Equinix prices, moves up, ONO also launches; SunCoke, Warner Music slate; Nortel up by points

By Paul Deckelman and Paul A. Harris

New York, July 6 - Second-half issuance got under way in earnest in Junkbondland on Wednesday, as data center operator Equinix, Inc. drove by with a well-received $750 million offering of 10-year notes. When that upsized deal moved off into the secondary market, traders saw the bonds up handsomely.

Also in the domestic market, the giant record company Warner Music Group Corp. was heard by syndicate sources to be looking for a big hit when it takes to the road starting Thursday to market a three-part $1.045 billion offering, with pricing likely next week. Assuming the deal comes to fruition, it would be the first purely junk-rated mega-deal to price since Dutch global telecom operator VimpelCom Holdings BV's $2.2 billion three-parter on June 22 and the first strictly domestic deal since Arch Coal Inc.'s $2 billion two-part behemoth came to market almost exactly one month ago on June 8.

Another deal slating on Wednesday was metallurgical coal producer SunCoke Energy, Inc.'s $400 million eight-year notes transaction. The Sunoco, Inc. unit, being partly spun-off by its corporate parent, hit the road on Wednesday to sell the deal to investors, although pricing is not expected till later this month.

Price talk emerged on energy operator Saratoga Resources Inc.'s downsized offering of five-year senior secured notes, which is expected to price on Thursday.

In the overseas market, Spanish cable-TV company Grupo Corporativo ONO SA priced a €300 million add-on to an existing bond issue. Mexican cement company Cemex SAB de CV weighed in with a $650 million issue of seven-year secured bonds.

Away from the new deals, the secondary market tone remained firm. Nortel Networks Corp.'s bonds shot up by multiple points again in the aftermath of last week's auction of the liquidating company's more successful-than-expected auction of its big portfolio of communications industry patents.

Upsized Equinix at tight end

The drive-by market sparked back to life during the Wednesday session, with two quick-to-market issues raising $1.39 billion, each one coming as a single, massively upsized tranche of junk.

Equinix priced $750 million of 10-year senior notes (Ba2/BB-) at par to yield 7%.

The yield printed at the tight end of 7% to 7¼% price talk. The amount was increased from $500 million.

J.P. Morgan Securities LLC and Citigroup Global Markets were the joint bookrunners.

The Foster City, Calif.-based data services company plans to use the proceeds for general corporate purposes including the repayment of its 2½% convertible subordinated notes due 2012, as well as for working capital, potential acquisitions and strategic transactions.

Previous to Equinix, the most recent drive-by deal had been a US Airways pass-through certificates transaction which priced on June 30.

That deal was done off the investment-grade syndicate desk, according to market sources.

Before that the most recent drive-by had been Harbinger Group, Inc.'s $150 million add-on to its 10 5/8% notes due Nov. 15, 2015, which priced at 101 on June 23.

Cemex massively upsizes

Mexico's Cemex priced a $650 million add-on to its 9% notes due Jan. 11, 2018 (/B/B+) at 97.616 to yield 9½% after substantially increasing the amount.

The deal launched earlier in the day with a 9½% yield and a size of $300 million.

Citigroup ran the books.

Proceeds will be used for general corporate purposes, including the repayment of debt.

The original $1 billion issue priced at 99.364 to yield 9 1/8% on Jan. 4 2011, so the company paid a 37.5 basis points premium relative to the original yield in order to get the add-on done.

However the add-on notes traded up in the secondary, according to a hedge fund manager who spotted them at 99¾ bid, par ¼ offered, versus the 97.616 issue price.

The Monterrey, Mexico-based building materials company shelved plans for a $650 million issue of eight-year notes in June due to market conditions.

Ono prices mid-talk

In the European market, Spain's Grupo Corporativo Ono priced a €300 million fungible add-on to its 8 7/8% senior secured notes due Dec. 1, 2018 (B2/B) at 99 to yield 9.06%.

The reoffer price came in the middle of price talk which had been set at 98.5 to 99.5.

Deutsche Bank AG will bill and deliver. Deutsche Bank, Bank of America Merrill Lynch and SG CIB are the global coordinators and joint bookrunners. The joint bookrunners also included BBVA Securities Inc., BNP Paribas Securities, Credit Agricole CIB, Goldman Sachs International, ING, Morgan Stanley, Natixis Bleichroeder and Banco Santander.

Special purpose vehicle Nara Cable Funding is the issuing entity.

The Madrid, Spain-based cable television operator plans to use the proceeds to repay debt.

The original €700 million issue priced at par on Oct. 19, 2010, so Ono paid an 18.5 bps premium for tapping its 8 7/8% notes on Wednesday.

However as with the above-mentioned Cemex tap, the Ono add-on bonds had traded higher by the European close, according to market source who spotted them at 99 3/8 bid, 99 7/8 offered, up from the 99 issue price.

