Manitowoc Food prices to cap $3.5 billion week; recent deals active; Arcelor up on debt plan

By Paul Deckelman and Paul A. Harris

New York, Feb. 5 – Manitowoc Foodservice Inc., as expected, served up a $425 million offering of eight-year notes on Friday.

As has been the case with almost all of the recently priced new deals, execution was crisp, coming at the tight end of pre-deal market price talk.

The offering brought the week’s tally of new U.S. dollar-denominated and fully junk-rated paper to $3.52 billion in five tranches, down a little from the $3.8 billion that came to market in six tranches last week.

The week’s new issuance – which also included Charter Communications Inc.’s Wednesday megadeal-sized offering, as well as more modestly sized offerings from Acadia Healthcare Co., Inc., Vizient, Inc. and Kinetic Concepts Inc. - raised the total of new-deal issuance for the year so far to $9.44 billion in 15 tranches, according to data compiled by Prospect News.

However, that was still running some 58.5% behind the new-issuance pace seen at this time a year ago, when $22.76 billion of new junk paper from domestic or industrialized-country issuers had come to market in 37 tranches by this time on the calendar.

Traders saw a fair amount of activity in recently priced bonds, with Vizient trading at a clear premium to its issue price, Acadia up a little, but Charter struggling to stay at or above par.

Away from the new deals, traders noted gains in ArcelorMittal SA’s bonds, aided by news that the European steel giant will raise new capital to take out some of its existing debt.

Statistical indicators of junk market performance were mixed on Friday versus where they had finished on Thursday, their third consecutive mixed session and fourth such mixed session in the last eight trading days.

Those market measures, though were lower versus where they had finished last Friday – their first lower week after two straight weeks when the gauges were higher all around, and the third lower week out of the last five.

Manitowoc Foodservice prices tight

The Friday session saw the completion of a single deal in the high-yield primary market.

Manitowoc Foodservice priced a $425 million issue of eight-year senior notes (Caa1/B) at par to yield 9½%.

The yield printed at the tight end of the 9½% to 9¾% yield talk.

Goldman Sachs was the left bookrunner. J.P. Morgan, HSBC and Citigroup were the joint bookrunners.

Proceeds, together with proceeds from a concurrent term loan B, will be used to pay a $1,388,000,000 cash dividend to Manitowoc ParentCo in connection with spinoff of the New Port Richey, Fla.-based commercial foodservice equipment company, and for general corporate purposes.

Manitowoc Cranes revisions, talk

Manitowoc Co., Inc. (Manitowoc Cranes) talked an upsized, restructured $260 million offering of 5.5-year senior secured second-lien notes (B1/B+) with a 12¾% coupon, discounted to approximately 95.3 resulting in an all-in yield of 14%.

The deal size was increased from $250 million.

The maturity was decreased to 5.5 years from eight years.

There are also covenant changes.

The deal is set to price on Monday.

Goldman Sachs is the left bookrunner. J.P. Morgan, Citigroup and Wells Fargo are joint bookrunners.

Proceeds, together with the $1,388,000,000 cash dividend from Manitowoc Foodservice, Inc. and an $85 million initial draw on the company’s ABL revolver, will be used repay debt and for general corporate purposes.

Aside from Manitowoc Crane, just one other dollar-denominated deal was positioned on the active forward calendar as business for the Feb. 8 week, heading into the weekend.

Endurance International Group Holdings Inc. marketed a $350 million offering of eight-year senior notes during the past week. That deal is facing headwinds, according to market sources.

Beyond Manitowoc Cranes and Endurance primary market activity is likely to continue in February as it was in the later part of January.

There will be deals, sources say. But the volume is not expected to ramp up sharply anytime soon.

Several sources had visibility on deals for the coming week, when canvassed on Friday, although no one had issuer names to volunteer.

WFS prices two tranches

In the European primary market, two issuers priced a combined three euro-denominated tranches to raise a total of €538 million on Friday.

WFS Global Holding SAS priced €240 million of notes in two resized tranches as part of an acquisition financing.

The secured tranche was an upsized €100 million add-on to the company’s 9½% senior secured notes due July 15, 2022 (B2/B) which priced at 101 to yield 9.285%. The add-on was increased from €90 million. The reoffer price came 50 basis points rich to the rich end of the 100 to 100.5 price talk.

