Nexeo Plastics prices; Kodiak pushed; Staples plans $2.13 billion; ADT, Kosmos below par

By Paul A. Harris and Abigail W. Adams

Portland, Me., March 22 – The high yield primary market saw one deal clear the calendar and another carry over to the March 25 week on Friday.

Nexeo Plastics priced a $410 million issue of 10 1/8% seven-year senior secured notes (B3/B) at 98.171 to yield 10½%.

Kodiak Gas Services LLC was expected to price its $400 million offering of eight-year senior notes (Caa2/B-/B). However, pricing was pushed into the upcoming week.

Staples Inc. is planning to bring $750 million in new secured debt and $1.375 billion of unsecured debt as part of a refinancing deal in the near future.

The company’s 8½% senior notes due 2025 shot up in high-volume activity on news the notes would be taken out via a new offering.

While Staples was posting gains, the secondary space ended an otherwise strong week on soft footing with the market in general down about ¼ point, sources said.

ADT Corp.’s new senior notes (Ba3/BB-) and Kosmos Energy Ltd.’s 7 1/8% senior notes due 2026 (expected ratings BB-/BB) were both below their new issue price in secondary trading.

Power Solutions’ 8½% senior notes due 2027 (B3/B/B-) continued to lose ground in active trading on Friday with the notes closing the week below par.

Nexeo prices wide, Kodiak carries over

A rugged Friday in the capital markets saw a single junk deal clear the primary calendar.

Nexeo Plastics priced a $410 million issue of 10 1/8% seven-year senior secured notes (B3/B) at 98.171 to yield 10½%.

The yield printed 50 basis points beyond the wide end of the 9¾% to 10% yield talk.

The issuer brought extensive covenant changes that bear primarily upon how the company may disburse cash and incur additional debt (see related story in this issue).

Goldman Sachs & Co. LLC was the left bookrunner.

Kodiak Gas was expected to price its $400 million offering of eight-year senior notes (Caa2/B-/B) before the weekend.

Earlier in the Friday session, the notes were talked to yield 9¼% to 9½%, well wide of early guidance in the 8½% to 8¾% area.

However, the deal was pushed into the March 25 week, a market source said.

Staples bringing $2.13 billion

New issue news volume was thin on Friday, as a considerable amount of the market's attention focused on the National Collegiate Athletic Association's March Madness Men's Division 1 National Basketball Tournament, now underway in the United States, sources said.

Staples is planning to bring $750 million of new secured debt and $1.375 billion of unsecured debt as part of a refinancing effort.

Goldman Sachs is lead left on the offering.

The refinancing also includes a $3.2 billion term loan set to launch at a bank meeting on Tuesday.

UBS Investment Bank is lead left on the loan (see related story in this issue).

The European market is expected to reactivate in late March and early April, with some issuers in Europe keen to price deals before the Easter holiday, a London-based debt capital markets banker said.

ADT under water

ADT’s new senior notes were under water in active trading in the secondary space.

The 5¾% senior notes due 2026 traded down to 99¾ after closing Thursday slightly above par, a market source said.

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

ADT’s 5¼% senior notes due 2024 also dropped below par on Friday. The notes were down to 99 7/8 on Friday after also closing the previous session slightly above par.

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

ADT priced a $750 million issue of the 5¾% senior notes and a $750 million issue of the 5¼% senior notes at par on Thursday.

The yield on the 5¾% notes printed in the middle of yield talk in the 5¾% area and tighter than initial talk in the 6% area.

The yield on the 5¼% notes printed in the middle of yield talk in the 5¼% area and tighter than initial talk in the 5½% area.

The secured notes were heard to be playing to around $2 billion of orders across both tranches, a trader said.

However, the deal was revised with a planned third tranche of unsecured notes pulled from the market.

The initial size of the deal was $2.75 billion.

However, with the unsecured tranche eliminated ADT priced $1.5 billion of first priority senior secured notes.

Kosmos trades down

Kosmos Energy’s 7 1/8% senior notes due 2026 also dropped below par in active trading on Friday.

The 7 1/8% notes were changing hands around 99 7/8 in the late afternoon with more than $15 million of the bonds on the tape, a market source said.

Kosmos priced an upsized $650 million issue of the 7 1/8% senior notes on Thursday.

The issue size was increased from $600 million.

The yield printed at the tight end of yield talk in the 7¼% area but wide of initial talk in the 7% area.

The deal appealed to both high-yield and emerging markets accounts, sources said.

Power Solutions loses steam

Power Solutions’ unsecured tranche continued to lose ground in high-volume activity on Friday.

The 8½% senior notes due 2027 (B3/B/B-) were again trading down with the notes closing Friday below par.

The notes shaved off another 5/8 point to close the week just under par. About $19 million of the bonds changed hands during Friday’s session.

While the notes were strong after breaking for trade on Monday, they were showing signs of weakness in the later part of the week.

The notes reached a peak of 101½ in the early part of the week before beginning to trade down.

Power Solutions’ 6¼% senior notes due 2026 were also trading down alongside the broader market on Friday.

The 6¼% notes closed the day at 101 3/8 after trading as high as 102 on Thursday.

Both tranches priced at par on Monday.

Staples soars

Staples 8½% senior notes due 2025 soared in secondary trading on news of a pending refinancing deal.

The notes shot up 8 points to 107¾, a market source said. More than $41 million of the bonds were on the tape by the late afternoon.

The notes were trading up as news circulated they would be taken out via a new bond offering through a make-whole provision, the source said.

Thursday inflows

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

Indexes drop

Indexes were down on Friday and were mixed on the week with some posting cumulative gains and some posting losses.

The KDP High Yield Daily index dropped 2 basis points to close Friday at 70.12 although the yield was flat at 5.91%.

The index rose 12 bps on Thursday, 2 bps on Wednesday, 5 bps on Tuesday and 6 bps on Monday.

The index saw a cumulative gain of 23 bps on the week.

The ICE BofAML US High Yield index sank below 7% year-to-date returns on Friday after surpassing it just the day before.

The index dropped 15.8 bps with the year-to-date return now 6.954%.

The index gained 21.4 bps on Thursday, 4.5 bps on Wednesday, 11.3 bps on Tuesday and 6 bps on Monday for a cumulative gain of 27.4 bps on the week.

After sinking below 6% year-to-date returns on March 9, the index popped back above it on March 11.

The index initially shot past 6% returns on Feb. 25 after passing 5% returns on Feb. 12.

The CDX High Yield 30 index dropped 60 bps to close Friday at 106.11.

The index rose 15 bps on Thursday, was up 9 bps on Wednesday, dropped 6 bps on Tuesday and gained 6 bps on Monday.

The index saw a cumulative loss of 36 bps on the week.

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