Allison prices; new deals take focus; Anadarko dips on share repurchase; telecom falls

By Paul A. Harris and Stephanie N. Rotondo

Seattle, Sept. 21 – Allison Transmission, Inc. priced the day’s single new deal, an upsized $400 million offering of 10-year senior notes that came at the tight end of talk.

Otherwise Cincinnati Bell Inc. and Avantor, Inc. were working on deals, Cincinnati Bell setting talk on a $350 million offering of eight-year senior notes and Avantor extending marketing of its $4.25 billion three-part offering to allow for covenant changes in response to investor resistance and additional call protection.

The secondary high-yield market continued to focus on recently priced deals, though overall activity was muted given the observance of Rosh Hashana.

In terms of price moves, recent deals – such as Mattamy Group Corp.’s $500 million of 6½% notes due 2025 and Multi-Color Corp.’s $600 million of 4 7/8% notes due 2025, both of which priced on Wednesday – were little changed.

Even energy names, which saw a big run-up on Wednesday, were barely changed.

One trader said California Resources Corp.’s 8% second-lien notes due 2022 were steady at 61¼.

A second market source echoed that level, but called it ½ point lower.

A third source pegged the notes in a 61 to 61½ context, deeming that “sideways” for the day.

Elsewhere in energy, Anadarko Petroleum Corp.’s debt was a shade weaker as the market reacted to news of a share repurchase.

There did continue to be downward pressure in the telecommunications space, specifically on Windstream Holdings Inc. and Frontier Communications Corp.

Allison Transmission upsizes

Allison Transmission priced an upsized $400 million issue of 10-year senior notes (Moody’s: Ba3/Fitch: BB) at par to yield 4¾% on Thursday, according to a syndicate source.

The amount was increased from $300 million.

The yield printed at the tight end of yield talk that had been set in the 4 7/8% area.

Citigroup Global Markets Inc. was the left bookrunner for the Rule 144A and Regulation S for life offer. Barclays, BofA Merrill Lynch, BMO Securities, Fifth Third Bank, JP Morgan Securities LLC, SMBC Nikko, Deutsche Bank Securities Inc., Goldman Sachs & Co and MUFG were the joint bookrunners.

The Indianapolis-based manufacturer of transmissions and hybrid-propulsion systems plans to use the proceeds for general corporate purposes.

Cincinnati Bell talk 8% area

Cincinnati Bell talked its $350 million offering of eight-year senior notes to yield in the 8% area, according to a syndicate source.

Books close at 11 a.m. ET Friday and the Rule 144A and Regulation S for life offer is set to price thereafter.

Morgan Stanley & Co., PNC Capital Markets, Regions Bank, Barclays, Citigroup Global Markets Inc. and Citizens Bank are the joint bookrunners.

The notes come with three years of call protection.

The Cincinnati, Ohio-based provider of integrated communications solutions plans to use the proceeds to fund the cash portion of its acquisition of Honolulu-based Hawaiian Telcom HoldCo, Inc. and to refinance Hawaiian Telecom’s existing credit agreement.

The issuing entity will be CB Escrow Corp.

Avantor changes covenants

A revision of covenants in Avantor’s $4.25 billion three-part offering of high-yield notes kept the deal in the market for an extra day.

To recap, the deal includes $1,401,050,000 of senior first-lien notes due 2024, talked earlier in the week at 5¾% to 6%.

It also includes €500 million of senior first-lien notes due 2024, talked earlier in the week at 5¾% to 6%.

The sole unsecured tranche features $2.25 billion of senior notes due 2025, talked earlier in the week at 8¾% to 9%.

The call protection was modified to include one extra year of premium protection for the secured and unsecured tranches.

All of the notes will be non-callable for three years and then callable at to-be-determined premiums in years four, five and six, becoming callable at par in year seven. The previous structure would have made the notes callable at par in year six.

Other revisions include the disposition of collateral and the manner in which cash may be disbursed.

Commitments with respect to the revisions were due before Thursday’s close and the deal is set to price Friday.

The official talk on the dollar-denominated tranches blew out from initial price talk, according to market sources.

The dollar-denominated first lien notes, officially talked at 5¾% to 6%, had been in the market with initial talk of 5¼% to 5½%.

