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Bankruptcy: Aeropostale Says Standalone Reorg Plan ‘Not Feasible,’ Seeks Asset Sale

Aeropostale filed a proposed reorganization plan and disclosure statement on July 15 calling for the sale of the company, according to court filings.

In its motion seeking approval of the proposed plan, the company said it had “been engaged in negotiations with potential purchasers and equity sponsors as well as parties in interest, such as DIP lenders and the official committee of unsecured creditors … over the path forward for these Chapter 11 cases,” adding that the company “concluded that reorganization on a standalone basis is not feasible.”

aerospostal logoAs reported, the company filed for Chapter 11 on May 4 in bankruptcy court in Manhattan, saying it intended to emerge from Chapter 11 within the next six months “as a standalone enterprise with a smaller store base, increased operating efficiencies and reduced SG&A expenses.” The company also said at the time, however, that it would likewise continue to pursue an asset sale process while simultaneously developing a reorganization plan.

Court filings show that a bid deadline for the proposed sale would be Aug. 18. An auction, if required, would be held on Aug. 22, and a hearing to approve a sale would be held on Aug. 26.

As for the plan, a confirmation hearing would be held Aug. 23, and plan consummation would occur on Aug. 25.

The company scheduled a hearing on the adequacy of the disclosure statement on an expedited basis for July 25. — Alan Zimmerman

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Toys ‘R’ Us Launches Uptier Debt Swap Targeting Unsecured Notes

Toys ‘R’ Us has launched an uptier exchange offer as part of its previously announced plans to refinance the majority of its near-term unsecured bonds coming due in 2017 and 2018 for newly issued secured debt maturing in five years.

Toys r US logoEligible holders of the $444 million series of 10.375% unsecured holding company notes due 2017 will have the option to accept, for each bond tendered by the early tender deadline, either par-for-par the new 12% secured notes due 2021 at the early tender deadline, or consideration of $950 thereafter, or a combination of the newly issued notes and cash for a total consideration of $1,000, of which up to $550 will be paid in cash at a variable amount tied to the participation level. Specific details of the tiering are available here.

The tender applies to $400 million of the 2017 notes, as $50 million has already been privately placed by an existing noteholder.

Total consideration for each of the 7.375% unsecured holding company notes due 2018 tendered will consist of $900 of newly issued secured notes at the early tender deadline, or $850 thereafter, according to the company statement.

Participating holders of the 2018 notes will not receive any cash for their 2018 notes.

The new 12% senior secured notes due 2021 will be issued via subsidiary “TRU Taj LLC “ and are capped at $525 million.

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.

As reported, Toys ‘R’ Us previously stated that it intends to refinance up to approximately 89% of these existing notes via this exchange offer, after it entered into a support agreement with certain noteholders in June to tender approximately 63% and 34% of the outstanding 2017 and 2018 notes.

Notably absent from the exchange, sources speculate that the company might look to refinance the $722 million of 8.5% secured propco II notes due 2017 in the public market given J.C. Penney’s recent refinancing of its term loan facility.

The early tender deadline expires at 5 p.m. EDT on July 26, 2016. The final deadline is 11:59 p.m. EDT on Aug. 9, 2016.

Total long-term debt at the company was $5.2 billion as at April 30, of which $4.6 billion is scheduled to come due via three series of notes by 2018. The company also has a $1.025 billion B-4 term loan due 2020 (L+875, 1% LIBOR floor), which 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.

The company in February engaged Bank of America Merrill Lynch, Goldman Sachs, and Lazard “to assist in the refinancing of its capital structure.” Goldman Sachs; Merrill Lynch; Pierce, Fenner & Smith; Deutsche Bank; Citi; and J.P. Morgan are joint dealer managers in connection with the exchange offers.

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

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S&P: 2016 Global Corporate Default Tally Climbs to 100, vs 62 in 2015

us high yield defaults

There were four corporate defaults globally in the past week, bringing the number of defaults year-to-date to 100, up from 62 during the same period last year, according to S&P.

