Transocean, CBS Radio, Virgin Australia price to close $3.5 billion primary week, new deals rise

By Paul Deckelman and Paul A. Harris

New York, Oct. 7 – The high-yield primary market was busy for a second consecutive session on Friday, as three issuers each priced a single-tranche transaction, generating $1.34 billion of new U.S.-dollar-denominated and fully junk-rated paper – just a little less than the $1.4 billion of new junk from domestic or industrialized-country borrowers which got done during Thursday’s session.

That brought the week’s new issuance to $3.5 billion, a little busier than last week’s issuance totals.

Marine energy driller Transocean Ltd. had the big deal of the day, a quickly shopped and privately marketed $600 million issue of eight-year secured notes.

Traders said that the notes, which priced at a discount to par, firmed smartly when they were freed for secondary dealings.

Broadcaster CBS Radio Inc. brought a downsized $400 million offering of eight-year notes to market as a regularly scheduled forward calendar deal; those bonds also moved up when they hit the aftermarket.

The day’s other transaction, from airline operator Virgin Australia Holdings Ltd., also came off the calendar – a $350 million five-year issue, which was seen hovering around its pricing level in the secondary on limited volume.

Traders also saw continued relatively firm trading levels, well above their respective issue prices, for some of the other recently priced offerings, including Thursday’s deals from Gulfport Energy Corp. and Concordia International Corp., although the latter deal was off from the lofty aftermarket levels it had initially hit after pricing.

Statistical market performance measures turned mixed on Friday after having been higher across the board on Wednesday and again on Thursday, their third mixed session in the last five trading days.

Those indicators were meantime also mixed versus where they had finished last Friday, after being higher for the previous two weeks.

Transocean prices $600 million

A busy Friday in the primary market saw a trio of issuers price single-tranche dollar-denominated deals to raise a combined total of $1.34 billion.

Transocean priced $600 million of 7¾% eight-year first lien senior secured notes (BB+) at 98.5 to yield 8%.

The deal was privately marketed and priced.

There was no official yield talk. However the notes had been whispered at 8¼% to 8½%, an informed source said.

Piper Jaffray & Co. was the sole bookrunner and sole manager.

In spite of a generally tough market for energy names, the deal went well and was oversubscribed, the source added.

Proceeds will be used primarily for the purpose of partially financing the construction of the Deepwater Thalassa rig.

CBS Radio prices mid-talk

CBS Radio priced a downsized $400 million issue of eight-year senior notes (B3/B-) at par to yield 7¼%.

The issue size was decreased from $460 million, with $60 million of proceeds shifted to the concurrent bank loan.

The yield printed on top of revised yield talk. Earlier talk had the deal coming in the 7½% area.

Deutsche Bank, J.P. Morgan, Citigroup, BofA Merrill Lynch, Credit Suisse, Goldman Sachs and Wells Fargo were the joint bookrunners.

Proceeds, along with proceeds from concurrent bank debt, will be used to fund a distribution to CBS Corp. in connection with its spinoff of CBS Radio. Remaining proceeds will be used for general corporate purposes and ongoing cash needs.

Virgin Australia five-year notes

Virgin Australia Holdings priced a $350 million issue of five-year senior notes (expected ratings B3/B+) at par to yield 7 7/8%.

The yield printed in the middle of the 7¾% to 8% yield talk and tight to initial guidance of 8%, according to a trader.

UBS was the left lead bookrunner. Goldman Sachs was the joint bookrunner.

Proceeds will be used for general corporate purposes, to fund capital needs and to improve the diversity and tenor of the company’s funding profile.

Sparse calendar

With Friday’s action in the book, the holiday foreshortened week ahead could be a slow one in the primary market, sources said.

There were no tips on Friday regarding possible blockbuster transactions in the post-Columbus Day week.

“There’s better buyers than sellers in the market,” a portfolio manager remarked, adding that no one is presently selling anything and accounts have cash.

“Right now it seems like people are just grinding into these elections,” the manager added.

Only one deal was on the road at Friday’s close.

The full roadshow for the Lions Gate Entertainment Corp. $520 million offering of eight-year senior notes (B2/B-) is expected to wrap up on Wednesday.

Early guidance has the acquisition deal coming with a yield in the 6½% area, according to a trader.

Hellenic Petroleum upsizes

In the euro-denominated primary market, Greece-based Hellenic Petroleum SA priced an upsized €375 million issue of non-callable 4 7/8% five-year senior notes at 99.453 to yield 5% on Friday, according to a market source.

The issue size was increased from €300 million.

Credit Suisse and HSBC were the global coordinators. Eurobank Ergasias, Alpha Bank, NBG and Piraeus were the joint bookrunners.

The Marousi, Greece-based oil company plans to use the proceeds to fund a tender for its €489,382,000 of outstanding 8% guaranteed notes due May 2017 issued by its wholly owned subsidiary, Hellenic Petroleum Finance plc, and to repay debt.

N&W Global prices

N&W Global Vending SpA priced a €300 million issue of 7% seven-year senior secured fixed-rate notes (B2/B) at 98.5 to yield 7.277%.

Early yield guidance was in the 7½% area.

Goldman Sachs and Deutsche Bank were joint global coordinators and joint bookrunners. Banca IMI and Credit Agricole were also joint bookrunners.

Proceeds will be used to repay the bridge loan used in the financing of Lone Star Funds’ acquisition of N&W Global Vending, a vending machine company based in Valbrembo, Italy.

