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Bombardier prices upsized ($750M) high yield bond offering at tight end of talk

Bombardier this afternoon completed a two-part offering of senior notes via a large J.P. Morgan-helmed bookrunner group, according to sources. Terms on the B+/B1/B+ deal were finalized at the tight end of guidance after a net $750 million upsizing ahead of pricing, to a combined $2.25 billion. The company returns to market after 11 months for capital to help fund general corporate purposes. Issuance is under Rule 144A for life. Terms:

Issuer Bombardier 
Ratings B+/B1/B+
Amount $750 million
Issue senior notes (144A-life)
Coupon 5.5%
Price 100
Yield 5.5%
Spread T+451
Maturity Sept. 15, 2018
Call nc-life
Trade Feb. 27, 2015
Settle March 13, 2015 (t+10)
Bookrunners JPM/Barc/BNP/BAML/CMZ/CAG/CS/DB/GS/MS/NTX/RBS/SG
Co-Managers n/a
Price talk 5.5-5.75%
Notes Total deal upsized by $750 million ahead of pricing. 
Issuer Bombardier 
Ratings B+/B1/B+
Amount $1.5 billion
Issue senior notes (144A-life)
Coupon 7.5%
Price 100
Yield 7.5%
Spread T+549
Maturity March 15, 2025
Call nc-5 @ par+50% coupon
Trade Feb. 27, 2015
Settle March 13, 2015 (t+10)
Bookrunners JPM/Barc/BNP/BAML/CMZ/CAG/CS/DB/GS/MS/NTX/RBS/SG
Co-Managers n/a
Price talk 7.5-7.75%
Notes
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JC Penney credit default protection cost widens on quarterly results, 2015 outlook

Credit protection referencing J .C. Penney added to yesterday’s weakness on Friday morning after the retailer revealed disappointing guidance for 2015 and reported a loss for its holiday-season quarterly results.

Five-year CDS in the name widened out roughly 8% this morning, to 9/10.25 points upfront, according to Markit.

That makes protection in the name essentially $75,000 more costly than before the news, with an approximate $963,000 upfront payment at the midpoint, in addition to $500,000 payments annually, to protect $10 million of the issuer’s corporate debt.

J.C. Penney posted a loss of $59 million, or 19 cents per share, in the fourth quarter ended Jan. 31, compared with a profit of $35 million, or 11 cents, in the year-ago quarter which also included a one-time tax gain of $270 million.

The performance was below the S&P Capital IQ consensus estimate for a profit of $47.47 million, or earnings per share of 10 cents a share.

Total revenue for the quarter increased 2.9% to $3.89 billion, slightly above the consensus estimate of $3.88 billion.

In an analyst meeting in October, the company’s CEO Mike Ullman unveiled further details of its turnaround strategy, which it said would boost sales by $2.55 billion over the next three years.

Standard & Poor’s primary credit analyst Robert Schulz said the company’s results and 2015 guidance suggest a sustainable recovery in the company’s business.

“Comparable-store sales for the year and the quarter were up 4.4%. Because the company’s past performance was so weak, gross margins, EBITDA, and cash flow generation sharply improved,” said Schulz.

“Guidance for 2015 calls for less dramatic, but still meaningful improvements; we think comparable-store sales improvement of at least 3% in 2015 is achievable since the company has largely returned to its traditional strategies and the U.S. economic recovery is ongoing,” said Schulz.

The company’s bonds were not particularly active this morning. The 5.65% notes due 2020 changed hands at 86.5, versus 87 yesterday, and the long-tenor 7.4% bonds due 2037 only traded in small lots at 74.25, versus 77-78 earlier this week, trade data show.

The 8.125% notes due 2019 were steady, with trades reported at 97.5 and 98.5, though versus par issuance in September. Shares were recently down 5.7% to $8.69.

The Plano, Texas-based company is rated CCC+/Caa2. – Rachelle Kakouris

Follow Rachelle on Twitter for distressed debt news and insight.

