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Level 3 upsized $1B 8-year #highyield bonds (B/B3) price to yield 5.375%

Level 3 Communications this afternoon completed its upsized $1 billion offering of eight-year (non-call three) senior notes via Citi (left), Bank of America Merrill Lynch, Morgan Stanley, Barclays, Goldman Sachs, Jefferies, and J.P. Morgan. Terms were finalized at the midpoint of talk, after a $400 million upsize. Proceeds from the deal – along with those from a covenant-lite B term loan – will be used to support Level 3′s planned $7.3 billion purchase of TW Telecom, the company disclosed in an SEC filing last month.

Terms:

Issuer Level 3 Escrow II
Ratings B/B3
Amount $1 billion
Issue senior (144A)
Coupon 5.375%
Price 100
Yield 5.375%
Spread T+324
Maturity Aug. 15, 2022
Call nc3
Trade July 29, 2014
Settle Aug. 12, 2014 (T+10)
Bookrunners Citi/BAML/MS/Barc/GS/Jeff/JPM
Price talk 5.375% area
Notes Upsized by $400 million
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Fridson: Cr-a-a-a-ck! Volatility returns to high-yield bond market

high yield bond volatility

Amid large cash outflows and widening spreads, volatility has returned to the U.S. high yield bond market, says LCD’s Martin Fridson:

For a few months, high-yield investors almost forgot what volatility looked like. In response to similar trends in a variety of markets, dealers complained that moribund prices were killing their trading profits. June began to solve those so-called problems; July reacquainted everybody with downside volatility …

The chart shows the difference between the largest and smallest daily option-adjusted spread (OAS) on the BofA Merrill Lynch US High Yield Index for each month of 2014. From a peak of 50 bps in February, the OAS range dropped steadily to 13 bps in May, the equivalent of a barely detectable pulse. Daily variability of the high-yield risk premium doubled to 26 bps in June and rose further to 36 bps in July, nearly matching January’s 39 bps.

This analysis is taken from Marty’s weekly commentary for LCD, available to subscribers. In it he also analyzes the influences on high yield volatility, the myth of deal attenuation of market drops, and whether the increased volatility of late implies a broad market retreat (spoiler: not necessarily).

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Bankruptcy: James River Coal auction delayed yet again, now set for Aug. 4

james river logo

James River Coal Co. has postponed the auction of its assets once again, this time to Aug. 4, according to a notice filed Friday with the bankruptcy court in Richmond, Va.

This is the third delay of the auction. The auction had initially been set for July 8, according to the bidding procedures approved by the bankruptcy court, but was previously postponed to, first, July 21, and then a second time to July 28.

As with the previous delays, the notice didn’t provide a reason for the postponement. And the company again stated it made the decision to delay the auction and sale hearing “in consultation with” the unsecured creditors’ committee appointed in the case and its DIP lender.

As reported, the bankruptcy court on July 10 extended the exclusive period during which only the company could file a reorganization plan through Nov. 13, and extended the corresponding period for the company to solicit acceptances to a plan through Jan. 12, 2015.

As also reported, the company said in its motion seeking the exclusivity extension filed last month that it had “received various preliminary indications of interest from potential strategic and financial bidders and are continuing to make progress towards their goal of consummating a value-maximizing restructuring transaction in the near-term.”

Under the company’s bidding procedures, indications of interest were due by May 22 and bids were due by June 30. – Alan Zimmerman

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GSE Environmental nets confirmation of reorganization plan

GSE logo

The bankruptcy court overseeing the Chapter 11 proceedings of GSE Environmental today confirmed the company’s proposed bankruptcy plan, according to a court order filed on the court docket.

As reported, the bankruptcy court approved the disclosure statement on June 11. As also reported, the three classes of impaired creditors entitled to vote on the company’s proposed plan overwhelmingly voted to accept the plan (see “GSE Environmental creditors vote overwhelmingly for proposed plan,” LCD, July 23, 2014).

