CommScope, SandRidge, MarkWest lead busy primary; new Arcelor gains; funds lose $111.1 million

By Paul A. Harris and Paul Deckelman

New York, May 28 – The high-yield primary arena swung into high gear on Thursday, seeing one of its busiest sessions so far this year.

CommScope Holding Co., Inc., a provider of infrastructure to the communications industry, had the big deal of the day, a $2 billion regularly scheduled forward calendar offering split into five- and 10-year tranches. Both halves of that deal were seen by traders to have moved up when the offering hit the aftermarket.

CommScope was just one of three megadeal-sized transactions to come to market on Thursday.

Out of the oil and natural gas sector, SandRidge Energy, Inc. priced an upsized $1.25 billion of five-year secured notes, while MarkWest Energy Partners, LP did $1.2 billion of 10-year unsecured notes, both as opportunistically timed and quickly shopped drive-by deals. Both traded around their respective issue prices.

However, news that SandRidge’s new paper would be secured hammered the company’s existing unsecured notes down by several points in very active dealings.

Another oil and gas name coming to market on Thursday was American Energy – Permian Basin LLC, which priced a regularly scheduled $295 million offering of five-year secured notes.

Builder Meritage Homes Corp. rounded out the day’s dealings with $200 million of quick-to-market 10-year notes.

By the end of the session, $4.95 billion of new dollar-denominated and fully junk-rated paper had priced, making it the fourth-heaviest primaryside session of the year so far, according to data compiled by Prospect News. It was the biggest day in the new-deal space since May 14, when $5.9 billion had gotten done in nine tranches, the data indicated.

Traders said that Wednesday’s trio of new issues was well bid for in active dealings, with both halves of the $1 billion two-part deal from steelmaker ArcelorMittal SA seen having done especially well.

Statistical market-performance measures turned mixed on Thursday after having been higher all around on Wednesday. It was the fourth mixed session during the last five trading days.

Meanwhile, flows of funds into and out of high-yield mutual funds and exchange-traded funds, seen as a reliable barometer of overall junk market liquidity trends, showed a net loss of $111 million in the latest reporting week, resuming a recently negative pattern that had been briefly interrupted by an inflow last week.

CommScope prices $2 billion

A busy Thursday in the primary market saw five issuers price a total of six tranches to raise an overall $4.95 billion of proceeds.

Three of the five issuers came with drive-by deals.

Only one of the six tranches was upsized.

However, executions were notable, with five of Thursday's six tranches coming at the tight ends of price talk, while the sixth came at the wide end.

CommScope Holding priced $2 billion of high-yield notes in two tranches.

The deal came in secured and unsecured tranches via two different issuing entities.

CommScope, Inc. priced $500 million of five-year senior secured notes (Ba2/BB) at par to yield 4 3/8%. The yield printed at the tight end of yield talk in the 4½% area. Proceeds, along with cash on hand, will be used to repay a portion of the company’s existing term loan.

CommScope Technologies Finance LLC priced $1.5 billion of 10-year senior unsecured notes (B2/B) at par to yield 6%. The yield printed at the tight end of the 6% to 6¼% yield talk. Proceeds from the unsecured notes, along with proceeds from a concurrent $1.25 billion term loan, will be used to fund the acquisition of the Broadband Network Solutions business of TE Connectivity, Ltd.

J.P. Morgan Securities LLC, BofA Merrill Lynch, Deutsche Bank Securities Inc., Wells Fargo Securities LLC, Barclays and Jefferies LLC were the joint bookrunners.

SandRidge upsizes

SandRidge Energy priced an upsized $1.25 billion issue of 8¾% five-year senior secured second-lien notes (B1/B) at par to yield 8.751%.

The deal was upsized from $1 billion.

The yield came at the tight end of yield talk in the 8 7/8% area.

Joint global coordinator Barclays will bill and deliver. Morgan Stanley & Co. LLC and RBC Capital Markets were also joint global coordinators.

The Oklahoma City-based oil and gas exploration and production company plans to use the proceeds to repay amounts drawn under its revolver and for general corporate purposes. The additional proceeds resulting from the $250 million upsizing of the deal will be used for general corporate purposes.

MarkWest drives by

MarkWest Energy Partners and its subsidiary MarkWest Energy Finance Corp. priced a $1.2 billion issue of non-callable 4 7/8% 10-year senior notes (Ba3/BB) at 99.026 to yield 5%.

The yield printed at the wide end of the 4 7/8% to 5% yield talk.

