Open Text, drive-by Aircastle deals price; Open Text jumps; energy names off as oil slides again

By Paul Deckelman and Paul A. Harris

New York, Jan. 12 – The high-yield primary sphere saw a pickup in activity on Monday for a second consecutive session.

Syndicate sources said that two single-tranche issues worth a collective $1.3 billion priced – roughly three times the $450 million of new dollar-denominated, fully junk-rated bonds that priced in two tranches on Friday.

Canadian business software provider Open Text Corp. priced an upsized $800 million of eight-year notes as a regularly scheduled forward-calendar deal. The new bonds firmed smartly when they hit the aftermarket and were the day’s most actively traded issue.

Aircraft leasing company Aircastle Ltd. brought a quickly shopped and upsized $500 million of seven-year notes to market. Those bonds were also higher in secondary dealings.

Friday’s offering from NCI Building Systems, Inc., which shot up by several points in immediate aftermarket dealings, were seen coming in a little from those highs in Monday’s trading.

Apart from those deals already priced, the syndicate sources saw Presidio Holdings Inc. start shopping around a $400 million offering of eight-year notes that will be used to help finance the acquisition of the IT infrastructure services provider.

European telecommunications companies Virgin Media Inc. and Ziggo Bond Finance BV began marketing euro-denominated deals, though Virgin’s also has a dollar-denominated component. Sector peer Telecom Italia SpA priced a €1 billion split-rated eight-year issue.

Away from the new deals, energy names such as California Resources Corp., Halcon Resources Corp. and Linn Energy LLC were under pressure as crude oil prices again retreated.

Statistical market-performance measures turned lower across the board on Monday, after having been mixed on Friday.

Open Text upsizes

Two dollar-denominated deals priced during Monday's primary market session.

Both were upsized.

One came as a drive-by and one came on the heels of a roadshow.

One priced at the tight end of talk, while the other came in the middle of talk.

Open Text priced an upsized, restructured $800 million issue of eight-year senior notes (Ba2/BB) at par to yield 5 5/8%.

The deal was upsized from $600 million.

The yield printed in the middle of the 5½% to 5¾% yield talk.

The tenor of the notes was decreased to eight years from 10 years.

Call protection was decreased to three years from five years. The first call premium was increased to 75% of the coupon from 50%, and the notes become callable on Jan. 15, 2018 at 104.219.

Joint bookrunner Barclays will bill and deliver. Morgan Stanley, RBC and Citigroup were also joint bookrunners.

The Waterloo, Ont.-based provider of enterprise information management software plans to use the proceeds to repay its existing term loan A and for general corporate purposes, including near-term acquisitions. The additional proceeds resulting from the $200 million upsizing of the deal will be used to put cash on the balance sheet.

Aircastle drive-by

In drive-by action, Aircastle priced an upsized $500 million issue of non-callable seven-year senior notes (Ba2/BB+) at par to yield 5½%.

The deal was upsized from $400 million.

The yield printed at the tight end of the 5½% to 5 5/8% yield talk.

In the aftermarket, the deal traded up to 101 1/8 bid, 101 ½ offered, according to a trader.

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

The Stamford, Conn.-based company plans to use the proceeds for general corporate purposes, including possible debt repayment.

Presidio starts Tuesday

Presidio plans to start a roadshow on Tuesday in New York for its $400 million offering of eight-year senior notes (Caa1/CCC+), backing a merger.

Joint bookrunner Barclays will bill and deliver. Credit Suisse, Citigroup, Goldman Sachs and RBC are also joint bookrunners.

Telecom Italia at a spread

The Monday session saw a substantial pickup in the news volume from the European new issue market.

Telecom Italia (Ba1/BB+/BBB-) priced a €1 billion issue of eight-year senior notes at a 275 basis points spread to mid-swaps.

The spread came on top of final spread talk.

The quick-to-market deal generated over €4 billion of orders at that spread talk, a market source said.

The notes were sold at a reoffer price of 99.446 and yield 3.33%.

Global coordinator and joint bookrunner SG CIB will bill and deliver. Barclays, BNP Paribas and MUFG were joint bookrunners. HSBC, ING, Natixis and Santander are bookrunners.

The Rome-based telecommunications company plans to use the proceeds for general corporate purposes, including liability management.

Virgin Media offering

Virgin Media set price talk for its £925 million equivalent three-part offering of 10-year notes.

Virgin Media Secured Finance plc talked a £300 million tranche of senior secured notes (Ba3/BB-) to yield in the 5¼% area.

Virgin Media Finance plc is offering £625 million-equivalent of senior unsecured notes (B2/B) in two tranches, with euro-denominated notes being talk in the 4¾% area and dollar-denominated notes being talked in the 5 7/8% area.

Books close at 9:30 p.m. ET on Tuesday.

Joint bookrunner Deutsche Bank will bill and deliver. Barclays, BNP, Credit Suisse and HSBC are also joint bookrunners.

Proceeds will be used for general corporate purposes, including the acquisition of UPC Ireland.

Ziggo €730 million equivalent

Ziggo Bond Finance plans to price €730 million equivalent of 10-year senior notes in dollar- and euro-denominated tranches in the middle part of the week.

Credit Suisse is the lead left bookrunner. BofA Merrill Lynch, Deutsche Bank, ING and Morgan Stanley are the joint bookrunners.

