Morning Commentary: Nexeo Plastics, Kodiak Gas cue up Friday deals; new ADT paper droops

By Paul A. Harris

Portland, Ore., March 22 – The new issue market looks to clear a pair of medium-sized dollar-denominated junk bond deals ahead of the weekend, sources say.

Nexeo Plastics is on deck with $410 million of seven-year senior notes (B3/B) via left bookrunner Goldman Sachs & Co. LLC.

On Friday morning Nexeo overhauled the covenant package safeguarding prospective buyers of the notes.

Those changes bear primarily upon how the company may disburse cash and incur additional debt.

Meanwhile Kodiak Gas Services LLC talked its $400 million offering of eight-year senior notes (Caa2/B-/B) to yield 9¼% to 9½%, well wide of early guidance in the 8½% to 8¾% area.

Both Nexeo and Kodiak are set to price before mid-afternoon on Friday, sources say.

New ADTs droop

Junk bonds were down ¼ point to ½ point, in line with equities, as all the major U.S. stock indexes were down over 1% on Friday morning, a trader said.

Friday also saw a dramatic move in Treasuries as the Treasury yield curve continued to flatten, the trader remarked, noting that 10-year government paper was up a point and yielding just 2.43%.

First priority senior secured bullet notes (Ba3/BB-) sold Thursday by ADT Corp. were lagging new issue prices on Friday, the trader said.

ADT’s 5¼% notes due 2024 and 5¾% notes due 2026 were both trading in a context of 99¾ bid, the source said.

Those bonds priced at par in two evenly split $750 million tranches.

The deal crawled out of the market, one sellside source remarked.

At the same time that it priced those secured notes, the Boca Raton, Fla.-based security services company withdrew a $1.25 billion tranche of unsecured notes that had been talked at 7½% to 7¾%, downsizing the overall transaction to $1.5 billion from $2.75.

Elsewhere, the Power Solutions megadeal, which priced earlier in the week, was lower on Friday.

Power Solutions’ Panther BF Aggregator 2 LP/Panther Finance Co. 6¼% senior secured notes due May 2026 (Ba3/B+/BB) were 101¼ bid, 101¾ offered on Friday. They were 101 5/8 bid on Thursday.

That paper priced at par in a $1 billon tranche, on Monday.

The Panther 8½% unsecured notes due May 2027 (B3/B/B-) were 99 5/8 bid, par offered on Friday, down from par 3/8 bid on Thursday. The unsecured notes priced at par in a $1.95 billion tranche.

Thursday inflows

The daily cash flows of the dedicated high-yield bond funds were positive on Thursday, a trader said.

High-yield ETFs saw $150 million of inflows on the day.

Actively managed high-yield funds saw $74 million of inflows on Thursday, the trader said.

News of those daily inflows follows a Thursday afternoon report that the combined funds saw $1.796 billion of net inflows in the week to Wednesday's close, according to Lipper US Fund Flows.

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