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Ithaca Energy high yield bonds (CCC+/Caa1) price to yield 8.125%

Ithaca Energy this afternoon completed its offering of senior notes via Barclays (B&D), BNP Paribas, Deutsche Bank, and RBC, according to sources. Terms were finalized at the midpoint of talk. Proceeds from the 144A-for-life offering will be used to partially repay the borrower’s RBL facility. Ithaca Energy is an oil and gas operator focused on North Sea production, appraisal, and development activities. Terms:

Issuer Ithaca Energy
Ratings CCC+/Caa1
Amount $300 million
Issue senior (144A-life)
Coupon 8.125%
Price 100
Yield 8.125%
Spread T+650
Maturity July 1, 2019
Call nc2 @ par+75% coupon
Trade June 30, 2014
Settle July 3, 2014 (T+3)
Bookrunners Barclays/BNP/DB/RBC
Co-Managers Scotia/SEB
Price talk 8-8.25%
Notes First call @par+75% coupon
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Carlson Travel Holdings inks PIK-toggle notes (B-/Caa1) at 7.5% yield

Carlson Travel Holdings this afternoon completed its offering of senior PIK-toggle notes via Morgan Stanley and J.P. Morgan. Terms were finalized inside of its 7.75% area talk, according to sources. Proceeds will be used as part of the financing for the proposed buyout of SapoToro, which holds the 45% equity interest in Carlson Wagonlit Travel that is not held by the issuer. SapoToro is a wholly owned subsidiary of Chase Travel Investment, which is owned by J.P. Morgan Chase & Co.

Terms:

Issuer Carlson Travel Holdings
Ratings B-/Caa1
Amount $360 million
Issue senior PIK toggle (144A-life)
Coupon 7.5% cash/8.25% PIK
Price 100
Yield 7.5%
Spread T+579
Maturity Aug. 15, 2019
Call nc1 @ 102
Trade June 26, 2014
Settle July 3, 2014 (T+5)
Bookrunners MS/JPM
Price talk 7.75% area
Notes Equity claw may redeem up to 100% prior to Aug 15, 2015 at 102% with proceeds of certain equity offerings.
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AV Homes 5-year high yield bonds (B-/Caa1) price to yield 8.5%

AV Homes this afternoon completed its $200 million offering of senior notes via J.P. Morgan, Citi, RBC, Credit Suisse, and Deutsche Bank. JMP Securities and Zelman are acting as co-managers, according to sources. Terms were finalized at the midpoint of talk. AV Homes is seeking capital to fund general corporate purposes, which may include land purchases, land development, and the financing of homebuilding activities and acquisitions. While a debut in the fixed-coupon corporate marketplace, AV Homes has previously issued convertible debt, most recently in July 2012. Terms:

Issuer AV Homes
Ratings B-/Caa1
Amount $200 million
Issue senior (144A)
Coupon 8.5%
Price 100
Yield 8.5%
Spread T+685
Maturity July 1, 2019
Call nc2 @par+75% coupon
Trade June 25, 2014
Settle June 30, 2014 (T+3)
Bookrunners JPM/Citi/RBC/CS/DB
Co-Managers JMP/Zelman
Price talk 8.5% area
Notes First call at par +75% coupon
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Distressed Debt: Altegrity Exits Restructuring Watchlist, American Apparel joins (again)

American Apparel has re-joined LCD’s Restructuring Watchlist, which tracks troubled  issuers.

News that the company had terminated CEO and company founder Dov Charney for cause created choppy market conditions for the clothier’s debt. Further, due to the management change, American Apparel may have triggered a default under its credit agreements and could need to seek a default waiver from lenders.

Earlier this year the clothing manufacturer hired Skadden, Arps, Slate, Meagher & Flom as restructuring adviser, and bondholders had begun to organize, according to The Wall Street Journal. Details of the retailer’s recent financial challenges were noted by HighYieldBond.com in a June 19 story.

