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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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American Tire Distributors $805M high yield offering prices to yield 10.25%

American Tire Distributors this afternoon completed its offering of subordinated notes via joint bookrunners Bank of America, Goldman Sachs, Wells Fargo, Deutsche Bank, J.P. Morgan, SunTrust Robinson Humphrey, and UBS. Terms were finalized at 10.25% area, which was wider than initial whispers in the 9% area. Leads made a number of covenant changes as well. Note the deal features an issuer-friendly first call premium at par plus 50% coupon despite the short schedule and an equity claw for up to 40% at par plus the coupon for the first three years.

The notes will be used to refinance the existing 11.5% subordinated notes due 2018 and to fund a distribution to ATD Holdings to enable its parent to fund a cash dividend or distribution to certain existing security holders. An initial $200 million of the 11.5% subordinated notes was sold privately in May 2010 following a fully syndicated offering of secured notes that backed a sponsor-to-sponsor sale of the company to TPG Capital from Investcorp, Berkshire Partners, and Greenbriar Equity Group. Another $225 million was placed in January 2014 to support an acquisition of Hercules Tire & Rubber.

The unrated debt carries a unique call structure, with the current call of 102 declining to par in June. Terms:

Issuer American Tire Distributors / ATD Finance
Ratings CCC+/Caa1
Amount $805 million
Issue subordinated notes (144A-life)
Coupon 10.25%
Price 100
Yield 10.25%
Spread T+846
Maturity March 1, 2022
Call nc3 @ par+50% coupon
Trade Feb. 10, 2015
Settle Feb. 25, 2015 (t+10)
Jt. Bookrunners BAML/GS/WFS/DB/JPM/STRH/UBS
Co-Managers RBC, MS, Mizuho, RBS, TPG
Price talk 10.25% area
Notes w/ three-year equity clawback option for up to 40% of issue @110.25; covenant package reworked; first call premium par+50% coupon.
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Bankruptcy: Endeavour seeks time to rework reorg plan in wake of oil price declines

Endeavour International asked the bankruptcy court overseeing its Chapter 11 proceedings to extend the exclusive period during which only the company could file a reorganization plan by 120 days, through June 8, to give it additional time to reach negotiate modifications to its proposed reorganization plan in light of declining oil prices.

The company also asked the bankruptcy court to extend its corresponding exclusive period to solicit votes to a plan through Aug. 6. The initial exclusivity periods to file and to solicit votes to a plan are set to expire on Feb. 9 and April 8, respectively.

As reported, the company early last week adjourned its plan confirmation to a “date to be determined,” saying, “As a result of the recent decline in oil and gas prices and the implications of such decline on the debtors’ proposed plan, the debtors have engaged in discussions with certain of the consenting creditors [to the company’s restructuring-support agreement] and their advisors and the advisors to the official committee of unsecured creditors concerning the impact of such price declines on the proposed plan and potential amendments to the restructuring support agreement and the proposed plan.” (See “Endeavour delays plan hearing, mulls changes due to oil price drop,” LCD, Feb. 4, 2015).

In a motion seeking to extend exclusivity filed several days later on Feb. 6, the company said, “Although these discussions are only in the preliminary stages, the debtors are encouraged by the parties’ willingness to engage on key issues,” adding, “Extension of the exclusive periods will further this cooperative dialogue.”

According to the motion, the company’s reorganization plan “was developed in an industry environment where oil prices had remained relatively stable for the past four years,” noting that between early 2011 and shortly before the company filed for Chapter 11 in October of 2014, the spot price for Brent Crude and fluctuated between $100-115 a barrel. At the time the company and its consenting creditors executed the RSA, the company said, the spot price was at $90 a barrel.

Following a recent rally, spot prices for Brent Crude were at $51.74 on Feb. 2, according to the U.S. Department of Energy, reaching as low as $46.09 on Jan. 22 – prices not seen since the depth of the financial crisis in early 2009 and, before that, in 2005.

