Nufarm, LSB, Commercial Metals, Apergy price; energy pulls back; funds up $2.97 billion

By Paul A. Harris and Abigail W. Adams

Portland, Me., April 19 – The domestic and European high-yield primary markets were active on Thursday with $1.5 billion in four U.S. deals pricing, €225 million in one European deal and several more on tap.

Nufarm Ltd. priced an upsized $475 million issue of eight-year senior notes (B1/BB-) at par to yield 5¾%. The notes were active after breaking for trade and were seen slightly above their issue price.

LSB Industries, Inc. priced a $400 million issue of 9 5/8% five-year senior secured notes (Caa1/CCC) at 99.509 to yield 9¾%.

Commercial Metals Co. priced a $350 million issue of eight-year senior notes (Ba3/BB+) at par to yield 5¾%.

Apergy Corp. priced a $300 million issue of eight-year senior notes (B1/B) at par to yield 6 3/8%.

Lycra Co.’s upsized $1 billion equivalent dual-currency offering is set to price on Friday and BBA Aviation set price talk for its $500 million offering of eight-year senior notes.

In the European market, Gamenet Group SpA priced a €225 million issue, Hibu Group started a roadshow for a £225 million offering and Gestamp Automocion, SA and Adler Real Estate AG launched new offerings.

Meanwhile, the secondary market saw a slight pull-back on Thursday with the general market down about ¼ point, a market source said.

The dip in the energy sector was leading the charge in the pullback of the overall market, the source said.

While the overall market was down, several recent deals continued to hold their own. Hub International Ltd.’s newly priced 7% senior notes due 2024 (Caa2/CCC+) dominated trading activity in the secondary market on Thursday.

While the notes were down slightly from Wednesday, they were still trading well, sources said.

Meanwhile high-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall junk market liquidity trends – attracted $2.971 billion of new investor cash in the week to April 18, according to fund-flow statistics generated by AMG Data Services Inc.

The inflow was three times the previous week’s $989 million although the cash flows are still deeply negative for the year to date.

Nufarm upsizes, active in secondary

Nufarm priced an upsized $475 million issue of eight-year senior notes (B1/BB-) at par to yield 5¾% on Thursday.

The yield printed in the middle of yield talk that was set in the 5¾% area.

UBS was the lead bookrunner for the debt refinancing deal.

The notes were active in the secondary market with more than $59 million traded by late afternoon.

The notes were seen at par ½ bid, par ¾ offered, market sources said. While the notes were busy, they did not trade as high as some recent deals.

“The coupon is low,” a market source observed.

LSB at a discount

LSB Industries priced a $400 million issue of 9 5/8% five-year senior secured notes (Caa1/CCC) at 99.509 to yield 9¾%.

The yield printed at the tight end of the 9¾% to 9 7/8% price talk and in line with the 9½% to 10% initial guidance.

Goldman Sachs was the left bookrunner. Jefferies was the joint bookrunner.

The Oklahoma City-based manufacturing, marketing and engineering company plans to use the proceeds to fund a concurrent tender offer for its 8½% notes due Aug. 1, 2019 and to redeem any notes not tendered.

Any remaining proceeds to be used for general corporate purposes.

Commercial Metals drives by

In quick-to-market action, Commercial Metals priced a $350 million issue of eight-year senior notes (Ba3/BB+) at par to yield 5¾%.

The yield came at the tight end of talk for a yield in the 5 7/8% area. Early guidance was in the high 5% to 6% area.

BofA Merrill Lynch was the left bookrunner. Citigroup, PNC, Wells Fargo and Santander were the joint bookrunners.

The Irving, Texas-based metals fabrication and recycling services provider plans to use the proceeds to help finance its acquisition of U.S. rebar steel mill and fabrication assets from Gerdau SA.

Apergy prices tight

Apergy priced a $300 million issue of eight-year senior notes (B1/B) at par to yield 6 3/8%.

The yield printed at the tight end of yield talk announced in the 6½% area.

J.P. Morgan, Deutsche Bank, HSBC, Mizuho and Wells Fargo were the joint bookrunners.

Proceeds, together with a new term loan and a draw on the company’s revolver, will be used to fund the spinoff of the Woodlands, Texas-based provider of highly engineered technologies to the oil and gas industry from Dover Corp.

Upsized Lycra to price Friday

Looking to Friday’s session, Lycra plans to price its upsized two-part offering of senior secured notes (B1/B).

The deal was increased to $1 billion equivalent from $810 million equivalent and price talk set at levels tight to initial guidance.

The deal includes an upsized $690 million of seven-year notes talked at 7½% to 7¾%, versus initial guidance in the 8% area. The tranche was increased from $500 million.

The deal also includes €250 million of five-year notes talked to yield in the 5½% area, versus initial guidance in the 6% area.

Joint global coordinator and sole physical bookrunner JPMorgan will bill and deliver. Barclays is also a joint global coordinator.

Proceeds will be used to finance the acquisition of Lycra by Shandong Ruyi Technology Group.

BBA talked at 5½% area

BBA Aviation talked its $500 million offering of eight-year senior notes (Ba2) to yield in the 5½% area.

Official talk comes tight to the 5½% to 5¾% initial guidance.

Pricing is expected on Friday.

J.P. Morgan is leading the debt refinancing deal.

Gamenet prices floater

As forecast, the European market also continued to generate a steady news volume on Thursday.

Italy’s Gamenet Group priced a €225 million issue of five-year senior secured notes (B1/B) with a coupon of Euribor plus 375 basis points at par.

The spread came 25 bps below the tight end of the Euribor plus 400 to 425 bps spread talk.

