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Micron Technology inks $1B high yield bond offering at wide end of talk

Micron Technology late yesterday completed a $1 billion, two-part offering of senior notes under Rule 144A for life via Morgan Stanley, Goldman Sachs, and Credit Suisse. Terms were finalized at the wide end of guidance after tranche sizes were revised at launch from $500 million apiece, to $550 million and $450 million for the 2024 and 2026 notes, respectively, sources said. As the issuer works to build out its corporate yield curve, proceeds will be used to repay or repurchase existing debt, including convertible notes, and for general corporate purposes, sources add. Micron manufactures and markets semiconductor products worldwide, including flash memory, RAM, and other memory modules. The company trades on the Nasdaq under the ticker MU, with a market capitalization of roughly $32 billion. Terms:

Issuer Micron Technology
Ratings BB/Ba3
Amount $550 million
Issue senior notes (144A-life)
Coupon 5.25%
Price 100
Yield 5.25%
Spread T+341
Maturity Jan. 15, 2024
Call nc-3 @ par+75% coupon
Trade April 27, 2015
Settle April 30, 2015 (T+3)
Bookrunners MS/GS/CS
Jt. lead Managers BAML/Citi/HSBC/JPM
Co-managers BNP/DBS/ING/MUFG/SC/USB/WF
Price talk 5.125% area
Notes Upsized by $50 million; first call par+75% coupon.
Issuer Micron Technology
Ratings BB/Ba3
Amount $450 million
Issue senior notes (144A-life)
Coupon 5.625%
Price 100
Yield 5.625%
Spread T+368
Maturity Jan. 15, 2026
Call nc-5 @ par+50% coupon
Trade April 27, 2015
Settle April 30, 2015 (T+3)
Bookrunners MS/GS/CS
Jt. lead managers BAML/Citi/HSBC/JPM
Co-managers BNP/DBS/ING/MUFG/SC/USB/WF
Price talk 5.5% area
Notes Downsized by $50 million; first call par+50% coupon.
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Micron Technology drives by high yield bond mart with $1B offering to repay debt

Micron Technology this morning announced a $1 billion, two-part senior note offering for pricing today via joint runners Morgan Stanley, Goldman Sachs, and Credit Suisse, along with joint lead managers Bank of America, Citi, HSBC, and J.P. Morgan, according to sources.

The notes come under Rule 144A for life and will include two tranches maturing on Jan 15, 2024 and Jan. 15, 2026, with first calls in three years and five years, respectively. An investor call will be held at 10:30 a.m. EDT.

Proceeds will be used to repay or repurchase existing debt, including convertible notes, and for general corporate purposes, sources indicate.

Current senior ratings are BB/Ba3. Micron’s was last offering priced in January as $1 billion of 5.25% senior notes due August 2023, with use of proceeds the same as today’s deal. That issue was recently quoted at 102.125/102.625, yielding roughly 4.8%, trade data show, with one trade this morning down an eighth of a point, at 102. Meanwhile, its longer-dated 5.5% notes due Feb. 2025 traded this morning at 101.75, yielding 5.2%, down half a point from bids last week at 102.25, yielding 5.123%.

Micron manufactures and markets semiconductor products worldwide, including flash memory, RAM, and other memory modules. The company trades on the Nasdaq under the symbol MU, with a market capitalization of roughly $31.5 billion. – Joy Ferguson

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Peabody high yield bonds gain, default protection cheapens after 1Q report flags asset sales

Bonds backing Peabody Energy traded higher today and credit protection in the name cheapened as investors seemed to focus not on the company’s weaker-than-anticipated first-quarter results, but rather on management’s plans to potentially sell assets domestically and abroad. The unsecured 6.25% notes due 2021 advanced one point, to 63/63.5, while the second-lien 10% notes due 2020 improved the same amount, to 87/87.5, according to sources.

The coal credit missed analyst expectations on almost every line item. Net revenue, for example, at $1.54 billion, missed consensus mean estimates by roughly 4%, and quarterly EBITDA, at roughly $183 million, was the middle of corporate guidance for $160-200 million but approximately 10% below consensus mean estimates, according to S&P Capital IQ.

The company’s stock price slumped approximately 6% today, to $4.56.

