Giant-sized Ziggo deal, Cincinnati Bell close out $9.84 billion week; Concordia gets clobbered

By Paul Deckelman and Paul A. Harris

New York, Sept. 16 – The high-yield primary sphere ended the week on a high note Friday, bringing slightly more than $3 billion of new U.S. dollar-denominated and fully junk-rated paper to market in three tranches, the most new paper of any session this week.

The big deal of the day came from Dutch telecommunications and cable operator Ziggo Holding BV. Through a pair of subsidiaries, it priced $2 billion of dollar-denominated senior secured 10-year notes, €775 million of secured euro-denominated notes, and $625 million of 10-year unsecured paper.

Traders said that both dollar tranches of the new Ziggo paper traded slightly below their shared par issue price, on heavy volume.

The day’s other transaction also came from the communications sphere, as Cincinnati Bell Inc., a telephone service provider in the Midwestern United States, came to market with $425 million of eight-year notes.

Those notes were solidly higher in busy aftermarket dealings.

Traders said that that the market’s main focus was trading in new and recently priced issues, including Thursday’s offering from Callon Petroleum Co. and Wednesday’s new deals from Allison Transmission, Inc. and IMS Health, Inc.

Away from the new issues, Canadian pharmaceuticals manufacturer Concordia International Corp. was a major mover on the downside on Friday, losing as much as 10 points on the news that the British government is enacting new legislation aimed at preventing drug companies from drastically raising prices on their medications.

Statistical market performance measures turned lower across the board on Friday, after having been mixed on Thursday and down for two sessions before that.

The indicators were meantime also lower all around versus where they had been last Friday, their second straight week-over-week loss, after having been higher for one week and mixed the week before that.

Ziggo three-part 10-year deal

Netherlands-based Ziggo priced three tranches of 10-year notes including both secured and unsecured bonds on Friday.

There were two tranches of secured paper issued by Ziggo Secured Finance BV.

Those included $2 billion of 10-year senior secured notes (Ba3/BB-) that priced at par to yield 5½%. The yield printed at the wide end of the 5¼% to 5½% yield talk.

The secured portion of the deal also included €775 million of 10-year senior secured notes (Ba3/BB-) that priced at par to yield 4¼%. The yield printed at the wide end of the 4% to 4¼% yield talk.

A single unsecured tranche, issued by Ziggo Bond Finance BV, featured $625 million of 10-year senior unsecured notes (B2/B) that priced at par to yield 6%. The yield printed at the tight end the 6% to 6 1/8% yield talk.

Credit Suisse was the left lead bookrunner. ABN Amro, Barclays, BNP Paribas, BofA Merrill Lynch, Credit Agricole CIB, Deutsche Bank, Goldman Sachs International, HSBC, ING, JPMorgan, Mediobanca, Nomura, Rabobank and Scotia were joint bookrunners.

The cable operator, which is based in Utrecht, plans to use the proceeds to partially refinance term loans and fund a distribution to shareholders.

Cincinnati Bell prices tight

Cincinnati Bell priced a $425 million issue of eight-year senior notes (B3/B) at par to yield 7% on Friday.

The yield printed at the tight end of the 7% to 7¼% yield talk. Initial guidance was 7½%.

Morgan Stanley, Citigroup and Goldman Sachs were the joint bookrunners for the debt refinancing deal.

Intralot prints at 6¾%

Greece’s Intralot SA priced a €250 million issue of five-year senior notes (B1) at par to yield 6¾%.

JPMorgan, SG CIB, BofA Merrill Lynch, Morgan Stanley and Nomura are the joint global coordinators and joint bookrunners.

The Athens-based lottery operator plans to use the proceeds to fund a concurrent tender offer for Intralot Finance Luxembourg SA’s 9¾% senior notes due 2016.

The week ahead

The week ahead will get underway with a comparatively thin $1.65 billion active calendar.

Landry’s Inc. plans to close the books late Monday on its $575 million offering of eight-year senior notes, a Jefferies deal that has been on a roadshow.

Landry’s plans to price and allocate the bonds, as well as the concurrent bank loan, on Tuesday.

Allegiant Travel Co. may be mulling modifications to the structure of its $300 million notes offer, a trader said on Friday.

The company roadshowed seven-year senior notes but might elect to go instead with a five-year maturity, the source added.

The deal, via sole bookrunner Morgan Stanley, was expected to price Friday. However no terms were available at press time.

Outflows on Thursday

Cash flows of dedicated high-yield bond funds were mixed on Thursday, the most recent session for which data was available at press time.

High-yield ETFs sustained $179 million of outflows on the day.

Actively managed funds saw $300 million of outflows on Thursday.

Those daily flows followed news late Thursday afternoon that dedicated junk bond funds sustained $2.45 billion of outflows for the week to Wednesday’s close.

Dedicated bank loan funds also underwent outflows on Thursday: negative $45 million.

A less busy week

The day’s two junk bond deals brought the weekly total of new issuance up to $9.85 billion in 12 tranches, according to data compiled by Prospect News.

That was down from the $11.03 billion from domestic or industrialized-country borrowers which had priced in 17 tranches last week, ended Sept. 9 – one of the heaviest new-issuance weeks so far this year, not too far removed from the biggest-volume week, the one ended June 10, which saw $12.01 billion priced in 15 tranches. Last week’s activity pace was all the more remarkable for the fact that it was one day shorter than usual, with the market closed on Monday, Sept. 5 in observance of Labor Day.

