Upsized Clear Channel leads $1.9 billion session; Service Corp., CGG also price; Charter up

By Paul Deckelman

New York, April 28 - The high-yield primary sphere snapped back on Monday after Friday's largely featureless session, which saw no deals price and just one join the forward calendar.

High-yield syndicate sources said that three domestic and industrialized-country issuers combined for $1.9 billion of new U.S.-dollar-denominated, fully junk-rated paper in Monday's session.

Leading the action was an upsized $850 million offering of 3.75-year notes from Clear Channel Communications Inc. via a financing subsidiary. The diversified media and entertainment company's new bonds priced well after market activity had wrapped up for the night and did not see any immediate aftermarket dealings.

That drive-by deal was one of three quick-to-market deals that got done just hours after they had been announced, although the day's other two pricings - from Service Corp. International and CGG SA, came nowhere nearly as late in the session as the Clear Channel deal did, and actually traded around a little above their respective issue prices. Deathcare giant Service Corp. priced $550 million of 10-year notes, while CGG, a French company that provides geophysical services to the energy industry, did $500 million of 7¾% notes.

The syndicate sources also heard of several prospective new deals that could price on Tuesday, or beyond.

SunCoke Energy Partners, LP, a maker of the coke used in steel production, unveiled plans for a $250 million add-on to its existing 2020 notes, with pricing seen likely on Tuesday.

Another add-on deal expected to get done on Tuesday is French hospital operator Holding Medi-Partenaires SAS, also taking on an addition to its 2020 notes.

Homebuilder Century Communities plans a $200 million note offering that is expected to price later on in the week.

In the secondary market, traders said that volume flows were light and they cited a number of factors, including the absence of many portfolio managers and other senior decision makers at the Milken Institute economic conference going on this week in Los Angeles, the stock market's downside movement for most of the session, and the looming Federal Reserve policy meeting on Tuesday and Wednesday.

Among the few names that were seen active were some Clear Channel bonds in apparent reaction to its new deal, and Charter Communications Inc., some of whose notes were moving around on the news that Charter will buy some cable assets being divested by larger rival Comcast as the latter swallows up Time Warner Cable.

But while activity was restrained, statistical market-performance measures were up across the board on Monday, after having finished mostly lower on Friday.

Clear Channel sharply upsizes

The big deal of the session came from Clear Channel Communications, which priced an upsized $850 million of 3.7-year senior notes (Ca/CCC) late Monday.

The quick-to-market issue - increased from an originally announced $400 million - priced at par to yield 10%.

The notes, which mature on Jan. 1, 2018, are being issued by CCU Escrow Corp., a newly-formed subsidiary of San Antonio, Texas-based Clear Channel, a diversified media and entertainment company.

Goldman Sachs & Co., Credit Suisse Securities (USA) LLC, Morgan Stanley & Co. Inc., Deutsche Bank Securities Inc. and Wells Fargo Securities LLC were the joint bookrunners on the deal, high yield syndicate sources said.

Upon the closing of the notes' offering, CCU Escrow will deposit the proceeds into a segregated escrow account. The funds will be released when conditions are met, including the substantially concurrent redemption of the company's $567.1 million of outstanding 5½% senior notes scheduled to mature this coming Sept. 15 and its $241 million of 4.9% senior notes due 2015, as well as the assumption of the escrow unit's obligations under the notes. Clear Channel said that it intends to issue a notice of redemption for both of those existing note issues within 30 days of the closing of the new bond deal.

Should the release conditions not be met within 60 days of the notes' issue date, CCU Escrow will redeem the notes at par, plus accrued and unpaid interest up to, but not including, the redemption date.

Existing notes trade busily

Terms on Clear Channel's new issue did not begin to circulate until well after trading had wrapped up for the day, meaning there was no immediate aftermarket in those bonds.

However, a market source said that the company's existing 14% notes due 2021 were topping the Junkbondland Most Actives list, with over $42 million having changed hands by late afternoon.

