ATS Automation Tooling prices to cap $1.99 billion week; recent deals quieter but hold gains

By Paul A. Harris and Paul Deckelman

New York, June 12 – The high-yield primary market quieted down on Friday – a fitting end to a week that was considerably less busy than the prior week had been amid investor uncertainty and a shift of cash out of Junkbondland that was reflected in a series of daily cash outflows from high-yield mutual funds and particularly from high-yield exchange-traded funds.

Just one modestly sized deal was heard by syndicate sources to have priced during the session, Canadian automation solutions provider ATS Automation Tooling Systems Inc.’s $250 million of eight-year notes, which priced as a regularly scheduled offering off the forward calendar. Traders said the new bonds firmed smartly when they began trading in the secondary market.

That deal capped off a week that saw just $1.99 billion of new dollar-denominated and fully junk-rated paper from domestic or industrialized-country borrowers come to market in eight tranches. That was well down from the $9.83 billion that got done in 16 tranches the prior week, which ended June 5, according to data compiled by Prospect News.

The week’s new issuance did raise the year-to-date tally of new paper to $174.59 billion in 282 tranches, running 9.6% ahead of the new-issue pace seen last year, when $159.27 billion of new junk bonds had priced in 297 tranches by this point on the calendar. But that represented a slowdown from last week, when new issuance was running 15.3% ahead of the prior-year pace.

Traders meantime said that deals that priced earlier in the week, such as Thursday’s twin offerings from Alere, Inc. and from Sealed Air Corp., were trading around the same solidly higher levels they had notched in initial aftermarket dealings after the bonds priced but at considerably lower volume than had been seen on Thursday.

Primaryside sources said that Tribune Media Co., Eclipse Resources Corp. and Georgia Renewable Power, Inc. would be shopping offerings around to prospective investors during the week ahead.

Statistical indicators of junk market performance were lower across the board on Friday after having been higher all around on Thursday. It was the seventh such down day in the last nine sessions.

Those indicators, meantime, were all down versus where they had finished out the previous Friday for a second straight week and for the third time in the last four weeks.

ATS Automation prices

ATS Automation Tooling Systems priced Friday's sole dollar-denominated deal amid a heavy volume of primary market news in Europe and North America.

The first-time issuer priced $250 million of eight-senior senior notes (B2/B+) at par to yield 6½%.

The yield printed at the tight end of the 6½% to 6¾% yield talk and on top of initial guidance.

J.P. Morgan Securities LLC and Goldman Sachs & Co. were the joint bookrunners.

The Cambridge, Ont.-based automation solutions provider plans to use the proceeds to repay amounts outstanding under its senior secured credit facility and for general corporate purposes.

Tribune starts roadshow

The active calendar saw a meaningful buildup.

Tribune Media began a roadshow on Friday for $1 billion of senior notes in two tranches.

The debt refinancing deal includes eight-year notes and 10-year notes.

Deutsche Bank Securities Inc., Citigroup Global Markets Inc., BofA Merrill Lynch, JPMorgan, Goldman Sachs and Morgan Stanley & Co. LLC are the joint bookrunners.

Eclipse Resources roadshow

Eclipse Resources plans to conduct a roadshow for a $650 million offering of eight-year senior notes during the week ahead.

An investor call is scheduled to take place on Tuesday.

Deutsche Bank, BMO Securities, Goldman Sachs, Citigroup, Morgan Stanley, KeyBanc Capital Markets, Capital One South Coast, RBC Capital Markets and Wells Fargo Securities LLC are the joint bookrunners.

The independent oil and gas exploration and production company plans to use the proceeds to finance the redemption of its outstanding 12% senior PIK notes, to fund its capital expenditure plan and for general corporate purposes.

Georgia Renewable secured deal

Georgia Renewable Power plans to market a $225 million offering of seven-year first-lien senior secured notes during the week ahead.

Seaport Global is the bookrunner.

The notes come with three years of call protection, 10% annual amortization and a 50% cash flow sweep.

Credit ratings remain to be determined.

The Albany, Ga.-based renewable power generator plans to use the proceeds for general corporate purposes.

New Look sells three-part deal

Apparel and footwear retailer New Look priced £1.2 billion equivalent of high-yield notes in a restructured three-part debt refinancing deal.

New Look Secured Issuer plc priced two tranches of senior secured notes due July 1, 2022 (B2/B/B).

They included £700 million of fixed-rate notes that priced at par to yield 6½% and €415 million of three-month Euribor plus 450 basis points floating-rate notes that priced at 99.5.

The notes in both secured tranches came on top of price talk.

A proposed euro-denominated tranche of senior secured fixed-rate notes was withdrawn.

In addition, New Look Senior Issuer priced £200 million of eight-year senior unsecured notes (Caa2/CCC+/CCC) at par to yield 8%, also on top of price talk.

Joint global coordinator and joint bookrunner Goldman Sachs will bill and deliver. JPMorgan and Nomura were also joint global coordinators and joint bookrunners.

Deutsche Bank, HSBC, Lloyds Bank and Royal Bank of Scotland are joint bookrunners.

