Graham Holdings, Atotech on tap; Ithaca Energy, JW Aluminum delayed; EP Energy dominates

By Paul A. Harris and Abigail W. Adams

Portland, Me., May 21 – The high-yield primary market was quiet on Monday with no new deals pricing on the day.

Ithaca Energy (North Sea) plc’s $350 million offering of five-year senior notes (Caa1/CC+) and JW Aluminum Continuous Cast Co.’s $285 million offering of eight-year senior notes (B3/B-), which were expected on Friday, still have yet to price.

However, the active forward calendar is filling in.

Graham Holdings Co. is on the road with a $400 million offering of eight-year senior notes (expected ratings B1/BB+) and is expected to price on Wednesday.

Atotech BV plans to price a $300 million offering of five-year senior PIK toggle notes at the end of a roadshow expected to run through the May 21 week.

In the euro-denominated market, Chemours Co. expects to price €450 million of eight-year senior notes (expected ratings Ba3/BB-) on Tuesday.

Meanwhile, EP Energy Corp.’s new 7¾% senior notes due 2026 (B1/B) dominated activity in the secondary market with the notes trading almost 2 points above their issue price.

EP Energy’s outstanding 8% senior notes due 2025 were also active and making gains in secondary trading.

Valeant Pharmaceuticals International, Inc.’s recently priced 8½% senior notes due Jan. 31, 2027 (Caa1/B-/B-) remained strong in active trading in the secondary space.

BWX Technologies, Inc.’s recently priced 5 3/8% senior notes due 2026 were also firm in active secondary trading.

New notes from Hearthside Food Solutions LLC and SRS Distribution, Inc. were relatively unchanged in the secondary space with the both notes still just south of par.

Graham Holdings roadshow

Graham Holdings is on the road with a $400 million offering of eight-year senior notes (expected ratings B1/BB+).

Initial guidance has the deal coming to yield in the high 5% to 6% area.

It is expected to price on Wednesday.

JP Morgan is leading the offer.

The notes come with three years of call protection.

The Arlington, Va.- based diversified American conglomerate plans to use the proceeds, plus cash on hand, to redeem all $400 million of its existing 7¼% notes due 2019.

Atotech PIK toggle holdco deal

Germany-based Atotech BV plans to price a $300 million offering of five-year senior PIK toggle notes at the end of a roadshow expected to run through the May 21 week.

The issuing entities will be Alpha 3 BV, the indirect parent of Atotech, and Alpha 2 BV, the direct parent of Alpha 3.

Original guidance is in the 8½% area, the source added.

JP Morgan is the lead.

Proceeds will be used to fund a distribution to stockholders.

Chemours €450 million for refinancing

In the euro-denominated market, Chemours Co. expects to price €450 million of eight-year senior notes (expected ratings Ba3/BB-) on Tuesday.

Initial price talk is in the high 3% area to 4%.

Citigroup is the left bookrunner. JP Morgan, Barclays, Credit Suisse, HSBC, RBC, BofA Merrill Lynch and Deutsche Bank are the joint bookrunners.

The Wilmington, Del.-based provider of performance chemicals plans to use the proceeds to refinance its existing euro-denominated 6 1/8% senior notes due 2023 and partially redeem its dollar-denominated 6 5/8% senior notes due 2023.

Ithaca, JW Aluminum ‘floundering’

Ithaca Energy’s $350 million offering of five-year senior notes and JW Aluminum $285 million offering of eight-year senior notes have yet to price. Both deals were expected to price on Friday.

“They both seem to be floundering,” a market source said. If the deals do not price by Wednesday, they are expected to be pulled, the source said.

Ithaca Energy has been marketing the $350 million offering with initial price talk in the low 9% area.

JW Aluminum has been marketing the $285 million offering with early guidance in the mid-to-high 9% area.

JW Aluminum is returning to the new issue market after it postponed a $300 million offering of eight-year senior secured notes in February, citing adverse market conditions.

EP Energy dominates

EP Energy’s 7¾% senior notes due 2026 were going strong in the secondary market with the new notes trading up to 2 points above their issue price.

