Altice three-parter, Tops cap nearly $9 billion week; new SandRidge slides in heavy trading

By Paul A. Harris and Paul Deckelman

New York, May 29 – The high-yield primary market closed out the week on Friday – and trading for the month of May – on a busy note by pricing two deals, one of them a giant-sized three-part offering.

That regularly scheduled forward calendar deal, from European cable, broadband and voice communications provider Altice SA in support of its pending acquisition of U.S. cabler SuddenLink Communications, totaled $1.72 billion and came to market via three financing subsidiaries, consisting of a tranche of eight-year secured paper and two tranches of 10-year unsecured paper.

Traders did not see any initial aftermarket activity in the late-pricing deal.

That offering largely overshadowed the day’s other transaction, a scheduled and slightly upsized $560 million issue of seven-year secured paper from supermarket operator Tops Holding LLC. That priced earlier in the session. Traders said the new Tops bonds moved higher in active aftermarket dealings.

The day’s $2.27 billion in four tranches of new dollar-denominated and fully junk-rated paper from domestic or industrialized-country borrowers was down from the $4.95 billion of such bonds that had come to market on Thursday in six tranches from five issuers on Thursday, according to data compiled by Prospect News – the fourth heaviest trading day of 2015 so far.

The day’s issuance brought the week’s total of new junk bonds to $8.97 billion in 15 tranches, up from the $6.39 billion that had come to market the previous week, ended Friday, May 22. Issuance on the week was up even though there was one less trading day due to the market’s close this past Monday in observance of Memorial Day.

Friday was the final trading session of May, with the last two days of the month falling on the weekend. The day’s new deals brought issuance for the month up to $35.14 billion in 64 tranches, according to the Prospect News data. As busy as that was, it was down from the $38.99 billion which had priced, also in 64 tranches, during April, and down from the $39.66 billion which came to market in 56 tranches in March, the busiest month of the year so far.

It was also off from the $37.16 billion that had priced last May, again in 64 tranches.

As May closed out, new issuance for the year stood at $162.48 billion in 257 tranches, according to the Prospect News data. That was up 12% from the pace seen a year ago, when some $145.05 billion had gotten done in 267 tranches by this point on the calendar.

Traders said that besides the brisk trading in the aforementioned new Tops Holding bonds, Friday’s secondary market was characterized by even more active trading in new issues which had priced Thursday, from oil and natural gas operators SandRidge Energy Inc. and MarkWest Energy Partners, LP. But while the latter bonds firmed on the day, the SandRidge notes – easily the day’s busiest issue – lost ground and were trading well below their issue price.

There was also active trading in some of the other issues which priced on Thursday, from CommScope Holding Co. Inc. and American Energy – Permian Basin LLC, as well as Wednesday’s issue from ArcelorMittal SA.

Statistical market-performance measures were mixed for a second straight session on Friday. They had turned mixed on Thursday after having been higher all around on Wednesday. Friday was the fifth mixed session during the last six trading days.

However, the indicators were higher versus where they had ended the previous week on Friday, May 22 – the first weekly gain after having been lower all around last week and mixed for two straight weeks before that.

Altice prices three-part deal

The Friday primary market session saw two issuers price an overall total of four tranches to raise a combined total of $2.27 billion.

Executions were mixed and somewhat choppy, with two tranches pricing on top of or in the middle of talk, and two pricing well wide of talk.

One deal was upsized.

Both issuers completed their transactions at the conclusions of roadshows.

Among the day’s sales was a $1.72 billion three-part high-yield bond financing backing Altice’s acquisition of a 70% stake in Suddenlink Communications, according to a market source.

The deal came in three tranches from three different issuing entities.

Altice US Fin I Corp. priced $1.1 billion of eight-year senior secured first-lien notes (B1/BB-) at par to yield 5 3/8%. The yield printed in the middle of the 5¼% to 5½% yield talk.

In the holdco tranche, Altice US Fin II Corp. priced $300 million of 10-year senior unsecured notes (Caa1/B-) at par to yield 7¾%. The yield printed 37.5 basis points beyond the wide end of yield talk that had been set in the 7¼% area.