Of the 100 defaults, 67 are based in the U.S.

The full report is available here via S&P Global Market Intelligence’s Global Credit Portal.

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High Yield Bond Issuance Eases in June as Yields Dipped Modestly

weekly volume-yield to worst

High yield bond issuance contracted to $21.8 billion in June, from $28.7 billion in May and an 11-month high of $32.3 billion in April, and all despite some big names in market with large deals, according to LCD, an offering of S&P Global Market Intelligence.

Meanwhile, yields slid modestly amid a slow grind higher in the secondary market heading toward the June 23 Brexit vote. The average yield-to-worst on the S&P U.S. Issued Corporate High Yield Index dipped to 6.93% at the end of June, from 7.17% ending May. The average new-issue clearing yield expanded to 6.66% in June, from 6.08% in May. – Matthew Fuller

Follow Matthew on Twitter @mfuller2009 for leveraged debt deal-flow, fund-flow, trading news, and more.

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Nexstar Broadcasting Prices $900M High Yield Bond Offering

Nexstar Broadcasting Group this afternoon completed an offering of senior notes via bookrunners Bank of America Merrill Lynch, Credit Suisse, Deutsche Bank, SunTrust Robinson Humphrey, Barclays, and Wells Fargo. The B+/B3 paper priced at the tight end of guidance, sources said. Proceeds from the offering will be combined with cash on hand and proposed credit facilities to finance the company’s $4.6 billion acquisition of Media General. Take note of a larger than typical equity clawback option, for up to 40% of the issue, and a special par-plus-accrued redemption clause tied to the merger closing. Terms:

Issuer Nexstar Escrow
  Ratings B+/B3
Amount $900 million
Issue senior notes (144A-life)
Coupon 5.625%
Price 100
Yield 5.625%
Spread T+428
Maturity Aug. 1, 2024
Call nc3 @ par+75% coupon
Trade July 13, 2016
Settle July 27, 2016 (T+10)
Joint bookrunners BAML/CS/DB/STRH/BARC/WFS
Co-managers CapOne, FTS, MUFG
Price talk 5.75% area
Notes first call par+75% coupon; w/ three-year equity clawback option for up to 40% of the issue @ 105.625; w/ par-redemption clause if the merger doesn’t close.

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Hi-Grade: As Bond Market Beckons, Teva Looks to Accelerate Actavis Financing

Teva Pharmaceutical Industries today confirmed widespread market expectations that a much-anticipated blockbuster debt offering backing its $40.1 billion acquisition of Allergan’s generics business, Actavis Generics, may be only days away.

Teva logoTeva CEO Erez Vigodman said today on a 2016 updated guidance call that management is “closely monitoring the corporate bond markets” for a potential acceleration of the bond deal, “given the very attractive terms currently prevailing there.” (Notably, Walt Disney last Thursday printed the lowest-ever coupons for 10- and 30-year debt, while Molson Coors Brewing on June 28 garnered the lowest 30-year coupon by a BBB–/Baa3 issuer, according to LCD, an offering of S&P Global Market Intelligence.)

Teva officials said on today’s call that the only remaining obstacle to the deal closing is clearance from the Federal Trade Commission (FTC), which “could come at any time.” The company today also filed a Form F-3 post-effective amendment with the SEC, citing current estimates for the acquisition close to “occur shortly.”

According to reports, Teva has tapped BAML, Barclays, BNP Paribas, Credit Suisse, HSBC, and Mizuho for fixed-income calls in the U.S. through tomorrow, followed by presentations in Europe Monday and Tuesday, as the company eyes issuance in denominations potentially including U.S. dollars, euros, and Swiss Francs.

