TerraForm, upsized Platform megadeal close $4.8 billion primary week, new bonds head higher

By Paul Deckelman and Paul A. Harris

New York, Jan. 23 – After a robust start and a quieter mid-week, the high-yield primary sphere closed out the holiday-shortened week on Friday in high style, pricing a pair of new deals totaling close to $1.8 billion.

Syndicate sources said that Miami-based chemical manufacturer Platform Specialty Products Corp. priced an upsized $1.2 billion equivalent dual-currency offering, which included an upsized $1 billion of seven-year notes as well as a euro-denominated tranche of eight-year paper.

Traders said the new dollar-denominated notes were solidly higher when they were freed for aftermarket dealings, with volume soaring to over $100 million, making that easily the busiest credit in Junkbondland.

Unlike the quickly shopped drive-by deals that dominated the first part of the week, the Platform deal was a regularly scheduled transaction pricing off the forward calendar, as was the day’s other pricing – clean-energy company TerraForm Power Operating, LLC’s $800 million issue of eight-year notes. Those notes too were seen having firmed smartly when they began trading in the secondary market.

The day’s twin deals brought the week’s issuance of new dollar-denominated, fully junk-rated paper from domestic or industrialized-country borrowers up to $4.83 billion in nine tranches, according to data compiled by Prospect News. That was virtually identical to the $4.81 billion in nine tranches which had priced the week before, ended Jan. 16.

The week’s new deals, in turn, raised issuance so far this year to $10.08 billion in 20 tranches – although that was running nearly 32% behind the red-hot new-deal pace set last year, when some $14.79 billion of junk bonds had priced in 22 tranches by this point on the calendar.

Traders saw the week’s new deals mostly trading up from their respective issue prices.

Thursday’s issues from Aruba Investments, Inc. and Speedway Motorsports, Inc. both moved up in their initial aftermarket dealings.

Even Zayo Group Holdings, Inc., which had struggled for several sessions to get back to its par issue price, was better. Endo International plc’s new bonds remained busily traded.

Statistical indicators of junk market performance were better across the board for a third consecutive session on Friday, after having been mixed for four straight sessions before that.

They were also higher all around versus where they had ended the previous week, when they had been lower.

Primary behind expectations

Despite the strong showing, Friday turned out to be quieter than expected in the primary market.

Two issuers priced a combined three tranches, two of them dollar-denominated, generating a $1.8 billion of proceeds.

Meanwhile two deals that had been expected to clear the market before the weekend have been pushed into the week ahead, according to market sources.

Platform Specialty upsizes

Platform Specialty Products priced an upsized $1.42 billion dual-currency senior notes transaction (B2/BB-/).

An upsized $1 billion tranche of seven-year notes priced at par to yield 6½%. The tranche was increased from $500 million as the company decreased its term loan to $500 million from $1 billion. The yield printed at the tight end of the 6½% to 6¾% yield talk.

In addition the company priced a revised €350 million tranche of eight-year notes at par to yield 6%, at the tight end of the 6% to 6¼% yield talk.

Prior to revision, the acquisition financing deal was announced with two seven-year tranches.

The overall transaction size was increased from $920 million equivalent.

Credit Suisse, Barclays, Nomura and UBS were the joint bookrunners.

TerraForm at discount

TerraForm Power Operating priced an $800 million issue of 5 7/8% eight-year senior notes (B1/BB-/) at 99.214 to yield 6% in a green bond issue.

The yield printed at the tight end of the 6% to 6¼%, and in line with initial guidance that had the deal coming in the low to mid 6% yield context.

Joint bookrunner Barclays will bill and deliver. BofA Merrill Lynch, Morgan Stanley, Goldman Sachs, Citigroup and Macquarie were also joint bookrunners.

The Bethesda, Md.-based clean power company plans to use the proceeds to partially fund the purchase price and recapitalization of First Wind Holdings Inc. and to refinance term loans.

Meanwhile Presidio had been expected to price its $400 million offering of eight-year senior notes (Caa1/CCC+) on Friday, however no terms were available at press time. Earlier in the week the deal had been talked at a discount to yield 10¾% to 11%.

And in the European market, Techniplas BV has been marketing a €135 million offering of five-year senior secured notes (B3/B), talked earlier in the week with a 9¼% to 9½% coupon and a 9¾% to 10% all-in yield.

The books, which had been scheduled to close on Friday, will remain open into the Monday session, according to a market source.

Altice markets $4.57 billion equivalent

Altice International began a roadshow on Friday in London for $4.57 billion equivalent of bonds, a multi-tranche offering that is expected to price on Jan. 30.

The deal is in the market via bookrunners Goldman Sachs, JPMorgan, Credit Suisse, Deutsche Bank, Morgan Stanley, BNP Paribas, Credit Agricole, Banka IMI, Citigroup, HSBC, Nomura, RBC, SG CIB and UniCredit.

Altice SA is offering €500 million and $1,755,000,000 of 10-year senior unsecured notes (expected ratings B3/B), in tranches helmed by left lead JPMorgan.

Altice Financing SA is offering $2.06 billion and €500 million of eight-year senior secured notes. And Altice Finco SA is offering $385 million of 10-year senior unsecured.

The Altice Financing and Altice Finco tranches are being quarterbacked by left lead Goldman Sachs.

The Luxembourg-based telecommunications company plans to use the proceeds to help finance the acquisition of the Portuguese assets of Portugal Telecom from Grupo Oi SA.

Platform dominates market

In the secondary arena, traders saw busy activity in the new 6% notes due 2023 being issued by PSPC Escrow Corp., which will be merged into Platform Specialty Products Corp. as part of the latter’s acquisition off Tokyo-based agricultural chemicals manufacturer Arysta LifeScience Ltd.

