Upsized Cott, downsized Dana Corp., ADT price; oil gyrations continue; Cliffs off on news

By Paul Deckelman and Paul A. Harris

New York, Dec. 4 – The high-yield primary sphere picked up its pace on Thursday, according to high-yield syndicate sources. They saw some $1.35 billion of new junk bonds come to market in three tranches. That was up from $834 million of new dollar-denominated, fully junk-rated paper from domestic or industrialized-country borrowers that had come to market in two tranches Wednesday.

Canadian soft-drink bottler Cott Corp. popped the top on an upsized $625 million of five-year notes, which were quoted slightly below issue price. The deal was the day’s sole regularly scheduled forward calendar offering.

In drive-by action, automotive components manufacturer Dana Holding Corp. priced a $425 million 10-year issue. The bonds firmed slightly in active aftermarket dealings.

Security alarm company ADT Corp. came to market with a downsized $300 million of 5.25-year notes. Traders did not see any initial secondary dealings in the new credit.

Hub International Ltd.’s 2021 notes were actively traded, at somewhat lower levels, after the insurance brokerage company brought an add-on tranche to those notes on Wednesday.

Away from the new deals, energy names continued to bounce around, with notable activity in Halcon Resources Corp. and California Resources Corp.

But the dominant non-new-deal name Thursday was Cliffs Natural Resources Inc., whose bonds lost ground after the coal and iron ore mining company scrapped its tender offer for a portion of those notes and cancelled the accompanying junk bond deal.

Statistical market performance measures turned mixed on Thursday after having moved higher across the board on Wednesday.

Flows of investor cash into high-yield mutual funds and exchange-traded funds – considered a key barometer of overall junk market liquidity trends – saw an $859 million net outflow in the latest reporting week, more than offsetting the previous week’s $44 million inflow.

Cott upsizes

Three issuers completed single-tranche deals on Thursday, raising a combined total of $1.35 billion.

Cott Beverages Inc. priced an upsized $625 million of 6¾% five-year senior notes (B3/B-) at par to yield 6.748%.

The deal was upsized from $615 million.

The yield came in line with yield talk in the 6¾% area.

Joint bookrunner Barclays will bill and deliver. Credit Suisse, Deutsche Bank, J.P. Morgan and BofA Merrill Lynch were also joint bookrunners.

The company plans to use the proceeds to fund the acquisition of DSS Group, Inc., parent company to DS Services of America, Inc. The additional proceeds resulting from the $10 million upsizing will be used to reduce the draw on Cott's ABL revolver.

Dana drives through

In a quick-to-market deal, Dana Holding priced a $425 million issue of 10-year senior notes (B2/BB+) at par to yield 5½%, on top of yield talk.

Citigroup, BofA Merrill Lynch, Barclays, Deutsche Bank, JPMorgan, UBS and Wells Fargo were the joint bookrunners.

The company plans to use the proceeds to repay its 6½% notes due 2019 and for general corporate purposes.

ADT downsizes

ADT priced a downsized $300 million issue of non-callable 5.25-year senior notes (expected Ba2/confirmed BB-) at par to yield 5¼%.

The deal was downsized from $400 million.

JPMorgan, Citigroup, Barclays, BofA Merrill Lynch, Credit Suisse, Deutsche Bank, Goldman Sachs, Morgan Stanley, Scotia and Wells Fargo were the joint bookrunners.

The Boca Raton, Fla.-based provider of home security systems and services plans to use the proceeds to repay bank debt and for general corporate purposes.

Constellium sets talk

Constellium NV set price talk for its €535 million equivalent offering of senior notes due Jan. 15, 2023 (B1/B).

Notes in the dollar-denominated tranche are talked to yield 7¼% to 7½%.

Notes in the euro-denominated tranche are talked to yield 6¾% to 7%.

Tranche sizes remain to be determined.

The deal is set to price Friday morning, New York time.

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.

Also expected to price Friday is JBS USA LLC's $750 million offering of 10-year senior notes (expected Ba3/confirmed BB) via BofA Merrill Lynch, BMO, Deutsche Bank, Morgan Stanley and Wells Fargo.

And Real Alloy Holding Inc. is expected to price its $300 million offering of five-year senior secured notes via joint bookrunners Goldman Sachs and Deutsche Bank.

Both deals had roadshows that kicked off earlier in the week.

There was no price talk available on either offer at press time Thursday, according to market sources.

Westmoreland talk is 8½% area

Westmoreland Coal Co. talked its $400 million of seven-year senior secured first-lien notes (existing Caa1/confirmed B) to yield in the 8½% area.

The deal is set to price on Monday.

BMO is the left bookrunner. Deutsche Bank and Credit Suisse are the joint bookrunners.

The notes come with three years of call protection.

Superior Plus prices

Superior Plus LP priced C$200 million of seven-year senior notes (/BB/DBRS: BB) at par to yield 6½%.

The yield printed on top of price talk.

Scotia, BMO and National Bank Financial were the lead managers for the debt refinancing.

Dana notes edge higher

In the secondary sphere, Dana Holding’s new 5½% notes due 2024 were seen having pushed higher when they were freed to trade.

A market source saw the Maumee, Ohio-based vehicular power train manufacturer’s new paper having firmed to 100 1/8 bid from its par issue price, with over $33 million having traded – putting that quick-to-market new deal right near the top of the high yield Most Actives list.