But the total size of the bond offerings may also be smaller than expected. Teva said today that the net cost of the acquisition has shrunk by $5 billion, to $35.1 billion, based on a substantially higher-than-expected $2.9 billion of upfront proceeds this year from mandated asset divestitures to garner regulatory approvals (Teva last year envisioned shedding only about $400 million of assets), $1 billion from a working capital adjustment and proceeds from a sale of products back to Allergan, and $1.5 billion from a change in the expected equity value.

The lower cost necessitates less in debt financing, the company said today. Deal financing needs started at $27 billion last year, and are now roughly $23 billion, including the $5 billion of A term loans ($2.5 billion due November 2018 and $2.5 billion tranche due November 2020) inked late last year, alongside a $4.5 billion senior unsecured revolver. Net debt at closing is now seen at roughly $34 billion, or $4 billion less than initial company projections last year, and that suggests that Teva may shop a long-term debt package below widespread expectations in recent weeks for total issuance in the neighborhood of $20 billion.

Teva expects to slash its net financial debt leverage over the next few years via the deployment of its roughly $25 billion of projected cumulative free cash flow through 2019, including the $2.9 billion of upfront asset-divestiture proceeds, and reflecting expectations for a ramp higher in free cash flow from $4.9 billion last year, to $7.2–7.8 billion annually by 2019.

However, Fitch in April cautioned that “elevated debt leverage may linger somewhat” following the acquisition, as the company has stated that it intends to stay on the hunt for M&A opportunities over the medium-term. But Fitch does expect leverage—which it sees spiking to more than 4x pro forma for the deal close, from 1.5x at the end of 2015—to ebb near 3x over the next two years as it repays 2016–2017 debt maturities and term-loan obligations, keeping Teva comfortably in compliance with credit agreement covenants.

(The term loans include a leverage test set at 5.25x, stepping to 5x two quarters after closing, and then to 4.25x two quarters after that, and to 4x two quarters after that, and then to 3.5x thereafter. The term loan is also covered by an interest-coverage test.)

While ratings agencies are reviewing all three sides of the present BBB+/Baa1/BBB+ profile for downgrade, all three agencies have stated in recent months that downgrades are likely to be limited to one notch.

Teva has not tapped the U.S. markets for long-term debt financing since December 2012, when it placed $2 billion of senior notes across $700 million of 2.25% long seven-year notes due March 18, 2020 at T+110, and $1.3 billion of 2.95% 10-year notes due Dec. 18, 2022 at T+125. Proceeds of that offering backed the repayment of debt associated with its $6.8 billion acquisition of Cephalon in 2011, which necessitated the issuance that year of $5 billion of notes in six parts.

Teva debt has held steady through the expectations for large-scale issuance. The 3.65% notes due November 2021, which date to that 2011 bond offering as a 10-year deal at T+170, changed hands today at T+132 versus the five-year Treasury rate, or the firm end of a trading range from T+130–150 in recent weeks, with the wider levels corresponding with the rout of global credit markets late last month on the shattering Brexit outcome, trade data show. — John Atkins

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International Wire Prices $260M Bond Offering to Yield 11.75%

International Wire Group this afternoon completed an offering of secured notes via bookrunners Jefferies, Wells Fargo, and KKR Capital Markets. Terms on the B/B3 transaction were finalized essentially at the tight end of price talk after a $10 million upsize, according to sources. The engineered-wires manufacturer returns to market after nearly four years for capital to help refinance existing debt. Take note of the old-style first call premium at par plus 50% coupon on three years of protection for this tenor, and a 40% equity clawback option. Camden, N.Y.–based International Wire trades on the over-the-counter market under the symbol ITWG and carries a market capitalization of roughly $232 million. Terms:

Issuer International Wire Group
Ratings B/B3
Amount $260 million
Issue secured notes (144A-life)
Coupon 10.75%
Price 96.286
Yield 11.75%
Spread T+1,066
Maturity Aug. 1, 2021
Call nc3 @ par+50% coupon
Trade July 12, 2016
Settle July 26, 2016 (T+10)
Joint bookrunners JEFF/WFS/KKR
Price talk 11.75-12% yield with 3.5-4 point OID
Notes first call par+50% coupon; upsized by $10 million; w/ three-year equity clawback option for up to 40% of the issue @ 110.75.

