Berry downsizes; Q’Max on tap; NuStar, American Airlines hold premiums; Ally improves

By Paul A. Harris and Abigail W. Adams

Portland, Me., May 17 – The domestic high-yield primary market remained active on Friday with one deal pricing.

Berry Global Group, Inc. priced a downsized $1.75 billion amount of senior secured notes in two tranches on Friday.

The calendar also continued to grow with Q'Max Solutions Inc. planning to market a $225 million offering of five-year senior secured notes (Caa2/B-) in the coming week.

The deal joins Eldorado Gold Corp., CNG Holdings, Inc., Jefferies Finance LLC, and Neiman Marcus Group Ltd. LLC on the forward calendar.

Meanwhile, new paper remained in focus in the secondary space with the recent deals continuing to perform well.

Berry Global’s new tranches were seen trading at a slight premium to their issue price after breaking for trade with the second priority notes outperforming the first priority notes.

NuStar Logistics, LP’s 6% senior notes due 2026 (Ba2/BB-/BB) made the largest gains of the recent deals with the notes more than 1 point above their issue price.

American Airlines Group Inc.’s 5% senior notes due 2022 (B1/BB-) were among the most actively traded in the secondary space with the notes continuing to hold their ½ point premium.

Ally Financial Inc.’s 3 7/8% senior notes due 2024 continued to improve in active trading on Friday.

Outside of the new paper, United States Steel Corp.’s junk bonds continued to see high-volume activity with the notes dropping after the United States lifted the tariff on steel imports from Canada and Mexico.

Berry – oversubscribed, tight

What started as a megadeal turned out to be something slightly less.

Berry Global Group priced a downsized $1.75 billion amount of senior secured notes in two tranches on Friday.

The deal included a downsized $1.25 billion tranche of split-rated seven-year first priority notes (Ba2/BBB-) that priced at par to yield 4 7/8%.

The tranche size was decreased from $2 billion. The yield printed at the tight end of the 4 7/8% to 5% revised yield talk; earlier talk was in the 5% area.

In addition, Berry Global priced a downsized $500 million tranche of eight-year second priority notes (B2/BB) at par to yield 5 5/8%.

The tranche size decreased from $1 billion.

The yield printed at the tight end of revised yield talk in the 5¾% area; earlier talk was in the 6% area.

The overall amount of bond issuance decreased from $3 billion.

The $750 million downsize came amid high demand for the paper.

Books for Berry's new secured bonds, across both tranches, were heard to be filled with $8.5 billion of orders early Friday, an investor said.

Wells Fargo Securities LLC and Goldman Sachs & Co. LLC were the joint active bookrunners.

Wells Fargo was the left lead for the bond deal.

The $1.25 billion of proceeds extracted from the bonds were shifted to the dollar-denominated tranche of the concurrent term loan B, increasing its size to $4.25 billion.

The shifts of proceeds among the dollar-denominated term loan, the euro-denominated term loan, the first priority bonds and the second priority bonds were undertaken in order to get the company the most advantageous cost of capital possible, an informed source commented.

The Evansville, Ind.-based company plans to use the proceeds, along with cash on hand, to help fund its acquisition of RPC Group plc, as well as to repay certain debt of RPC and its subsidiaries and to prepay an existing Berry term loan.

Q'Max investor call

Looking to the May 20 week, Q'Max Solutions plans to present its $225 million offering of five-year senior secured notes (Caa2/B-) to investors on a conference call on Monday.

Pareto Securities has the books.

The Houston-based multinational oilfield services provider plans to use the proceeds to help fund its upcoming acquisition of Mountain Mud, as well as to repay debt and buy out certain existing equipment leases.

Forward calendar

Elsewhere, the Eldorado Gold $300 million offering of five-year senior secured second-lien notes (Caa1/B) is expected to come during the May 20 week.

Some market watchers were expecting it to clear before Friday's close, but it was pushed back, according to a market source, who added that changes to the deal are expected.

Initial talk is in the high 8% to 9% area.

CNG Holdings is expected to price its $310 million offering of five-year senior secured notes early in the week ahead.

Early guidance has the deal coming with a 12% coupon to yield 13%, a trader said.

Jefferies Finance is conducting a roadshow for $450 million of seven-year senior secured notes (Ba2/BB-).

The roadshow wraps up Tuesday. Early talk is in the mid-to-high 6% area.

And Neiman Marcus Group is in the market with a $550 million offering of five-year second-lien notes which is expected to price mid-to-late in the week ahead.

Away from the announced calendar, look for at least four additional transactions, pending market conditions, a syndicate banker said on Friday, specifying that none of them appeared poised to top the $400 million to $500 million range.

Berry at a slight premium

New paper from Berry was trading at a slight premium after breaking for trade with the second priority notes outperforming the first priority notes, sources said.