A hearing is scheduled in Wilmington, Del., on March 11. Under Delaware bankruptcy court rules, exclusivity is automatically extended until the court issues a ruling. – Alan Zimmerman

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Official unsecured creditor, second-lien panels named in Caesars Ch. 11

The U.S. Trustee for the bankruptcy court in Chicago has appointed two official committees in the Chapter 11 proceedings of Caesars Entertainment Operating Co. (CEOC).

As required by law, Patrick Layng, the U.S. Trustee, named an official unsecured creditors’ committee, but he also opted to appoint an official committee of second-lien noteholders.

As reported, second-lien lenders generally do not support the proposed restructuring plan the company has agreed to with first-lien noteholders, which would provide second-lien holders with a minimal recovery.

As also reported, it was three second-lien lenders – two of which, Tannenbaum and Oaktree, are on the new official committee – that sought to force CEOC into Chapter 11 in Delaware with an involuntary filing (see “Caesars 2nd-lien holders seek involuntary Chapter 11 for CEOC,” LCD, Jan. 12, 2015).

The official committee status means, among other things, that the company will be paying the fees and expenses of a group of creditors opposed to the company’s proposed reorganization plan.

The members of the second-lien committee, contacts, and e-mail information (phone numbers were not provided in the filing) are as follows:

  • Wilmington Savings Fund Society, Wilmington, DE (Patrick Helay — phealy@wsfsbank.com)
  • BOKF, N.A., Tulsa, OK (George Kubin — gkubin@csbt.com)
  • Delaware Trust Co., Wilmington, DE (Sandra Horwitz — shorwitz@delawaretrust.com)
  • Tennenbaum Opportunities Partner V, Santa Monica, CA (David Hollander — David.Hollander@tennenbaum.com)
  • Centerbridge Capital Partners Master LP, New York, NY (Vivek Melwani — VMelwani@centerbridge.com)
  • Palomino Fund, Short Hills, NJ (James Bolin — j.bolin@amlp.com)
  • Oaktree FF Investment Fund, Los Angeles, CA (Kenneth Liang — KLiang@oaktreecapital.com)

The unsecured creditors’ committee, meanwhile, has the following members:

  • International Game Technology, Reno, NV (Linda Rosenthal — Linda.Rosenthal@IGT.com)
  • US Foods Inc., Rosemont, IL (Dorothy Capers — dorothy.capers@usfoods.com)
  • Law Debenture Trust Co. of NY, New York, NY (James Heaney — james.heaney@lawdeb.com)
  • MeehanCombs Global Credit Opportunities Master fund LP, Stamford, CT (Matt Meehan — matt@meehancombs.com)
  • Wilmington Trust, Wilmington, DE (Geoffrey Lewis — glewis@wilmingtontrust.com)
  • Hilton Worldwide, McLean, VA (Charles Corbin – charles.corbin@hilton.com — Note: Corbin is the interim chairperson of the panel)
  • Board of Levee Commissioners for the Yazoo Mississippi Delta, Greenwood, MS (Willie Gregory — wgregory@southlandmanagement.com)
  • Earl of Sandwich (Atlantic City) LLC, Orlando, FL (Thomas Avallone — TAvallone@planethollywoodintl.com)
  • PepsiCo, Winton-Salem, NC (Michael Bevilacqua — Mike.bevilacqua@pepsico.com)

Alan Zimmerman

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Dollar Tree inks $3.25B high yield bond offering at tight end of price talk

Dollar Tree this afternoon completed its two-part senior notes offering backing its acquisition of rival Family Dollar, via J.P. Morgan, along with joint books Wells Fargo, Bank of America, RBC, and U.S. Bancorp. Terms were finalized at the tight end of guidance, and tighter than early market chatter, but a read from the gray market points to enduring demand, with some quotes up over two points. Leads added the five-year (non-call two) tranche this week after downsizing the concurrent B term loan and upsizing the A term loan. Family Dollar shareholders approved the transaction last month, and closing is expected in March. The combination of Dollar Tree and Family Dollar would create the largest discount retailer in North America by number of stores. Terms:

