AES, UPC dollar deal price to close out March; Charter up on Bright House acquisition news

By Paul A. Harris and Paul Deckelman

New York, March 31 – The high-yield primary sphere closed out the month of March on Tuesday – its busiest month so far this year – by pricing two quick-to-market, dollar-denominated, fully junk-rated issues totaling $1,375,000,000.

That stood in sharp contrast to Monday’s session, when no such paper from domestic or industrialized-country borrowers had come to market.

European cable, internet and phone service provider UPC Broadband had the big deal of the day, an upsized $800 million offering of 10-year secured notes that it priced via a financing subsidiary. That issue was part of a two-part dual-currency deal, whose downsized euro-denominated component is scheduled to price on Wednesday.

On the domestic scene, power generation company AES Corp. did a $575 million offering of 10-year notes, which priced at a discount to par and then traded around that issue price in active aftermarket dealings.

The two pricings closed out a month that saw some $38,862,000,000 of new dollar-denominated, junk-rated debt price in 55 tranches, according to data compiled by Prospect News. That was up from February’s $31.02 billion in 47 tranches, as well as from the $31,156,000,000 that had gotten done in 68 tranches a year ago.

March’s busy pace of issuance swelled the junk market’s year-to-date total to $88.24 billion, running some 29.4% ahead of the new-deal pace seen at this time last year, according to the data.

Away from the new deals, there was heavy activity in Charter Communications, Inc.’s existing paper, notably the 10-year deal that it priced late last year. Those bonds were up on the news that the cable, internet and phone service provider will buy smaller industry rival Bright House Networks LLC in a $10 billion transaction that will be mostly funded by stock rather than cash – and that will result in pro forma deleveraging for Charter once the transaction closes.

Statistical indicators of market performance were higher across the board for a second consecutive session on Tuesday.

UPC upsizes dollar tranches

The dollar-denominated primary market saw two issuers bring one tranche apiece on Tuesday, raising an overall total of $1.37 billion.

Both deals came as drive-bys.

One was upsized.

One priced at the tight end of talk, while the other priced on top of talk.

Amsterdam-based UPC priced an upsized $800 million issue of senior secured notes due Jan. 15, 2025 (Ba3/BB) at par to yield 5 3/8% on Tuesday, according to a market source.

The yield printed at the tight end of the 5 3/8% to 5½% yield talk.

The debt refinancing deal was upsized from $600 million. At the same time, the company’s concurrent offering of 12-year notes was downsized to about €414 million from €600 million. The euro-denominated notes are talked to yield 4% to 4 1/8% and are expected to price Wednesday.

J.P. Morgan, Credit Suisse, ING, Morgan Stanley, Nomura and Scotia were joint bookrunners for Tuesday's issue of dollar-denominated 10-year notes.

AES at a discount

AES priced a $575 million issue of 5½% 10-year senior notes (Ba3/BB-) at par to yield 5.631%.

The reoffer coupon and reoffer price came on top of price talk.

Goldman Sachs ran the books.

Proceeds will be used to fund the concurrent tender offers for outstanding senior notes, with any remaining proceeds to be used to retire some outstanding debt and for general corporate purposes.

Hexion on deck

Hexion Inc. plans to price a $315 million offering of five-year first-priority senior secured notes due 2020 (expected ratings B3/CCC+) on Wednesday.

Initial guidance has the deal coming with a yield in the 9¼% area, a trader said.

JPMorgan, Citigroup, Deutsche Bank, Goldman Sachs, UBS, BofA Merrill Lynch, Credit Suisse and Morgan Stanley are the joint bookrunners.

The Columbus, Ohio-based chemical company plans to use roughly $40 million of the proceeds to repay or redeem all of its outstanding 8 3/8% sinking fund debentures due 2016, with any remaining proceeds to be used to repay its ABL facility in full and for general corporate purposes.

The calendar

Aside from Hexion, the calendar has five tranches from four issuers, all expected to clear before the end of the week.

Price talk is pending on these offers, but there is initial guidance/price whisper circulating the market.

Interval Leisure Group is in the market with a $300 million offering of eight-year senior notes (Ba3/BB-) that are guided in the high 5s.

Sabre GBL Inc. is marketing $530 million of senior secured notes due 2023 (Ba3/B+), which are guided in the mid 5s.

Radio One Inc. is shopping $350 million of senior secured notes due 2022 (B2/B) that are being guided in the 7% area.

And Murray Energy Corp. is in the market with $1.55 billion of second-lien senior secured notes (B3/B-) in two tranches. The deal includes five-year notes guided at 10½% and eight-year notes guided in the 11% area.