GSE filed for Chapter 11 on May 5 in Wilmington, Del., with a pre-arranged plan calling for the exchange of about $173.4 million of first-lien credit claims for 100% of the equity in the reorganized company. In addition, the plan, as confirmed, provides for up to $1.35 million in cash to pay general unsecured claims, which are estimated at about $1 million (excluding about $40 million of first-lien deficiency claims, which are being waived due to acceptance of the plan by holders of the GUCs). – Alan Zimmerman


 

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Capsugel inks add-on to PIK-toggle notes (B-/Caa1) at 101.75; backs refi, sponsor dividend

Capsugel this afternoon completed an add-on to its 7%/7.75% holdco PIK-toggle notes due 2019, via joint bookrunners Citi, Barclays, Deutsche Bank, KKR, Mizuho, SMBC, and UBS. Terms were finalized at the tight end of talk. Proceeds, along with those from a €355 million covenant-lite term loan, will be used to fully refinance the drug-capsule manufacturer’s €325 million issue of 9.875% notes due 2019, and fund a sponsor dividend. Commitments on the loans were accelerated to 5:00 p.m. EDT today, from July 28. Price talk is E+300, with a 1% Euribor floor and a 99.75 offer price. The issuer is also seeking to boost its revolving credit facility to $175 million, from $150 million, and extend the maturity by three years, to 2019, with a springing maturity to its 2018 term debt. Capsugel makes hard capsules and drug-delivery systems.

Terms:

Issuer Capsugel
Ratings B-/Caa1
Amount $415 million
Issue senior holdco PIK-toggle add-on (144A-life)
Coupon 7% cash/7.75% PIK
Price 101.75
Yield 6.16%
Spread T+446
Maturity May 15, 2019
Call nc4mos @102
Trade July 24, 2014
Settle July 31, 2014 (T+5)
Bookrunners Citi/Barc/DB/KKR/MIZ/SMBC/UBS
Price talk 101.5 area

 


 

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Capsugel drives by with $415M add-on to PIK-toggle notes due 2019; backs refi, sponsor dividend

Capsugel has launched a $415 million add-on to its holdco PIK-toggle notes due 2019, which pay 7% cash/7.75% PIK. Citi, Barclays, Deutsche Bank, KKR, Mizuho, SMBC, and UBS are joint bookrunners.

Pricing is slated for today, and there is an investor call at 10:00 a.m. EDT.

Proceeds, along with those from a €355 million covenant-lite term loan, will be used to fully refinance the drug-capsule manufacturer’s €325 million issue of 9.875% notes due 2019, and fund a sponsor dividend.

Commitments on the loans were accelerated to 5:00 p.m. EDT today from an original deadline of July 28. Price talk is E+300, with a 1% Euribor floor and a 99.75 offer price. The seven-year loan will include six months of 101 soft call protection. At the proposed guidance, the loan will yield roughly 4.11% to maturity.

The original $465 million of PIK-toggle notes were issued last October and are callable in November 2014 at 102, and November 2015 at 101. The 144A-for-life offering is rated B-/Caa1. When the market first learned of the new add-on earlier this month, the notes traded down three quarters of a point to 102.5, trade data shows. The notes closed last night at 102, according to S&P Capital IQ.

The issuer is also seeking to boost its revolving credit facility to $175 million, from $150 million, and extend the maturity by three years, to 2019, with a springing maturity to its 2018 term debt.

For reference, the 9.875% notes due 2019 date back to KKR’s 2011 acquisition of the business from Pfizer. The company said it issued a redemption notice for the notes at 107.406 earlier this month, while holders will receive accrued and unpaid interest of €49.375 per €1,000 of the principal amount of the notes.

Capsugel makes hard capsules and drug-delivery systems. – Staff reports

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Bankruptcy: AgFeed disclosure statement hearing set for Aug. 21

The bankruptcy court overseeing the Chapter 11 proceedings of AgFeed USA has scheduled a hearing on the adequacy of the company’s proposed disclosure statement for Aug. 21, according to court filings in the case.

The company on July 22 also filed an amended reorganization plan and disclosure statement, slightly adjusting the process for funding recoveries for some of its creditor classes, but leaving the terms and recoveries of its previously filed reorganization plan fundamentally unchanged.

