Alpha Auto Group has walked away from its first high yield bond offering, after pricing expectations drifted into the double-digits amid an unenthusiastic response from buysiders, according to five sources following the deal.
The USD 225m unsecured deal – proceeds of which were slated to take out the privately-owned auto retailer’s term loan facilities and fund a distribution to its parent entities – launched last week through JPMorgan, but went cold after buysiders pushed for wider pricing.
The development comes as Virtu Financial put syndication of a USD 525m secured bond, also led by JPMorgan, on ice after investors demanded wider pricing. It also comes amid a flurry of supply in the high yield market, with 16 issuers pricing new deals so far this week.
Proceeds from the Alpha’s proposed five-year bonds were earmarked to take out CAD 137.5m of term loan debt, with the remainder going towards distributions to its parent entities for the repurchase of preferred equity and partnership interests, according to deal documents.
Lead JPMorgan opened syndication last week with price whispers in the 8%-8.25% area, but later widened whispers to the 9.5%-10% area, three of the sources said. Whispers continued to drift into the 10%-11% area, but the issuer was not willing to go that wide, the sources added.
Alpha was 7.5x levered as of 31 March, based on CAD 449.5m of total debt and CAD 60.1m of pro forma LTM adjusted EBITDA, including add-backs related to recent acquisitions.
Last year, Alpha acquired Wilsonville Dealerships for CAD 157m and Mierins Auto Group for CAD 204m, resulting in the addition of about 12 dealerships, according to a recent Moody’s report.
Whispers for the deal ended up well wider than the yields offered by comparable auto retailers, such as 2.9x-levered Asbury Automotive Group and 3.7x-levered Group 1 Automotive.
Asbury’s USD 600m 6% senior subordinated notes due 2024 last traded on 19 June at 104 to yield 3.776%, up from trades in the 102.25-102.5 range earlier this month, according to MarketAxess.
Group 1’s USD 550m 5% senior unsecured notes due 2022 last traded at 101.25 to yield 3.598%, in line with recent levels, according to MarketAxess.
JPMorgan declined to comment. Alpha Auto did not respond to a request for comment.