Issuer Family Tree Escrow
Ratings B+/Ba3
Amount $2.5 billion
Issue senior (144A)
Coupon 5.75%
Price 100
Yield 5.75%
Spread T+391
Maturity March 1, 2023
Call nc-3 @ par +75% coupon
Trade Feb. 6, 2015
Settle Feb. 23, 2015 (T+10)
Bookrunners JPM/WFS/BAML/RBC/USB
Price talk 5.75-6%
Notes
Issuer Dollar Tree
Ratings B+/Ba3
Amount $750 million
Issue senior (144A)
Coupon 5.25%
Price 100
Yield 5.25%
Spread T+391
Maturity March 1, 2020
Call nc-2
Trade Feb. 6, 2015
Settle Feb. 23, 2015 (T+10)
Bookrunners JPM/WFS/BAML/RBC/USB
Price talk 5.375% area
Notes Five-year tranche added after initial launch.

 

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Speculative-grade default rate rises to 13-month high, says S&P GFIR

The U.S. trailing-12-month speculative-grade corporate default rate is estimated to have increased to 1.8% in January, from 1.5% in December, according to S&P Global Fixed Income Research (S&P GFIR). Domestically, Verso Paper and two confidential issuers defaulted during the month.

The current observation is at its highest level in 13 months, or since it was at 2.2% in December 2013.

The S&P GFIR forecast for the U.S. speculative-grade default rate is for a modest increase, to 2.4% by September 2015.

“Standard & Poor’s Ratings Services upgraded 17 companies with total debt of about $67 billion, and downgraded 27 companies with total debt of about $82 billion in January,” said Diane Vazza, head of S&P GFIR.

Today’s report, titled “The U.S. Speculative-Grade Corporate Default Rate Rose To 1.8% In January,” is available to subscribers of premium S&P GFIR content at the S&P Global Credit Portal.

For more information or data inquiries, please call S&P Client Services at (877) 772-5436.

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Hi-grade: Apple prints 3rd blockbuster bond deal – $6.5B – in as many years

Apple today placed $6.5 billion offering of SEC-registered senior notes, in an upsizing from an initially proposed $5 billion amount, as the company continues to buy back its shares at an aggressive pace. It inked the issues at L+25 for $500 million of five-year FRNs, T+42 for $1.25 billion of same-dated 1.55% fixed-rate notes, T+67 for $1.25 billion of 2.15% seven-year notes, T+85 for $1.5 billion of 2.5% 10-year notes, and T+125 for $2 billion of 3.45% 30-year bonds.

Traders at the time of pricing reported initial grey-market indications 2-5 bps through reoffer levels.

The deal is the largest this year and the biggest since Medtronic on Dec. 1 last year placed a $17 billion, M&A-driven offering. Over the last three years, there have been only 18 larger offerings, including two by Apple that rank among the six largest since the financial crisis, LCD data show.

Spreads were set north of previous blockbuster offerings over the last two Aprils. In April 2014, the company inked a $12 billion offering that included five-year floating-rate notes at L+30; 2.1% five-year fixed-rate notes at T+37.5; 2.85% seven-year notes at T+60; 3.45% 10-year notes at T+77; and 4.45% 30-year bonds at T+100.

In April 2013, Apple inked $17 billion of notes as it embarked on its shareholder-return program, printing issues including five-year notes at L+25 for FRNs and T+40 for a 1% issue; 2.4% 10-year notes at T+75; and 3.85% 30-year bonds at T+100.

For reference, the 2.1% notes due May 2019 changed hands on Friday at date-adjusted levels in the mid-T+30s, while the 2.85% seven-year issue traded in the mid-T+50s, the 3.45% 10-year issue traded in the low T+70s, and the 4.45% 30-year issue traded near T+120, trade data show.

