Digicel, Archrock price; Intelsat slides, Dean Foods, McDermott drop; funds out $1.91 billion

By Paul A. Harris and Abigail W. Adams

Portland, Me., March 7 – The primary market continued to churn out new deals with two pricing during Thursday’s session and one more on tap for Friday.

Digicel priced an upsized $600 million issue of five-year first-lien senior secured notes (B1//B) at par to yield 8¾%.

Archrock, Inc. priced a $500 million issue of eight-year senior notes (B3/B-) at par to yield 6 7/8% in a Thursday drive-by.

Manitowoc Co., Inc.’s $300 million offering is on tap for Friday.

While the primary market remained active, trading volume was light on Thursday with the secondary space soft, sources said.

Intelsat SA’s junk bonds continued to slide in high-volume activity in the wake of political opposition to its C-band spectrum proposal.

Dean Foods Co.’s 6½% senior notes due 2023 continued to trade down in the secondary space after a ratings downgrade was sparked by an earnings miss and a strategic review.

McDermott International Inc.’s 10 5/8% senior notes due 2024 were also losing ground following a ratings downgrade.

The notes have been under pressure since disclosing overages on a contract in mid-December.

Meanwhile, high-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall liquidity trends in the junk market – saw outflows of $1.91 billion for the week ended Wednesday, according to fund-flow statistics generated by AMG Data Services Inc.

The outflow is the first in six weeks.

Digicel upsizes

On Thursday, Digicel priced an upsized $600 million issue of five-year first-lien senior secured notes (B1//B) at par to yield 8¾%.

The issue size increased from $550 million.

The yield and price both came on top of final talk. Earlier yield talk was in the 9% area.

Citigroup was the left bookrunner.

The Kingston, Jamaica-based mobile phone network provider plans to use the proceeds to refinance short-term secured debt.

The additional proceeds resulting from the $50 million upsizing will be used to put additional cash on the balance sheet.

The additional cash will be used for general corporate purposes which may include distributions to Digicel International Finance Ltd.

The new 8¾% notes were trading up out of the gate. They were seen changing hands between par ¾ and 101 1/8, according to a market source.

More than $43 million of the bonds changed hands by the late afternoon.

Archrock drives by

In quick-to-market Thursday action, Archrock priced a $500 million issue of eight-year senior notes (B3/B-) at par to yield 6 7/8%.

The yield printed in the middle of yield talk in the 6 7/8% area.

J.P. Morgan Securities LLC was the lead for the debt refinancing deal.

Manitowoc on deck

One deal is on deck for Friday.

Manitowoc is in the market with a $300 million offering of seven-year senior secured second-lien notes (B2/B).

Earlier in the week, the deal was whispered to yield in the low 8% area.

Intelsat’s slide

Intelsat’s junk bonds remained under pressure in high-volume activity on Thursday.

Intelsat (Luxembourg) SA’s 8 1/8% senior notes due 2023 dropped ¾ point to 76¼, a market source said.

More than $26 million of the bonds were on the tape by the late afternoon.

The notes dropped 5 points on Tuesday and are down 6½ points on the week, sources said.

Intelsat SA’s 9½% senior notes due 2023 were largely flat in high-volume trading.

The notes closed the day flush with Wednesday at 90¾, a market source said.

More than $20 million of the bonds were on the tape during Thursday’s session.

The notes dropped 4½ points on Tuesday and are down 4¾ points on the week, sources said.

Intelsat’s junk bonds were dropping after news surfaced of mounting political opposition to the company’s C-band proposal.

Intelsat is part of the C-band alliance which is pushing to use part of the C-band spectrum to support the introduction of 5G wireless services in the United States.

Dean Foods downgraded

Dean Foods’ 6½% senior notes continued to trade down in high-volume activity on Thursday following a ratings downgrade.

The notes dropped 1½ points to close Thursday at 67½.

More than $17 million of the bonds changed hands during Thursday’s session.

The notes have been under pressure since Dean Foods reported fourth-quarter earnings and announced a strategic review in late February.

The review is expected to include the sale of certain assets, a merger or joint venture with another company, going private, or the sale of the company.

On Wednesday, S&P lowered Dean Foods’ credit rating to CCC+ from B- and lowered the credit rating on the 6½% notes to CCC+.

Absent a turnaround, the debt obligations of the food and beverage company appear unsustainable over the long term, the rating agency said.

McDermott drops

McDermott’s 10 5/8% senior notes due 2024 were again trading down in high-volume activity on Thursday.

The 10 5/8% notes dropped about 1 point to close Thursday at 82½, according to a market source.

More than $14 million of the bonds were on the tape by the late afternoon.

The notes were trading down following a rating downgrade from S&P.

S&P lowered its issuer credit rating to B from B+ and lowered the rating on its unsecured notes to CCC+ from B-.

The downgrade was due to McDermott’s recent earnings miss and losses on various projects, the rating agency said. (See related article in this issue)

The 10 5/8% notes have been under pressure since mid-February when the engineering, construction and installation company announced it was taking a $168 million charge for its Cameron LNG project in Louisiana.

The notes have slid 10 points since the announcement.

Indexes down again

Indexes continued their decline on Thursday.

The KDP High Yield Daily index was down 5 basis points to close Thursday at 69.71 with the yield now 6.05%.

The index was down 11 bps on Wednesday, 4 bps on Tuesday and was flat on Monday.

The ICE BofAML US High Yield index dropped 18.2 bps with the year-to-date return now 6.076%.

The index was down 11 bps on Wednesday and 4.1 bps on Tuesday and rose 0.2 bp on Monday.

The index shot past 6% returns on Feb. 25 after passing 5% returns on Feb. 12.

The index surpassed 4% year-to-date returns on Jan. 30.

The CDX High Yield 30 index dropped 22 bps to close Thursday at 105.47. The index was down 36 bps on Wednesday, 26 bps on Tuesday and 12 bps on Monday.

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