Primary quiet, though Mercer on tap, American Greetings on road; new deals busy, Tempur Sealy lower

By Paul Deckelman and Paul A. Harris

New York, Jan. 30 – The high yield primary market began the January-February crossover week on a quiet note on Monday, with syndicate sources hearing that no new U.S. dollar-denominated and fully junk-rated issues from domestic or industrialized-country borrowers had priced, in contrast to Friday’s three-tranche, $1.05 billion session.

However, the sources said that things were happening behind the scenes.

They said that pulp producer Mercer International Inc. would likely price a $225 million offering of seven-year notes on Tuesday.

Primaryside players were also looking forward to a pricing later in the week from American Greetings Corp., with holders of the greeting-card company’s existing paper seen likely to roll into that new eight-year deal.

In the secondary market, traders said that Friday’s three new offerings – from – Canadian oilfield services company Trinidad Drilling Ltd., domestic oil and natural gas exploration and production company WildHorse Resource Development Corp. and casino operator Jacobs Entertainment Inc. – were all moderately busy on the day, though volume did not match Friday’s levels, with the Jacobs and Trinidad deals still holding to their very strong aftermarket levels.

Away from the new deals, traders noted the continued heavy trading in natural gas company Sabine Pass Liquefaction LLC’s bonds following a recent ratings upgrade.

And they said Tempur Sealy International, Inc. was lower after the mattress maker ended its contract with its largest distributor.

Statistical market performance measures were mixed for a third straight session on Monday; they had turned mixed on Thursday and stayed that way Friday and again Monday after having been higher across the board for two straight sessions. It was the indicators’ fourth mixed session in the last seven trading days.

Mercer International Inc. talked its $225 million offering of seven-year senior notes to yield 6½% to 6¾%, according to a syndicate source.

Books close at 10 a.m. ET Tuesday, and the deal is set to price thereafter.

The deal was scheduled to kick off on a mid-morning investor conference call on Monday.

Credit Suisse Securities (USA) LLC, Barclays and RBC Capital Markets LLC are the joint bookrunners for the Rule 144A and Regulation S with registration rights offer.

The notes become callable after three years at par plus 50% of the coupon and feature a three-year 35% equity clawback and a 101% poison put.

The Seattle-based pulp producer plans to use the proceeds to refinance its 7% senior notes due 2019.

‘Big roll’ for American Greetings

A trader meantime said that he had heard that “the early read” on the upcoming $375 million offering of eight-year senior notes from American Greetings Corp. was that “there will be a big roll” into the new issue by the holders of the company’s existing two issues of paper, which are being refinanced with the new-deal proceeds.

Market sources said that the Cleveland-based creator and manufacturer of innovative social expression products will use the proceeds from the offering to fund tender offers for its own 7 3/8% senior notes due 2021 and for the 9¾%/10½% senior PIK toggle notes due 2019 issued by its indirect parent holding company, Century Intermediate Holding Co.

The company was heard to have begun a four-day roadshow for the new deal on Monday, with pricing expected on Thursday via BofA Merrill Lynch, KeyBanc Capital Markets, PNC Capital Markets, Citizens Bank, Wells Fargo Securities LLC, J.P. Morgan Securities LLC and BBVA.

Friday deals’ volume moderates

Elsewhere, traders said that three new issues that came to market on Friday stayed moderately busy on Monday, although trading volume in each of the names was off from the initial aftermarket levels seen after those issues had priced.

A trader said that WildHorse Resource Development Corp.’s 6 7/8% notes due 2025 were trading “right around par,” which he called up by about ½ point from Friday’s finish.

At another desk, though, a trader saw those bonds off 3/8 point from the day’s peak levels, ending around 99 5/8 bid, with over $20 million traded, while a third pegged the bonds in a 99¼ to 99¾ bid context.

On Friday, the Houston-based oil and natural gas exploration and production company had priced $350 million of the notes at 99.244, to yield 7%, after that regularly scheduled forward calendar offering had been upsized from $300 million originally.

Sabine Pass tops Most Actives

Away from the new deals, traders said that as has been the case over a number of recent sessions, Houston-based natural gas processing company Sabine Pass Liquefaction LLC’s bonds were easily dominating the day’s Most Actives List.

