Arch Coal reports wider loss; Visant regains ground; RadioShack debt stumbles as exec exits

By Stephanie N. Rotondo and Paul H. Harris

Phoenix, April 22 - High-yield bonds were only slightly changed again on Tuesday as more players returned to their desks after a long holiday weekend.

Still, overall liquidity was muted.

"Dull day," said one market source.

Even Arch Coal Inc. bonds were little changed after the coal producer reported a bigger-than-expected quarterly loss and lowered its shipping forecast.

Visant Holdings Corp. continued to be active, according to traders. The company's debt regained some of the ground lost in the previous session on news the Federal Trade Commission blocked the company's Jostens Inc. merger with American Achievement Group Holdings Corp.

Meanwhile, RadioShack Corp. was on the weaker side. The company announced an executive departure on Tuesday, and word on the street was that the company's previously announced store-closure plan was running into obstacles.

All eyes on Altice/Numericable

No deals priced on Tuesday, as the leverage markets focused closely upon the massive €15.8 billion equivalent of debt financing backing transactions in which Altice SA is acquiring a stake in Numericable Group AG, and Numericable is acquiring Societe Francaise de Radiotelephone SA (SFR) from Vivendi SA.

The market is expecting $10.9 billion and €4.57 billion of combined issuance from Numericable Group AG, the operating company, and Altice, the holding company, to clear on Wednesday.

And though it seems like a lot, it is playing to a lot of demand, market sources say.

The order book for the Numericable dollar-denominated bonds is being reported at $22 billion, according to a portfolio manager.

The Numericable euro-denominated bonds are playing to a €20 billion book, the manager added.

At the holding company, demand for Altice bonds is being reported at $14 billion and €11 billion, respectively.

It may be a massive amount of bonds, but it will end up being a food fight, the buy-sider said, as demand for the bonds will ultimately swamp what, on the face of it, is a massive supply.

Numericable pulls euro tranche

All pieces of the Altice/Numericable debt financing remained in play on Tuesday, sources said.

Numericable withdrew a planned €500 million tranche of five-year first-lien senior secured notes.

Those proceeds will be shifted either to the dollar-denominated term loan, now sized at $1.5 billion, or to the dollar-denominated five-year first-lien notes, now sized at $1.8 billion, the source said.

The remaining five tranches of the bond deal (Ba3/B+), upsized by €2 billion equivalent to €8.8 billion equivalent on Monday, include

• $1.8 billion minimum of five-year notes, upsized from $920 million, talked to yield in the 5% area;

• €1.6 billion of eight-year notes, upsized from €1 billion, talked to yield 5½% to 5¾%;

• $4.2 billion of eight-year notes, upsized from $2 billion, talked to yield 6% to 6¼%;

• €915 million of 10-year notes, downsized from €1 billion, talked to yield 3/8% behind the euro-denominated eight-year notes; and

• $2 billion of 10-year notes talked to yield 3/8% behind the dollar-denominated eight-year notes.

The withdrawn €500 million tranche of five-year notes had been coming with talk in the 5% area, the same as the surviving $1.8 billion minimum dollar-denominated tranche, and it did not appear to be playing to vigorous demand, market sources said.

Global coordinator JPMorgan will bill and deliver for Numericable. Deutsche Bank and Goldman Sachs are also global coordinators.

For the euro-denominated notes, Barclays, BNP Paribas, Credit Agricole CIB, Credit Suisse, Morgan Stanley, ING, Banca IMI and Natixis are the bookrunners.

For the dollar-denominated notes, Barclays, BNP Paribas, Credit Agricole CIB, Credit Suisse Securities (USA) LLC, Morgan Stanley & Co. LLC and ING are the bookrunners.

As reported, the Numericable deal underwent massive revisions on Monday, with €2 billion of proceeds being shifted to the bonds from the bank loans.

Altice revises tranche sizes

Altice made further revisions to the tranche sizes and price talk for its €4.15 billion equivalent two-part offering of eight-year non-call-three senior notes (B3/B) on Tuesday.

