AMC, Constellium lead $1 billion-plus day in primary; energy, commodities lead junk lower

By Paul A. Harris and Stephanie N. Rotondo

Portland, Ore., March 23 – AMC Networks Inc., Constellium NV and iStar Financial Inc. priced single-tranche deals on Wednesday, raising a combined total of $1.7 billion.

It was the third session in a row that the dollar-denominated new issue market topped the $1 billion mark, representing the first time in 2016 the primary has strung together three $1 billion-plus sessions in succession.

All three deals were upsized, and two of the three came as drive-by deals.

Executions were tight, with two of the deals coming at the tight end of price talk, while the third came on top of talk.

However, at least two of Wednesday's new issues eased in the secondary against a backdrop of overall weakness in the junk market, a trader said.

As the market prepared for an early close on Thursday, high-yield bonds were dragging.

The KDP High Yield index fell to 65.87, with a 6.57% yield. On Tuesday, the reading was 66.02, with a yield of 6.56%.

The CDX North American Index meantime fell a shade to 102.35 bid, 102.55 offered, according to one source.

The downward trend was due in part to a decline in energy names as oil prices fell.

Feeling the pinch were issues from Denbury Resources Inc., Range Resources Corp. and Chesapeake Energy Corp.

AMC upsizes

AMC Networks priced an upsized $1 billion issue of eight-year senior notes at par to yield 5%.

The issue size was increased from $750 million.

The yield printed on top of both price talk and initial guidance.

BofA Merrill Lynch, Morgan Stanley & Co. LLC, Citigroup Global Markets Inc., J.P. Morgan Securities LLC, Barclays, BNP Paribas Securities Corp., Credit Agricole CIB, Scotia Capital, SunTrust Robinson Humphrey Inc., U.S. Bancorp Investments Inc., Fifth Third Securities, Goldman Sachs & Co. and UBS Investment Bank were the joint bookrunners for the debt refinancing and general corporate purposes deal.

Constellium upsized and tight

In the session's sole roadshow deal, Constellium priced an upsized $425 million issue of five-year senior secured notes (B2/B+) at par to yield 7 7/8%.

The issue size was increased from $400 million.

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

The note were 99½ bid, par offered in the secondary market late Wednesday afternoon, a trader said.

Goldman Sachs was the left bookrunner. Deutsche Bank Securities Inc. and HSBC Bank were the joint bookrunners.

The Netherlands-based developer of aluminum products plans to use the proceeds for general corporate purposes, which may include investments in Wise Metals and a joint venture with UACJ Corp., capital expenditures, debt repayment, working capital, research and development or future acquisitions. Constellium expects to invest €100 million of the proceeds in Wise Opco.

iStar drives by

iStar priced an upsized $275 million issue of five-year senior notes (B2/B+) at par to yield 6½% on Wednesday.

The issue size was increased from $250 million.

The yield printed at the tight end of the 6½% to 6¾% yield talk and inside of initial guidance in the 6¾% area.

Subsequent to pricing the notes eased, according to a trader who spotted them at 99½ bid, par offered.

Another market source saw the bonds trading around par.

JPMorgan, BofA Merrill Lynch, Barclays and Wells Fargo were the joint bookrunners for the debt refinancing deal.

Proceeds from the offering will be used to take out the 3 7/8% notes maturing on July 1.

Two deals on the road

Wednesday's action cleared the pre-Easter new issue calendar.

And the foreshortened Thursday session, featuring an early close ahead of the three-day Easter holiday weekend, is apt to be a quiet one in the new issue market, a trader said.

Two deals are presently on the road and are expected to price during the week ahead.

Western Digital Corp. is in the market with $5.6 billion of bonds in two tranches, a $1.5 billion tranche of split-rated seven-year senior secured notes (Ba1/BBB-/BBB-), which are being guided in the low 6% yield context, and a $4.1 billion tranche of straight speculative-grade eight-year senior unsecured notes (Ba2/BB+/BB+), which are guided in the low 9% context. A portfolio manager remarked that 9% is an attention-getting yield on a double B piece of paper.

Also Surgery Partners, Inc. is on a roadshow with a $400 million offering of five-year senior notes.

Fiat Chrysler yields 3¾%

In the European market, Fiat Chrysler Automobiles NV priced €1.25 billion of eight-year senior notes (B2/BB/BB-) at par to yield 3¾% on Wednesday.

The yield printed at the tight end of the 3¾% to 3 7/8% yield talk.

Joint bookrunner SG CIB will bill and deliver for the general corporate purposes deal. Banca IMI, Credit Agricole, Commerzbank, Credit Suisse, Deutsche Bank, Royal Bank of Scotland and UniCredit were also joint bookrunners.

Tuesday inflows

The dedicated high-yield funds saw cash inflows on Tuesday, the most recent session for which data was available at press time, a trader said.

High-yield exchange-traded funds saw $67 million of inflows on the day.

Actively managed funds saw $135 million of daily inflows on Thursday.

Bank loan funds were also positive on the day at $15 million of inflows, the trader said.

Commodity names weaken

Oil and gas bonds came in as domestic crude prices declined about 4% for the day, falling below the $40-per-barrel mark. That weakness was due to the U.S. Energy Administration’s latest inventory report, which showed a 9.4 million-barrel build last week.

On Tuesday, the American Petroleum Institute had forecast an 8.8 million gain, though analysts polled by Reuters had predicted a 3.1 million add.

In response, Denbury Resources’ 6 5/8% notes due 2021 weakened by 2½ points to 49½ bid, according to a market source.

Range Resources’ 5% notes due 2023 were also lower, falling 1½ points to 87 bid.

And Chesapeake Energy’s 6 5/8% notes due 2020 dipped a point to 44.

But oil wasn’t the only commodity feeling the pressure on Wednesday. Other commodities, such as steel, were also drifting lower as the dollar gained.

In fact, the dollar hit a one-week high as members of the Federal Reserve indicated that there could be more than just two interest rate increases this year.

Last week, the central bank forecast that only two hikes would occur in 2016, down from December’s forecast of four increases.

With the lower commodity prices, names like AK Steel Holdings Corp. saw their debt decline.

A source pegged AK’s 7 5/8% notes due 2020 at 62½ bid, off a point.

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