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High yield mutual funds see investor cash inflows (thanks to ETFs)

Cash flow was positive again this week to high-yield funds, however the reading would be negative if not for the large inflow to exchange-traded funds. Indeed, there was a net inflow of $34 million to the asset class in the week ended March 27, but it is based an outflow of $136 million from mutual funds against an outsized inflow of $171 million to ETFs, according to Lipper, a Thomson Reuters company.

Last week’s inflow was $201 million, with roughly half to each segment, and that inflow was a reversal from an outflow of $418 million the week prior. Prior, there was an inflow of $820 million, so the four week trailing average is positive $159 million.

As for the 13 weeks so far in 2013, Lipper data shows inflows for eight of the weeks, for a net year-to-date inflow of about $1 billion. That full-year reading would be larger if not for the ETF outflows of roughly $120 million this year.

Net assets of the weekly reporter sample were $166.57 billion at the end of the observation period, with ETFs representing about 19% of the total, or $32.25 billion. Total assets declined $84 million over the week, while ETF assets expanded $194 million. – Matt Fuller

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High yield mutual funds see $144M investor cash inflow (vs. $1.36B to loans)

Data from EPFR Global show a $144 million cash inflow into U.S.-domiciled high-yield mutual funds and exchange-traded funds in the week ended March 20, by the weekly reporters only. That is just the fifth positive reading in 12 weeks this year and puts the year-to-date figure at a positive $200 million.

This latest result follows a $250 million outflow last week and a $783 million inflow in the week prior. A closer look at the numbers shows a $132.5 million ETF inflow, or 92% of the total, and $11 million was ex-ETF. The four-week trailing average climbs to $116.5 million, from $39 million last week.

The full-year figure is based on $1.28 billion of inflows to mutual funds against $1.09 billion of ETF outflows. In contrast, the cumulative figure for the comparable period one year ago was $15 billion of inflows.

In today’s reading, the total assets of the weekly reporter sample were $198.95 billion, versus approximately $198.51 billion last week, which, after stripping out the inflow figure, shows a $296 million expansion during the week, which is an increase of 0.15% due to strong market conditions.

In 2012, total assets excluding cash inflows rose 32%, to $191.1 billion, and in 2011, total assets excluding cash inflows rose 18%, to $143.8 billion. – Jon Hemingway

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Europe: Ziggo launches investment-grade bonds as part of refinancing

Ziggo has today launched a euro-denominated benchmark offering of seven-year (non-call life) secured notes via bookrunners Goldman Sachs and J.P. Morgan, alongside ABN Amro, BNP Paribas, Credit Suisse, ING, Morgan Stanley, Rabobank, and Societe Generale CIB. Books are open and pricing is expected to take place today.

Initial price guidance is set at mid-swaps plus 265 bps area, sources said.

While Ziggo is rated BB/Ba1, the bonds are expected to be rated BBB-/Baa3. The announcement follows a set of investor meetings the company has held this week, as it signed an €800 million senior five-year loan split between a €400 million TLA and a €400 million revolver, both paying E+200.

As of March 5, Ziggo had €922.9 million under the TLB paying E+300 and due March 2017, €750 million under the TLE (funded by the 6.125% notes due 2017) paying 6.125% due November 2017, and €140.4 million of TLF paying E+325 due September 2017. In addition, the company has €1.21 billion outstanding under its 8% notes due May 2018, for a total debt of €3.02 billion outstanding at the group. Cash on balance sheet stood at €92.4 million.

Ziggo, which was formed through the combination of Multikabel, Casema, and Essent Kabelcom, is the largest cable operator in the Netherlands, with a 55% share of the Dutch cable market. The bond issuer, Ziggo Bond Company, is rated BB/Ba1. The TLE is rated BBB-/Baa3. – Sohko Fujimoto/Luke Millar

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United States Steel eyes $250M bond offering backing debt repay

us steel logoUnited States Steel has announced a $250 million offering of eight-year (non-call four) senior notes. J.P. Morgan, Barclays, Goldman Sachs, and Morgan Stanley are joint bookrunners.

An investor call is scheduled for today at 11:00 a.m. EDT, with pricing slated as today’s business.

Proceeds will be used for the repurchase or repayment of debt, and for general corporate purposes.

The SEC-registered notes are being offered with 1k+1k denominations, while existing ratings are BB/B1.

The company has a well-stocked secondary curve, and the new notes will slip between its 7.375% notes due 2020 and 7.5% notes due 2022, which are currently quoted respectively at 105 to yield 6.5%, and 105.125 to yield 6.6%, according to S&P Capital IQ.

There is a $250 million convertible issue running concurrent to this bond offering.