A trader said that there was “a really decent amount of volume” in the new credit – an understatement, with the Trace system reportedly showing more than $119 million of those notes trading, easily the day’s heaviest action.

From the get-go, he said, “they traded initially, the first hour or so” being the busiest period.

He saw the bonds in a 101½ to 102 bid context, well up from the par level at which those upsized bonds priced.

A second trader said that both Platform’s bonds and the day’s other deal, from TerraForm Power Operating LLC, “did OK.”

He said “the Platform deal continued to trade up all day long.” He saw late levels between 101¼ and 102 bid.

He said that initially, “there was a lot of trading in the lower 101 handle, “but then once the flippers got cleaned out, the thing moved up.”

Yet another trader saw the bonds going out between 101¾ and 102 1/8 bid.

TerraForm trades up

One of the traders saw TerraForm’s 5 7/8% notes due 2022 ending the day around 102 bid.

“It priced at a pretty good discount” to par – 99.214 – “so that one is up almost 3 points.”

Like the Platform bonds, he said, the bonds moved higher from initial levels.

“It opened up at 101 3/8 to 101¾, but then some stuff got lifted” to the 102 area.

A second trader saw the clean energy company’s bonds ending somewhere between 101 5/8 and 102 bid.

Other recent deals firm up

The traders saw other recently priced deals also holding their own.

For instance, one said that Endo International’s 6% notes due 2025, which had come to market on Tuesday and had traded in very heavy volume on Wednesday “were still trading on decent volume, and staying put” around the 101¼ bid level to which the bonds had risen.

Endo, a Malvern, Penn.-based specialty pharmaceutical and medical devices manufacturer, had priced its notes at par via its Endo Ltd., Endo Finance LLC and Endo Finco subsidiaries after the quick-to-market transaction had been upsized from an originally announced $1 billion.

Although the Endo bonds priced too late in the session for any initial aftermarket action that day, they more than made up for it on Wednesday, when a staggering total of more than $152 million of the new notes changed hands, moving up 1 point on the session, and they remained among the volume leaders on Thursday, continuing to move marginally higher above 101.

On Friday, a market source quoted the bonds at 101 1/8 bid, calling them unchanged on the day, on volume of more than $17 million – good enough to put the credit on the day’s Junkbondland Most Actives list.

That source also saw Zayo Group’s 6% notes due 2023 finally move above its par issue price to 100 1/1/8 bid, a gain of ¼ point on the day, on volume of more than $8 million.

The company, a Boulder, Colo.-based telecommunications solutions company, brought a quickly shopped $700 million issue of 8-year notes to market on Tuesday via its Zayo Group LLC and Zayo Capital, Inc. subsidiaries, pricing it at par.

The new Zayo bonds were briskly traded, racking up volume of over $14 million the day they priced and more than double that on Wednesday – substantial enough to make it to the Most Actives list both days.

But the bonds struggled right out of the gate, finishing their first day slightly below issue at 99½ bid, and remaining below par after that, until finally beginning to head up from their bottom around 99 on Thursday, and continuing to firm on Friday amid a general market upturn.

“The tone of the market was good all day long,” one of the traders said.

“We saw a lot of stuff get lifted. Despite the selloff in equities, I think the lack of a real calendar has definitely put some legs underneath the market.”

Also doing better on Friday were Thursday’s two issues, which had come to market too late that day to trade at that time.

Aruba Investments, Inc. – a special purpose financing vehicle that Golden Gate Capital is using in its acquisition of Buffalo Grove, Ill.-based Angus Chemical Co. from Dow Chemical Co. – priced $225 million of 8¾% notes due 2023 at par as a regularly scheduled forward calendar offering. A trader saw the bonds on Friday at 102 bid, 103 offered.

He also saw Speedway Motorsports, Inc.’s 5 1/8% notes due 2023 in a 101 to 101¾ bid context on Friday.

The Concord, N.H.-based auto racing track operator, drove by with its $200 million issue on Thursday, with the bonds pricing at par.

Indicators extend gains

Statistical indicators of junk market performance were higher across the board for a third consecutive session on Friday; they had turned higher on Wednesday, and had stayed that way on Thursday, after having been mixed for the previous four consecutive sessions.

The indicators were also higher all around versus where they had finished out the previous week on Friday, Jan. 16, when they had been universally lower. That down week had followed two mixed weeks, dating back to the last week in December, and before that, two higher weeks

The KDP High Yield Daily Index rose by 10 basis points Friday to end at 70.87, its third straight gain and fifth gain in the last six sessions. It had risen by 7 bps on Thursday.

Its yield came in by 4 bps to 5.55%, its second straight narrowing; on Thursday, it had declined by 5 bps.

Those levels compared favorably with the 70.67 index reading and 5.62% yield seen the previous Friday.

The Markit Series 23 CDX North American High Yield Index saw its third straight gain after two straight losses, advancing by 1/8 on Friday to finish at 106 1/16 bid, 106 3/16 offered. On Thursday, it had gained 17/32 point.

It ended the week up nearly 1 full point from the previous Friday’s level of 105 3/16 bid, 105¼ offered.

And the Merrill Lynch U.S. High Yield Master II Index gained 0.14% on Friday, its fifth straight advance. It had gained 0.178% on Thursday.

The latest gain lifted its year-to-date return to 0.344% – a new high for the year so far – from 0.203% on Thursday. The previous year-to-date high point had been 0.234% on Jan. 9.

The index showed a one-week gain of 0.408%, in contrast to its 0.297% weekly loss the previous Friday, when the year-to-date loss had been 0.064%. It has shown two weekly gains so far this year, against one weekly loss.

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