European deals price; Bruin, Comstock on tap; Altice gains more; funds lose $260 million

By Paul A. Harris and Abigail W. Adams

Portland, Me., July 19 – The European primary market was active on Thursday with two new deals pricing.

While the domestic primary market remained quiet, high yield players were eyeing a deal that priced in the investment grade market.

ContourGlobal Power Holdings SA priced an upsized €750 million amount of senior secured notes (BB/BB) in two tranches.

Techem Energy Metering Service GmbH priced a €465 million issue of eight-year senior notes (Caa1/B-/CCC+) at par to yield 6%.

In the dollar-denominated investment grade market, Antares Capital priced an upsized $280 million issue of 6% notes (Fitch: BBB-/DBRS: BBB) at 99.995 to yield 6%.

However, the deal could have been given a junk bond rating from Moody’s or S&P and the yield made it of interest to high-yield players, a market source said.

Meanwhile, Bruin E&P Partners LLC is expected to price a $600 million offering of eight-year senior notes (B3/B+) on Friday.

Comstock Resources, Inc. may also price its $850 million offering of eight-year senior notes (Caa1/B/B) on Friday. However, the deal is experiencing pushback and may carry over to the July 23 week.

The secondary space was also quiet on Thursday with the market largely flat and most names trading sideways, a market source said.

Altice France SA’s 8 1/8% senior notes due Feb. 1, 2027 (B1/B) continued to dominate trading with the new notes gaining further in high-volume activity.

The Paris-based telecommunications company’s 7 3/8% notes were also active although largely unchanged.

California Resources Corp.’s 8% senior notes due 2022 remained a major volume mover with the notes up ¾ point as the price of West Texas intermediate crude oil for August delivery continued to rebound from its lows earlier in the week.

Ply Gem Holdings Inc.’s 8% senior notes due 2026 were again active in trading with the notes slipping slightly after a more than 8 point rise on Wednesday.

High-yield mutual funds and exchange-traded funds were back in the red as $260 million of cash left the funds during the weekend ended July 18, according to fund-flow statistics generated by AMG Data Services Inc.

The outflow came after a substantial $1.852 billion gain the previous week which had in turn followed a $1.729 billion outflow during the week ended July 4.

ContourGlobal upsizes

ContourGlobal Power priced an upsized €750 million senior secured notes (BB/BB) in two tranches.

The deal included an upsized €450 million of five-year notes which priced at par to yield 3 3/8%. The tranche size was increased from €400 million. The yield printed at the tight ends of official price talk and initial guidance, both set in the 3½% area.

The long-maturity tranche came as €300 million of seven-year notes which priced at par to yield 4 1/8%. The yield printed in the middle of yield talk that was announced in the 4 1/8% area and in line with initial guidance in the low 4% area.

The combined size increased from €700 million.

Goldman Sachs managed the placement.

The London-based power generator plans to use the proceeds to refinance its 5 1/8% senior secured notes due 2021.

Techem prices tight

Techem Energy Metering priced a €465 million issue of eight-year senior notes (Caa1/B-/CCC+) at par to yield 6%.

The yield printed at the tight end of the 6% to 6¼% yield talk.

There were covenant changes.

Nevertheless, the Techem execution – ostensibly a quick-to-market deal in spite of triple C ratings from Moody’s and Fitch – appeared solid, a sellside source said.

It was a bridged deal, the source noted, but added that unlike some bridged deals in the United States, dealers did not undertake a syndication effort for the Techem bridge.

One investor took a flyer on Techem at price talk, thinking it rich for a highly leveraged, triple C rated buyout deal.

Deutsche Bank was the lead among a syndicate of banks that included Credit Suisse, Credit Agricole and others.

Proceeds from the bonds are being used to help fund the buyout of the Baar-Zug, Switzerland-based provider of utility metering products and related services by a consortium of investors led by Partners Group and including Caisse de depot et placement du Quebec and Ontario Teachers’ Pension Plan, as well as Techem’s management team.

Antares eyed

In the dollar-denominated investment-grade market, Antares Capital priced an upsized $280 million issue of 6% notes (Fitch: BBB-/DBRS: BBB) at 99.995 to yield 6%.

The offering was increased from $250 million.

The yield printed in the middle of yield talk set in the 6% area.

Citigroup managed the sale that was transacted on the investment grade syndicate desk.

