Upsized Sunoco megadeal, plus Ingevity price; new Sunoco, L Brands busy; Cablevision off ahead of deal

By Paul Deckelman and Paul A. Harris

New York, Jan. 9 – The 2018 revival of the high-yield primary market continued for a second consecutive session on Tuesday, as syndicate sources reported that two new dollar-denominated and fully junk-rated offerings got done, including the first megadeal-sized billion-dollar plus transaction.

Motor fuel and petroleum products distributor Sunoco LP and its Sunoco Finance Corp. unit priced an upsized $2.2 billion three-part offering consisting of five-, eight- and 10-year paper.

All three tranches were seen trading actively at somewhat higher levels when they hit the aftermarket.

The day’s activity also included a $300 million eight-year deal from packaging company Ingevity Corp.

Both of those deals came off the forward calendar.

Besides those two purely high-yield offerings, market participants noted that Jabil Inc., a provider of electronic manufacturing design solutions, did a split-rated (Ba1/BBB-/BBB-) $500 million 10-year offering, which also traded actively, although traders said most of the interest in that deal came from higher-grade investors.

Back in the purely junk category, Monday’s deal from retailer L Brands, Inc., traded actively, but was little changed on the day.

The syndicate sources meantime said that CSC Holdings, LLC is shopping a new offering around, the proceeds of which will be used to fund a dividend to its corporate parent in connection with the pending separation of European cable and telecommunications giant Altice NV from its Altice USA, Inc. unit, which owns U.S. cable operator Cablevision. Ahead of that deal, Cablevision’s existing bonds, and those in the Altice capital structure, traded busily, and at lower levels.

Away from new-deal related names, traders saw the various bonds in communications satellite company Intelsat SA’s capital structure lower, although they saw no news that might explain the move.

Energy names such as California Resources Corp. and driller Noble Holding International Ltd. gained in line with higher oil prices.

But statistical market performance measures turned lower across the board on Tuesday, their first overall negative performance since Dec. 19. That broke a string of six consecutive sessions before that in which the indicators had been higher all around.

Sunoco upsizes

The primary market saw its second and third deals of 2018 – including the first to top $1 billion in size – price during the Thursday session.

Sunoco LP and Sunoco Finance Corp. launched and priced an upsized $2.2 billion amount of senior notes (Ba1/BB-/BB) in three tranches.

The debt refinancing deal included

• $1 billion of five-year notes which priced at par to yield 4 7/8%. The yield printed 12.5 basis points inside of the 5% to 5¼% yield talk. The tranche was announced at a size of $500 million minimum;

• $800 million of eight-year notes, which priced at par to yield 5½%. The yield printed at the tight end of the 5½% to 5¾% yield talk. The tranche was announced at a size of $500 million minimum; and

• $400 million of 10-year notes, which priced at par to yield 5 7/8%. The yield printed in the middle of the 5¾% to 6% yield talk. The issue size was increased from $1.75 billion.

Credit Suisse, RBC, BofA Merrill Lynch, BBVA, Mizuho, Natixis, TD, Goldman Sachs, Deutsche Bank, Morgan Stanley, PNC, Credit Agricole, Citigroup, SMBC Nikko and MUFG were the joint bookrunners.

Ingevity prices $300 million

Ingevity Corp. priced a $300 million issue of eight-year senior notes (Ba3/BB) at par to yield 4½%.

BofA Merrill Lynch, Wells Fargo and JP Morgan were the joint bookrunners.

The North Charleston, S.C.-based packaging company plans to use the proceeds to finance the purchase of substantially all the assets primarily used in the pine chemicals business of Georgia-Pacific Chemicals LLC and Georgia-Pacific LLC, and for general corporate purposes.

CSC investor call Wednesday

Meanwhile the calendar saw a slight buildup on Tuesday.

CSC Holdings, LLC plans to participate in an investor conference call at 11 a.m. ET on Wednesday for a $500 million offering of senior guaranteed notes due January 2028 (existing ratings Ba1/BB).

The deal is scheduled to price Friday.

Goldman Sachs is the left bookrunner. JP Morgan, BNP Paribas and Credit Agricole are the joint bookrunners.