United States Steel is an integrated steel producer of flat-rolled and tubular products. – Luke Millar

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Watco high-yield bonds price tight to talk, at par to yield 6.375%; terms

Watco Companies this morning completed an offering of senior notes via bookrunners Wells Fargo, J.P. Morgan, Barclays, BMO, and USB, according to sources. Terms on the shortline rail carrier’s debut in market were arranged at the tight end of talk, and an early read from the secondary market points to at least a one-point gain on the break, the sources add. As reported, funds raised from the deal, along with borrowings under a new senior secured credit facility, will be used to repay debt outstanding under its existing facility. Issuance is coming under Rule 144A for life. Terms:

Issuer Watco Companies
Ratings CCC+/B3
Amount $400 million
Issue senior notes (144A for life)
Coupon 6.375%
Price 100
Yield 6.375%
Spread T+444
FRN eq. L+333
Maturity April 1, 2023
Call nc5
Trade April 1, 2023
Settle March 22, 2013 (t+3)
Books WFS/JPM/Barc/BMO/USB
Px talk 6.5% area
Notes
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Sinclair Television high-yield bonds price at par to yield 5.375%; terms

Sinclair Television Group late yesterday completed an offering of senior notes via joint bookrunners J.P. Morgan, Deutsche Bank, and RBC, according to sources. Pricing was on the wide side of talk but at the target size of $600 million. The shorter non-call period for the eight-year tenor is being countered with an investor-friendly first call price at par plus 75% of the coupon. The new bonds are part of a broad refinancing effort, as the company concurrently announced $900 million of new term loans, consisting of a $500 million A term loan due April 2018 and a $400 million B term loan due April 2020. The firm is also looking to put in place a $100 million revolver maturing in 2018. Combined proceeds from the new bonds and loans, along with cash on hand or revolver borrowings, will be used to refinance existing bank debt, and to fund the acquisition of Barrington Broadcasting as well as television stations from Cox Media. Terms:

 

Issuer Sinclair Television Group
Ratings B/B1
Amount $600 million
Issue senior notes (144A)
Coupon 5.375%
Price 100
Yield 5.375%
Spread T+388
FRN eq. L+371
Maturity April 1, 2021
Call nc3; 1st call @ par +75% of coupon
Trade March 18, 2013
Settle April 2, 2013 (T+10)
Books JPM/DB/RBC
Jt Leads
Co’s.
Px talk 5.25% area
Notes w/ three-year equity clawback for 35% @ 105.375; carries T+50 make-whole call; w/ change of control put @ 101.
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Chesapeake Energy completes $2.3B 3-part high-yield bond offering; terms

Chesapeake Energy today completed a three-part offering of senior notes via active bookrunners Morgan Stanley and Credit Suisse and passive bookrunners Citi, Goldman Sachs, and Wells Fargo, according to sources. Final terms for the three- and eight-year tranches were finalized at the tight end of talk, while the 10-year bullet notes came at the midpoint. Proceeds will be used fund tender offers launched this morning for over $900 million of existing 7.625% notes due 2013 and 6.875% notes due 2018, and to redeem 6.775% notes due 2019 at par pursuant to the March 15 redemption notice. Any remaining proceeds will be used to repay any 2013 notes not tendered as well as other outstanding debt, including revolver borrowings. Chesapeake last week delivered notice to redeem its 6.775% notes following a court ruling that left open the possibility for bondholders to pursue a make-whole payment of an additional $400 million. Chesapeake said it is continuing to pursue its lawsuit requesting the court confirm the notice is timely and effective to redeem the notes at par, with payment to be made within 60 days. Terms:

Issuer Chesapeake Energy
Ratings BB-/Ba3
Amount $500 million
Issue senior notes (SEC Reg.)
Coupon 3.25%
Price 100
Yield 3.25%
Spread T+287
FRN eq. L+273
Maturity March 15, 2016
Call nc1; 1st call @ 101
Trade March 18, 2013
Settle April 1, 2013 (T+10)
Joint Bookrunners MS/CS/Citi/GS/WF
Co-leads
Co’s.
Px talk 3.25-3.5%
Notes carries T+50 make-whole call
Issuer Chesapeake Energy
Ratings BB-/Ba3
Amount $700 million
Issue senior notes (SEC Reg.)
Coupon 5.375%
Price 100
Yield 5.375%
Spread T+381
FRN eq. L+365
Maturity June 15, 2021
Call nc3; 1st call @ par +75% of coupon
Trade March 18, 2013
Settle April 1, 2013 (T+10)
Joint Bookrunners MS/CS/Citi/GS/WF
Co-leads
Co’s.
Px talk 5.375-5.5%
Notes carries T+50 make-whole call
Issuer Chesapeake Energy
Ratings BB-/Ba3
Amount $1.1 billion
Issue senior notes (SEC Reg.)
Coupon 5.75%
Price 100
Yield 5.75%
Spread T+379
FRN eq. L+369
Maturity March 15, 2023
Call nc-life
Trade March 18, 2013
Settle April 1, 2013 (T+10)
Joint Bookrunners MS/CS/Citi/GS/WF
Co-leads
Co’s.
Px talk 5.75% area
Notes carries T+50 make-whole call
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CenturyLink high-yield bonds price at par to yield 5.625%; terms

