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AmeriGas Wraps $1.35B High Yield Bond Offering Backing Tender Offer

amerigas logoPropane-gas distributor AmeriGas placed a two-part offering late Monday at the middle of talk. The SEC-registered bonds were shopped via joint bookrunners Bank of America Merrill Lynch (lead), Citi, J.P. Morgan, and Wells Fargo Securities, and included six additional co-managers. Proceeds will be used to finance tenders offers for the company’s 6.25% notes due 2019, 6.75% notes due 2020, and 6.5% notes due 2021, and for general corporate purposes. Terms:

Issuer AmeriGas Partners
Ratings Ba3/BB
Amount $675 million
Issue senior notes (SEC reg.)
Coupon 5.875%
Price 100
Yield 5.875%
Spread T+420
Maturity Aug. 20, 2026
Call non-callable for life
Trade June 20, 2016
Settle June 27, 2016 (T+5)
Physical bookrunners
Joint bookrunners BAML/CITI/JPM/Wells Fargo
Co-managers Citizens/PNC/BB&T/BNY/Santander/TD Securities
Price talk 5.75–6%
Notes
Issuer AmeriGas Partners
Ratings Ba3/BB
Amount $675 million
Issue senior notes (SEC reg.)
Coupon 5.625%
Price 100
Yield 5.625%
Spread T+409
Maturity May 20, 2024
Call non-callable for life
Trade June 20, 2016
Settle June 27, 2016
Physical bookrunners
Joint bookrunners BAML/CITI/JPM/Wells Fargo
Co-managers Citizens/PNC/BB&T/BNY/Santander/TD Securities
Price talk 5.5–5.75%
Notes

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US Leveraged Loan, High Yield Bond Issuance Eases as Markets Eye Brexit, Fed

Leveraged finance issuance cooled considerably last week ahead of the Brexit vote in the U.K. and a Fed announcement in the U.S., and on the heels of a surge of activity in both the high yield bond and leveraged loan markets the previous week.

US leveraged loan high yield bond issuance

Issuance in the two segments totaled $15.1 billion last week, $9.9 billion in loans and $5.2 billion in bonds. That’s down significantly from the $30 billion the previous week ($17.9 billion/$12 billion), according to LCD, an offering of S&P Global Market Intelligence.

Year to date, U.S. leveraged loan issuance totals $203 billion, down from $218 billion at this point in 2015. There has been $117 billion in high yield issuance, down 34% from the $179 billion at this point last year.

Of note in the leveraged loan market, power concern Dynegy brought to market a $2 billion credit to refinance debt backing an ENGIE M&A deal, while business payment processing co. Wex approached the market for a $1.21 billion institutional loan backing the acquisition of Electronic Funds Source (there was a sizable revolving credit, too).

The highest-profile deal in the bond market last week: a $2.9 billion offering from Reynolds Group. That debt helps fund a cash tender offer. – Tim Cross

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Revlon Eyes $3B of Debt for Elizabeth Arden Acquisition

Revlon disclosed that it has entered into a commitment letter with Citigroup and Bank of America Merrill Lynch providing a $1.8 billion senior secured term loan, a $400 million asset-based revolver, and up to $400 million of a senior unsecured bridge loan in connection with the planned $870 million acquisition of Elizabeth Arden. Additionally, Revlon is seeking to privately place $400 million of senior unsecured notes.

Elizabeth-Arden-LogoThe debt financing will be used to fund the acquisition as well as refinance Revlon’s and Elizabeth Arden’s debt. As of March 31, 2016, Revlon had $647.7 million outstanding under its B term loan due 2017 (L+250, 0.75% LIBOR floor) and $649.5 million outstanding under its B term loan due 2019 (L+300, 1% floor).

In the secondary, Revlon’s loans have been up around par. Holders of Revlon 5.75% notes due 2021 have held on to the debt, trade data show. The paper last changed hands at par on June 10, and trading on the notes was light leading up to the announcement. Elizabeth Arden’s 7.375% notes due 2021 saw greater gains. The paper, also not an active mover in the secondary market, changed hands at 102.25 on Friday morning, down slightly from the 102.75 price on Thursday afternoon. Prior to this, however, the notes last sold on May 26 at 72 and a quarter, trade data show.