Leaving the list
Altegrity 
headed in another direction, off the Watchlist, as hot market conditions allowed for a series of refinancing moves. Last week the security concern stepped off the shadow calendar with its $550 million offering of first-lien secured notes. The offering will be used to prepay amounts outstanding under its credit facility and pay the cash portion and accrued interest of the existing notes exchange

Altegrity debt had been under pressure amid government spending since the U.S. Justice Department accused the firm’s USIS division of defrauding the government of millions of dollars by filing at least 665,000 incomplete background investigations. USIS conducted the background checks for NSA leaker Edward Snowden and Aaron Alexis, the gunman at the Navy Yard shootings in Washington, D.C. last year, according to media reports. The full story and refinancing details for Altegrity can be read here ($$).

We will update the Restructuring Watchlist as events warrant. The Watchlist, which is published regularly in LCD’s Distressed Weekly, includes companies that have recently hired restructuring advisers or entered into creditor negotiations, issuers with debt trading at deeply distressed levels, as well as those with recent credit defaults or downgrades into junk territory.

Contact Marc Auerbach for questions regarding the Watchlist or LCD Research. – Matt Fuller

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Europe: High yield supply set for record week as refinancings dominate

High-yield primary is set for the biggest week of supply in its history, with seven borrowers preparing to issue 11 tranches (not including dollar-denominated components) for a total of €5.8 billion. That would break the previous record of €5.6 billion issued in the week ended April 29, 2013, and more than double this month’s volume to ensure June surpasses March 2014 as the second-largest monthly volume on record (the largest being April this year).

LCD subscribers can click here for full story, analysis, and charts including:

  • Largest high yield bond tranches since 2006
  • Refinancing-related high yield bond issuance

 

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Nielsen places add-on to 5% high yield bonds (BB/B1) due 2022 at 4.923% yield

Nielsen Finance this afternoon completed an $800 million add-on to its 5% senior notes due April 15, 2022 via sole bookrunner J.P. Morgan, according to sources. Terms were finalized at the midpoint of talk. Note the new fully-fungible deal will have investment-grade covenants and is first callable at par +75% coupon. Nielsen is seeking capital to redeem the existing 7.75% senior notes due 2018. Terms:

Issuer Nielsen Finance LLC/Nielsen Finance Co.
Ratings BB/B1
Amount $800 million
Issue senior (144A-life)
Coupon 5%
Price 100.375
Yield 4.923%
Spread T+297
Maturity April 15, 2022
Call nc3 @par+75% coupon)
Trade June 23, 2014
Settle July 8, 2014 (T+10)
Bookrunners JPM
Price talk 100-100.50
Notes First call at par+75% co
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Europe: Inflow to European high yield funds last week

J.P. Morgan’s weekly analysis of European high-yield funds shows a €349 million inflow for the week ended June 18. This figure includes a €56 million net inflow for ETFs and an €11 million net inflow for short-duration funds. The reading for the week ended June 11 is revised from a €257 million inflow to a €314 million inflow.
The provisional reading for May is a €1.05 billion inflow, versus a €723 million inflow in May 2013. The provisional 2014 reading is an inflow of €7.6 billion.

The latest inflow is the third largest of the year, though it has been bolstered by the inclusion of five new funds by J.P. Morgan last week. The large influx of funds will be needed this week, as primary supply has exploded. The live pipeline contains €5.8 billion of paper from seven borrowers, which will more than double the volume for June and ensure it generates the second-largest monthly total for European high-yield on LCD’s records (which began in 2006). The issuers are FivesDebenhamsMotherson AutomotivePfleidererBoparan,Wind, and Crown European Holdings.

In the U.S., retail-cash outflows for high-yield funds totalled $239 million in the week ended June 18, according to Lipper. The outflow is the first negative reading in seven weeks and it’s almost entirely due to withdrawals from the exchange-traded fund segment, at $231 million, or 97% of the outflow. The full-year reading now shows inflows of $5.9 billion, and it’s roughly 14% related to the ETF segment.

