Upsized AMC drive-by, Waterworks price; new AMC, Extraction O&G firmer; Rite Aid gains continue

By Paul Deckelman and Paul A. Harris

New York, July 19 – The high-yield primary arena saw its first billion-dollar-plus day of the second half of the year on Wednesday as two domestic junk-rated issuers combined to bring some $1.3 billion of new dollar-denominated paper to market.

It was the biggest new issuance day in Junkbondland since the $1.79 billion that priced on June 29, according to data compiled by Prospect News.

Syndicate sources said that cable TV network operator and content provider AMC Networks, Inc. priced an upsized and quickly shopped $800 million offering of eight year notes.

And they saw an upsized $500 million regularly scheduled forward calendar offering of eight-year notes backing the pending acquisition of industrial products distributor HD Supply Waterworks get done.

Traders said the new AMC notes moved up when they hit the aftermarket, though they did not immediately report any initial dealings in the Waterworks paper.

The traders meantime reported upside movement on brisk volume in Tuesday’s new issue from energy operator Extraction Oil & Gas, Inc.

But they said that activity had pretty much fallen off in some of the credits that had priced earlier in the week, including automotive retailer Lithia Motors, Inc. and homebuilder K. Hovnanian Enterprises, Inc.

Away from the new deals, there was continued firming, on active volume, in Rite Aid Corp.’s paper, a day after the drugstore chain operator released pro forma financial results taking into account the planned sale of nearly half of the chain’s more than 4,600 stores to larger industry rival Walgreens Boots Alliance, Inc.

Oil and natural gas names such as California Resources Corp. showed gains as crude oil prices bounced back for a second straight session from their losses earlier in the week.

Statistical market performance measures were firmer across the board on Wednesday after having turned mixed on Tuesday – though just barely so – which, in turn, followed four straight upside sessions before that.

AMC, big upsize and tight

Two issuers with single tranches – one coming in from a roadshow, the other driving by – combined to raise $1.3 billion on Wednesday.

Both deals came upsized.

Executions came right along the crease, as one deal priced inside of talk while the other came at the tight end.

Both blew through initial guidance, as sources advise the high-yield spigot could open wide, in the week ahead, for a gush of high summer issuance.

AMC Networks Inc. priced an upsized $800 million issue of eight-year senior notes (Ba3/BB) at par to yield 4¾% in a quick-to-market Wednesday debt refinancing transaction.

The issue size was increased from $500 million.

The yield printed at the tight end of the 4¾% to 5% yield talk, and inside of initial guidance in the 5% area.

Citigroup was the left bookrunner. BofA Merrill Lynch, JP Morgan, Morgan Stanley, BNP Paribas, Fifth Third, Scotia, SunTrust, US Bancorp, Wells Fargo and Goldman Sachs were joint bookrunners.

CD&R Waterworks upsized and tight

Coming upon the completion of its roadshow HD Supply Waterworks, Ltd. (CD&R Waterworks Merger Sub, LLC) priced an upsized $500 million issue of eight-year senior notes (Caa1/B-) at par to yield 6 1/8%.

The issue size was increased from $475 million.

The yield printed 12.5 basis points below the tight end of the 6¼% to 6½% yield talk, and deep inside of 6¾% to 7% early guidance.

The acquisition deal issue was significantly oversubscribed on Tuesday, with accounts being advised that allocations would be dire even for those that participated in the bridge syndication, an investor said.

BofA Merrill Lynch, JP Morgan, Citigroup, Barclays, Credit Suisse, Deutsche Bank, RBC, Goldman Sachs, Natixis and Nomura were the joint bookrunners.

Diversey starts Thursday

In the European market Diversey Care plans to start a roadshow on Thursday in London's West End for a €545 million offering of eight-year senior notes (expected ratings Caa2/B).

Joint bookrunner Goldman Sachs will bill and deliver. Credit Suisse, Barclays, Citigroup, BofA Merrill Lynch, RBC, HSBC, SunTrust Robinson Humphrey and Jefferies are also joint bookrunners.

Proceeds will be used to fund the buyout of Diversey Care, the cleaning and hygiene solutions business of Charlotte, N.C.-based Sealed Air Corp., by Bain Capital.

In a European primary market that has been on a tear through the early part of July - €5.9 billion in 14 tranches and £645 million in two tranches, month-to-date – Diversey has considerable elbow room.

The only other deal on the euro calendar at present is France-based InfoPro Digital's €500 million two-part offering of senior secured notes (B2), running a roadshow that is scheduled to wrap up on Thursday.

The deal includes five-year fixed-rate notes, non-callable for two years, with initial guidance of 4¾% to 5%, and five-year floating-rate notes, non-callable for one year, with initial guidance of Euribor plus 475 to 500 basis points.

Mixed Tuesday flows

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

High-yield ETFs saw $47 million of inflows on the day.

However actively managed funds sustained $65 million of outflows on Tuesday.

Dedicated bank loan funds saw $30 million of inflows on Tuesday, the investor said.