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CDW places 8.5-year senior notes at par to yield 5%; terms

CDW this afternoon completed its offering of senior notes, via J.P. Morgan, Barclays, Morgan Stanley, Deutsche Bank, Goldman Sachs, and Bank of America Merrill Lynch. Terms were finalized at the tight end of talk. Proceeds will be used to redeem the borrower’s 8.5% senior notes due 2019, which become callable for the first time at the start of April, at 104.25. The new notes feature a first call of par plus 75% coupon. CDW is a provider of integrated technology solutions. It trades on the NASDAQ under the ticker CDW, and has a market capitalization of roughly $6.5 billion. Terms:

Issuer CDW
Ratings B+/B1
Amount $525 million
Issue senior (SEC registered)
Coupon 5%
Price 100
Yield 5%
Spread T+309
Maturity Sept. 1, 2023
Call nc-3 @ par plus 75% coupon
Trade Feb. 26, 2015
Settle March 3, 2015 (T+3)
Bookrunners JPM/Barc/MS/DB/GS/BAML
Co-Managers WFS/USB/MUFG
Price talk 5-5.125%
Notes First call par +75% coupon.

 

 

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Standard Gen’l jabs back at RadioShack creditor panel over 2014 refi

Standard General asked the bankruptcy court overseeing the Chapter 11 proceedings of RadioShack to deny the official unsecured creditors’ committee in the case of the power to conduct Rule 2004 discovery against it, saying it has already provided thousands of pages of documents to the panel and is willing to discuss the scope of the panel’s additional information requests.

In its Rule 2004 motion filed last week, the committee sought court permission to require Standard General, among others, including RadioShack officials, to produce documents and testify at depositions. A hearing on the panel’s motion is set for March 4 (see “RadioShack cred panel seeks to probe Standard General transactions,” LCD, Feb. 18, 2015).

But beyond its willingness to talk with the panel about providing information, Standard General said in a Feb. 23 response to the committee’s motion that it “objects to the committee’s blatant misuse of the Rule 2004 process as a vehicle for its baseless accusations” against it, adding that it would use its response “to correct the record and clarify the facts.”

As reported, in October 2014, Standard General, along with fellow shareholder LiteSpeed and certain other “participating investors,” acquired the company’s then outstanding credit agreement loans under a $535 million asset-backed revolver from GE Capital pursuant to a loan sale agreement. Among other things, that transaction converted certain outstanding revolving loans into term debt, while also increasing the company’s borrowing capacity, ostensibly to allow it to acquire inventory for the upcoming holiday season (see “RadioShack bonds surge on report of financing agreement,” LCD, Oct. 3, 2014).

As also reported, in seeking court authority to, among other things, investigate the October 2014 transaction to determine whether it is potentially avoidable as a fraudulent conveyance, the unsecured creditors’ committee alleged the deal may have been specifically undertaken, in part, to delay the company’s default and Chapter 11 filing until after the fourth quarter of 2014, in order to protect certain participating investors in the transaction that may have sold CDS protection on the company betting it would not default before Dec. 20, 2014.

At the same time, the transaction also allegedly served to position Standard General at the top of the company’s credit structure to pave the way for its acquisition of certain of the company’s stores (to be followed by a co-branding deal with Sprint in the acquired stores) via a credit bid.

The committee cited, among other things, the fact that the transaction, purportedly an effort to help the company, also set certain deadlines to occur early this year that would have required the company to refinance its debt, which was extremely unlikely given the company’s financial condition and which the company was ultimately unable to accomplish, leading to its Chapter 11 filing on Feb. 5.

In its response to the committee’s motion, however, Standard General, described itself as “an investment firm that specializes in investing in and turning around highly levered companies facing challenges,” said it viewed RadioShack as “a perfect candidate for such a turnaround.”

As a result, Standard General said, in August 2013 and May 2014 it acquired both common shares and call options that gave it “a meaningful position in the equity of the company,” and it also established a credit position between July 2013 and June 2014 comprised of unsecured bonds hedged in part with credit default swaps.

