Primary pace quickens as Ashtead megadeal, Sirius add-ons, and AK price; new U.S. Steel, Diamond active

By Paul Deckelman and Paul A. Harris

New York, Aug. 2 – The high-yield primary pace picked up on Wednesday as a trio of issuers brought nearly $2 billion of new junk-rated, dollar-denominated paper to market in a series of quickly shopped offerings.

British industrial equipment rental company Ashtead Group plc led the way with a $1.2 billion offering of eight- and 10.25-year secured notes, evenly split into two tranches.

Among the domestic issuers, satellite broadcaster Sirius XM Radio Inc. priced $500 million in two add-on tranches to the five- and 10-year notes that the company sold in late June.

AK Steel Corp. was the sole single-tranche issuer of the day, doing $280 million of eight-year notes.

It was the second deal in as many days coming from the industrial metals sector, following on the heels of Tuesday’s big offering from AK rival United States Steel Corp. That 10-year deal was meanwhile the busiest credit in Wednesday’s Junkbondland activity, easing in heavy trading.

Not far behind on the Most Actives list were Tuesday’s other offerings, from Diamond Offshore Drilling, Inc. and Penske Automotive Group, Inc.

Away from the new deals, traders saw AMC Entertainment Holdings Inc.’s various bond issues under pressure even as the movie-theater operator’s stock slid after disappointing earnings.

Statistical market performance measures were better for a second consecutive session on Wednesday; they had turned higher across the board on Tuesday after having been mixed over the previous two sessions and lower all around the session before that.

Ashtead prices $1.2 billion

Three issuers price a total of five tranches, raising a combined total of $1.99 billion in the Wednesday's dollar-denominated primary market.

All of it came quick-to-market.

None of it was upsized.

Executions betrayed a new issue market that is hungry for paper: Two tranches came inside of talk, one came at the tight end and two came on top of talk.

Ashtead Group plc priced $1.2 billion of second priority senior secured notes in two tranches, both of which priced inside of talk and blew well through initial guidance.

The debt refinancing deal included $600 million of notes due Aug. 15, 2025 which priced at par to yield 4 1/8%. The yield came inside of the 4¼% to 4½% yield talk. Initial guidance was 4½% to 4¾%.

In addition the company priced $600 million of notes due Dec. 31, 2025 at par to yield 4 3/8%. The yield came inside of the 4½% to 4¾% yield talk. Initial guidance was 4¾% to 5%.

JP Morgan was the lead bookrunner.

SiriusXM two-part tap

SiriusXM priced $500 million of senior notes (Ba3/BB) in two add-on tranches.

The debt refinancing deal included a $250 million add-on to the 3 7/8% senior notes due 2022 which priced at 101.00 to yield 3.6%.

A $250 million add-on to the 5% notes due 2027 also priced at 101.00 to yield 4.846%.

Both tranches priced on top of price talk.

JP Morgan, Barclays, Morgan Stanley, BMO, Citigroup, Deutsche Bank, Goldman Sachs, RBC, SunTrust, Wells Fargo, BNP Paribas, Credit Agricole, Mizuho, Scotia and US Bancorp managed the sale.

AK Steel prices tight

AK Steel Corp. priced a $280 million issue of eight-year senior notes (B3/B-) at par to yield 6 3/8%.

The yield printed at the tight end of yield talk.

Wells Fargo was the left bookrunner. Deutsche Bank, Goldman Sachs, BofA Merrill Lynch, Barclays, BMO, Citigroup, Credit Suisse and KeyBanc Capital Markets were the joint bookrunners.

The West Chester Township, Ohio-based steel producer plans to use the proceeds to refinance its 8 3/8% senior notes due 2022.

Cornerstone upsizes

Cornerstone Chemical Co. upsized its offering of seven-year senior secured notes (B2/B) to $450 million from $430 million.

Talk was finalized at 6¾%, the tight end of the 6¾% to 7% yield talk.

The deal is set to price and allocate on Thursday. Prior to the upsizing it had been scheduled to price on Wednesday.

Talk has firmed through the course of time that the deal has been in the market. Initial guidance was in the low-to-mid 7% area. That subsequently firmed to the 7% area on Monday.

Goldman Sachsis the left bookrunner.

Proceeds will be used to fund the acquisition of Cornerstone Chemical Co. by Littlejohn & Co. LLC from H.I.G. Capital, and to repay debt. The additional $20 million of proceeds resulting from the upsizing of the deal will be used to reduce the amount of equity in the acquisition financing.

Triumph starts roadshow

Triumph Group, Inc. started a roadshow on Wednesday for a $500 million offering of eight-year senior notes.

The debt refinancing deal is expected to price early in the Aug. 7 week.

JP Morgan and Citigroup are the joint bookrunners.

Lima Corporate prices FRN

Italy-based Lima Corporate SpA priced a €275 million issue of Euribor plus 375 basis points six-year senior floating-rate notes (B2/B) on Wednesday.