Under that plan, all of the company creditors will be paid in full, in cash. In addition, a Securities and Exchange Commission claim against the company will be settled, and a class action lawsuit against the company pending in federal court in Tennessee will be settled as well, with a portion of the proceeds of those settlements being contributed to a “plan fairness fund” that would fund distributions to holders of subordinated claims and, to the extent any proceeds remain, equity holders (see “AgFeed new amended liquidation plan has equity panel support,” LCD, May 12, 2014). – Alan Zimmerman

 

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Bankruptcy: Edwin Watts Golf Shops nets court confirmation of reorganization plan

The bankruptcy court overseeing the Chapter 11 proceedings of Edwin Watts Golf Shops yesterday confirmed the company’s wind-down reorganization plan, according to an order filed on the court docket.

As reported, EWGS filed for Chapter 11 protection on Nov. 4, 2013, after several years of “extremely sluggish consumer demand” in the golf industry. In December, EWGS won bankruptcy-court approval for the sale of its assets to a joint-venture between liquidator Hilco Merchant Resources and GWNE, an affiliate of Worldwide Golf Shops for a bid worth $40.8 million. Hilco conducted going-out-of-business sales at certain EWGS retail locations, while other locations were taken over by Worldwide, a former competitor.

The bankruptcy court approved the company’s disclosure statement on June 9, according to the court docket. Under the company’s plan, the lion’s share of the sale proceeds, amounting to about $40.5 million, were used at the sale closing to repay the company’s DIP facility, which had about $29.5 million outstanding (DIP funds were used to repay the company’s first lien debt and fund operations through the sale).

Remaining proceeds will be split, after payment of administrative and priority claims, between holders of secured subordinated notes, issued in the original principal amount of about $36.6 million, and holders of general unsecured claims, allowed in the amount of about $28 million, with $1.1 million anticipated to be available for GUCs, according to the company’s disclosure statement. – Alan Zimmerman

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Regency Energy places $700M 8-year high yield bonds to yield 5.125%

Regency Energy this afternoon completed its offering of senior notes via Barclays (B&D), BBVA, Comerica Securities, Deutsche Bank, Morgan Stanley, ABN Amro, BNP Paribas, Fifth Third Bank, Goldman Sachs and MUFG. Terms were finalized at the tight end of talk, along with a $200 million upsizing. Proceeds will be used for general corporate purposes, including the repayment of borrowings under the revolver. Dallas-based Regency is a master limited partnership engaged in gathering, treating, processing, compressing, and transporting natural gas and natural-gas liquids. It trades on the stock exchange under the ticker RGP and has a market cap of roughly $12.9 billion. Terms:

Issuer Regency Energy
Ratings BB/Ba3
Amount $700 million
Issue senior (SEC Reg.)
Coupon 5%
Price 99.158%
Yield 5.125%
Spread T+288
Maturity Oct. 1, 2022
Call nc-life; redeemable at par three months prior to maturity
Trade July 22, 2014
Settle July 25, 2014 (T+3)
Bookrunners Barc/BBVA/COMER/DB/MS/ABN/BNPP/FT/GS/MUFG
Co-Managers CAPONE
Price talk 5.25% area
Notes Notes are non-call life but redeemable at par three months prior to maturity.
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Bankruptcy: Overseas Shipholding nets court confirmation of reorganization plan; history, analysis

The bankruptcy court overseeing the Chapter 11 proceedings of Overseas Shipholding Group has confirmed the company’s reorganization plan, according to an order filed on the court docket.

The confirmation hearing was held today.

As reported, the bankruptcy court approved the adequacy of the company’s disclosure statement on May 27.

The company filed for Chapter 11 on Nov. 14, 2012, in Wilmington, Del., after a potential tax liability of more than $460 million came to light. The liability issue arose after the company determined that because certain U.S. subsidiaries of the company were co-obligors with certain of the company’s international units under its credit facilities, those international units could be deemed to have made some $3.2 billion in taxable distributions to the company, arising out of drawdowns on the facility. Among other things, the revelation led to a restatement of the company’s financials for 12 years, from 2000 through 2012, not to mention litigation, still pending in state court in New York, between the company and its former counsel, Proskauer Rose, over the legal advice and services that allegedly gave rise to the liability.