Proceeds, together with proceeds from the 2018 term loans, $500 million of additional borrowings under the revolver and cash on the balance sheet, will be used to fund a $1.5 billion dividend to Cablevision, the direct parent of CSC Holdings, which will use those proceeds to fund a dividend to its parent, Altice USA, Inc., which will in turn use those proceeds to fund a dividend to its stockholders immediately prior to and in connection with the separation of Altice USA from Altice NV.

Zoopla starts roadshow

In Europe, Zoopla Property Group plc and ZPG plc began a roadshow on Tuesday for a £200 million offering of 5.5-year senior notes (S&P: BB-).

The offer, via left bookrunner HSBC, is expected to price on Thursday.

The London-based real estate services and information company plans to use the proceeds, together with cash on hand and borrowings under its new revolving credit facility, to pay off its existing revolver and to repay amounts outstanding under its existing term loans.

High yield investors in Europe have cash to put to work, and are waiting for the primary market to get its legs, according to a London-based senior syndicate official who added that they probably won't have to wait long.

The Jan. 15 week could be a busy one in Europe, the official said, and added that there are quite a few euro deals being pre-marketed in the present week.

New Sunoco issues active

In the secondary market, all three tranches of the big new Sunoco deal were trading actively, reflecting “pent-up investor demand” for new paper, a trader said, with ample cash on the sidelines seen being put to work this way.

The Dallas-based gasoline and other petroleum products distributor’s 4 7/8% notes due 2023 were initially seen trading around 100 3/8 bid, up a little from their par issue price.

But by the end of the day, they had moved up to around 100 7/8 bid, with over $53 million of those notes having changed hands, topping the day’s Most Actives list.

The new Sunoco 5½% notes due 2026were also initially seen around 100 3/8 bid, up from their par offering price, but they too had moved up to around the 100¾ bid area by the close, with over $33 million having traded.

Sunoco’s 5 7/8% notes due 2028 were initially quoted in a 100¾-to-101 bid context, but had fallen back to around 100 5/8 bid going home, also on over $33 million traded.

L Brands notes busy, but stable

Monday’s new issue from L Brands was also among the most actively traded paper on the day, with over $47 million seen to have traded, on top of the more than $50 million which had moved around on Monday after the Columbus, Ohio-based retailer had priced its quick-to-market $500 million issue of 5¼% notes due 2024 at par.

Several traders saw the new bonds straddling a par-to-100¼ bid context, calling the issue basically unchanged on the day.

Split-rated Jabil trades around

Several traders noted the new Jabil, Inc. 3.95% notes due 2028, which priced during the session off the investment-grade desks.

Those notes were priced to yield 145 basis points over Treasuries, or the equivalent of 99.714, yielding 3.985.

A trader said that by the end of the day, they had moved up to a 99 7/8-to-100 5/8 bid context, or on a spread basis, between 140 and 142 bps over.

More than $76 million of the St. Petersburg, Fla.-based company’s issue traded, he said, with most of it going to investment-grade accounts.

Cablevision notes off ahead of deal

With Cablevision’s CSC unit planning to bring a new deal to market this week, the Bethpage, N.Y.-based cable television operator’s existing bonds were seen trading lower on Tuesday.

A market source said that its 5½% notes due 2027 lost 5/8 point, to end at 100 5/8 bid, with over $29 million having traded.

Its 5¼% notes due 2024 traded a little under 99½ bid down about 3/8 point, while its 10 7/8% notes due 2025 retreated by ¾ point, to 119¼ bid.

The CSC offering’s proceeds will be used to fund a dividend to corporate parent Cablevision, which in turn will fund a dividend to its corporate parent, Altice USA, which will in turn use those proceeds to fund a dividend to its stockholders immediately prior to and in connection with the separation of Altice USA from Altice NV.

The Netherlands-based international cable giant announced on Monday that it will spin off its 67.2% holding in Altice USA, establishing the American unit as a separate entity, although Altice NV’s founder and chairman, Patrick Drahi, will still exercise control over both companies, simultaneously serving as the president of the board for Altice Europe – as Altice NV will be renamed – as well as chairman of the board of Altice USA.

