Scientific Games, EP Energy megadeals lead nearly $3 billion session; new EP moves up; Peabody slates

By Paul Deckelman and Paul A. Harris

New York, Feb. 1 – The high-yield primary market started February off with a bang on Wednesday, in contrast to the sleepy way that it had closed out January the day before.

Syndicate sources said four issuers brought a total principal amount of $2.92 billion of new U.S. dollar-denominated and fully junk-rated paper from domestic issuers to market on Tuesday, well up from the $225 million which had gotten done in just one tranche on Tuesday.

The day’s big deal was an upsized $1.15 billion of paper from Scientific Games Corp., a provider of technology-based products and services to the casino industry and to lottery operations, which did a quickly shopped add-on to its existing 2022 notes. There was also considerable activity in one of the company’s other existing bond issues.

Oil and natural gas company EP Energy LLC also did an upsized megadeal, pricing $1 billion of eight-year secured notes as a regularly scheduled forward calendar transaction.

Those notes firmed when they hit the aftermarket as the day’s most actively traded purely junk-rated issue.

Two other existing EP Energy issues were mixed in active trading.

The day’s other two new deals were smaller –financial services provider CURO Financial Technologies Corp.’s upsized $470 million of five-year secured notes, a regularly scheduled deal, and security alarm company APX Group, Inc.’s unscheduled $300 million add-on to its existing 2022 notes.

The syndicate sources meantime reported that bankrupt coal producer Peabody Energy Corp. will begin shopping a $1 billion bond issue around, as part of the company’s exit financing as it emerges from the Chapter 11 reorganization process.

In the secondary arena, traders saw continued active trading at higher levels in pulp producer Mercer International Inc.’s new seven-year notes, which priced on Tuesday.

Statistical market performance measures moved higher across the board on Wednesday, after having been lower all around on Tuesday and mixed over three straight sessions before that. It was the indicators’ third higher session in the last seven trading days.

Scientific Games upsizes

A busy Wednesday session in the new issue market saw Scientific Games price an upsized $1.15 billion add-on to the Scientific Games International, Inc. 7% senior notes due Jan. 1, 2022 (Ba3/B+) at 106.00 to yield 5.268%.

The issue size was increased from $1 billion.

The reoffer price came at the rich end of the 105.75 to 106 price talk.

JP Morgan, BofA Merrill Lynch, Deutsche Bank, Credit Suisse, Fifth Third, Macquarie, PNC and Goldman Sachs were the joint bookrunners.

The New York-based company plans to use the proceeds to prepay a portion of its term loans, redeem or repurchase all of its outstanding senior subordinated notes due 2018, repay a portion of its revolving credit facility and for general corporate purposes.

EP Energy upsizes

EP Energy priced an upsized $1 billion issue of eight-year 1.5-lien senior secured notes (Caa1/B-) at par to yield 8%.

The issue size was increased from $600 million.

The yield printed on top of yield talk in the 8% area.

Credit Suisse was the sole bookrunner.

The Houston-based oil and natural gas exploration and production company plans to use the proceeds to refinance its 1.5-lien term loan.

CURO upsizes

CURO Financial Technologies Corp. priced an upsized $470 million issue of 12% five-year senior secured notes (Caa1/B-) with a 12% coupon at 98.155 to yield 12½%.

The issue size was increased from $460 million.

The coupon, reoffer price and yield came on top of talk.

Jefferies was the bookrunner.

The Wichita, Kan.-based consumer finance company plans to use the proceeds to refinance debt.

Vivint taps 7 7/8% notes

APX Group, Inc., the holding company of Vivint, Inc., announced that it has issued a $300 million add-on to its 7 7/8% senior secured notes due Dec. 1, 2022.

BofA Merrill Lynch managed the sale, a source said.

The Provo, Utah-based home security services provider plans to use the proceeds to redeem $300 million of its 6 3/8% senior secured notes due 2019 and for general corporate purposes.

American Greetings talk 8¼% to 8½%

American Greetings Corp. talked $375 million of eight-year notes (Ba3/BB-) to yield 8¼% to 8½%.

Official talk comes on top of initial guidance.

The deal is expected to price by the end of the week.

BofA Merrill Lynch, KeyBanc, PNC, Citizens, Wells Fargo, J.P. Morgan and BBVA are managing the sale.

Peabody $1 billion roadshow

Peabody Energy Corp. plans to start a roadshow on Thursday for a $1 billion offering of five-year first lien senior secured notes.

Goldman Sachs is the left bookrunner. JP Morgan, Credit Suisse and Macquarie are the joint bookrunners.

The notes are being offered in connection with the restructuring of Peabody as part of the Second Amended Joint Plan of Reorganization filed with the U.S. Bankruptcy Court for the Eastern District of Missouri on Jan. 27, 2017.

