Altice comes back for seconds, Monday Altice deal gains in heavy trading; energy issues jump

By Paul Deckelman and Paul A. Harris

New York, April 19 – Junk market players could be forgiven for thinking that history was repeating itself on Tuesday.

European cable and telecommunications company Altice NV – which on Monday had priced a quickly shopped $2.75 billion offering of 10-year notes – visited Junkbondland for a second straight session, this time to bring a $1.5 billion 10-year bond offering to market as a drive-by transaction.

The deal was done via a financing subsidiary in conjunction with its Cequel Communications subsidiary, which operates Suddenlink, a cable and broadband provider in the United States.

A trader heard the new bonds quoted a little above their issue price.

Altice’s Monday deal, meantime, was the most heavily traded junk credit, firming by nearly 1 point from its issue price.

There was also brisk trading in the recently priced bonds of another Altice subsidiary, Numericable SFR SA.

Away from All Things Altice, Western Digital Corp.’s two tranches of recently issued bonds – which had been in retreat last week on investor angst about high-tech companies after competitor Seagate Technology issued disappointing preliminary quarterly numbers – seemed to have regained their footing and were trading upward, in busy dealings.

Oil and natural gas companies such as Chesapeake Energy Corp. and Consol Energy Inc., as well as energy-related companies such as TransOcean Ltd. all moved higher, in line with higher energy prices.

Statistical market performance measures turned higher across the board on Tuesday, after having been mixed for a second consecutive session on Monday; they had turned mixed on Friday after having been higher across the board in each of the previous five sessions.

Altice returns

A day after it priced $2.75 billion of 7½% senior secured notes due 2026 (B1/BB-), Altice had its name on top of the wrapper for another drive-by junk deal.

In Tuesday's trade, Altice-Cequel/Suddenlink priced a $1.5 billion issue of 10-year senior secured notes (Ba3/BB-) at par to yield 5 1/5%.

The sole dollar-denominated deal to price during the session, it came at the tight end of the 5½ % to 5¾% price talk, and on top of initial guidance.

An anticipated upsizing of up to $1 billion did not materialize, and traders – basically inferring from that – said the deal appeared to go alright, but was not believed to be hugely oversubscribed.

J.P. Morgan, Barclays, BNP Paribas, Credit Suisse, BofA Merrill Lynch, Deutsche Bank, Goldman Sachs (the left bookrunner for Monday's deal), Morgan Stanley and RBC were the joint bookrunners for the Altice-Cequel/Suddenlink deal.

Proceeds will be used to refinance bank debt. Had the upsize materialized, the additional proceeds would have been used to refinance the Cequel 6 3/8% notes due 2021, a source said.

Hence the telecom giant may have been saying au revoir instead of goodbye, as Tuesday's deal was allocating.

Protection 1 talk 9¼ to 9½

Elsewhere in the primary market Protection 1 talked $3.14 billion of second-priority senior secured notes due 2023 (B3/B-) to yield 9 ¼% to 9 ½%.

Books close at 3 p.m. ET on Wednesday.

Deutsche Bank is the left bookrunner for the deal to fund the buyout of ADT Corp.

Cirsa upsizes

The European primary market generated news on Tuesday.

Cirsa Funding Luxembourg SA priced an upsized €450 million issue of 5¾% five-year senior notes (B2) at 99.456 to yield 5 7/8%.

The issue size was increased from €300 million.

The yield printed 12.5 basis points beneath the tight end of the 6% to 6¼% yield talk.

Deutsche Bank was the bookrunner for the debt refinancing deal.

Corral Petroleum roadshow

Corral Petroleum Holdings AB started a roadshow on Tuesday for a $700 million equivalent offering of five-year PIK toggle notes which will be sold in dollar- and euro-denominated tranches.

The deal roadshows in Europe for the remainder of the present week. A roadshow in the United States is scheduled to follow in the week ahead.

Deutsche Bank has the books.

Corral Petroleum, a London-based holding company for Preem, an oil refiner based in Stockholm, plans to use the proceeds to refinance its 15% senior PIK notes due 2017.