AMC moves up

In the secondary market, a trader saw the new AMC Networks 4¾%notes due 2025 having pushed up by around 1 point on the session, bracketing 101 bid at 100 7/8 to 101 1/8.

A second trader pegged the New York-based cable television network operator and content provider’s new bonds in a 100¾-to-101 bid, while a third saw them going out at 101 bid, after having priced at par earlier.

One of the traders said that the volume in the new deal “was not huge.”

Traders meantime did not immediately report any initial aftermarket dealings in St. Louis-based industrial products distributor HD Supply Waterworks’ new 6 1/8% issue of eight-year notes.

Biggest day in three weeks

The AMC and HD Waterworks pricings totaled $1.3 billion of new U.S. dollar-denominated and fully junk-rated paper.

That was the heaviest new issuance seen in the junk market since June 29, when five issuers had combined to price some $1.79 billion of such paper.

Interestingly, a trader saw one of those June 29 issues – Boulder Colo.-based telecommunications infrastructure provider Zayo Group, LLC/Zayo Capital, Inc.’s add-on to its existing 5¾% senior notes due Jan. 15, 2027 – as showing up among Wednesday’s most actively traded credits.

He said that more than $13 million of those notes had changed hands on Wednesday, gaining more than 1/8 point on the day to firm up to 105 3/8 bid.

Extraction O&G bonds busy and better

Among more recently priced issues, a trader said that Extraction Oil & Gas, Inc.’s 7 38% notes due 2024 were right near the top of the Most Actives list, with over $30 million having traded.

He saw the notes jump by 7/8 point, ending at 102¼ bid.

Another trader saw the Denver-based oil and natural gas exploration and production company’s new issue trading between 101 7/8 and 102¼ bid.

Extraction had priced $400 million of those notes at par in a quick-to-market transaction on Tuesday that was upsized from an originally announced $350 million.

The new issue had initially firmed by more than 1¼ points when it first hit the aftermarket.

Traders meantime reported only dwindling volume in some of the new deals that had traded busily earlier in the week, including Medford, Ore.-based automotive retailer Lithia Motors’ 5¼% notes due 2025, which had priced on Monday, as well as the two-part offering from Red Bank, N.J.-based homebuilder Hovnanian, which had priced on Friday.

A trader said of the latter transaction that it was “kind of clubby, it priced and was quickly put away,” with the 10% notes due 2022 last trading around 104 bid and the 10½% notes due 2024 at 105 bid.

Rite Aid rise continues

Away from the new deals, Rite Aid’s bonds were seen better for a second straight session on Wednesday, firming after the Camp Hill, Pa.-based Number-Three U.S. drugstore chain operator released pro forma financial expectations resulting from its pending sale of 2,186 of its stores to Walgreens for $5.175 billion in cash.

Rite Aid’s 6 1/8% notes due 2023 once again were the most actively traded junk issue, with over $71 million having changed hands, on top of Tuesday’s $102 million volume. They moved up to 100¼ bid, a gain of ¾ point on the day, on top of Tuesday’s 1 full point gain.

Its 7.70% notes due 2027 did even better than that, up 1 3/8 points to 99 7/8 bid, on volume of over $15 million.

Rite Aid projects spending some $4.92 billion of the anticipated net proceeds from the store sale for repayment of most of its more than $7 billion of net debt, dropping its leverage ratio of 6.8 times EBITDA down to the low 3 times range.

Energy credits up

Traders saw strength in energy names after crude prices rose for a second consecutive session and for the seventh trading day in the last eight.

California Resources’ benchmark 8% notes due 2022 gained ¾ point, to end at 65 1/8 bid, with over $12 million having traded.

Indicators improve

Statistical market performance measures were firmer across the board on Wednesday after having turned mixed on Tuesday - though just barely so – which, in turn, followed four straight upside sessions before that.

. The KDP High Yield Daily Index jumped by 11 basis points on Wednesday, ending at 72.498, its second consecutive day of double-digit gains, coming on the heels of Tuesday’s 13 bps climb, and its sixth straight move upward overall, after five successive losses before that.

Its yield came in by 6 bps, closing at 4.98%, its second narrowing in a row. The yield had also tightened by 4 bps on Tuesday, after having widened out by 6 bps on Monday. Before that, the yield had fallen over three straight sessions.

The Markit CDX Series 28 High Yield Index rebounded on Wednesday after having eased marginally on Tuesday, rising by about 1/8 point to end at 107 5/8 bid, 107 11/16 offered. Tuesday had been the index’s first downturn, however small, after four straight upside sessions before that.

And the Merrill Lynch North American High Yield Index saw its eighth straight gain on Wednesday, firming by 0.158%, on top of Tuesday’s 0.116% upturn. Those eight consecutive better sessions follow three sessions before that on the downside.

Wednesday’s advance lifted the index’s year-to-date return to 5.607%, establishing a fourth consecutive new year-to-date peak level by topping the old mark of 5.607%, which had been set on Tuesday.

© 2015 Prospect News.
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