In the super holdco tranche, Altice US Fin SA priced $320 million of 7¾% 10-year senior notes (Caa2/CCC+) at 98.275 to yield 8%. The coupon printed 37.5 bps beyond the wide end of coupon talk that had been announced in the 7¼% area. The yield printed 50 bps wide of the 7½% yield talk.

In addition to the wide pricings on the holdco and super holdco tranches, there were covenant changes, according to a high-yield portfolio manager who added that the deal was not believed to have been heavily oversubscribed.

J.P. Morgan and BNP Paribas were the underwriters.

Tops sees slight upsizing

Tops Holding LLC and Tops Markets II Corp. priced an upsized $560 million issue of seven-year senior secured notes (B3/B) at par to yield 8%.

The debt refinancing deal was increased from $550 million.

The yield printed on top of yield talk.

BofA Merrill Lynch and Wells Fargo were the joint bookrunners.

Darling prices tight

Darling Global Finance BV, a wholly owned indirect subsidiary of Darling Ingredients Inc., priced a €515 million issue of seven-year senior notes (Ba3/BB+) at par to yield 4¾%.

The yield printed at the tight end of the 4¾% to 5% yield talk.

Joint bookrunner Goldman Sachs International will bill and deliver. JPMorgan and BMO Capital Markets were also joint bookrunners.

The Irving, Texas-based developer and producer of sustainable natural ingredients from edible and inedible bio-nutrients plans to use the proceeds from the offering to repay debt.

Darling Global Finance, the issuing entity, is incorporated in the Netherlands.

Elsewhere Nexans SA cited market conditions as it postponed its €250 million offering of five-year senior notes (BB-).

However the company may have been after a yield that was too tight for investors, the source remarked, adding that the deal had been whispered in the high 2% context.

Santander and SG CIB were the global coordinators.

The week ahead

The June 1 week will open to a modest $2.2 billion calendar.

Informatica Corp. is marketing $750 million of eight-year senior notes (Caa2/CCC+) which are whispered in the mid 7% yield context, according to a buyside source. Price talk is expected on Monday and the deal is expected to price Tuesday, the source added.

France-based CMA CGM is selling $800 million equivalent of senior notes in two tranches. A tranche of dollar-denominated five-year notes is whispered at 8½%. A tranche of euro-denominated 5.5-year notes is being guided 50 to 70 bps inside of dollar notes. The roadshow is scheduled to wrap up on Tuesday.

And Life Time Fitness Inc. is in the market with a $600 million offering of eight-year senior notes (Caa1/CCC+) with initial guidance in the 8% area. The deal is expected to price on Thursday.

Inflows on Thursday

Dedicated high-yield funds saw cash inflows on Thursday, the most recent session for which data was available at press time, according to a high-yield investor.

High-yield ETFs saw $74 million of daily inflows on Thursday. Asset managers saw $70 million of inflows.

Meanwhile dedicated bank loan funds saw $20 million of inflows on Thursday.

Tops up, but off highs

In the secondary market, the new Tops Holding 8% senior secured notes due 2022 “seem to have been pretty well received,” a trader said, initially pegging the Williamsville, N.Y.-based supermarket retailer’s deal in a 100¾ to 101 bid context.

He later on saw the bonds settling in around 100 5/8 bid.

A second trader saw the bonds trading between 100½ and 101¼, with “most of them having a par handle.”

The earlier trades took place between 100¾ and 101, and most of the later trades between 100¾ and 100 7/8.

Later on, he said, “they were hitting a 100 5/8 bid, and going down to 100½.”

He saw more than $40 million of the bonds traded by the close.

The traders meanwhile did not see an initial aftermarket activity in the new Altice bonds, which priced late in the session, after many market participants had already made the customary pre-summer early Friday afternoon exit.

SandRidge slides on heavy volume

The most actively traded issue of the day in Junkbondland was Thursday’s big new offering from SandRidge Energy.

A market source saw more than $210 million of the Oklahoma City-based oil and natural gas exploration and production company’s new 8¾% notes due 2020 trade. The debt had priced par in a quickly shopped transaction.

One of the traders said that “they were trading at 100 1/8 yesterday – but with a 99 handle today.”

