West megadeal, NuvoTV, Wave Division offerings price; Valeant plans massive deal

By Paul Deckelman and Paul A. Harris

New York, June 18 – The high-yield primary sphere continued to churn out new deals on Wednesday, with syndicate sources hearing that some $1.42 billion of new dollar-denominated, junk-rated paper had come to market in three tranches – about equal to the amount of new junk securities that had priced during Tuesday’s session.

West Corp., an Omaha-based communication services provider, had the big deal of the day, a $1 billion regularly scheduled forward calendar offering of eight-year notes that priced fairly early in the session, but which was seen having struggled a little in the aftermarket.

NUVOtv, a Glendale, Calif.-based Hispanic-oriented cable network operator, brought an upsized $240 million of five-year secured notes to market off the forward calendar; that paper was seen having firmed when it hit the aftermarket.

Out of that same sector, Wave Division Holdings LLC, a Kirkland, Wash.-based broadband cable company, did an upsized $175 million of five-year PIK toggle notes, which were also quoted solidly higher when they moved into secondary trading.

The sources also heard that Canadian drugmaker Valeant Pharmaceuticals International Inc. was getting ready to shop a giant $12.35 billion bond deal around to investors as part of the financing for its prospective acquisition of sector peer Allergan Inc. Assuming that big deal does come to market, it would be one of the largest junk financings of all time, second only to the more than €12 billion equivalent (about $16 billion) multi-tranche, dual-currency offering seen earlier this year from European cable and broadband operators Numericable Group AG and Altice SA.

Among recently priced deals, railroad operator All Aboard Florida’s five-year PIK notes chugged higher on Wednesday after having hung around their issue price in initial aftermarket dealings on Tuesday.

But wireless antenna tower operator SBA Communications Corp.’s notes were little moved from their Tuesday pricing level.

Overall, statistical indicators of junk market performance were mixed on Wednesday for a sixth consecutive session.

West Corp. prices $1 billion

The Wednesday primary market session saw three issuers complete single-tranche deals to raise a combined $1.42 billion.

All three of the deals were in the market at least overnight.

Two of the three were upsized, although the upsizings in both cases were relatively moderate.

Two priced at the tight end of talk, while the other came on top of talk.

West Corp. priced a $1 billion issue of eight-year senior notes (B3/B+) at par to yield 5 3/8%.

The yield printed in the middle of the 5¼% to 5½% yield talk.

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

NUVOtv and Wave: Upsized, tight

The remaining two transactions were both completed in moderately upsized amounts, and both came at the tight ends of talk.

NUVOtv priced an upsized $240 million issue of five-year senior secured notes (B3/B-) at par to yield 10 3/8%.

The acquisition financing was upsized from $230 million.

The yield printed at the tight end of yield talk in the 10½% area.

Jefferies was the sole bookrunner.

And WaveDivision Holdings LLC priced an upsized $175 million issue of five-year PIK toggle notes (Caa1/B-) at par to yield 8¼%.

The dividend-funding deal was upsized from $150 million.

The yield printed at the tight end of yield talk in the 8 3/8% area.

The 8 3/8% cash coupon steps up by 75 basis points to 9% for PIK interest payments.

Deutsche Bank, Wells Fargo, RBC and SunTrust were the joint bookrunners.

Altegrity starts Thursday

The active forward calendar grew on Thursday, as deals started lining up for executions in the week ahead following investor roadshows.

Altegrity, Inc. plans to start a roadshow on Thursday in New York and New Jersey for its $550 million offering of five-year senior first-lien secured notes due 2019 (pro forma ratings B3/B-).

Goldman Sachs is the left bookrunner for the debt refinancing. Credit Suisse and Macquarie are the joint bookrunners.

AV Homes plans roadshow

AV Homes Inc. plans to start a roadshow on Thursday for a $200 million offering of five-year senior notes (expected ratings Caa1/B-).

The deal is set to price on Tuesday.

J.P. Morgan, Citigroup, RBC, Credit Suisse and Deutsche Bank are the joint bookrunners.

