Pilgrim's Pride lines up debt financing

By Mariana Santibanez

NEW YORK (Frankfurt: HX6.F - news) , June 5 (IFR) - Pilgrim's Pride Corp, the second largest US chicken processor, has lined up a number of banks to help finance its offer for Hillshire Brands (Frankfurt: LEE1.F - news) as it escalates its bidding war with Jimmy Dean sausage maker Tyson Foods (NYSE: TSN - news) , sources familiar with the matter said.

Pilgrim's, majority owned by Brazilian meat processing company JBS, has lined up banks including Barclays (LSE: BARC.L - news) , Bank of Montreal, Rabobank and Wells Fargo (Berlin: NWT.BE - news) to finance a potential bid, the sources said.

The company and the banks declined to comment. The sources declined to be named. Earlier this week, Pilgrim's Pride, said it had raised its offer for Hillshire to US$55 per share, which valued the company at US$7.7bn including debt.

Tyson Foods' offer of US$50 per share values Hillshire at US$6.8bn, including US$500m in debt.

The offers come after Hillshire said last month it had planned to buy Pinnacle Foods (NYSE: PF - news) in a deal valued at US$4.3bn, excluding debt.

The two offers, made last week, require Hillshire to terminate its deal with Pinnacle.

Hillshire said on Tuesday it would "provide information" to both bidders and conduct talks with them.

PIKS HIT PRIMARY

The eventual winner of Hillshire should have little trouble raising debt financing if current strong market conditions prevail.

Even deeply subordinated PIK toggles are getting a strong reception in the market, highlighted by strong demand for packaging firm Ardagh's upsized US$1.05bn-equivalent dual-currency issue Thursday.

The deal, announced Wednesday, was originally expected to price either Thursday or Friday but was over the line by early afternoon today with books for the dollar tranche heard to be well over US$5bn, according to one investor.

The NC2 senior deal was split between a 250m tranche with a 8.375% coupon and a US$710m dollar portion with a 8.625% coupon - which was the tight end of respective 8.5% and 8.75% guidance with a 98-99 original issue discount.

Both tranches priced at a slight discount at 99 to offer upside. In secondary, one banker said he saw the bond bid at 101, but the short-call on the bond, as well as the 50% clawback at US$102 up to December 2015, is likely to cap the upside of the issue.

The bulk of the proceeds will refinance a far more expensive PIK - its 11.125% secured 2018 issue - that had accreted to 643m in size and becomes callable later this month.

The investor said he had placed orders for the deal even though he had concerns about the company's leverage.

While the PIK note avoids shareholder dilution, it will increase Ardagh's ratio of adjusted net debt to Ebitda to 6.7x from around 5.8x at the end of March.

"This is such an equity friendly company," said the investor.

"The company has been very good at leveraging up at cheap enough levels to justify its growth plans. But it's so acquisitive, and my worry is that it is over stretching the capital structure."

Ardagh has also had a tricky year. It only recently closed its acquisition of Verallia North America (VNA) after a battle with regulators, which forced it to sell some US plants and relaunch the debt financing for the deal.

Now that is out of the way, Ardagh intends to pursue its long-awaited US IPO in the second half of next year. Ahead of this, though, it is using the PIK to strip out a EUR73m dividend.

"They're taking advantage of a red-hot credit market to put in place a cheaper IPO bridge without diluting themselves," said another investor.

The other investor questioned the company's plans to delever, and whether the proceeds from a potential IPO would be used to pay down debt.

"It has had PIKs in its capital structure for so long, I'm not convinced," he said.

Sole lead Citi - which traditionally handles all of the company's bond deals - looked to Ardagh's unsecured 2021s bid around 5.875% as a pricing benchmark. Recent unsecured to PIK premiums have been around 250bp-300bp.

SMALLER ISSUES

Ardagh was the biggest of five issuers in the high-yield market Thursday, raising a combined US$2.11bn just in dollars.

Southern Star Central raised US$450m from a new eight-year senior deal, pricing the trade at par with a 5.125% coupon, which was tight to 5.25% area talk. The proceeds will refinance the more expensive 6.75% 2016s as well as pay a dividend to its private equity owner Morgan Stanley Infrastructure Partners.

RBC (MCX: RBCM.ME - news) was left-lead on the deal, while BAML was on the right.

It was heard to be four to five times oversubscribed and traded up 1.5 points on the break.

Other deals also appeared to go smoothly, with Cascades upsizing its dual-tranche Canadian and US dollar deal. A US$150m PIK toggle for JCH Parent, though, came wider than expected, printing at a larger-than-expected discount at 98 with a 10.5% cash coupon. Guidance had been set at 9.75%-10% with a 99 OID.

The other big focus in the market was the Lipper data. For the week ended June 4, Lipper reported an inflow of USD261.4m into corporate investment grade funds (YTD total of USD39.283bn) and an inflow of USD301.6m into high yield funds (YTD total of USD5.829bn).

But loan funds saw their third biggest outflow on record, and the biggest since 2011 after another US$1.100bn left the asset class.

DEALS PRICED:

ARDAGH FINANCE PACKAGING

Ardagh Finance Packaging S.A., existing ratings Caa2/CCC+, announced a US$/1bn 5-year nc2 senior PIK notes via sole-bookrunner CITI. 144a/RegS w/o reg rights. USD101 COC put. First (Other OTC: FSTC - news) 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.

PRICE TALK: US$1.05bn (upsized from US$1bn). Expect EUR tranche of 250 million, balance in US$. Price talk: USD: 8.75% at 98-99 OID, EUR: 8.50% at 98-99 OID

LAUNCHED: US$1.05bn (upsized from US$1bn). Accounts have until 12:30pm New York / 5:30pm London today to reconfirm orders, pricing thereafter.

