Intelsat, Aircastle price upsized drive-by deals, new bonds rise; Valeant bonds busy on board turmoil

By Paul Deckelman and Paul A. Harris

New York, March 21 – The high yield primary sphere opened the new week on Monday with a pair of opportunistically timed, quickly marketed and upsized new deals, syndicate sources said.

Satellite communications operator Intelsat SA brought a $1.25 billion offering of eight-year senior secured first-lien notes to market via one of its subsidiaries.

Earlier in the session, aircraft leasing company Aircastle Ltd. flew by with a $500 million seven-year transaction.

Both new deals were heard to have gained altitude in initial aftermarket dealings, although the Intelsat gains seemed to be more pronounced.

Intelsat’s existing notes were meantime seen among the busiest bonds of the day. They were mostly lower, reflecting investor angst that the company was adding a big new tranche of secured debt, senior in the capital structure to the existing unsecured notes. However, some of the Intelsat issues managed to hold their own.

Among recently priced issues, Friday’s offering from communications and marketing firm MDC Partners Inc. was seen by traders having firmed in active dealings.

Away from the new issues, Valeant Pharmaceuticals International, Inc.’s bonds were busy amid renewed company turmoil about alleged accounting misstatements.

Statistical market performance measures turned higher across the board on Monday after having been mixed on Friday. It was their second stronger session in the last three trading days.

Intelsat upsized and tight

Two issuers appeared with quick-to-market Monday deals, raising a combined $1.75 billion by pricing one tranche apiece.

Both issues were upsized and both printed at the tight end of talk.

Intelsat Jackson Holdings SA priced an upsized $1.25 billion issue of eight-year senior secured first lien notes (B1/B-) at par to yield 8%.

The issue size was increased from $1 billion.

The yield printed at the tight end of the 8% to 8¼% yield talk.

The buzz in the market held that the deal was more than six-times oversubscribed.

Goldman Sachs was the left bookrunner. Guggenheim was the joint bookrunner.

Intelsat Jackson plans to use the proceeds for general corporate purposes which may include repayment or repurchase of Intelsat Jackson or Intelsat Luxembourg SA debt, including intercompany loans payable by to Intelsat Luxembourg and its affiliates by Intelsat Jackson, and for working capital purposes.

Aircastle prices seven-year bullet

Aircastle Ltd. priced an upsized $500 million issue of non-callable seven-year senior notes (Ba1/BB+) at par to yield 5%.

The issue size was increased from $400 million.

The yield printed at the tight end of yield talk in the 5 1/8% area.

Deutsche Bank, BNP Paribas, Citigroup, Credit Agricole, Goldman Sachs, J.P. Morgan, MUFG and RBC were the joint bookrunners.

The Stamford, Conn.-based company plans to use the proceeds for general corporate purposes, which may include the acquisition of aircraft or debt refinancing.

Aleris starts roadshow

Aleris International, Inc. began a brief roadshow for a $450 million offering of five-year senior secured notes on Monday.

An investor call was also scheduled to take place on Monday.

The roadshow wraps up on Tuesday, and the deal is expected to price thereafter.

Credit Suisse, JP Morgan, BofA Merrill Lynch, Barclays, Deutsche Bank, Goldman Sachs and Citigroup are the joint bookrunners for the debt refinancing deal.

Aleris climbs aboard an active forward calendar featuring one other roadshow deal set to price before the Thursday close ahead of the holiday weekend to come.

Constellium NV is roadshowing a $400 million offering of five-year senior secured notes (B2/B+). The deal is expected to price in the middle part of the week ahead. Early guidance was in the 8% area, sources say.

Elsewhere, look for a couple of sizable deals – $500 million or more – from the health care sector to show up during the early part of the present, holiday foreshortened week, a syndicate official advised.

The primary market could remain active through Wednesday, but then will likely taper off as participants leave their desks ahead of Easter weekend, a trader said.

HeidelbergCement sells 2¼% notes

In the European primary market HeidelbergCement AG priced a €1 billion issue of 2¼% seven-year senior notes (expected ratings Ba1//BB+) at a 205 basis points spread to mid-swaps.

The spread came at the tight end of revised spread talk in the 210 bps area. That talk had tightened during marketing from earlier guidance in the 225 bps area.

The deal, which was launched at benchmark size, played to €3 billion of orders.

Active bookrunner Morgan Stanley will bill and deliver. BofA Merrill Lynch, ING, Commerzbank and Nordea were also active bookrunners.

BNP Paribas, Citigroup, Danske, Deutsche Bank, Handelsbanken, Intesa, Mediobanca, Royal Bank of Scotland, SEB and Standard Chartered Bank were the passive bookrunners.

Aircastle notes appreciate

In the secondary arena, a trader saw the new Aircastle 5% notes due 2023 trading in a 100¼ to 101 bid range shortly after the upsized issue had priced at par.

Shortly afterward, three traders at separate shops were all pegging the new notes in a somewhat tighter 100½ to 101 bid context.

New Intelsat notes improve

The new Intelsat SA notes, issued by the Luxembourg-based communications satellite company’s Intelsat Jackson subsidiary, were seen by a trader at 101 bid, post-pricing.

A second market source later on located those bonds at 102¼ to 103.

Existing Intelsat bonds busy

The news that Intelsat was bringing a big new secured deal “caused some of its holders to bail out of their existing bonds,” one of the market sources said, noting that the new bonds would be senior to the current bonds in the company’s capital structure. He suggested that holders who liked the company would then buy into the new bonds.

