Albertsons prices; Mueller, Matterhorn on tap; Rite Aid active; Tesla gains; PetSmart rebound continues

By Paul A. Harris and Abigail W. Adams

Portland, Me., June 6 – The domestic primary market saw one upsized deal price on Wednesday. However, the domestic and European primary market will see several more price before the week draws to a close.

Albertsons Cos., Inc. priced an upsized $750 million issue of Libor plus 375 basis points 5.5-year senior secured floating-rate notes at 99.50. The notes were seen well above their issue price after breaking for trade.

While Albertsons was the lone deal to price on Wednesday, Mueller Water Products, Inc.’s offering of $425 million eight-year senior notes (Ba3/BB) and Salt Mobile SA’s (Matterhorn Telecom SA) offering of CHF 2,085,000,000 billion equivalent four part offering of senior secured notes (B2/B+) is set to price on Thursday.

Aleris International, Inc.’s $400 million offering of five-year senior secured junior priority notes (B1/CCC+) is scheduled to price before the end of the week.

Meanwhile, the secondary space was firm on Wednesday. “There’s definitely a bid to the market,” a source said.

While Albertsons’ new floaters did not spur activity in the food and drug retailers other junk bonds, Rite Aid Corp.’s 6 1/8% senior notes due 2023 (B3/B-) were active in the space and down about ¾ point.

Tesla Inc.’s junk bonds were up about 2¼ point on Wednesday after the annual shareholder meeting on Tuesday and a company announcement that it is on track to meet its production goals.

The bonds are heavily shorted and the jump may have been the result of a squeeze, a market source said.

PetSmart Inc.’s junk bonds remained in focus and continued to make gains with the notes returning to their previous levels before their downward spiral in early May.

Albertsons upsizes

Albertsons priced an upsized $750 million issue of Libor plus 375 basis points 5.5-year senior secured floating-rate notes at 99.50.

The issue size was increased from $500 million.

It had been in the market with early guidance of Libor plus 425 bps at 99.5.

BofA Merrill Lynch was the lead left bookrunner for the notes which came in connection with the company’s merger with Rite Aid.

Salt talks CHF 2.1 billion

Salt Mobile SA (Matterhorn Telecom SA) set price talk in its CHF 2,085,000,000 billion equivalent four part offering of senior secured notes (B2/B+).

With tranche sizes still to be determined, price talk is as follows:

• Euro-denominated seven-year floating-rate notes are talked at Euribor plus 350 to 375 basis points, with a 0% Euribor floor;

• Swiss franc-denominated seven-year fixed-rate notes are talked at 4% to 4¼%;

• Euro-denominated eight-year fixed-rate notes are talked in the 4 ¾% area, and

• Dollar-denominated eight-year fixed-rate notes are talked in the 7% area.

Books close at 10 a.m. ET Thursday and the debt refinancing deal is set to price thereafter.

Credit Suisse is the left lead global coordinator. Goldman Sachs and SG CIB are also global coordinators.

On deck

Mueller Water Products is in the market with a $425 million offering of eight-year senior notes (Ba3/BB) with initial guidance in the high 5% to 6% area.

The deal is expected to price on Thursday.

BofA Merrill Lynch has the lead for the debt refinancing deal.

Aside from the above, the active deal calendar features dollar- and euro-denominated offers expected to clear in the latter part of the June 4 week.

Aleris International is marketing $400 million of five-year senior secured junior priority notes (B1/CCC+) with initial guidance in the 11¼% area.

On the European calendar, InterXion Holding is scheduled to roadshow €1 billion of seven-year senior notes through Thursday.

And Finland-based stainless steel producer Outokumpu Oyj is marketing a €250 million six-year senior secured notes on a roadshow also set to wrap up on Thursday.

Price talk on InterXion and Outokumpu remained pending as the Wednesday European close neared, according to a London-based debt capital markets banker.

Albertsons trades up, Rite Aid down

Albertsons’ new Libor plus 375 basis points floating-rate notes were well above their 99.5 issue price after breaking for trade, market sources said.

The new notes were seen trading between par to par 3/8.

There was little activity in Albertsons junk bond structure as a result of the new deal, a market source said.

However, Rite Aid’s 6 1/8% senior notes due 2023 were active in the secondary market on Wednesday.

The notes were seen down about ¾ point to trade at 102 3/8 with about $22.5 million of the bonds on the tape, according to a market source.

Albertsons’ new floating rate notes were brought into the market in connection with its merger with Rite Aid.

Proceeds will be used to cover costs associated with the merger and repay Rite Aid’s debt.

While the merger is scheduled to close in the second half of 2018, Rite Aid has not yet scheduled a meeting for shareholder approval and some investors are organizing to prevent the merger from taking place, Forbes reported.

Tesla gains

Tesla’s 5.3% senior notes due 2025 jumped about 2¼ point in active trading on Wednesday. The notes were seen up to 90 3/8 with about $21.5 million of the bonds traded.

The rise in the bond prices “could have just been a squeeze in the bonds,” a market source said. The Tesla bonds are heavily shorted, the source said.

Tesla held its annual shareholder meeting on Tuesday where shareholders approved all of the company’s proposals and rejected calls to remove Elon Musk as chairman, MarketWatch reported.

Musk announced that Tesla will likely meet its production goals for Model 3 sedans by the end of June and will have positive net cash flows in the second half of 2018.

The large short position in Tesla’s bonds are no surprise given the difference of opinion about the company’s future prospects, a market source said.

If Tesla is able to meet its production goals and improve its cash flow, people may have to call their shorts, the source said.

PetSmart rebound continues

PetSmart junk bonds continued their rebound on Wednesday with the structure seen up again more than 1½ to 2 points. “Everyday they do a little bit better,” the source said.

The notes continued to see high trading volume on Wednesday, as they have for much of the week.

PetSmart’s 5 7/8% notes due 2025 were up more than 1½ point to trade north of 75 5/8 with about $30 million of the bonds traded.

The 7 1/8% notes due 2023 were up 2 ¾ points to trade at 58¾. The 8 7/8% notes due 2025 were up more than 3 points to trade at 58 with about $21 million of the bonds on the tape.

PetSmart notes have been on the rebound since Monday when the company’s asset transfer of its stake in Chewy.com was less than anticipated. PetSmart recently announced that it has hired restructuring advisers to help it reduce its debt.

PetSmart notes were under pressure for most of May after Amazon announced the launch of its own dog food brand and investors responded negatively to the appointment of a new CEO.

With PetSmart’s recent gains, the notes have surpassed their levels prior to Amazon’s announcement in early May.

Indexes gain

Benchmarks for the high-yield secondary market all saw gains on Wednesday.

The KDP High Yield index was up 10 basis points to close Wednesday at 70.53 with the yield now 5.87%. The index was up 11 bps on Tuesday.

The Merrill Lynch High Yield index further solidified itself in positive territory on Wednesday. The index was up 8 bps with the year-to-date return now 0.108.

The index crossed into positive territory on Tuesday for the first time since May 15.

The CDX High Yield 30 index was also up on Wednesday more than compensating for its Tuesday losses. The index was up 15 bps to close Wednesday at 106.83. The index was down 4 bps on Tuesday.

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