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Valeant Pharma Prices $1.5B High Yield Offering to Refi Maturing Debt

Broad market issuer Valeant Pharmaceuticals today placed $1.5 billion of eight-year notes via sole bookrunner Barclays. Prior to pricing, the offering was upsized by $500 million. Proceeds will be used to fund a tender offer for the borrower’s 7%, 6.375%, and 5.375% notes due 2020. Valeant last month placed a $750 million add-on to its secured notes due 2025. Valeant Pharmaceuticals (NYSE:VRX) develops, manufactures, and markets pharmaceuticals worldwide. Terms:

Issuer Valeant Pharmaceuticals 
Ratings B–/Caa1
Amount $1.5 billion
Issue Senior (144A/Reg S for life)
Coupon 9%
Price 98.611
Yield 9.25%
Spread T+691
Maturity Dec. 15, 2025
Call non-call four (par +50% coupon)
Trade Dec. 4, 2017
Settle Dec. 18, 2017 (T+10)
Sole bookrunner Barc
Price talk n/a
Notes Upsized from $1 billion; change-of-control put @ 101; up to 40% equity claw

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Hi-Grade Bonds: Coach Wraps $1B Offering Backing $2.4B Kate Spade Buy

Coach Inc. today locked in $1 billion of acquisition-related bond funds to finance its purchase of Kate Spade. The two-part senior offering included $400 million of 3% notes due July 15, 2022 at T+140, or 3.106%; and $600 million of 4.125% notes due July 15, 2027 at T+200, or 4.142%.

Both tranches were printed at the firm end of guidance in the T+145 and T+205 areas and through initial whispers in the areas of T+162.5 and T+225, respectively.

The New York–based luxury-goods company placed a debut senior unsecured offering in February 2015 for its acquisition of luxury-footwear company Stuart Weitzman. It printed $600 million of 4.25% 10-year notes due April 2025 at T+225, and the issue has traded over the last month at G-spreads bracketing 185 bps, before accounting for roughly 11 bps on the curve, according to MarketAxess.

In May, Coach announced that it would acquire competitor Kate Spade & Company for $18.50 per share in cash for a total transaction value of $2.4 billion. The deal is expected to close in the third quarter of this calendar year. Since then, Coach disclosed that it obtained a $2.1 billion unsecured bridge term loan credit family from BAML, and a $2 billion loan package from a group of 13 banks, the latter across a $900 million revolving loan facility; an $800 million, six-month term loan credit facility; and a $300 million, three-year term loan facility.

The acquisition will be funded with proceeds from today’s bond offering, along with cash on hand at Coach and Kate Spade, and roughly $1.1 billion in term loans (that the company expects to borrow at or around the time the merger is completed), according to regulatory filings. Additionally, Kate Spade’s $385 million term loan will be repaid with its own cash on hand, filings show.

The deal carries a special mandatory redemption at 101 if the merger is not completed by Feb. 7, 2018. Additionally, the structure offers investor protections via 25 bps coupon steps per each notch downgrade by ratings agencies below the investment-grade level, to a maximum of 200 bps, falling away on a rise at BBB+/Baa1.

Earlier today, S&P Global Ratings, Moody’s, and Fitch assigned respective BBB–/Baa2/BBB ratings to the new offering, which is expected to be $1 billion in size.

The acquisition did not trigger ratings actions from S&P Global Ratings, which only confirmed its current rating and stable outlook. “Pro forma for the new debt and acquisition, we forecast FFO to debt will decrease to mid-30% and improve to high-30% by the end of fiscal 2018 on the repayment of the $800 million term loan and continued EBITDA growth,” the agency said today.

Following the merger announcement, Moody’s reviewed its rating for a possible downgrade, but last week it confirmed the rating and revised the outlook to negative. “While the acquisition will increase the combined company’s pro forma leverage to 3.3 times from 2.0 currently, we expect leverage to decline to about 2.6 times in the next 12 months as the company plans to repay $800 million of debt using its cash balance and make additional prepayments using operating cash flow,” analysts said today.

“The negative outlook reflects the enhanced execution, integration and business risks that accompany the acquisition of Kate Spade particularly in light of the secular shifts in the overall retail business environment, the ever changing fashion trends and over promotion which could result in slowing EBITDA growth,” Moody’s said on June 1 when it revised its outlook.

Fitch—which last month placed its BBB rating on Rating Watch Negative, and anticipates a one-notch downgrade to BBB– once the merger is complete—today assigned its current rating to the new offering. “The acquisition would cause Coach’s leverage to increase from the current 2.6x level to 3.7x on a pro forma basis at closing and decline to around 3.3x at the end of FY 2018 upon the repayment of the $800 million six-month term loan. Leverage is expected to trend to under 3.0x over the following two years on EBITDA growth,” analysts said today. Terms:

