Intelsat prices $2.25 billion; Refinitiv starts roadshow; ATD down on recapitalization

By Paul A. Harris and Abigail W. Adams

Portland, Me., Sept. 5 – The anticipated pick-up in new deal activity materialized on Wednesday with one multi-billion dollar deal pricing and marketing beginning for one more.

Intelsat Jackson Holdings SA priced an upsized $2.25 billion issue of six-year senior notes (Caa1/CCC+) at par to yield 8½% in a drive-by on Wednesday.

Refinitiv kicked off the fall’s first roadshow and began marketing $5.5 billion equivalent amount of high-yield notes in four tranches on Wednesday.

Intelsat’s new notes were active after breaking for trade and were largely hovering around par.

The offering, which is being used to finance a tender offer, kickstarted trading activity throughout the structure although most of Intelsat’s bonds were trading flat.

American Tire Distributors, Inc.’s 10¼% senior notes due 2022 were again in the spotlight on Wednesday.

The notes were again trading down after the company announced a recapitalization deal with bondholders in a possible move towards bankruptcy.

HCA Inc.’s junk bonds saw slight improvement in active trading on Wednesday after Moody’s Investors Service called the company’s acquisition of Mission Health credit positive.

Intelsat upsizes

Intelsat Jackson Holdings opened the fall season in the junk bond market as it priced an upsized $2.25 billion issue of six-year senior notes (Caa1/CCC+) at par to yield 8½% on Wednesday.

The offering was increased from $2 billion.

The yield printed in the middle of yield talk set in the 8½% area and at the tight end of the 8½% to 8¾% initial guidance.

The deal played to around $4 billion of orders, a market source said.

JP Morgan, Credit Suisse, Goldman Sachs and Morgan Stanley were the joint bookrunners.

Proceeds will be used to refinance Intelsat Jackson’s 7¼% senior notes due 2020 by means of a concurrent tender offer and/or redemption.

The 8½% notes were active in the secondary with about $17 million on the tape shortly after they broke for trade in the late afternoon. They were seen trading between par and par ¼, according to a market source.

Refinitiv on the road

As forecast, Refinitiv kicked off the fall’s first roadshow and began marketing $5.5 billion equivalent of high yield notes in four tranches on Wednesday.

The deal is coming in two tranches each of secured notes (B2/B/BB+) and unsecured notes (Caa2/B-/B+), including:

• $2 billion of 7.5-year senior secured notes with initial price talk in the low 7% area,

• $1 billion equivalent of 7.5-year senior secured notes with initial price talk in the 5% area,

• $1.8 billion of eight-year senior unsecured notes with initial price talk in the low 9% area, and

• $700 million equivalent of eight-year senior unsecured notes with initial price talk in the 7% area.

The deal is being marketed by means of a full roadshow taking it into the Sept. 17 week, which is when it is expected to price, sources say.

JP Morgan is the global coordinator and sole physical bookrunner.

Proceeds, along with $8 billion equivalent of term loan debt, will be used to help fund the acquisition of a 55% stake in Thomson Reuters Financial & Risk by Blackstone, Canada Pension Plan Investment Board and GIC and for general corporate purposes.

Intelsat active

Intelsat’s new offering kickstarted trading activity throughout the structure with several notes active although unchanged.

Intelsat’s 9¾% notes due 2025 were seen trading between 105½ and 105¾, which was largely flat, a market source said.

The notes were the most active of the structure with more than $27 million in trades despite not being the subject of the tender offer, the source said.

Proceeds from the pricing of Intelsat’s new 8½% senior notes due 2024 will be used to fund a tender offer for the communications satellite services provider’s 7¼% notes due 2020. At the same time that the tender starts, the company will issue a notice to redeem any remaining notes on Oct. 15.

The 7¼% notes were also trading largely flat at par ¼ to par 3/8, a source said. About $15 million of the bonds were on the tape.

“They really haven’t traded up at all,” a market source said.

American Tire in focus

American Tire Distributors (ATD)’s 10¼% senior notes due 2022 were again the focus of the secondary space on Wednesday after news broke the company had reached a recapitalization deal with bondholders.

The 10¼% notes traded up to 31 in intraday trading but stood poised to close the day at 29¼, sources said. The 10¼% notes closed last week at 35 1/8.

With more than $40 million of the bonds on the tape, the 10¼% notes were the most active issue by the late afternoon.

ATD announced Tuesday it had missed a coupon payment on the notes and had reached an agreement with 70% of the holders of the notes to exchange the bonds for equity in the company, a market source said.

The recapitalization plan would give bondholders a 95% stake in the reorganized company and reduce the company’s debt by $1.1 billion.

The agreement appears to be a pre-packaged bankruptcy deal, a market source said.

S&P and Moody’s Investors Service lowered ATD’s credit ratings on Wednesday, which also contributed to their loss in value, a market source said.

ATD’s 10¼% notes have plummeted since April after the company lost its contract to distribute Goodyear tires and certain tires of Bridgestone Americas.

Prior to losing their contract with Goodyear, ATD’s 10¼% senior notes were trading around 97½.

HCA improves

HCA’s junk bonds were active on Wednesday with several of the notes seen slightly improved, including the health care facility operator’s recently priced 5 3/8% notes due 2026 and 5 5/8% senior notes due 2028.

The 5 3/8% notes were up about ½ point to par ¾.

The 5 5/8% notes were up about ¼ point to par ¼ with about $13 million of the bonds on the tape by the late afternoon.

However, HCA’s 5½% notes due 2047 were the most active in the structure. The notes gained about 3/8 point to trade up to par ½ with about $16.5 million of the bonds on the tape.

HCA recently announced it had signed a definitive agreement to acquire North Carolina hospital chain Mission Health for $1.5 billion.

Moody’s affirmed its current credit ratings and outlook for HCA on Tuesday and called the announcement credit positive.

HCA priced a $2 billion two-tranche offering at par on Aug. 9, which included a $1 billion tranche of the 5 3/8% notes and a $1 billion tranche of the 5 5/8% notes.

The notes initially lagged their issue price but have since solidified above par.

Tuesday outflows

Daily cash flows for dedicated high-yield bond funds were negative on Tuesday, the most recent session for which data was available at press time, at trader said.

High-yield ETFs sustained $125 million of outflows on the day.

Actively managed funds saw $80 million of outflows on Tuesday, the trader said.

Heading into Wednesday’s session, the final session in the present weekly fund flows reporting period, funds were tracking $277 million of net outflows for the first four days of the five-day reporting period, the source added.

Indexes mixed

Three benchmarks for the high-yield secondary market were mixed on Wednesday with two posting losses and one seeing nominal gains.

The KDP High Yield Daily index was down 4 basis points on Wednesday to close the day at 70.42 with the yield now 5.82%.

The index was flat on Tuesday at 70.46 and closed Friday with a 2 bps loss on the week.

The Merrill Lynch High Yield index again posted losses on Wednesday after breaking a downward trend on Tuesday.

The index was down 8.9 bps on Wednesday with the year-to-date return now 1.865%. After two consecutive trading days of losses, the index was up 2.7 bps on Tuesday.

The index closed Friday with a 6.9 bps gain on the week.

The CDX High Yield 30 index saw nominal gains on Wednesday, breaking posted five consecutive trading day of losses.

The index was up 2 bps to close the day at 106.79. The index closed Friday with an 11 bps loss for the week.

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