The Kissimmee, Fla.-based homebuilder plans to use the proceeds for general corporate purposes including land purchases, land development, home-building and acquisitions.

Valeant: $12.35 billion coming

For investors lamenting a dearth of supply, help appeared on the horizon on Wednesday.

Valeant Pharmaceuticals International Inc. plans to help finance its acquisition of Allergan Inc. by selling a whopping $12.35 billion of notes.

The deal shapes up as $2.75 billion of senior secured notes backed by a one-year secured bridge loan priced at Libor plus 425 bps with a 1% Libor floor and $9.6 billion of senior unsecured notes backed by a one-year unsecured bridge loan priced at Libor plus 550 bps with a 1% Libor floor. There will also be $7 billion of term loans.

Barclays, RBC, Mitsubishi, Deutsche Bank, DNB and HSBC are the joint lead arrangers and bookrunners on the term loans and bridge loans.

The deal is expected to go before Allergen shareholders on Aug. 15.

Deal chatter

Although the dollar-denominated calendar contains $2 billion of announced business expected to clear before the end of the week, no formal price talk has been heard on any of the five deals in question.

However initial guidance and yield whisper has been circulating the market on some of them.

Global Partner LP is marketing $375 million of eight-year senior notes (B2/B+) via BofA Merrill Lynch, JPMorgan, Wells Fargo and RBS Securities Inc. Guidance is in the mid-6% context, according to an investor.

Evertec, Inc. plans to sell $400 million of eight-year senior secured notes (B1/BB-) via JPMorgan and BofA Merrill Lynch. The deal is guided in the low 5% context.

Allegiant Travel Co. is selling $300 million of five-year senior notes (B1/BB-), which are guided in the 6% area. Goldman Sachs has the books.

And Cenveo Inc. is marketing $790 million of secured notes in two tranches. The deal, which is being led by JPMorgan, BofA Merrill Lynch, Barclays and Macquarie, includes $540 million of non-callable senior priority notes due 2019 (expected ratings B3/B), guided in the low 6% range, and $250 million of junior priority notes due 2022 (expected ratings Caa2/CCC), callable after three years at par plus 75% of the coupon and guided at 8% to 8½%.

R&R Ice Cream dual-currency deal

In Europe, R&R Ice Cream plc announced that it plans to issue €255 million equivalent of senior secured notes due 2020.

The deal is intended to come in tranches sized at €150 million minimum, with the balance to be issued in Australian dollars.

Proceeds, together with shareholder funding provided by PAI Partners SAS and certain other investors, will be used to finance the acquisition of Peters Food Group Ltd.

Little direction for West

In the aftermarket, traders saw the big new offering from West Corp. having struggled after the technology-driven communications services provider’s 5 3/8% notes due 2022 priced during the morning.

“Those did not do well,” one trader said, quoting the $1 billion issue around a par to 100 1/8 context versus their par issue price.

A second trader opined that “right out of the box, they were trading around 100¼. Then everyone and their mother decided to flip it, and it was trading as low as 99½ afterwards,” before ending the day in a 99¾ to par bid range.

At another desk, a market source saw the new bonds straddling their issue price at 99 7/8 bid, 101 1/8 offered.

“Actually, after the Fed came out, [the West bonds] did a little better,” the first trader said, referring to the communiqué from the Federal Reserve about the latest actions from its policy-making Federal Open Market Committee. The central bank expressed confidence that the U.S. economic recovery was on track and once again reduced the amount of Treasury paper and mortgage-backed securities that it will buy in the coming month to $35 billion from June’s $45 billion and down further from the $85 billion monthly that it was buying under its stimulus program before it started to taper.

Overall, he said, “the tone was definitely a little better after [Fed chair Janet] Yellen’s press conference,” he said, adding that earlier in the day “there were a lot of bid-wanteds; now that’s going to turn into offers-wanted. ETF flows probably shifted to buys from sells.”

The broader financial markets, he continued, “reacted pretty positively,” noting the rise in major stock indexes such as the Standard & Poor’s 500 and the Dow Jones industrial average and firmer levels for Treasuries, “which rallied pretty good as well.”