Among the issues seen on the downside were Intelsat Jackson’s 6 5/8% notes due 2022, which traded down a deuce on the day at 56 bid, with over $23 million changing hands.

The unit’s 5½% notes due 2023 lost 1 1/8 point to end at 62 bid, with over $21 million traded, while its 7½% notes due 2021 were off by nearly 2 points, at just over 65 bid, on volume of over $17 million.

Intelsat Jackson’s 7¼% notes due 2020 lost 1 point on the day, ending at 66 bid, with over $15 million having traded.

However, the notes of Intelsat Jackson’s direct corporate parent, Intelsat Luxembourg – itself a subsidiary of ultimate corporate parent Intelsat SA – were higher on the day, since some of the new-deal proceeds are expected to be used to repay or repurchase Intelsat Luxembourg debt.

Luxembourg’s 8 1/8% notes due 2023 were seen by a market source ending at 28½ bid, up 1 5/8 points, with over $27 million having traded.

Its 7¾% notes due 2021 gained 1 7/8 points, to 28¾ bid, with over $19 million traded.

At another desk, a trader saw Luxembourg’s 6¾% notes due 2018 jump by 5 points on the day, to 77 bid, with over $9 million having changed hands.

MDC Partners moves up

Among recently priced offerings, traders saw the MDC Partners 6½% notes due 2024 trading at better levels Monday versus where they had finished out in initial aftermarket dealings on Friday after the notes priced.

A trader said the bonds were in a 101½ to 102½ context, which he called up ¾ point from where he had seen them late in the day on Friday.

A second trader saw the bonds at 102 bid, which he said was up ¼ point on the day, with about $12 million traded.

Yet another market source said that the bonds opened in a 102 to 102¼ bid context, “but then they got a little weaker as the day went on.” He last saw the bonds trading between 101½ and 102 bid.

MDC, a New York-based marketing and communications form, priced its $900 million issue at par on Friday as a regularly scheduled forward calendar deal following a short roadshow. It was upsized from an originally planned $800 million.

Valeant busy amid new turmoil

Away from the new or recently priced deals, Valeant Pharmaceuticals International’s paper was among the busiest credits, as had been the case all of last week.

The embattled Laval, Que.-based drug manufacturer’s bonds were “all over the lot,” a market source said, some up and some down, amid the latest backdrop of the ongoing turmoil in the company.

Its most actively traded issue, the 6 1/8% notes due 2025, registered over $144 million traded, making it easily the most active junk credit on the day. Those bonds finished at 76¼ bid, up 7/8 points, while its 6¾% notes due 2018 gained more than 1¾ points to close at 89¼ bid, with over $40 million traded.

However, the company’s 5 7/8% notes due 2023 retreated by 3/8 point on the day to end at 76½ bid, on volume of over $26 million, while its 7½% notes due 2021 lost ½ point, to 82¼ point, with some $19 million of turnover.

Valenat’s 6 3/8% notes due 2020 were seen down nearly 1 full point on the day, ending at 81 bid, with about $15 million traded.

Valeant some weeks ago undertook a review of its accounting procedures by an independent ad hoc committee of its board of directors after questions arose about its treatment of revenues generated by its sales through a controversial mail-order specialty pharmacy company, Philidor, with Valeant later severing its ties with Philidor.

The ongoing review has caused a delay in the timely filing of its year-end financials with the Securities and Exchange Commission, raising the possibility that the company might breach the reporting requirements clause in its bond indentures, and thus possibly be in danger of triggering a cross-default under its credit facility if the situation is not cured in a timely manner.

On Monday, Valeant announced that chief executive Michael Pearson will leave the company – and pointed the finger of blame for “misstatements” in its past financial reports at its former chief financial officer, Howard Schiller, charging that “the improper conduct of the company's former chief financial officer and former corporate controller, which resulted in the provision of incorrect information to the committee and the company's auditors, contributed to the misstatement of results.”

It requested that Schiller – who stepped in and served as interim CEO late last year and earlier this year while Pearson was on an extended medical leave of absence – resign from his seat on the company’s board.

Schiller, through his attorney, denied any improper conduct or responsibility for the misstatements in question – and said that he would not voluntarily resign from the board, setting up the possibility of a board showdown over the issue.

Market seen better

Overall, one of the traders said, “the market had a pretty good tone to it all day,” although he added that “the flows were kind of light.”

He said that the current market situation is that “there’s not enough bonds around. People are looking for anything.”

Indicators firmer on day

Statistical market performance measures turned higher across the board on Monday after having been mixed on Friday. It was their second stronger session in the last three trading days.

The KDP High Yield Daily index rose by 9 basis points on Monday to end the day at 66.09, its fourth straight gain after one loss and seventh improvement in the last eight sessions. On Friday, the index had jumped by 24 bps, after having zoomed by another 28 bps on Thursday.

Its yield came in by 4 bps to 6.58%, after having eased by 1 bp on Friday. It was its fourth straight narrowing after having widened in one session and its sixth such tightening in the last seven sessions.

The Markit Series 25 CDX North American High Yield index moved up by 7/32 point on Monday, finishing at 103 1/32 bid, 103 1/16 offered. It was the index’s first gain after Friday’s 1/8 point downturn and its third gain in the last four sessions.

The Merrill Lynch North American High Yield Master II index posted its third consecutive improvement on Monday, advancing by 0.162% on the day, on top of Friday’s 0.59% upturn.

That marked the index’s sixth gain in the last eight sessions.

Monday’s rise strengthened the index’s year-to-date return to 3.767%, its third straight new peak cumulative gain, up from 3.599% at the close on Friday.

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