CenturyLink today completed an offering of senior notes via bookrunners J.P. Morgan, Barclays, Citi, and SunTrust, according to sources. Terms printed at the middle of talk and demand prompted a doubling in size, to $1 billion. Proceeds will be used to repay RC borrowings. As of Dec. 31, 2012, the telecommunications giant reported $820 million drawn under a $2 billion revolving credit facility, according to SEC filings. Issue ratings of BB/Ba2/BB+ reflect two recent rating actions: a fallen-angel downgrade by Fitch in February and similar downgrade last week by Moody’s, from Baa3. The downgrades were tied to the company’s new capital-allocation strategy announced last month in an effort to stabilize and grow operating revenue. The scheme initiates a $2 billion stock-repurchase program over two years, funded with free cash flow, and a common share dividend reduction to $0.54 per share, from $0.725 per share. Terms:

Issuer CenturyLink
Ratings BB/Ba2
Amount $1 billion
Issue senior notes (SEC reg.)
Coupon 5.625%
Price 100
Yield 5.625%
Spread T+432
FRN eq. L+415
Maturity April 1, 2020
Call nc-life
Trade March 18, 2013
Settle March 21, 2013 (T+3)
Joint Bookrunners JPM/Barc/Citi/Sun
Co-Leads
Co’s.
Px talk 5.5-5.75%
Notes w/ three-year equity clawback for 35% @ 105.625; w/ change-of- control put @ 101; upsized by $500 million.
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Chesapeake Energy drives by high yield bond mart with $2.3B offering

Chesapeake Energy is in the market with an SEC-registered $2.3 billion three-tranche drive-by offering of unsecured notes. Morgan Stanley (B&D) and Credit Suisse are active bookrunners, and are joined by Citigroup, Goldman Sachs, and Wells Fargo as passive bookrunners. Co-managers are yet to be determined.

Maturity dates for the tranches are March 2016, June 2021, and March 2023, with respective optional redemption of non-call one, non-call three, and non-call life.

An investor call is scheduled for today at 10:30 a.m. EDT.

Banks are guiding investors to expected ratings of BB-/Ba3.

Proceeds will be used to purchase the portion of the 2013 notes and the 2018 notes that are tendered in the concurrent tender offers, and to redeem the 2019 notes at par pursuant to the March 15 special redemption notice. Any remaining proceeds will be used to purchase, repay, and/or redeem any 2013 notes that are not tendered in the concurrent tender offer and to purchase, repay, and/or redeem other outstanding indebtedness, including indebtedness outstanding under the corporate revolving bank credit facility.

The company today announced tender offers for any and all of its 7.625% senior notes due 2013, and its 6.875% senior notes due 2018. The purchase price for the 2013 notes is $990 per $100k principal amount, with an early tender premium of $30. For the 2018 notes the purchase price is $1,044.50 per $100k principal amount, again with an early tender premium of $30. The early tender deadline is 5:00 p.m. EDT on March 28. The tender deadline is end of day on April 12.

As reported, last week Chesapeake Energy delivered notice to redeem its 6.775% senior notes due 2019 at par, following a court ruling late Thursday that left open the possibility for bondholders to pursue a make-whole payment of an additional $400 million. Chesapeake said it is continuing to pursue its lawsuit requesting the U.S. District Court for the Southern District of New York confirm the notice is timely and effective to redeem the notes at par, with payment to be made within 60 days.

Chesapeake Energy Corporation engages in the acquisition, exploration, development, and production of natural gas and oil properties in the U.S. – Luke Millar

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Europe: high yield deal investor meetings postponed as markets react to Cyprus

The €10 billion bailout of Cyprus over the weekend has taken the wind out of high-yield primary’s sails today. Two issuers were due to meet with investors in London today – with save-the-date notices having been sent out on Friday – but these meetings have been postponed in order to assess the reaction to the Cyprus bailout, according to market sources. Goldman Sachs was due to host a meeting at 10:00 a.m. today for a deal from a packaging company, while BNP Paribas was due to host a lunch for an offering from an industrial credit.

Nevertheless, Ziggo this morning announced it is holding investor meetings over a possible secured bond issue, though with a secured bond rating of BBB-/Baa3, the deal will not rely solely on high-yield investor demand.

The uncertainty caused by Cyprus comes as primary supply was picking up, and inflows into the asset class increased in anticipation of a pre-Easter issuance surge. Five borrowers issued €2.6 billion of paper last week, which is the first time this number of borrowers have issued in a single week since the start of February, according to LCD. This coincided with a €355 million inflow to high-yield funds, according to J.P. Morgan data, which is the third-largest weekly inflow of the year.

The reaction to the bailout raises hopes that the stall in supply will prove temporary as this morning’s weakening in risk assets has begun to reverse. There is, however, still much uncertainty over the terms of the bailout, and the possible reactions to any precedents set.

The iTraxx Crossover opened 25 bps wider at 430 this morning, but has since tightened to 422, while there has been little movement in high-yield cash, sources said. The FTSE 100 dropped 100 points at the open but has recovered slightly to be quoted 61 points in the red, which is roughly 1% lower.

Peripheral government yields are the underperforming asset calls, with Greek 10-year yields 37 bps wider this morning at 10.9%, Spanish bond yields 40 bps wider at 4.9%, and Portuguese bond yields 15 bps wider at 6.05%. – Luke Millar / Sohko Fujimoto