The 4 7/8% senior notes due 2026 were seen by one source at 99 7/8 bid, par 1/8 offered.

Another source pegged them at par bid, par ½ offered.

The 5 5/8% senior notes due 2027 were seen at par ½ bid, par ¾ offered. They were trading in a range of par ¼ to par 7/8, a market source said.

NuStar trades up

NuStar’s 6% senior notes due 2026 were maintaining a large premium in active trading in the secondary space on Friday.

The 6% notes were seen at 101 1/8 bid, 101 5/8 offered.

They were changing hands around 101½ in the late afternoon, which was level with Thursday’s close, sources said.

The notes saw more than $25 million in reported volume during Friday’s session.

NuStar priced a $500 million issue of the 6% notes at par in a Thursday drive-by.

The yield printed on top of yield talk and inside of initial guidance which was in the 6¼% area.

The deal was heard to be as much as two-times oversubscribed.

American Airlines active

American Airlines’ 5% senior notes were among the most actively traded issues in the secondary space on Friday with the notes holding on to the premium it had after breaking for trade.

The 5% notes were seen at par ¼ bid, par ¾ offered and were changing hands around par ½, sources said.

There was more than $52 million in reported volume by the late afternoon.

American Airlines priced a massively upsized $750 million issue of the 5% notes at par in a Thursday drive-by.

The initial size of the deal was $350 million. It was brought to market by a significant amount of reverse inquiry, a source said.

Early guidance had the deal coming to yield 5% to 5¼%.

Ally Financial improves

Ally Financial’s 3 7/8% senior notes due 2024 continued to improve on Friday.

The notes were seen trading between 99¼ and 99.831 after closing the previous session at 99.

About $22 million of the bonds were in play during Friday’s session.

Ally Financial priced a $750 million issue of the 3 7/8% notes at 98.992 to yield 4.1% in a Thursday drive-by.

The yield printed on top of yield talk.

Early guidance was in the 4¼% area, a market source said.

U.S. Steel drops

U.S. Steel’s junk bonds continued to see high-volume activity on Friday with the notes trading down on news that steel tariffs would be lifted on Canada and Mexico.

U.S. Steel’s 6 7/8% senior notes due 2025 were down about 7/8 point to trade at 91, according to a market source.

More than $20 million of the bonds were on the tape by the late afternoon.

U.S. Steel’s 6¼% senior notes due 2026 traded as low as 86 3/8 on Friday after closing the previous session at 87½, according to a market source.

More than $16 million of the bonds were on the tape by the late afternoon.

The notes were improved about 1 point on Thursday after hitting their lowest level of the year on Wednesday on news the tariff on steel imports may be lifted.

On Friday, news broke that the United States had indeed reached a deal with Mexico and Canada to remove tariffs on steel and aluminum imports.

U.S. Steel was actively lobbying to prevent the tariff from being lifted.

Mixed Thursday flows

The daily cash flows of the dedicated high-yield bond funds were mixed on Thursday, the most recent session for which data was available at press time, a trader said.

High-yield ETFs saw $293 million of inflows on the day.

It was risk-on in the junk market on Thursday, sources said, with a trader noting a disproportionately high number of offers-wanted-in-competition (OWIC) lists pressed on the market by the ETFs.

Actively managed high-yield funds, which have sustained a steady stream of negative flows in recent days, saw $295 million of daily outflows on Thursday, the trader said.

News of Thursday's daily flows follows a late Thursday afternoon report from that the combined funds sustained $2.572 billion of outflows in the week to Wednesday's close, according to Lipper US Fund Flows.

Eleven different high-yield funds sustained outflows of greater than $50 million during that period, a market source said.

It was the biggest weekly outflow from the junk funds thus far in 2019, leaving the funds with $11.7 billion of net inflows, year-to-date, the source added.

Indexes mixed

Indexes closed the week mixed on Friday. However, all posted cumulative losses on the week.

The KDP High Yield Daily index rose 2 basis points to close Friday at 69.98 with the yield now 5.82%.

The index was up 3 bps on Thursday but slid 3 bps on Wednesday, was down 2 bps on Tuesday and dropped 10 bps on Monday.

The index posted a cumulative loss of 10 bps on the week.

The ICE BofAML US High Yield index was largely flat on Friday, shaving off 1.1 bps with the year-to-date return now 8.247%.

The index gained 24.3 bps on Thursday, slid 6.6 bps on Wednesday, rose 19.7 bps on Tuesday, and sank 42.4 bps on Monday.

The index saw a cumulative loss of 6.1 bps on the week and briefly dropped below 8% returns on Monday only to pop back above it on Tuesday.

The CDX High Yield 30 index dropped 18 bps to close Friday at 106.38.

The index was down 32 bps on Thursday, slid 6 bps on Wednesday, rose 32 bps on Tuesday and plummeted 102 bps on Monday.

The index posted a cumulative loss of 126 bps on the week.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.