- US$ at 8.625% coupon at US$99 OID

-  at 8.375% coupon at US$99 OID

PRICED: US$1.05bn (upsized from US$1bn). US$101 COC put. Equity clawback 50% at USD102 prior to 12/31/15. First pay 12/15/14. Settlement date 6/12/14.

- US$710m. Cpn 8.625%. Due 6/15/19. Ip USD99.0. MWC T+50bp. Call schedule: 6/15/16 at USD104.313, 6/15/17 at USD102.156, 6/15/18 and thereafter at par. Cusip # 03969LAA4.

- 250m. Cpn 8.375%. Due 6/15/19. Ip USD99.0. MWC B+50bp. Call schedule: 6/15/16 at USD104.188, 6/15/17 at USD102.094, 6/15/18 and thereafter at par. ISIN # XS1076716338

JCH PARENT

JCH Parent, Inc., ratings tbd, announced a US$150m 5yr nc1 senior PIK toggle notes via WFS(left)/BARC. 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).

PRICED: US$150m. Cpn 10.50%. (11.25% PIK). Due 3/15/19. Ip USD98.0. Cash Yield 11.060%. +951bp vs. 1.50% 2/2/8/19 UST. MWC T+50bp. Equity clawback up to 100% (a) prior to March 15, 2015 at 105% of the principal amount of the notes and (b) on or after March 15, 2015 and prior to March 15, 2016 at 103% of the principal amount of the notes. Call schedule 3/15/16 at USD102.0, 3/15/17 at USD101.0, 3/15/18 and thereafter at par. First pay 9/15/14. Settlement date 6/10/14. Cusip # 46616WAA6.

SOUTHERN STAR CENTRAL CORP

Southern Star Central Corp, Ba1/BB+, announced a US$450m 8yr nc3 senior note offering via RBC(left)/BAML. 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, to repay borrowings under the current revolving credit facility, to make a distribution to MSIP-SSCC Holdings, LLC and to pay related transaction fees and expenses.

PRICE TALK: 5.25% area.

PRICED: USD450m. Cpn 5.125%. Due 7/15/22 NC3. Ip par. Yld 5.125%. +279bp vs. 1.75% 5/15/22 UST. MWC T+50bp. Equity clawback 35% at USD105.125 until 7/15/17. USD101 COC put. Call schedule: 7/15/17 at USD103.844, 7/15/18 at USD102.563, 7/15/19 at USD101.281, 7/15/20 and thereafter at par. First pay 1/15/15. Settlement date 6/16/14. Cusip 843830AF7.

CASCADES INC (Other OTC: CADNF - news)

Cascades Inc, expected ratings Ba3/B, announced a US$500m 8yr nc3 sr notes via WFS(left)/BAML/CIBC/RBC/TDS. Joint-leads are NBC/SCOT/BMO/DES/BNP (Paris: FR0000131104 - news) /COME (Swiss: CADN.SW - news) /RABO. 144a/RegS for life. UOP: To repay existing senior notes due 2016 and 2017, for general corporate purposes, and pay related transaction fees and expenses. BIZ: Founded in 1964, Cascades produces, converts and markets packaging and tissue products that are composed mainly of recycled fibres.

The company is also planning a CAD200m 7yr nc3 senior note offering via CIBC(left)/NATB/SCOT/TDS/WFS/BMO. 144a eligible.

PRICE TALK: 5.50%-5.75% on both the USD and CAD.

PRICED: First pay 1/15/15. Settlement date 6/19/14.

- US$550m (upsized USD500m). Cpn 5.50%. Due 7/15/22. Ip par. Yld 5.498%. +316bp vs. 1.75% 5/15/22 UST. Call schedule: 7/15/17 at USD104.125, 7/15/18 at USD102.75, 7/15/19 at USD101.375, 7/15/20 and thereafter at par. Equity clawback up to 35% at USD105.50 prior to 7/15/17. Cusip # 146900AM7.

- CAD250m (upsized CAD200m). Cpn 5.50%. Due 7/15/21. Ip par. Yld 5.499%. +357.2bp vs. CAD 3.25% 6/1/21. Call schedule: 7/15/17 at USD104.125, 7/15/18 at USD102.75, 7/15/19 at USD101.375, 7/15/20 and thereafter at par. Equity clawback up to 35% at USD105.50 prior to 7/15/17. Cusip # 146900AN5.

MICHAELS STORES

Michaels Stores, Inc, expected ratings Caa1/CCC+, announced a US$250m add-on to its 5.875% December 15, 2020 nc2.5yr sr sub notes via DB(left)/JPM/BARC/BAML/CS/MS/WFS/GUGG/MACQ. 144a for life. US$101 COC put. UOP: To repay existing 7.75% Senior Notes due 2018. BIZ: Largest arts and crafts specialty retailer in North America.

PRICE TALK: US$101.50 - US$102.0.

PRICED: US$250m. Cpn 5.875%. Due 12/15/20 NC2.5yr. Ip USD102.0. Yld 5.505%. +344bp vs. 2.00% 11/30/20 UST. Equity clawback 40% until 12/15/16 at USD105.875. Call schedule: 2016 at USD102.938, 2017 at USD101.469, 2018 at par. First pay 12/15/14. Settlement date 6/16/14. Cusip # 594087AT5.

DEALS PIPELINE:

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.

PRICE TALK: 10.50 - 10.75% (£ Tranche +25-50bps from $ tranche). Books close at 4pm (NYC time) Thursday. Pricing expected Friday morning after shareholder vote.

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

UPDATE: Pricing expected next week (w/c 6/9).

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. (Reporting by Mariana Santibanez, Olivia Oran at Reuters, Robert Smith and Natalie Harrison; Editing by Marc Carnegie)