Fortress lines up rare project finance high-yield deal

By Natalie Harrison and Mariana Santibanez

NEW YORK (Frankfurt: HX6.F - news) , June 4 (IFR) - Investment management firm Fortress is looking to sell a payment-in-kind toggle bond that could let it stump up less equity to finance a new Florida passenger railway service.

The US$390m All Aboard Florida (AAF) deal is likely to offer more in the way of yield to compensate for both the riskier PIK toggle structure and the lack of cash flows until the project is up and running.

Fortress, which bought Florida East Coast Railway (FEC) in 2007, is looking to price the trade next week via left-lead JP Morgan (Other OTC: MGHL - news) and bookrunner Morgan Stanley (Berlin: DWD.BE - news) .

"If you say PIK, you often see half the market goes away, and then you say project finance and another half disappears," one source told IFR.

"[This trade] is a bet on Fortress," said the source. "There is security in this deal."

That includes a lien on the land, the rights to the passenger track and the ability to run the business if the project goes wrong.

In April, Florida East Coast Holdings Corp sold an upsized US$1.15bn issue comprised of a US$875m senior secured 2019 bond, which priced at par to yield 6.75%, and a US$275m senior 2020 note, which priced at the wide end of guidance at par to yield 9.75%.

Part of the proceeds were used to finance a dividend to the Fortress board, which will now put that towards the passenger line. FEC has not carried passengers since 1968.

GETTING BUSIER

Another PIK toggle was announced Wednesday for Luxembourg-based packaging firm Ardagh, which will use proceeds to refinance existing PIK notes and pay a EUR73m shareholder dividend.

Ardagh, which has revived its US IPO plans after finally closing its acquisition of Verallia North America (VNA) following a long battle with regulators, is targeting a US$1bn-equivalent dual-currency dollar and euro issue.

Citi, which has led most of Ardagh's deals in the past, including the relaunched financing for VNA in January, is sole lead.

The company recently said it would look to refinance higher coupon debt, including existing PIKs callable in 2014 and 2015, in light of material savings in its acquisition finance package for VNA.

A global investor call is scheduled for Thursday, with expected pricing either late Thursday or early Friday.

Elsewhere in the market, three deals priced for US$1.41bn Wednesday.

One of those was a US$210m issue for Polymer Group, which will partly finance the acquisition of a 71.25% stake of Brazil's Providencia as it looks to boost its presence in Latin America.

The North Carolina-based fabrics company upsized the five-year non-call 1.5 senior unsecured note bond by US$10m and squeezed pricing from 7.00% price talk to print a new 2019 at par to yield 6.875%. The bond jumped to 101.25 on the break.

Citi was lead-left on the new trade, followed by Barclays (LSE: BARC.L - news) , RBC (MCX: RBCM.ME - news) and HSBC to the right.

California-based homebuilder Tri Pointe priced an upsized US$900m dual-tranche bond to finance the merger with Weyerhaeuser Real Estate Company.

Books were heard close to US$2bn, according to one account following the deal, with demand slightly heavier in favor of the longer-dated 10-year.

The US$450m 5-year priced at 98.894 with a 4.375% coupon to yield 4.625%, inside of 4.75% area price talk.

The US$450m 10-year priced at 98.150 with a 5.875% coupon to yield 6.125%, on the tight end of 6.125%-6.25% guidance.

Taylor Morrison Home Corp's 5.625% 2024s, trading to yield inside 6%, were used as a direct reference for the Tri Pointe trade, an investor said.

Citi was lead-left with Deutsche Bank (Xetra: DBK.DE - news) on the right.

GATES GLOBAL TO LAUNCH

The LBO financing for Blackstone (NYSE: BX - news) 's purchase of auto parts maker Gates Global will be the second US leveraged buyout financing of the year, according to Thomson Reuters (Frankfurt: TOC.F - news) data, and the largest private equity buyout of an industrial company in more than four years.

The US$4.2bn financing, split between loans and bonds, is second in size only to the US$7.6bn credit backing Cerberus Capital Management's acquisition of Safeway (NYSE: SWY - news) in early March.

Lead Credit Suisse is holding a bank meeting on Thursday to launch the US$3.2bn loan package for Gates, TRLPC reported.

The new cross-border credit will include a US$2.49bn seven-year term loan B, a EUR200m seven-year term loan, a US$125m five-year revolver, and a US$325m ABL revolver.

The bond deal is expected to follow soon, one market source said.