But he said the bonds didn't really go anywhere price-wise, instead staying anchored around 103¾ bid.

Service Corp. drives by

Service Corp. International priced $550 million of 10-year senior notes (B1/BB-) on Monday, syndicate sources said.

The notes priced at par to yield 5 3/8%, in the middle of pre-deal market price talk of 5¼% to 5½%.

The quick-to-market offering was brought to market by bookrunners Wells Fargo, B of A Merrill Lynch and J.P. Morgan Securities LLC.

Service Corp., a Houston-based owner of funeral homes and cemeteries in the United States, Canada and Germany, plans to use the proceeds of the offering, together with borrowings under its revolving credit facility and cash on hand, to finance the purchase via a tender offer or the subsequent repurchase or redemption, of all of its outstanding 6¾% senior notes due 2015 and 7% senior notes due 2019 and all of the outstanding 6½% senior notes due 2019 of its wholly owned Stewart Enterprises, Inc. subsidiary.

A trader saw the new Service Corp. notes trading at 100¼ bid, 100½ offered.

A second trader sighted the bonds at 100 5/8 bid, 101 1/8 offered.

France's CGG comes to market

The day's other pricing originated on the other side of the Atlantic, as CGG SA (Ba3) priced a $500 million offering of senior notes due Jan. 15, 2022.

The quickly shopped deal priced at par to yield 6 7/8%, in the middle of pre-deal market price talk of 6¾% to 7%.

The deal was brought to market by global coordinators Credit Suisse, which handled billing and delivery, and BNP Paribas Securities Corp., as well as joint bookrunners B of A Merrill Lynch and RBC Capital Markets Corp. It was marketed to potential buyers via a morning investor call.

CGG - a Paris-based provider of geological, geophysical, and reservoir services to customers in the oil and gas exploration and production industry, as well as a manufacturer of geophysical equipment - plans to use the offering proceeds to redeem its $225 million of 9½% senior notes due 2016. Remaining proceeds will go to redeem part of its $400 million of outstanding 7¾% senior notes due 2017.

Monday's deal was CGG's second recent foray into the junk bond market. On April 16 it priced €400 million of 5 7/8% senior notes due 2020 at par. That deal, upsized from an originally announced €360 million, was marketed to investors via a roadshow. Proceeds were slated for the repurchase of the company's €360 million of Oceane convertible notes due 2016, with anything left over to be used to repay other debt.

When Monday's new deal hit the aftermarket, a trader pegged those bonds at 100 3/8 bid, 100 5/8 offered.

At another shop, a trader quoted them going out at 100 9/16 bid, 100 15/16 offered.

SunCoke offering on tap

Adding to the calendar, SunCoke Energy Partners was heard by high yield syndicate sources to be offering a $250 million add-on to its existing 7 3/8% senior unsecured notes due Feb. 1, 2020. The notes will be co-issued by its wholly owned SunCoke Energy Partners Finance Corp. subsidiary.

The sources expect the add-on to be priced on Tuesday via joint bookrunners Citigroup Global Markets Inc., Barclays Capital Inc. Credit Suisse, J.P. Morgan and RBC.

The deal was being marketed to potential investors via a roadshow that began with an investor lunch in New York on Monday and which will include a similar lunch on Tuesday in Boston.

The notes are being offered as additional notes under the indenture under which the company issued its original $150 million of the notes in January 2013.

However, they will initially have a different Cusip number than the existing issue and will not be initially fungible with the existing notes for trading purposes. Following the expiration of restrictions on transferability and resale, the company intends to combine the new and existing notes under the same unrestricted Cusip and the notes should then be fungible.

Lisle, Ill.-based SunCoke is a publicly-traded master limited partnership that manufactures coke used in the blast furnace production of steel and provides coal handling services to the coke, steel and power industries. Its general partner is a wholly owned subsidiary of Sun Coke Energy, Inc.