Faurecia upsizes tap

In addition to the above-mentioned euro-denominated notes from UPC, set to price Wednesday, the European high yield saw one deal price on Tuesday.

France-based Faurecia priced an upsized €200 million add-on to its 3 1/8% senior notes due June 15, 2022 (expected ratings B1//BB-) at 100.125 to yield 3.106%.

The debt refinancing deal was upsized from €100 million.

The reoffer price came at the rich end of price talk in the par area.

Lead left bookrunner and global coordinator BNP Paribas will bill and deliver. SG CIB was also a global coordinator. CM-CIC, Commerzbank, Natixis and Santander were joint bookrunners.

New AES trades actively

In the secondary realm Tuesday, both the new AES 5½% notes due 2025 and UPC’s UPCB Finance IV Ltd. issue priced late in the day – too late for the latter issue to see very much in the way of aftermarket dealings.

However, despite the lateness of its arrival in the market, Arlington, Va.-based domestic and international power producer AES’s new paper saw more than $21 million of trading volume, a market source said.

He quoted the bonds at 99 bid, unchanged from their par pricing level.

The company’s existing 8% notes due 2020 meantime firmed smartly, another market source said, to 115½

bid, a gain of 1½ points on the day.

Its 8% notes due 2017 were up more than a deuce on the day, ending at 115 5/8 bid.

Sunoco keeps climbing

A trader said that Sunoco LP’s 6 3/8% notes due 2023 “were trading better” during Tuesday’s session, seeing those bonds in a 103-to-103½ bid context.

That was up from the 102 3/8 bid level at which those bonds had traded in heavy volume on Monday, when more than $42 million of the new issue had changed hands.

The Houston-based energy partnership, which distributes and markets gasoline and other fuels to gas stations and other retail outlets, had priced $800 million of those notes at par on Friday in a regularly scheduled forward calendar offering.

Consol Energy eases

Among other recently priced issues, a trader said that Consol Energy Inc.’s 8% notes due 2023 “were trading off, below their deal level.”

He pegged the bonds at 98¼ bid – down from the 98.552 at which the Pittsburgh-based coal and natural gas producer had priced its $500 million scheduled forward calendar deal last Wednesday to yield 8¼%.

The new issue had been downsized from an originally announced $650 million.

Among other recently priced issues, Ally Financial Inc.’s 4 5/8% notes due 2025 were at 98 7/8 bid, up 3/8 point on the session, with more than $16 million having traded.

The Detroit-based automotive lender and online banking company had priced $500 million of the notes last Wednesday at 98.04 to yield 4 7/8%.

It also priced $750 million of 4 1/8% notes due 2020 at 98.888 to yield 4 3/8%.

Charter climbs on deal news

Away from the new issues, Charter Communications’ 5¾% notes due 2024 shot up by nearly 1 point on Tuesday to just above the 103 bid level, a market source said, with over $62 million of the notes having moved around.

A trader at another desk said the bonds were “easily the most active” issue, both within the company’s capital structure and in Junkbondland generally. He said they had gained 1½ points on the day to end in a 103¼-to-103½ bid context.

Charter’s 5¼% notes due 2022, issued via its CCO Holdings subsidiary, gained 1¼ points, ending at 102¾ bid.

The Stamford, Conn.-based cable, internet and phone service provider’s paper moved up after Charter announced plans to acquire smaller industry rival Bright House Networks in a more than $10 billion transaction that will be mostly funded by stock rather than cash – and that will result in pro forma deleveraging for Charter once the transaction closes, dropping its leverage ratio of net debt as a multiple of adjusted EBITDA by ½ of a turn, to 3.9 times (see related story elsewhere in this issue).

Indicators stay strong

Statistical indicators of junk market performance were higher versus their levels from the day before for a second consecutive session on Tuesday; they had improved across the board on Monday after having been mixed for four straight sessions before that.

The KDP High Yield Daily index rose by 3 basis points to end at 71.28, its second gain in a row and seventh better finish in the previous eight sessions. On Monday, it had firmed by 6 bps.

However, its yield also increased by 3 bps, to 5.39%, even though the yield typically declines when the index reading rises. It was the first increase in the yield after one decrease, which in turn had followed two straight sessions during which it was unchanged. The index had declined over five successive sessions before that.

The Markit Series 24 CDX North American High Yield index rose by 3/32 to close at 107 3/32 bid, 107 1/8 offered, its second straight advance. The index had been up by ¼ point on Monday.

The Merrill Lynch U.S. High Yield Master II index notched its third gain in as many sessions on Tuesday, improving by 0.034%, on top of a 0.129% rise on Monday.

That lifted its year-to-date return to 2.544% from 2.509% on Friday, although it remained down from its peak 2015 level of 3.125%, which was reached on March 2.

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