Meanwhile, the Fiat SpA two-part euro-denominated deal, which priced on Tuesday, was trading slightly below issue price at the European close on Wednesday, according to the source who had both the three-year notes and the seven-year notes at 99 7/8 bid.

Both tranches in the €1.5 billion deal priced at par.

A whopper from Warner

In keeping with the rekindled drive-by market, the active forward calendar also took aboard a burst of potential issuance on Wednesday.

Warner Music Group lined up $1.045 billion of high-yield bond financing.

The three-tranche deal, which begins roadshowing on Thursday, is part of the financing for the acquisition of the company by Access Industries.

Two tranches, one secured and the other unsecured, will be offered via special-purpose vehicle WMG Acquisition Corp. The two parts include a $150 million add-on to its 9½% senior secured notes due June 15, 2016 (/BB-) and a $695 million tranche of senior notes due Oct. 1, 2018 (/B-).

At the holding company level, WMG Holdings Corp. will sell a $200 million tranche of senior notes due Oct. 1, 2019 (/B-).

Credit Suisse and UBS are the joint bookrunners.

The deal is set to price during the July 11 week.

SunCoke markets $400 million

SunCoke Energy started a roadshow on Wednesday for a $400 million offering of eight-year senior notes (B1/B+).

J.P. Morgan, Credit Suisse, Barclays, Citigroup and RBS are the joint bookrunners.

The Lisle, Ill.-based producer of metallurgical coke plans to use the proceeds to repay intercompany debt to Sunoco, Inc. and for general corporate purposes.

Saratoga sets price talk

Saratoga Resources talked its $127.5 million offering of five-year senior secured notes with a 12½% coupon, to be priced at a discount to yield 13%.

The non-rated deal, which is expected to generate approximately $125 million of proceeds after the discount, is set to price on Thursday morning.

Imperial Capital is the bookrunner.

Equinix issue impressive

Although Equinix's new 10-year notes came to market fairly late in the session, a trader still saw the Redwood City, Calif.-based data center operator's deal having firmed smartly when the bonds were freed for secondary activity.

He pegged the bonds at 102 bid, 102½ offered - well up from the par level where the upsized drive-by deal had priced.

The company's existing 8 1/8% notes due 2018 were meantime seen trading at 109 bid, up nearly ¾ point from their most recent previous trading level a week ago, though unchanged from the most recent prior round-lot level, recorded in late June. Over $7 million of the bonds changed hands on Wednesday, making it one of the busier junk issues.

Concrete gain for new Cemex

The trader also saw the Cemex's seven-year secured bonds trading at 99¾ bid, 100¼ offered.

That was well up from the $650 million add-on offering's pricing level of 97.l616, which produced a yield of 9½%.

The existing Cemex Finance LLC 9½% notes due 2016 traded actively on Wednesday, dipping by as much as 1¼ points on the day to 103¼ bid, before going out around 103.6, still down nearly a full point from Tuesday's levels, with over $14 million of the bonds traded.

Its zero-coupon notes also due 2016 eased by a like amount, to end at 102¼ bid, on turnover of more than $12 million.

Last week's deals firming

Among the deals which priced late last week and which then moved solidly higher, a trader said that SoftBrands Inc. and Atlantis Merger Sub Inc.'s $560 million issue of 11½% notes due 2018 was trading on Tuesday at 98¼ bid, 99½ offered - slightly above the levels seen on Tuesday, and well up from 92.143 level where the issue had priced on Thursday to yield 13¼%. The bonds had notched most of their big gains in trading on Friday, and continued to firm marginally after that on Tuesday and again on Wednesday.

The debt was sold as part of the financing for the pending $2 billion acquisition of St. Paul, Minn.-based Lawson Software, Inc., by SoftBrands parent Infor Global Solutions and GGC Software Holdings Inc., an affiliate of Golden Gate Capital.

The trader also saw inVentiv Health, Inc.'s $390 million issue of 10% senior notes due 2018 at 98 bid, 99 offered, up about ½ point from Tuesday's 97½ bid, 98½ offered, and again well up from the 95 level at which the Somerset, N.J.-based provider of clinical and consulting services to the healthcare industry priced its deal on Thursday to yield 11.031%. The bonds moved steadily upward on Thursday, Friday and again this week.

Both deals required some tinkering before they came to market, with the tenor of the Lawson deal chopped by one year to make it a seven-year piece of paper rather than an eight-year, while some covenant changes were made. inVentiv's deal had been originally shopped around the market as an eight-year issue maturing in 2019 - but the company abandoned that plan and instead opted to make its offering a mirror tranche to its existing $275 million of 10% 2018 notes, which priced a year ago. The new bonds will carry the same terms as the original issue but are non-fungible.

