Primary prices $2.9 billion; Newell trades up; Herbalife flat; funds add $1.64 billion

By Paul A. Harris and Abigail W. Adams

Portland, Me., May 21 – The domestic high-yield primary market saw an explosion of activity on Thursday with seven issuers pricing a cumulative $2.9 billion in eight tranches.

Pharmaceutical Product Development priced an upsized $1.2 billion, United States Steel Corp. priced an upsized $1 billion, Teleflex Inc. priced $500 million, Clark Equipment Co. priced $300 million, Northwest Fiber, which does business as Ziply Fiber, priced $250 million, and Cooper-Standard Automotive Inc. priced $250 million.

XPO Logistics, Inc. priced a $300 million add-on to its 6¼% senior notes due May 1, 2025 (Ba3/BB-).

Meanwhile, the secondary space was largely unchanged on Thursday with new paper the focus of trading activity.

The majority of deals to price during Thursday’s session had strong breaks.

However, as U.S. Steel prepped its latest offering, the company’s unsecured notes were selling off.

The deals to price during Wednesday’s session remained active in the aftermarket but with mixed results.

Newell Brands Inc.’s 4 7/8% senior notes due 2025 (Ba1/BB+/BB) were well above their issue price in high-volume activity.

However, Herbalife Nutrition Ltd. and HLF Financing, Inc.’s 7 7/8% senior notes due 2025 (B1/BB-) largely fell flat.

Demand for new paper remains strong in junkbondland with investors eager to put money to work, sources said.

Money continued to enter the space with high-yield mutual and exchange-traded funds continuing to experience inflows.

Dedicated funds saw inflows of $1.637 billion for the week ending Wednesday, according to Refinitiv Lipper US Fund Flows.

A torrid session

A torrid Thursday session in the new issue market may have capped a big week for high-yield issuance.

Thursday's action cleared the active calendar ahead of Friday's abbreviated session and the extended Memorial Day holiday weekend to follow.

Pharmaceutical Product Development, issuing as Jaguar Holding Co. II and PPD Development, LP, price an upsized $1.2 billion amount of senior notes (B2/B) in a revised two-part transaction done as a drive-by.

The deal included $700 million of eight-year notes that priced at par to yield 5%, at the tight end of the 5% to 5¼% yield talk.

In a tranche added subsequent to the announcement of the deal, PPD also priced $500 million of five-year notes at par to yield 4 5/8%.

The overall amount of issuance increased to $1.2 billion from $700 million.

United States Steel Corp. priced an upsized $1 billion amount of 12% five-year senior secured notes (B2/B+) at 94.665 to yield 13½%.

The issue size increased from $700 million.

The coupon came on top of coupon talk. The yield came in the middle of yield talk in the 13½% area. The issue price came cheap to price talk of approximately 95.

Teleflex priced a $500 million issue of eight-year senior notes (Ba3/BB) at par to yield 4¼%.

The yield printed 12.5 basis points through yield talk in the 4½% area. Initial guidance was in the high 4% area.

The notes had a strong break. They were marked at par ¾ bid, 101½ offered after freeing for trade.

XPO Logistics priced a $300 million add-on to its 6¼% senior notes due May 1, 2025 (Ba3/BB-) at 101.75 to yield 5.835%.

The issue price came at the rich end of price talk in the 101.5 area.

Clark Equipment priced a $300 million issue of five-year senior secured notes (Ba3/BB+) at par to yield 5 7/8%.

The yield came 12.5 basis points through the 6% to 6¼% price talk, and well inside of initial guidance in the 6½% area.

The notes also saw a strong break and were marked at 101¾ bid soon after pricing.

Northwest Fiber priced $250 million of 10¾% eight-year senior notes (Caa1/CCC) at 98 to yield 11.131% on Thursday, according to market sources.

The coupon and issue price came on top of price talk.

A $225 million amount of the notes was placed via Rule 144A and Regulation S, with the remaining $25 million placed privately.

The 10¾% notes were marked at 99½ bid after freeing for trade.

Cooper-Standard Automotive priced a $250 million issue of 13% four-year senior secured notes (B1/B-) at 98 to yield 13.664%.

The coupon and price came on top of talk. The yield printed wide of initial talk in the 13½% area.

The notes also saw a strong break and were marked at 99 bid, a source said.

Newell

Newell Brands’ 4 7/8% senior notes due 2025 were trading more than 2 points above their discounted issue price in high-volume activity on Thursday.

However, some sources were mystified by the notes’ performance.

The 4 7/8% notes were seen at 101½ bid Thursday afternoon. “That gets you a 4½% yield and barely a 415 spread,” a source said.

The notes were changing hands at 101 5/8 heading into the market close.

They had more than $73 million in reported volume.

With the tight coupon and short maturity, “I’m not sure how this one got done,” a source said.

The Atlanta-based marketer of consumer and commercial products has a troubled business model, the source said.

Newell Brands was one of 2019’s fallen angels.

While some sources were not a fan of the offering, the deal was heavily oversubscribed during bookbuilding.

Newell priced a $500 million issue of 4 7/8% notes at 99.5 to yield 4.989% in a Wednesday drive-by.

The deal printed low to the 5% to 5¼% yield talk. It was heard to be as much as 10x oversubscribed.

Herbalife flat

Herbalife’s 7 7/8% senior notes due 2025 largely fell flat in high-volume activity in the secondary space.

The 7 7/8% notes were trading in the par to par ¼ context on Thursday with more than $55 million in reported volume, sources said.

The coupon was hefty and the company has good cash flow, a source said.

With a market cap of $3.5 billion and debt of $2 billion, the credit seemed to be in good shape.

However, there has been an ongoing debate in the investor community about whether the Los Angeles-based nutritional supplements supplier is a Ponzi scheme, a source said.

In previous years, Pershing Square’s William Ackman and famed investor Carl Icahn publicly clashed over Herbalife with Ackman taking a short position in the company and Icahn going long.

Ackman capitulated his position in 2018.

Herbalife priced a $600 million issue of the 7 7/8% notes at par on Wednesday.

The yield printed in the middle of yield talk in the 7 7/8% area and tight to initial talk in the 8% area.

U.S. Steel declines

U.S. Steel’s unsecured senior notes were selling off on Thursday as the company prepped its new offering.

U.S. Steel’s 6¼% senior notes due 2026 dropped 3 points to 58½, according to a market source.

The 6 7/8% senior notes due 2025 dropped 2½ points to 63.

While the unsecured notes were still trading with a higher yield than U.S. Steel’s latest offering, the new offering pushed the notes further down the capital structure, a source said.

Indexes mixed

Indexes were mixed on Thursday

The KDP High Yield Daily index gained 15 basis points to close Thursday at 63.52 with the yield 7.27%.

The index was up 33 bps on Wednesday, 22 bps on Tuesday and 45 bps on Monday.

The ICE BofAML US High Yield index gained 33 bps with the year-to-date return now negative 7.525%.

The index was up 69.1 bps on Wednesday, dropped 28 bps on Tuesday and jumped 103.5 bps on Monday.

The CDX High Yield 30 index dropped 20 bps to close Thursday at 95.19. The index gained 133 bps on Wednesday, shaved off 20 bps on Tuesday and jumped 166 bps on Monday.

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