Issuer Coach Inc.
Ratings BBB–/Baa2/BBB
Amount $400 million
Issue SEC-registered senior notes
Coupon 3.000%
Price 99.505
Yield 3.106%
Spread T+140
Maturity July 15, 2022
Call Make-whole T+25 until notes are callable at par from one month prior to maturity
Px Talk Guidance: T+145 area (+/– 5 bps); IPT: T+162.5 area
Issuer Coach Inc.
Ratings BBB–/Baa2/BBB
Amount $600 million
Issue SEC-registered senior notes
Coupon 4.125%
Price 99.858
Yield 4.142%
Spread T+200
Maturity July 15, 2027
Call Make-whole T+30 until notes are callable at par from three months prior to maturity
Trade June 6, 2027
Settle June 20, 2017
Books BAML/JPM(act)/HSBC(pass)
Px Talk Guidance: T+205 area (+/–5 bps); IPT: T+225 area
Notes Proceeds will be used to fund a portion of the Kate Spade acquisition
Deal includes 25 bps coupon steps per notch downgrade below investment grade
Special mandatory redemption at 101 if merger is not complete by Feb. 7, 2018


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Community Health add-on notes price at 101.75 to yield 5.83%; terms

Community Health Systems has wrapped a $900 million tack-on to its 6.25% senior secured notes due 2023, following a $200 million increase, sources said. Credit Suisse was left lead on the transaction, which cleared at the middle of talk. The deal was launched for funds to refinance the company’s existing term loan A due 2019. The borrower will use the additional proceeds for general corporate purposes, which may include the repayment of debt, sources said. In March, the company first issued $2.2 billion of the notes. Franklin, Tenn.–based Community Health (NYSE: CYH) owns, leases, and operates general acute care hospitals in the U.S. Terms:

Issuer Community Health Systems
Ratings BB-/Ba3
Amount $900 million (add-on)
Issue senior secured notes (SEC-registered)
Coupon 6.25%
Price 101.75
Yield 5.83% (YTW)
Spread T+389
Maturity March 31, 2023
Call callable on March 31, 2020 @ 103.125
Trade May 9, 2017
Settle May 12, 2017 (T+3)
Bookrunners CS/BAML/C/CACIB/DB/GS/JPM/RBC/STRH/WFS
Price talk 101.5-102
Notes Upsized by $200 million; add-on brings full amount issued to $3.1 billion; change of control put @ 101; up to 40% equity claw until March 31, 2020 at 106.25%; make-whole @ T+50

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inVentiv Health Prices $675M High Yield Bond Offering

inVentiv Health today priced its downsized $675 million offering of eight-year senior notes at the tight end of talk, sources said. Bookrunners for the notes, which were trimmed down from an initial $720 million, were Credit Suisse, Bank of America Merrill Lynch, Goldman Sachs, Morgan Stanley, Barclays, and Jefferies. The amount removed from the bond deal was placed towards the issuer’s seven-year B term loan. Proceeds from both the notes and the loan will be used to fund the purchase of an equity stake in the company by Advent International and to refinance debt. Advent will become an equal owner of inVentiv alongside current owner Thomas H. Lee Partners. Burlington, Mass.–based inVentiv Health provides clinical, communications, and patient assistance services to the life sciences, biotech, and pharmaceutical industries. Terms:

Issuer inVentiv Health
Ratings CCC+/Caa2
Amount $675 million
Issue senior (144A)
Coupon 7.5%
Price 100
Yield 7.5%
Spread T+600
Maturity Oct. 1, 2024
Call nc3 (@ par +50 coupon)
Trade Sept. 29 2016
Settle Oct. 14, 2016 (T+10)
Bookrunners CS/BAML/GS/MS/BARC/JEF
Price talk 7.5–7.75%
Notes Downsized from $720 million

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Allison Transmission Prices $1B High Yield Bond Offering

Allison Transmission logoAllison Transmission today priced its upsized offering of eight-year notes at the tight end of talk, sources said. The notes were placed privately through a Citi-led deal, which included nine additional bookrunners. The transaction was originally planned to wrap on Thursday, but pricing was accelerated to this afternoon. The issuer will use the proceeds, along with cash, to pay down its $2.39 billion TLB due 2019. Terms:

Issuer Allison Transmission
Ratings Ba3/BB (Moody’s/Fitch)
Amount $1 billion
Issue senior (144A-for-life)
Coupon 5%
Price 100
Yield 5%
Spread T+342 bps
Maturity Oct. 1, 2024
Call nc3 (at par plus 50% of coupon)
Trade Sept. 14, 2016
Settle Sept. 23, 2016 (T+7)
Joint bookrunners C/BARC/BAML/BMO/Fifth Third/JPM/SMBC/DB/GS/MUFG
Price talk 5–5.25%
Notes Upsized from $500 million; 40% equity claw

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Navient Prices $500M High Yield Bond Offering

navient logoNavient, in its second tap of the bond market this year, priced an offering of seven-year, SEC-registered notes this afternoon at the low end of talk, sources said. Bookrunners for the offering were Bank of America Merrill Lynch, J.P. Morgan, and RBC Capital Markets. Navient, the fallen-angel spin-off of Sallie Mae, will use the proceeds for general corporate purposes. Terms:

