Downsized West, upsized Energy Transfer, PBF add-on price; existing Valeants fall; Intelsat improves

By Paul Deckelman and Paul A. Harris

New York, Oct 3 – The high-yield primary sphere saw its second consecutive $2 billion-plus session for the week and the new month of October so far on Tuesday, and its third straight $2 billion day overall counting last Friday, as a trio of issuers each brought a single tranche of new U.S. dollar-denominated and fully junk-rated paper to market.

All three of the day’s deals finally emerged differently sized from what was originally announced.

West Corp., a provider of communications and network infrastructure services, had the day’s sole downsized issue – but still the big deal of the day, – with a regularly scheduled $1.15 billion forward calendar offering of eight-year senior notes.

Traders quoted the new West paper as having firmed modestly when it hit the aftermarket after pricing.

There were also two upsized issues, both of them opportunistically timed and quickly shopped drive-by offerings out of the oil and natural gas sector.

Midstream operator Energy Transfer Equity, LP, did $1 billion of 5.5-year senior secured notes, while pipeline and terminal services provider PBF Logistics priced a $175 million add-on to its existing $250 million of May 2023 notes.

Traders did not immediately report any initial aftermarket activity in either of the latter two credits, which had priced later in the day.

They meantime saw continued brisk activity in Monday’s three new issues, from CrownRock LP, Valeant Pharmaceuticals International, Inc. and Scientific Games Corp., as well as Friday’s big new deal from Caesars Entertainment Corp.

While the new Valeant secured notes continued to trade well, the Canadian drug manufacturer’s existing unsecured bonds – subordinate to the new paper in its capital structure – were in retreat, on active volume.

Away from the new issues, or older credits linked to the new issues, communications satellite company Intelsat SA’s bonds were seen orbiting at higher altitudes, amid considerable turnover.

Statistical market performance measures turned mixed on Tuesday, after having been higher across the board for three straight sessions before that. The indicators had been mixed last Wednesday, then improved all around on Thursday and had continued to rise on Friday and Monday.

West Corp. downsizes

In Tuesday's primary market West Corp. priced a downsized $1.15 billion issue of 8½% eight-year senior notes (B3/CCC+/B-) at 98.579 to yield 8¾%.

The issue size was decreased from $1.35 billon, with $200 million of proceeds shifted to the concurrent term loan, increasing the loan size to $2.9 billion from $2.7 billion.

The deal priced at the tight end of the 8¾% to 9% yield talk which was announced on Monday, along with changes to the bond covenants.

Joint bookrunner RBC will bill and deliver. Credit Suisse, Barclays, BofA Merrill Lynch, Citigroup, Deutsche Bank, Morgan Stanley and Goldman Sachs were also joint bookrunners.

Proceeds will be used to help fund the buyout of the Omaha-based provider of communication and network infrastructure services by Apollo Global Management LLC.

Energy Transfer Equity upsizes

Energy Transfer Equity, LP priced an upsized $1 billion issue of 5.5-year senior secured bullet notes (Ba2/BB-/BB+) at par to yield 4¼%.

The issue size was increased from $750 million.

The yield printed on top of yield talk in the 4¼% area.

Morgan Stanley, Mizuho, Credit Suisse, Goldman Sachs, MUFG, Natixis, Scotia, SMBC and TD were the joint bookrunners.

The Dallas-based midstream oil and gas company plans to use the proceeds to pay down its term loan facility and for general partnership purposes.

PBF Logistics upsized and rich

PBF Logistics priced an upsized $175 million add-on to its 6 7/8% senior notes due May 15, 2023 (existing ratings B3/B+) at 102.00.

The issue size was increased from $150 million.

The reoffer price came at the rich end of the 101.5 to 102 price talk, which was also the initial guidance.

Deutsche Bank and RBC were the global coordinators. BofA Merrill Lynch, Barclays, BNP Paribas, Citigroup, Credit Agricole, Credit Suisse, Morgan Stanley, MUFG, Natixis, UBS and Wells Fargo were the joint bookrunners.

The Parsippany, N.J.-based crude oil pipeline transportation and terminal services provider plans to use the proceeds, including the additional proceeds resulting from the $25 million upsizing of the deal, to repay debt under its revolving credit facility and for general corporate purposes.

Signal lights green

Signal lights on the new issue track appear to be green, a debt capital markets banker said on Tuesday.

However the Deutsche Bank 25th Annual Leveraged Finance Conference, presently underway in Scottsdale, Ariz., could serve to restrain issuance in the present week somewhat, the banker said.

One deal is on deck for Wednesday.

Time Inc. is attempting to place $300 million of eight-year senior notes (B2/B).

Price talk is expected on Tuesday morning, according to an informed source.

Initial guidance is in the 7¼% area, a trader said.

Afflelou €425 million two-part deal

In the European market France-based optical and eyewear products and services provider Afflelou started a roadshow on Tuesday for a €425 million two-part offering of six-year senior secured notes (B3/B/B+).

The deal is coming in tranches of fixed-rate notes, which come with 2.5 years of call protection, and floating-rate notes, which come with one year of call protection.

Tranche sizes remain to be announced.

The roadshow wraps up Friday, and the debt refinancing deal is set to price thereafter.

Sole global coordinator JPMorgan will bill and deliver. BNP Paribas, Credit Agricole CIB and UniCredit are the joint bookrunners.