Elsewhere Buzzi Unicem SpA mandated Banca IMI, BNP Paribas and Citigroup to set up meetings with fixed income investors ahead of a possible offering of euro-denominated high yield notes.

The non-deal roadshow started on Monday. A deal could come by the end of the present week.

The company has a BB+ credit profile, and the notes offer, should it come, will receive an investment grade-style execution, the source said.

Mixed Monday flows

The cash flows of the dedicated high yield funds were mixed on Monday, the most recent session for which data was available at press time, a portfolio manager said.

High yield ETFs saw $58 million of inflows on the day.

However asset managers sustained $25 million of outflows on Monday.

The high yield index was posting a composite spread of 612 bps on Tuesday morning, which looked just about right, on a historical basis, to the portfolio manager.

Junk has rallied big time, the manager remarked, but noted – as have others – that the present rally is a steep one, on a historical basis.

The composite yield was 8.38% on Tuesday morning, down from a wide of 10.44% on Feb. 11, the manager said.

That's 206 bps in just over two months.

To top that 206 bps of tightening one much dial back the calendar to the waning days of 2011, and the “Taper Tantrum,” the manager said.

At that time, in the wake of Fed chairman Ben Bernanke's revelation that the Fed would be winding down asset purchases with which it was intending to stimulate the U.S. economy, junk saw an even greater amount of tightening, albeit at a considerably more gradual pace, the manager noted.

In the late 2011-early 2012 timeframe the junk composite yield moved to 7.05% on March 1, 2012, from its wide of 9.67% on Oct. 5, 2011, or 262 bps in just under five months.

New Altice quoted firmer

A trader quoted the new Altice-Cequel/Suddenlink 7½% senior secured notes due 2026 in a 100¼ to 100½ bid context, up from their par issue price.

Monday Altice deal tops actives

The Altice 7½% notes due 2026, which came to market on Monday, were meanwhile seen having moved up in heavy trading on Tuesday.

A market source said that more than $358 million of those notes changed hands – nearly six times the volume of the next busiest credit.

He pegged the bonds at 100 13/16 bid.

That was up from the par level at which the Luxembourg-based cable and broadband provider’s Altice Financing SA subsidiary had priced its $2.75 billion drive-by offering, which was upsized from an originally announced $2.25 billion.

At another shop, a trader said that Monday’s Altice deal was going home at 100¾ bid.

“They initially dropped down to the par level when this new deal was announced today,” he said.

The 7½’s – which came to market on Monday too late for any aftermarket dealings at that time – were trading between 100½ and 100¾ bid during the morning, “then it hit the tape that they [i.e., Altice] were bringing another $1.5 billion, and they dropped about ¼ to 3/8 point right away and stayed down there for a bit before recovering later in the session.

“This afternoon they started catching a bid again,” the trader said.

Established Altice bonds mixed

For a second straight session, market participants saw considerable activity in some of Altice’s existing paper.

Its Altice Financing 6 5/8% notes due 2023 gained 5/8 point on the session, ending at 99 5/8 bid, with over $20 million traded – in contrast to Monday when the bonds had eased by ¼ point on the session to 99 bid, on volume of over $16 million.

The Altice Financing 6½% notes due 2022 were ¼ point better on Tuesday, firming to 100¾ bid, on volume of over $124 million. On Monday, those bonds had lost ½ point, with over $11 million of those notes having changed hands.

However, the company’s Altice SA 7¾% notes due 2022 eased by 1/16 point on Tuersday, to 99 13/16 bid, with over $12 million traded.

Numericable moves up

Another Altice-related issue – subsidiary Numericable’s recently priced 7 3/8% senior secured notes due 2026 – was seen by a trader Tuesday up ¼ point on the session, trading around the 102 to 102 1/8 bid level.

A second trader saw those notes up ¼ point, to 102 1/8 bid, as over $33 million traded.

On Monday, those notes were 1/8 point easier on the day, a market source said, closing at 101 7/8 bid, on volume of over $30 million, making it one of the day’s busiest issues.

