Upsized Unitymedia deal, drive-by Hub add-on price; oil bonds rebound, Claire’s paper retreats

By Paul Deckelman and Paul A. Harris

New York, Dec. 3 – Activity quickened in the high-yield primary market on Wednesday, as syndicate sources heard of two pricings generating $834 million of new dollar-denominated, fully junk-rated paper. That was a pickup from the slower post-holiday pace seen on Monday and Tuesday, which each produced one new deal of $250 million and $225 million, respectively.

German cable systems operator Unitymedia Hessen GmbH & Co. KG and affiliate Unitymedia NRW GmbH priced an upsized $550 million of senior secured notes due January 2025 as part of a larger €1.45 billion equivalent two-part transaction that included a tranche of similar euro-denominated notes.

That deal – originally expected to come to market on Tuesday – was pushed back a day after being restructured, with the addition of the dollar tranche to the original euro-denominated piece of paper, and twice upsized.

Traders saw some slight gains when it hit the aftermarket.

The syndicate sources also said that insurance provider Hub International Ltd. did a quickly shopped $280 million add-on to its existing 2021 notes.

Among other recently priced issues, the new bonds from Spectrum Brands Inc. and Tenneco Inc. traded around the levels at which they had finished Tuesday, with a fair amount of volume in the latter credit.

Away from the issues that have actually priced, the syndicate sources said that prospective new deals emerged from meatpacker JBS USA LLC and aluminum products manufacturer Constellium NV, the latter a two-part dollar- and euro- denominated deal. Both are expected to price Friday.

One prospective bond offering meanwhile went away, with gaming developer Parq Resort & Casino pulling its planned secured notes issue, choosing instead to borrow that money via a concurrent bank loan transaction.

Outside the new-deal realm, traders saw active dealings in energy names like Halcon Resources Corp., Sandridge Energy Inc. and California Resources Corp., and at mostly higher levels, as the battered oil and natural gas company paper began recovering from its recent sell-off, the traders said.

Claire’s Stores Inc.’s bonds, on the other hand, were in retreat after the retailer reported its latest earnings data, giving up the gains notched on Tuesday ahead of the numbers.

Statistical market performance indicators turned higher across the board Wednesday after having been mixed on Tuesday and having ended on the downside all around over the two sessions before that.

Unitymedia sees big upsize

In the Wednesday primary market, $834 million of dollar-denominated junk bonds were priced in two tranches from two different issuers.

Unitymedia KabelBW launched and priced an upsized €1.45 billion equivalent amount of senior secured notes due Jan. 15, 2025 (expected ratings Ba3/BB-).

The deal included an upsized €1 billion tranche of notes that priced at par to yield 4%. The tranche, which was upsized from €785 million, was priced on top of price talk that had tightened from earlier guidance of 4% to 4¼%.

An upsized $550 million tranche of notes priced at par to yield 5%. The dollar-denominated tranche was upsized from $500 million, and the dollar-denominated notes also priced on top of price talk.

The combined issuance was increased from €1.18 billion equivalent. The deal was announced on Tuesday as a €785 million euro-only offering.

Joint bookrunner Goldman Sachs will bill and deliver for the debt refinancing deal. Barclays, BNP Paribas, Credit Agricole, J.P. Morgan, SG CIB and UBS were also joint bookrunners.

Hub taps 7 7/8% notes

Hub International priced a $280 million add-on to its 7 7/8% senior notes due Oct. 1, 2021 (Caa1/CCC+) at 101.5 to yield 7.494%.

The reoffer price came in the middle of the 101 to 102 price talk.

Morgan Stanley was the sole bookrunner.

The Chicago-based insurance brokerage firm plans to use the proceeds for general corporate purposes, including to fund future acquisitions and pay down revolver debt that financed prior acquisitions.

JBS 10-year notes

The active forward calendar also saw a meaningful buildup on Wednesday.

JBS USA plans to price $750 million of 10-year senior notes (expected Ba3/confirmed BB) on Friday.