The unsecured notes, officially talked at 8¾% to 9%, had been introduced with initial price talk of 7 3/8% to 7 5/8%.

With the covenant changes and at the wider talk, the Avantor deal – which had engendered considerable investor pushback – should go well, an investor said on Thursday.

Goldman Sachs is the left lead. Barclays, J.P. Morgan Securities LLC and Jefferies LLC are also leads.

Proceeds, together with preferred equity financing of Vail Holdco as well as $5.5 billion of senior secured credit facilities and cash on hand at VWR International LLC, will be used to finance the acquisition of VWR and to fund a distribution to equity holders of Avantor and the issuer’s subsidiaries.

Miller Homes prices £425 million

In the European session, Miller Homes Group Holding plc priced a £425 million two-part offering of senior secured notes (BB-/BB-).

The deal included £250 million of seven-year fixed-rate notes that priced at par to yield 5½%. The yield printed 25 basis points beneath the tight end of the 5¾% to 6% initial yield talk. The tranche size came at the high end of the £225 million to £250 marketed range.

In addition, the company priced £175 million of Libor plus 525 bps six-year floating-rate notes at par with a 0% Libor floor. The spread came at the tight end of initial spread talk of Libor plus 525 to 550 bps. That talk also specified a 0% Libor floor. The tranche size came at the low end of the £175 million to £200 million marketed range.

Left lead global coordinator Barclays will bill and deliver. Deutsche Bank and HSBC were also global coordinators.

Goldman Sachs, Jefferies and Lloyds were joint bookrunners.

Proceeds will be used to fund the buyout of the United Kingdom-based homebuilder by Bridgepoint.

Eramet unrated deal upsizes

Paris-based mining and metallurgy firm Eramet Co. priced an upsized €500 million issue of non-rated 4.196% senior notes due Sept. 28, 2024 at 99.999 to yield 4.2%, according to a market source.

The amount was increased from €300 million.

The yield came inside the 4 3/8% to 4 ½% initial guidance, the source said, adding that the deal was playing to $1.1 billion of demand at that guidance.

BNP Paribas, Credit Agricole CIB, Deutsche Bank, Natixis and SG CIB are the bookrunners. Credit Agricole will bill and deliver.

Proceeds will be used for general corporate purposes which may include debt refinancing.

One deal is on deck for the Friday session, a European market source said.

German pharmaceutical company Stada Arzneimittel AG is in the market with €825 million of notes in two tranches.

The price talk, 3½% to 3¾% for the €485 million tranche of seven-year secured notes (expected ratings B2/B+/BB-) and the 5¼% area for the €340 million tranche of eight-year unsecured notes, is unchanged, the source added.

Proceeds from the deal are being used to help fund the buyout of Stada by Bain Capital and Cinven.

AMG sees $866 million inflows

Dedicated high-yield bond funds saw $866 million of inflows for the week to Wednesday’s close, according to information released by Lipper US Fund Flows.

It follows the previous week’s $96 million outflow.

According to a Prospect News analysis of the data, this week’s inflow is the 18th year to date, versus 20 weeks of outflows.

Telecoms decline

Notable weakness in the telecommunications sector continued on Thursday.

A trader said Windstream’s 7¾% notes due 2021 fell 1¼ points to close at 71. He also saw Frontier’s 10½% notes due 2022 sliding down ½ point to 84¼ while its benchmark 11% notes due 2025 were steady at 82.

Another trader said Windstream “continues to be weaker,” calling the company’s debt structure off ½ point to a full point across the board.

He said the 2021 paper was “pretty active,” finishing in a 71 to 71½ range.

At another desk, Windstream’s 6 3/8% notes due 2023 were seen declining 1½ points to 69¾.

Junk generally easier

Overall, the high-yield space was slightly softer from the midweek session, according to market indicators.

The KDP High Yield Index slipped to 72.30, with a 5.09% yield, on Thursday. That compared to 72.33, with a yield of 5.08% as of Wednesday’s close.

As for the CDX North American Series 28 High Yield Index, it was down over 1/8 point at 106.963 bid, 107.043 offered, a source reported.