The Utrecht-based telecommunications company plans to use the proceeds to finance the contribution of UPC Netherlands to the Ziggo credit pool.

New Open Text moves up

In the secondary market, a trader said that the new 5 5/8% notes due 2023 from Open Text were easily the busiest issue in Junkbondland on Monday, with over $93 million of those bonds changing hands.

“It shows you there was fair amount” of pent-up investor demand on that issue, he said, noting that it was upsized to accommodate some of that demand for the software provider’s paper.

The $800 million deal was the largest purely junk-rated and dollar-denominated issue to come to market so far in the nascent new year.

He saw the bonds move up to “right around” the 102 bid level, after having priced at par.

A second trader also saw those bonds going home at 102 bid, in heavy trading.

A third pegged them in a 101 7/8 to 102¼ bid context.

Aircastle takes flight

The day’s other issue – from aircraft leasing company Aircastle – priced after the Open Text deal and thus saw considerably less aftermarket activity.

One of the traders saw those 5 ½% notes due 2022 “wrapped around 101,” up from the par level at which that quickly shopped offering had priced.

But, he added, “we haven’t seen much activity in them yet.”

Friday’s NCI deal easier

A trader said that NCI Building Systems’ 8¼% notes due 2023 had come in by about ½ of a point from the strong levels they had hit in initial secondary dealings on Friday after the Houston-based manufacturer of non-residential construction metal products had priced them at par and they had moved up to a 102 ½-to-103 context.

He saw the bonds finishing on Monday around 102 to 102¼, on volume of around $13 million.

A second trader also saw the bonds having come in to around 102 from the 102 ½ mark earlier.

Centene holds gains

Traders saw Friday’s other deal – the $200 million add-on to its existing 4¾% notes due 2022 sold by St. Louis-based health care services provider Centene Corp. – hanging onto, and maybe even extending, the gains seen in its initial aftermarket action.

That quick-to-market deal had priced at par on Friday and had moved up by about 1 point after that.

A trader saw the bonds unchanged to 1/16 of a point higher Monday, quoting them last at 101¼ bid.

A second said that he had not seen much trading in that issue.

But a third said they were hanging in a little above Friday’s closing levels. He saw them at 101 1/8 bid, 101 5/8 offered, a gain of about 3/8 on the session.

Energy issues easier

Away from the new deals, a trader said that energy-related names “were down by 1 or 2 points, depending on the issue, with oil under $46” per barrel. The forward-month contract for West Texas Intermediate, the benchmark U.S. crude oil grade, fell by $2.44, or 5.05%, to end at $45.92.

He saw California Resources’ 6% notes due 2024 finishing down 2 points, at 79¾ bid, on volume of over $42 million, making it the busiest bond in the high-yield space other than the new Open Text notes.

He quoted Linn Energy’s 8 5/8% notes due 2020 off by 1¾ points, ending at 87¾ bid, with over $35 million having traded, while Halcon Resources’ 9¾% notes due 2020 retreated by 2¾ points to 74½ bid, on volume of over $20 million.

“Oil is down,” he said, “so oil and gas bonds are going to be down.”

However, a second trader, while seeing the energy-sector issues “off generically by about a point or so,” added: “When oil was at $55, and it was getting hit, down another dollar, we’d see movement in these names. Oil is below $46 now, and these names have been beaten up really badly, so [now] we’re seeing incremental weakness as oil keeps sliding.

“We’re just not seeing the pressure that we saw a few weeks ago. These pure-play oil names have gotten to levels where they do weaken, but we’re not seeing a complete sell-off.”

However, he cautioned, “if oil continues to trade at these levels, and lower for a significant period of time, I think you’re going to see names probably leg down again.

Waiting for the calendar

Overall, he said, “late last week, accounts started to not care as much about the secondary – they were raising a little cash and kind of looking ahead at how the primary was going to be shaping up and what the [forward] calendar would look like.”

“It will be interesting to see how this shakes out. So goes the calendar, so goes secondary trading, too” the trader added.

Indicators turn south

Statistical indicators of junk market performance turned lower on Monday, after having been mixed on Friday and higher across the board for two consecutive sessions before that.

The KDP High Yield Daily index eased by 2 basis points to 70.73, breaking a string of three straight gains. On Friday, it was up by 2 bps, while on Thursday it had jumped by 34 bps.

The yield was unchanged at 5.59%, after having come in by 2 bps on Friday, its third consecutive narrowing. On Thursday, it had tightened by 11 bps.

The Markit Series 23 CDX North American High Yield index was down by 1/32 of a point on the day on Monday to finish at 105 9/16 bid, 105 19/32 offered, its second straight loss after two straight gains before that. On Friday, it had declined by 3/32 point.

The Merrill Lynch U.S. High Yield Master II index saw its first loss after three successive advances before that, losing 0.039%, versus Friday’s gain of 0.125%.

That cut its year-to-date return to 0.194% from 0.234% on Friday, its high point for the year so far.

However, it remained above its low for the year – a 0.59% cumulative loss recorded last Tuesday. That mark was the biggest loss since October of 2011.

The Finra/Bloomberg U.S .High Yield index volume fell to $687 billion on Monday from $3.731 billion at the close on Friday.

© 2015 Prospect News.
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