BofA Merrill Lynch, BMO, Deutsche Bank, Morgan Stanley and Wells Fargo are the joint bookrunners for the debt refinancing.

Look for the post-Thanksgiving week to be a backloaded one in the primary market, sources said Wednesday.

Among deals on the calendar expected to price before the end of the week is the Cott Beverages Inc. $615 million offering of five-year senior notes via Barclays, Credit Suisse, JPMorgan, BofA Merrill Lynch and Deutsche Bank.

The deal could price Thursday, a trader said.

Although no price talk had surfaced by press time on Wednesday, the deal is guided in the mid-6% yield context, according to a portfolio manager.

December is not expected to be a conspicuously big month in the new issue market, the manager said, adding that the precipitous slide in crude oil prices is exerting a constraining force on the market.

But make no mistake, 2014 has been a very big year in the market, the manager asserted.

Constellium dual-currency deal

Constellium plans to take part in an investor conference call on Thursday to present its €535 million equivalent offering of senior notes due Jan. 15, 2023 (expected ratings B1/B).

The offer is coming in dollar- and euro-denominated tranches, the sizes of which remain to be determined.

Pricing is set for Friday.

Deutsche Bank and Goldman Sachs are joint bookrunners for both tranches. BNP Paribas is a joint bookrunner for the dollar-denominated tranche. SG CIB is a joint bookrunner for the euro-denominated tranche.

Proceeds will be used to finance the acquisition of Wise Metals Intermediate Holdings LLC.

Also in the euro-denominated market, look for the Siemens Audiology Solutions €315 million offering of senior notes (B-) to launch in the near term, possibly before the end of the week, sources said on Wednesday.

The bonds are part of a debt financing backed by Deutsche Bank, Goldman Sachs, UBS and UniCredit, with proceeds to fund the acquisition of Siemens Audiology Solutions by a group of investors led by EQT.

Parq abandons notes offer

Parq Resort & Casino withdrew its $200 million offering of seven-year senior secured second-lien notes (Caa1/B-) and shifted proceeds to its bank loan structure.

The notes, which were marketed on a mid-November roadshow, had been talked with an 11½% coupon to yield 12%.

Credit Suisse and Dundee Securities were the joint bookrunners for the project financing.

Unity bonds edge up

In the secondary arena, a trader saw the new Unitymedia 5% senior secured notes due in January of 2025 moving in a par-to-100½ bid context, up from their par issue price earlier.

A second trader pegged the new deal at 100¼ bid, 100¾ offered.

There meanwhile was no immediate aftermarket activity in Hub International’s 7 7/8% notes due 2021 after the pricing of its add-on tranche.

Tenneco bonds improve

Tenneco’s 5 3/8% notes due 2024 were seen to have improved on Wednesday, a day after their pricing.

A market source quoted the notes at 101 bid, calling that a gain of 5/16 point on the day. Volume was a brisk $14 million, putting the issue among the most actively traded junk credits of the session, though not quite among the Top Ten.

A second trader called the bonds improved by ¼ point, seeing them going home at 100 5/8 bid, 100 7/8 offered.

Yet another trader located the bonds in a 100½-to-101 context.

The Lake Forest, Ill.-based automotive parts producer priced $225 million of those notes at par in a quick-to-market deal on Tuesday. They were heard to have firmed to a 100 3/8-to-100¾ bid context when they were freed for secondary market dealings later that same session.

Spectrum hangs in

Traders saw Monday’s offering from Spectrum Brands basically unchanged, hanging onto the gains notched since that quickly shopped $250 million of 6 1/8% notes due 2024 priced at par.

A market source said they were unchanged on the day at 101½ bid on volume of about $5 million – down from the $11 million that had traded at that level on Tuesday and the $16 million seen in Monday’s initial aftermarket dealings, when the Madison, Wis.-based consumer products manufacturer’s bonds moved up to around 100 7/8 bid.

A second trader saw them on Wednesday in a 101-to-101½ bid context.