In spite of the investment-grade ratings from Fitch and DBRS, the deal was talked at a yield and would have quite possibly garnered a high-yield rating from either Moody’s or S&P, a high yield sellside source opined.

Friday’s deals

Looking ahead to Friday’s session, Bruin E&P Partners is expected to price a $600 million offering of eight-year senior notes (B3/B+).

Initial guidance is 7½% to 7¾%, according to a market source, who added the word in the market is that the deal is going well.

Meanwhile, Comstock Resources has undertaken a refinancing of its 2019 and 2020 maturities, for which purpose it is attempting to place $850 million of eight-year senior notes (Caa1/B/B).

Initial guidance is in the 9% area, sources say.

However, that may not be enough, according to a trader who said pushback surfaced after bookrunner BofA Merrill Lynch paraded the deal recently at a New York roadshow.

Bondholders know the company has to get the deal done and want a bigger concession because of it, the trader said, forecasting that Comstock will ultimately come cheap to the initial talk, and therefore should trade well.

Some calendars have Comstock pricing on Friday.

However, it could slip into the July 23 week, the trader said.

Altice continues to dominate

In the secondary, Altice’s new 8 1/8% senior notes continued to dominate trading activity with the notes up another ½ point.

The notes were quoted at 101 bid, 101¼ offered early Thursday and traded up throughout the afternoon to 101½, sources said. The notes closed Wednesday at 101.

About $82 million of the bonds were on the tape by late afternoon.

Altice priced an upsized $1.75 billion tranche of the 8 1/8% notes at par on Tuesday as part of a dual-currency offering.

The deal was heavily oversubscribed and the dollar-denominated tranche was upsized from the initial $1.25 billion amount.

The deal also included an upsized €1 billion tranche that priced at par to yield 5 7/8%. The euro tranche increased from €650 million and priced at the tight end of yield talk in the 6% area.

The 5 7/8% notes were also trading at a premium to their issue price and were seen at 101 3/8 bid on Thursday, a market source said.

While new paper from Altice was the focus of the secondary space, the company’s existing 7 3/8% notes remained active although largely unchanged. The notes continued to trade around 98¼.

They slipped about ¼ point to the 98¼ level on Wednesday, sources said.

California Resources gains

California Resources 8% senior notes due 2022 remained major volume movers in the secondary space as crude oil experienced another volatile week.

The 8% notes were up again on Thursday as the price of crude oil rebounded from a large drop on Monday and Tuesday.

The 8% notes were quoted at 89¼ bid, 90 offered and were seen trading at 89¾, about a ¾ point increase, a market source said. There were about $33 million of bonds on the tape by late afternoon.

The price of crude oil was also up about 75 cents to $69.51 on Thursday.

California Resources 8% notes have been active throughout the week as the price of crude oil nosedived on Monday and Tuesday to the $67.50 range only to regain its footing.

PlyGem in focus

PlyGem’s 8% senior notes due 2026 remained in focus in the secondary on Thursday although the notes slipped slightly after skyrocketing on Wednesday.

The notes were quoted at 103¼ bid, 104 offered on Thursday and were seen trading around 104, sources said.

“They’re off slightly from where they went out,” a market source said.

The notes remained active with about $17 million on the tape by late afternoon.

The 8% notes jumped on Wednesday after news broke the company would merge with NCI Building Systems, pending NCI shareholder and regulatory approval, in the fourth quarter.

The notes climbed more than 8 points on Wednesday to 104½ bid, 105½ offered.

Indexes mixed

Three benchmarks for the high-yield secondary market were mixed on Thursday after all posted gains on Wednesday.

The KDP High Yield index was down 1 basis point to close Thursday at 70.39 with the yield now 5.88%. Thursday’s loss wiped out the index’s 1 bp gain on Wednesday.

The index was also up 1 bps on Tuesday after a 1 bps drop on Monday.

The Merrill Lynch High Yield index continued to see gains on Thursday. The index was up 2.4 bps with the year-to-date return now 0.651%. The index was up 4.6 bps on Wednesday.

Thursday marked the tenth consecutive trading day of gains for the index, which crossed into the black on July 6.

The CDX High Yield 30 index dropped 17 bps on Thursday closing the day at 106.63. Thursday’s losses wiped out Wednesday’s gains when the index rose 13.8 bps.

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