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LCD Daily High Yield Bond Index Report: Data for September 28, 2015

The S&P U.S. Issued High Yield Corporate Bond Index tracks U.S.-dollar-denominated high-yield bonds issued by U.S.-domiciled companies and includes ratings-based sub-indices. Observations below are as of the most recent close, the prior close, a week ago, and a year ago. The data is courtesy of S&P Dow Jones Indices. Further details can be found online at http://bit.ly/1jm5vGs.

HY Corporate Bond Index Sept 28 2015

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Exterran Energy Solutions withdraws $400M high yield bond offering

Exterran Holdings announced this morning that it has withdrawn the $400 million offering of seven-year (non-call three) senior notes via joint bookrunners Goldman Sachs, Wells Fargo, Credit Agricole, Bank of America Merrill Lynch, Citi, RBC, and UniCredit, according to sources.

This is the 10th officially withdrawn or postponed deal of the year although two issuers, FMG Resources and Presidio, returned with revised offerings. Last year, 17 deals were postponed for a total of $5.825 billion, with the bulk occurring between September and December.

Exterran Energy Solutions, a subsidiary of Exterran Holdings, announced the senior notes deal on Monday, July 13, with proceeds being used as part of its spin-off plans, as announced in November 2014. Ratings had been assigned as BB-/B1, with a 3 recovery rating from S&P, and leads had reworked covenants this week.

As a result of the withdrawal, Exterran Holdings stated today that the planned spin-off of its international services and global fabrication businesses into a stand-alone, publicly traded company named Exterran Corporation will be delayed. Exterran Holdings said it intends to complete the spin-off when market conditions allow.

Houston-based Exterran Holdings, together with its subsidiaries, provides operations, maintenance, services, and equipment for the oil and natural-gas production, processing, and transportation applications. – Joy Ferguson

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Charter places record-setting $15.5B bonds for acquisitions as cable industry consolidates

Charter Communications (Nasdaq: CHTR) yesterday placed a $15.5 billion benchmark offering of 144a/Reg S senior secured notes (with registration rights) after garnering a strong order book, as it seeks funds to complete the acquisitions of Time Warner Cable (NYSE: TWC) for roughly $80 billion, including the assumption of $22 billion of net debt, and Bright House Networks for more than $10 billion.

For reference, the deal is the fourth largest so far this year, behind M&A-driven deals for Actavis Funding ($21 billion on March 3), AT&T ($17.5 billion on April 23), and AbbVie ($16.7 billion on May 5). The only other larger offerings in recent years were printed by Verizon Communications ($49 billion in September 2013), Medtronic ($17 billion in December 2014), and Apple ($17 billion in April 2013).

Only three deals were printed in 2014 at sizes of $10 billion or more, versus nine offerings so far this year, all backing M&A or share buybacks.

Yesterday’s offering comes via Charter’s subsidiary CCO Safari II, LLC, an entity formed to pre-fund transaction financing. Proceeds will be placed in escrow until closing of the deals.

At the closing of the transaction between CHTR and TWC, the notes will be assumed by Charter’s subsidiaries, Charter Communications Operations and Charter Communications Operating Capital, according to the company. The deal is subject to a special mandatory redemption, at 101, in the event the TWC acquisition is not consummated by May 23, 2016, but is not subject to the closing of the Bright House play.

Yesterday’s offering was launched at guidance numbers, and 5-15 bps through initial whispers, but only in the context of high new-issue concessions amid cautious market tone and M&A-related leverage implications for yesterday’s blockbuster deal.  For reference, yesterday’s 30-year issue was set at T+335, versus indications for TWC’s outstanding 4.5% Sept. 15, 2042 issue yesterday at date-adjusted levels near T+300, or roughly 20 bps wider since the announcement of mandates for the new bond offering earlier this week.

The offering is on track for eligibility for IG indices under an expected BBB-/Ba1/BBB- profile as ratings review continue. Charter ratings are expected to rise from prior assignments at BB- at S&P and Ba3 at Moody’s, and consolidate with ratings at Time Warner Cable, which is currently rated BBB/Baa2.

