Jacobs prices add-on; Clear Channel on deck; TransDigm weakens; Dun & Bradstreet mixed

By Paul A. Harris and Abigail W. Adams

Portland, Me., Feb. 4 – While new deal activity was light on Monday in the high-yield primary market with one small add-on pricing, a hefty new offering joined the forward calendar.

Jacobs Entertainment Inc. priced a $35 million add-on to its 7 7/8% senior secured second-lien notes due Feb. 1, 2024 (B2/B) at 103.25 to yield 6.927%.

Clear Channel Worldwide Holdings Inc. plans to price $2.2 billion of five-year senior subordinated notes (expected ratings Caa1/CCC+) in the coming week.

Meanwhile, Monday marked another strong day for the secondary space with the market up about 1/8 point, a market source said.

While the overall market continued to post gains, TransDigm Inc.’s recently priced senior notes were losing steam on Monday following the pricing of an add-on.

Dun & Bradstreet Corp.’s recently priced senior notes were mixed with the secured tranche dropping below its issue price while the unsecured tranche traded at a premium to it.

Outside of the new paper, Hexion Inc.’s junk bonds were mixed with the first-lien notes posting large gains while the second-lien notes saw large losses.

Jacobs taps 7 7/8% secured

A relatively quiet Monday in the primary market saw Jacobs Entertainment price a $35 million tack-on to its 7 7/8% senior secured second-lien notes due Feb. 1, 2024 (B2/B) at 103.25 to yield 6.927% in a drive-by.

The reoffer priced came at the rich end of the 102.75 to 103.25 price talk.

The Golden, Colo.-based owner and operator of gaming properties plans to use the proceeds to fund its acquisition of truck stop locations in Louisiana, as well as to repay its revolving credit facility and for general corporate purposes.

Clear Channel $2.2 billion

The active forward calendar took aboard a hefty new offering.

Clear Channel Worldwide Holdings, which spun off from iHeartMedia Inc. in January, plans to price $2.2 billion of five-year senior subordinated notes (expected ratings Caa1/CCC+) on Wednesday afternoon or Thursday morning.

Deutsche Bank, Morgan Stanley, Barclays, Citigroup, Credit Suisse and JP Morgan are the joint bookrunners.

The San Antonio-based outdoor advertising company plans to use the proceeds to refinance its 7 5/8% series A and series B senior subordinated notes due 2020.

Clear Channel Outdoor joins CommScope Inc., which is also on the active forward calendar with a $3 billion offering of notes coming in three tranches sized at $1 billion each.

CommScope is expected to price on Thursday.

The Hickory, N.C.-based provider of infrastructure services for communication networks is selling $1 billion of five-year senior secured notes with initial talk in the 6% area.

In another secured tranche, CommScope intends to sell $1 billion of seven-year senior secured notes with initial talk in the 6½% area.

In the sole unsecured tranche, the company is selling $1 billion of eight senior notes with initial talk in the high 8% area.

Proceeds will be used to help fund the acquisition of Arris International plc, a Suwanee, Ga.-based telecommunications company, for about $7.4 billion, including the repayment of debt.

TransDigm weakens

TransDigm’s recently priced senior notes were weaker on Monday, despite a strong day for the market.

TransDigm’s 6¼% senior secured notes due 2026 (Ba3/B+) continued to trade down after the pricing of an additional add-on on Friday with the notes dropping below their reoffer price.

The 6¼% notes dropped another ½ point to close Monday at par ¾, according to a market source.

With more than $41 million of the bonds on the tape, the notes remained the most active in the secondary space.

TransDigm initially priced an upsized $3.8 billion issue of the 6¼% notes at par on Jan. 30.

While the notes initially skyrocketed, the aerospace components maker returned to the market days later to price a $200 million tap of the notes at 101.

The add-on pushed the 6¼% notes lower, which closed last Friday at 101¼.

In addition to the $200 million add-on, TransDigm priced a $550 million tranche of eight-year senior subordinated notes (B3/B-) at par to yield 7½% in the Friday drive-by.

The unsecured tranche was not very active in the secondary space, according to a market source.

However, TransDigm’s outstanding 6½% senior subordinated notes due 2024 and 6 3/8% senior subordinated notes due 2026 continued to trade down.

