Meredith megadeal, Berry cap $8.3 billion week; Meredith pops; Frontier surges again

By Paul Deckelman and Paul A. Harris

New York, Jan. 19 – The high-yield primary market saw a pair of new issues totaling $1.9 billion of new dollar-denominated and fully junk-rated paper get done on Friday, syndicate sources said.

Magazine publisher and broadcaster Meredith Corp. priced a $1.4 billion offering of eight-year notes off the forward calendar as part of the financing for its pending purchase of iconic publishing powerhouse Time Inc.

Traders said those new bonds shot up when they were freed for secondary dealings on huge volume.

The day’s other deal was a quickly shopped and upsized $500 million of eight-year notes from plastic packaging producer Berry Global, Inc.

Traders saw those bonds trade actively in the aftermarket but little changed from their issue price.

The day’s deals capped off a week which saw $8.3 billion of new junk from domestic or industrialized-country borrowers, according to data compiled by Prospect News, up from last week’s first-of-the-year issuance totals. Issuance was also up strongly from its year-ago pace, the data showed.

Traders said that new and recently issued credits dominated market activity on Friday, including Thursday’s trio of offerings from Crown Holdings, Inc., Arby’s Restaurant Group, Inc. and Extraction Oil & Gas, Inc.

Away from those new issues, Frontier Communications Corp. paper remained on a roll during Friday’s session, its fourth straight better performance. The surge follows the wireline telecommunications company’s launch of amendments to its credit agreements that will loosen up the terms of some of its covenants, potentially allowing it to issue new debt in order to address upcoming senior note maturities.

Statistical market performance measures turned mixed on Friday after being lower across the board for on Wednesday and again on Thursday.

For the week, the indicators were lower all around from where they had finished last Friday, ended Jan. 12 – their second consecutive lower week.

Meredith prices below talk

Meredith priced a $1.4 billion issue of eight-year senior notes (B3/B) at par to yield 6 7/8% on Friday.

The yield came 12.5 basis points beneath the low end of the 7% to 7¼% yield talk.

The deal was heard to have been two-times oversubscribed, according to a trader who added that the deal stormed into the secondary market, trading above 102 bid.

Credit Suisse Securities (USA) LLC was the lead bookrunner. RBC Capital Markets LLC, Barclays and Citigroup Global Markets Inc. were the joint bookrunners.

The Des Moines-based media and marketing company plans to use the proceeds to help fund its purchase of Time Inc. and refinance existing debt.

Berry Global upsizes

Berry Global priced an upsized $500 million issue of eight-year second lien senior secured notes (B2/BB-) at par to yield 5½%.

The amount was increased from $400 million and the yield printed at the tight end of yield talk that was set in the 4 5/8% area.

Credit Suisse Securities (USA) LLC, Goldman Sachs & Co., Barclays, Citigroup Global Markets Inc., Wells Fargo Securities LLC, Deutsche Bank Securities Inc. and JP Morgan Securities LLC are the joint bookrunners for the Rule 144A and Regulation S for life offer.

The Evansville, Ind.-based provider of plastic consumer packaging and engineered materials plans to use the proceeds to fund its acquisition of Clopay Plastic Products Co., Inc.

Selecta prices €1.3 billion

Selecta Group BV priced €1.3 billion equivalent of six-year senior secured notes (B3/B) in a revised three-part transaction on Friday, according to a market source.

The deal included:

• €765 million of fixed-rate notes that priced at par to yield 5 7/8%, at the tight end of yield talk in the 6% area;

• CHF 250 million of fixed-rate notes that priced at par to yield 5 7/8%, also at the tight end of yield talk in the 6% area; and

• €325 million of Euribor plus 537.5 basis points floating-rate notes that priced at par, at the tight end of spread talk in the Euribor plus 550 basis points area.

A proposed Swedish krona-denominated tranche of floating-rate notes was abandoned.

Goldman Sachs will bill and deliver for the euro-denominated notes.

Credit Suisse will bill and deliver for the Swiss franc-denominated notes.

Goldman Sachs, Credit Suisse and BNP Paribas are the joint global coordinators. Banca IMI, Credit Agricole CIB, Deutsche Bank, ING, KKR and UniCredit Bank are the joint bookrunners.

The Cham, Switzerland-based self-service coffee and convenience food provider plans to use the proceeds to redeem its existing notes, to repay its term loan, to pay off its revolving credit facility, to undertake a refinancing at Argenta Group, to repay an Argenta shareholder, to repay a Selecta minority investor and to put cash on its balance sheet.

Thursday outflows

Dedicated high-yield funds saw negative daily flows on Thursday, the most recent session for which data was available at press time, a trader said.