Goldman Sachs International and UBS are managed the sale.

The Villanova, Italy-based provider of products and services to the medical fields of orthopedics and traumatology plans to use the proceeds to repay bank debt.

Lima Corporate may have brought the curtain down on summer 2017 in the euro-denominated primary market, a London-based sellside source said.

AK issue edges up

In the secondary market, traders saw the new 6 3/8% notes due in October 2025 from AK Steel having edged up following that quick-to-market pricing.

A trader said that he saw the metals processor’s new deal at 100 1/8 bid, versus their par pricing level, with over $36 million of the notes changing hands.

At another desk, a trader quted the bonds right at their par issue price.

Sirius loses altitude

New York-based satellite radio broadcaster Sirius XM’s new deal had the net effect of hammering down the company’s existing bonds onto which the add-on tranches were attached.

A market source quoted the 3 7/8% notes due 2022 at 101 5/8 bid – up from the 101 level at which the $250 million add-on priced, but down ½ point from the levels the existing 3 7/8% notes were trading at on Tuesday, before the add-on deal was announced. More than $23 million traded on Wednesday.

Its 5% notes due 2027 likewise firmed from the add-on issue price of 101, going home at 101 7/8-but that was down 3/8 point from the pre-deal levels for the existing bonds. Volume was more than $31 million.

A second trader quoted both issues in a 101½-to-101¾ bid context.

Sirius priced $750 million of the 2022 notes and $1.25 billion of the 10-year bonds at par in a $2 billion quick-to-market offering back on June 26.

U.S. Steel leads actives

A market source said that U.S. Steel Corp.’s 6 7/8% notes due 2027, which preceded sector peer AK Steel’s offering by a day, was the most actively traded junk credit on Wednesday, racking up more than $85 million of volume.

But he pegged those notes down 3/8 point on the day, at 100 5/8 bid.

A second trader heard the bonds earlier circulating in a 100 3/8-to101¼ bid context, before easing later in the session.

The Pittsburgh-based steelmaking giant had priced its $750 million of new paper at par on Tuesday in a regularly scheduled forward calendar offering.

Diamond, Penske deals busy

Tuesday’s other two new issues were likewise seen actively trading on Wednesday, though on nowhere near the kind of volume that U.S. Steel generated.

Two traders saw Diamond Offshore Drilling’s 7 7/8% senior secured notes due 2025 trading between 99¾ and par bid, with one of them seeing the bonds finally finishing at par, up ¼ point on the day, on turnover of more than $62 million.

The Houston-based global offshore energy drilling company had priced its $500 million of new paper at par in a scheduled forward calendar deal Tuesday.

Penske Automotive’s 3¾% senior subordinated notes due 2020 firmed by 1/8 point, to 101 5/8 bid, on volume of over $17 million.

The Bloomfield Hills, Mich. Based auto retailer had priced its $300 million drive-by deal at par on Tuesday and the new notes had firmed smartly in initial aftermarket dealings.

Bad show for AMC

Traders said that new and recently priced deals dominated Wednesday’s proceedings.

But one said that AMC Entertainment’s paper “came under a lot of pressure” after the Leawood, Kans.-based movie theater operator reported disappointing second-quarter earnings.

Its 6 1/8% notes due 2027swooned by more than 3 points, to 100 1/8 bid, with over $22 million traded, while its 5 7/8% notes due 2022 likewise lost ground to end at 102 5/8 bid, on more than $20 million traded.

The company’s New York Stock Exchange-traded shares meantime slid by $5.60, or 26.92%, ending at $15.20, on volume of over 16.9 million, more than eight times the norm.

Indicators improvement continues

Statistical market performance measures were better for a second consecutive session on Wednesday; they had turned higher across the board on Tuesday after having been mixed over the previous two sessions and lower all around the session before that.

The KDP High Yield Daily Index firmed by 2 basis points on Wednesday to finish at 72.62, its second straight advance. It had also risen by 1 bp on Tuesday, after having fallen over two straight sessions before that, including Monday, when it was off by 3 bps.

Its yield came in by 2 bps to go home Wednesday at 4.97%, its first narrowing after four successive sessions in which the yield had widened out, including on Tuesday, when it was up by 4 bps – an unusual gain, since typically moves inversely to the index reading, generally falling when the index reading rises, as the latter measure did on Tuesday, and rising when the index reading falls.

The Markit CDX Series 28 High Yield Index edged up by not quite 1/32 point on Wednesday, ending at 107¾ bid. 107 25/32 offered, its third straight gain after two successive losses before that. On Tuesday, it had improved by 1/8 point.

The Merrill Lynch North American High Yield Index closed up by 0.006% on Wednesday, its second successive upturn; on Tuesday, it had risen by 0.1%, reversing Monday’s 0.004% loss.

Wednesday’s advance lifted the index’s year-to-date return to 6.233% – its second straight new 2017 cumulative peak level. That topped the previous zenith of 6.227%, which had been set on Tuesday.

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