Debt investors instead appeared to focus on capital raise prospects. Peabody “is progressing a strategic review of its portfolio of Australian tenements and is continuing to explore interest for U.S. assets,” according to a company statement. The company said it is “initiating a heightened emphasis on portfolio optimization through asset sales and joint ventures, including sales of non-core reserves, surface lands and partial interests in active operations,” the filing showed.

Peabody Energy placed the $1 billion issue of 10% second-lien notes in early March via a syndicate helmed by Bank of America and Morgan Stanley to address 7.375% notes due 2016 and to fund general corporate purposes. Issuance was at 97.57, to yield 10.5%.

Ratings are mixed, at BB+/B2/BB-. Recall that as a result of the new second-lien debt, S&P lowered its issue-level rating on the company’s unsecured debt to B+, from BB-. – Matt Fuller

Follow Matthew on Twitter @mfuller2009 for leveraged debt deal-flow, fund-flow, trading news, and more.

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Fortescue returns with $1.5B high yield bond offering; debt volatile

Fortescue Metals Group is back in the market today with a $1.5 billion offering of seven-year (non-call three) secured offering via sole bookrunner J.P. Morgan, according to sources. An investor call is scheduled for 11:00 a.m. EDT, with pricing later today, and proceeds will be used to address the company’s existing notes maturing in 2017 and 2018, according to sources.

The deal is a return to market after the company decided to defer a $2.5 billion secured notes offering one month ago, which itself was pitched after a $2.5 billion, seven-year term loan offering was dropped.

Investors are being guided towards BB+/Ba1/BBB- rating, according to sources. Note, the first call in three years is at a rare and investor-friendly par plus 100% coupon. Last month’s deal included a first call at par plus 50% of the coupon, sources indicated. In addition, if $1 billion of common equity proceeds is raised in the first two years and proceeds are used for debt repayment, then the notes can be redeemed at par plus 50%, then 25%, and par.

Recall the $2.5 billion, seven-year (non-call three) offering was whispered in a high-7% context early in the marketing process, price talk was released at 8-8.25%, and over the course of market deterioration – with other new issues from other commodity credits trading many points below offering prices – investor demands widened towards 9%, according to sources. Credit Suisse and J.P. Morgan acted as joint physical bookrunners on that deal.

Existing Fortescue bonds rallied this morning on the deal announcement, with the bonds being taken out popping around three points and the longer-dated series also trading higher. The 6.875% notes due 2018 targeted in the refinancing gained 3.5 points, to trade at 103, while the 6% notes due 2017 were also bid up to a 103 context.

The longer-dated 6.875% notes due April 2022 not targeted traded as much as two points higher initially this morning, at 74, before settling back a latest trade at 72, trade data show. Note those bonds traded at 85 prior to the previous deal launch last month.

However, amid speculation that the deal will clear wide of where the original deal was guided in March, Fortescue’s covenant-lite term loan due 2019 cooled to an 86/86.5 market this morning, down about three quarters of a point from yesterday, sources said. The paper is currently priced at L+275, with a 1% LIBOR floor, but note the spread is tied to a leverage-based grid ranging from L+275-350.

Benchmark Iron Ore 62% Fe is up 4% today, at $52.9 per dry metric tonne, according to The Steel Index, a division of Platts. Pricing is up roughly 6% week over week and higher by approximately 13% from the record low of $46.7 at the outset of the month.

Fortescue is rated BB/Ba2/BB+. The company’s shares trade on the Australian Securities Exchange, under the ticker FMG. – Staff reports

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YouTube: High yield bonds steal show in 1Q European leveraged finance mart

Usually loans command the most attention in the European leveraged finance market (and get top billing in our video). In 2015’s first quarter, however, high yield bonds took center stage.

Charts in the video:

  • European high-yield fund flows
  • New-issue bond yields by rating
  • New-issue B-rated loan yields
  • Share of ELLI priced at par or higher
  • European covenant-lite loan volume
  • European leveraged loan new-issue volume

The URL:

Click here to download PDF slides of the video on Slideshare.

URL for the slides:

http://www.slideshare.net/lcdcomps/european-1-q-2015-loan-market-update

While you’re on YouTube please subscribe to LCD’s YouTube Channel. That way won’t miss any LCD videos. You can also subscribe by clicking on the link to the right of any LCD News email, or here:

http://www.youtube.com/user/LCDcomps

If you’d like to embed any LCD video on a web page or in other digital media, it’s simple via the “embed” button on the YouTube page for the video. You can also embed the slides via Slideshare.

