Hilton prices; Harsco, Aker BP on tap; Dish gains; Comstock jumps, Covey Park tanks on acquisition

By Paul A. Harris and Abigail W. Adams

Portland, Me., June 10 – The high-yield primary market launched the week at an active pace with one large drive-by deal pricing and two more joining the forward calendar.

Hilton Domestic Operating Co. Inc., an indirect subsidiary of Hilton Worldwide Holdings Inc., priced an upsized $1 billion issue of senior notes due Jan. 15, 2030 (Ba2/BB+) at par to yield 4 7/8% in a quick-to-market Monday trade.

Harsco Corp. started a roadshow for a $500 million offering of eight-year senior notes.

And Aker BP ASA joined the forward calendar with a $500 million offering of five-year senior notes (expected ratings Ba1/BB+/BBB-) with pricing expected on Wednesday.

Meanwhile, the secondary space continued its upward momentum on Monday as markets rallied following an easing of trade tensions between Mexico and the United States.

Dish Network Corp.’s junk bonds were active and making gains amid speculation of a merger with AT&T’s DirecTV.

Comstock Resources, Inc.’s 9¾% senior notes due 2026 skyrocketed and Covey Park Energy LLC’s 7½% senior notes due 2025 tanked following news Comstock would acquire Covey Park in a deal valued at $2.2 billion.

Hilton upsizes to $1 billion

Hilton Domestic Operating Co., an indirect subsidiary of Hilton Worldwide Holdings, priced an upsized $1 billion issue of senior notes due Jan. 15, 2030 (Ba2/BB+) at par to yield 4 7/8%.

The issue size was increased from $750 million.

BofA Securities was the left bookrunner.

The McLean, Va.-based hospitality company plans to use the proceeds to repay its senior secured credit facilities, with any remaining proceeds to be used for general corporate purposes which may include, but are not limited to, funding certain share repurchases under its share repurchase program.

Harsco starts roadshow

Harsco started a roadshow on Monday in New York and New Jersey for a $500 million offering of eight-year senior notes, according to a syndicate source.

Goldman Sachs is the left bookrunner.

The Camp Hill, Pa.-based provider of diversified industrial services plans to use the proceeds, along with a draw on its revolving credit facility, to fund its acquisition of Clean Earth Inc. from Compass Group Diversified Holdings LLC.

Aker investor call Tuesday

Aker BP plans to shop a $500 million offering of five-year senior notes (expected ratings Ba1/BB+/BBB-) on an investor conference call scheduled to get underway at 10 a.m. ET Tuesday.

Initial price talk is in the low 5% area.

The deal is set to price on Wednesday.

Global coordinator Barclays will bill and deliver. BNP Paribas, HSBC and MUFG are also global coordinators.

The Oslo-based oil and gas exploration and production company plans to use the proceeds to pay down its revolving credit facility.

Dish gains

Dish’s junk bonds were active and posting gains on Monday amid speculation the direct-broadcast satellite provider and AT&T’s satellite broadcast business DirecTV were contemplating a merger.

Dish’s 7¾% senior notes due 2026 rose 2 points to 97¼, according to a market source. More than $22 million of the bonds changed hands during Monday’s session.

Dish’s 5 7/8% senior notes due 2024 rose 2¾ points to 94¼ with more than $17.5 million of the bonds on the tape.

The spread on Dish’s five-year credit default swap tightened by 44 bps on Monday, the most since February, a source said.

Dish’s junk bonds closed out last week with gains as headlines circulated that Dish and DirecTV were considering a merger.

The 7¾% notes rose about 1¾ points and the 5 7/8% notes rose about 3 points on the news.

Several media outlets reported on Friday that the two satellite TV companies were again contemplating a merger to curb dwindling subscriber numbers.

The merger was attempted about 17 years ago and failed to meet with regulator approval. However, the companies believe the merger would be approved this time around, Bloomberg reported.

The acquisition

Comstock Resources’ and Covey Park’s junk bonds were moving in opposite directions on news Comstock would acquire Covey Park in a deal valued at $2.2 billion.

Comstock’s 9¾% senior notes due 2026 jumped 10 points on the announced acquisition. The notes traded up to close Monday at 83, according to a market source.

The bonds saw more than $18 million in reported volume.

While Comstock’s notes skyrocketed, Covey Park’s 7½% senior notes due 2025 tanked.

The notes dropped 9 points to close Monday at 80, according to a market source.

More than $10 million of the bonds changed hands during the session.

Comstock plans to use proceeds from newly issued common and convertible preferred stock, a new credit facility and cash to fund the acquisition.

The cash and stock transaction includes the assumption of Covey Park’s debt. (See related article in this issue)

The acquisition was seen as credit positive for Comstock Resources but not for Covey Park.

S&P lowered Covey Park’s outlook to stable from positive and affirmed its B issuer credit rating as a result of the acquisition.

S&P also affirmed Comstock Resources’ B credit rating and revised its recovery rating to 3 from 4.

Moody’s had a credit rating of Caa1 on Comstock’s 9¾% notes and a credit rating of B3 on Covey Park’s notes prior to the acquisition.

Indexes gain

Indexes continued to post gains on Monday after all posted cumulative gains on the week last week.

The KDP High Yield Daily index rose 29 bps to close Monday at 70.09 with the yield now 5.72%.

The index saw a cumulative gain of 40 bps on the week last week.

The ICE BofAML US High Yield index skyrocketed 34.9 bps with the year-to-date return now 8.915%.

The index saw a cumulative gain of 104.7 bps on the week last week, again crossing the 8% year-to-date threshold after dropping below it on May 29.

Less than one week later, the index is no brushing up against a 9% return.

The CDX High Yield 30 index jumped 39 bps to close Monday at 106.25. The index saw a cumulative gain of 132 bps on the week last week.

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