High-yield ETFs sustained $524 million of outflows on the day.

Actively managed funds saw $20 million of outflows on Thursday, the trader said.

Issuance pace picks up

Friday’s two new issues, totaling $1.9 billion, brought the amount of new dollar-denominated and fully junk-rated paper from domestic or industrialized-country borrowers pricing during the week to $8.31 billion in 14 tranches, according to data compiled by Prospect News.

Even with one fewer trading session than usual this past week – fixed-income markets in the United States were closed on Monday, Jan. 15 in observance of the Martin Luther King Day federal holiday – issuance still topped the $7.3 billion of new junk bonds which priced in 11 tranches the week before, ended Jan. 12.

That week, in turn, represented a strong pickup from the two weeks before that, ended Jan. 5 and Dec. 29, when no junk bond deals had priced, in line with the traditional year-end market lull.

As of the close on Friday, year-to-date issuance had grown to $15.61 million in 25 tranches – running 29.3% ahead of the primary pace seen at this time a year ago, when volume had totaled $12.07 billion in 20 tranches.

For all of 2017, junk market issuance came to $281.57 billion in 524 tranches, running about 24.1% ahead of the $226.78 billion which had priced in 359 tranches in 2016, the Prospect News data indicated.

Meredith moves up

In the secondary market, traders said that the clear standout of the session was Meredith’s new 6 7/8% notes due 2026.

“They were very, very active,” a trader said, “and they traded very well” when they reached the aftermarket, shooting up to a 102¼ to 102 ½bid context from their par pricing level.

A second trader was absolutely astounded when he checked out the volume levels on the new deal – and reported back that more than $280 million of the $1.4 billion issue, or around 20%, had changed hands, including at least $258 million of round-lot trades of at least $1 million or more, as well as numerous smaller off-lot transactions, as buyers looked to flesh out their scant allocations of the oversubscribed new issue.

He said the bonds had moved around between 102 and 102½, with the last prints of the day in a 102¼ to 102 3/8 bid context.

Berry busy but little changed

In contrast, the volume figures for the day’s other new issue – Berry Global’s 4½% notes due 2026 were relatively pedestrian, with about $32 million of that deal seen having traded around – normally a pretty sizable number, but one which paled in comparison to the intense activity in the Meredith notes.

One of the traders pointed out, in Berry’s defense, that the overall issue was considerably smaller and that it came to market much later in the session than the relatively early pricing Meredith paper had done.

A market source said that there was “not much movement” after that par pricing, with the plastic packaging company’s quick-to-market paper in a 100 1/8 to 100¼ bid context.

“They just priced really tight,” a trader at another desk mused, adding: “I don’t even know how that was possible.”

Recent deals dominate Actives

With a flood of new paper having hit the junk market over the previous several sessions, it came as no surprise that, as one trader said, “the recent deals made up the bulk of the trading today.”

For instance, a market source said that the new Extraction Oil & Gas 5 5/8% notes due 2026 were second only to the Meredith in terms of volume, with over $82 million traded.

But unlike the publishing company’s popping paper, the Denver-based energy exploration and production company’s quickly shopped deal showed little price movement.

The notes were quoted at one desk at 100 3/16 bid, off about 1/16 point from initial levels reached in Thursday’s trading after that $750 million dollar deal – upsized from $600 million originally – had priced at par and then had moved up modestly.

A second source saw the bonds straddling their issue price in a 99 7/8 to 100 3/8 bid context.

But other of the new deals dominating the day’s Most Actives list seemed to be doing well.

“A lot of those deals were trading halfway decently,” one of the traders said.

He noted that the Arby’s 6¾% notes due 2026 “came late last night,” when the Atlanta-based quick-service restaurateur priced $485 million of that paper at par in a forward calendar offering via its IRB Holding Corp. financing subsidiary, but “it never really freed” at that time.

He said the Arby’s bonds opened up on Friday as high as 101½ to 101¾ bid, although he saw them settling later in a 101 to 101¼ bid range.

Another trader saw them moving around a little better than that, around 101½ bid, with over $63 million traded.

And a third saw the bonds “wrapped around” 101.

Philadelphia-based packaging company Crown Holdings’ 4¾% notes due 2026 moved up by ¼ point on the day to 101¼ bid, a market source said, with over $50 million traded.

That $875 million deal – upsized from an originally planned $750 million – had priced at par on Thursday via the company’s Crown Americas LLC and Crown Americas Capital Corp. financing subsidiaries, as part of a three-part offering that had also included five- and eight-year tranches of euro-denominated notes. The new bonds had moved up to around 101 bid by the end of Thursday’s session in active trading.

© 2015 Prospect News.
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