Altice drives by with secured megadeal, existing notes ease; existing Calumet notes fall on new deal

By Paul Deckelman and Paul A. Harris

New York, April 18 – The high yield primary market kicked off the new week on Monday with a single large-sized deal, as European cable operator and telecommunications company Altice NV priced a quickly shopped and upsized $2.75 billion of 10-year secured notes via a financing subsidiary.

Traders did not immediately report any aftermarket activity in the huge new deal.

They did see the company’s existing bonds trading lower, on busy volume.

That was also the case with the existing paper from Calumet Specialty Products LP, after the maker of fuels and other hydrocarbons priced an unscheduled secured note offering on Friday.

Away from the new deals, there was brisk activity in energy issues such as Whiting Petroleum Corp. and California Resources Corp. following the failure of global oil producers to reach agreement on output cuts at a weekend meeting.

Statistical market performance measures were mixed for a second consecutive session on Monday; they had turned mixed on Friday after having been higher across the board in each of the previous five sessions. It was the fourth mixed session in the last 12 trading days.

Altice upsized and tight

Altice Financing SA priced Monday's sole deal, an upsized $2.75 billion issue of 10-year senior secured notes (B1/BB-) that came at par to yield 7½%.

The deal size was increased from $2.25 billion.

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

It played to about $7 billion in orders, a market source said.

Goldman Sachs was the left bookrunner for the massive debt refinancing. BofA Merrill Lynch, Barclays, BNP Paribas, Citigroup, Credit Agricole, Credit Suisse, Deutsche Bank, HSBC, ING, Morgan Stanley Natixis, RBC and UBS were the joint bookrunners.

RegionalCare Capella roadshow

Elsewhere, in Monday's primary market news, RegionalCare Capella Healthcare plans to start a roadshow on Tuesday in New York for an $800 million offering of seven-year senior secured notes.

An investor call is also set to take place on Tuesday.

Initial guidance has the deal coming with a yield in the mid-7% range, a trader said.

The roadshow continues into Friday, and the offer is set to price thereafter.

Barclays is the lead left bookrunner. RBC, Deutsche Bank, Credit Suisse, UBS and Citigroup are the joint bookrunners.

Proceeds will be used to help fund the creation of RegionalCare Capella Healthcare through the merger of RegionalCare Hospital Partners Inc. and Capella Healthcare Inc.

Apart from Altice and RegionalCare Capella the news stream was thin.

McGraw-Hill Global Education Holdings LLC announced in a Monday press release that it intends to sell $640 million of eight-year senior notes (B3//BB-).

The New York-based provider of education materials plans to use the proceeds for debt refinancing in order to extend its maturity profile, as well as to merge McGraw-Hill School Education into the McGraw-Hill Global Education credit group and to fund a dividend.

The debt financing also includes a $1,655,000,000 credit facility scheduled to launch at a Monday bank meeting. Credit Suisse Securities (USA) LLC is leading the credit facility.

And there was color on Friday's Calumet Specialty Products Partners LP $400 million issue of 11½% senior secured notes that priced at 98.273 to yield 12%.

The notes were par ¼ bid heading into the Monday mid-morning.

BofA Merrill Lynch managed the sale.

It was a “clubby” deal, sources said on Monday.

The entire issue was said to be taken down by six to eight accounts, a trader said.

Also on Monday, high yield accounts – especially hedge funds – took an active interest in Argentina's $15 billion four-part sovereign comeback deal, a trader said.

The deal was believed to be playing to an overall $70 billion of orders across all four tranches, a trader said, adding that yields ranged from 6¼% to 8%.

Cirsa brings €300 million

In the European primary market Cirsa Funding Luxembourg SA is marketing a €300 million offering of five-year senior notes.

Deutsche Bank is the sole bookrunner.

The Madrid-based gaming company plans to use the proceeds to refinance notes due in 2018.

Outflows on Friday

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

High yield ETFs saw $408 million of outflows on the day.

Actively managed funds sustained $30 million of outflows on Friday.

Meanwhile, dedicated bank loan funds were also negative, seeing $5 million of outflows on the day.

Existing Altice bonds retreat

In the secondary market, traders did not immediately report any substantial aftermarket activity in the new Altice 7½% senior secured notes due 2026, citing the relative lateness in the session at which that that huge deal priced.

However, they did see considerable activity in some of the company’s existing paper.

Its 6 5/8% notes due 2023 were seen by a trader to have eased by ¼ point on the session, finishing at 99 bid, on volume of over $16 million.

Its 6½% notes due 2022 lost ½ point, closing at 100½ bid, with over $11 million of those notes having changed hands.

Altice subsidiary Numericable SFR SA’s recently priced 7 3/8% senior secured notes due 2026 were 1/8 point easier on the day, a market source said, seeing the French telecom and broadband operator’s paper closing at 101 7/8 bid, on volume of over $30 million, making it one of Junkbondland’s busiest issues. The company had priced some $5.19 billion of those notes in a regularly scheduled forward calendar offering back on April 6 – the biggest junk bond deal of the year

Calumet paper pummeled

The existing bonds of Calumet Specialty Products Partners LP were trading off badly on Monday, traders said, in the wake of the Indianapolis-based specialty fuels producer’s new deal on Friday.

