Ball brings three-part deal; new Ball bonds gain; Synovus, Churchill Downs also price issues

By Paul Deckelman and Paul A. Harris

New York, Dec. 2 – The high-yield market saw its first dollar-denominated pricing activity in more than a week on Wednesday, when three issuers brought $1.55 billion of new junk bonds to market in three tranches.

The big deal of the session was an upsized €2 billion equivalent of five-year and eight-year paper from Broomfield, Colo., packaging giant Ball Corp. The five-year portion of the transaction was split into dollar- and euro-denominated tranches. Some $1 billion of the dollar bonds priced and were heard by secondary market traders to have firmed smartly from their issue price in heavy initial aftermarket activity.

Ball’s tri-partite, regularly scheduled forward calendar deal priced fairly early in the session – the first dollar dollar-denominated, fully junk-rated issue from a domestic or industrialized-country borrower since Columbus, Ohio-based builder M/I/ Homes, Inc. brought $300 million of 10-year notes to market in an opportunistically timed and quickly shopped transaction back on Monday, Nov. 23.

Once Ball got the ball rolling, two other issuers followed suit, also with upsized offerings.

Banking company Synovus Financial Corp. priced $250 million of 10-year subordinated notes.

And racetrack operator Churchill Downs, Inc. did a $300 million add-on to its existing 2021 notes.

Traders reported not much initial secondary market activity in the latter two notes.

Away from the deals that actually priced, primaryside players were looking for possible pricings on Thursday or Friday from domestic borrowers ClubCorp Holdings, Inc., NGL Energy Partners LP and Mednax, Inc. and, in the European market, from Swissport Investment SA.

Apart from the new-deal arena, traders saw a generally firm market tone but not any overwhelming strength. There was brisk activity in credits such as Frontier Communications Corp. and Charter Communications Inc.

Intelsat SA’s bonds continued to gain.

Statistical measures of junk market performance turned mixed on Wednesday, their second mixed session in the last four trading days. Those indicators had turned higher across the board on Monday and stayed there on Tuesday after having been mixed last Friday.

Ball Corp. blowout

The first deals of the post-Thanksgiving period priced on Wednesday. Three issuers brought one dollar-denominated tranche of junk apiece to raise an overall total of $1.55 billion.

The executions were tight. One deal priced at the tight end of official talk and inside of initial guidance. Another, the session's sole add-on, came at the rich end of both original and revised talk. The third priced in the middle of guidance.

And all of Wednesday's transactions were upsized.

Ball launched and priced an upsized €2,043,752,359 three-part offering of non-callable senior notes (Ba1/BB+/BB+) in what market sources described as a blowout deal.

The acquisition-financing debt included $1 billion of five-year notes that priced at par to yield 4 3/8%. The yield printed at the tight end of yield talk in the 4½% area. Early guidance was 4½% to 4¾%.

The dollar-denominated bonds played to $4 billion of orders, according to a trader who added that allocations were tough.

In addition, Ball priced €400 million of five-year notes at par to yield 3½%. The yield printed at the tight end of the 3½% to 3¾% yield talk. Early guidance was 4%.

The company also priced €700 million of eight-year notes at par to yield 4 3/8%. The yield printed at the tight end of yield talk in the 4½% area. Early guidance was 4½%.

The euro-denominated tranches were “super oversubscribed,” the trader said, again adding that allocations were tough.

The overall size of the deal was increased by about €600 million from the previous size of €1.5 billion equivalent.

Joint bookrunner Goldman Sachs will bill and deliver. Deutsche Bank, BofA Merrill Lynch, KeyBanc, Mizuho and Rabo were also joint bookrunners.

Churchill Downs upsized, rich

Churchill Downs priced an upsized $300 million add-on to its 5 3/8% senior notes due Dec. 15, 2021 (B1/BB) at 101 to yield 5.095%.

The deal size was increased from $250 million.

The reoffer price came at the rich end of the 100.5 to 101 price talk, which was revised from earlier talk of par to 101.

J.P. Morgan Securities LLC, Wells Fargo Securities LLC and U.S. Bancorp Investments Inc. were the joint bookrunners.