Revlon’s existing 5.75% notes, which totaled $492.7 million as of March 31, though, will remain outstanding.

Elizabeth Arden, meanwhile, as of March 31, had $42.5 million in borrowings and $3.4 million in letters of credit outstanding under its $300 million revolver due December 2019, $25 million in outstanding borrowings under its second-lien revolver, and $350 million outstanding under its 7.375% senior notes due March 2021.

Revlon expects pro forma leverage will be roughly 4.2x net by the end of 2016.

Revlon and Elizabeth Arden yesterday announced that they have signed an agreement under which Revlon will acquire the outstanding shares of Elizabeth Arden for $14 per share. The acquisition is expected to close by the end of 2016.

New York–based Revlon sells beauty and personal care products. The company’s shares trade on the NYSE under the ticker REV. Elizabeth Arden, which is based in Miramar, Fla., also sells beauty products. Elizabeth Arden’s shares trade on the Nasdaq under the ticker RDEN. Elizabeth Arden is rated CCC+/Caa1. — Richard Kellerhals/Jakema Lewis

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Bankruptcy: Energy Future Holdings’ TCEH Nets Disclosure Statement OK

The bankruptcy court overseeing the Chapter 11 proceedings of Energy Future Holdings today approved the adequacy of unit Texas Competitive Electric Holding’s proposed disclosure statement, according to a court order filed in the case.

The hearing on the disclosure statement was held yesterday in Wilmington, Del.

The approval clears the company to solicit creditor votes for the proposed reorganization plan for the unit.

The voting deadline is Aug. 3, and the hearing to confirm the proposed reorganization plan is scheduled for Aug. 17.

As reported, after the company’s proposed sale of its regulated utility, Oncor, fell through in late April as a result of unfavorable regulatory and tax rulings from the Texas Public Utility Commission, the company filed new and amended reorganization plans for its so-called E-side (comprised of parent EFH and intermediate holding company Energy Future Intermediate Holdings, which directly holds the company’s Oncor stake) and T-side (the company’s unregulated power generation and retail operations, or TCEH) units.

As also reported, the new reorganization plan for TCEH continued to provide for substantially the same creditor recoveries and for the spin-off of TCEH, although the “sequencing” of the company’s reorganization, which previously had contemplated the TCEH spin-off and the Oncor sale occurring simultaneously, was changed to provide for the TCEH spin-off and reorganization separately from, and prior to, the completion of the reorganization on the E-side of the company.

A hearing on approving the disclosure statement for the company’s E-side is slated to begin July 21, with a reorganization plan confirmation hearing to begin Sept. 26. — Alan Zimmerman

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Investors Retreat from US High Yield Bond Funds, Taking $1.8B with them

U.S. high yield bond funds recorded an outflow of $1.8 billion in the week ended June 15, according to the weekly reporters only to Lipper. This is the largest redemption in five weeks, and it wipes out the inflow of $892 million from the two prior weeks.

US high yield bond fund flows

The influence of ETFs was heavy, at 87% of the sum. In contrast, last week’s inflow of $748 million was just 29% related to ETFs.

Whatever that might say about fast money, hedging strategies, and other market-timing efforts, this week’s net infusion drags the trailing four-week average down into the red, at negative $368 million, from positive $366 million last week.

The year-to-date total infusion contracts a bit to $5.6 billion, with 8% ETF-related. Last year at this point, after 24 weeks, the $3.6 billion net inflow was inverse 10% ETF-related.

The change due to market conditions this past week was negative $2 billion, or roughly 1% against total assets of $190.3 billion at the end of the observation period. The ETFs account for about 20% of the total, at $37.3 billion.

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Distressed Debt: Key Energy Cut to CC on Proposed Restructuring, Likely Ch.11Fiiling

S&P Global Ratings has cut Key Energy Services to CC, from CCC+, after the oilfield services company today announced that it has entered into confidential agreements with certain holders of its 6.75% senior notes due 2021 and certain lenders of the term loans regarding a proposed financial restructuring.

