SoftBank prices dollar bonds as part of giant multi-part deal; energy names off, Caesars climbs

By Paul Deckelman and Paul A. Harris

New York, July 22 – One of the year’s biggest junk bond deals came to market on Wednesday, with syndicate sources seeing Japanese telecommunications company SoftBank Group Corp. – the majority owner of familiar Junkbondland wireless name Sprint Corp. – pricing a five-tranche, benchmark-sized offering of dollar- and euro-denominated notes.

The dollar portion of that bond behemoth consisted of $1 billion each of seven-year notes and 10-year notes. Traders did not report any initial aftermarket dealings in the SoftBank paper, which was sold under Regulation S only.

SoftBank was the only dollar-denominated issue to have priced during the session.

Looking ahead to Thursday, traders were anticipating pricing on a $405 million offering of eight-year notes from Kenan Advantage Group Inc., a provider of liquid bulk transportation services.

Away from the new deals, the market saw continued weaknesses in energy sector names such as oil and natural gas producer SandRidge Energy Inc., Chesapeake Energy Corp. and California Resources Corp.

Non-energy names such as aircraft manufacturer Bombardier Inc. also struggled.

But Caesars Entertainment Corp. notes shot up by several points on a creditor-friendly ruling from the bankruptcy judge overseeing the troubled casino giant’s restructuring.

Statistical measures of junk market performance were lower all around for a fourth consecutive session on Wednesday.

Softbank prices five tranches

One issuer, SoftBank, raised $2 billion in Wednesday’s dollar-denominated primary market.

The all-bullet senior notes deal (Ba1/BB+) came in five tranches altogether.

The Tokyo-based telecommunications company priced $1 billion of seven-year notes at par to yield 5 3/8%, and $1 billion of 10-year notes at par to yield 6%.

The notes in both dollar tranches priced on top of final price talk and at the tight ends of early guidance for yield in the 5 3/8% area and 6% area, respectively.

Softbank also priced €2.25 billion of the bullet notes in three euro-denominated tranches.

The notes in all three tranches priced on top of final talk and 12.5 basis points inside of early guidance.

A €500 million tranche of seven-year notes priced at par to yield 4%. Early guidance was in the 4¼% area.

A €1.25 billion tranche of 10-year notes priced to yield 4¾%. Early guidance was in the 5% area.

And a €500 million tranche of 12-year notes priced at par to yield 5¼%. Early guidance was in the 5½% area.

Deutsche Bank was a global coordinator and the physical bookrunner. Goldman Sachs International was also a global coordinator.

Mizuho Securities, Morgan Stanley, BofA Merrill Lynch, Credit Agricole CIB and Nomura were joint bookrunners.

Proceeds will be used for general corporate purposes including debt refinancing.

Center Parcs prices tight

As has been the case throughout the week, European business dominated primary market news on Wednesday.

Center Parcs Group priced a £560 million issue of class B2 fixed-rate secured notes due Aug. 28, 2020 (/B/B) at par to yield 7%.

The yield printed at the tight end of yield talk.

The final maturity of the notes is February 2042.

Joint bookrunner Deutsche Bank will bill and deliver. Barclays, HSBC and JPMorgan were also joint bookrunners.

Proceeds will be used to repay the company’s outstanding class B notes and to help fund the acquisition of Center Parcs by Brookfield Property Partners LP.

Domus Vi taps 6 7/8% notes

France-based elderly care services provider Domus Vi priced a €125 million add-on to its 6 7/8% senior secured notes due Aug. 15, 2021 (B2) at 105.25 to yield 5.83%.

The reoffer price came on top of price talk.

Joint bookrunner Goldman Sachs will bill and deliver for the acquisition deal. Deutsche Bank and Natixis were also joint bookrunners.

Verallia drops dollar tranche

Verallia moved up timing for its €860 million offering of high-yield notes and withdrew a proposed dollar-denominated tranche while leaving the overall size of the deal unchanged.

Price talk is due out Thursday and the deal is expected to price and allocate on Friday. The schedule announced earlier in the week had the roadshow running to July 28.