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Bankruptcy: Caesars seeks plan filing exclusivity extension through Nov. 15

Caesars Entertainment Operating Co. asked the bankruptcy court overseeing its Chapter 11 proceeding to extend the exclusive period during which only the company could file a reorganization plan through Nov. 15, saying its case was “among the largest, most complex and highly litigious restructurings in recent history.”

The company is also seeking to extend the corresponding exclusive period to solicit votes to a reorganization plan through Jan. 15, 2016.

The company said that while its case was still in its “infancy,” it had nonetheless “already made significant progress toward a successful restructuring,” citing, among other things, its venue fight in Wilmington, Del., its largely consensual first day motions, successfully negotiating an adequate protection agreement, and its restructuring support agreement, which was reached prior to the Chapter 11 filing.

“But,” the company added, “significant work remains to achieve confirmation of a Chapter 11 plan, whether it is the plan [contemplated by the RSA] or another proposed by the debtors.”

First, the company said, the examiner that has been appointed in the case must complete his report. As reported, New York-based attorney Richard Davis was approved as the examiner on March 25 (see “Richard Davis nets court OK as Caesars bankruptcy examiner,” LCD, March 26, 2015). His investigation is anticipated to cover a wide range of issues related to potential fraudulent conveyance and other avoidance actions in connection with numerous pre-petition transactions undertaken by the company in advance of its bankruptcy filing.

The bankruptcy court did not set a deadline for the investigation, and according to the company’s exclusivity motion, the investigation could take “six months or longer.”

The company said that the parties in the case “generally have requested that the [company] not proceed with a disclosure statement hearing on the plan until the examiner has issued his report,” adding, “[a]ccordingly, the debtors have not moved forward with the plan confirmation process.”

Meanwhile, the company said, it needs time to continue to build support for its plan among creditors, noting that it is continuing to negotiate with its first lien bank lenders and other stakeholder regarding the RSA.

In this regard, the company laid out its strategy.

“If the debtors can successfully negotiate a revised RSA that is supported by more than two-thirds in dollar amount of both first lien bank and bond debt, it would be a key milestone in these cases and solidify support from a supermajority of the top of the debtors’ capital structure,” the company said. “The debtors would then be able to turn their attention in earnest towards their junior creditors — represented by two official committees — to try to obtain their support for a plan supported by the senior bank and bond group.”

Further, the company said, it had decided to market test its proposed reorganization plan by soliciting plan overbids to the plan. The company’s independent Governance Committee would oversee this process, the company said, noting that it would take months to design, implement, and complete – and that is even before any alternative plan would have to face regulatory or bankruptcy court approvals.

Fourth, the company also noted that a trial is set for Aug. 3 to resolve the pending involuntary petition that was filed against the company in bankruptcy court in Wilmington, Del., on Jan. 12, three days before the company filed its own voluntary petition in Chicago. As reported, the company ultimately won its bid to have the venue of that case transferred to Chicago, and while the company has opted, as an administrative matter, to pursue its reorganization via the voluntary petition it filed, the involuntary case that was transferred from Delaware remains pending.

As reported, the determination of whether the company’s Chapter 11 began on Jan. 12 with the involuntary filing, or on Jan. 15 with the voluntary petition, could affect, among other things, the avoidability of certain transactions undertaken by the company on Oct. 15, 2014 in connection with granting first lien lenders liens in the company’s cash collateral, with the expectation that a Chapter 11 would not be filed until at least 90 days later, once the preference period had lapsed (see “CEOC involuntary Ch. 11 in spotlight again as creds aim to nix liens,” LCD, April 9, 2015 $).

According to the exclusivity motion, “[t]he grant or denial of the involuntary petition will have significant implications on the Debtors’ ability to implement the plan in its current form.”

A hearing on extending exclusivity is set for April 29, court filings show. – Alan Zimmerman

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Walter Energy skips April 15 bond coupon payments amid reorg talks

Walter Energy has opted to skip today’s interest payment due to holders of both 9.5% first-lien notes due 2019 and 8.5% unsecured notes due 2020 as widely anticipated amid ongoing reorganization discussions. Management said it’s not a liquidity issue, what with $435 million of cash on hand, according to a company statement, as compared to the $46.1 million and $19.1 million due to bondholders, respectively.