Wells Fargo was the left bookrunner for the debt refinancing deal. Barclays, Citigroup Global Markets Inc., Goldman Sachs & Co., JPMorgan, BofA Merrill Lynch, Morgan Stanley, RBC, SunTrust Robinson Humphrey Inc., U.S. Bancorp Investments Inc. and UBS Securities LLC were the joint bookrunners.

American Energy Permian prices

American Energy – Permian Basin priced a $295 million issue of five-year second-lien senior secured notes (B1/CCC+) at par to yield 8%.

The yield printed at the tight end of the 8% to 8¼% yield talk and tight to initial guidance in the low-to-mid 8s, sources said.

Goldman Sachs, Credit Suisse Securities (USA) LLC, BofA Merrill Lynch, Morgan Stanley and Wells Fargo were the joint bookrunners.

The Oklahoma City-based oil and gas company plans to use the proceeds to repay bank debt.

Meritage drives by

Meritage Homes priced a $200 million issue of non-callable 10-year senior notes (Ba3/BB-/BB-) at par to yield 6%.

The yield printed at the tight end of the of 6% to 6¼% price talk.

The quick-to-market deal was managed by JPMorgan, Citigroup, Deutsche Bank, BofA Merrill Lynch, PNC and RBC.

The Scottsdale, Ariz.-based homebuilder plans to use the proceeds for general corporate purposes including the repayment of debt under its revolver.

Altice/Suddenlink talk

Dealers set the table on Thursday for what promises to be a busy Friday in the primary market.

Price talk surfaced Thursday in the $1.72 billion three-part high-yield bond financing backing Altice’s acquisition of a 70% stake in Suddenlink Communications.

The deal features three tranches from three different issuing entities.

Altice US Fin I Corp. talked $1.1 billion of eight-year senior secured first-lien notes (B1/BB-) to yield 5¼% to 5½%.

In the holdco tranche, Altice US Fin II Corp. talked $300 million of 10-year senior unsecured notes (Caa1/B-) to yield in the 7¼% area.

In the super holdco tranche, Altice US Fin SA talked $320 million of 10-year senior notes (Caa2/CCC+) with a coupon in the 7¼% area and to price at a discount to yield 7½%.

Books close at 1 p.m. ET Friday, and the notes are set to price thereafter.

JPMorgan and BNP Paribas are the underwriters.

Elsewhere, Tops Holding LLC and Tops Markets II Corp. talked their $550 million offering of seven-year senior secured notes (B3/B) to yield in the 8% area.

The deal is expected to price Friday.

BofA Merrill Lynch and Wells Fargo are the joint bookrunners.

And in the euro-denominated market, Darling Global Finance BV, a wholly owned indirect subsidiary of Darling Ingredients Inc., talked its €515 million offering of seven-year senior notes (Ba3/BB+) to yield 4¾% to 5%.

The deal is expected to price Friday.

Joint bookrunner Goldman Sachs will bill and deliver. JPMorgan and BMO are also joint bookrunners.

The Irving, Texas-based developer and producer of sustainable natural ingredients from edible and inedible bio-nutrients plans to use the proceeds from the offering to repay debt.

Darling Global Finance, the issuing entity, is incorporated in the Netherlands.

CommScope climbs in trading

In the secondary arena, traders saw both portions of CommScope’s $2 billion two-part forward calendar deal having moved up when they reached the aftermarket.

A trader said that the Hickory, N.C.-based communications infrastructure provider’s 4 3/8% senior secured notes due 2020 had opened at around 100½ bid after that $500 million tranche had priced at par.

He also saw its 6% senior unsecured notes having moved up to 101 bid, also after that $1.5 billion tranche had priced at par.

A second trader saw the five-year paper up ¾ point, while the 10-years were a whole point higher.

At another shop, a market-watcher said that both parts of the issue had moved up to a 100¾-to-101 1/8 bid context.

New SandRidge steady ...

SandRidge Energy’s 8¾% senior secured second-lien notes due 2020 were seen by a trader having firmed slightly to 100 1/8 bid after the drive-by deal had priced at par.

At another shop, a market source quoted the notes in a 100 1/8-to-100½ bid context.

... but old SandRidge slides

SandRidge’s existing senior unsecured bonds were down across the board on the news of the $1 billion offering of senior secured second-priority notes, which would rank higher in the company’s capital structure than those outstanding bonds.

A trader said that “it was among the most active names today.”

A market source said that SandRidge’s 7½% notes due 2021 saw the most action, with over $49 million traded. He saw the notes down 2 3/8 points on the day, falling to 59¼ bid.

A second trader saw the bonds down more than 2 points, trading in a 59-to-60 context, versus prior levels around 62 bid.