Ultimately, the company settled the IRS claim in December 2013 for $264.3 million (see “Overseas Shipholding says IRS claim reduced to $264.3M,” LCD, Dec. 20, 2013).

With that issue resolved, the company entered into a plan support agreement in February with lenders under its $1.5 billion credit facility, its senior tranche of debt thanks to guarantees by the company’s operating subsidiaries, under which lenders would receive nearly all of the equity in the reorganized company, except for $61.4 million of reorganized equity value that would be distributed to current equity holders via stock and warrants.

Shortly after that, however, the existence of two alternative reorganization proposals from separate shareholder groups that had formed in the case was disclosed.

Still, on March 7 the company filed its proposed reorganization plan reflecting the terms of its plan support pact, now supported by lenders holding 72% of the credit agreement claims (see “Overseas Shipholding files plan; disclosure-stmt hearing on April 11,” LCD, March 10, 2014).

On March 17, however, the bankruptcy court appointed an official equity committee in the case. The panel then made a single alternate shareholder reorganization proposal that, the panel said, would provide all of the company’s creditors with “full value or otherwise unimpaired treatment” and would also provide a recovery for equity holders “significantly greater” than that provided for in the company’s proposed reorganization plan.

On April 7, after the equity committee dropped its objection, the bankruptcy court approved the plan support agreement between the company and its lenders, with a May 7 disclosure statement hearing marked as the next hurdle for the company/lender plan.

Before that could occur, the company on May 2 filed an amended plan backed by the equity committee (see “Overseas Shipholding files amended plan; rights offering detailed,” LCD, May 5, 2014). This is the plan, following several amendments to tweak it over ensuing months, that was confirmed today.

Under the plan, lenders under the company’s $1.5 billion credit agreement will be repaid in cash.

The company’s unsecured and secured creditors, meanwhile, are to receive 100% of their claims. To that end, holders of the company’s 7.5% unsecured notes due in 2024 (with about $148.7 million outstanding as of the petition date) and 8.125% senior notes due in 2018 (with about $303 million outstanding as of the petition date) will be reinstated, following payment of outstanding interest, although holders of the 7.5% notes will have the additional option to receive “Election Notes” that contain terms similar to the 7.5% notes, but would mature in 2021 and also pay holders on the effective date an additional 1% of their principal amount of 7.5% notes in cash, an amount that was tacked on to settle an objection from an ad hoc panel of noteholders that the company’s reorganization plan would trigger provisions in the notes’ indenture mandating cash redemption at 101% of principal value.

All other claims, including the company’s 8.75% unsecured notes due 2013 (with about $66.1 million outstanding as of the petition date), the company’s secured facility from the Export-Import Bank of China, or CEXIM (with about $312 million outstanding as of the petition date), and the Danish Ship Finance secured facility (with about $267 million outstanding as of the petition date) will be paid in full in cash, with an additional 1% default rate tacked on to the CEXIM and DSF payments.

The plan will be funded via a $1.510 billion rights offering under which current equity holders would receive a subscription right to purchase 12 class A securities at $3 per security. The rights offering is backstopped by a group of 17 parties comprised of Alden Global Capital, BHR Capital, BlueCrest Capital, BlueMountain Capital, Brownstone Investment Group, Caspian Capital, Caxton International, Cerberus, Credit Value Partners, Cyrus Capital, Goldman Sachs, Knighthead Capital, Luxor Capital, Paulson & Co., Silver Point Capital, Stone Lion Capital, and Strategic Resources (see “Overseas Shipholding again amends plan, rights offer,” LCD, May 27, 2014). Equityholders that do not participate in the rights offering will be entitled to receive one share of a new class B security in the reorganized company for each current share of Overseas Shipholding held.

Also backing the plan is a $1.35 billion exit facility comprised of two five-year terms loans – a $625 million loan at OSG International (L+475, 1% LIBOR floor) and a $600 million loan at OSG Bulk Ships (L+425, 1% floor) – and a $50 million cash-flow revolver at OSG International and a $75 million asset-based RC at OSG Bulk Ships (see “Overseas Shipholding exit loans allocate, break above OIDs; terms,” LCD, July 7, 2014). – Alan Zimmerman