Upsized Springleaf issue prices, existing bonds better; new CDW notes hold around issue price

By Paul Deckelman and Paul A. Harris

New York, Nov. 25 – Springleaf Holdings, Inc. priced a quickly shopped, upsized $700 million offering of five-year notes on Tuesday in the junk bond market’s sole U.S.-dollar-denominated pricing.

Traders did not see any immediate aftermarket dealings in the consumer finance company’s new deal.

However, they reported that its existing 2017 bonds – some of which will be taken out using the new-deal proceeds – were firmer on the session.

With no other U.S. dollar issues pricing – several, such as EnTrans International LLC and Parq Resort and Casino remain on the forward calendar but aren’t expected to price this week – market participants noted DHX Media Ltd.’s upsized C$175 million seven-year issue that priced during the session.

Secondary market sources saw Monday’s 10-year offering from CDW Finance/CDW LLC holding steady right around its par issue price.

Monday’s other deal – from Tibco Software Inc. – was also seen trading around its heavily discounted issue price.

But other recent deals like MGM Resorts International, KLX Inc. and HD Supply Holdings, Inc. were seen keeping the robust aftermarket gains they have notched.

Post Holdings Inc.’s bonds were better, even though the food products company’s quarterly loss expanded from year-ago levels, while its debt rose sharply as a result of multiple acquisitions.

Statistical market-performance measures turned mixed – though barely – after having been higher across the board two straight sessions before that.

Springleaf upsizes deal

Two deals crossed the finish line in Tuesday’s primary market.

Springleaf Holdings’ Springleaf Finance Corp. subsidiary priced an upsized $700 million issue of non-callable five-year senior notes (B2/B-) at par to yield 5¼% in a quick-to-market transaction.

The deal was increased from $500 million.

The yield printed at the tight end of the 5¼% to 5 3/8% yield talk.

BofA Merrill Lynch was the left bookrunner. Citigroup was the joint bookrunner.

The Evansville, Ind.-based consumer finance company plans to use the proceeds, including those from the $200 million upsizing of the deal, to repurchase approximately $370 million of its notes maturing in 2017 from holders. Remaining proceeds will be used for general corporate purposes which may include further debt repurchases and possible acquisitions. When the deal was announced on Tuesday morning, Springleaf said it had agreements to buy back $199.2 million of its 6.9% notes due 2017 from a single holder at a premium. That holder had agreed to buy $200.5 million of the new notes.

DHX upsizes

Meanwhile in the Canadian dollar-denominated market DHX Media priced an upsized C$175 million issue of seven-year senior notes (/BB-//DBRS: BB(low)) at par to yield 5 7/8%.

The deal was expanded from C$150 million.

The yield printed at the tight end of yield talk that had been set in the 6% area.

RBC and Scotia were the joint bookrunners for the debt refinancing and general corporate purposes deal.

Decks cleared

Tuesday’s transactions clear the decks ahead of the four-day Thanksgiving holiday weekend in the United States, sources said.

Two deals remain on the active calendar, carried over from last week, and are expected to remain in the market until the post-holiday period, according to an informed source.

They are EnTrans International’s $250 million offering of six-year senior secured notes (B2/B), via sole bookrunner Credit Suisse, talked last week to yield 8¾% to 9%, and Parq Resort and Casino’s $200 million offering of seven-year senior secured second-lien notes (Caa1/B-), via Credit Suisse and Dundee, talked last week with an 11½% coupon to yield 12%.

The post-holiday week should also produce news on Westmoreland Coal Co.’s expected $400 million offering of senior secured notes due 2021 via BMO, according to a source familiar with the situation.

The company is tendering for $675,485,000 of its 10¾% senior secured notes due 2018, a refinancing which also includes a new credit facility. There were a Tuesday conference call on the refinancing, according to a fund manager.

Meanwhile Tibco Software’s new 11 3/8% senior notes due December 2021 (Caa2/CCC), which priced Monday at 97.10 in a $950 million issue, were trading at 97½ bid, 98½ offered on Tuesday, according to a buyside source who characterized the bond deal as a “hung situation.”

Tibco’s bank loan was turning in a much more notable performance in the secondary market, according to the buysider who is involved with both junk bonds and loans.

The Tibco loan was at 98 bid, 98½ offered throughout Tuesday’s session, the buysider said, noting that it priced at 95.

A trader, meanwhile, said that there were very few trades in the new Tibco bonds, suggesting that a healthy amount of the issue remains with the dealer.

Post-Thanksgiving forecast

A portfolio manager said that the calendar after Thanksgiving likely won’t be overly aggressive due to the neutral to negative cash flows that dedicated high-yield funds have been seeing lately.

Any time there is a calendar with decent credits coming with sufficient yield people are selling in order to play that calendar, said the manager.

The most recent daily fund flow information was positive, according to market sources.

Flows on Tuesday saw high-yield exchange-traded funds getting $266 million of inflows while actively managed high-yield funds saw $105 million of inflows.

Springleaf existing bonds up

In the secondary market, traders said that they had not seen any aftermarket dealings in the day’s sole U.S. dollar-denominated pricing, from Springleaf Finance Corp., owing to the relatively lateness in the day at which the upsized 5¼% notes due 2019 priced.