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Rebound: US High Yield Bond Prices See Largest Gain 18 Months

The average bid of LCD’s flow-name high-yield bond sample has surged 282 bps since the previous reading, on Thursday, to 99.92% of par, yielding 6.75%, from 97.10, yielding 7.41%, on July 7. Performance within the sample was all positive, with gains of a full point or more for 13 of the 15 constituents.

This is the single-largest upside move for the twice-weekly measure in approximately 18 months, or since an advance by 307 bps recorded on Dec. 18, 2014, to 96.40 at the time. That was a snapback rally after a rough month due to the bear market mauling in oil and energy credits and heavy outflows; this time it’s a post-Brexit-vote relief rally alongside heavy inflows.

With the relatively huge gain in price, the average yield to worst plunged 66 bps, to 6.75%, and the average imploded by 76 bps, to T+566. The current observations are the thinnest in one year. – Staff reports

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Valvoline Sets $375M Bond Offering to Repay Ashland debt

Valvoline has announced a $375 million, eight-year (non-call three) offering of senior notes. Citi (left), Bank of America Merrill Lynch, Morgan Stanley, Scotia, Deutsche Bank, Goldman Sachs, and J.P. Morgan are joint bookrunners. A roadshow will run today through Thursday, with pricing expected on Thursday afternoon.

ValvolineProceeds will be transferred to Ashland, which will then repay its unsecured credit facilities. Ashland has not made a final determination about which facilities or the amounts it will repay, according to the preliminary offering memorandum.

In September last year, Ashland announced its plan to separate into two independent, publicly traded companies: one comprising Ashland’s specialty ingredients and performance materials businesses (the chemicals business); and the other comprising its Valvoline business.

Valvoline plans to use the net proceeds from the proposed IPO to repay short-term debt in full and to reduce obligations under its senior-secured term loan facility, to a maximum of $375 million. Proceeds from the new notes will be held in escrow in case the IPO does not take place.

The bonds include an investor-friendly first call at par plus 75% coupon, and a 40% equity claw (excluding the proposed IPO).

As reported, bonds backing specialty chemicals maker Ashland dropped 2-3 points when the spin-off was announced last year. Ashland’s most-actively traded bonds—the 4.75% notes due 2022—were at 97.5/98.35. They have since recovered strongly, to close last night at 102.75, yielding 4.2%, according to S&P Global Market Intelligence.

Valvoline operates in the global automotive lubricant industry. — Luke Millar

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Rivers Pittsburgh Launches $415M Secured Note Offering to Refinance Debt

Rivers Pittsburgh has launched a $415 million, five-year (non-call two) secured notes offering via Goldman Sachs (left), Wells Fargo, Fifth Third, and U.S. Bancorp. A roadshow will run today through Friday, with pricing to follow.

rivers pittsburghProceeds from the 144A-for-life offering will be used, along with $50 million of drawings under the super senior RCF and cash on hand, to fully repay the company’s credit facility, to redeem its 2019 bonds, and to fund the repurchase by Pittsburgh Gaming Holdings of the holdco notes.

Trade data shows there is $155 million of 9.5% second-lien 2019 notes outstanding and they are currently callable at 102.375. They appear to be its only outstanding bonds, and were issued back in 2012. At that time the bonds were reduced to $275 million, from $300 million, as bank demand for the concurrent A term loan at L+375 allowed for a $25 million upsizing, to $185 million.

Holdings Gaming Borrower owns and operates Rivers Casino, a 450,000-square-foot facility located on Pittsburgh’s north shore next to Heinz Field. The casino opened in August 2009. — Luke Millar

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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.