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US High Yield Bond Issuance Hits $19.5B in August

US high yield bond issuance

High yield bond issuance in the U.S. rebounded to $19.5 billion in August – often a sleepy month for junk bonds – from $14.9 billion in July, according to LCD. Through August, U.S. high yield issuance in 2016 totals $153 billion, down noticeably from the $206 billion seen at the same point in 2015. – Staff reports

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This story first appeared on www.lcdcomps.com, an offering of S&P Global Market Intelligence. LCD’s subscription site offers complete news, analysis and data covering the global leveraged loan and high yield bond markets. You can learn more about LCD here.

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Bankruptcy: Foresight Energy Completes Out-of-Court Restructuring

Foresight Energy on Aug. 30 completed its out-of-court restructuring of more than $1.4 billion in indebtedness, the company announced.

The coal-mining company reached a tentative deal to restructure its debt outside of bankruptcy court in April after it failed to make a $23.6 million coupon payment due Feb. 15. After several extensions, the company launched the restructuring transactions on Aug. 1.

By way of background, the company found itself in a precarious position after the Delaware Chancery Court in December ruled that a revised “partnership” deal implemented by principal equity holder Murray Energy demonstrated a “de facto” change in control, putting Foresight on the hook to repay a $600 million bond issue at 101%.

With long-term debt of $1.5 billion and a cash position of $16.2 million as of March 31, Foresight did not have sufficient liquidity to repay the debt in the event of acceleration.

The company said the restructuring was implemented principally through concurrent exchange and tender offers in which holders of 99.98% of the principal amount of the company’s 7.875% senior notes due 2021 participated. The company purchased roughly $105 million of outstanding notes for cash, and exchanged the remaining notes for about $349 million of new second-lien notes, roughly $299 million of new convertible PIK notes, and warrants to acquire up to 4.5% of the total outstanding units of the company upon the redemption of the convertible PIK notes (see “Foresight Energy launches exchange offer to support restructuring,” LCD News, Aug. 2, 2016, and “Foresight Energy’s facility to be amended after exchange offer,” LCD News, Aug. 2, 2016, for a detailed description of the exchange offer and related transactions).

The company further said the restructuring also provided for, among other things, the amendment and restatement of the company’s senior credit facility and receivables securitization facility, respectively. — Alan Zimmerman

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US High Yield Bond Funds See $889M Cash Inflow

U.S. high-yield funds recorded an inflow of $888.9 million for the week ended Aug. 17, according to the weekly reporters to Lipper only. It’s the second consecutive week of inflows, but down from $1.65 billion last week.

high yield fund flows

ETF influence accounted for just 41% of the total, or $366 million, compared to 76% of last week’s ballooning inflow.

With another inflow, the four-week trailing average narrowed to negative $24 million, from negative $166 million last week.

The year-to-date total inflow is now $9.6 billion, with 32% ETF-related. A year ago at this juncture, the measure was an outflow of $1.45 billion, with 72% ETF-related.

The change due to market conditions this past week was positive $751.5 million, representing 0.4% of total assets. Total assets at the end of the observation period were $200.9 billion. ETFs account for about 21% of the total, at $41.9 billion. — Jon Hemingway

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This story first appeared on www.lcdcomps.com, an offering of S&P Global Market Intelligence. LCD’s subscription site offers complete news, analysis and data covering the global leveraged loan and high yield bond markets. You can learn more about LCD here.

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S&P: High Yield Default Rate to Hit 5.6% by June 2017

high yield default rate

The U.S. speculative-grade default rate is expected to reach 5.6% by next June, from 4.3% in June of this year, according to S&P Global Fixed Income Research.

In a worst-case scenario the default rate could rise to 7.1% by June 2016, S&P said, citing continued concerns regarding the energy/oil & gas segment – a large high yield issuer constituency – including low/volatile prices and more limited debt funding sources.