The company has established among the lowest funding costs on record for shorter-dated issues since 2013, including two of the five tightest initial reoffer spreads ever recorded for three-year issues. But the company’s new-issue spread curve tended to be steeper than some similarly rated companies in recent years, including Wal-Mart and Exxon Mobil.

Apple bought back roughly $45 billion of its shares over the 12 months through Dec. 27, 2014, the most in its history, according to S&P Capital IQ. It bought back $26 billion over the year-earlier period, after repurchasing less than $2 billion in 2012.

However, the company still generated more in operating cash flow ($70.8 billion) over the 12 months through Dec. 27 last year than the combined $67 billion sum of capital spending ($10.8 billion), share buybacks, and common dividends ($11.2 billion).

Ratings agencies have maintained stable outlooks on the double-B profile through the ramp in shareholder returns.

“We view Apple’s financial risk profile as ‘minimal,’ reflecting operating margins and return on capital in excess of 30% in recent years. We expect Apple to maintain conservative financial policies, including maintenance of a very significant surplus cash position,” S&P stated in ratings rationale published in December.

“Our rating and outlook incorporate the company’s substantial share repurchases and intention to increase dividends on an annual basis. Although total shareholder returns may moderately exceed discretionary cash flow on an annual basis, robust overall cash generation affords the company the flexibility to return large amounts of cash to shareholders without detracting from the overall credit quality. Furthermore, Apple’s substantial net cash position relative to funded debt provides considerable debt capacity within the rating,” S&P analysts added. The agency today reiterated those views in rating the new bond offering.

Of note, Apple last year incurred its first significant short-term borrowings since the mid-1990s, reporting a record-high $6.3 billion as of Sept. 27, according to S&P Capital IQ.   

“Based on estimates of the decline in domestic cash, Moody’s estimated that Apple could borrow an incremental $25 billion to fund the share purchases, which should be accommodated within the expectations of the Aa1 long-term rating,” Moody’s analysts wrote last April.

“However, if debt going forward is increased meaningfully more than the $25 billion now expected by Moody’s, that would be negative and could pressure the rating down,” Moody’s added. Terms:

Issuer Apple Inc.
Ratings AA+/Aa1
Amount $500 million
Issue SEC-registered senior notes
Coupon L+25
Price 100
Maturity Feb. 7, 2020
Call nc-life
Px Talk guidance and IPT: LIBOR equivalent of fixed-rate pricing level
Issuer Apple Inc.
Ratings AA+/Aa1
Amount $1.25 billion
Issue SEC-registered senior notes
Coupon 1.55%
Price 99.78
Yield 1.596%
Spread T+42
Maturity Feb. 7, 2020
Call make-whole T+10
Px Talk guidance T+45 area (+/- 3 bps); IPT T+55 area
Issuer Apple Inc.
Ratings AA+/Aa1
Amount $1.25 billion
Issue SEC-registered senior notes
Coupon 2.15%
Price 99.981
Yield 2.153%
Spread T+67
Maturity Feb. 9, 2022
Call make-whole T+10
Px Talk guidance T+70 area (+/- 3 bps); IPT T+80 area
Issuer Apple Inc.
Ratings AA+/Aa1
Amount $1.5 billion
Issue SEC-registered senior notes
Coupon 2.50%
Price 99.859
Yield 2.516%
Spread T+85
Maturity Feb. 9, 2025
Call make-whole T+15
Px Talk guidance T+85 area (+/- 3 bps); IPT T+95 area
Issuer Apple Inc.
Ratings AA+/Aa1
Amount $2 billion
Issue SEC-registered senior notes
Coupon 3.45%
Price 99.113
Yield 3.498%
Spread T+125
Maturity Feb. 9, 2045
Call make-whole T+20
Trade Feb. 9, 2015
Settle Feb. 9, 2015
Books DB/GS
Px Talk guidance T+125-128; IPT T+137.5 area
Notes proceeds for general corporate purposes, including share repurchases and dividends, working capital, capital spending, and debt repayment

 


 

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US High Yield Distress Ratio Opens 2015 at Elevated 13.4%

The U.S. corporate bond distress ratio opened the new year at an elevated 13.4% as of Jan. 14, according to S&P’s Global Fixed Income Research Group. Distress ratio credits are compiled as those trading at T+1,000 or greater.

