New deal frenzy continues; primary prices $3.35 billion over six deals; Antero, William Lyon lag

By Paul A. Harris and Abigail W. Adams

Portland, Me., June 25 – The summer junk bond blitz continued on Tuesday with six issuers pricing $3.35 billion in single dollar-denominated tranches.

Three of the six tranches came as drive-bys and four were upsized.

CCO Holdings LLC and CCO Holdings Capital Corp., subsidiaries of Charter Communications, Inc., priced an upsized $750 million add-on to their 5 3/8% senior notes due June 1, 2029 (expected ratings B1/BB) at 102.00.

Antero Midstream Partners LP priced an upsized $650 million issue of 8.5-year senior notes (Ba3/BB+) at par to yield 5¾%.

Virgin Media Ltd. priced an upsized $600 million add-on to the Virgin Media Secured Finance plc 5½% senior secured notes due May 15, 2029 (Ba3/BB-/BB+) at 101.75 to yield 5.225%.

Parkland Fuel Corp. priced a $500 million issue of eight-year senior notes (B1/BB) at par to yield 5 7/8%.

Hexion Inc. priced a $450 million issue of eight-year senior notes (Ba3/B-) at par to yield 7 7/8%.

Avon International Capital plc priced an upsized $400 million issue of 6½% senior secured notes due Aug. 15, 2022 (Ba1/BB-) at par to yield 6.503%.

Despite the flurry of activity, the forward calendar remains robust with Fairstone Financial Inc.’s $300 million offering of five-year senior notes (B1/B) set to price on Wednesday.

Meanwhile, the secondary space was active on Tuesday with the influx of new paper.

However, the issues’ performance was mixed with some skyrocketing and others lagging their issue price.

Antero Midstream’s new 5¾% senior notes were lagging their issue price with the notes down almost 5/8 point soon after breaking for trade.

William Lyon Homes Inc.’s 6 5/8% senior notes due 2027 (S&P: B+) were also struggling in the aftermarket with the notes well below their issue price.

While coming in from their highs after breaking for trade, Post Holdings, Inc.’s 5½% senior notes due 2029, Catalent Pharma Solutions Inc.’s 5% senior notes due 2027 and Herc Holdings Inc.’s 5½% senior notes due 2027 were still trading at a premium to their issue prices.

NextEra Energy Operating Partners, LP’s 4¼% senior notes due 2024 were largely flat on Tuesday but were holding onto their slight premium in the secondary space.

Charter’s add-on

With market conditions red hot, CCO Holdings and CCO Holdings Capital, subsidiaries of Charter Communications, showed up on Tuesday, pricing an upsized $750 million add-on to their 5 3/8% senior notes due June 1, 2029 (expected ratings B1/BB) at 102.00 in a drive-by.

The issue price came rich to price talk in the 101.875 area. Initial talk was 101.5 to 101.75.

Deutsche Bank was the sole bookrunner.

The Stamford, Conn.-based broadband communications company plans to use the proceeds for general corporate purposes including potential buybacks of the class A common stock of Charter and for debt repayment.

Tuesday's CCO unsecured notes drive-by add-on came concurrently with a benchmark split-rated offering from Charter Communications' operating subsidiaries Charter Communications Operating, LLC and Charter Communications Operating Capital Corp.

The senior secured notes due July 1, 2049 (expected ratings Ba1/BBB-/BBB-) priced in a transaction that was executed on the investment grade syndicate desk.

Antero drives by

Antero Midstream Partners priced an upsized $650 million issue of 8.5-year senior notes (Ba3/BB+) at par to yield 5¾% in a quick-to-market trade.

The yield printed at the wide end of the 5 5/8% to 5¾% yield talk but in the middle of initial talk in the 5¾% area.

JP Morgan, Wells Fargo, BofA, Capital One, Credit Agricole and Scotia were the joint bookrunners for the debt refinancing deal.

The notes were trading down soon after pricing. They were seen as low as 99 3/8 heading into the market close, a source said.

Virgin Media upsizes

Virgin Media priced an upsized $600 million add-on to Virgin Media Secured Finance plc’s 5½% senior secured notes due May 15, 2029 (Ba3/BB-/BB+) at 101.75 to yield 5.225%.

The issue size was increased from $470 million.

The issue price came in the middle of price talk in the 101.75 area and rich to initial price talk in the 101.5 area.

Citigroup was the left lead bookrunner for the debt refinancing deal.

Parkland prices $500 million

Parkland Fuel priced a $500 million issue of eight-year senior notes (B1/BB) at par to yield 5 7/8%.

The yield printed in the middle of the 5¾% to 6% yield talk and tight to initial talk in the 6% area.

J.P. Morgan, BofA, CIBC, RBC and Wells Fargo were the joint bookrunners for the debt refinancing deal.

Hexion prices tight

Hexion priced a $450 million issue of eight-year senior notes (Ba3/B-) at par to yield 7 7/8%.

The yield printed at the tight end of yield talk in the 8% area and inside of the 8% to 8¼% early guidance.