Recent issues in play

The week’s newly-priced high-yield bonds continued to take center stage in Thursday trading.

Multi-Color’s $600 million 4 7/8% notes were seen trading “tons of times,” according to one trader.

He said the issue finished the day at 101 3/8, down a touch from the previous day.

The deal priced Wednesday, coming upsized from $480 million. The yield printed 12.5 basis points beneath the tight end of the 5% to 5¼% yield talk.

BofA Merrill Lynch was the left bookrunner. Citigroup Global Markets Inc., BMO Securities, Credit Suisse Securities (USA) LLC, Goldman Sachs & Co. and KeyBank Capital Markets were the joint bookrunners.

Mattamy Group’s 6½% notes were meantime pegged at 101 7/8, a gain of ¼ point.

Like Multi-Color, the deal priced Wednesday, and it was upsized from $450 million. The company also sold C$225 million of 6½% notes due 2025, which was increased from an expected C$200 million.

The yield on both tranches printed 12.5 bps inside yield talk that had been set in the 6¾% area.

Credit Suisse billed and delivered for the dollar-denominated notes. RBC Capital Markets billed and delivered for the Canadian dollar-denominated tranche.

Other bookrunners for both tranches were BMO Securities, J.P. Morgan Securities LLC, BofA and Wells Fargo Securities LLC.

From Tuesday’s business, Waste Industries’ $305 million of 6% notes due 2025 were called ¼ point better at 101¾.

Wrangler Buyer Corp. was the actual issuer of the deal, which priced at the tight end of the 6% to 6¼% yield talk. Proceeds will be used to help finance the acquisition of Waste Industries by HPS Investment Partners LLC and Equity Group Investments from Macquarie Infrastructure Partners.

Barclays was the left bookrunner. Macquarie Capital and SunTrust Robinson Humphrey Inc. were the joint bookrunners.

Rounding out the week’s new issues, NextEra Energy Partners LP’s $550 million of 4½% notes due 2027 were holding at 101 7/8, a trader said.

Another source quoted the $550 million of 4¼% notes due 2024 in a 101 5/8 to 102 range.

That deal priced Monday, though it was originally expected to price on Tuesday. There was also large demand for the new $1.1 billion two-part issue, which had over $4 billion in orders, a trader told Prospect News post-pricing.

BofA, Barclays, Credit Suisse, Goldman Sachs, JPMorgan, Morgan Stanley & Co. LLC, MUFG, Scotia Capital, UBS Investment Bank and Wells Fargo were the joint bookrunners.

Anadarko on a buying spree

Anadarko Petroleum’s 5.55% notes due 2026 were a little lighter on Thursday as the market reacted to word of a common stock repurchase.

A trader saw the notes closing at 111½, which he said was down ½ point.

Late Wednesday, Anadarko announced that it planned to repurchase up to $1 billion in common stock by the end of 2017. Another $1.5 billion shares would be bought back in 2018.

The buybacks are in addition to the $36.65 million of stock it repurchased in the first half of 2017.

In its announcement, the oil and gas company also noted that it expects to be cash flow neutral in 2018 in terms of its upstream and midstream investments.

“So $1 billion of 2017 share repurchases, while detracting from potential debt reduction, isn’t a huge negative for bondholders,” wrote Gimme Credit LLC analyst Philip C. Adams in an afternoon report published Thursday.

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A trader said Post Holdings Inc. “has been active” ever since the company announced it was buying Bob Evans Farms for about $1.5 billion on Tuesday.

The name continued to be notable on Thursday, though the trader said the 5% notes due 2026 were unchanged at par.

A second trader said the 5½% notes due 2025 were trading “close to 104,” which he said was “maybe a smidge better.” The trader also said the 5¾% notes due 2027 were “about sideways” at 103½.

Earlier this year, Post bought British cereal maker Weetabix for $1.8 billion.

Post plans to use cash on hand to fund the acquisition, which is expected to close in the second quarter of 2018.

The company is anticipating $25 million in cost savings once the deal is done.

UBS Investment Bank, Barclays, Goldman Sachs and BofA are Post’s financial advisers.

JPMorgan acted as an exclusive financial adviser to Bob Evans.

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