Cash outflows for bank loan funds moderated to $369 million in the week ended June 18, from $1.2 billion the week before and $1.1 billion the week prior to that, according to Lipper. This is the sixth consecutive outflow, for a net $3.7 billion withdrawal over that span, representing the largest multi-week depletion since a run of outflows in August 2011. Year-to-date inflows now total just $2 billion, of which $797 million, or 39% of the sum, is ETF-related.

As reported, J.P. Morgan only calculates flows for funds that publish daily or weekly updates of their net asset value and total fund assets. As a result, J.P. Morgan’s weekly analysis looks at around 55 funds, with total assets under management of €38 billion. Its monthly analysis takes in a larger universe of 100 funds, with €52 billion of assets under management. For a full analysis, please see “Europe receives HY fund flow calculation”. – Luke Millar

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Carlson Wagonlit prepping $360M of PIK-toggle notes

Carlson Travel Holdings has announced $360 million of PIK-toggle notes. Morgan Stanley and J.P. Morgan are bookrunners for the 144A-for-life transaction.
An investor call is scheduled today for 12:30 p.m. EST, along with other meetings this week, and pricing is slated for Friday.
Proceeds will be used as part of the financing for the proposed buyout of SapoToro, which holds a 45% equity interest in CWT that is not currently held by the issuer. SapoToro is a wholly owned subsidiary of Chase Travel Investment.
The new five-year notes are first callable after one-year at 102.
The borrower has two 2019 notes outstanding, the 6.875% notes and 7.5% notes that are quoted respectively at 106.875 yielding 4.8%, and 109 yielding 3.4%, according to S&P Capital IQ.
Netherlands-domiciled Carlson Wagonlit is a travel management company. – Luke Millar
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Momentive value seen at $2-2.45B, 2nd-lien recovery at 12.8%-28.1%

Momentive Performance Materials said its estimated going-concern value following emergence from Chapter 11 would be between $2.0-2.45 billion, resulting in a recovery rate for second-lien lenders of 12.8%-28.1%.

Momentive said in an amended disclosure statement filed yesterday that its estimated valuation was based on, among other things, the company meeting its financial projections and emerging from Chapter 11 with pro-forma indebtedness of $1.292 billion.

As reported, under the company’s proposed reorganization plan, second-lien lenders ($1.161 billion of 9% second-priority springing lien notes due 2021 and €133 million 9.5% second-priority springing lien notes due 2021) are to receive all of the equity in the reorganized company, along with participation rights in a $600 million rights offering at a price per share determined by using the pro forma capital structure and an enterprise value of $2.2 billion, applying a 15% discount to the equity value.

The company said the second-lien recovery rate would vary based on the total number of shares of new stock that would ultimately be issued under the plan, which in turn could vary significantly based upon the company’s net debt upon emergence. The company said its net debt would be affected by, among other factors, the amount of cash generated by the company until its emergence, the total amount of allowed claims in the case, and whether the company is required to pay its senior lenders as much as $210 million in make-whole claims – disputes that are the subject of two adversary actions pending in the case.

The disclosure statement explained that the reason the net debt level has such a significant effect upon the second-lien lender recovery rate is that the total number of shares to be issued under the plan is based on a variable formula (total enterprise value, less net debt, divided by $20.33 per share), but the number of shares to be issued under the reorganization plan’s contemplated $600 million rights offering is fixed at about 36.2 million shares, meaning that all of the variance is limited to the second-lien equity recovery (although it would appear that the negative effect would be mitigated, at least in part, for those second-lien lenders that participate in the rights offering).

