DISH DBS drive-by leads $3.7 billion session, existing DISH notes fall on new-deal news

By Paul Deckelman and Paul A. Harris

New York, Nov. 5 – High-yield primaryside activity picked up sharply on Wednesday, with syndicate sources hearing of four single-tranche offerings having priced, bringing in a total of $3.73 billion of new dollar-denominated, fully junk-rated paper.

That far topped the paltry $45 million which had come to market in on tranche one Tuesday.

The day’s big deal came from satellite television broadcaster DISH DBS Corp., which did an upsized $2 billion drive-by offering of 10-year notes.

The DISH deal came to market too late in the day for any real aftermarket activity – but traders said that the news that DISH would be bringing a sizable new issue to market hammered down several issues of the company’s existing bonds in active dealings.

Back on the new-deal front, MSCI Inc., a provider of investment decision support tools to the financial industry, brought $800 million of 10-year notes to market. Cruise-ship operator NCL Corp. sailed in with a $680 million issue of five-year notes, while automotive components manufacturer Nexteer Automotive Group Ltd. did a $250 million offering of seven-year notes.

The day’s new deals, other than the late-breaking DISH, were heard by traders to have moved up when they reached the aftermarket. NCL’s five-year notes were the most active of those issues.

Syndicate sources heard that Omnicare, Inc., Scientific Games Corp. and Abengoa Yield plc would be circulating new junk deals in the dollar market.

One that will not be doing that – homebuilder Lennar Corp. – withdrew its planned $350 million five-year issue.

Statistical indicators of junk market performance were stronger across the board on Wednesday, after having fallen all-around during Tuesday’s session.

DISH upsizes by $750 million

The primary market saw plenty of action on Wednesday.

Four issuers priced single-tranche deals to raise a combined $3.73 billion.

Executions were notable: one of the four deals came on top of talk, two came at the tight end of talk, and one came inside of talk. Further, one deal was upsized.

One of the day’s offerings came as a drive-by.

DISH DBS Corp. priced an upsized $2 billion issue of non-callable 10-year senior notes (Ba3/BB-) at par to yield 5 7/8%.

The deal was increased from $1.25 billion.

The yield printed on top of yield talk.

The deal played to a $2 billion order book, according to a high yield investor who took part.

Deutsche Bank was the bookrunner for the debt refinancing and general corporate purposes deal.

MSCI prices inside of talk

MSCI priced an $800 million issue of 10-year senior notes (Ba1/BB+) at par to yield 5¼%.

The yield printed 12.5 basis points inside of yield talk that had been set in the 5½% area.

J.P. Morgan, Morgan Stanley and Goldman Sachs were the joint bookrunners for the debt refinancing deal.

Norwegian Cruise prices tight

NCL priced a $680 million issue of five-year senior notes (B2/BB-) at par to yield 5¼%.

The yield printed at the tight end of the 5¼% to 5½% yield talk.

Barclays, J.P. Morgan and Deutsche Bank were the joint bookrunners for the acquisition financing.

Nexteer prints at tight end

Nexteer Automotive Group priced a $250 million issue of seven-year senior notes (Ba1/BB+) at par to yield 5 7/8%.

The yield printed at the tight end of yield talk that had been announced in the 6% area.

J.P. Morgan and BofA Merrill Lynch were joint bookrunners capital expenditures and general corporate purposes deal.

Omicare for Thursday

Omnicare began a two-day roadshow for its $700 million two-part offering of non-callable senior notes.

The public offer, which is expected to price Thursday, is coming in tranches of notes that will mature in 2022 and in 2024. The tranche sizes remain to be determined.

No yield talk circulated, however the eight-year paper is guided at 5¼% to 5½%, according to a buyside source who added that the 10-year notes are guided at 5½% to 5¾%.

BofA Merrill Lynch is the left bookrunner for the debt refinancing. Barclays, Goldman Sachs, J.P. Morgan and SunTrust are the joint bookrunners.

Scientific Games plans notes

Scientific Games began marketing a $2.9 billion two-part offering of notes.

The deal, which is expected to price on Nov. 14, is coming as a $700 million tranche of seven-year senior secured notes (Ba3/BB-) and a $2.2 billion tranche of eight-year senior unsecured notes (Caa1/B).

Bank of America Merrill Lynch, J.P. Morgan and Deutsche Bank are managing the sale.

Proceeds, along with $2.1 billion of bank debt, will be used to help fund the acquisition of Bally Technologies Inc. for about $5.1 billion, including about $1.8 billion of net debt.

The bank loan kicks off Thursday.

Abengoa Yield tries dollars

Abengoa Yield plans to price a $255 million offering of unrated non-callable five-year senior notes on Thursday.

The acquisition financing deal comes in place of a similarly structured €200 million offering that ran a roadshow at the end of October, and was shopped with early yield guidance in the mid-5% context, sources said.

As with the euro-denominated offer, joint bookrunner BofA Merrill Lynch will bill and deliver for the dollar-denominated deal. As before Citigroup, HSBC and Santander are also joint bookrunners.

The calendar appears to be undergoing a purposeful buildup.

“The window is open,” an investor said on Wednesday, adding that recent issues are doing okay in the secondary market.

“People are going to try to get things done,” the buysider said.

Elsewhere Lennar Corp. pulled its proposed $350 million offering of non-callable five-year senior notes (Ba3/expected BB/BB+).

It was an opportunistic deal, and the company was unhappy with the available rate, said a source close to the deal.

On Tuesday the deal was talked in the 4 1/8% area, in line with earlier guidance.