Elsewhere Unilabs Holding AB is in the market with a €130 million add-on to its 5¾% senior notes due May 15, 2025 (Caa1/CCC+).

Credit Suisse and Deutsche Bank are the joint global coordinators. HSBC and BNP Paribas are the joint bookrunners.

The Geneva, Switzerland-based medical diagnostics company plans to use the proceeds to repay bank debt and fund acquisitions.

West Corp. firms

In the secondary arena, traders said the new 8½% notes due 2025 from West Corp. were firmer when they moved into the secondary market, though on only a relative handful of large-sized trades.

One saw the bonds having moved up to 99 5/8 bid, 100 1/8 offered, versus their 98.579 issue price.

A second trader saw them at better levels than that, going home in a 100 1/8-to-100½ bid context.

And yet another trader pegged the new notes between 100¼ and 100½ bid.

New Valeant notes sizzle

A trader said that the new-deal arena “was where the focus of this market lies,” and this was especially true looking at the $2.35 billion of new issues which priced on Monday.

Valeant Pharmaceuticals International’s new 5½% senior secured notes due 2025 were easily the busiest name in Junkbondland on Tuesday, with over $110 million having changed hands by the close, a market source said.

He saw the notes going out at 101 bid, calling that a ¼-point gain on the day.

Two other traders saw the notes in a 101-to-101½ bid context.

Valeant, a Laval, Que.-based drug manufacturer, priced $1 billion of those notes at par on Monday in a quick-to-market transaction. The new bonds firmed smartly in initial aftermarket dealings, moving up by around ¾ point.

Existing bonds fizzle

However, traders said that Valeant’s various issues of existing bonds were lower across the board in active trading.

One market source suggested that holders of those notes – which are structurally subordinated to the new issue – “were switching out” of the older bonds and heading into the new deal.

Valeant’s 6¾% notes due 2021 lost nearly ½ point on the session, closing at 98¼ bid, with around $19 million having traded.

Its 5 7/8% notes due 2023 were down a full point, at 87½ bid, on volume of around $17 million.

The company’s 7½% notes due 2021 closed at 99½ bid, while its 5 5/8% notes also due 2021 ended at 93½ bid, both down ¾ point on the day on volume of around $13 million each.

Recent deals busy

Monday’s other two offerings were also seen trading actively on Tuesday.

Crown Rock LP’s 5 5/8% notes due 2025 edged up by around 1/8 point on the day, a trader said, ending at 100 3/8 bid, with over $48 million having traded.

Two other traders located the notes in a 100¼-to-100½ bid range.

The Midland, Texas-based oil and natural gas exploration and production company priced a quickly shopped $1 billion of those notes at par. They firmed by around ¼ point in initial aftermarket dealings Monday.

The day’s other offering – Scientific Games’ 5% senior secured notes due 2025 – were quoted at 100 1/8 bid, a trader said, which he called off by around 1/8 point on the day.

A second saw the notes at 100¼ bid, with around $25 million having traded.

The Las Vegas-based provider of gaming system technology priced $350 million of those notes at par in a drive-by transaction, with the new bonds seen having firmed around ¼ point when they began trading.

Going back a little bit further, Friday’s megadeal from Caesars Entertainment eased slightly, with a trader seeing the notes down around 3/16 point, at 99 15/16 bid, on turnover of more than $26 million.

A second trader pegged the bonds at par.

The Las Vegas-based casino giant priced $1.7 billion of that paper at par in a regularly scheduled forward calendar offering; the bonds initially got as good as 100¾ bid when they hit the aftermarket, but came down from those levels on Monday and eroded a little further on Tuesday.

Intelsat improves

Away from the new deals, traders noted that Luxembourg-based communications satellite company Intelsat’s various bonds were all solidly firmer on Tuesday, some by multiple points, but they did not know what was pushing the bonds up.

The company’s Intelsat Jackson Holdings SA 5½% notes due 2023 gained 2½ points on the session to end at 88 bid, with over $31 million having traded, while its 9¾% notes due 2025 jumped by 1¾ points, to 103½, with over $14 million of volume.

Its Intelsat Luxembourg SA 8 1/8% notes due 2023 zoomed buy more than 4 points, to 66 5/8 bid, with over 429 million traded, while parent Intelsat SA’s 7¾% notes due 2021 were also 4-point gainers, at 68¾ bid, on volume of more than $14 million.

Indicators turn mixed

Statistical market performance measures turned mixed on Tuesday, after having been higher across the board for three straight sessions before that. The indicators had been mixed last Wednesday, then improved all around on Thursday and had continued to rise on Friday and Monday.

The KDP Daily High Yield Index saw its first loss after six straight upside sessions, easing by 1 basis point on Tuesday to end at 72.39, versus Monday’s 3 bps rise.

Its yield was unchanged on Tuesday at 5.12%, after having come in by 1 bp, on Monday, its second straight narrowing.

The Markit CDX Series 29 High Yield Index ended at 108 1/32 bid, 108 1/16 offered, a gain of almost 1/8 point. It was the index’s eighth successive upturn. On Monday, the index had risen by 3/32 point.

And the Merrill Lynch North American High Yield Index firmed by 0.03% on Tuesday, its fourth straight improvement. On Monday, it gained 0.029%.

Tuesday’s advance raised its year-to-date return to 7.109% from Friday’s close at 7.077%, establishing a fourth straight new 2017 year-to-date peak level.

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