Neiman Marcus, Verra Mobility price; Fortescue Metals, Terex at a premium; Yum! improves

By Paul A. Harris and Abigail W. Adams

Portland, Me., March 19 – The domestic high-yield primary market saw two deals price during Friday’s session.

Neiman Marcus Group Inc. priced an upsized $1.1 billion issue of five-year senior secured first-lien notes (Caa2/CCC+).

And Verra Mobility Corp. and VM Consolidated, Inc. priced a $350 million issue of eight-year senior notes (Caa1/B-).

The new deal activity will continue into the March 22 week with Interior Logic Group and Advanz Pharma Corp. Ltd. joining the forward calendar.

Meanwhile, the secondary space saw modest improvement on Friday following a brutal session on Thursday that wiped out the ICE BofAML US High Yield index’s gains for the year.

However, volume was light with new issues continuing to dominate the tape.

Fortescue Metals Group Ltd.’s 4 3/8% senior notes due 2031 (Ba1/BB+) and Terex Corp.’s 5% senior notes due 2029 (B2/BB-) were putting in strong performances in the aftermarket with the notes 1 to 2 points above their issue prices.

Meanwhile, Yum! Brands, Inc.’s 4 5/8% senior notes due 2032 (B1/BB-) improved in active trading.

Friday’s primary

Neiman Marcus Group priced an upsized $1.1 billion issue (from $1 billion) of 7 1/8% five-year senior secured first-lien notes (Caa2/CCC+) at par on Friday.

The deal, which the luxury department store operator brought in order to repay some bankruptcy-related debt, went well, according to market sources.

It was playing to $3.6 billion of demand at launch, early Friday afternoon, and was trading at 101½ bid, 102 offered at the close, a bond trader said.

Elsewhere, Verra Mobility priced a $350 million issue of eight-year senior notes (Caa1/B-) at par to yield 5½%, in the middle talk.

Treasuries sold off further on Friday, creating some stock market volatility, the trader remarked, noting that 10-year government paper was yielding 1.73% shortly after the close.

However, Friday's issuers, from the lower echelons of the speculative-grade credit spectrum, appeared to suffer no ill effects, while rising Treasury yields continue to pressure higher-rated, longer-duration junk bonds, crossover paper and of course investment-grade bonds, market sources say.

Dealers announced a couple of offerings on Friday, so that the March 22 week will get underway with an active calendar already in place.

Interior Logic Group set a Monday investor call for the presentation of a $300 million offering of eight-year senior notes (Caa1/CCC+).

And London-based Advanz Pharma Corp. plans to start a roadshow on Monday for a $1.02 billion equivalent two-part offering of seven-year senior secured notes.

The deal is coming in tranches of $560 million equivalent of euro-denominated notes and $460 million equivalent of sterling-denominated notes (see related stories in this issue).

Fortescue in demand

Fortescue’s 4 3/8% senior notes due 2031 were putting in a strong performance in the secondary space.

The notes traded in a range of par 5/8 to 101½ during Friday’s session. They stood poised to close the day on a 101-handle, according to a market source.

The notes were active with more than $74 million in reported volume.

Fortescue Metals priced an upsized $1.5 billion, from $750 million, issue of the 4 3/8% notes at par on Thursday.

The yield printed at the tight end of the 4 3/8% to 4½% yield talk.

The deal played to heavy demand and was playing to $2.1 billion of orders shortly after it was announced, a source said.

Terex on a 102-handle

Terex’s 5% senior notes due 2029 continued to trade on a 102-handle after a strong break the previous session.

The notes were changing hands in the 102 to 102½ context in the late afternoon, a source said.

There was about $20 million in reported volume.

Terex priced a $600 million issue of the 5% notes at par to yield 4.999% on Thursday.

Pricing came at the wide end of the 4¾% to 5% yield talk although the deal was heard to be 2x oversubscribed.

Yum! improves

Yum!’s recently priced 4 5/8% senior notes due 2032 improved in active trading on Friday, which was a firmer day for the markets.

The 4 5/8% notes gained about ½ point to trade up to 101 late in the session, according to a market source.

There was more than $32 million in reported volume.

While the 4 5/8% notes have traded with a premium since breaking for trade on Tuesday, they have been stuck on a par-handle amid the market volatility.

However, sources anticipated the notes would improve once the overall market stabilized.

$169 million Thursday outflows

The dedicated high-yield bond funds sustained $169 million of net outflows on Thursday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs had $199 million of outflows on the day.

Actively managed high yield funds were positive on Thursday, seeing $30 million of inflows on the day, the source said.

$169 million Thursday outflows

The dedicated high-yield bond funds sustained $169 million of net outflows on Thursday, the most recent session for which data was available at press time, according to a market source.

High yield ETFs sustained $199 million of outflows on the day.

Actively managed high-yield funds were positive on Thursday, with $30 million of inflows on the day, the source said.

Indexes mixed

Indexes closed the week mixed.

The KDP High Yield Daily index shaved off 4 points to close the day at 68.86 with the yield now 4.31%. The index dropped 17 points on Thursday, 10 points on Wednesday, 3 points on Tuesday and 3 points on Monday.

The index posted a weekly decline of 37 points.

The ICE BofAML US High Yield index dropped into negative territory on Friday with its gains for the year knocked out over the two previous sessions.

The index dropped 4.6 bps with the year-to-date return now 0.041%.

The index dropped 23.7 bps on Wednesday, 23.8 bps on Wednesday, 0.3 bps on Tuesday and 0.7 bps on Monday.

The index posted a cumulative loss of 53.1 bps on the week.

The CDX High Yield 30 index gained 25 bps to close Friday at 108.55.

The index dropped 60 bps on Thursday, gained 26 bps on Wednesday, dropped 14 bps on Tuesday and gained 3 bps on Monday.

The index posted a weekly gain of 44 bps.

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