Xplornet add-on prices, Nathan’s slates; Bombardier flies on Airbus deal; Toys up on Asia IPO talk

By Paul Deckelman and Paul A. Harris

New York, Oct 17 – For a second straight session, syndicate sources said that the high-yield primary arena was relatively quiet on Tuesday, with just a single new issue of U.S. dollar-denominated and fully junk-rated paper having come to market.

Canadian telecom company Xplornet Communications Inc. did an upsized $30 million add-on to its existing $230 million of five-year notes that priced earlier this year.

The sources meantime said that fast-food operator Nathan’s Famous Inc. was shopping a secured notes deal around, with pricing possible as soon as Wednesday.

Away from that, traders said that for the first time in a number of days, their market’s focus was not new or recently priced issues, although there were some moderately busy dealings in recently priced names like Charter Communications, Inc., West Corp. and UPC Holding BV, the real action was among existing issues of companies generating news.

Bombardier Inc.’s several issues of notes dominated the day’s Most Actives list, firming solidly on the news that the Canadian aircraft manufacturer will sell a majority stake in its C-Series airliner operation to European aerospace giant Airbus – a transaction which may also get around a threatened United States government imposition of heavy tariffs on C-Series planes scheduled to be sold to U.S.-based carriers such as Delta Air Lines, since Airbus plans to actually do the final assembly work on planes to be sold in the U.S. at its existing facility in Alabama.

An even bigger gainer was Toys ‘R’Us, Inc., particularly its recently battered 2018 notes, which zoomed by some 15 points on news reports the retailer – currently restructuring under Chapter 11 – may do an initial public offering for its burgeoning Asian business, which is not covered by the bankruptcy filing.

And hospital names like Community Health Systems, Inc., Tenet Healthcare Corp. and HCA Inc. continued to bounce back from the losses the sector suffered late last week on the prospect of changes to the Affordable Care Act in the U.S.

Statistical market performance measures were higher across the board for the first time in a week on Tuesday; those indicators improved after having been mixed on Friday and again on Monday, which followed a lower session all around last Thursday and a mixed trading day last Wednesday.

Xplornet upsizes

In the second consecutive primary market session to generate thin news volume Xplornet Communications Inc. priced an upsized $30 million add-on to its 9 5/8%/10 5/8% senior PIK notes due June 1, 2022 (Caa2/CCC) at 103.50.

The issue size was increased from $25 million.

The reoffer price came at the rich end of the 103 to 103.5 price talk.

SunTrust, BMO and Jefferies were the joint bookrunners.

The Woodstock, New Brunswick-based rural-focused broadband service provider plans to use the proceeds, in addition to an add-on to its term loan, to finance the acquisition of Internet business assets in Canada. The additional proceeds resulting from the $5 million upsizing of the deal, along with a $5 million upsize to the loan, will be used for general corporate purposes which may include refinancing the 2009 credit facility.

Nathan's Famous via Jefferies

Nathan's Famous, Inc. plans to price a $150 million offering of eight-year senior secured notes on Wednesday via Jefferies.

The Jericho, NY-based company plans to use the proceeds to refinance its 10% notes due 2020, as well as to fund a dividend, and for general corporate purposes.

As to the relative quiet that has permeated the new issue market thus far in the Oct. 16 week, some potential issuers are sidelined by earnings blackouts, a trader said, and added that the New York Yankees' battle for the American League pennant – with Tuesday, Wednesday and Thursday games in New York – is no doubt commandeering some attention among capital markets participants.

CMA CGM upsizes, through talk

In the European session France-based container ship company CMA CGM SA launched and priced an upsized €500 million issue of seven-year senior notes (B3/B-) at par to yield 5¼%.

The issue size was increased from €300 million.

The yield printed 12.5 basis points inside of yield talk in the 5½% area. Initial talk was 5½% to 5¾%.

Joint global coordinator BNP Paribas will bill and deliver. HSBC was also a joint global coordinator. Credit Agricole CIB, ING, SG CIB and UniCredit Bank were the joint bookrunners.

The company, which is based in Marseille, plans to use the proceeds, including the additional proceeds resulting from the €200 million upsizing of the deal, to repay debt.

Monday outflows

The daily cash flows of the dedicated high-yield bond funds were negative on Monday, the most recent session for which data was available at press time, a trader said.

High-yield ETFs sustained $53 million of outflows on the day.

Actively managed high-yield funds sustained $35 million of outflows on Monday.

The daily cash flows of the dedicated bank loan funds were also negative on Monday, with the loan funds sustaining $25 million of outflows on the day.

Xplornet slightly firmer

In the secondary realm on Tuesday, a trader said that things were “pretty quiet today,” although a second market source said that overall volume was “pretty decent,” coming in at around $3 billion.

A trader said that the new Xplornet Communications 9 5/8%/10 5/8% senior PIK notes due in June of 2022 had edged up to a 103¾ bid, 104½ offered level, after that quickly shopped add-on deal had priced at 103.5.

However, he said there were few trades, owning to the extremely small size of that $30 million transaction.

Another trader said that Monday’s offering of 9% senior secured notes due 2022 from Britain-based aerospace industry supply chain provider Pattonair was not trading around.

