Standard Industries, Constellium, American Greetings, Harland price; funds up $413 million

By Paul Deckelman and Paul A. Harris

New York, Feb. 2 – The high-yield primary market saw its second consecutive busy session on Thursday, making it two-for-two in February so far.

Syndicate sources said that $2.15 billion of U.S. dollar-denominated and fully junk-rated paper from domestic or industrialized-country borrowers priced in five tranches, although that lagged behind Wednesday’s nearly $3 billion that got done in four tranches.

Netherlands-based aluminum products supplier Constellium NV had the day’s big deal, an upsized $650 million of eight-year notes that priced after a roadshow.

Also upsizing was greeting-card maker American Greetings Corp.’s $400 million of eight-year notes and check products supplier Harland Clarke Holdings Corp.’s $350 million of 5.5-year secured paper, both of which also came off the forward calendar.

Roofing materials manufacturer Standard Industries Inc.’s $500 million of 10-year notes, in contrast, was not upsized and was a quick-to-market transaction.

The sources also heard that Bermuda-based liquid natural gas carrier company Golar LNG Partners LP priced a $250 million 4.5-year floating-rate issue earlier in the session.

Secondary market traders said that the new American Greetings paper moved up by more than 1 point, while the Harland Clarke and Constellium deals were also quoted higher.

And they saw continued active trading in Wednesday’s new issues from oil and natural gas producer EP Energy LLC and gaming technology company Scientific Games Corp.

Away from the new deals, oilfield services firm Weatherford International’s bonds rose after the company reported better revenues and a smaller year-over-year loss and unveiled a debt-cutting strategy.

Statistical market performance measures were trending higher for a second straight session on Thursday. They had improved 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’ fourth higher session in the last eight trading days.

High-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall junk market liquidity trends – got back in the black in the latest reporting week after two outflows, according to data released on Thursday, as $413 million more came into those weekly reporting-only domestic funds than left them in the form of investor redemptions during the week ended Wednesday. That was a solid rebound from the $532 million outflow reported last Thursday for the seven-day period ended Jan. 25 (see related story elsewhere in this issue).

Constellium oversubscribed

During an active Thursday session in the new issue market three junk-rated issuers – each bringing a single tranche – walked away with a combined $1.3 billion.

Thursday’s deals bore testimony to hot market conditions.

All three deals were upsized. Two priced at the tight ends of talk, while one came well inside of talk.

Constellium priced an upsized $650 million issue of eight-year senior notes (Caa1/CCC+) at par to yield 6 5/8%.

The issue size was increased from $625 million.

The yield printed at the tight end of yield talk that was set in the 6¾% area.

The deal was said to be four-times oversubscribed, according to a market source.

Deutsche Bank, BNP Paribas, Credit Suisse and Goldman Sachs managed the sale.

The Amsterdam-based aluminum products supplier plans to use the proceeds, together with cash on hand, to fund a 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.

American Greetings: 20 accounts zeroed

American Greetings priced an upsized $400 million issue of 7 7/8% eight-year senior notes (Ba3/BB-) at 99.272 to yield 8%.

The issue size was increased from $375 million

The yield printed 25 basis points below the tight end of the 8¼% to 8½% yield talk.

The debt refinancing deal played to $2.8 billion of orders, according to a market source who added that the top allocation was $10 million; 20 accounts got zero allocations, the source added.

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

Harland Clarke upsized, tight

Harland Clarke Holdings priced an upsized $350 million issue of senior secured notes due Aug. 15, 2022 (B1/BB-) at par to yield 8 3/8% on Thursday, according to a syndicate source.

The issue size was increased from $300 million.

The yield printed at the tight end of yield talk that had been announced in the 8½% area.

Credit Suisse, BofA Merrill Lynch, J.P. Morgan, Citigroup, Deutsche Bank, Jefferies and Macquarie were the joint bookrunners for the debt refinancing deal.

Standard Industries split-rated

In the crossover market, Standard Industries priced a split-rated $500 million issue of 10-year senior notes (Ba2/BBB-) at par to yield 5%.

The yield printed at the tight end of yield talk in the 5 1/8% area.

BofA Merrill Lynch and Deutsche Bank were the bookrunners.

The Parsippany, NJ-based roofing company, also known as Building Materials Corp. of America, plans to use the proceeds to refinance debt related to its recent acquisition of German-based roofing tile manufacturer Braas Monier Building Group SA.

Change Healthcare talk, change

Change Healthcare Holdings, LLC downsized its offering of eight-year senior notes (B3/B-) to $1 billion from $1,235,000,000, and revised the deal’s contested equity clawback provision on Thursday.

The structural change provides a conventional equity clawback for 40% of the issue at par plus the full coupon for the first three years.