The unsecured portion of the issuance was a downsized €140 million tranche of new 12½% seven-year senior notes (Caa1/CCC+) which priced at 98 to yield 12.94%. The tranche size was decreased from €150 million. The unsecured notes priced in line with talk that specified a to-be-determined discount resulting in a yield in the 13% area.

Global coordinator BofA Merrill Lynch will bill and deliver. ING was the joint bookrunner.

Moby at the wide end

Onorato Armatori SpA, the holding company for Italian ferry boat operator Moby SpA, priced a €300 million issue of seven-year senior secured notes (Ba2/expected BB-) at par to yield 7¾%.

The yield printed at the wide end of the 7½% to 7¾% yield talk.

Joint physical bookrunner Goldman Sachs will bill and deliver. JPMorgan and UniCredit were the joint physical bookrunners. Banca IMI, Banca Akros and Jefferies were joint bookrunners.

The Milan-based company plans to use the proceeds to refinance debt.

In the wake of Friday’s business, just one euro-denominated deal, a sizable one, remained on the euro-calendar.

Netherlands-based vehicle leasing company LeasePlan Corp. NV has been roadshowing €1.55 billion of senior secured notes (B1/BB+/expected BB-) in three tranches: euro-denominated and dollar-denominated five-year notes, and euro-denominated seven-year notes, with tranche sizes to be determined.

The European portion of the roadshow was set to conclude by the end of the past week. The buzz on the deal is that the European roadshow, which was a two-team cross-border roadshow, was well attended, according to a London-based sellside source.

The buyout deal roadshows in the United States in the week ahead and wraps up on Thursday.

Joint bookrunner JPMorgan will bill and deliver. Goldman Sachs, Credit Suisse and ING are also joint bookrunners.

Beyond LeasePlan, the European market could become quiet, especially given the recent volatility, the sellsider said, adding that issuers know very well that they will have to pay up to get their deals done amid the ongoing instability in the global capital markets.

Only those with no choice will come, the source said.

Also, potential European issuers are entering a blackout period, which will also serve to damp down issuance, the sellsider said.

New Manitowoc unseen

In the secondary market, traders were not reporting any initial aftermarket dealings Friday in the new Manitowoc Foodservice 9½% notes due 2024.

However, traders said they saw gains in the parent company’s two issues of existing bonds which are expected to be repaid using the proceeds from the foodservice unit’s new bonds and term loan, as well as the concurrent eight-year secured offering that the Manitowoc, Wis.-based parent, a maker of cranes and industrial lifting equipment, is currently shopping around to potential investors.

A trader saw the existing 5 7/8% notes due 2022 jump to 109¼ bid, up 3 points on the session, with over $18 million having changed hands. That gain followed Thursday’s 1½ point rise in the bonds, also on over $18 million of volume.

Its 8½% notes due 2020 were seen ½ point better at 104½ bid, on volume of around $4 million. On Thursday, the notes had firmed by ¼ point, with over $7 million traded.

New Charter churns actively

Among recently priced deals, a trader said that “everybody was just trading in the new issues.”

But he said that the biggest deal of the week – Charter Communications’ 5 7/8% notes due 2024 – was having the most trouble, trading below its par issue price for most of Friday’s session.

He chalked that weakness up to “a low coupon in a weak market.”

The Stamford, Conn.-based cable operator’s CCO Holdings, LLC and CCO Holdings Capital Corp. priced that $1.7 billion issue – the week’s biggest – at par on Thursday in a quick-to-market transaction that was upsized from an originally announced $1.5 billion.

While the bonds were heard to have gotten as good as 100¾ bid on Thursday, they went home closer to par.

On Friday, a market source said, the new notes were among the busiest in Junkbondland, with over $37 million trading

But after initially firming modestly from Thursday’s par close, the bonds were in retreat, seen finishing up the session slightly below par at 99¾ bid.

A second trader quoted two-sided markets at 99½ bid, 99¾ offered.

He also saw the company’s existing 5¾% notes at 96¾ bid, 97¾ offered.

More Acadia activity

For a second straight session, Acadia Healthcare’s new 6½% notes due 2024 were seen to have been actively traded.

The bonds went home down 5/8 point, a trader said, at 100 1/8, after having finished on Thursday at 100¾ bid, on volume of over $27 million.

A second trader saw the bonds circulating between par and 100 3/8 bid.