The distress ratio is a hair lower than 13.8% in December, but represents a big expansion from 8.1% in November, 5% in September, and a recent low of 4.7% in June, according to S&P GFIR reports.

“Recent drops in oil prices have impacted the profitability of oil and gas companies (particularly the exploration and production segment), whose spreads have widened considerably, and that spread expansion had a spillover effect to the broader speculative-grade spectrum as a whole,” said Diane Vazza, head of S&P GFIR.

The distress ratio generally trended lower since the second half of 2012, however, as noted above, and it’s been at an elevated level since October. It’s a leading indicator and typically a precursor to more defaults.

The lagging indicator is S&P’s trailing-12-month U.S. corporate default rate, which slipped to 1.5% in December, from 1.6% in November.Caesars Entertainment and LBI Media defaulted in December, but larger year-ago defaults rolled out of the calculation.

Today’s report, titled “Distressed Debt Monitor: The U.S. Distress Ratio Remains Elevated, At 13.4%,” is available to subscribers of premium S&P GFIR content at the S&P Global Credit Portal.

For more information or data inquiries, please call S&P Client Services at (877) 772-5436. – Staff reports

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US High Yield Bond Issuance Hit $4.8B Last Week; $13.4B YTD

US high yield bond issuance.JPG

 

It was another relatively quiet week in the U.S. high yield bond market, with six issues accounting for nearly $5 billion in volume. Investors continue to trend toward quality, with lower-rated issuers forced to pay-up significantly, according to LCD’s Joy Ferguson. (Indeed, a CCC rated deal for Presidio was scrapped today; that issue was shopped to investors at upwards of 11%.)

Year to date, US issuance lags, with some $13.4 billion booked so far in 2015, compared to $19.6 billion at this point in 2014, according to LCD. – Tim Cross

 

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Presidio shelves $400M high yield bond offering amid insufficient investor demand

Presidio this morning postponed its $400 million offering of senior notes backing its purchase by Apollo Global Management from American Securities due to insufficient demand at price talk, according to sources.

This is the second postponed deal of the year after Koppers withdrew its $400 million, five-year offering last week. Last year, 17 deals were postponed for a total of $5.825 billion, with the bulk occurring between September and December.

Presidio, via issuing entity Aegis Merger Sub, had emerged last Wednesday with talk of 10.75-11%, inclusive of its OID, on its eight-year (non-call three) offering, which was well wide of initial thoughts in the low 9% range, sources had indicated.

Barclays (B&D), Credit Suisse, Citi, Goldman Sachs, and RBC were joint bookrunners, joined by co-managers Apollo and Natixis.

Ratings on the offering had been assigned at CCC+/Caa1. Additionally, S&P assigned a 6 recovery rating to the issue. Note the deal came with a larger-than-typical equity clawback of up to 40% for the first three years at par plus the coupon.

Last Wednesday, arrangers on the concurrent loan revised pricing upward. The $600 million seven-year covenant-lite term loan was widened to L+575, offered at 97, from L+475, with a 1% LIBOR floor, and offered at 99. The financing also includes a $50 million revolver. The loan is allocating today, sources said.

Presidio, an IT infrastructure-solutions provider for approximately 6,000 clients across the U.S., assists clients in designing, procuring, implementing, and managing IT infrastructures that deliver tangible business value. – Joy Ferguson