A busier week

Counting Friday’s three new issues, $3.49 billion of new U.S. dollar-denominated and fully junk-rated paper from domestic or industrialized-country borrowers had priced in eight tranches during the week just completed, according to data compiled by Prospect News.

That was up from the $3.18 billion which had priced in six tranches the previous week, ended Sept. 30, though off from the $4.7 billion which had come to market in 10 tranches the week before that, ended Sept. 23.

This week’s new deals brought the year-to-date issuance total up to $180.82 billion in 275 tranches.

That was running 19.8% behind the new-deal pace seen at this time last year, when $225.36 billion had priced in 355 tranches by this point on the calendar, the Prospect News data indicated.

That was a narrowing from the 21.4% gap between this year’s and last year’s issuance which had been seen last week.

A trader likened the increased pace of activity on Thursday and Friday, versus the relatively quiet primary seen during the first part of the week, to “a tsunami” of new paper.

Transocean trades up

A trader quoted the day’s largest deal, the Zug, Switzerland-based global marine energy drilling contractor Transocean’s 7¾% first-lien senior secured notes due 2024, between 102¼ and 103¼ bid, well up from the 98.5 level at which it had priced to yield 8%.

Another market source pegged the bonds in a 103¼ to 104 bid context.

A trader at another shop said that more than $29 million of those new notes changed hands during the session, mostly between 103 and 104½ bid, with “the last prints constantly” between 104¼ and 104½.

The company’s existing 9% notes due 2023 meantime were actively traded but unchanged at 98½ bid on volume of more than $11 million.

CBS a volume leader

The busiest of the day’s new issues in the aftermarket was the CBS Radio 7¼% notes due 2024, with one trader estimating volume at more than $52 million, $46 million of it in round-lot transactions.

“They were trading higher, with a decent amount of volume,” he said, quoting the New York-based broadcasting giant’s deal having traded between 101 and 102 7/8 bid, up from its par issue price. He saw the last trades of the day going off between 102½ and 102¾ bid.

Two other traders quoted the bonds during the day in a 102 to 102½ bid context.

Virgin Australia near issue

The last of the day’s three deals to price, Virgin Australia Holdings’ 7 7/8% notes, saw relatively little aftermarket activity on Friday, certainly when compared to the session’s other transactions.

A market source said that only around $7 million of the Brisbane, Australia-based airline operator’s new deal traded around. He quoted it between 100 1/8 and 100¼ offered, versus its par issue price.

A second trader saw the bonds in a 100¼ to 100½ bid context.

Thursday deals trade actively

Among the issues which priced on Thursday, Alliance One International, Inc.’s 8½% senior secured first-lien notes due April 2021 were the most active. More than $29 million traded.

A trader saw the Morrisville, N.C.-based leaf tobacco merchant’s regularly scheduled forward calendar deal at 100 1/8 bid, up from the 99.085 level at which the $275 million offering had priced to yield 8¾%.

“I don’t think it has moved much,” a second trader said, locating the notes in a 99¾ to 100 3/8 context, about where they had finished up on Thursday.

The trader meantime said that Concordia International’s 9% senior secured notes due April 2022 “traded down a little bit” on Friday from where they had finished their initial aftermarket run on Thursday.

He saw the Oakville, Ont.-based pharmaceutical company’s new bonds trading between 102 1/8 and 102¼ bid, down from the levels above 103 at which that paper had traded late in the day on Thursday after the $350 million regular forward calendar deal had priced at par.

Another trader called the notes down ¾ point on the day at 102¼ bid.

A market source put trading volume Friday at around $22 million.

Gulfport Energy’s 6% notes due 2024 were seen by a trader moving around between 101¼ and 102 on Friday before finally settling into a 101½ to 101¾ bid context late in the day on volume of more than $25 million.

The Oklahoma City-based independent oil and natural gas company’s quick-to-market $650 million offering had priced at par on Thursday and then had moved around in a 101½ to 102 bid range when it was freed for aftermarket dealings later on in that session.

Indicators turn mixed

Statistical market performance measures turned mixed on Friday after being higher across the board on Wednesday and again on Thursday, making it their third mixed session in the last five trading days.

Those indicators were meantime also mixed versus where they had finished last Friday, after having been higher for the previous two weeks.

The KDP High Yield Index retreated by 3 basis points on Friday, closing at 71.34 – breaking a string of fourteen consecutive gains before that, including Thursday’s 15 bps rise.

Its yield was unchanged on the day at 5.47%.

For the week, the index was up from last Friday’s 70.86 index reading.

The Markit Series 27 CDX Index was marginally lower on the day at 104 11/32 bid, 104 3/8 offered, after improving by nearly 3/32 point on Thursday, its second straight upturn after two losses.

It was also down slightly from 104 3/8 bid, 104 13/32 offered at the close last Friday.

However, the Merrill Lynch High Yield Index moved up by 0.032 on Friday, its eighth consecutive gain after two straight losses. On Thursday, it had risen by 0.058%.

Friday’s advance raised the index’s year-to-date return to 15.831%, its seventh straight new peak level from the year, up from the former mark of 15.794%, which had been set on Thursday.

It was the index’s highest finish since Dec. 31, 2009, when it had closed out that year at 57.512%.

For the week, the index gained 0.045%, its third straight weekly gain following two straight weekly losses. Last week, it had improved by 0.414%.

Gains have now been seen in 30 weeks so far this year, against losses in 10 weeks.

© 2015 Prospect News.
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