The Franklin, Tenn.-based behavioral healthcare services provider priced $390 million of the notes at par on Thursday after shopping them to investors via a roadshow.

They priced early enough in the session to see some aftermarket trading; in fact, the new Acadia issue had been the most active junk credit that session, with over $89 million having traded, at least $71 million of those being round-lot transactions.

The bonds initially opened strongly when they were freed to trade, pushing as high as 102¼ bid, before coming down from that peak level to finish at 100¾ bid.

Thursday’s other new deal – Vizient’s 10 3/8% notes due 2024 – gained 1 point on the day on Friday, going out at 102 ½ bid, a market source said, on volume of over $20 million.

A second trader saw more modest gains in a 101 3/8 to 102 1/8 bid context.

The Irving, Texas-based network of not-for-profit healthcare organizations priced its $600 million issue – upsized from an initial $500 million – at par in a regular forward calendar offering.

The new bonds were seen by a trader to be moving around late Thursday in a 101 to 102 bid context, though on not much aftermarket activity.

ArcelorMittal up on debt plan

Away from the new issues, ArcelorMittal said late Thursday that it not only lost nearly $8 billion in all of 2015 but that it was looking to raise as much as $3 billion in new capital to take out as much as $4 billion in debt.

On the news, “the bonds were up markedly but it looks like they came back to earth,” a trader said.

The trader saw the company’s 7¼% notes due 2021 holding steady at 86½. The 7½% notes due 2021 dipped ¼ point to 86 as the 8% notes due 2039 rose over 3 points to 76¼.

The 6 1/8% notes due 2018 ticked up a ½ point, the trader said, ending at 95½.

“All on heavy volume,” the trader added.

A second trader said the debt was “up on that news about raising capital, debt reduction, etc.” He said the bonds were up 5 to 6 points on the day.

Specifically, he said the 6¼% notes due 2022 traded as high as 88, but came off those highs to end in an 86 to 87 ZIP code.

That compared to previous levels between 81 and 82, he said.

ArcelorMittal hopes a new capital raise will better position the company while prices remain depressed. The new funds will come via a rights issue for shareholders, with the Mittal family contributing up to $1.1 billion.

The company also intends to sell its 35% stake in Gestamp Automoción for about $975 million.

Proceeds from both the rights issue and the asset sale will be used to lower the company’s debt burden to under $12 billion.

Indicators mixed; off on week

A trader said that overall, the junk market Friday “was softer, with some names trading down.”

However, statistical measures of junk market performance were mixed for a third consecutive session on Friday; they had turned mixed on Wednesday after having been lower across the board on Monday and Tuesday and then stayed that way on Thursday and again on Friday.

Friday was the indicators’ fourth mixed session in the last eight trading days.

But the indicators were closing the week down from where they had ended last Friday, their first down week after two stronger-across-the-board weeks before that. It was their third downside week out of the last five.

The KDP High Yield Daily Index eased by 2 basis points Friday to end at 62.52 – its fifth straight decline after having risen for seven straight sessions before that.

On Thursday, the index had retreated by 11 bps.

However, its yield – which would normally move inversely to the index reading, rising as the index fell and vice versa – bucked the usual trend for a second straight session on Friday coming in by 3 bps to end at 7.29%. On Thursday, it had declined by 4 bps despite a falling index reading. Those were the yield’s first two narrowings after three consecutive widenings.

Those levels compared unfavorably with the 63.15 index reading and 7.19% yield seen last Friday.

The Markit Series 25 CDX North American High Yield Index lost 13/16 point on Frida to end at 97 31/32 bid, 98 1/32 offered, its second straight loss; on Thursday, it was off by ¼ point.

The index was also down from last Friday’s 99 23/32 bid, 99¾ offered.

The Merrill Lynch North American High Yield Master II Index finished off by 0.323% on Friday, versus Thursday’s 0.113% rise - its first gain after three consecutive losses, which in turn had followed seven straight advances.

Friday’s loss widened its year-to-date deficit to 2.1688% from 2.373 3% on Thursday. The cumulative loss, though, remains well down from the index’s worst red-ink level for the year so far, the 4.095% deficit seen on Jan. 20.

For the week, the index lost 1.103%, after having risen in both of the previous two weeks.

-Stephanie N. Rotondo contributed to this review

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