A downsized $2.9 billion tranche of notes is talked to yield 7¾%. The size is reduced from $3.15 billion. The talk is tightened from earlier talk in the 8% area.

An upsized €2.05 billion tranche of notes is also talked to yield 7¾%. The size is increased from €1.9 billion. The talk is widened from earlier talk in the 7½% area.

Goldman Sachs is the left joint global coordinator for Altice's Rule 144A and Regulation S bond offering. Deutsche Bank and JPMorgan are also joint global coordinators.

The syndicate of underwriters also includes Barclays, BNP Paribas, Credit Agricole CIB, Credit Suisse, Morgan Stanley, ING and Natixis.

The Altice/Numericable financing also included the Numericable €2.75 billion equivalent term loan, downsized from €2.84 billion equivalent, after previously downsizing it from €5.6 billion, a €750 million five-year revolver at Numericable and a €200 million five-year revolver at Altice.

The bonds and loans are all expected to allocate on Wednesday.

Market mixed...again

Yet again this week, market indicators were mixed on Tuesday.

The KDP High Yield index ended at 74.97 with a yield of 5.19%, which compared to 74.98 with a 5.2% yield on Monday.

Another market source said the CDX North American High Yield index gained a quarter point to 107¼ bid, 107 3/8 offered.

Arch posts wider loss

Arch Coal bonds were only slightly impacted after the company posted a bigger-than-expected loss for the first quarter.

A trader said the 7¼% notes due 2021 fell half a point to 751/2, while the 7% notes due 2019 lost almost 1½ points to end around 77 5/8.

"I didn't think they were down all that much," another trader said, seeing the 7¼% notes in a 75¼ to 75½ context.

For the quarter, net loss widened to $124.1 million, or 59 cents per share, from $70 million, or 33 cents per share, the year before.

Adjusted loss was 60 cents per share, which was better than the 42-cent-per-share loss expected by analysts polled by Thomson Reuters.

Revenue was fairly steady at $736 million. Analysts had predicted $717.7 million.

The company attributed the bigger loss to lower prices and weak demand for metallurgical coal.

Looking forward, Arch said it is expecting to focus on its Appalachian assets, which cost less to produce met coal. However, the company still slashed its 2014 cost outlook at the top end to $66 per ton from $67 per ton.

The low end held at $63 per ton.

Additionally, the company is forecasting that it will ship between 6.3 million and 7.3 million tons of met coal this year. That compared to previous guidance of 7.5 million to 8.5 million tons.

Visant rebounds

Visant's 10% notes due 2017 were clawing their way back up in Tuesday trading after falling 7 to 8 points on Monday.

One trader said the bonds were up 1¾ points to 951/4. Another trader said the paper "rebounded another 1½ points" to close around 95.

Visant's debt dropped on Monday as investors reacted to news that its Jostens merger with American Achievement was being blocked by the FTC.

The $486 million merger was originally announced in November and had been expected to close in July, assuming all regulatory hoops were jumped through. But the FTC on Thursday said it was seeking a court order to block the merger, alleging that it would have hurt the class ring-buyers market.

"A combination of two of the three leading manufacturers would have led to higher prices and lower quality for the students and their parents who purchase these rings," Debora Feinstein, bureau of competition director, said in a news release.

Due to the FTC's ruling, the parties of the merger agreement have agreed to terminate the offer.

No termination fee will be paid.

RadioShack exec resigns

RadioShack debt was slipping Tuesday as the company announced the resignation of Troy H. Risch, executive vice president of store operations.

Risch, a 19-year veteran from Target Corp., held the post for a little over a year. He was said to leave the position to explore other interests.

A trader said the 6¾% notes due 2019 dipped half a point to 36 5/8. Another trader said the bonds "continued to trade a little bit lower" at 36 bid, 37 offered.

Along with the executive departure, chatter has it that the Fort Worth-based electronics retailer's plan to shutter 1,100 stores has hit a snag.

According to the Wall Street Journal, the company needs to get approval of two major creditors in order to move forward with the closures. Thus far, the lenders have not gotten on board.

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