The St. Denis, France-based telecom and broadband operator had priced some $5.19 billion of those notes in a regularly scheduled forward calendar offering back on April 6 – the biggest junk bond deal of the year.

Western Digital rebounds

Elsewhere, Western Digital’s 10½% notes due 2024 gained 1¾ points to close at 97 bid, a trader said, with more than $44 million of turnover.

Its 7 3/8% senior secured notes due 2023 ended at 10¼ bid, up ¾ points, with around $29 million traded.

The Irvine, Calif.-based computer hard-drive manufacturer’s bonds – which priced back on March 30 in a $5.255 billion two-part regular forward calendar offering – had recently been in retreat, falling for most of last week in active trading after sector peer Seagate released preliminary revenue projections ahead of its quarterly results, which will be reported next week.

Energy names improve

Away from companies with new or recently priced offerings, oil and gas bonds continued to be in focus on Tuesday.

“We’re seeing energy and commodity-related names outperforming,” a trader said.

He quoted Chesapeake Energy’s 8% second-lien notes due 2022 up 2¼ points, to 61½ bid, with over $38 million traded.

A second trader said they were “active again,” rising over 2 points to close at 61¼.

Another market source saw the Oklahoma City-based oiler’s 6 5/8% notes due 2020 pushing up a point to 52 bid.

Consol Energy’s 5 7/8% notes due 2022 gained 4½ points to 83 bid, with over $23 million traded.

EP Energy Corp.’s 9 3/8% notes due 2020 meantime saw a sizeable gain for the day, as a trader said the issue increased by over 4 points to 61¼. Oasis Petroleum Inc.’s 6 7/8% notes due 2022 also saw a hefty increase, ending up nearly 5 points at 86½.

In Whiting Petroleum Corp. paper, a trader said the 6¼% notes due 2023 jumped “almost 4 points” to 79.

Seaborne energy drilling company TransOcean’s 8.1% bonds due 2041 jumped by 6 points, to 65½ bid, with over $29 million traded.

The energy-sector names got a lift as domestic crude oil prices jumped over 3% for the day.

The commodity’s rise came as oil workers in Kuwait went on strike for the third straight day, nearly halving the OPEC-member nation’s daily production. A power outage in Venezuela and a pipeline fire in Nigeria were also weighing on daily production.

Those issues, combined with the looming refinery maintenance season, have some market players thinking the oversupplied oil space could soon rebalance.

The surge came after oil prices got hammered on Monday following a meeting of OPEC and non-OPEC producers in Doha, Qatar, on Sunday. The market had hoped that a deal to freeze production would come out of said meeting, but such a plan failed to come to fruition.

Indicators turn higher

Statistical market performance measures turned higher across the board on Tuesday, after having been mixed for a second consecutive session on Monday; they had turned mixed on Friday after having been higher across the board in each of the previous five sessions.

The KDP High Yield Daily index jumped by 37 basis points on Tuesday to end at 67.16, rebounding from Monday’s 6 bps loss – which had snapped a winning streak of six straight gains before that.

Its yield came in by 9 bps on Tuesday, to 6.28% its fifth straight narrowing and sixth in the last eight sessions. On Monday, it had tightened by 1 bp.

For a second straight session on Tuesday, the Markit Series 26 CDX North American High Yield index moved up by 11/32 point, matching Monday’s gain. The index had bounced back on Monday from its 3/16 point loss on Friday; before that loss, the index had posted five straight advances.

The Merrill Lynch North American High Yield Master II index finished up for an eighth consecutive session on Tuesday, climbing by 0.634%. On Monday, it had edged up by 0.009%.

That lifted its year-to-date return to 6.029%, its seventh successive new peak level for the year, from the previous mark of 5.36%, set on Monday.

Tuesday’s year-to-date level was not only a new high for the year, but the first time the index has topped 6% since it ended at 7.419% on Dec. 31, 2013.

Stephanie N. Rotondo contributed to this review.

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