’s 6 3/8% notes due 2023, which had priced too late during Tuesday’s session for aftermarket activity.

One trader saw the bonds in a par-to-100¼ bid context.

A second trader said that the notes moved around during the day between 99¾ and 100½, but that range had tightened during the afternoon to between par and 100 1/8 or 100¼ bid.

He said that it was the clear volume leader, with over $86 million having changed hands.

The Houston-based energy exploration and production company had priced $800 million of the notes at par on Tuesday in a quick-to-market offering via its wholly owned EP Energy LLC subsidiary and the latter’s wholly owned Everest Acquisition Finance Inc. unit.

Energy Transfer, Blue Coat trade

Tuesday’s other two issues – from Energy Transfer Equity and Blue Coat Holdings – were also seen finishing the day high up on Junkbondland’s Most Actives list.

One of the traders saw Energy Transfer’s 5½% notes due 2027 in a 99¾-to-par context, on volume of over $74 million.

That was well up from the 98.5 level at which the Dallas-based midstream energy company had priced its quickly shopped $1 billion deal.

A second trader also saw the bonds finishing around par, while a third pegged them at 99¾ bid.

Blue Coat Holdings’ 8 3/8% notes due 2023 were moving around in a 100¼-to-100 3/8 bid complex, one of the traders said.

A second saw them between 100 1/8 and 100 5/8 on volume of over $25 million.

The Sunnyvale, Calif.-based cyber-security company priced its $470 million issue at par in a regularly scheduled transaction off the forward calendar.

Blue Coat was the only one of the three deals to have seen any aftermarket activity on Tuesday, trading in a range of 100 1/8 to 100 3/8.

Energizer finally runs down

A trader saw the volume on Friday’s offering of 5½% notes due 2025 from St. Louis-based flashlight battery maker Energizer Holdings Inc. via its Energizer SpinCo Inc. financing unit finally winding down on Wednesday, after having energetically dominating the Most Actives list the previous two sessions.

“It was quiet today – only about $3 million traded.”

He noted that after that $600 million regularly scheduled deal had come to market at par on Friday, too late for any dealings at that time, volume had zoomed to over $87 million on Monday and over $53 million on Tuesday, topping the actives list each session, “so anybody who wanted to get it, or get out of it, had already done so.”

The notes finished quoted around a 100 1/8-to100¼ context.

At another desk, a trader pointed out that most of the new deals seen over the last several sessions had pretty much stuck around or slightly above their respective issue prices.

“Nothing is running away, not at all,” he said.

Altice, Cequel off

Away from the new deals, traders said that Altice SA’s bonds were lower on the news that the Luxembourg-based provider of cable, broadband and phone service to various European markets will jump into the U.S. cable pool with the acquisition of the ninth-largest domestic cabler, St. Louis-based Suddenlink Communications.

“Altice was active and off a little on the news that they’ll be paying $9.1 billion for Suddenlink,” a trader noted.

He saw the company’s bonds down anywhere from ¼ to ½ point across its capital structure.

Another market source saw Altice’s 7 5/8% notes due 2025 down ¾ point at 99¾ bid on volume of over $31 million, although a second, separate tranche of 7 5/8% 2025 bonds issued by the company’s Altice Finco SA subsidiary was unchanged at 103 bid on volume of around $12 million.

Parent Altice SA’s 7¾% notes due 2022 dipped by 5/8 point to 101 3/8 bid on volume of over $28 million, while Altice Finco’s 6 5/8% notes due 2023 were also off by 5/8 point, at 103 7/8 bid, with over $23 million having traded.

Meanwhile, Cequel Communications LLC – which does business under the Suddenlink name – was seen well off on the day, on the prospect that its leverage will increase substantially as a result of the buyout deal.

Under the terms of the transaction announced Wednesday, Altice will buy 70% of Cequel/Suddenlink – but the latter expects to issue $1.76 billion in new debt and keep $5.06 billion in existing debt to help fund that acquisition, with Altice kicking in $1.19 billion of cash.

Both Standard & Poor’s and Moody’s Investors Service warned of a possible downgrade to Cequel’s ratings, with S&P estimating that pro-forma leverage is expected to increase to the mid-7x range in 2015 from about 5.8x in 2014.

Cequel’s 6 3/8% notes due 2020 fell as low as 103 before finally finishing down 1 3/8 points on the day at 104 bid, with over $16 million traded.

Its 5 1/8% notes due 2020 issued in May of 2013 ended at 99¼ bid, down 1¼ points, with over $37 million traded, while a separate tranche of 5 1/8% 2020 bonds issued last September were down a deuce at 98¾ bid, with over $20 million changing hands; both series of 2020 notes had hit intraday lows just above 97 bid before getting back some of that and cutting their losses.

Indicators again lower

Statistical market performance indicators were lower for a third consecutive session on Wednesday. They had lost ground on Monday and stayed down across the board on Tuesday after having been higher all around on Friday.

The KDP High Yield Daily index saw its third straight loss on Wednesday, dropping 5 basis points to end at 71.37, on top of downturns of 4 bps on Tuesday and 2 bps on Monday. Wednesday’s setback was also its fourth in the last five sessions and fifth in the last seven trading days. The index last rose on Friday, by 5 bps.

Its yield, meantime, was up by 1 bp for a second session in a row on Wednesday, closing at 5.26%. It had also risen by 1 bps on Tuesday after been unchanged on Monday for the second time in three sessions and having come in by 2 bps on Friday.

The Markit Series 24 CDX North American High Yield eased by 1/16 point on Wednesday to close at 106 15/16 bid, 106 31/32 offered, its third straight decline. It had also retreated by 1/32 point on Tuesday and by 3/16 point on Monday, after having risen the two previous sessions, including Friday’s 7/32 point gain.

The Merrill Lynch North American Master II high-yield index ended lower for a third straight day. It was off by 0.059%, following downturns of 0.06% on Tuesday and 0.024% on Monday. The latter loss had broken a three-session winning streak, including Friday’s 0.127% improvement.

Wednesday’s setback cut its year-to-date return to 3.762% from 3.823% on Tuesday. It was also down from its peak level for the year of 3.952%, set on April 27.

© 2015 Prospect News.
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