In an optimistic scenario the speculative grade default rate could rise to 4.3%. – Tim Cross

The full report, which also details the default rate ex energy, high yield issuance (overall and by rating), default rate by time horizon, and default rate vs interest burden, is available to S&P Global Credit Portal subscribers here. It was written by Diane Vazza and Nick Kraemer.

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Big Tex/ATW Bonds Price to Yield 9.625%

big tex logoBig Tex/American Trailer Works (ATW) today placed its offering of seven-year (non-call three) notes backing the acquisition and merger of the two companies by Bain Capital. The deal was finalized at the low end of talk, sources said. The 144A-for-life notes were issued though issuer entity BDC Acquisition and shopped via Goldman Sachs and Barclays. In addition to financing the M&A transaction, the proceeds will also be used to refinance ATW’s existing debt. Terms:

Issuer BDC Acquisition (American Trailer Works)
  Ratings B/B3
Amount $670 million
Issue senior secured (144A-for-life)
Coupon 9.625%
Price 100
Yield 9.625%
Maturity Sept. 15, 2023
Call non-call three (1st call @ par+50 coupon)
Trade Aug. 17, 2016
Settle Aug. 24, 2016
Joint Bookrunners GS/BARC
Price talk 9.75% area
Notes 1st call @ par+50 coupon

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Sinclair Television Group Prices $400M Bond Offering to Yield 5.125%

sinclair television groupSinclair Television Group late yesterday priced its upsized bond offering in the middle of talk, sources said. Bookrunners include Wells Fargo as lead, along with J.P. Morgan, Deutsche Bank, RBC, SunTrust Robinson Humphrey, Bank of America Merrill Lynch, and MUFG. Sinclair tapped the market to raise funds to repay $350 million of its 6.375% senior unsecured notes due 2021. This is the latest refinancing effort from the broadcasting company. Earlier this year, it issued $250 million of 5.875% senior notes due 2026 to repay drawings under its RCF. The new notes were finalized with a first call premium of par plus 50% coupon, sources said. Terms:

Issuer Sinclair Television
Ratings B+/B1
Amount $400 million
Issue senior (144A)
Coupon 5.125%
Price 100
Yield 5.125%
Maturity Feb. 15, 2027
Call non-call five
Trade Aug. 15, 2016
Settle Aug. 30, 2016 (T+11)
Bookrunners WFS/JPM/DB/RBC/STRH/BAML/MUFG
Co-managers Citizens/Liontree/Moelis
Price talk 5.00-5.25% area
Notes First call at par +50% coupon; upsized from $350 million.

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Service King Prices $75M High Yield Bond Offering to Yield 8.029%

service kingService King late Thursday placed a $75 million add-on to its 7.875% notes due 2022, sources said. The deal was finalized at 99.25, plus accrued interest from April 1, via bookrunners J.P. Morgan, Bank of America Merrill Lynch, Credit Suisse, Deutsche Bank, Macquarie, and Blackstone. The amount outstanding on the notes prior to the recent tack-on was $300 million. The borrower will use the proceeds for general corporate purposes. Terms:

Issuer Service King
Ratings CCC/Caa1
Amount $75 million (add-on)
Issue senior (144A-for-life)
Coupon 7.875%
Price 99.25
Yield 8.029%
Spread T+671
Maturity Oct. 1, 2022
Trade Aug. 11, 2016
Settle Aug. 16, 2016 (T+3)
Bookrunners JPM/BAML/CS/DB/MACQ/BLACKSTONE
Price talk 99 area OID
Notes 40% equity claw at 107.875

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5-Hour Energy Scraps Financing Deal after Sale of company Falls Through

Arrangers for Innovation Ventures, the maker of 5-Hour Energy drinks, pulled the company’s two-pronged financing package this morning after the sale to Renew Group Private fell apart.

5 Hour Energy logoThe financing package included a $525 million senior secured loan and a $400 million senior note issue that had been circulating the market, according to sources. Proceeds would have backed Renew Group’s purchase and refinanced outstanding bonds.