The Louisville, Ky.-based horse racing track operator plans to use the proceeds to repay bank debt and for general corporate purposes, which may include payment of an anticipated earn-out obligation in March related to its Big Fish Games acquisition.

Synovus upsizes

Synovus Financial priced an upsized $250 million issue of 10-year fixed-to-floating-rate subordinated notes due Dec. 15, 2025 (/BB-/BB+) at par to yield 5¾%.

The notes pay a 5¾% coupon until Dec. 15, 2020, after which the coupon resets to Libor plus 418.2 bps annually.

The deal size was increased from $150 million.

The yield printed in the middle of the 5½% to 6% guidance.

Sandler O’Neill + Partners, LP was the manager.

The Columbus, Ga.-based financial services company plans to use the proceeds for general corporate purposes, including potential strategic acquisitions, share repurchases and debt repayment.

Swissport sets talk

Looking to the Thursday session, Swissport Investment set price talk in a €690 million two-part high-yield notes offering.

A €400 million tranche of six-year senior secured notes (B1/B), which come with 2.5 years of call protection, is talked to yield 6¾% to 7%. The talked size of the secured notes tranche comes at the low end of the €400 million to €450 million targeted range.

A €290 million (CHF 315 million equivalent) tranche of seven-year senior unsecured notes (Caa1/CCC+), which come with three years of call protection, is talked to yield in the 9¾% area.

Books close at 4:30 a.m. ET on Thursday, and the notes are set to price thereafter. The notes are pricing at the same time as the €650 million term loan.

Joint lead bookrunner Barclays will bill and deliver. JPMorgan is also a joint lead bookrunner.

Look for the pace of primary market to remain much like that of the early part of the post-Thanksgiving week through the run-up to 2016: steady but by no means intense, pending market conditions.

That was the word from a syndicate banker who took a telephone call late Wednesday from Prospect News.

Thursday could be relatively busy, the official added.

The source had visibility on three possible deals, one each from the health care, services and retail sectors.

None of them are especially big, and all may be subject to market conditions, the banker said.

Mixed flows

The cash flows of the dedicated high-yield funds were mixed on Tuesday, the most recent session for which data was available at press time, according to a market source.

High-yield exchange-traded funds saw $145 million of inflows on the day.

However, actively managed funds sustained $110 million of outflows on Tuesday.

Dedicated bank loan funds, meanwhile, sustained $125 million of outflows on Tuesday, including $23 million from bank loan ETFs, the traders said.

Market has a Ball

With Ball’s big deal having finally broken the logjam that had tied the primary up for nearly 10 days since its last previous pricing, M/I Homes’ 6¾% notes due 2021, traders in the secondary market said that the beverage can manufacturer’s new dollar-denominated 4 3/8% notes due 2020 moved solidly higher when they hit the aftermarket following their pricing.

One trader pegged the new bonds around 101¼ bid, well up from their par pricing level.

“There was some activity in it,” he said, although he said that he heard that “allocation was kind of chunky,” with big allocations going to a fair number of accounts, thus holding down trading activity.

But he added that “there probably were some flippers.”

He said that “it traded around 101 for a bit; it got a bid behind it.”

A second trader saw two-sided activity in the new credit, seeing the notes going home in a 101-to-101½ bid context, while at another desk, a market source located them at 101 bid, 101¼ offered.

One of the traders said that “it was busy,” with over $72 million having changed hands by the close, topping the Junkbondland Most Actives list for the day.

Churchill Downs, Synovus quiet

A trader meantime saw the new Churchill Downs add-on 5 3/8% notes due 2021 trading around 102-to-102¼, up from their 101 pricing level, though he didn’t see much volume.

The traders did not initially report any aftermarket dealings in the new Synovus Financial 5¾% subordinated notes due 2025.

Last week’s M/I Homes 6¾% notes, meantime, were quoted by a trader at 101 1/8 bid, 101 5/8 offered, essentially unchanged.

Market firm but subdued

Away from the new deals, a trader said that Wednesday’s market seemed “fairly subdued.

