Allison Transmission oversubscribed; Endo, Par Pharma jump; Bed Bath & Beyond surges

By Paul A. Harris and Abigail W. Adams

Portland, Me., March 26 – The domestic and European high-yield primary market each saw one deal price with several deals on deck for the domestic primary market.

In a highly oversubscribed offering, Allison Transmission, Inc. priced a $500 million issue of 10-year senior notes (Ba3//BB) at par to yield 5 7/8% in a quick-to-market trade.

Realogy Group LLC is expected to price $400 million of eight-year senior notes (B2) on Wednesday.

Surgery Partners, Inc. is expected to price its $430 million offering of eight-year senior notes before the week draws to a close.

Kodiak Gas Services LLC also still appears to be in the market with its $400 million offering of eight-year senior notes (Caa2/B-/B), although there were no updates on the deal, which was held over from last week.

In the European market, Volvo Car AB priced a €600 million issue of 2 1/8% senior notes (Ba1/BB+) at a 215 basis points spread to mid-swaps.

Meanwhile, the secondary space was firming on Tuesday.

Endo International plc’s junk bonds and Endo subsidiary Par Pharmaceutical Cos., Inc.’s recently priced 7½% senior notes due 2027 jumped in active trading on Tuesday following Purdue Pharma’s settlement with Oklahoma.

Bed Bath & Beyond Inc.’s 5.165% senior notes due 2025 jumped more than 4 points following activist investors’ plans for a management shakeup.

As Realogy Group marketed its new deal, the company’s 4 7/8% senior notes due 2023 continued their upward momentum on Tuesday.

Oversubscribed Allison prices tight

Amid moderate news flow in the primary market on Tuesday, Allison Transmission priced a $500 million issue of 10-year senior notes (Moody's: Ba3/Fitch: BB) at par to yield 5 7/8% in a quick-to-market trade.

The yield printed at the tight end of yield talk in the 6% area and inside of initial guidance in the low 6% area.

The drive-by debt refinancing deal, which was propelled into market by reverse inquiry, was heard to be playing to $1.5 billion of orders at noon on Tuesday, according to a trader.

The bonds were trading at par 5/8 bid, 101 1/8 offered in the aftermarket, the source said.

A while earlier an investor marked the new Allison Transmission bonds 5 7/8% notes due June 2029 at par ¾ bid, 101¼ offered.

Citigroup was the left bookrunner.

Realogy could upsize

Looking to the Wednesday session, Realogy Group is expected to price $400 million of eight-year senior notes (B2).

There is fully $400 million of reverse inquiry demand at play in the deal, an investor said on Tuesday, adding that there is a buzz in the market that Realogy could upsize.

As the market awaits official price talk, initial guidance is in the mid-to-high 9% area, sources say.

The calendar

Elsewhere, Surgery Partners is in the market with a $430 million offering of eight-year senior notes.

Early guidance is in the 9¼% to 9½% area.

The roadshow was scheduled to present in Boston on Wednesday and the debt refinancing deal, helmed by Jefferies, is set to price during the present week.

Kodiak Gas Services, held over from last week, appears to still be in the market with a $400 million offering of eight-year senior notes (Caa2/B-/B), sources say.

There were no Tuesday updates.

The latest buzz has Kodiak coming at 10%, with further covenant changes.

The notes were talked to yield 9¼% to 9½% last Friday, which is well wide of early guidance in the 8½% to 8¾% area.

Meanwhile, Staples is expected to take the wrapper off of a $750 million offering of secured notes and a $1,375,000,000 offering of unsecured notes in the very near future, an investor said.

The unsecured piece has guidance in the low 10% area, sources say.

The Staples deal, which involves a $1 billion dividend to sponsor Sycamore Partners, might get a warmer reception than is customary for dividend deals, an investor said on Tuesday.

That's because it represents net “new” issuance.

Lately the calendar has been heavy with refinancing deals, which take investors out of existing bonds while replacing them with new ones, resulting in no net new issuance, the source explained.

And the cash balances of the accounts are thought to be high, at present, the investor added.

Also near at hand is Inmarsat with up to $1,125,000,000 of senior notes backed by a bridge loan, the investor said.

Dealers are seeking to syndicate that bridge, the investor said.

As reported, the bridge bears interest at Libor plus 425 bps with a 0% Libor floor. The spread increases by 50 bps every three months up to a specified cap.

BofA is the administrative agent for the bridge.

Volvo oversubscribed

During the European session, Volvo Car priced a €600 million issue of 2 1/8% senior notes (Ba1/BB+) at a 215 bps spread to mid-swaps.

The spread came on top of spread talk and tight to earlier guidance of mid-swaps plus 240 bps, according to a market source who added that the deal was heard to be playing to €2 billion of demand.

Endo jumps

Endo International’s junk bonds were gaining ground in high-volume activity on Tuesday on the heels of Purdue Pharma’s opioid lawsuit settlement with the state of Oklahoma.

Endo’s 6% senior notes due 2025 rose 3 points in high-volume activity.

The notes were changing hands around 73 with more than $35 million of the bonds on the tape by the late afternoon, according to a market source.

Endo subsidiary Par Pharmaceutical’s recently priced 7½% senior notes due 2027 jumped 1¼ points to 101 1/8.

More than $28 million of the bonds changed hands during Tuesday’s session.

Purdue, the maker of OxyContin, agreed to pay $270 million to settle Oklahoma’s lawsuit alleging it had contributed to the opioid epidemic in the state.

Endo has also been named in thousands of lawsuits accusing the generics and specialty pharmaceutical company of contributing to the opioid epidemic.

Endo’s junk bonds have moved in sympathy with news on Purdue. The settlement was seen as a positive for drug companies facing liabilities from opioids, according to a market source.

Bed Bath & Beyond surges

Bed Bath & Beyond’s 5.165% senior notes due 2044 surged on Tuesday as news surfaced activist investors were planning on a management shake-up of the company.

The 5.165% senior notes rose more than 4 points. They were seen at 75½ in the late afternoon. They were previously trading around 71, a market source said.

The junk bonds were surging alongside the company’s stock as activist investors plan a management shake-up.

Legion Partners Asset Management LLC, Macellum Advisors and Ancora Advisors LLC are seeking to replace the entire 12-member board of the struggling retailer.

They are also seeking to replace the chief executive officer, Bloomberg reported.

Realogy gains continue

Realogy’s 4 7/8% senior notes due 2023 continued their upward momentum on Tuesday as the company marketed its new offering.

The 4 7/8% notes rose 2 1/8 points to 91 7/8, according to a market source.

The notes were also on the rise during Monday’s session after Realogy announced its new offering.

The 4 7/8% notes gained 1¼ points to close Monday at 89¾, a source said.

Indexes gain

Indexes showed signs of recovery on Tuesday with some largely flat while others posted gains.

The KDP High Yield Daily index gained 1 bp to close Tuesday at 70.06 although the yield remained flush with Monday at 5.93%.

The index dropped 7 bps on Monday after a cumulative gain of 23 bps on the week.

The CDX High Yield 30 index gained 19 bps to close Tuesday at 106.16. The index dropped 14 bps on Monday after a cumulative loss of 36 bps on the week last week.

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