Standard General said it continues to hold these positions, and that its “incentives have always been aligned with the other equityholders and bondholders.”

Standard General said there has never been a scenario under which it would benefit “from any outcome detrimental to the company, much less a bankruptcy filing,” and added that its decision to become a secured lender through the October 2014 transaction was ground in its “longstanding [belief] in RadioShack’s potential,” and its desire “to support the management team’s turnaround plan.”

Standard General asserts that the October 2014 deal, which increased the company’s liquidity by $140 million, enabled RadioShack to obtain inventory for the holiday season and “essentially meet its revenue forecasts for the fourth quarter in the retail portion of its business.”

Standard General further denied that it ever traded in the company’s security with inside information, and that contrary to the committee’s assertions that it benefitted from the company’s Chapter 11 filing, said “it was deeply disappointed that the company had to file for bankruptcy protection, and as a result it has suffered losses in its positions in the company.”

Lastly, Standard General characterized the panel’s allegation that the October 2014 deal delayed the company’s financial reckoning to 2014 to placate lenders that had also written CDS protection on the company as “conspiracy theories,” and called them “a red herring and completely misplaced.” – Alan Zimmerman

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Fridson: High Yield Bonds Extremely Overvalued, Again, As Credit Tightens

The U.S. high-yield bond market has returned to the extreme valuation experienced continuously from October 2013 to October 2014 except for one break in September 2014. Based on Martin Fridson’s econometric model, which explains 82% of the historical variance in the option-adjusted spread (OAS) of the BofA Merrill Lynch US High Yield Index, fair value is currently 616 bps, up from 561 bps one month earlier.

The graph below shows the difference between fair value and the actual spread as of Jan. 31. At that point, the actual OAS was 526 bps, so the difference (90 bps) was less than one standard deviation (130 bps), our cutoff for defining an extreme. Since then, the spread has narrowed sharply to 453 bps (on Feb. 20), creating a gap of -163 bps versus fair value and pushing the fever line below the lower horizontal bar.

fridson - high yield bonds overvalued

Why has the high-yield asset class returned to a state of extreme overvaluation? A key change since year-end is a worsening of credit availability. The Federal Reserve’s quarterly survey of senior loan officers now reports that the percentage of banks tightening credit standards on loans to medium-sized and large companies minus the percentage easing standards is -5.5% (representing a small net easing). In the fourth quarter of 2014, the comparable figure was an easier-credit reading of -10.5%. – Martin Fridson

The full version of this story, along with weekly and monthly analysis from Marty, is available via S&P Capital IQ’s Leveraged Commentary & Data, at www.lcdcomps.com

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Blackboard scraps $75M add-on high yield bond offering

Blackboard has cancelled its planned issuance of a $75 million add-on to its 7.75% notes due 2019 via joint bookrunners Bank of America Merrill Lynch, Deutsche Bank, and Morgan Stanley, according to sources.

In a memo addressed to the holders of the 7.75% notes, the company stated it had cancelled the add-on due to market conditions.

This is the fourth sidelined deal thus far in 2015, for a net $1.1 billion in supply, although the $400 million Presidio LBO offering was eventually revived and put out to market on Jan. 30. Last year, there were 17 postponed deals, for a combined $5.83 billion, according to LCD.

Pricing on Blackboard’s bond offering had initially been set for late last week, after the deal was launched on Wednesday, Feb 4, with proceeds slated to partially fund the acquisition of Schoolwires.

The existing ratings profile is CCC+/Caa1, and the notes are first callable on Nov. 15, 2015. The add-on was not expected to be fungible with the original senior notes, which priced in October 2013 at par. Those 144A-for-life bonds traded down a few points over the past week to 94.5, to yield 9.2%, according to S&P Capital IQ.

