IHO (Schaeffler), IAA, Builders FirstSource, Jefferies Finance price; Amsted holds; Taylor Morrison lags

By Paul A. Harris and Abigail W. Adams

Portland, Me., May 22 – The high-yield primary market saw another active session on Wednesday with four deals clearing the forward calendar.

IHO Verwaltungs GmbH, the holding company whose interests include manufacturer Schaeffler AG, priced approximately €2.05 billion equivalent of senior secured PIK toggle notes (Ba1/BB+/BB+) in four tranches.

IAA, Inc. (Insurance Auto Auctions, Inc.) priced an upsized $500 million issue of eight-year senior notes (S&P: B/Fitch: BB-) at par to yield 5½%.

Builders FirstSource Inc. priced an upsized $400 million issue of eight-year senior secured notes (B2/BB-) at par to yield 6¾%.

Jefferies Finance LLC and JFIN Co-Issuer Corp. priced a downsized $400 million issue of seven-year senior secured notes (Ba2/BB-) at par to yield 6¼%.

Meanwhile, new paper was in focus in the secondary space albeit with mixed performances.

New issues from IAA and Builders FirstSource skyrocketed after breaking for trade.

Amsted Industries Inc.’s recently priced 5 5/8% senior notes due 2027 (Ba3/BB) held on to their large premium in active trading.

Eldorado Gold Corp.’s 9½% senior notes due 2024 (Caa1/B) were also changing hands at a premium to their issue price.

However, Taylor Morrison Communities Inc.’s recently priced 5 7/8% senior notes due 2027 (Ba3/BB) were lagging in secondary trading.

Carvana Co.’s 8 7/8% senior notes due Oct. 1, 2023 (Caa2/CCC+) were active in the secondary space following the pricing of an add-on.

While the notes were flush with their reoffer price, they were coming in from their previous level.

IHO four-part PIK toggle notes

IHO Verwaltungs, the holding company whose interests include manufacturer Schaeffler AG, priced approximately €2.05 billion equivalent of senior secured PIK toggle notes (Ba1/BB+/BB+) in four tranches.

The tranches priced as follows:

• €800 million of six-year notes with a 3 5/8% cash coupon and a 4 3/8% PIK coupon priced at par to yield 3 5/8%, at the tight end of yield talk in the 3¾% area;

• €500 million of eight-year notes with a 3 7/8% cash coupon and a 4 5/8% PIK coupon priced at 98.324 to yield 4 1/8%, in the middle of yield talk in the 4 1/8% area;

• $450 million of eight-year notes with at a 6% cash coupon and a 6 ¾% PIK coupon priced at par to yield 6%, in the middle of yield talk in the 6% area; and

•$400 million of 10-year notes with 6 3/8% cash coupon and a 7 1/8% PIK coupon priced at par to yield 6 3/8%, in the middle of yield talk in the 6 3/8% area.

Joint global coordinator Deutsche Bank is the left lead and will bill and deliver for the euro-denominated notes.

Joint global coordinator Citigroup Global Markets Inc. is the left lead and will bill and deliver for the dollar-denominated notes.

The Herzogenaurach, Germany-based company plans to use the proceeds, together with cash on hand, to fully redeem dollar- and euro-denominated notes due in 2021 and 2023, as well as to repay €150 million under the issuer term facility, and to close out cross-currency hedging arrangements related to certain of the redeemed notes.

IAA upsized and tight

IAA (Insurance Auto Auctions, Inc.) priced an upsized $500 million issue of eight-year senior notes (S&P: B/Fitch: BB-) at par to yield 5½%.

The issue size increased from $400 million.

The notes, related to KAR Auction Services Inc.'s spinoff of its salvage automobile auction business, priced at the tight end of the 5½% to 5 5/8% yield talk and tight to initial guidance in the 6% area.

JP Morgan, BofA, Barclays, Goldman Sachs and Morgan Stanley were the joint bookrunners.

Proceeds, together with proceeds from a senior secured credit facility, will be used to pay a special dividend to KAR Auction Services related to the spinoff of IAA, as well as to pay fees related to the spinoff, and for general corporate purposes.

Builders FirstSource upsized

Builders FirstSource priced an upsized $400 million issue of eight-year senior secured notes (B2/BB-) at par to yield 6¾%.

The issue size increased from $300 million.

The yield printed in the middle of yield talk in the 6¾% area and inside of initial guidance in the 7% area.

Credit Suisse ran the books.

The Dallas-based building products manufacturer and distributor plans to use the proceeds to pay down its term loan due 2024.