It plans to use some of the proceeds from the offering to fund the cash payment in connection with its acquisition of an additional 33% ownership interest in each of its Haverhill and Middletown cokemaking facilities and to repay certain debt assumed from its sponsor, SunCoke Energy, as part of this acquisition. On Friday, SunCoke Energy Partners announced plans for a cash tender offer for up to $160 million of its $400 million of outstanding 7 5/8% senior notes due 2019.

Another Tuesday add-on

In the euro-denominated market, French hospital operator Medi-Partenaires was heard by high yield syndicate sources to be preparing a €110 million add on to its existing 7% senior secured notes due May 15, 2020.

The deal is expected to price on Tuesday via global coordinator Credit Suisse, which will handle billing and delivery, as well as joint bookrunners CommerzbankCapital Markets Corp., Credit Agricole and Goldman Sachs.

Terms will be set after a short roadshow that included a group meeting on Monday in Paris and which will include a lunch on Tuesday in London.

Medi-Partenaires plans to use the proceeds from the offering to fund its pending acquisition of the Medipole Sud Sante business.

Should that acquisition not take place by Dec. 31, the temporary notes will be subject to special mandatory redemption requirements.

Century coming later in week

Slowing things down a little, Century Communities plans to sell $200 million of senior notes due 2022.

High yield syndicate sources said Monday that the deal is expected to price later this week.

The issue will come to market via B of A Merrill Lynch, J.P. Morgan and FBR Capital Markets.

The Greenwood Village, Colo.-based homebuilder said that proceeds from the bond sale will be used to repay all outstanding indebtedness under its existing revolving credit facility and for the acquisition and development of land. Any remaining proceeds will go for general corporate purposes.

A dull day

Away from the new-deal realm, traders were lamenting the overall lack of activity.

One called Monday's market "a very boring day," while a second termed it "a non-event."

The first trader noted the opening of the Milken Institute annual conference in Los Angeles this week, an event attended by many in the financial world. He noted that "a lot of old-time junk bond guys" who probably were around when institute founder Michael Milken was the king of the high-yield world will probably be in attendance.

A second trader acknowledged the impact the Milken event likely had on market activity, although he also said other factors were also weighing on the market - stocks being down for much of the day before their late recovery - "nobody wants to be a hero in front of that."

He also cited market participants' wary vigil to see what the Federal Reserve's policy committing will decide at its two-day meeting on Tuesday and Wednesday, a huge slate of earnings coming up, and "five new deals announced - so nobody wanted to get too creative."

He said that he saw "very little" re-trading in the new deals that did price on Monday.

Charter bonds churn

The news that Charter Communications - shut out from acquiring larger rival Time Warner Cable when still bigger sector peer Comcast stepped in and made a better offer - will manage to get some of Time Warner anyway, as it buys assets that Comcast will divest for anti-trust reasons helped give the Stamford, Conn.-based company's bonds a boost.

A trader saw its 5 1/8% notes due 2023 up 7/8 point at 97 bid, on volume of $10 million.

Its 5¾% notes due 2024 were 1 point better at 100 ½ bid, with over $8 million traded.

But other issues were "up ½ to ¾ point, but not on large volume," he said.

Indicators turn higher

Statistical junk performance indicators turned higher on Monday. That followed their turn lower on Friday, after having been mixed for the four sessions before that.

The Markit Series 22 CDX North American High Yield Index gained 5/32 point on Monday to end at 106 15/16 bid, 107 offered. On Friday, it had lost 9/32 point, its third consecutive setback.

The KDP High Yield Daily Index gained 3 basis points to close at 74.95, after having dropped by 4 bps on Friday, its fourth loss in five sessions.

Its yield came in by 1 bp to 5.20%, after having risen by 2 bps on Friday.

And the widely followed Merrill Lynch High Yield Master II Index rose by 0.034% on Monday, in contrast to Friday, when dipped by 0.008%, suffering its first loss after four consecutive gains.

Monday's gain raised the index's year-to-date return to 3.581% - a new peak level for the year - from 3.546% on Friday. It was also up from the previous peak level of 3.554%, set last Thursday.

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