DEALS PRICED:

POLYMER GROUP

Polymer Group Inc, Caa1/CCC+, announced a US$200m senior unsecured note offering via CITI(left)/BARC/RBC/HSBC. Equity clawback up to 35% at par plus coupon during the first 1.5yrs. 144a/RegS w/reg rights. USD101 COC put. Call Protection: NC-1.5 (subject to T+50 makewhole), stepping down to par + 0.75% coupon for next 6 months, par + 0.5% coupon for next 12 months, par + 0.25% coupon for next 12 months, and par thereafter. UOP: Finance a portion of the Providencia acquisition.

PRICE TALK: 7.00% area

PRICED: US$210m. Cpn 6.875%. Due 6/1/19. Ip par. Yld 6.875%. +522bp vs. 1.50% 5/31/19 UST. First (Other OTC: FSTC - news) pay 12/1/14. Call schedule: 6/1/16 at USD103.438, 6/1/17 at USD101.719, 6/1/18 and thereafter at par. Equity clawback 35% at USD106.875 prior to 12/1/15. USD101 COC put. MWC T+50bp. Settlement date 6/11/14. Cusip # 731745AM7

OUTERWALL INC (NasdaqGS: OUTR - news)

Outerwall Inc. announced a US$300m senior unsecured 2021 notes. UOP: to repay existing indebtedness under its credit facility, but may reserve a portion of the proceeds for general corporate purposes, which may include but are not limited to maintenance or repayment of other outstanding indebtedness, acquisitions or other investments, and the payment of other corporate expenses. BIZ: Outerwall Inc. has more than 20 years of experience creating some of the most profitable spaces for their retail partners. HSBC lead-left.

WHISPERS: HIGH-5% AREA

PRICE TALK: 5.875%

PRICED: US$300m. Cpn 5.875%. Due 6/15/21. Ip par. Yld 5.875%. +368bp vs. 2.00% 5/31/21 UST. First pay 12/15/14. Call schedule: 2017 at USD104.406, 2018 at USD102.938, 2019 at USD101.469, 2020 at par. USD101 COC put. Equity clawback up to 35% at USD105.875 prior to 6/15/17. Settlement date 6/9/14. Cusip # 690070AB3.

TRI POINTE HOMES (NYSE: TPH - news)

Moody's assigned a B1 rating to the proposed US$800m senior unsecured note offering for Tri Pointe Homes, Inc. Citi (left)/DB. UOP: Proceeds of the new notes will be used to finance the combination with Weyerhaeuser Real Estate Company ("WRECO"), a subsidiary of Weyerhaeuser Company (NYSE: WY - news) ("Weyerhaeuser"). The notes will initially be issued by WRECO, but TRI Pointe will become the issuing entity upon consummation of the merger. BIZ: TRI Pointe, founded in 2009 and headquartered in Irvine, California, designs, builds, and sells single-family homes throughout Northern and Southern California as well as Colorado.

PRICE TALK: 5-year at 4.75% area, 10-year at 6.125-6.25%. Books close at 2:30pm, with pricing expected to price today

PRICING UPDATE: US$900m total (min size US$400m). 5-year 4.625%, 10-year 6.125%.

LAUNCHED: USD900m 2-tranche deal. Settlement date 6/13/14

- USD450m Due 6/15/19 at 4.625%

- USD450m Due 6/15/24 at 6.125%

PRICED:USD900m 2-tranche deal. First pay 12/15/14. Settlement date 6/18/14 - USD450m. Cpn 4.375%. Due 6/15/19. Ip USD98.894. Yld 4.625%. T+298.5bp - USD450m. Cpn 5.875%. Due 6/15/24. Ip USD98.150. Yld 6.125%. T+352bp.

DEALS PIPELINE:

JCH PARENT

JCH Parent, Inc., ratings tbd, announced a US$150m 5yr nc1 senior PIK toggle notes via WFS(left)/BARC. Pricing expected mid-week. Equity clawback For the first year, the Issuer may redeem up to 100% of the aggregate principal amount of the notes at a purchase price of 102% of the principal amount. UOP: (1) to pay cash dividends (2) to make a contribution to Jack Cooper Holdings to pay down outstanding amounts on the Credit Facility (3) to make the first interest payment due on the notes and for other general corporate purposes. BIZ: Leading finished vehicle logistics provider in the United States and Canada specializing in light vehicle transportation services.

PRICE TALK: 9.75-10% (cpn), USD99.0 OID, 10-10.25% (yld). Books close at the end of the day, pricing tomorrow morning (05Jun).

ARDAGH FINANCE PACKAGING

Ardagh Finance Packaging S.A., existing ratings Caa2/CCC+, announced a US$/EUR1bn 5-year nc2 senior PIK notes via sole-bookrunner CITI. Global investor call at 10am tomorrow (06Jun), with expected pricing either late Thursday or early Friday. 144a/RegS w/o reg rights. USD101 COC put. First call at par plus 50% coupon. Equity clawback 50% at USD102 until 12/31/15. UOP: Refinancing of existing 2018 Secured PIK notes including accreted value and redemption premiums, and shareholder dividend (73 million). BIZ: Ardagh Group is a Luxembourg-based producer of glass and metal products.