Fitch and S&P yesterday rated the notes under an assumption of leverage in the high 4x to 5x area pro forma for the TWC and Bright House transactions. Fitch assessed Charter’s leverage at 4.4x at the end of March, in the context of Charter’s total leverage target between 4x and 4.5x. “Fitch recognizes that a large portion of the TWC transaction will involve senior secured debt, both existing at TWC and new issuance. Charter recently stated that it expects to maintain a senior leverage target of 3.5x following the completion of the TWC and Bright House transactions. Depending on the ultimate capital structure, a one or two notch upgrade of Charter’s IDR and existing ratings could be possible provided that pro forma senior secured leverage is at or below 4.0x and total leverage does not exceed 5.0x,” Fitch stated yesterday.

Fitch added that it views both acquisitions positively, and expected them to result in a stronger consolidated debt profile. – Staff reports

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Harsco cancels high yield bond deal, terminates tender offer

Harsco Corp. late on Friday announced it decided to withdraw its $250 million offering of senior notes in response to market conditions, according to a company statement. As reported, the five-year (non-call two) transaction was being pitched at 6-6.25% via joint bookrunners Citigroup, Credit Suisse, HSBC, J.P. Morgan, MUFG, RBC, and U.S. Bancorp.

This is the ninth cancelled bond deal thus far in 2015, however two returned. Indeed, Fortescue revived and placed a $2.3 billion offering as part of a refinancing, and Presidio came back and inked its $400 million buyout deal, according to LCD.

Proceeds from the SEC-registered Harsco deal were aimed to repurchase the company’s 2.7% notes due 2015 pursuant to a tender offer, with the remaining proceeds slated to repay drawings under the revolver. In turn, the tender offer was terminated, according to the firm.

Camp Hill, Pa.-based Harsco provides industrial materials and equipment used in construction and infrastructure projects. It trades on the NYSE under the ticker HSC and has a market capitalization of roughly $1.3 billion. – Staff reports

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World Acceptance Corp. postpones $250M high yied bond offering

Consumer finance firm World Acceptance Corp. announced this morning it has postponed its $250 million offering of senior notes, according to a company press release.

This is the ninth postponement or withdrawal in 2015, although two of those deals returned, from Fortescue Metals Group and Presidio, leaving a total withdrawn amount of $1.91 billion, according to LCD.

The offering of five-year senior notes was announced one week ago, with talk set at 9% area on Wednesday after the call period was lengthened by a year, to non-call three. But yesterday, investor sources said the bulk of demand came north of 9% and it was uncertain if the company was willing to come at that level.

Indeed, World Acceptance stated today that the financing was opportunistic and it could wait. “While we are interested in diversifying our capital structure in order to maintain long-term flexibility, we can afford to be patient, as this offering was opportunistic in nature,” said Sandy McLean, chief executive officer. “While a transaction could have been completed, we believe that the terms could be more favorable in the future, and we will potentially revisit an offering as appropriate.”

Wells Fargo and BMO were leading the deal, which targeted the repayment of borrowings under an amended senior secured revolving credit facility, according to the company statement. Ratings of B/B3 had been assigned.

Greenville, S.C.-based World Acceptance offers short- and medium-term consumer installment loans and a variety of insurance products, including credit insurance, tax-return services, and automobile club memberships. It serves individuals with limited access to consumer credit.

The company trades on the Nasdaq under the symbol WRLD, with an approximate market capitalization of $885 million. The company has trailing-12-month net revenue of approximately $618 million and roughly $192 million in EBITDA, according to S&P Capital IQ. – Joy Ferguson

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Fortescue high yield bond, leveraged loan debt mixed after co. “defers” refinancing plan

Fortescue Metals Group debt was mixed late yesterday and again this morning in the wake of the company’s decision to “defer the voluntary refinancing” via a $2.5 billion offering of secured notes and multi-tiered bond tender offer. The postponement is the sixth withdrawal this year, (though Presidio returned) and it’s the largest single pulled deal dating to the financial crisis, according to LCD.

The 6% notes due 2017 targeted in the exercise changed hands this morning at 88, versus 91.063 late on Tuesday and 94.25 earlier this week, while 6.875% notes due 2022 not involved in the tender offer were volatile, trading anywhere from 74.5 to 77, with the most recent print at 75.5, versus 85 prior to the deal launch, trade data show.