Labco two-part deal

Labco SA priced a restructured €800 million two-part offering of seven-year senior secured notes (B3/B+/B+).

The debt refinancing deal included €500 million of fixed-rate notes that priced at par to yield 6¼%. The yield printed on top of yield talk.

In addition, Labco priced a €300 million tranche of floating-rate notes carved out of the deal subsequent to the deal being announced. The floating-rate notes came with a three-month Euribor plus 500 bps coupon, discounted to 99.5. Both the coupon and price came on top of talk.

Joint bookrunner JPMorgan will bill and deliver. Barclays, Deutsche Bank, HSBC, Morgan Stanley, Natixis and UBS were also joint bookrunners.

Nord Anglia CHF 235 million

Nord Anglia Education Finance LLC plans to start a roadshow on Monday for a CHF 235 million offering of seven-year senior secured notes (B1/B+).

Credit Suisse, Goldman Sachs, Deutsche Bank and HSBC are managing the sale.

Proceeds, together with additional debt and new equity, will be used to fund the acquisition of six schools from Meritas Schools Holdings LLC.

Mixed flows

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

High-yield exchange-traded funds saw $70 million of outflows on Thursday.

Asset managers saw $95 million of inflows on the day.

ATS Automation improves

In the secondary market, a trader said that ATS Automation Tooling Systems’ 6½% notes due 2023 had moved up to a 100¾-to 101¾ bid context after pricing at par earlier in the session.

A second trader said that after they had been freed for aftermarket dealings, the bonds circulated between a low of 101 and a high of 102½.

He said that about $11 million of the notes had traded.

Sealed Air quietly holds gains

A trader quoted Sealed Air’s new 5½% notes due September 2025 at 101 1/8 bid, 101 5/8 offered, which he called down 1/8 on the day.

At another desk, a trader said that the bonds were in a 101-to-101 3/8 bid context. He said that the notes “basically did not go anywhere” from where they had finished out Thursday after the Charlotte, N.C.-based plastic packaging products producer had priced its $400 million issue at par as a regularly scheduled forward calendar offering. Those bonds, in turn, were part of a larger, $850 million equivalent offering that also included €400 million of 4½% notes due September 2023 that also priced at par.

The second trader said that while the bonds had been busy on Thursday, with over $65 million having changed hands by the close, “they were pretty quiet today.”

He said that “in the morning, [investors] tried to trade them in the Street,” but by the end of the day, volume had racked up to “just $10 miserable million” bonds.

Alere issue steady

He also saw activity in Alere’s new 6 3/8% senior subordinated notes due 2023 fall off on Friday, though not quite as radically as in the Sealed Air bonds.

He said that volume fell to $27 million on Friday – still strong enough to place the bonds near the top of the high-yield Most Actives list but well down from over $73 million at the close on Thursday.

The bonds were in a 101-to101 3/8 context; he called that near where the new notes had traded on Thursday.

A second trader pegged the notes at 101 1/8 bid, 101½ offered, which he said was ½ point better on the day.

Alere, a Waltham, Mass.-based provider of medical diagnostic services, priced $425 million of the notes at par on Thursday as a regularly scheduled forward calendar transaction, and the bonds pushed up to around the 101 bid level in active dealings after they were freed to trade.

Indicators back on the slide

Overall, one of the traders said that “the market was softer today” after having firmed on Thursday.

“The ETFs were selling today, so they were creating the pressure.”

Accordingly, statistical indicators of junk market performance were lower across the board on Friday after having been higher all around on Thursday. It was the seventh such down day in the last nine sessions.

Those indicators, meantime, were all down versus where they had finished out the previous Friday for a second straight week and for the third time in the last four weeks.

The KDP High Yield Daily index lost 6 basis points on Friday to finish at 70.75 after having gained 4 bps on Thursday, which had broken a string of seven successive downside days.

Its yield moved up by 1 bp to 5.61% after having tightened by 1 bp on Thursday. Friday marked the seventh widening in the last eight sessions.

Those levels compared unfavorably with the 71.10 index reading and 5.48% yield that had been seen the previous Friday, June 5.

The Markit Series 24 CDX North American High Yield index was down by 7/16 point on Friday to close at 106 5/32 bid, 106 3/16 bid, its first downturn after having improved over two straight sessions, including Thursday, when it had risen by 1/16 point.

Friday’s downturn was its seventh such setback in the last nine sessions.

It left the index down from 106½ bid, 106 17/32 last Friday.

And the Merrill Lynch North American Master II High Yield index was also back in the red Friday with a 0.091% loss after two straight gains, including Thursday’s 0.168%.

It was the index’s eighth loss in the last 10 sessions and dropped its year-to-date return to 3.093% from 3.187% on Thursday. Those levels remain well down from the 4.062% reading, the index’s peak level for the year so far, recorded on May 29.

For the week, the index was down by 0.193% – its second consecutive weekly loss. Last week it recorded a 0.739% slide, which had left its year-to-date return at 3.293%. It was the third weekly loss in the last four weeks. So far this year, the index has recorded Friday-to-Friday gains in 16 weeks and has lost ground from the prior Friday in seven weeks.

© 2015 Prospect News.
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