The 6½% notes dropped ¾ point to 98 in high-volume activity with more than $18 million of the bonds on the tape, a market source said.

While less active, the 6 3/8% notes dropped 1 1/8 point to 94 5/8.

TransDigm’s initial offering, which was announced on Jan. 28, included an unsecured tranche, which was withdrawn from the market with proceeds shifted to the secured tranche.

However, TransDigm returned days later to price the unsecured tranche in the drive-by.

Dun & Bradstreet mixed

While demand for Dun & Bradstreet’s secured tranche outpaced its unsecured tranche during bookbuilding, the opposite was true in the secondary space.

While Dun & Bradstreet’s unsecured tranche traded at a slight premium to its issue price, the secured tranche dipped below its issue price during Monday’s session.

The 6 7/8% senior notes due 2026 (B2/B/BB) were quoted at 99 1/8 bid, 99 5/8 offered mid-morning, according to a market source.

However, the notes traded up to 99¾ by the late afternoon.

More than $36 million of the bonds were on the tape by the late afternoon.

Dun & Bradstreet’s 10¼% senior notes due 2027 (Caa2/CCC/B-) were quoted at par ½ bid, 101 offered in mid-afternoon and were seen changing hands at par ¾ in the late afternoon.

More than $21 million of the notes were on the tape by the late afternoon.

The secured tranche was trading with a yield of 6.92%, a market source said.

The unsecured was most likely performing better in the secondary space because the secured tranche priced too tightly, the source said.

Dun & Bradstreet priced an upsized $1.45 billion of senior notes in two tranches on Friday.

The company priced an upsized $700 million of the 6 7/8% notes at par. Pricing came at the tight end of revised yield talk in the 7% area.

Earlier talk was in the 7¼% area. Initial guidance was in the mid-7% area.

The tranche was increased from $500 million.

The company priced a downsized $750 million tranche of the 10¼% senior notes at par.

The yield printed at the wide end of the 10% to 10¼% yield talk. Initial talk was in the 10¼% to 10½% area.

The tranche was decreased from $850 million.

Hexion mixed

Hexion’s junk bonds due 2020 were mixed on Monday with the first-lien notes trading sharply higher and the second-lien notes trading sharply lower.

The 6 5/8% first-lien senior notes due 2020 rose 2¼ point to 82½ on Monday. The 9% second-lien notes dropped 3¾ points to 41¼.

Hexion’s second-lien noteholders have been engaged in a struggle with first-lien noteholders over the upcoming maturity of the notes.

The second-lien noteholders hired legal counsel for negotiations regarding the maturity.

Second-lien noteholders have proposed using unencumbered real estate assets as collateral for the extension of the secured debt, a market source said.

However, the proposal does not appear to have garnered any traction given the trading level of the notes.

The specialty chemicals company has also renewed its push to sell assets as the maturity of the notes approaches.

With an interest payment due on Feb. 15, the battle between first- and second-lien noteholders has returned to focus, a market source said.

Friday inflows

The daily cash flows of the dedicated high-yield bond funds were positive on Friday, the most recent session for which data was available at press time, a trader said.

High-yield ETFs saw $147 million of inflows on the day.

Actively managed high-yield funds saw $75 million of inflow on Friday, the trader said.

Since the Jan. 29-30 Federal Open Market Committee meeting, at which the Fed reached a decision to maintain rates at their present level, and stated that it would be “patient” as it determines what future adjustments to rates may be necessary, the combined high yield bond funds have seen $1.4 billion of net inflows, the source added.

Indexes

Indexes were again on the rise on Monday after all closed the previous week with large cumulative gains.

The KDP High Yield Daily index rose 6 basis points to close Monday at 69.46 with the yield now 6.27%.

The index saw a cumulative gain of 60 bps on the week last week.

The ICE BofAML US High Yield index climbed another 11.7 bps on Monday with the year-to-date return now 4.836%.

The index saw a cumulative gain of 81.4 bps on the week last week, skyrocketing past a 4% year-to-date return on Jan. 30.

The CDX High Yield 30 index rose 22 bps to close Monday at 106.12.

The index saw a cumulative gain of 76 bps on the week.

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