The previous structure, which engendered investor pushback, would have allowed the issuer to take out 100% of the deal at graduating fractions of the coupon beginning at 25% of the coupon for the first nine months and ending with a conventional 40% clawback for par plus the full coupon from the 25th month through the 36th month, a source said.

Price talk for the senior notes is set in the 5 7/8% area, inside of the 6% to 6 ¼% early guidance.

Investors had been demanding a higher yield in return for the initially proposed 100% equity clawback, a trader said.

Books are closed, and the offering is set to allocate on Friday.

Symantec starts roadshow

Symantec Corp. began a roadshow on Thursday for a $1 billion offering of eight-year senior notes.

The deal, which is expected to come with speculative-grade credit ratings, is set to price in the week ahead.

BofA Merrill Lynch is leading the acquisition financing.

Wednesday outflows

Cash flows for dedicated high-yield bond funds were negative on Wednesday, the most recent session for which data was available at press time, a market source said.

High-yield ETFs sustained $129 million of outflows on the day.

Asset managers saw $75 million of outflows on Wednesday.

Late Thursday news surfaced that the dedicated junk bond funds saw $413 million of aggregate inflows in the week to Wednesday’s close, according to a report from Lipper US Fund Flows.

And in further testimony of the present swollen appetite for floating-rate debt securities, dedicated bank loan funds saw $992 million of inflows for the week to Wednesday’s close, according to a portfolio manager who invests in both junk bonds and loans.

American Greetings, others up

In the secondary market, a trader said that the new American Greetings 7 7/8% notes had moved up to a 101 to 102 bid context.

That was up from the par level at which the Cleveland-based greeting-card company’s upsized offering had priced.

Also among the day’s new deals, a trader said that San Antonio-based check producer and payment systems company Harland Clarke Holdings’ 8 3/8% senior secured notes had firmed to 100¾ bid after pricing at par.

A trader saw Amsterdam-based aluminum products supplier Constellium’s new 6 5/8% notes at 100½ bid, up from their par issue price.

Recent deals stay active

Away from Thursday’s new issues, traders saw continued activity in some of the recently priced new issues.

For instance, a trader saw EP Energy’s new 8% 1.5-lien senior secured notes due 2025 trading right around the par level, calling that down ¾ point on the session, on volume of over $80 million. For a second consecutive session, the Houston-based oil and natural gas exploration and production company’s new deal was Junkbondland’s most active purely high-yield credit.

On Wednesday, the bonds had moved up to 100¾ bid on chart-topping volume of over $75 million after that upsized $1 billion regularly scheduled forward calendar offering had priced at par.,

The new Scientific Games 7% notes due 2022 were seen having gained 1/8 point on Thursday to finish at 106 1/8 bid on volume of more than $71 million.

The New York-based provider of technology and services to the casino industry and lottery systems had priced its quick-to-market add-on to those existing7% notes at 106 on Wednesday, yielding 5.268%, after the issue was upsized to $1.15 billion from an originally planned $1 billion tap.

Weatherford higher on numbers

Away from the new or recently priced credits, traders saw Weatherford International’s several series of notes having firmed smartly on the day after the Houston-based oilfield services company reported better fourth-quarter numbers.

A trader saw its 7¾ notes due 2021 around midday at 104¾ bid, 105½ offered – up 2½ points from Wednesday’s close at 102¼ bid, 102¾ offered.

Another trader later on said that those bonds were heading for home up more than 4 points on the day at 107 3/8 bid.

The company’s 6.8% long bonds due 2037 were likewise 4 point gainers on the day, ending at 90 bid on volume of more than $12 million.

The company reported fourth-quarter revenue as $1.41 billion, up 4% sequentially from its third-quarter results, including an 8% gain in its North American segment revenue.

The segment operating loss was $76 million – a $35 million improvement sequentially and a $194 million improvement from a year earlier.

Weatherford also intends to cut its net debt to below $3 billion by 2021, despite the recent industry down cycle, the company’s management said on its conference call (see related story elsewhere in this issue).

Indicators stay firm

Statistical market performance measures were trending higher for a second straight session on Thursday. They had improved across the board on Wednesday, after being lower all around on Tuesday and mixed over three sessions before that.

The KDP High Yield Index moved up by 2 basis points on Thursday, closing at 72.04, its second straight gain and third advance in the last four sessions. On Wednesday, it had edged up by 1 bp after having eased by 1 bp on Tuesday.

For a second consecutive session, its yield was unchanged at 5.15%, after having risen by 1 bp to that level on Tuesday, which followed a 2 bps tightening on Monday.

The Markit Series 27 CDX Index firmed by nearly 3/32 point on Thursday, a market source said, rising to 106 13/32 bid, 106½ offered. On Wednesday, it had gained 5/32 point – its first upturn after two straight losses and its second improvement in four sessions.

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