Audatex prices first junk deal since June 30; Exterran to hit the road; Sitel jumps on news

By Paul Deckelman

New York, July 13 – The “Great July Junk Bond Drought” finally came to an end on Monday, as Audatex North America, Inc., a provider of software and services to the automobile insurance claims processing industry, priced an $850 million add-on to its existing 2023 notes.

The new issue priced in the early evening, way too late for any kind of a real aftermarket, after the deal was restructured, with a planned 10-year note tranche dropped.

The Audatex pricing was the first dollar-denominated and purely junk-rated issue from a domestic or industrialized-country borrower seen in nearly two weeks. The last previous new junk issue to come to market was aircraft engine repair and maintenance company DAE Aviation Holdings Inc.’s $485 million of eight-year notes, which priced back on June 30.

With the log-jam finally broken, other issuers may now feel that the time is ripe to bring their long-delayed deals.

Exterran Holdings Inc., a provider of natural gas compression services to the energy industry, was heard by syndicate sources to be getting ready to start a roadshow on Tuesday for a $400 million offering of seven-year notes. The issue could price as soon as the end of this week.

Away from the new-deal realm, Sitel LLC’s bonds jumped on the news that the customer care company’s owner, Onex Corp., has agreed to sell Sitel to France-based Groupe Acticall.

Statistical market performance measures moved higher for a third straight session Monday.

The junk primary is back

High-yield market participants returning to work on Monday after the weekend were greeted by an unaccustomed sight – the news that a fully junk-rated company was actually going to do a new deal, with pricing expected sometime Monday.

That was the upshot of an announcement from Solera Holdings, Inc., a Westlake, Texas-based provider of software and services to the automobile insurance claims processing industry, saying that its Audatex North America indirect subsidiary was going to do an $850 million two-part issue, consisting of a tranche of new 10-year senior unsecured notes and an add-on to its existing $565 million of 6 1/8% senior unsecured notes due Nov. 1, 2023 (B1/BB-).

When the quick-to-market issue finally priced – well after trading had wrapped up for the day – the deal had been restructured, with the 10-year piece abandoned and the full $850 million shifted into the add-on tranche.

The notes priced at 99.5 to yield 6.201%.

Price talk on the notes had been par-to-100.5.

The Rule 144A/Regulation S for life offering was brought to market via sole bookrunning manager Goldman Sachs & Co.

The new notes will be immediately fungible with the existing notes and will carry the same indenture terms.

Audatex originally sold $340 million of the 6 1/8% notes in 2013, pricing them at par in a quick-to-market transaction on Oct. 27 of that year, along with a $510 million add-on to its existing 6% senior notes due June 15, 2021.

It priced another $225 million of the 6 1/8% notes, along with another $175 million of the 6% 2021 notes, in a second quick-to-market transaction on Nov. 12, 2014, with those 2023 add-on notes pricing at 104.5 to yield 5.48%.

The company planned to use the net proceeds from the new deal to complete the purchase of the equity interests in its Service Repair Solutions joint venture from its joint venture partner and to repay all of its outstanding borrowings under the senior unsecured interim credit facility that it entered into in connection with its acquisition of DMEautomotive, LLC on June 2.

Any remaining net proceeds will go for general corporate purposes, including continuing to actively seek, evaluate and potentially pursue strategic initiatives. Such strategic initiatives may include future acquisitions, joint ventures, investments or other business development opportunities.

It’s been a long time

The Audatex/Solera pricing was the first such pricing of a dollar-denominated, fully junk-rated deal since June 30, when DAE Aviation Holdings, a Scottsdale, Ariz.-based provider of aircraft engine repair, maintenance and overhaul services, priced $485 million of 10% notes due 2023 back on June 30.

Those StandardAero bonds priced at 98.65 to yield 10¼%.

After that, though, the temperatures outside sweltered, Junkbondland’s primary went into a deep freeze, with borrowers hugging the sidelines until the latest sources of turmoil buffeting world financial markets – the slowing economy in China and that country’s stock market meltdown, the Greek debt crisis and the continued fall in oil prices – seemed to have played themselves out, at least for now.