This week’s new deals brought the year-to-date issuance total up to $166.19 billion in 247 tranches, according to the data.

That was running 21.3% behind the new-deal pace seen at this time last year, when $213.97 billion had priced in 342 tranches by this point on the calendar, the Prospect News data indicated.

The gap between this year’s and last year’s issuance was about the same as it had been last week.

Ziggo bonds trade busily

Among specific issues, a trader saw both tranches of the new Ziggo notes trading around the par level at which they had priced, in active dealings.

At another desk, a market source said that $64 million of the new Ziggo Bond Finance BV 6% senior unsecured notes due in January 2027 traded between 99½ and 100½ bid when they were freed for the aftermarket, finally going home in a 99¾ to 99 7/8 bid context.

He saw more than $87 million of the other dollar-denominated Ziggo tranche, from Ziggo Secured Finance BV, having changed hands.

Those 5½% senior secured notes, also due in January 2027, traded between 99 5/8 and 100¼ bid, with the last prints of the day in the 99 7/8 to 100¼ bid neighborhood.

Cincinnati Bell bonds climb

A trader saw Cincinnati Bell’s new 7% notes due 2024 trading around 101¼ bid late in the afternoon, well up from the par level at which the local wireline and internet service provider in the eponymous southern Ohio city had priced its regularly scheduled forward calendar offering.

Then, he said, “the bids were getting hit.”

But he nonetheless saw the bonds going home in a 101¼ to 101 3/8 bid context, with more than $93 million traded, easily topping the junk bond Most Actives list.

Recent bonds busy

One of the trader said that as has been the case throughout the week, the main area of investor focus has been trading in new or recently priced issues.

A trader saw more than $70 million of Callon Petroleum’s 6 1/8% notes due 2024 change hands. He pegged those bonds between 100 5/8 and 100¼ bid.

The Natchez, Miss.-based independent oil and natural gas company had priced its $400 million scheduled forward calendar issue at par on Thursday after the transaction was downsized from an originally announced $350 million and the bonds had moved up to 101¼ bid in active initial aftermarket dealings.

Indianapolis-based automotive drive-train components manufacturer Allison Transmission’s 5% notes due 2024 traded in a 100 7/8 to 101 3/8 bid context on Friday, with over $25 million of turnover.

It had priced its $1 billion drive-by issue at par on Wednesday after upsizing it from $500 million.

Wednesday’s other deal – from IMS Health – saw less activity on Friday, a trader said, putting the volume at just about $8 million.

He quoted the notes at 102 bid, 102 7/16 offered.

The Danbury, Conn.-based medical information technology company priced $1.05 billion of the notes at par, as part of a two-part forward calendar issue also including a euro-denominated tranche.

Concordia crushed on U.K. move

Away from the new-deal realm, a trader said that he saw the bonds of Canadian drugmaker Concordia International “down at least 8 or 9 points on the day.”

Another market source put the decline even higher, at around 10 points.

A trader noted that there were “oodles and oodles of trades” in the debt following news the United Kingdom introduced new legislation that would prevent drug companies from massively increasing drug prices.

As it related to Concordia, the Canadian drugmaker was singled out in the United Kingdom earlier this year for doing just what the bill is hoping to stem. The company’s U.K. unit has a variety of specific generic drugs for which there are few, if any, competitors. That allowed Concordia to increase the price of one of its drugs – eyedrops for bacterial conjunctivitis – by 14 times.

In the wake of the news, the bonds were “down big,” a trader said.

The trader called the 7% notes due 2023 off 9 points at 65, while the 9½% notes due 2022 dropped nearly 9½ points to 68 7/8.

Another trader noted that the debt was down as much as 15 points during the session, though the paper went out closer to 10 points weaker.

He saw the 9½% notes trading into the high-60s and the 7% notes dipping into the mid-60s from the mid-70s previously.

This isn’t the first time Concordia has faced troubles. Just last month, the company’s equity took a major downturn after revenue guidance was slashed by 16%. Concerns about the company’s debt burden and chatter that there would be no merger partner to save the day have also played a role in the company’s decline.

Indicators turn lower

Statistical market performance measures turned lower across the board on Friday, after having been mixed Thursday, and were lower versus last Friday’s levels, their second straight weekly decline.

The KDP High Yield Index saw its sixth straight loss Friday, easing by 5 bps, on top of Thursday’s 4 bps downturn to end 70.06.

It was also down from last Friday’s 70.54 level.

The Markit Series 26 CDX Index was off by 7/32 point on Friday, ending at 103 21/32 bid, 103 11/16 offered, versus Thursday’s 19/32 point gain.

It was unchanged from last Friday.

And the Merrill Lynch High Yield Index retreated by 0.112%, its fifth loss in the last six sessions. On Thursday, it had edged upward by 0.02%.

Its year-to-date return fell to 13.816% on Friday from Thursday’s to 13.943%, and was down as well from last Thursday’s 14.992%, which had been its fourth straight new 2016 peak cumulative level.

On the week, the index lost 0.639%, its second consecutive weekly downturn.

-Stephanie N. Rotondo contributed to this review

© 2015 Prospect News.
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