Its 6½% notes due 2021 were particularly hard-hit, plunging by a dozen points to finish at 64¼ bid, on volume of over $15 million.

The company’s 7 ¾% notes due 2023 were almost as bad, nosediving by more than 9 points to 62¾ bid, a market source said, although he noted more restrained trading in that issue of only about $5 million.

A trader said that while the new Calumet 11½% senior secured notes due in January of 2021 that priced on Friday are rated B2/B+, the other bonds “are Caa2/CCC+ and are unsecured. The value of the unsecured notes goes away, and there is more value for the secured piece.”

He said that the new bonds were being quoted around 104½ to 105 bid, “but I don’t think they really traded at all,” seeing no transactions showing up on the Trace system.

Earlier in the day, another trader quoted them at around 100¼ bid – well up from their 98.273 issue price.

All of this was going on against what the first trader called “a comedy of bad stories” about the company that hammered its Nasdaq-traded shares down by $4.97, or 48.39% on Monday. They ended at $5.30, on volume of over 11.4 million shares, or over 14 times the normal volume.

On Friday, in conjunction with its announcement of its secured bond deal, the company also said that “[i]n view of current volatility in market conditions and as part of a broader effort to maintain an adequate level of liquidity at the Partnership, the board of directors of Calumet's general partner unanimously voted to suspend the current quarterly cash distribution of $0.685 per unit, or $2.74 per unit on an annualized basis, effective for the quarter ended March 31, 2016.”

Moody’s Investors Service on Monday meanwhile cut its ratings on the company’s outstanding debt, slicing its corporate family rating to Caa1 from B2 previously and cutting the existing bonds back to Caa2 from B3.

The ratings agency said that “Calumet's liquidity will improve following the new $400 million notes issuance and suspension of distributions,” but also warned that “the Caa1 CFR reflects the company's high leverage and likelihood that profitability of the Fuel Products and Oilfield Services segments in 2016-2017 will remain well below peak levels.”

Moody’s further said that the corporate family rating “reflects its elevated leverage at a time when refining industry margins are contracting and Moody's expectation that the company's profitability will remain below levels achieved in 2014-2015, despite the completion of four capacity expansion projects over the past year.”

Energy active on Doha outcome

Away from new or recently priced issues, energy names were active on Monday after a weekend meeting in Doha, Qatar, failed to result in an oil production freeze between OPEC and non-OPEC producers.

Domestic crude fell nearly 1% on the day – though it was down as much as 4% earlier in the session – in response to the news. Saudi Arabia was reportedly a major holdout, refusing to participate in any such deal unless Iran agreed to also participate.

Iran, for its part, has been saying that it would not agree to a freeze until it had reached pre-sanction production levels.

Still, market chatter is that no deal is a better conclusion, as it allows the oil market more time to naturally rebalance itself. Investors appeared to be only partly convinced, as oil and gas securities traded mixed on the day.

Traders said there was a fair bit of action going on in Chesapeake Energy Corp.’s 8% second-lien notes due 2022. One trader said the paper traded “about 40 times,” rising “almost 2½ points” to 60.

A second trader called the bonds “pretty active,” seeing the notes rise to a 59 to 60 context from opening levels around 55.

“So they had a nice intraday move,” he said.

However, at another desk, a market source said the paper ended off 1/8 bid, at just under 58 bid, having given up its early gains. He said that over $40 million traded.

California Resources’ 8% notes due 2022 fell by 1 3/8 points on the day, ending at 53¼ bid, on volume of over $14 million.

Whiting Petroleum was also busy; those bonds were heading into higher territory, according to a trader.

He saw the 5¾% notes due 2021 tick up almost a point to 73¾, with about $20 million of the bonds trading. The 6¼% notes due 2023 closed up 1¼ points at 75¼.

Indicators stay mixed

Statistical market performance measures were mixed for a second consecutive session on Monday; they had turned mixed on Friday after having been higher across the board in each of the previous five sessions. It was the fourth mixed session in the last 12 trading days.

The KDP High Yield Daily index saw its first loss on Monday after six straight gains, dropping back by 6 basis points to end at 66.79, versus Friday’s 16 bps rise and even bigger jumps of 24 bps on Tuesday, 32 bps on Wednesday and 21 bps on Thursday.

Its yield, though, managed to continue narrowing on Monday, coming in by 1 bp to 6.37%, even though the yield generally moves inversely to the index’s movement, rising while the index falls and vice versa. It was its fourth consecutive tightening, including Friday’s 4 bps decline to 6.38%. It had also tightened by 5 bps on Thursday and by 11 bps on Wednesday, after having been unchanged on Tuesday.

The Markit Series 26 CDX North American High Yield index moved up by 11/32 point on Monday, going out at 103 bid, 103 1/16 offered, bouncing back from its 3/16 point loss on Friday; before that loss, the index had posted five straight advances.

The Merrill Lynch North American High Yield Master II index finished up for a seventh consecutive session on Monday, edging up by 0.009%, on top of Friday’s 0.022% improvement.

That lifted its year-to-date return to 5.36%, its sixth successive new peak level for the year, from the previous mark of 5.351%, set on Friday.

Stephanie N. Rotondo contributed to this review.

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