Beyond the second-lien recovery, the amended disclosure statement also set out the terms of the new debt that the company would issue to fund the plan, consisting of an optional $270 million ABL (a $200 million last-in, first-out Tranche A at L+200 and a $70 million first-in, last out Tranche B at L+275) to replace the existing DIP ABL; $1 billion of new seven-year first-lien notes at L+400; and an incremental facility consisting of either a $250 million second-lien bridge loan or a private placement of senior second-priority secured notes yielding $250 million, priced at L+600, increasing 50 bps in each three-month period beginning on the closing date. If the financing is in the form of a bridge loan, on the first anniversary of the closing date any amount remaining unpaid would be converted into an eight year, senior second-priority term loan that would be further convertible, at the option of the lender and with certain limitations, into second-lien exchange notes.

The proceeds of the financings, together with cash on hand, are to fund distributions under the plan, including DIP claims of $373 million, administrative and fee claims of about $52 million, and cash payments to senior lenders ($1.1 billion of 8.875% first-priority senior notes due 2020 and $250 million of 10% senior secured notes due 2020, the so-called 1.5-lien notes). The proceeds of the incremental facility are to be used, to the extent needed, to repay the 1.5-lien notes.

If senior lenders vote to reject the company’s proposed reorganization plan, however, the new first-lien and incremental debt would not be issued, and the company’s senior lenders would instead receive replacement first-lien and 1.5-lien debt, respectively, with different terms than the debt described above.

Meanwhile, as reported, a hearing on the adequacy of the disclosure statement has been underway today in bankruptcy court in White Plains, N.Y. Also before the court today was whether to approve the company’s proposed restructuring support agreement and rights offering backstop agreement, and whether to approve the company’s proposed timetable for the case that would see a confirmation hearing scheduled for Aug. 14.

The results of the hearing are not yet available on the court docket, but Reuters reported that the bankruptcy court approved the adequacy of the disclosure statement, while expressing concerns about some terms in the RSA and rights offering backstop, particularly a proposed $30 million break-up fee.

The Reuters report did not provide any details with respect to the company’s proposed timetable. Indenture trustees for both the company’s subordinated noteholders and the 1.5-lien notes challenged that timetable as too compressed, and the trustee of the subordinated notes also wanted the bankruptcy court to schedule a “threshold hearing” on whether the notes were subordinate in rank of payment to the second-lien notes. According to the trustee, if the notes are deemed pari passu with the second-lien notes, the company’s proposed plan would not be confirmable, eliminating the need for further action on the plan. – Alan Zimmerman

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American Apparel bonds choppy after CEO terminated for cause

Markets in American Apparel debt were choppy today, with odd-lot trades of the company’s 13% notes due 2020 in the low 90s and other markets at 89/90 and 91.5/92.5, following news the company terminated CEO and company founder Dov Charney for cause.

Due to the management change, American Apparel may have triggered a default under its credit agreements and it could need to seek a default waiver from lenders.

CFO John Luttrell will replace Charney as interim CEO. The board also appointed two co-chairman to replace Charney as board chairman.

Charney’s termination stems from “an ongoing investigation into alleged misconduct,” a news release yesterday said.

“We take no joy in this, but the board felt it was the right thing to do,” board co-chairman Allan Mayer said. “Dov Charney created American Apparel, but the company has grown much larger than any one individual and we are confident that its greatest days are still ahead.”

In March, American Apparel 13% notes due 2020 gained five points, to around 85, after the company launched a follow-on share offering to raise $30.5 million, partly to pay a coupon owed to bondholders on April 15.

The $206 million issue of CCC-/Caa1 secured notes was issued in March 2013 at 97, in a private offering to repay and terminate credit facilities with Lion Capital and Crystal Financial. After the company failed leverage tests, the coupon stepped up to 15%, comprising 13% cash and 2% in-kind.

Earlier this year, the clothing manufacturer hired Skadden, Arps, Slate, Meagher & Flom as restructuring adviser, and bondholders had begun to organize, according to The Wall Street Journal. – Abby Latour

Follow Abby on Twitter @abbynyhk for middle-market deals, leveraged M&A, distressed debt, private equity, and more