LMI AEROSPACE (NasdaqGS: LMIA - news)

LMI Aerospace, Inc. announced a US$250m 5-year nc2 second-priority senior secured note offering via RBC(left)/WFS/STRH. Roadshows begin June 5, with pricing expected late next week (w/c 6/9). 144a/RegS w/reg rights. USD101 COC put. Equity clawback up to 35% during non-call period at par plus coupon. Special redemption: Up to 10% per year at 103% during non-call period. UOP: to secure borrowings under commensurate with the offering, to repay the full amounts outstanding under its existing revolving credit facility and term loan B facility and for related fees and expenses. BIZ: LMI Aerospace, Inc. ("LMI") is a leading supplier of complex structural assemblies, components and kits and provider of design engineering services to the aerospace and defense markets.

DFC FINANCE CORP

DFC Finance Corp, ratings tbd, announced a US$500m/GBP150m 6-year nc3 senior secured note offering via JEFF/CS. The deal launched May 28, with pricing expected after shareholder vote June 6. 144a/RegS w/o reg rights. First call par plus 50% coupon. UOP: To fund the acquisition of DFC Global Corp (NasdaqGS: DLLR - news) . along with $750mm of equity from Lone Star Funds. BIZ: Leading international non-bank provider of alternative financial services.

SUNSHINE OILSANDS (Other OTC: SUNYF - news)

Sunshine Oilsands Ltd., ratings Nr/Nr, announced a US$325m 5-year nc2 senior secured note offering via IMPERIAL(left)/MS/SCOTIA. 144a/RegS applies. Roadshow began May 22 in New York. First call at par plus 3/4 coupon. UOP: Together with proceeds from the concurrent USD$70 million equity offering (i) to fund expenditures necessary to complete phases one and two at the West Ells project and general corporate purposes, (ii) settle outstanding accounts payable, (iii) prefund 18 months of cash interest and (iv) pay fees and expenses. BIZ: Calgary, Albert-based independent energy company focused primarily on the evaluation, development and production of its oil sands leases in the Athabasca (Frankfurt: AHU.F - news) region of Alberta.

WHISPERS: 15% area

ALL ABOARD FLORIDA

All Aboard Florida (AAF Holdings LLC & AAF Finance Company) announced a USD390m 5yr nc2 senior secured PIK toggle notes via JPM(left)/MS. Co-managers BMO. 144a/RegS for life. Pricing is expected next Friday (13Jun). First call at par plus 50% coupon. UOP: To finance all or a portion of the design, construction, development and equipping of the Project (Miami to Wes Palm Beach) and to fund pre-opening expenses and working capital BIZ: Privately owned and operated express passenger rail system in the U.S. Mandatory Redemption: At par if Company abandons Project before Opening Deadline. Offer to purchase: At par if Project fails to open by the Opening Deadline. Interest Payments: First payment will be 50% Cash / 50% PIK; may elect to pay 1) entirely in cash interest or 2) 50% cash / 50% PIK in subsequent periods; PIK interest will be equal to cash interest +75bps.

SOUTHERN STAR CENTRAL CORP

Southern Star Central Corp, Ba1/BB+, announced a US$450m 8yr nc3 senior note offering via RBC(left)/BAML. Roadshows begin today (02Jun), with pricing expected late this week. 144a/RegS w/o reg rights. USD101 COC put. First call at par plus 75% of coupon. Equity clawback up to 35% during the first 3-years at par plus the coupon. UOP: to repurchase any and all of its outstanding 6.75% senior notes due 2016 (two series) pursuant to two cash tender offers and consent solicitations that commenced today, to repay borrowings under the Company's current revolving credit facility, to make a distribution to MSIP-SSCC Holdings, LLC and to pay related transaction fees and expenses. BIZ: Southern Star Central Corp., headquartered in Owensboro, Kentucky, owns Southern Star Central Gas Pipeline, Inc. ("Central"), an interstate natural gas transportation company in the Midwest and Mid-continent regions of the United States. Southern Star's pipeline system is composed of approximately 6,000 miles of mainline and branch transmission and storage pipelines located in Colorado, Kansas, Missouri, Nebraska, Oklahoma, Texas and Wyoming. The system serves customers in these seven states, including major metropolitan areas in Kansas and Missouri, which are its main market areas. (Reporting by Natalie Harrison and Mariana Santibanez; Editing by Shankar Ramakrishnan and Marc Carnegie)