Credit Suisse was the left bookrunner.

The Columbus, Ohio-based specialty chemicals company is using the proceeds to repay its debtor-in-possession credit facilities and other distributions provided for under its plan of reorganization, as well as to repay fees and expenses related to its emergence from bankruptcy.

Avon upsizes

Avon International priced an upsized $400 million issue of 6½% senior secured notes due Aug. 15, 2022 (Ba1/BB-) at par to yield 6.503%.

The issue size was increased from $350 million.

Price talk was 6½% to 6¾%.

The notes came with the same maturity and call structure as the existing 7 7/8% notes due Aug. 15, 2022 but will trade under a separate Cusip number.

The two series of notes will be non-fungible.

Goldman Sachs was the left bookrunner for the debt refinancing deal.

Fairstone talk 8% to 8¼%

Fairstone Financial is on deck with a $300 million offering of five-year senior notes (B1/B) with pricing expected on Wednesday.

The debt refinancing deal was talked on Tuesday to yield 8% to 8¼%, tight to initial guidance in the low 8% area.

Citigroup, NBC and RBC are the joint bookrunners.

William Lyon lags

William Lyon’s 6 5/8% senior notes were struggling in the secondary space with the notes seen well below their issue price.

They were changing hands at 99¾ bid, par 1/8 offered early in the session and were down to 99½ bid, 99¾ offered heading into the market close, sources said.

There was $20 million on the tape in the late afternoon. While a relatively small issue, there were a lot of bonds for sale, a source said.

William Lyon priced a $300 million issue of the 6 5/8% notes at par in a Monday drive-by.

The deal came tight to early guidance and official price talk in the 6¾% area.

The deal came from the home builder sector and had a wide credit spread.

Post weakens

Post Holdings’ 5½% senior notes due 2029 were coming in from their highs on Tuesday while still trading at a large premium to their issue price.

The 5½% notes were seen at 101 1/8 bid, 101½ offered early in the session but came in as the session progressed.

They were seen changing hands at par 5/8 in the late afternoon with more than $52 million of the bonds on the tape, according to a market source.

The notes jumped after breaking for trade, closing Monday at 101¼.

Post priced an upsized $750 million issue of the 5½% notes at par in a Monday drive-by.

The deal size increased from $500 million and priced at the tight end of yield talk in the 5½% to 5¾%.

Catalent comes in

Catalent Pharma’s 5% senior notes due 2027 were also coming in from their highs on Tuesday, although the notes continued to trade at a large premium to their issue price.

The notes were largely range bound between 101 and 101 3/8 offered and stood poised to close the day around 101, sources said.

More than $50 million of the bonds were on the tape by the late afternoon.

While the notes were coming in from their highs, sources were still surprised to see the notes trade at such a large premium.

The coupon was small for a single B credit, a source said.

The notes traded as high as 101 5/8 after breaking for trade on Monday and closed the day around 101¼.

Catalent priced $500 million of the 5% notes at par on Monday.

Pricing came on top of yield talk and in line with initial guidance in the low 5% area.

Herc weakens

Herc Rentals’ 5½% senior notes due 2027 were also coming in from their post-pricing high on Tuesday as new paper flooded the secondary space.

The 5½% notes were seen at par 3/8 bid, par ¾ offered early in the session and traded down to par ¼ heading into the market close, sources said.

The notes saw more than $88 million in reported volume by the late afternoon.

The 5½% notes traded as high as par 7/8 after breaking for trade.

Herc priced an upsized $1.2 billion issue of the 5½% notes at par on Monday.

The deal was upsized from $1 billion and the yield printed at the tight end of yield talk and early guidance in the 6 5/8% area.

NextEra hold

NextEra’s 4¼% senior notes due 2024 were largely flat on Tuesday with the notes holding onto their slight premium.

The notes were quoted at par ¼ bid, par ¾ offered and were changing hands at par 3/8 heading into the market close, sources said.

More than $68 million of the bonds were on the tape by the late afternoon.

NextEra priced a $700 million issue of the five-year notes at par on Monday.

The yield printed at the tight end of yield talk in the 4 3/8% area and inside of initial guidance in the 4½% area.

Mixed Monday flows

The daily cash flows of the dedicated high-yield bond funds were mixed on Monday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs sustained $26 million of outflows on the day.

Actively managed funds saw $40 million of inflows on Monday, the source added.

Indexes down

Indexes were coming in on Tuesday after launching the week on mixed footing.

The KDP High Yield Daily index was down 3 bps to close Tuesday at 70.81 with the yield now 5.47%.

The index shaved off one point on Monday after gaining 63 bps on the week last week.

The ICE BofAML US High Yield index dropped 18.3 bps with the year-to-date return now 10.009%.

The index gained 5.5 bps on Monday and saw cumulative gains of 113.7 bps on the week last week.

The index shot past 10% returns on June 20 after crossing the 9% threshold on June 18.

The CDX High Yield 30 index dropped 49 bps to close Tuesday at 107. The index was down 15 bps on Monday after gaining 153 bps on the week last week.

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