Parent Altice’s various bonds were also seen lower in Tuesday dealings, with its 7 5/8% notes due 2025 losing 1¼ points to end at 96¼ bid, with over $32 million traded.

Its 7¾% notes due 2022 finished down 1 1/8 points, at 99½ bid, while its 6 5/8% notes due 2024 ended at about 104 5/8 bid, down nearly ¼ point on the day.

The Altice-owned SFR Group SA’s 7 3/8% notes due 2026 closed at 102 bid, down 1 1/8 point, with over $19 million having changed hands.

Intelsat bonds trade lower

Away from the new deals or new-deal related names, traders saw Luxembourg-based communications satellite provider Intelsat’s bonds losing altitude Tuesday, although one trader said that he was “not sure what was driving that – but the bonds were busy and definitely off.”

The company’s Intelsat Jackson Holdings SA 5½% notes due 2023 closed down 3/8 point at 81 1/8 bid, with more than $23 million having traded.

The Jackson unit’s 9¾% notes due 2025 retreated by 7/8 point, to 95 7/8 bid, with over $21 million of volume.

And its 7¼% notes due 2020 likewise eased a little to end at 93 bid, with over $19 million traded.

But the company’s Intelsat (Luxembourg) SA 7¾% notes due 2021 – weaker-rated, at Ca/CCC-, versus the Jacksons’ Caa2/CCC+ – were the big losers on the day, a trader said, seeing those bonds plummet 4½ points on the session to end at 48¾ bid, on volume of over $11 million.

Crude boosts energy names

In a familiar scenario, energy-rated names pushed higher Tuesday in line with a surge in world crude oil prices.

Key domestic grade West Texas Intermediate for February delivery soared by $1.23 per barrel in Tuesday’s New York Mercantile Exchange action, settling at $62.96, after having pushed above $63 during the session.

March-contract North Sea Brent crude was up by $1.04 per barrel in London futures trading, ending at $68.82.

It was the second straight gain and the fourth in the last five sessions, for both crude oil grades.

Los Angeles-based oil and natural gas exploration and production operator California Resources’ 8% notes due 2022 gained ¾ point on the day, ending at 87¼ bid, although one trader opined that “not that many traded” – volume was only around $14 million, relatively small for the $2.25 billion sector benchmark deal.

Some of the energy-drilling names that work with the E&P operators like CalRes pushed upward.

Cayman Island-based driller Noble Holding’s 6.050% long bonds due 2041 were up by a deuce on the day, ending at 70¼ bid, with over $31 million having traded.

Its 7¾% notes due 2024 gained 1 7/16 points ending at 93 3/16, while its 7.70% notes due 2025 were up 2¼ points, at 89½ bid.

London-based drilling company Ensco plc’s 4½% notes due 2024 gained 1 3/8 point to end at 89½ bid, with over $18 million traded.

Swiss-based Transocean’s 7½% notes due 2025 were up by 3/16 point, at 105 7/16 bid, with over $15 million traded.

Indicators head south

Statistical market performance measures turned lower across the board on Tuesday, their first overall negative performance since Dec. 19. That broke a string of six consecutive sessions before that in which the indicators had been higher all around.

The KDP High Yield Daily Index eased by 1 basis point on Tuesday to finish at 72.22, its first loss after eight straight gains, including Monday’s 1 bps rise and Friday’s 6 bps improvement.

Its yield was unchanged for a second straight session at 5.15%; on Friday, it had come in by 2 bps to come down to that level, which was its fifth straight narrowing.

The Markit CDX Series 29 index lost 9/32 point on Tuesday to end at 108 21/32 bid, 108 11/16 offered – its first loss after six consecutive gains, including Monday’s 1/32 point gain and Friday’s 3/16 point improvement.

And the Merrill Lynch High Yield Index also turned negative on Tuesday, backtracking by 0 .011%, after having firmed over the previous five straight sessions including Monday, when closed up by 0.057%.

Tuesday’s loss dropped its year-to-date return to 0.851% from 0.862% on Monday, its peak level for the year so far.

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