The outlook is negative, reflecting the high likelihood that Key will seek to restructure its debt through a prepackaged Chapter 11 proceeding once it comes to terms with creditors, S&P said in its report.

Key Energy said in an 8-K filing that the discussions with its creditors remain ongoing, with both sides presenting proposals.

Based on the disclosures filed, the creditors’ proposal contemplates, among other things, an exchange of all outstanding notes for 100% of the equity of the reorganized Key Energy, subject to dilution as a result of a $75 million rights offering, the proceeds of which would be used together with other available funds to repay $63 million in aggregate principal and interest of the term loans at par, with the remaining $250 million principal balance of the term loans to remain in place, subject to certain modifications agreed upon among the creditors. Also, under the creditors’ proposal, vendors and other general unsecured creditors would be paid in full. Further, eligible Key Energy shareholders would receive the ratable right to acquire up to 8% of the equity of the reorganized company pursuant to the rights offering and ineligible shareholders would be entitled to a ratable share of a $100,000 payment.

Key’s counter proposal addresses, among other things, calls for existing shareholders to receive 5% of the reorganized equity.

Total senior debt at the company was roughly $988 million as of March 31, including $675 million of 6.75% senior notes due 2021 and $312 million outstanding under its term loan due 2020 (L+925, 1.00% LIBOR floor.)

Houston–based Key Energy Services operates as an onshore rig-based well servicing contractor in the U.S. and internationally. The company trades on the NYSE under the ticker KEG and has a market capitalization of approximately $47.2 million. —Rachelle Kakouris

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Toys R Us High Yield Bonds, Leveraged Loans Soar on Word of Near-Term Refinancing

High yield bond and leveraged loan debt backing Toys ‘R’ Us jumped in the trading market this morning after the company announced plans to refinance the majority of its near-term unsecured debt maturities, of which $850 million is scheduled to come due in 2017 and 2018.

The targeted $448 million issue of 10.375% holdco notes due 2017 climbed more than eight points to 101, its highest level since Sept. 2013, trade data show. The company’s other pre-fallen-angel targeted notes, the $402 million issue of 7.375% holdco notes due 2018, changed hands in small clips around an 84 context.

Notably absent from the exchange, the $722 million 8.5% secured propco II notes due 2017 are up around two points on the news, trading in a 98–99 range, trade data show.

Sources speculate that the company could refinance those notes in the public market given J.C. Penny’s recent refinancing of its term loan facility.

On the derivatives front, the cost of a five-year credit default swap (CDS) for the issuer cratered by roughly 24%, to a 15.5/18.5-points-upfront market quote, according to Markit. That’s essentially $550,000 cheaper of an upfront payment, at $1.7 million at the mid-point, in addition to the $500,000 annual payment, to protect $10 million of Toys ‘R’ Us bonds. Moreover, it’s now about $3.1 million less expensive than records wides around 48 points upfront in December.

Over in the loan market, the Toys ‘R’ Us covenant-lite B-4 term loan due 2020 (L+875, 1% LIBOR floor) popped up to an 87.5/89.5 market, rising roughly three points on the news, sources said.

The company said it intends to refinance up to approximately 89% of the 2017 and 2018 holdco notes with new debt maturing in five years via an exchange offer, of which 50.2% have so far tendered. In addition, a third party has also agreed to purchase up to $50 million of new debt, filings show.

As per the terms of the offer, the holders of all the outstanding $402 million holdco notes due 2018, and up to $400 million of the $448 million holdco notes due 2017, will have the option to exchange for new 12.00% senior secured notes due 2021 issued through a new subsidiary “ExchangeCo,” with the maximum amount of new secured notes to be issued at $525 million; in addition to $50 million of privately placed notes.

Holders of the 2018 holdco notes will receive 90% of the new notes with no cash component for each $1000 tendered by the early tender date

Holders of the 2017 holdco notes have a “notes only option” to receive par payment in the new secured ExchangeCo notes if tendered by the early tender deadline, or a “notes plus cash” option for either 50% in cash with the balance paid in new secured notes at par if the 2017 notes participation level reaches 74.9% or above. Other scenarios are an option for 52.5% in cash and the balance paid in new secured notes at par if participation is within a range of 75–84.9%; 55% in cash with balance paid in new notes at 85% participation; or a pro rata share of $150 million in cash with the balance paid in new notes for participation above 85%.