If Peabody's plan of reorganization is confirmed and certain other conditions are satisfied on or before Aug. 1, 2017, the proceeds from the notes will be released from escrow to fund a portion of the distributions to creditors provided for under the plan of reorganization, and Peabody will become the obligor under the notes.

Ferroglobe starts roadshow

Ferroglobe plc was scheduled to begin a roadshow on Wednesday in New York and New Jersey for a $350 million offering of five-year senior notes.

Goldman Sachs is the sole bookrunner.

The London-based supplier of silicon metal, silicon-based specialty alloys, and ferroalloys plans to use the proceeds to repay certain existing debt, and pay certain compensation expenses owed to Ferroglobe’s former executive chairman.

In addition there were announcements of dollar-denominated deals from Constellium NV, $625 million of senior notes due 2025, to fund tender for subsidiaries Wise Metals Group LLC's and Wise Alloys Finance Corp.'s 8¾% senior secured notes due 2018 and for general corporate purposes.

And Symantec Corp. said it intends to sell $1 billion of senior notes due 2025, with proceeds to help fund its acquisition of LifeLock, Inc.

gategroup Swiss-franc deal

Switzerland-based gategroup will take part in an investor roadshow next week in Europe, according to a market source.

A Swiss franc-denominated deal is expected to follow.

Meetings with investors are being organized by BNP Paribas, Credit Suisse and UBS.

The Kloten, Switzerland-based firm is the parent company for 10 brands that provide services to the travel industry, including catering, hospitality, provisioning and logistics.

New EP Energy up...

In the aftermarket, traders saw the new EP Energy 8% 1.5-lien senior secured notes due 2025 move up when they were freed for secondary dealings after having priced at par.

A market source saw the new bonds late in the day at 100¾ bid, on volume of over $75 million, topping the junk market’s Most Actives list on the day.

A second trader saw the notes doing even better than that, pegging them at 101¼ bid.

... While existing paper is mixed

The company’s several series of existing paper were also busy on Wednesday, a trader pointed out, seeing both its 6 3/8% notes due 2023 and its 9 3/8% notes due 2020 trading around.

The 6 3/8% notes were seen ending 1½ points lower, at 87½ bid, with over $21 million having traded.

The 9 3/8% notes, on the other hand, gained more than ½ point to end around 102 3/8 bid, also on more than $21 million of turnover.

Scientific Games gains

The new Scientific Games 7% notes due 2022 were ending around 106 17/32 bid, after that add-on deal had priced at 106 earlier. More than $13 million traded.

But a trader noted that the existing bonds had finished above the 107 bid level on Tuesday, before news of the add-on deal was released.

A second trader agreed, seeing the bonds down by as much as 13/16 point from the company’s pre-deal levels.

One of the traders meantime said that the company’s existing 10% notes were “pretty active, with some trading in them.” He saw that paper go home at 105 bid, calling that up 2 points on the session.

A second trader also located the 10s at just over the 105 bid level, with over $24 million of volume.

Mercer holds its gains

A trader said that Mercer International’s new 6½% notes due 2024 were trading at 101¼ bid, about where those notes had gone home on Tuesday after pricing at par earlier in the session.

At another shop, a trader said the notes were at 101 1/8 bid Wednesday, up 1/8 point from where he had seen them on Tuesday.

A relatively robust more than $15 million traded Wednesday, although that was well down from Tuesday, when Mercer had been the most actively traded purely junk issue on volume of more than $48 million.

The Seattle-based wood pulp producer had priced its $225 million of the 6½% notes at par after a short roadshow.

Indicators turn firmer

Away from trading in the new issues, a market source said that “nothing too too exciting” was going on in Wednesday’s market.

Statistical market performance measures meanwhile moved higher across the board on Wednesday, after having been lower all around on Tuesday and mixed over three straight sessions before that. It was the indicators’ third higher session in the last seven trading days.

The KDP High Yield index edged up by 1 basis point on Wednesday, closing at 72.02, after having eased by 1 bp on Tuesday. It was the index’s second gain in the last three sessions.

Its yield was unchanged at 5.15%, after having risen by 1 bp on Tuesday. That followed a 2 bps tightening on Monday.

The Markit Series 27 CDX index gained 5/32 point on Wednesday, a market source said, seeing it finish at 106 3/8 bid, 106 7/16 offered, its first gain after two straight losses and its second rise in the last four sessions. On Tuesday, it had been down 1/8 point on the day.

The Merrill Lynch High Yield index posted its first gain after two consecutive losses, its fifth advance in the last seven sessions. It improved by 0.119%, versus losses of 0.054% on Monday and 0.032% on Tuesday.

That raised its year-to-date return to 1.463% from Tuesday’s 1.343% and established a new 2017 peak level, surpassing last Friday’s 1.43%, the previous zenith.

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