Two big deals from familiar issuers did come to market last week – but both Stamford, Conn.-based cable operator Charter Communications Inc.’s $15.5 billion six-tranche offering last Thursday and Fort Worth-based automotive lender General Motors Financial Inc.’s $2.3 billion two-part transaction were split-rated, priced off the investment-grade desks, traded on spread and mostly attracted high-grade accounts looking to pick up a little extra yield by dipping down into crossover territory.

Exterran plans deal

With a bona fide junk issuer having actually taken the plunge and brought a deal to market, primaryside watchers speculated that other new deals could come soon.

Late in the day, market sources said that subsidiaries of Exterran Holdings will begin a roadshow on Tuesday for a planned $400 million issue of seven-year senior unsecured notes.

That roadshow will open in New York, where a group luncheon is to be held. On Wednesday, the roadshow will move to Boston, and then to the U.S. west coast on Thursday and Friday, with pricing expected thereafter.

The Rule 144A/Regulation S offering, which is being sold with registration rights, will be brought to market via joint bookrunning managers Goldman Sachs, Wells Fargo Securities LLC, Credit Agricole Securities (USA) Inc., Bank of America Merrill Lynch, Citigroup Global Markets Inc., RBC Capital Markets Corp. and UniCredit Bank AG.

ScotiaCapital (USA) Inc. and SMBC Nikko Securities America Inc. will act as senior co-managers on the issue.

HSBC Securities (USA) Inc., Santander Investment Securities Inc. and BB&T Capital Markets will be co-managers on the deal.

The notes are being issued in connection with the coming spin-off by Exterran – a Houston-based global provider of natural gas compression services, operations, maintenance, service and equipment for oil and gas producers, processors and transporters – of its international services and global fabrication businesses, which will be formed into a stand-alone, publicly traded company called Exterran Corp. Divestment of the global operations will leave Exterran Holdings as pure-play U.S. compression services business.

The notes are to be issued by Exterran Energy Solutions, LP, currently a wholly owned subsidiary of Exterran Holdings, and EES Finance Corp., a wholly owned subsidiary of Exterran Energy Solutions. After completion of the separation, the issuing entities will become subsidiaries of the new Exterran Corp.

The net proceeds from the note offering, along with borrowings under Exterran Energy Solutions’ new agreement, will be used to repay current parent Exterran Holdings’ existing debt.

Sitel bonds soar

Away from the new deals, Sitel’s 11½% notes due 2018 jumped more than 6 points to close at 101 1/8 bid, on volume of more than $10 million.

The bonds had traded as low as around 87½ bid on Thursday, firmed to around 95 on Friday and just kept going on Monday.

Private-equity firm Onex said Friday that it has agreed to sell Sitel Worldwide Corp., the corporate parent of bond-issuer Sitel LLC.

Onex said it expects to receive about $55 million in proceeds from the sale of Nashville-based customer-care provider Sitel Worldwide. The price includes an earn-out. The buyer is Groupe Acticall of France.

Indicators remain higher

Statistical market-performance measures were higher for a third straight session on Monday. They had turned higher across the board on Thursday after having been lower all around on Wednesday, adding to those gains on Friday and again on Monday.

The KDP High Yield Daily index rose by 9 basis points Monday, to 69.96, after having been unchanged on Friday at 69.87; it had broken out of a three-session slump on Thursday, moving up by 5 bps, after having fallen by 9 bps on Wednesday.

Its yield meanwhile came in by 5 bps to close at 5.76%, after having risen by 1 bp on Friday.

The Markit Series 24 CDX North American High Yield index firmed for a third straight session on Monday, rising by 5/16 point to end at 106 23/32 bid, 106¾ offered.

On Friday, it had risen by 9/16 point. The index has now been up in four sessions out of the last five.

The Merrill Lynch North American Master II High Yield index also advanced for a third straight session, moving up by 0.149%, on top of its 0.117% gain on Friday.

Monday’s gain lifted its year-to-date return to 2.537% from 2.385% on Friday, although it remained well down from the 4.062% reading recorded on May 29, the index’s peak level for the year so.

© 2015 Prospect News.
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