Consideration for tenders after the early tender date will be 85% in the case of the 2018 notes and 95% in the case of the 2017 notes.

The new notes issued under the ExchangeCo entity will hold equity interests in the entities from the company’s Europe, Japan and Australia operations, as well as Wayne Real Estate Parent Company and the company’s 70% interest in Toys Asia JV.

Furthermore, the new secured notes will be guaranteed by the company and certain of the obligors under European ABL, and secured by a first-lien on all equity interests of ExchangeCo a second-lien on the equity interests of the collateral agent under the European ABL Facility.

The company will also assign the new ExchangeCo with up to $100 million of cash contributions to capitalize the new entity, to be funded by up to approximately $28 million from the Asia JV and up to approximately $24 million from Propco I, with the remainder funded by internal sources of cash.

Finally, the company also offered preliminary first-quarter results, estimating same-store sales growth of 0.9% and adjusted EBITDA of roughly $79 million, up 13% from the first quarter 2015.

Cash on balance sheet was roughly $680 million as of Jan. 30.

The $1.025 billion B-4 term loan was placed in June 2014 via Goldman Sachs, Bank of America Merrill Lynch, Wells Fargo, J.P. Morgan, Citigroup, and Deutsche Bank in part to repay the company’s 2016 debt maturities. The deal was seen as something of a “self-help” exercise by the market. Bank of America Merrill Lynch is administrative agent.

S&P Global ratings today affirmed its B– corporate credit rating on the issuer, while its corporate rating at Moody’s and Fitch remains B3 and CCC respectively.

Toys ‘R’ Us is working with Bank of America Merrill Lynch, Goldman Sachs, and Lazard. As reported, the company announced it had retained the group in February “to assist in the refinancing of its capital structure.”

Wayne, N.J.–based Toys ‘R’ Us is controlled by Bain Capital, KKR, and Vornado Realty Trust. – Rachelle Kakouris

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With Stronger High Yield Bond Mart, Gogo Decides it Will Take that $500M After All

Airplane wi-fi provider Gogo today re-launched to market after two weeks on the sidelines a $500 million issue of six-year (non-call three) secured notes as part of a loan-repayment effort.

The high yield bond deal returns to market following cancellation of the original trade ahead of settlement and the unwinding of all trades resulting from a large deal proposal from a major airline customer. There has also been a steady grind higher in the secondary high-yield market since that time.

Indeed, the Gogo print was 12% after a $25 million upsize, to $525 million, and it traded up to roughly 102 in the secondary market, offering about 11.5%. With that, the better market, and the potential business deal, economics for Gogo will no doubt be better this time around.

As for the market over the two-week span, the B tier of the S&P U.S. Issued High Yield Corporate Bond Index has cinched inward to 6.24% at market close yesterday, from 6.38% when the Gogo deal was “DK’ed” two weeks ago, while the broad market metric contracted more, to an average of 6.8% at close yesterday, from 7.18% two weeks ago.

As with the first deal, Morgan Stanley leads the bookrunner trio, with J.P. Morgan and Bank of America, and co-managers include Evercore and UBS. Proceeds from the 144A-for-life deal will be used to pay down all of the company’s term debt, which was roughly $288 million at the end of the first quarter, and additional proceeds will be used to support working capital and for general corporate purposes, including the roll-out of next-generation product and technology, according to a company statement.

An investor call is scheduled for 11 a.m. EDT, and pricing is expected this afternoon, according to sources.

First-time issuer ratings of B–/B2 were assigned to the original transaction, with negative and stable outlooks, respectively. S&P Global Ratings also assigned a 3H recovery rating to the deal, indicating an expectation for the higher end of meaningful recovery (60–70%) in the event of default, and said that the negative outlook “reflects risks concerning international growth plans” and an “expectation that ongoing capital expenditures from expansion activity will diminish the company’s current cash balance, possibly resulting in the need for external financing in two to three years.”