The 7¾% notes closed Monday at 101¾ bid, 102 offered, market sources said. “It’s a good one,” a market source said. “They’re doing really well.”

The 7¾% notes dominated trading activity in the secondary market. Almost $74 million of the bonds traded by late afternoon with the next most heavily traded name seeing only $27 million in trades.

EP Energy priced a $1 billion issue of eight-year 1.125-lien senior secured notes at par late Friday.

The yield printed at the wide end of an upwardly revised 7½% to 7¾% yield talk. Earlier yield talk was 7¼% to 7½%.

In addition to the widening of the talk, there were also covenant changes bearing primarily upon how the company may disburse cash and incur additional debt.

With wider price talk and covenant changes, the deal was oversubscribed, market sources said.

EP Energy’s 8% senior notes due 2025 were also making gains in active trading in the secondary market. The notes were up about ¾ point to trade up to 75¾, a market source said.

Valeant going strong

New paper from Valeant was also a major volume mover during Monday’s session with more than $26 million of the bonds traded by late afternoon.

The recently priced 8½% senior notes due 2027 were seen slightly improved with the notes trading between 101 and 101¼, market sources said.

The notes closed Friday at par 7/8 bid, 101 1/8 offered.

Valeant priced $750 million of the 8.6-year senior notes (Caa1/B-/B-) at par to yield 8½% in a drive-by on May 17.

The yield printed at the tight end of yield talk that was set in the 8 5/8% area and inside initial price talk in the 8¾% area.

Sources attributed the secondary market success of Valeant’s new notes to the fact proceeds would be used to take out the specialty pharmaceutical company’s shorter duration notes.

Proceeds from the offering, together with a new five-year revolver and term loan, will be used to redeem Valeant’s 5 3/8% senior notes due 2020, 6 3/8% senior notes due 2020, 6¾% senior notes due 2021 and 7¼% senior notes due 2022.

Valeant’s 5 7/8% senior notes due 2023 were also active on Monday with the notes trading down slightly to just south of 95.

Last week’s deals

While Valeant’s new notes were slightly improved in active trading, many of last week’s deals were unchanged.

BWX Technologies’ newly priced 5 3/8% senior notes due 2026 remained firm in active trading. The notes were largely unchanged and closed the day at par ½, a market source said.

More than $20 million of the bonds traded during Monday’s session.

BWX Technologies priced a $400 million issue of eight-year senior notes (Ba3/BB+) at par on May 18 at the tight end of yield talk in the 5½% area and inside the 5½% to 5¾% initial guidance.

Hearthside Food Solutions’ new 8½% senior notes due 2026 (Caa2/CCC+) continued to trade below par in active trading on Monday. The notes dipped about 3/8 point to 99¼ on Monday.

However, the 8½% notes closed the day relatively unchanged at 99½ bid, par offered. About $20 million of the bonds traded on Monday.

Hearthside priced a downsized $350 million issue of the 8½% notes at par on May 17.

The offering was decreased from $375 million and the yield came at the wide end of the 8¼% to 8½% talk.

SRS Distribution’s 8¼% senior notes due 2026 (Caa2/CCC+) were slightly improved on Monday at 99¾ bid, par ¼ offered.

The notes closed Friday at 99¾ bid, par offered.

However, the new notes saw little trading activity. SRS Distribution priced a downsized $350 million issue of the 8¼% notes at par on May 17.

The deal was cut from $380 million and the yield printed near the wide end of the 8% to 8¼% yield talk and well wide of the 7¾% to 8% initial guidance.

Indexes mixed

Three benchmarks for the high-yield secondary market were mixed on Monday after all posted losses on Friday.

The KDP High Yield index was down 4 basis points to close Monday at 70.49 with the yield now 5.89%. The index was also down 4 bps on Friday.

The Merrill Lynch High Yield index saw slight gains on Monday. The index was up 2.1 bps on Monday with the negative year-to-date return now 0.231.

The index was down 4 bps with the negative year-to-date return 0.252% on Friday.

The index has been in negative territory since May 15 after a brief foray into positive territory on May 14.

The CDX High Yield 30 index was up 9 bps to close Monday at 106.84, recouping its 7 bps drop on Friday.

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