Washington, D.C.-based Blackboard is a privately held provider of technology and related services to the global education market. Schoolwires is an educational website, hosting and content management provider to K-12 schools and districts. – Staff Reports

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American Tire Distributors $805M high yield offering prices to yield 10.25%

American Tire Distributors this afternoon completed its offering of subordinated notes via joint bookrunners Bank of America, Goldman Sachs, Wells Fargo, Deutsche Bank, J.P. Morgan, SunTrust Robinson Humphrey, and UBS. Terms were finalized at 10.25% area, which was wider than initial whispers in the 9% area. Leads made a number of covenant changes as well. Note the deal features an issuer-friendly first call premium at par plus 50% coupon despite the short schedule and an equity claw for up to 40% at par plus the coupon for the first three years.

The notes will be used to refinance the existing 11.5% subordinated notes due 2018 and to fund a distribution to ATD Holdings to enable its parent to fund a cash dividend or distribution to certain existing security holders. An initial $200 million of the 11.5% subordinated notes was sold privately in May 2010 following a fully syndicated offering of secured notes that backed a sponsor-to-sponsor sale of the company to TPG Capital from Investcorp, Berkshire Partners, and Greenbriar Equity Group. Another $225 million was placed in January 2014 to support an acquisition of Hercules Tire & Rubber.

The unrated debt carries a unique call structure, with the current call of 102 declining to par in June. Terms:

Issuer American Tire Distributors / ATD Finance
Ratings CCC+/Caa1
Amount $805 million
Issue subordinated notes (144A-life)
Coupon 10.25%
Price 100
Yield 10.25%
Spread T+846
Maturity March 1, 2022
Call nc3 @ par+50% coupon
Trade Feb. 10, 2015
Settle Feb. 25, 2015 (t+10)
Jt. Bookrunners BAML/GS/WFS/DB/JPM/STRH/UBS
Co-Managers RBC, MS, Mizuho, RBS, TPG
Price talk 10.25% area
Notes w/ three-year equity clawback option for up to 40% of issue @110.25; covenant package reworked; first call premium par+50% coupon.
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Bankruptcy: Endeavour seeks time to rework reorg plan in wake of oil price declines

Endeavour International asked the bankruptcy court overseeing its Chapter 11 proceedings to extend the exclusive period during which only the company could file a reorganization plan by 120 days, through June 8, to give it additional time to reach negotiate modifications to its proposed reorganization plan in light of declining oil prices.

The company also asked the bankruptcy court to extend its corresponding exclusive period to solicit votes to a plan through Aug. 6. The initial exclusivity periods to file and to solicit votes to a plan are set to expire on Feb. 9 and April 8, respectively.

As reported, the company early last week adjourned its plan confirmation to a “date to be determined,” saying, “As a result of the recent decline in oil and gas prices and the implications of such decline on the debtors’ proposed plan, the debtors have engaged in discussions with certain of the consenting creditors [to the company’s restructuring-support agreement] and their advisors and the advisors to the official committee of unsecured creditors concerning the impact of such price declines on the proposed plan and potential amendments to the restructuring support agreement and the proposed plan.” (See “Endeavour delays plan hearing, mulls changes due to oil price drop,” LCD, Feb. 4, 2015).

In a motion seeking to extend exclusivity filed several days later on Feb. 6, the company said, “Although these discussions are only in the preliminary stages, the debtors are encouraged by the parties’ willingness to engage on key issues,” adding, “Extension of the exclusive periods will further this cooperative dialogue.”

According to the motion, the company’s reorganization plan “was developed in an industry environment where oil prices had remained relatively stable for the past four years,” noting that between early 2011 and shortly before the company filed for Chapter 11 in October of 2014, the spot price for Brent Crude and fluctuated between $100-115 a barrel. At the time the company and its consenting creditors executed the RSA, the company said, the spot price was at $90 a barrel.

Following a recent rally, spot prices for Brent Crude were at $51.74 on Feb. 2, according to the U.S. Department of Energy, reaching as low as $46.09 on Jan. 22 – prices not seen since the depth of the financial crisis in early 2009 and, before that, in 2005.