“It feels like there’s a bid to it, a firmer tone, but offers are not being lifted.”

No overall theme seemed to jump out during the session.

Frontier stays busy

Among the purely junk-rated credits, Frontier Communications’10½% notes due 2022, which had jumped more than 1 point in active dealings on Tuesday as part of a generally strong market uptrend, gave some of those gains back on Wednesday.

A trader saw the Stamford, Conn.-based wireline telecommunications company’s paper having retreated by ¼ point on the day to end at 100 1/8 bid, with over $23 million of the notes having changed hands.

Frontier’s 11% notes due 2025, which had zoomed by 1 3/8 points on Tuesday, gave almost all of that back on Wednesday, the trader said, seeing the notes finish at 98½ bid, down 1 1/8 point on the day. More than $10 million of the notes traded.

Frontier’s nearby neighbor in Stamford, cable operator Charter Communications, saw its 5¾% notes due 2026 ease slightly to finish at 101¾ bid, with over $16 million traded.

Also in the communications sphere, T-Mobile USA Inc.’s 6½% notes due 2026 were off by around 1/8 point at 101 bid, on volume of over $14 million.

However, its 6% notes due 2023 were quoted up ½ point on the day at 102¼ bid on turnover of more than $10 million.

Intelsat gains continue

Luxembourg-based satellite communications operator Intelsat’s recently beleaguered bonds continued to bounce back from their previously oversold state, a market source said, locating its 7¼% notes due 2020 at 86½ bid, a gain of nearly 3 points on the day, on volume of over $10 million.

Its 6 5/8% notes due 2022 were 1½ point better at 63½ bid, on volume of more than $9 million.

The company’s bonds have seen some volatility of late, falling last week and again on Monday, before starting to gain altitude on Tuesday and continuing that upward trajectory on Wednesday.

Traders offered no ready explanation for the gyrations in Intelsat paper, noting that there had been no real news about the company for several weeks.

At the end of October, Intelsat reported third-quarter results, actually beating market expectations by earning net income of $78 million, or 66 cents per share, on revenue of $580.8 million.

However, at an investor conference earlier in November, the company said that it had nearly $15 billion of outstanding debt.

Cliff bonds get clobbered

On the downside, a trader said that Cliffs Natural Resources Inc.’s 5.95% notes due 2018 had gotten hammered down to around a 36 bid context from Tuesday levels around 40.

“It’s short paper too,” he said of the Cleveland-based iron ore producer’s issue.

“Just part of the overall recent metals and mining collapse,” he said.

Indicators turn mixed

Statistical measures of junk market performance turned mixed on Wednesday, their second mixed session in the last four trading days. Those indicators had turned higher across the board on Monday and stayed there on Tuesday after having been mixed last Friday.

The KDP High Yield Daily index gained 8 basis points on Wednesday to end at 65.93, its third straight gain and fourth advance in the last five sessions. The index had risen by 9 bps on Monday and by another 10 bps on Tuesday, in contrast to Friday’s 4-bps fall.

Its yield came in by 3 bps on Wednesday to end at 6.85%, its second straight narrowing and third such tightening in the last five sessions. The yield had declined by 4 bps on Tuesday after having been unchanged on Friday and again on Monday. The yield had also narrowed by 3 bps last Wednesday. It was not published last Thursday in observance of the Thanksgiving Day holiday.

The Markit Series 25 CDX North American High Yield index fell by 5/32 point on Wednesday to end at 102 5/8 bid, 102 21/32 offered, its second loss in the last six trading days. Wednesday’s downturn snapped a four-session winning streak, including Tuesday’s 11/16-point jump.

The Merrill Lynch North American Master II High Yield index rose by 0.132% on Wednesday, its third straight improvement and its fifth in the last six trading days. That upturn included Tuesday’s 0.233% advance.

The index’s year-to-date loss narrowed to 1.76% on Wednesday from 1.89% on Tuesday – the first time the cumulative loss had finished back under 2% since Nov. 19, when it closed at negative 1.919%.

Those year-to-date losses were still well above the index’s worst 2015 cumulative setback of 3.069%, recorded on Oct. 2.

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