The metallurgical coal credit said “it is working with its debtholders to establish a capital structure that will position the company to weather a highly competitive and challenging market.” In this context, the company has opted to enter the typical 30-day grace period on missed coupon payments, the filing shows.

Walter 9.5% first-lien notes traded up two points this morning, at 49, though the notes are now trading flat, or without accrued interest, trade data show. Second-lien 11% partial-PIK-toggle notes due 2020 have been wallowing just under 10 in recent days, while both 9.875% unsecured notes due 2020 and the 8.5% unsecured notes due the coupon were pegged around 6, according to sources.

Still, the 9.5% paper remains down rough eight points since prior to reports in early March that the company engaged legal counsel Paul Weiss to advise it on restructuring options (see “Walter Energy bonds lower after report says co. hired legal counsel,” LCD News, March 11, 2015).

Walter Energy’s covenant-lite B term loan due 2018 (L+625, 1% LIBOR floor) was little changed on the news this morning, quoted at 58.5/60, according to sources.

As reported, Walter Energy recently in an effort to preserve liquidity announced an agreement to issue 8.65 million shares of common stock in exchange for $66.75 million principal amount of its 8.5% unsecured notes. During 2014, the company exchanged $5.2 million in cash and 9.3 million shares of its common stock for $112 million of its 9.875% senior notes, according to Fitch.

Also as reported, the company has previously elected to pay half of the Oct. 1 and April 1 coupons on its 11% PIK-toggle bonds due 2020, with additional securities in an effort to shore up cash.

S&P rates Walter Energy at CCC+, with a negative outlook. Moody’s rates the company Caa2, with a stable outlook.

NYSE-listed Walter Energy is a producer of metallurgical and thermal coal, metallurgical coke and natural gas with a primary focus on metallurgical coal. Shares were down about 4% today, trading at $0.62. – Matt Fuller

Follow Matthew on Twitter @mfuller2009 for leveraged debt deal-flow, fund-flow, trading news, and more.

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Bankruptcy: Xinergy DIP loan nets interim court OK; final hearing set for May 5

The bankruptcy court overseeing the Chapter 11 proceedings of Xinergy gave interim approval to the company’s proposed $40 million DIP facility, according to an April 7 court order.

As reported, $20 million of the facility would be used to roll up the company’s existing first-lien term loans, with the remainder used to provide additional liquidity. Highbridge Capital Management and Whitebox Advisors are the lenders.

The interim approval gives the company access to $27.5 million, the $20 million to cover the roll-up and $7.5 million of new money.

The hearing on final approval of the facility is set for May 5. – Alan Zimmerman

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Murray Energy relaunches high yield bond deal at $1.3B, with significant discount

The Murray Energy M&A bond deal has been re-launched to market with a new, single-tranche structure and just over a three-point OID on new price talk. A $1.3 billion offering of six-year (non-call three) second-lien notes are guided with an 11.25% coupon to yield 12%, which works out to pricing at roughly 96.8, sources said.

The transaction was downsized from $1.55 billion and revised from a dual-tranche offer – five-year (non-call two) notes at 10.25-10.5% and an eight-year (non-call three) series at 10.75-11% – and issuance remains under Rule 144A for life. The first call premium of par plus 75% coupon is unchanged despite a structural revision.

With a new proposal out to accounts, bookrunners Deutsche Bank and Goldman Sachs are seeking recommitments through noon EDT tomorrow, Thursday, April 9, according to sources. Pricing is expected to follow.

Ratings for the new second-lien notes in the prior form were assigned as B-/B3, and with a 6 recovery rating by S&P, indicating expectation for negligible recovery (0-10%) in the event of default. The profile reflects a split decision on the state of the credit, with a one-notch downgrade by S&P, versus a one-notch upgrade by Moody’s.

Proceeds support the coal credit’s planned investment in Foresight Energy. As for changes to the investment, Murray will now pay roughly $1.37 billion for a 34% stake in the general partnership, and a 50% interest, as before, in the limited partnership. Murray originally planned to purchase an 80% interest in the GP.

The combined company will control over nine billion tons of coal reserves, the companies said. Foresight founder Christopher Cline will retain a minority interest in Foresight. – Matt Fuller

Follow Matthew on Twitter @mfuller2009 for leveraged debt deal-flow, fund-flow, trading news, and more.