In the loan market, Fortescue’s roughly $4.9 billion term loan due 2019 (L+275, 1% LIBOR floor) was pegged on either side of 91 this morning, up roughly 1.5 points from lows touched yesterday but little changed from levels late yesterday after rumors circulating that the bond deal had been pulled, according to sources. Note the paper is roughly two points below where it was trading before the company unveiled its refinancing plan.

Fortescue stated that it “decided not to pursue the previously announced $2.5 billion senior secured note offering and refinancing as the company’s disciplined cost objectives were not met,” according to a company statement. Terms and conditions did not meet the objectives because “debt capital markets were not favorable at this time,” the filing showed.

To that end, the seven-year (non-call three) offering of secured notes under Rule 144A for life was whispered in the high-7% context early in the marketing process, price talk was released Monday afternoon at 8-8.25%, and over the course of market deterioration yesterday – with recent new issues from other commodity credits trading many points below offering prices – investor demands were widening towards 9%, according to sources.

There was a strong order book, but it was beyond the company’s line in the sand of 8.5%, sources added.

Joint physical bookrunners were Credit Suisse (B&D), and J.P. Morgan. Proceeds were slated to finance a tender offer for all of the borrower’s 2017 and 2018 notes, and for some of its 2019 notes, as well as for general corporate purposes.

Ratings were crossover, at BB+/Baa3/BBB-.

As reported, the company dropped plans to issue a new $2.5 billion, seven-year term loan to back the tender offer that launched earlier this month, and it intended an amendment and extension to its outstanding $4.9 billion term loan due June 2019. Both efforts have also ended.

Fortescue is rated BB+/Ba1. The company’s shares trade on the Australian Securities Exchange, under the ticker FMG. – Staff reports

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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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BreitBurn Energy shelves $400M high yield bond offering; 10th scrapped deal YTD

BreitBurn Energy Partners has shelved its plans to offer $400 million of 8.5-year senior notes due to market conditions. Price talk was in the 8.25% area, and proceeds were to fund an RC-repayment effort.

This is the tenth cancelled bond deal in the year to date, for a net $4.3 billion of withdrawn offerings, according to LCD. Most were opportunistic refinancing deals that couldn’t secure an appropriate rate, and one M&A deal, the Jupiter Resources financing, was successful in an eventual return to market.

BreitBurn was in market with the B-/B3 transaction via a Citi-led bookrunner team that includes BMO, Credit Suisse, J.P. Morgan, RBC, RBS, and Wells Fargo. Amid the marketing efforts there was a small revision to the call schedule. The initial pitch was for the new classic, with a first call premium at par plus 75% coupon after three years, but it was rejiggered to a first call at par plus 50% coupon after 4.25 years, according to sources.

Los Angeles-based BreitBurn is an independent oil-and-gas company with properties in Michigan, California, Wyoming, Florida, and Kentucky. The company trades on the Nasdaq under the symbol BBEP, with an approximate market capitalization of $2.4 billion. – Matt Fuller

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

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APN News & Media withdraws $250M debut in high yield mart; deteriorating conditions

208px-APN_News_&_Media_Logo.svgAustralian media company APN News & Media has withdrawn a $250 million debut offering of senior notes via Credit Suisse, Deutsche Bank, and HSBC, according to a corporate statement. The company “decided not to proceed” despite “significant investor interest” because terms and conditions were not satisfactory to the firm.

This is an initial postponement amid the busy week in a deteriorating high-yield marketplace, and it’s the fifth sidelined deal of the year, according to LCD. One is back in market, of course: Jupiter Resources is again seeking to place a $1.125 billion issue to fund an acquisition.

The APN News & Media deal was structured as seven-year (non-call three) senior notes, and issuance was to be under Rule 144A for life. Ratings were BB/Ba3, and proceeds were being raised for RC repayments and for general corporate purposes.

Sydney, Australia-based APN News & Media Limited publishes newspapers and magazines in Australia and New Zealand. It trades on the Australian Stock Exchange under the symbol APN and has a market capitalization of $792 million. – Matt Fuller

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