“I guess her lack of really saying anything” other than what had been expected helped the markets.

“People viewed that as better than being hawkish, so that definitely put a pop in things.”

Day’s deals trade better

Apart from the West Corp. bonds, traders said that Wednesday’s other two pricings seemed stronger in the secondary market.

A trader said that he had only seen a 102 bid without any offers on NUVOtv’s 10 3/8% senior secured notes due 2019, which had priced earlier in the session at par.

A second trader said he had not seen those bonds at all.

But a third quoted a two-sided market in a 102 to 103 context.

That trader also saw Wave Division Holdings’ 8¼% PIK toggle notes due 2019 as having firmed to 102½ bid, 103½ offered, versus their par issue price.

Florida rail rises

Among Tuesday’s pricings, a trader said that All Aboard Florida’s 12%/12¾% senior secured PIK toggle notes due 2019 had moved up solidly to 101 5/8 bid, 102 3/8 offered, versus the par to 101 level at which he had seen in the bonds on Tuesday.

The $405 million issue had priced at par via the Coral Gables, Fla.-based rail transportation company’s AAR Holdings LLC and AAF Finance Co. subsidiaries after the regularly scheduled forward calendar deal was upsized from an originally planned $390 million.

Elsewhere among Tuesday’s deals, one of the market sources saw Acadia Healthcare Co. Inc.’s 5 1/8% notes due 2022 having firmed to 100 5/8 bid, bid, 100 7/8 offered.

That was up from the par level at which the Franklin, Tenn.-based behavior health services company’s $300 million drive-by offering had come to market on Tuesday. The new bonds had been seen later Tuesday trading in a 100½ to 101 context.

SBA Communications Corp.’s 4 7/8% notes due 2022 were seen going home in a 99 1/8 to 99 3/8 context.

A trader said that the bonds had been at 99 bid before the Federal Reserve announcement, and then moved up a little to around 99 1/8 to 99 3/8.

“They were trading just below their new issue before, and now they are just above it – in that ballpark,” he said.

Boca Raton, Fla.-based communications antenna tower operator SBA’s $750 million of those notes had priced at 99.178 on Tuesday in a quick-to-market transaction to yield 5%. It priced after upsizing from an originally announced $600 million.

The new SBA bonds had not been seen in any kinds of dealings on Tuesday after pricing.

Market indicators stay mixed

Statistical indicators of junk market performance meanwhile were mixed for a sixth consecutive session on Wednesday.

The KDP High Yield Daily index fell by 4 bps to end at 74.95 after having risen by 1 bps on Tuesday.

Its yield, though, was also down by 1 bp to 4.99% after having been unchanged Tuesday. It was an unusual movement, since the yield would normally rise in tandem with a fall in the index reading rather than decline. The yield has now narrowed in four sessions out of the last five.

The Markit CDX Series 22 index gained ½ point to finish at 108 7/8 bid, 108 29/32 offered, after having eased by 1/16 point on Tuesday, its second straight loss and fifth downturn in the previous six sessions.

The widely followed Merrill Lynch High Yield Master II index continued to add to its gains, posting its 11th straight improvement on Wednesday, when it was up by 0.016%, on top of Tuesday’s 0.031% advance.

That lifted its year-to-date return to 5.404%, its 10th straight new peak level for 2014, eclipsing the old mark of 5.388% that had been set on Tuesday.

The index showed an average issue price of 105.7415 on Wednesday, down slightly from Tuesday’s 105.7443, its second straight new high for the year so far.

Its yield-to-worst rose to 4.941%, up from Tuesday’s 4.933%, its second consecutive new low for the year and, in fact, a new all-time low.

Its spread-to-worst over comparable Treasury issues widened to 360 bps on Wednesday from Tuesday’s 358 bps, its second straight new low for the year.

Although junk bond yields are currently near their all-time lows, spreads remain well above their historical tight levels around 250 bps over comparable Treasuries, first set back in 1997 and matched in 2007.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.