The trader agreed with several other people in the market who spoke to Prospect News and opined that the combination of very low issue prices - both came at steep discounts to par - which resulted in fatter yields than even the already-generous, double-digit coupons, were key factors behind the handsome gains which each bond showed in the aftermarket.

Market signs mixed

Away from the new-deal arena, traders continued to see statistical measures of market performance mixed, though with a slightly positive bias for a second straight session on Wednesday, following three sessions of improvement late last week.

A trader saw the CDX North American Series 16 HY Index lose 5/16 point on Wednesday to end at 101½ bid, 101 5/8 offered. That was on top of the 3/8-point retreat seen on Tuesday, which had followed a 11/16 point surge on Friday.

But the KDP High Yield Daily Index rose by 3 basis points on Wednesday to finish at 75.25, after having gained 7 bps on Tuesday. Its yield declined by 2 bps 6.80%, in addition to the 3-bps narrowing seen on Tuesday.

And the Merrill Lynch High Yield Master II Index showed its sixth consecutive gain on Wednesday, rising by 0.065%, on top of the 0.213% advance notched on Tuesday.

The latest gain lifted its year-date return to 5.443% on Wednesday from Tuesday's 5.374% level, although the index still remains well down from its year-to-date peak level of 6.071%, which was reached back on May 20.

One of the traders said that Wednesday's market "seemed a little soft this morning, but then as the day wore on, things started to recover slightly."

Nortel heads north

Among specific issues, a trader proclaimed that Nortel Networks Corp. "was the name of the day" on Wednesday, as the bonds of the bankrupt Canadian communications equipment manufacturer firmed solidly - between 3 and 6 points, depending upon the issue - as Nortel announced the appointment of a court-ordered mediator, which is expected to speed up the allocation of the company's assets to its various creditor parties, including the bondholders.

The jump followed an even sharper rise late last week on the news that a consortium of high-tech powerhouse firms had bid $4.5 billion for a treasure trove of valuable Nortel patents - three times more than analysts had anticipated, and five times more than the original $900 million stalking horse bid by Google Inc., with the greater proceeds expected to generate a bigger recovery for the creditors as the troubled company is liquidated.

A trader estimated that "between all of their issues, north of $150 million traded."

He saw the biggest gain in Nortel's 6 7/8% notes due 2023, which zoomed by almost 6 points on the session to end at the 75 level, with $16 million traded.

The busiest issue he saw was the company's 10¾% notes due 2016, with over $63 million changing hands. He pegged those bonds up a little more than 3 points to the 107 level, which was also where its 10 1/8% notes due 2013 wound up on over $37 million traded. He said the latter issue was up by 2 points.

Another trader saw "hundreds of millions trading" across the company's capital structure. He saw the 10 1/8% and 10¾% notes going out in a 106 1/8-107 1/8 context, "probably up a couple of points," this after having come down from the day's peak levels around 108-108¼ earlier.

He saw the 6 7/8s were up between 5 and 6 points, around 75 bid, 77 offered.

"So basically, you can say that Nortel's lovin' life today," he observed. "The bond holders are pretty happy. There was a lotta, LOTTA volume."

Nortel announced that Ontario's provincial chief justice, Warren Winkler, will serve as the mediator following his appointment by the two courts overseeing Nortel's wind-down, the Ontario Superior Court of Justice and the U.S. Bankruptcy Court for the District of Delaware. The two courts held separate hearings last month in Toronto and in Wilmington on a proposed protocol for allocation of Nortel's assets, including the $4.5 billion generated in last week's patent auction, but have not released their rulings yet. "The mediation was ordered because of both courts' concern that the time required to prepare their decisions would also delay allocation proceedings and, therefore, distributions to creditors of the various Nortel estates," the company statement said.

Besides the news of the mediator, wires on Wednesday also crackled with the news that Canada's Industry Minister, Christian Paradis, said that he is looking into whether the government should review Nortel's patent sale under the Investment Canada Act. That law governs foreign investment in Canadian assets. Of the five companies in the consortium which won the auction - Apple Inc., Ericsson, EMC, Microsoft Corp. and RIM Ltd. - only the latter company, which contributed $770 million to the purchase, is based in Canada. Paradis wants to determine whether the sale of the 6,000 Nortel patents is a "net benefit" to Canada.

While this has the potential to delay the sale and ultimately, allocation of the proceeds to company creditors - some news reports on Wednesday theorized that Ottawa may decide not to review the patent sale on technical grounds - the Investment Canada Act mandates scrutinizing the purchase of a Canadian entity if the net value of the assets amount to more than $312 million in book value, but Nortel had reportedly written down the book value of the patents to zero.

The law also stipulates review of any transfer of assets generating more than C$73 million, but Nortel's global patent portfolio reportedly never made more than C$10 million annually.

© 2015 Prospect News.
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