The additional proceeds resulting from the $100 million upsizing of the issue will be used to repurchase approximately $97 million of the company's existing notes from certain beneficial owners in open market transactions.

Jefferies downsizes

Jefferies Finance and JFIN Co-Issuer Corp. priced a downsized $400 million issue of seven-year senior secured notes (Ba2/BB-) at par to yield 6¼%.

The issue size decreased from $450 million with the shift of $50 million of proceeds to the concurrent term loan, upsizing the loan to $750 million from $700 million.

The yield printed at the tight end of the 6¼% to 6½% yield talk and inside of initial guidance in the mid-to-high 6% area.

Jefferies was the left bookrunner.

The New York-based financial services provider plans to use the proceeds, plus cash on hand, to refinance debt and reduce non-funding debt.

Wednesday’s paper

Some of the issues to price during Wednesday’s session skyrocketed after breaking for trade.

IAA Spinco’s 5½% senior notes due 2027 rose more than 1 point out of the gate.

They were trading in a range of par ½ to 101¾ with prints in the late afternoon between 101¼ and 101 5/8, according to a market source.

More than $72 million of the bonds had changed hands.

Builders FirstSource’s 6¾% senior notes due 2027 also skyrocketed out of the gate.

The notes were changing hands between 101¼ and 101¾ shortly after breaking for trade, a market source said.

Amsted holds

Amsted Industries’ recently priced 5 5/8% senior notes due 2027 were holding onto their large premium in active trading in the secondary space.

The notes were continuing to trade at 101½, flush with Tuesday’s close, according to a market source.

More than $30 million of the bonds were on the tape by the late afternoon.

Amsted Industries priced a $400 million issue of the 5 5/8% notes at par in a Tuesday drive-by.

The yield printed at the tight end of yield talk in the 5¾% area, which was also the initial guidance.

Eldorado trades up

Eldorado Gold’s 9½% senior notes due 2024 were making gains in the secondary space on Wednesday.

The 9½% notes were quoted at 98 bid, 99 offered early in the session and were changing hands between 98¾ and 99 in the late afternoon, sources said.

Eldorado priced a $300 million issue of the 9½% notes at 98.00 to yield 10.02% on Tuesday.

The deal underwent structural and document changes prior to pricing.

Taylor Morrison lags

Taylor Morrison’s 5 7/8% senior notes due 2027 were lagging their issue price in secondary trading on Wednesday.

The notes were trading in a range of 99 5/8 to par 1/8 on Wednesday.

More than $34 million of the bonds were on the tape by the late afternoon.

The notes struggled out of the gate and were hovering around par on Tuesday, sources said.

Sources attributed the lackluster performance to tight pricing.

Taylor Morrison priced an upsized $500 million issue of the 5 7/8% notes at par in a Tuesday drive-by.

The issue size increased from $475 million.

The yield printed at the tight end of yield talk in the 6% area. Initial talk was in the low 6% area.

Carvana comes in

Carvana’s 8 7/8% senior notes due 2023 were active on Wednesday following the pricing of an add-on during the previous session.

While the notes were trading level with their reoffer price, they were coming in from their previous levels.

The 8 7/8% notes were seen at par ½ bid, par ¾ offered, according to a market source.

They were changing hands at par ½ in the late afternoon.

More than $30 million of the bonds were on the tape by the late afternoon.

Carvana priced a $250 million add-on to its 8 7/8% notes at 100.5 to yield 8.693% on Tuesday.

The Tempe, Ariz.-based eCommerce used car platform initially priced a $350 million issue of the 8 7/8% notes at par in September 2018.

Tuesday outflows

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

High-yield ETFs sustained $24 million of outflows on the day.

Actively managed high-yield funds saw $125 million of outflows on Tuesday, the trader said.

With just the Wednesday fund flows remaining to be tallied in the weekly funds flows reports, expected Thursday afternoon, the combined high-yield funds were tracking $95 million of outflows on the week, the source remarked.

Indexes mixed

Indexes were mixed on Wednesday.

The KDP High Yield Daily index was flat on Wednesday, closing the day at 69.98 with the yield 5.83%, flush with Tuesday.

The index slid 3 bps on Monday after a cumulative loss of 10 bps on the week last week.

The ICE BofAML US High Yield index slid 6.4 bps with the year-to-date return now 8.375%.

The index gained 20.5 bps on Tuesday and shaved off 1.3 bps on Monday after a 6.1 bps loss on the week last week.

The CDX High Yield 30 index dropped 18 bps to close Wednesday at 106.29.

The index gained 29 bps on Tuesday after dropping 20 bps on Monday.

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