On offer are Horizon Holdings III SAS’ €560 million of seven-year senior secured notes (B1/B+). The proposed dollar-denominated tranche of the secured notes was withdrawn with the proceeds shifted to the euro-denominated tranche.

In addition Horizon Holdings I SAS is selling €300 million of eight-year senior unsecured notes (B3/B-).

Global coordinator Credit Suisse will bill and deliver. Deutsche Bank is also a global coordinator.

Barclays, BNP Paribas, Nomura and SG CIB are joint bookrunners.

Proceeds will be used to help fund the buyout of the France-based glass packaging manufacturer by Apollo and to repay debt.

Taking out bridges

The week’s phenomenal burst of European business in the high-yield primary market is attributable in part to an anticipated dormant period during the month ahead, as investors in France and Germany are expected to be on vacation during August, sources say,

Dealers are electing to brave the ongoing volatility in the global financial markets because some of the transactions on offer are bridged with committed financings that are set to fund in the late summer-early fall timeframe, sources say.

And unlike bridge loans in the U.S. market, which are frequently syndicated to investors for a fee – and some say for improved allocations – the European bridges stay on the books of the banks and are not syndicated, a London-based debt capital markets banker explained on Wednesday.

So European dealers are keen to take out these bridges with bonds sooner than later, lest the banks in question be rendered subprime lenders by the forward march of time.

The above-mentioned Verallia deal, bridged with a committed financing set to fund in September, is a case in point, an informed source said on Wednesday.

Kenan Advantage talk

Meanwhile the dollar-denominated calendar has at least $2.3 billion of business set to clear before Friday’s close.

Looking to the Thursday session, Kenan Advantage Group Inc. plans to price a $405 million offering of eight-year senior notes (B3/B-).

The deal was talked to yield 7¾% to 8% on Wednesday.

Goldman Sachs is the left bookrunner. KeyBank is the joint bookrunner.

Cable & Wireless roadshow

Cable & Wireless Communications plc began an international roadshow on Wednesday in London for a $750 million offering of seven-year senior notes (expected ratings Ba3/B).

The European portion of the roadshow wraps up Friday and a July 27-31 roadshow is scheduled for the United States.

J.P. Morgan, BNP Paribas, RBC and Scotia are the joint bookrunners for the debt refinancing and general corporate purposes deal.

New SoftBank notes unseen

In the secondary sphere, traders did not report any initial aftermarket action in SoftBank’s two big tranches of dollar-denominated notes, the 5 3/8% paper due 2022 and the 6% notes due 2025.

A market source suggested that the oversubscribed megadeal played primarily to European and Asian investors.

Energy issues punished

A trader said that much of the day’s focus was on energy names, which were seen mostly on the downside, in line with the continued slide in world crude oil prices.

Benchmark domestic crude grade West Texas Intermediate’s August contract plummeted by $1.67, or 3.3% on the New York Mercantile Exchange, settling in at $49.19 per barrel – the first time light, sweet crude has settled below $50 in over three months and its lowest settlement price since April 2.

European benchmark Brent crude likewise slid by 91 cents, or 1.60%, closing at $56.13 on the ICE Futures Europe.

Against that somber backdrop, “we saw some E&P space names trade significantly lower. Some of the lower quality names are down 10 points from last week,” the trader said.

At another desk, Oklahoma City-based exploration and production operator SandRidge Energy’s 8¾% notes due 2020 were seen down ¼ point at 74 bid on volume of over $33 million, topping all purely junk-rated issues.

The company’s 7½% notes due 2021 fell by 1 full point to 28½ bid, with over $18 million having changed hands.

Los Angeles-based energy operator California Resources’ bellwether 6% notes due 2024 were seen falling 1 11/16 points on the day, ending at 77 9/16 bid with over $30 million trading.

But another market source said those bonds “popped up a little from their lows” in the 77 area, finally going out around 78½.