However, there was some activity in the consumer finance company’s existing 6.9% notes due 2017.

A market source saw the bonds gain as much as 1½ points on the day, trading up to 110 bid.

At another desk, that paper was seen having gone home up ½ point on the session at 109 bid, on volume topping $7 million.

The company plans to use some of its new-deal proceeds to repurchase about $370 million of the $2.8 billion outstanding issue from holders.

Monday deals around issue price

Among the deals which came to market on Monday, a trader said that CDW’s 5½% notes due 2024 were holding steady right around their par issue price.

He quoted the bonds at 99 7/8 bid, 100 1/8 offered.

That was about unchanged from the trading levels seen on Monday after the Vernon Hills, Ill.-based technology solutions provider priced its quick-to-market $575 million issue via its CDW Finance and CDW LLC subsidiaries.

The day’s other significant pricing – Tibco Software Inc.’s 11 3/8% notes due 2021 – was quoted by a trader at 97½ bid, 97¾ offered, although he did not see very much activity in the issue.

The Palo Alto, Calif.-based provider of infrastructure and business software priced $950 million of those notes at a deeply discounted 97.1 issue price to yield 12% in a regularly scheduled forward calendar offering, as part of the financing for Tibco’s upcoming LBO.

The bonds were not seen trading Monday after their pricing.

Recent deals hold gains

A trader said that some of the other recently priced bond offerings were holding at the higher levels to which those bonds had moved in aftermarket trading after pricing.

He said that KLX’s 5 7/8% notes due 2022 remained in a 102 to 102½ bid context.

KLX – being spun off from Wellington, Fla-based aircraft interiors producer B/E Aerospace, Inc. – priced $1.2 billion of the notes on Friday at par off the forward calendar.

The notes initially traded in a 100½ to 100¾ context and had jumped to around the 102 level by Monday, on volume of over $49 million.

He said that HD Supply’s 5¼% senior secured first priority notes due 2021 “were hanging in there” at around 101¼ bid, 101¾ offered.

The Atlanta-based facilities maintenance and building supplies company had priced $1.2 billion of the notes at par in a quick-to-market transaction last Wednesday.

When the bonds were freed for initial aftermarket dealings, traders saw heavy volume in the new issue, topping the $85 million mark as they finished in a context of 100 3/8 to 100½.

However, the bonds pushed higher in subsequent dealings, to their present levels above 101.

MGM Resorts International’s 6% notes due in March of 2023 were closing at 101½ bid, 102 offered.

The Las Vegas-based gaming and hospitality company priced a quickly-shopped $1.15 billion of the paper at par on Thursday, after the offering was upsized from the originally announced $1 billion, with the bonds moving up to around 101 bid, although volume was only moderate.

The company then did an equally unscheduled $100 million add-on on Monday. Those additional notes priced at 100.75 to yield 5.886%

Post pops after earnings

Away from the new deals, a market source said that Post Holdings’ 7 3/8% notes due 2022 had gained more than ½ point on the session, finishing at 101 5/16 bid.

He saw more than $16 million of the notes having traded on a round-lot basis, making the issue one of the busiest of the session. There were also a considerable number of smaller round-lot trades.

The bonds rose even though the St. Louis-based maker of ready-to-eat breakfast cereals and other food items reported a sharply wider loss for its 2014 fiscal fourth quarter – $291.7 million, or $5.86 per diluted share, from $3.2 million, or 10 cents per share, of red ink in the year-ago period.

However, excluding the one-time items largely responsible for the big loss, adjusted earnings came in at 13 cents per share, versus the roughly 8 cents per share that Wall Street was looking for.

Sales were $1.04 billion in the period, versus the $980 million that analysts expected.

Post also reported substantially higher debt and interest costs for the period from a year earlier, as a result of borrowings that funded the company’s ambitious acquisitions program (see related story elsewhere in this issue).

Indicators turn mixed

Overall dealings were seen quiet, as the run-up to Thursday’s Thanksgiving holiday continued.

Statistical indicators of junk market performance turned mixed on Tuesday – though just barely so – after having been higher across the board on Friday and again on Monday.

They had been mixed on Thursday and lower all around for six straight sessions before that.

The KDP High Yield Daily Index edged downward by 1 point on Tuesday to end at 71.81, its first loss after two gains in a row, including Monday’s 9 basis point advance.

However, its yield – which normally moves inversely to the index’s movements and thus would typically rise on a lower index reading – instead fell by 4 bps, to 5.43%, its third consecutive narrowing. On Monday, the yield had declined by 3 bps.

The Markit CDX North American High Yield Series 23 index posted its fourth straight gain on Tuesday, improving by 1/16 point to end at 107 7/16 bid, 107 15/32 offered. On Monday, it had gained 15/32.

The Merrill Lynch U.S. High Yield Master II Index also improved on Tuesday, rising by 0.09%. It was the index’s third straight gain, including Monday’s 0.099% advance.

The latest gain raised its year-to-date return to 4.172%, up from Monday’s 4.078% and from Friday’s 3.975%. However, the index remained well down from its peak level for the year of 5.847%, recorded on Sept. 1.

According to the FINRA-Bloomberg Active US High Yield Bond Index, junk market volume rose to $2.97 billion on Tuesday, from $2.885 billion on Monday.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.