Credit Suisse and UniCredit managed the debt refinancing deal.

Hibu starts roadshow

Hibu Group started a roadshow on Thursday for a £225 million offering of five-year senior secured notes (expected B3/confirmed B-) to be issued through Yell Bondco plc.

The deal, which is being managed by global coordinator and left lead Credit Suisse, is set to price in the April 23 week.

Proceeds will be used to repay debt.

Hibu, formerly Yell Group, is a multinational directories and internet services company headquartered in Reading, United Kingdom.

Elsewhere Gestamp Automocion announced on Wednesday that it has launched a €400 million offering of senior secured notes due 2026.

The Madrid-based manufacturer of metal components for the automotive industry plans to use the proceeds to refinance debt.

And Adler Real Estate launched a two-part offering of senior notes (S&P: BB+) on an investor conference call.

The deal, which is coming in an investment grade-style execution, will feature five-year notes and eight-year notes.

JP Morgan Securities plc is acting as sole global coordinator for the Regulation S offer. Deutsche Bank AG London Branch, Goldman Sachs International, JP Morgan and Morgan Stanley & Co. International plc the joint bookrunners.

The proceeds will be used primarily to refinance a bridge loan structured in connection with the acquisition of Brack Capital Properties NV, to fund a tender offer for up to €200 million of the company’s €500 million 4¾% notes and for general corporate purposes.

The tender offer was also announced on Thursday.

Primary an easier place

The primary market has become a somewhat easier place to do business in the past few days, a syndicate banker said on Thursday.

Issuers are more up to speed with current rate expectations and are no longer showing up demanding the razor-tight rates of yore, the source said.

And there is some stability in the secondary market with respect to new issues, giving investors a little more confidence as they become involved in new deals.

As a result, issuers that have been camped on the sidelines waiting for volatility to subside or for rates to move in their favor will probably be heading into the market sooner than later, the banker said.

It won't be a massive wave of issuance but more likely a steady stream, the source added.

Hub dominates

Meanwhile, Hub International’s newly priced 7% senior notes due 2024 (Caa2/CCC+) dominated trading activity in the secondary market on Thursday, which sources said has been starved for new issuances.

The notes were seen trading in a range of par ¼ to 101¼ on Thursday with more than $131 million of bonds in play, a market source said.

They were seen “coming in a little bit” in the afternoon to trade in a range of par ½ to par ¾, a market source said.

The notes closed Wednesday at 101¼ bid, 101¾ offered but were seen at par ½ bid, 101 offered late in the afternoon. “There was a little drop off,” a market source said.

With the market down on Thursday, the “flippers got nervous and knocked it down a little bit,” the source said. However, the notes are expected to return to 101 bid.

While the notes were trading well in the secondary market, the deal “isn’t that exciting,” a market source said. The current yield is about 6.8% which is not much for a triple C credit rating, the source commented.

Hub priced a $1.32 billion issue of the eight-year senior notes (Caa2/CCC+) at par to yield 7%, on Wednesday.

The yield printed below the 7¼% to 7½% yield talk. The deal was said to be five-times oversubscribed.

The pull-back

The secondary market saw a pull-back on Thursday after more than a week of steady gains.

The secondary market “was a little sloppy” early in the session but stabilized by late morning, a market source said.

In general, the market was down about ¼ point, the source added.

There was no substantial news to cause the pull-back or panic about it, a source said.

“The market’s been on fire,” the source noted, with credit spreads growing steadily narrower.

“I don’t think it can push too much tighter,” the source said

Energy dips

After helping fuel the gains in the secondary market over the past week and half, the energy sector took a breather on Thursday as crude oil dropped slightly from its $2 gains on Wednesday.

California Resources Corp.’s 8% senior notes due 2022 were down 1 point on Thursday after climbing 3 points on Wednesday.

The notes were seen at 87.5 on Thursday after closing Wednesday at 88.5, a market source said.

After surging $2 on Wednesday to $68.75, the barrel price of West Texas intermediate crude oil for May was down on Thursday to 68.29.

Ultra Petroleum Corp.’s 7 1/8% senior notes due 2025 (B2/B+) and 6 7/8% senior notes due 2022 were active on Thursday with both losing ground.

The 7 1/8% notes were seen down 2½ points to trade at 73¼.

The 6 7/8% notes were seen down about ½ point to trade at 79 7/8. Ultra Petroleum announced first quarter production results on Thursday of 803 million cubic feet equivalent.

Guidance was for production of 790 to 810 million cubic feet equivalent, according to a company news release.

Ultra Petroleum also announced that its borrowing base was reaffirmed and its credit agreement modified to enable a step up in the maximum net leverage covenant. The company will release its earnings report on May 10.

Indexes lose ground

The winning streak of market indicators came to an end on Thursday with some losing ground after a sustained period of gains.

The KDP High Yield index was down 14 basis points on Thursday to 71.09. The yield climbed to 5.62%. The index had seen 10 consecutive trading days of gains prior to Thursday’s session.

While still in positive territory for the year so far, the Merrill Lynch High Yield index dropped dramatically on Thursday. The index was down 37.9 bps on Thursday with the year-to-date return now 0.203%.

The year-to-date return was 0.582% on Wednesday.

The index turned positive on April 12 after a long stretch of negative year-to-date returns.

The CDX high yield 30 index also saw a dramatic decline on Thursday. The index was down 24 bps to close Thursday at 107.04.

The index has slowly traded down over the past two days, losing 5 bps to close Wednesday at 107.23 and dipping down 4 bps to close Tuesday at 107.28.

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