Gogo is Nasdaq-listed, but recall that TCP Capital expanded its investment in the company a year ago through the addition of a $15 million senior secured loan in the first quarter. See “TCP Capital adds more first-lien debt to Gogo in Q1,” LCD News, May 26, 2015. TCP Capital is a BDC that invests in middle market companies.

Chicago-based Gogo provides communications services to commercial and business aviation through strategic alliances with satellite operators, and it’s currently carrying an approximate $820 million market capitalization. Trailing 12-month net revenues of around $527 million boiled down to roughly $49 million in EBITDA, according to S&P Global Market Intelligence.

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In Market for $750M, Out with $2B: DISH Networks Prices High Yield Offering

DISH Network this afternoon completed an offering of senior notes via sole underwriter Deutsche Bank and at the typical issuer entity DISH DBS. Terms on the BB–/Ba3/BB– transaction were finalized at the middle of guidance after a large upsizing to $2 billion, from $750 million, according to sources. Proceeds from the prolific issuer’s return to market after an approximately 18-month hiatus will be used for “strategic transactions, which may include wireless and spectrum-related strategic transactions,” according to a company statement. Terms:

Issuer DISH DBS
Ratings BB–/Ba3/BB–
Amount $2 billion
Issue senior notes (144A)
Coupon 7.75%
Price 100
Yield 7.75%
Spread T+605
Maturity July 1, 2016
Call nc-life
Trade June 8, 2016
Settle June 13, 2016 (T+3)
Joint bookrunners DB
Price talk 7.75% area
Notes upsized by $1.25 billion

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Dell Wraps $3.25B Bond Offering Backing EMC Deal Inside of Price Talk

The Dell/EMC merger financing via issuer Diamond Finance was completed this afternoon via a J.P. Morgan-steered bookrunner octet. Terms on the BB/Ba2/BB+ transaction were finalized 25 bps inside of formal price guidance and more than that inside the early market whispers, according to sources. Nonetheless, an early read from the gray market points to at least a one-point gain on the break for each series. Take note of a first call premium of just par plus 50% coupon on the five-year tranche despite the short schedule, as well as a covenant that links the change-of-control put provision to a takeover event tied to credit-rating downgrades, according to sources. Moreover, there is a slightly larger-than-typical, but increasingly popular, 40% equity clawback option on each tranche during the call-protected period. Proceeds from the 144A-for-life offering will be used to help fund the acquisition of EMC, creating the world’s largest privately controlled technology company, according to Dell. Terms:

Issuer Dell/Diamond 1 & 2 Finance
Ratings BB/Ba2/BB+
Amount $1.625 billion
Issue senior notes (144A-life)
Coupon 5.875%
Price 100
Yield 5.875%
Spread T+465
Maturity June 15, 2021
Call nc2 @ par+50% coupon
Trade June 8, 2016
Settle June 22, 2016 (T+10)
Joint bookrunners JPM/CS/BAML/Barc/Citi/GS/DB/RBC
Co-managers ANZ, BBVA, CMZ, FTS, HSBC, Loop, MUFG, MIZ, NOM, SANT, SG, SC
Price talk 6.25% area (launched at 5.875%)
Notes first call par+50% coupon; w/ two-year equity clawback option for up to 40% of the issue @105.875.
Issuer Dell/Diamond 1 & 2 Finance
Ratings BB/Ba2/BB+
Amount $1.625 billion
Issue senior notes (144A-life)
Coupon 7.125%
Price 100
Yield 7.125%
Spread T+555
Maturity June 15, 2024
Call nc3 @ par+75% coupon
Trade June 8, 2016
Settle June 22, 2016 (T+10)
Joint bookrunners JPM/CS/BAML/Barc/Citi/GS/DB/RBC
Co-managers ANZ, BBVA, CMZ, FTS, HSBC, Loop, MUFG, MIZ, NOM, SANT, SG, SC
Price talk +125 bps to 5-year (launched at 7.125%)
Notes first call par+75% coupon; w/ three-year equity clawback option for up to 40% of the issue @107.125.