Ontex hits 4¾%

In the euro-denominated primary market, Ontex Group NV priced a €250 million issue of seven-year senior secured notes (Ba3//) at par to yield 4¾%.

The yield printed at the tight end of the 4¾% to 4 7/8% yield talk, according to an informed source, who added that the deal went very well.

BNP Paribas, Commerzbank, HSBC, ING, KBC, MUFG and UniCredit were the joint bookrunners for the debt refinancing.

New deals move up

In the secondary market, traders saw upside movement in the day’s new-deal offerings, other than DISH.

MSCI’s new 5¼% notes due 2024 were heard by a market source to have traded as high as 102 1/8 bid – well up from their par issue price.

More than $65 million of the notes from the New York-based provider of investment decision support tools turned over, putting the credit right at the top of the Junkbondland Most Actives list.

Another trader saw a more restrained gain in the 101½ to 102 area, while a third had them between 101¾ and 102½ bid.

A trader said that NCL’s new 5¼% notes due 2019 had moved up to a 101 to 101 3/8 context after having priced at par, and their trading volume of more than $45 million put them among the busiest bonds of the day.

A second trader, though, pegged the new bonds around 100½ bid.

Another said that the Miami-based cruise ship operator’s new issue traded between 100¾ and 101¼.

Nexteer Automotive Group’s 5 7/8% notes due 2021 drove up to 101 to 101½ , said a trader who saw $17 million of those notes change hands.

That $250 million issue from the Saginaw, Mich.-based manufacturer of automotive steering and drivetrain components had earlier priced at par.

Another market source located the notes between 101 and 101¾.

Existing DISH bonds trade off

As noted, DISH DBS’ sharply upsized $2 billion of 5 7/8% notes due 2024 came to market too late in the session for any kind of real aftermarket activity.

However, the news that the Englewood, Colo.-based satellite television broadcaster was bringing a big new deal caused a number of its existing credits to trade off.

For instance, a trader saw its 5% notes due 2023 lose 1¾ points to end at 97½ bid, on volume of over $30 million.

He said that its 6¾% notes due 2021 fell by 1 point to 110 bid, on volume of over $12 million, while its 5 1/8% notes due 2020 retreated by 1½ points on the day to end around 102½ bid, with over $10 million having changed hands.

DISH plans to use the new deal proceeds to refinance debt and for general corporate purposes.

In a research note issued before the company announced its big new deal, Gimme Credit senior analyst Dave Novosel pointed out that DISH generates strong free cash flow, with a full-year total so far of around $840 million, and that the company “has used more than $220 million of that to reduce debt. Nevertheless, debt totals more than $13.3 billion, putting leverage at 4.8x.”

He also noted that DISH has accumulated “vast” holdings in the radio frequency spectrum, a valuable commodity in the telecommunications and satellite industries, but the “critical issue” is how it will use those holdings, or whether it will accumulate more. “Leverage has escalated with the spectrum acquisition spending,” he concluded.

New GM trades actively

One of the traders opined that “a ton of GMs traded,” referring to the giant carmaker’s $2.5 billion three-part issue of 10.5-year, 20.5-year and 30.5-year notes, “but I’m going to have to assume that those are trading at everyone’s high-grade desk. They’re split-rated (Ba1/BBB-/BB+), and the spreads are pretty tight.”

Detroit-based General Motors Co.’s 4% notes due in April of 2025 were seen trading around 99.5 after pricing at 99.273, with more than $67 million of the notes seen having changed hands.

Its 5% notes due in April 2035 had moved up to 100 5/8 bid, after having priced at 98.759, with over $90 million seen having traded. Its 5.2% long bonds due in April 2045 were going home around 100¾ bid after pricing at 99.266, on volume of nearly $90 million.

A quiet session

A trader said that Wednesday was “just a quiet day after the election, with everyone digesting it and then waiting for the President to come out with his speech.”

Another trader noted that apart from the new deals, “everything else was earnings, just a slew of them.

“But at this point, nothing stands out.”

Little Chesapeake activity

A trader said that he did not see too much activity in one of those names that was out with earnings on Wednesday – Oklahoma City-based oil and natural gas operator Chesapeake Energy Corp., which reported third-quarter numbers.

He calculated that the company’s 4 7/8% notes due 2022 were about unchanged on the day.

“They had been offered at 103 yesterday [Tuesday], and then were quoted this morning at 102¼ to 103¼”.

During its conference call following the release of its results, company executives touted the progress that Chesapeake had made over the last two years in bringing down its overall debt levels and leverage measures (see related story elsewhere in this issue).

Indicators get better

Statistical indicators of junk market performance turned stronger across the board on Wednesday after having been lower all around on Tuesday. The indicators have been on the upside in in three sessions out of the last four.

The KDP High Yield Daily Index rose by 10 basis points on Wednesday to end at 72.40, versus its 21 bps slide on Tuesday, which in turn had broken a two-session winning streak.

Its yield declined by 3 bps to 5.31%, after having risen by 8 bps on Tuesday, and having come in for five successive sessions before that.

The Markit CDX North American High Yield Series 23 index was up by 1/8 point on Wednesday to close at 106 7/8 bid, 107 offered. It had lost 3/16 point on Tuesday, after having been unchanged on Monday.

The Merrill Lynch U.S. High Yield Master II Index rose by 0.079% on Wednesday, bouncing back from Tuesday’s 0.243% loss, which had been its first downturn after two straight advances Friday and Monday.

The latest loss lifted the index’s year-to-date return to 4.645% from 4.562% on Tuesday.

According to the FINRA-Bloomberg Active US High Yield Bond Index, Wednesday’s junk market volume rose to $3.542 billion from Tuesday’s $3.32 billion.

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