Energy names rebound

Away from the new deals, “energy continued to dominate,” a trader said, with a number of the names that had been getting rocked over the previous few sessions appearing to rebound in active trading from an apparently overdone recent sell-off.

The busiest name in the sector was Halcon Resources, with a market source seeing the Houston-based oil and natural gas exploration and production company’s 8 7/8% notes due 2021 up nearly 6 points on the session at just under 74 bid on volume of more than $38 million, tops in Junkbondland.

Its 9¾% notes due 2020 gained more than 5 points, also ending at the 74 bid area, with over $29 million having changed hands.

Oklahoma City-based E&P operator SandRidge Energy’s 7½% notes due 2023 were about unchanged on the day at just over 68 bid, with more than $27 million having traded.

But its 7½% notes due 2021 were seen going home at 69 5/8 bid, up 3/8 point, on volume of more than $17 million.

Its 8¾% notes due 2020 firmed smartly to 79 bid, a gain of 1½ points, with over $13 million traded.

Los Angeles-based E&P name California Resources’ 6% notes due 2024 gained 1 point at 88 on volume of over $19 million, while its 5½% notes due 2021 finished up a deuce at 88½ bid, with $12 million of turnover.

The rebound came against a backdrop of higher oil prices after a U.S. government report showed an unexpected decline in crude inventories for the latest period.

That helped send benchmark West Texas Intermediate light, sweet crude up 50 cents to $67.38 per barrel in New York Mercantile Exchange trading.

Claire’s gets clobbered

Away from oil, Claire’s Stores’ bonds – which had firmed on Tuesday ahead of the Hoffman Estates, Ill.-based specialty retailer’s quarterly earnings – fell back badly on Wednesday after the numbers proved to be disappointing.

“They were pretty good the past day or two,” a trader said, but on Wednesday “the name was under pressure and heavily traded.”

Its 9% notes due 2019 lost 2¼ points to end at 99¼ bid, with more than $25 million having traded, while its 8 7/8% notes due 2019 plunged a full 5 points to finish at 82 bid, with $16 million changing hands .

For the third quarter, the company reported a net loss of $26.82 million, somewhat worse than year-earlier red ink of $25.47 million.

Net sales also weakened, falling to $350.7 million. That was a 1.8% decline year over year.

Same-store sales in North America – the retailing industry’s key performance metric – dropped 1.6%, while European same-store sales dipped 1.1%.

Adjusted EBITDA came to $50.7 million, versus $54.6 million the previous year. SG&A fell 2.6%.

As of Nov. 1, cash and equivalents totaled $30.2 million, including $2.3 million of restricted cash.

Indicators move up

Statistical indicators of junk market performance turned higher across the board on Wednesday after having been mixed on Tuesday and lower across the board on Friday and again on Monday.

The KDP High Yield Daily index broke out of a three-session slump, edging upward by 2 basis points to close at 71.21, although that improvement was just a drop in the bucket compared with the plunges the index had seen over the prior three sessions: 14 bps on Tuesday, 37 bps on Monday and 18 bps on Friday.

Its yield came in by 2 bps to 5.65% after having risen over the previous three sessions, including Tuesday’s 5 bps widening. It had also ballooned out by 13 bps on Monday after having risen by 8 bps on Friday.

The Markit CDX North American High Yield Series 23 index saw its second straight gain on Wednesday, finishing up by ¼ point at 107 5/16 bid, 107 7/16 offered. It had also risen by 3/32 point on Tuesday, rebounding after two straight setbacks on Friday and Monday.

The Merrill Lynch U.S. High Yield Master II index shook off the rust of three straight sessions on the downside on Wednesday, advancing by 0.019% versus Tuesday’s 0.228% drop.

The gain lifted its year-to-date return to 3.104% from Tuesday’s 3.084%. However, the index remained well down from its peak level for the year of 5.847%, recorded on Sept. 1.

According to the Finra-Bloomberg Active US High Yield Bond index, junk market volume fell to $3.962 billion on Wednesday from Tuesday’s $4.415 billion total.

Stephanie N. Rotondo contributed to this review.

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