A second saw the bonds fall to 99 bid from a 99 1/8 to 99¼ context earlier.

Yet another saw the bonds down 1 full point on the day at 99 1/8.

MarkWest moves up

While the new $1.25 billion SandRidge issue “couldn’t get out of its own way,” as one of the traders put it, MarkWest Energy’s 4 7/8% notes due 2025 had no such problems Friday.

A trader saw those bonds moving around in a 99 1/8 to 99 5/8 context, around where they had traded on Thursday.

A second saw the bonds advance to 99 3/8 bid from around 99 on Thursday, while at another desk, the Denver-based E&P company’s new deal was being quoted as high as 99 5/8, up ½ point, on volume of more than $72 million.

The $1.2 billion quick-to-market issue had priced at 99.026 to yield 5%.

American Energy active

Thursday’s other new deal from the oil and gas sector – American Energy – Permian Basin’s 8% senior secured notes due 2020 – was trading in a 100½ to 101 bid range on Friday, one of the traders said, while another market source saw the bonds at 100½ bid, calling them down ¼ point on the session on volume of more than $16 million.

The Oklahoma City-based E&P company had priced $295 million of the notes at par in a regularly scheduled forward calendar deal.

CommScope secured notes busy

Away from the energy issues, traders saw brisk activity in CommScope Holding’s 4 3/8% senior secured notes due 2020, with more than $44 million of those bonds changing hands.

One trader called them unchanged on the day at 101 bid, while a second located them at 100 3/8.

A third said that both that issue and CommScope’s new 6% senior unsecured notes due 2025 were trading around 100½ bid.

The Hickory, N.C.-based provider of infrastructure services to the communications industry had priced $500 million of the five-year secured bonds and $1.5 billion of the 10-year unsecureds around par on Thursday, in a regularly scheduled transaction.

ArcelorMittal moves up

There was also active upside trading Friday in the two halves of Luxembourg-based steelmaker ArcelorMittal’s $1 billion issue, both tranches of which had priced at par in a Wednesday drive-by offering.

Its 5 1/8 notes due 2020 were seen up 3/16 point on the session at 101 5/8 bid, on volume of over $24 million.

The company’s 6 1/8% notes due 2025 firmed by 5/16 point to just under 102 bid, with more than $17 million of turnover.

Indicators mixed, up on week

Statistical market-performance measures were mixed for a second straight session on Friday. They had turned mixed on Thursday after having been higher all around on Wednesday. Friday was the fifth mixed session during the last six trading days.

However, the indicators were higher versus where they had ended the previous week on Friday, May 22 – the first weekly gain after having been lower all around last week and mixed for two straight weeks before that.

The KDP High Yield Daily Index lost 1 basis point to end the session at 71.49, its first loss after two consecutive gains before that. On Thursday, it had risen by 9 bps, after having edged up by 1 bp on Wednesday.

Its yield was unchanged Friday at 5.32% after having ballooned out by 8 bps on Thursday – even though the yield normally moves inversely to the index reading, typically falling when the index rises and vice versa – after having come in by 1 bp on Wednesday.

The index reading compared favorably to the 71.43 reading at the close of business the previous Friday, although the yield was wider than the prior week’s 5.25% yield.

The Markit Series 24 CDX North American High Yield Index was unchanged on Friday at 107 1/16 bid, 107 3/32 offered, after having retreated by 1/8 point on Thursday – its fourth loss in the previous five sessions and seventh downturn in the prior nine. On Wednesday, the index had gained 3/16 point.

The Markit index was up marginally from the previous Friday’s 107 1/32 bid, 107 3/32 offered.

The Merrill Lynch North American Master II High Yield Index meanwhile registered its sixth consecutive gain on Friday, firming by 0.036% on top of Thursday’s 0.006% advance.

Friday’s gain lifted the index’s year-to-date return to 4.062% – its fourth straight new peak level for the year. It was up from the 4.025% seen on Thursday, which had been the previous high point for 2015.

For the week, the index was up 0.159%, its first weekly gain after the previous week’s 0.014% loss, which had left the index’s cumulative reading the prior Friday at 3.896%. Friday marked the third weekly gain in the last four weeks.

© 2015 Prospect News.
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