A hearing is scheduled in Wilmington, Del., on March 11. Under Delaware bankruptcy court rules, exclusivity is automatically extended until the court issues a ruling. – Alan Zimmerman

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Official unsecured creditor, second-lien panels named in Caesars Ch. 11

The U.S. Trustee for the bankruptcy court in Chicago has appointed two official committees in the Chapter 11 proceedings of Caesars Entertainment Operating Co. (CEOC).

As required by law, Patrick Layng, the U.S. Trustee, named an official unsecured creditors’ committee, but he also opted to appoint an official committee of second-lien noteholders.

As reported, second-lien lenders generally do not support the proposed restructuring plan the company has agreed to with first-lien noteholders, which would provide second-lien holders with a minimal recovery.

As also reported, it was three second-lien lenders – two of which, Tannenbaum and Oaktree, are on the new official committee – that sought to force CEOC into Chapter 11 in Delaware with an involuntary filing (see “Caesars 2nd-lien holders seek involuntary Chapter 11 for CEOC,” LCD, Jan. 12, 2015).

The official committee status means, among other things, that the company will be paying the fees and expenses of a group of creditors opposed to the company’s proposed reorganization plan.

The members of the second-lien committee, contacts, and e-mail information (phone numbers were not provided in the filing) are as follows:

The unsecured creditors’ committee, meanwhile, has the following members:

  • International Game Technology, Reno, NV (Linda Rosenthal — [email protected])
  • US Foods Inc., Rosemont, IL (Dorothy Capers — [email protected])
  • Law Debenture Trust Co. of NY, New York, NY (James Heaney — [email protected])
  • MeehanCombs Global Credit Opportunities Master fund LP, Stamford, CT (Matt Meehan — [email protected])
  • Wilmington Trust, Wilmington, DE (Geoffrey Lewis — [email protected])
  • Hilton Worldwide, McLean, VA (Charles Corbin – [email protected] — Note: Corbin is the interim chairperson of the panel)
  • Board of Levee Commissioners for the Yazoo Mississippi Delta, Greenwood, MS (Willie Gregory — [email protected])
  • Earl of Sandwich (Atlantic City) LLC, Orlando, FL (Thomas Avallone — [email protected])
  • PepsiCo, Winton-Salem, NC (Michael Bevilacqua — [email protected])

Alan Zimmerman

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Dollar Tree inks $3.25B high yield bond offering at tight end of price talk

Dollar Tree this afternoon completed its two-part senior notes offering backing its acquisition of rival Family Dollar, via J.P. Morgan, along with joint books Wells Fargo, Bank of America, RBC, and U.S. Bancorp. Terms were finalized at the tight end of guidance, and tighter than early market chatter, but a read from the gray market points to enduring demand, with some quotes up over two points. Leads added the five-year (non-call two) tranche this week after downsizing the concurrent B term loan and upsizing the A term loan. Family Dollar shareholders approved the transaction last month, and closing is expected in March. The combination of Dollar Tree and Family Dollar would create the largest discount retailer in North America by number of stores. Terms:

Issuer Family Tree Escrow
Ratings B+/Ba3
Amount $2.5 billion
Issue senior (144A)
Coupon 5.75%
Price 100
Yield 5.75%
Spread T+391
Maturity March 1, 2023
Call nc-3 @ par +75% coupon
Trade Feb. 6, 2015
Settle Feb. 23, 2015 (T+10)
Bookrunners JPM/WFS/BAML/RBC/USB
Price talk 5.75-6%
Notes
Issuer Dollar Tree
Ratings B+/Ba3
Amount $750 million
Issue senior (144A)
Coupon 5.25%
Price 100
Yield 5.25%
Spread T+391
Maturity March 1, 2020
Call nc-2
Trade Feb. 6, 2015
Settle Feb. 23, 2015 (T+10)
Bookrunners JPM/WFS/BAML/RBC/USB
Price talk 5.375% area
Notes Five-year tranche added after initial launch.