SandRidge’s 7½% notes due 2023 likewise slid some 1¾ points to 58¾ bid, with over $30 million of the notes having changed hands.

A source at another desk called them down 1½ points, trading between 58½ and 59 bid.

Its 8 1/8% notes due 2020 dropped to 58¾ bid, a fall of 2¼ points, on volume of over $14 million.

The company’s 8¾% notes due 2020 were seen off 1¼ points, at 65¾ bid, on volume of more than $10 million.

MarkWest stays near issue

Elsewhere among the newly priced bonds, a trader saw MarkWest Energy Partners’ 4 7/8% notes due 2025 trading between 99 1/8 and 99 3/8 bid.

That was up from the par level at which the Denver-based oil and natural gas exploration and development company had priced its $1.2 billion issue.

Meritage Homes’ 6% notes due 2025 likewise stayed pretty much around their issue price.

A trader quoted the Scottsdale, Ariz.-based homebuilder’s bonds at 99¾ bid, slightly below the par level at which the unscheduled $200 million offering had priced.

But another market source saw the bonds having firmed to 100 5/8 point, on busy volume of more than $18 million.

At another shop, a trader pegged them in a 100 3/8-to-100 7/8 bid context.

Traders did not see any appreciable aftermarket action in American Energy – Permian Basin’s $295 million of unscheduled 8% senior secured notes due 2020.

Arcelor Mittal rise continues

Going back a day to the issues that priced on Wednesday, traders said that both halves of ArcelorMittal’s $1 billion drive-by offering continued to firm smartly on Thursday in active dealings.

“They definitely were up today,” one of the traders declared, seeing its 6 1/8% notes due 2025 a point better on the day, at 102 bid, versus their Wednesday close between 101 and 101¼ bid.

He saw its 5 1/8% notes due 2020 ending in a 101¼-to-101½ context, up ½ point from a 100¾-to-101 range on Wednesday.

A second trader said that those five-year notes were 1 point better, at 101½ bid, with “huge volume” of over $109 million seen, easily the most active issue in Junkbondland.

He saw its 10-year notes ¾ point better, at 101 5/8 bid, with more than $40 million of those bonds having changed hands.

Luxembourg-based ArcelorMittal, the world’s largest steelmaker, priced $500 million of each of those notes series at par on Wednesday.

FTS firms

Elsewhere among Wednesday’s deals, a market source estimated FTS International Inc.’s floating-rate senior secured notes due 2020 at 100 5/8 bid, up 3/8 point on the session, on volume of over $18 million.

The Fort Worth, Texas-based oil and gas field services provider priced $350 million of those notes at 99 to yield Libor plus 750 basis points.

Well Care Health Plans Inc.’s add-on to its 5¾% notes due 2020 was seen by traders having moved up to 105½ bid on Thursday.

A second saw the bonds in a 105 3/8-to-105 7/8 neighborhood.

The Tampa, Fla.-based Medicare managed-care provider priced its unscheduled $300 million deal Wednesday at 104½ to yield 4.803%.

They initially rose to around 105 on active volume of more than $27 million.

Indicators turn mixed

Statistical market-performance measures turned mixed on Thursday after having been higher all around on Wednesday. It was the fourth mixed session during the last five trading days.

The KDP High Yield Daily index rose by 9 bps to end at 71.50, its second straight advance. On Wednesday, it had edged up by 1 bp after having dipped by 3 bps on Tuesday.

However, its yield – which normally moves inversely to the index reading, typically falling when the index rises and vice versa – ballooned out by 8 bps to 5.32% after having come in by 1 bp on Wednesday.

The Markit Series 24 CDX North American High Yield index retreated by 1/8 point on Thursday after having gained 3/16 point on Wednesday. The index has now shown losses in four out of the last five sessions and in seven sessions out of the last nine.

The Merrill Lynch North American Master II High Yield index, though, registered its fifth consecutive gain on Thursday, firming by 0.006% on top of Wednesday’s 0.046% advance.

Thursday’s gain lifted the index’s year-to-date return to 4.025%, its third straight new peak level for the year. It was up from the 4.019% seen on Wednesday, the previous high point for 2015 and its first time this year over the psychologically significant 4% mark.

Fund flows turn negative

High-yield mutual funds and ETFs resumed their recent negative pattern this week after having posted a sizable inflow last week, market sources said Thursday.

It was the fifth such outflow in the last six weeks.

Some $111.1 million more left those weekly-reporting-only funds than came into them during the week ended Wednesday, versus the $906 million cash gain seen last week.

The downturn slightly dented the funds’ still-robust year-to-date net inflow position, although that remains below its high point for the year so far. (See related story elsewhere in this issue.)

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