“It was a small deal and just did not trade,” he said of the $280 million regularly scheduled forward calendar offering, which had priced at par.

Some recent-deal activity

While the traders said that the market’s main focus on Tuesday was not the new and recently priced offerings that had dominated the proceedings of late – which one trader acknowledged was “a big change” – there was some respectable aftermarket action in a few deals that have gotten done since the start of the month.

Nonetheless, there was still considerable activity seen in some recently priced issues, such as Charter Communications’ 5% notes due Feb. 1, 2028. A trader saw more than $37 million of those notes having changed hands on Tuesday, with the issue up by 1/8 point at 99¼ bid.

A second trader saw those notes in a 99-to-99 3/8 bid context.

Stamford, Conn.-based cable, broadband and telephone service provider Charter priced a $1 billion add-on to its existing 5% notes on Oct. 10, with the bonds coming to market at 98.5 to yield 5.189%.

The add-on was part of a quick-to-market two-part deal totaling some $1.5 billion, including $500 million of 4% notes due March 1, 2023, which priced at par.

Also active on Tuesday, for a second straight day among Junkbondland’s busiest bonds, was West Corp.’s 8½% notes due 2025. A market source pegged those notes at 98½ bid, up ¼ point on the day, on volume of over $26 million, on top of the $41 million which had traded on Monday.

West, an Omaha, Neb.-based provider of communications and network infrastructure services, priced $1.15 billion of those notes at 98.579 back on Oct. 3, yielding 8¾%.

That regularly scheduled forward calendar offering was downsized from an originally announced $1.3 billion.

And Friday’s new UPC Holding BV 5½% notes due in January of 2028 eased by 1/8 point on Tuesday to close at just under 100½ bid, with about $18 million having traded – well down from the more than $69 million which had moved around on Monday, when the credit topped the high yield Most Actives list..

The Netherlands-based telecommunications company – a unit of international media giant Liberty Global – priced $550 million of those 10.25-year notes at par in a quick-to-market transaction on Friday.

But apart from that trio of names, a trader said that the new deals were “not much traded today.”

For instance, he saw “only very slim volume” in Parsley Energy LLC’s 5 5/8% notes due 2027, although they continued to trade around 103-to-103¼ bid – a hefty premium to the par level at which the Austin,. Texas-based oil and natural gas exploration and production company had priced its quick-to-market $700 million offering of paper, upsized from an original $600 million, back on Oct. 5.

Bombardier flies on Airbus deal

A trader said that new issues “were not the focus today – instead, actual credit names were moving around.”

For instance, he said that Bombardier Inc.’s bonds “were up anywhere from 4 to 6 points across their [capital] structure.

“The whole structure traded on pretty big volume.”

In fact, the Montreal-based aircraft manufacturer’s bonds held down most of the top spots on the day’s Most Actives list, a market source said, with its 8¾% notes due 2021 the busiest of the bunch, with over $62 million having changed hands on the session. They finished up 6 points on the day at 113½ bid.

The source also saw the company’s 7½% notes due 2025 up nearly 6½ points, ending at just under 107 bid, with over $41 million having traded.

Its 6% notes due 2022 were seen going out around the 102 bid level, up 5¾ points on the day, with more than $37 million of turnover, while the company’s 6 1/8% notes due 2023 jumped 6½ points to 103 bid, on volume of more than $33 million.

Bombardier’s bonds headed for the wild blue yonder after the company announced that it had agreed to take pan-European aerospace giant Airbus on as a partner in its development of its new C-Series 150-passenger jets.

Under the terms of the complex deal announced on Tuesday, Airbus will own slightly more than half of the C-Series development unit, with Bombardier to hold 31% and the Province of Quebec to have a 19% stake. Currently, Bombardier owns 62% of the operation and Quebec has 38%.

The parties did not make available the estimated value of the Airbus investment in the C-Series business – other than to say that at the closing there would be “no cash contribution from any of the partners.”

However, they did say that having the deep-pocketed European aerospace giant on board would be “a win-win situation for all the parties involved – for Airbus, for Bombardier and for Quebec.

As part of the announcement, Airbus said that it would establish a new assembly line for the C-Series planes at its existing aircraft factory in Mobile, Ala., where it currently builds some of its own aircraft models.

The move is seen as a likely way around the recent U.S. Commerce Department threat to slap tariffs of as much as 300% on any C-Series planes made in Canada for sale to U.S.-based air carriers such as Delta Air Lines, which is scheduled to purchase at least 75 of the C-Series jets over the next few years.

Commerce recently announced the tariffs after domestic airline manufacturer Boeing complained that the more than $1 billion invested in Bombardier several years ago by the Quebec government, and additional aid it receives from Britain’s government for its manufacturing facility in Northern Ireland, constitute an improper subsidy of Bombardier’s aircraft production and thus, an unfair trade practice.

Bombardier’s bonds and shares retreated on news of the tariff, although they regained some of that lost ground days later when Delta’s chief executive officer, Edward H. Bastian, said during that company’s earnings conference call that Delta expects to take possession of the C-Series plane.

© 2015 Prospect News.
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