Issuer Navient
Ratings BB-/Ba3/BB
Amount $500 million
Issue senior (SEC-registered)
Coupon 7.25%
Price 100
Yield 7.25%
Maturity Sept. 25, 2023
Call non-call life
Trade Sept. 9, 2016
Settle Sept. 16, 2016 (T+3)
Joint bookrunners BAML/JPM/RBC
Price talk 7.25-7.375%

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PDC Energy Prices $400M High Yield Bond Offering

PDC logoPDC Energy this afternoon priced its drive-by $400 million offering of eight-year notes below initial guidance, sources said. Bookrunners for the privately placed deal were J.P. Morgan, BMO, Bank of America Merrill Lynch, and Wells Fargo. The Denver-based oil and gas exploration and production company will use the proceeds, along with revolver borrowings, to help finance the planned $1.5 billion acquisition of assets from Kimmeridge Energy.

Issuer PDC Energy
Ratings B–/B2
Amount $400 million
Issue senior (144A)
Coupon 6.125%
Price 100
Yield 6.125%
Spread T+457
Maturity Sept. 15, 2024
Call nc3 (at par plus 75% coupon)
Trade Sept. 12, 2016
Settle Sept. 15, 2016
Joint bookrunners JPM/BMO/BAML/WFS
Price talk 6.25–6.5%
Notes

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Hertz Prices $800M Bond Offering to Yield 5.5%

hertz logoHertz late this afternoon priced an upsized offering of eight-year notes at the low end of talk, sources said. The deal size was increased by $300 million, to $800 million. Bookrunners included Barclays, Citi, Bank of America Merrill Lynch, BMO, BNP Paribas, Credit Agricole, Goldman Sachs, J.P. Morgan, and RBC. The car and equipment rental company will use the proceeds to partially redeem its 6.75% notes due 2019. Terms:

Issuer Hertz
Ratings B/B2
Amount $800 million
Issue senior (144A-for-life)
Coupon 5.500%
Price 100
Yield 5.500%
Maturity Oct. 15, 2024
Call nc3 @ par plus 75% of coupon
Trade Sept. 8, 2016
Settle Sept. 22, 2016 (T+10)
Joint bookrunners BARC/C/BAML/BMO/BNP/CA/GS/JPM/RBC
Co-Managers CAP-ONE/DB/MIZ/NATIXIS/RBS/SCOTIA/UNICREDIT
Price talk 5.5–5.625%
Notes First call at par plus 75% coupon; upsized from $500 million

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Louisiana-Pacific Bonds Price to Yield 4.875%

Louisiana-Pacific today wrapped a $350 million drive-by bond deal at the tight end of talk, sources said. Bookrunners for the private placement included Bank of America Merrill Lynch, Goldman Sachs, and RBC. The Nashville, Tenn.–based building products manufacturer intends to use the proceeds to redeem the $350 million outstanding of 7.5% notes due 2020, which were placed with investors in May 2012. Terms:

Issuer Louisiana-Pacific
Ratings BB/Ba3
Amount $350 million
Issue senior (144A)
Coupon 4.875%
Price 100
Yield 4.875%
Spread T+342 bps
Maturity Sept. 15, 2024
Call non-call three
Trade Sept. 7, 2016
Settle Sept. 14, 2016 (T+5)
Joint bookrunners BAML/GS/RBC
Price talk 5% area
Notes first-call at par +75% coupon

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Europe: Triple-C Rated Ardagh Places 2-part PIK Toggle Bond Offering

ardagh glassArdagh today placed its upsized, two-part offering of PIK toggle bonds via bookrunners Citi (left) and Barclays. Both tranches came at the tight end of guidance. The additional $150 million of proceeds will be be used to repay debt at the OpCo entity, thereby increasing restricted payment capacity at the OpCo to service interest at the HoldCo entity. The original proceeds will be used to redeem the borrower’s 2019 PIK notes, which respectively have $841.2 million and €294.8 million outstanding and to finance a €270 million dividend. The new notes must pay cash coupons, provided there is sufficient restricted payment capacity at Ardagh Packaging Holdings Limited. The first coupon is guaranteed to be paid in cash. Proceeds from the sale of any secondary shares must be used to redeem up to 35% of the principal at 104 during the first three years. Ardagh Group manufactures metal and glass packaging solutions. Terms:

Issuer ARD Finance
Ratings CCC+/Caa2
Amount €845 million
Issue PIK toggle
Coupon 6.625% (7.375% PIK)
Price 100
Yield 6.625%
Spread B+710 bps
Maturity Sept. 15, 2023
Call nc3
Trade Sept. 7, 2016
Settle Sept 16, 2016
Books Citi (left), Barc
Px talk 6.75% area
Notes Total upsized by $150 million
Issuer ARD Finance
  Ratings CCC+/Caa2
Amount $770 million
Issue PIK toggle
Coupon 7.125% (7.875% PIK)
Price 100
Yield 7.125%
Spread T+574 bps
Maturity Sept 15, 2023
Call nc3
Trade Sept. 7, 2016
Settle Sept 16, 2016
Books Citi (left), Barc
Px talk 7.25% area
Notes Total upsized by $150 million

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