The bonds were all seen off slightly on the session.

One market source said that its 5¾% notes due 2024 led the active issues with over $60 million having traded, going out at 109 5/8 bid, down 1/8 point on the day.

He said that its 5 5/89% notes due 2023 were down by 3/16 point, at 108 15/16 bid, with about $54 million traded, while its 5 5/8% notes due 2025 finished down nearly ¼ point on the day at 109 bid, on volume of more than $47 million.

Sabine’s bonds have been very busy in the wake of the recent announcement by Fitch Ratings assigning a BBB- rating to the $13.5 billion of outstanding senior secured debt issued by Sabine, a unit of Houston-based Cheniere Energy Inc. That move followed a similar announcement in September by Standard & Poor’s, while Moody’s Investors Service still has the bonds at Ba1.

Traders noted that the Sabine bonds will be moving shortly into the investment grade index.

“All of the high yield guys are selling them,” one said, “and the high-grade guys are all buying them now.”

Tempur Sealy trades off

Elsewhere, traders saw Tempur Sealey’s bonds move lower after the Lexington, Ky.-based bedding maker announced that it had terminated its contracts with Mattress Firm Holdings Corp, its biggest customer, after disagreements over proposed changes that required “significant economic concessions.”

A trader saw its 5½% notes due 2026 as low as 98¾ bid, while another saw those notes ending around par bid, 100½ offered, which he called down 3 or 4 points from recent levels.

Its 5 5/8% notes due 2023 lost 3½ points to end at 100½ bid.

Indicators stay mixed

Statistical market performance measures were mixed for a third straight session on Monday; they had turned mixed on Thursday and stayed that way Friday and again Monday after having been higher across the board for two straight sessions. It was the indicators’ fourth mixed session in the last seven trading days.

The KDP High Yield index rose by 7 basis points on Monday to end at 72.02, versus its 4 bps fall on Friday, which followed two consecutive gains. Monday marked the index’s third rise in the last four sessions.

Its yield tightened by 2 bps, to 5.14%, after having widened by that same amount on Friday, following three straight sessions before that during which the yield had come in. Monday was the yield’s fourth narrowing in in the last five sessions.

However, the Markit Series 27 CDX index lost ¼ point on Monday to end at 106 7/16 bid, 106 15/32 offered, after having edged up by around 1/32 point Friday. It was the index’s second decline in the last three sessions.

And the Merrill Lynch High Yield index also moved to the downside, retreating by 0.054%, its first loss after four straight advances before that, including Friday’s 0.083% upturn. Monday was the index’s sixth setback in the last 10 sessions.

That cut its year-to-date return to 1.375% from Friday’s 1.43%, which had been its third consecutive new 2017 peak level, up from the previous zenith for the year of 1.346%, set on Thursday.

The new bonds had moved around between 99 5/8 and 100 1/8 when they were freed for secondary market trading, finally going home Friday right on the nose at par bid, a market source said, with over $56 million having changed hands during the session.

One of the traders said that the new Jacobs Entertainment 7 7/8% senior secured second-lien notes due 2024 were “maybe a little better on the day, finishing in a 102½ to 103 bid context, while a second trader located the bonds at 103 bid, calling them up ¼ point, on volume of around $12 million.

That was well down from the more than $68 million that had traded on Friday after the Golden, Colo.-based gaming company had priced its regularly scheduled $350 million offering at par, following a modest upsizing from the original $340 million.

At another desk, a trader saw the paper “about unchanged,” trading between 102 5/8 and 103 bid.

And one of the traders – noting that “all three of the [Friday] issues did well” – quoted Calgary, Alta.-based oilfield services provider Trinidad Drilling’s 6 5/8% notes due 2025 between 102½ and 103½ bid.

A second trader, though, called them about unchanged at 102½ bid, with $12 million traded, down from Friday’s more than $26 million of turnover.

That deal – also a regularly scheduled $350 million deal coming off the forward calendar – had also priced at par, moving up to above the 102¼ bid level in initial aftermarket dealings.

© 2015 Prospect News.
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