For a second straight session, Chesapeake Energy’s bonds were being battered down in active trading, after the Oklahoma City-based oil and natural gas company announced that it was suspending its quarterly dividend to save $240 million – leading stock and bond investors alike to fret about the company’s cash position.

Its busiest bond, the 4 7/8% notes due 2022, dropped nearly 2 points on the day to 79 5/16 bid, with over $31 million traded.

A trader said Chesapeake’s 5¾% notes due 2023 “have been moving around and gapping” on its way down to an 82 close, versus 86 bid on Tuesday. Over $13 million of the notes changed hands.

He said that “there’s just been significant pressure on the oil and gas space in general.

“Oil is lower – but I think there might just be some bigger sellers out there, kind of pushing these prices lower.”

Bombardier bombs

Away from the energy names, Bombardier, a Montreal-based aircraft and train manufacturer, saw its debt sliding downward as concerns about the business jet market ramped up.

“The stock and bonds were both plunging,” a trader said.

The trader said the 7½% notes due 2025 declined nearly 4 points to 78¾, while the 6% notes due 2022 dropped 4 points to 79.

Another tranche of the 2022 paper lost 10 points, ending at 80½, the trader said. He noted that the issue hadn’t traded in several weeks.

The weakness in the name came as aviation parts manufacturer B/E Aerospace said demand for large-cabin executive planes was declining, which was weighing on its own bottom line.

In addition, Bombardier reportedly held an investor call on Wednesday. While the call was characterized as occurring within the normal scope of business, one news outlet reported that some bondholders were concerned about the company’s ability to pay its long-term obligations, given the challenges it has had selling its new C Series aircraft.

Bombardier is expected to release its latest quarterly figures on July 30.

Ruling boosts Caesars

While most issues were on the downside Wednesday, a notable exception was Caesars Entertainment’s paper, particularly its 10% notes due 2018. They were seen up as much as 5 points on the day to 32 bid, on volume of more than $20 million.

The bonds firmed smartly against the backdrop of the federal bankruptcy court in Chicago refusing to give Las Vegas-based gaming giant Caesars the same immunity from creditor lawsuits that its Caesars Entertainment Operating Co. unit has as a result of being under Chapter 11 protection.

A number of junior bondholders and other creditors have filed suit against parent Caesars Entertainment, alleging that in the months ahead of the bankruptcy filing, Caesars had systematically moved some of its best assets to bankruptcy-remote subsidiaries, in order to put them out of reach of the creditors. Caesars had been looking to quash the lawsuits, warning that letting the creditor suits proceed could endanger the viability of the parent and the subsidiary’s whole restructuring plan.

Indicators extend slide

Statistical measures of junk market performance were lower all around for a fourth consecutive session on Wednesday.

The KDP High Yield Daily Index fell by 19 basis points on Wednesday to end at 69.19, its fourth straight loss and fifth in the last seven sessions. On Tuesday, it had plunged by 28 bps.

Its yield, meanwhile, rose by 7 bps to 5.95%, widening for a fourth successive session, after having gone up by 6 bps on Tuesday.

The Markit Series 24 CDX North American High Yield Index nosedived by 17/32 point on Wednesday to close at 106 3/16 bid, 106¼ offered, its fourth straight loss and fifth downturn in the last six sessions. It had retreated by 5/32 point on Tuesday.

The Merrill Lynch North American Master II High Yield Index lost ground for a fourth session in a row on Wednesday, dropping by 0.403% – its biggest one-day loss so far this year, surpassing the 0.345% defeat recorded on Jan. 6. It had fallen by 0.281% on Tuesday.

Wednesday’s loss dropped its year-to-date return to 1.622% from 2.034% on Tuesday.

It was the first time the index’s cumulative return had fallen below the psychologically significant 2.00% mark since March 19, when it closed at 1.983%, and represented its lowest closing level since Feb. 5, when the index had ended at 1.381%.

The year-to-date figure meantime remained well down from the 4.062% reading recorded on May 29, the index’s peak level for the year so far.

-Stephanie N. Rotondo contributed to this review

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