A second trader saw the bonds in a 100 1/8 bid, 100¼ offered context.

Cott bonds ease

A trader said that the new Cott 6¾% notes due 2020 traded slightly lower when they hit the aftermarket, quoting the issue at 99 5/8 bid, 100 1/8 offered.

The Mississauga, Ont.-based soft-drink bottler’s notes – sold via its wholly owned Cott Beverages subsidiary – had priced at par after the issue was slightly upsized from an original $615 million.

Traders meantime did not report any initial aftermarket dealings in the session’s third deal, from security alarm company ADT.

Hub bonds trade around

Among recently priced deals, a trader said that Hub International’s 7 7/8% notes due 2021 traded at 101½ bid – unchanged from the level at which the Chicago-based insurance brokerage company had priced its $280 million add-on to its existing notes on Wednesday.

A market source said that more than $24 million of the notes traded, putting them well up on the Most Actives list.

He said that their 101½ price was down 3/8 point from where the existing bonds had been trading before Wednesday’s drive-by deal

The day’s other pricing – German cable systems operator Unitymedia KabelBW’s 5% senior secured notes due Jan. 15, 2025 – traded in a 100 1/8-to100½ bid context on Thursday, with over $10 million having changed hands.

Unitymedia priced $550 million of those notes at par on Wednesday after upsizing the issue from $500 million, as part of a two-part offering that also included a euro-denominated secured notes tranche.

Energy names gyrations continue

Away from the new deals, the energy sector remained one of the busiest corners of Junkbondland on Thursday.

Houston-based oil and natural gas exploration and production operator Halcon Resources’ paper was a mixed bag.

Its 9¾% notes due 2020 were seen having gained 1/8 point on the session to end at 74½ on volume of over $36 million.

Its 8 7/8% notes due 2021, on the other hand, lost ½ point to end at 73¼ bid, with over $33 million having traded.

Los Angeles-based E&P name California Resources’ 6% notes due 2024 gained ½ point to close at 88½ bid on turnover of over $20 million.

Bonds fall off a Cliff

A trader said that Cliffs Natural Resources “was the big name today” after the company scrapped plans for a tender offer and subsequent bond offering, citing unfavorable market conditions.

Following the news, a trader said the iron ore producer’s debt “started to get hit, but then it came back a little.”

The 6¼% notes due 2040 were quite active, he said, with about $50 million exchanging hands. He said the issue hit a low of 56, but came back to end around 59½ – still down 4 points on the day.

The 3.95% notes due 2018 were also actively traded, the trader said, with about $30 million trading. The bonds ended just half a point weaker at 70½.

In the company’s other issues, the 4.8% notes due 2020 were seen ending steady at 62, while the 5.9% notes due 2020 finished off half a point at 64½.

Its New York Stock Exchange-traded shares ended down 57 cents, or 6.63%, to $8.03.

The Cleveland-based company had previously launched a tender for five series of notes, totaling about $600 million of debt. The company planned to issue about $1.1 billion of new debt to cover the exchange.

But as the bonds and equity have been weighed on of late – even when the company said Wednesday that it was selling more West Virginia coal assets for $175 million in cash – the company felt it was time to put those refinancing plans on hold.

“With the unfavorable move in market rates during the past few weeks, the prudent decision is to postpone the company’s refinancing plans until market conditions improve,” said Lourenco Goncalves, chief executive officer, in a statement.

Moody’s Investors Service put in its two cents, cutting the company’s credit ratings to Ba3 and the senior unsecured notes to B1.

Indicators turn mixed

Statistical indicators of junk market performance turned mixed on Thursday after having been higher across the board on Wednesday. It was the second time the market measures had been mixed in the past three days, having also been mixed on Tuesday.

The KDP High Yield Daily index recorded its second consecutive gain on Thursday, edging up by 2 basis points to close at 71.23. It had also been up by 2 bps on Wednesday, when it broke out of a three-session slump.

And for a second consecutive session, its yield came in by 2 bps to end at 5.63%. Before narrowing on Wednesday and again on Thursday, the yield had risen over three successive sessions.

But the Markit CDX North American High Yield Series 23 index finished the day lower, losing 9/32 point to go home at 107 1/16 bid, 107 1/8 offered.

That broke a two-session winning streak, including Wednesday’s ¼ point improvement.

However, the Merrill Lynch U.S. High Yield Master II index firmed for a second straight session on Thursday, adding on 0.013%, on top of its 0.019% advance on Wednesday, when it shook off the rust of three straight sessions before that on the downside.

The gain lifted its year-to-date return to 3.118% from Wednesday’s 3.104%. 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 $3.599 billion on Thursday from $3.962 billion at the close Wednesday.

Fund flows turn negative

High yield mutual funds and exchange-traded funds – considered a reliable barometer of overall junk market liquidity trends – turned massively negative this week, way more than offsetting the relatively small inflow that had been recorded the week before.

Some $859 million more left those weekly-reporting-only funds than came into them during the week ended Wednesday, in contrast to the $44.45 million inflow seen the prior week, ended Nov. 26.

A market source said that “they [investors] are bailing” out.

The week’s big outflow also turned the year-to-date fund flows figure to slightly negative (see related story elsewhere in this issue).

Stephanie N. Rotondo contributed to this review.

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