Ports America withdraws offering; Navistar in focus on acquisition; Shift4, United Natural trade strong

By Paul A. Harris and Abigail W. Adams

Portland, Me., Oct. 16 – The market's attention was focused on Ligado Networks LLC which was expected to price $3.85 billion of secured PIK notes in two bullet tranches on Friday.

However, no terms were available at press time.

Meanwhile, the secondary space was slightly firmer on Friday.

While recent deals were active and performing well in the aftermarket, Navistar International Corp.’s senior notes were in focus following news of the company’s acquisition.

While the company’s 9½% senior notes due 2025 were trading down on the news, Navistar’s 6 5/8% senior notes due 2025 gained in high-volume activity.

United Natural Foods Inc.’s 6¾% senior notes due 2028 (B3/CCC+) and Shift4 Payments, LLC’s 4 5/8% senior notes due 2026 (B2/B) continued to improve after both saw strong breaks the previous session.

Rolls-Royce plc’s 5¾% senior notes due 2027 (Ba3/BB-/BB+) remained active with the notes continuing to improve.

Canpack SA’s 3 1/8% senior notes due 2025 (Ba2/BB) were also making gains in active trading.

Friday’s primary

The market's attention was focused on Ligado Networks LLC which was expected to price $3.85 billion of secured PIK notes in two bullet tranches on Friday.

No terms were available at press time.

Terms were expected quite late on Friday, as the deal might be subject to outsize moves in the secondary market, traders said.

By waiting until a large swath of the market had left for the weekend, dealers might be able to damp down volatile trading on the break, they added.

The revised deal features $2.85 billion of three-year non-callable first-lien PIK notes (Caa1) being marketed with a 15½% all-PIK coupon at par. The deal was announced earlier with guidance of 13%, envisioning a coupon that would be 9% PIK and 4% cash, at OID 96.

The revised deal also includes $1 billion of 3.5-year non-callable second-lien PIK notes being marketed with a 17½% all-PIK coupon at OID 75. The second-lien deal was earlier announced with a tenor of four years, and initial guidance that would have set the coupon 300 basis points behind the first-lien notes, at OID 96.

The Oct. 19 week is set to get underway to an empty forward calendar.

With the U.S. presidential election 18 days away, new issue activity might ebb somewhat, a trader suggested on Friday.

However, the primary market is expected to remain active in the week ahead, sources say.

Navistar’s acquisition

Navistar’s senior notes were in focus on Friday following news the trucking company had agreed to Volkswagen AG’s Traton SE heavy-truck division’s offer for the company.

While the company’s 9½% senior secured notes due 2025 were trading down on the news, Navistar’s 6 5/8% senior notes due 2025 jumped.

Navistar’s 9½% notes dropped more than 1 point.

The notes were trading on a 111-handle heading into the market close.

However, Navistar’s 6 5/8% senior notes due 2025 climbed 2 points to trade in the 103½ to 103 5/8 context heading into Friday’s close.

The 9½% notes contain a provision with the first call at 107.125 after one year, if Traton acquires Navistar.

Navistar priced a $600 million issue of the 9½% notes at par in April.

On Friday, Traton announced that it had reached an agreement in principal to acquire the remaining shares of Navistar for an increased offer price of $44.5 per share.

102-handle

United Natural’s 6¾% senior notes due 2028 and Shift4 Payments’ 4 5/8% senior notes due 2026 were putting in a strong performance in the secondary space with both trading on a 102-handle.

United Natural’s 6¾% senior notes due 2028 were marked at 102 5/8 bid, 102 7/8 offered early in the session, a source said.

The notes were making gains after a strong break that saw them close the previous session at 102¼ bid, 102¾ offered.

The Providence, R.I.-based food wholesaler is from a favored sector with grocers considered resilient, a source said.

United Natural priced an upsized $500 million, from $400 million, issue of 6¾% notes at par on Thursday.

Pricing came at the tight end of the 6¾% to 7% yield talk. Initial talk was in the 7¼% area, a trader said.

Half the deal was spoken for in reverse inquiry, a source said.

Shift4 Payments’ 4 5/8% senior notes due 2026 were also putting in a strong performance.

The 4 5/8% notes were marked at 102¼ bid, 102¾ offered on Friday, a level reached shortly after breaking for trade.

Shift4 Payments priced a $450 million issue of the 4 5/8% notes at par on Thursday.

Pricing came at the tight end of yield talk in the 4¾% area. Initial guidance was in the low 5% area.

Improved

Rolls-Royce’s 5¾% senior notes due 2027 continued to climb in active trading on Friday.

The notes traded up to a 102-handle and were marked at 102 bid, 102¼ offered heading into Friday’s close.

The notes were changing hands in the 101½ to 101 7/8 context on Thursday.

Rolls-Royce priced a $1 billion tranche of the 5¾% notes at par on Wednesday as part of a £1.99 billion equivalent, three-tranche, three-currency offering.

Canpack’s 3 1/8% senior notes due 2025 continued to improve in active trading on Friday.

The notes were up ¼ point to 101 bid, 101¼ offered after closing out the previous session at par ¾ bid, 101 offered.

Canpack priced a $1.1 billion equivalent two-tranche offering on Thursday in a deal that played to both emerging market and high yield accounts.

The deal included a $400 million tranche of the 3 1/8% notes which priced at par. Pricing came tight to talk in the 3¼% area.

The deal also included a €600 million tranche of seven-year notes, which priced at par to yield 2 3/8%.

$72 million Thursday inflows

The dedicated high-yield bond funds had $72 million of net daily inflows on Thursday, according to a market source.

Actively managed high-yield funds saw $105 million of inflows on the day.

However high-yield ETFs were negative, sustaining $33 million of outflows on Thursday, the source said.

News of Thursday's daily fund flows follows a Thursday report that the combined funds saw $2.204 billion of net inflows on the week to the Wednesday, Oct. 14 close, according to the Refinitiv Lipper Fund Flow Report Newsline.

In other news on the fund flows front, funds which report to Refinitiv Lipper on a monthly basis reported $132 million of net outflows for September, increasing that month's net outflows from the combined funds to $7.7 billion, the market source said.

Tracking back, the funds saw $6.2 billion of monthly inflows in August, $8.8 billion of inflows in July, $6.5 billion of inflows in June, $20.5 billion of inflows in May, and $17.1 billion of monthly inflows in April, the source said.

For the year 2020 to Thursday's close the combined funds have seen $42.1 billion of net inflows, according to the market source.

Indexes mixed

Indexes closed Friday mixed.

The KDP High Yield Daily index gained 3 basis points to close Friday at 66.75 with the yield now 5.41%.

The index fell 13 bps on Thursday after gaining 6 bps on Wednesday and 7 bps on Tuesday.

The index was largely flat on the week with a cumulative gain of 3 bps on the week.

The ICE BofAML US High Yield index gained 16.2 bps with the year-to-date return now 1.071%.

The index dropped 34.4 bps on Thursday and was down 4.2 bps on Wednesday after gaining 23.3 bps on Tuesday.

The index was also largely flat on the week with a cumulative gain of 0.9 bps.

The CDX High Yield 30 index dropped 10 bps to close Friday at 105.74.

The index was down 16 bps on Thursday, 16 bps on Wednesday and 13 bps on Tuesday for a cumulative decline of 55 bps on the week.

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