Innovation Ventures is still evaluating plans that would allow it to refinance its debt, the company stated this morning in a press release.

Bank of America Merrill Lynch and KeyBanc Capital Markets were arranging the loan and had set price talk of L+450, with a 1% LIBOR floor and a 99 offer price on a $500 million term loan.

S&P Global Ratings rated the issuer B+ and the first-lien debt BB, with a 1 recovery rating. The proposed bonds drew B–, with a 6 recovery rating.

As reported, Farmington Hills, Mich.–based Innovation Ventures is 80% directly or indirectly owned by CEO Manoj Bhargava, who would have sold a roughly 80% stake through a trust. — Kelsey Butler

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This story first appeared on www.lcdcomps.com, an offering of S&P Global Market Intelligence. LCD’s subscription site offers complete news, analysis and data covering the global leveraged loan and high yield bond markets. You can learn more about LCD here.

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MGM Properties Prices $500M High Yield Bond Offering Backing Refinancing

MGM Growth Properties yesterday completed its offering of 10-year (non-call life) notes after a $100 million upsize, for a total of $500 million, sources said. The deal was finalized lower than talk, and at par, for a yield of 4.5%, sources noted. Bookrunners included Bank of America Merrill Lynch (left), Barclays, J.P. Morgan, Citi, Deutsche Bank, BNP Paribas, Fifth Third, Morgan Stanley, and SMBC. Proceeds will be used to refinance amounts outstanding under the company’s revolver that were drawn in connection with the acquisition of the real property of Borgata Hotel Casino and Spa from MGM Resorts International and for general corporate purposes. Terms:

Issuer MGM Growth Properties
Ratings BB–/B2
Amount $500 million
Issue unsecured notes (144A)
Coupon 4.50%
Price 100%
Yield 4.50%
Spread T+296 bps
Maturity Sept. 1, 2026
Call non-callable for life
Trade Aug. 9, 2016
Settle Aug. 12, 2016
Joint bookrunners BAML/JPM/BARC/C/DB/BNP/FIFTH THIRD/MS/’SMBC
Price talk 4.625% area
Notes first call at par plus 50% coupon

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Veritas Rolls Out Cross-Border Secured Bonds Backing LBO

Veritas logoVeritas has revived the secured-bond component of the cross-border debt financing package backing The Carlyle Group’s acquisition of the company from Symantec, sources said. The software company is pitching $387 million of seven-year notes as well as €230 million of notes with the same maturity, both non-call three.

Bookrunners on the deal are Morgan Stanley, Bank of America Merrill Lynch, UBS, Jefferies, Barclays, Citi, Mizuho, with pricing expected as early as today, sources added. Ratings for the proposed notes are B+/B1.

Last November, Veritas postponed both the loan and bond components of the cross-border debt financing package, citing market conditions. Bank of America Merrill Lynch, Morgan Stanley, UBS, Jefferies, Barclays, Citigroup, Credit Suisse, and Goldman Sachs were listed as arrangers on the transaction, with BAML as left lead on the loans and Morgan Stanley as left lead on the bonds.

At the time, the U.S. dollar component of the loan transaction being sold to investors was reduced by $950 million, to $1.5 billion, from $2.45 billion. Of that $950 million, $250 million was expected to be tacked onto the secured bond deal, originally outlined as $500 million, while the arrangers would have held the $700 million balance, sources said at the time.

This June, the cross-border LBO loan portion of the deal was completed (See “Veritas underwriters complete sale of LBO loans at 85; terms” LCD News, June 15, 2016), at which time it was noted that $750 million of cross-border secured notes remained in the pipeline from the issuer. The $1.941 billion TLB-1 is currently marked at 93/94, and the TLB-2 is quoted at 89.5/91.5, sources said. — Staff reports

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This story first appeared on www.lcdcomps.com, an offering of S&P Global Market Intelligence. LCD’s subscription site offers complete news, analysis and data covering the global leveraged loan and high yield bond markets. You can learn more about LCD here.