Downsized CEVA, upsized Wynn Macau price; new URI, Aircastle busy; funds gain $573 million

By Paul Deckelman and Paul A. Harris

New York, March 13 - The high-yield primary sphere was heard by syndicate sources to have churned out more than $1.6 billion of new junk paper, with issuers domiciled outside of the United States accounting for all of the action.

Dutch supply-chain logistics company CEVA Group plc priced $625 million of seven-year secured bonds in two tranches, split between first-lien and 1.5-lien issues, after that regularly scheduled forward calendar deal was downsized.

There was also a pair of quickly shopped same-day pricings. Casino operator Wynn Macau Ltd., based in the eponymous Chinese gaming enclave, brought an upsized $750 million offering of 7.5-year notes to market.

And Australian mining services company BIS Industries Ltd. did $250 million of new five-year PIK toggle notes via its indirect parent company.

Several euro-denominated offerings - from Britain's CNH Industrial Finance Europe SA and from Spanish issuers Grupo Antolin and Grupo Isolux Corsan Finance BV - also priced during the session.

The BIS bonds were the only ones among the day's dollar pricings to be seen in the aftermarket, where they traded modestly higher.

Wednesday's deals from United Rentals (North America) Inc. and from Aircastle Ltd. were among the most actively traded issues Thursday.

Traders saw the junk market easier overall, taking its cue from equities, which continued to slide. However, statistical indicators of junk market performance were mixed on the day after having been lower across the board on Wednesday.

But another indicator - the flow of cash into and out of high-yield mutual funds and exchange-traded funds, considered a key barometer of junk market liquidity trends - posted its fifth consecutive sizable weekly positive number.

Funds gain $573 million

Near the close on Thursday, market sources familiar with the fund-flow statistics generated by AMG Data Services Inc. said that $573 million more came into high-yield mutual funds and ETFs than had left them in the week ended Wednesday.

It was the fifth consecutive weekly gain seen by Arcata, Calif.-based AMG, a unit of the Lipper analytics division of Thomson Reuters Corp., and the third straight cash addition of between $500 million and $600 million. It followed on the heels of a $560 million inflow in the week ended March 5 and an almost identically sized $559 million inflow in the week ended Feb. 26.

That run of five inflows also included $804 million during the week ended Feb. 19 on top of a massive $1.45 billion cash addition the week before that, ended Feb. 12 - the biggest cash addition the funds have seen since the week of Oct. 23 last year, when a $2.02 billion net inflow was recorded, according to a Prospect News analysis of the figures.

The five straight inflows, totaling about $3.95 billion, represented a strong rebound from the two consecutive large downturns that preceded them - a $909 million outflow in the week ended Jan. 29 followed by a $972 million cash loss in the week ended Feb. 5, which followed three straight inflows at the beginning of the year, according to the Prospect News analysis.

Including the latest week's results, there have now been eight inflows since the beginning of the year, versus the two outflows, resulting in a year-to-date cumulative net inflow of an estimated $2.56 billion, according to the analysis.

Cumulative fund-flow estimates may be revised upward or downward or may be rounded off and could include unannounced revisions and adjustments to figures from prior weeks.

In 2013, inflows were seen in 33 weeks, versus 20 weeks of outflows, with total net inflows for the year tallying up to about $1.27 billion, according to the analysis.

Another fund-tracking service, the Cambridge, Mass.-based EPFR Global, meantime reported an inflow for the week of around 2.5 times the AMG figure, or a little over $1.4 billion, split roughly 5-5-4 among purely U.S.-based high-yield funds, global junk funds and strictly European funds. It too has seen eight inflows in the 10 weeks since the start of the year.

EPFR's methodology differs from AMG/Lipper's as its fund universe includes many non-U.S.-domiciled mutual funds and ETFs, as opposed to AMG/Lipper's strictly domestic orientation.

Analysts said that the sustained flows of fresh cash into junk - and the mutual funds and ETFs represent but a small, though very observable and quantifiable percentage of the total amount of investor money coming into or leaving the more than $1 trillion junk market - has been a key catalyst behind the relatively strong performance seen by both the junk primary and secondary markets over the past two years and which has mostly continued on into this year as well.

Wynn massively upsizes

The Thursday session in the high-yield primary market produced an intense news volume on both sides of the Atlantic.

In the dollar market, three issuers brought a total of four tranches with which they raised $1.68 billion.

One tranche was massively upsized. Two of the four came as drive-by deals.

With respect to price talk, two tranche came at the tight end, one came on top, and the other came at the rich end of price talk and the wide end of coupon talk.

Wynn Macau priced a massively upsized $750 million add-on to its 5¼% senior notes due Oct. 15, 2021 (existing ratings Ba2/BB/BB) at 100.75 to yield 5.093%.

The deal was upsized from $400 million.

The price came on top of price talk.

BofA Merrill Lynch, Deutsche Bank Securities Inc., J.P. Morgan Securities LLC and UBS Investment Bank were the global coordinators. BOCI Securities Ltd., BNP Paribas, Industrial and Commercial Bank of China Ltd. and Morgan Stanley & Co. LLC were the joint bookrunners.

CEVA, downsized and tight

CEVA Group priced a downsized $625 million two-part senior secured notes transaction.

The deal included a downsized $300 million tranche of first-lien notes (B2/B-) that priced at par to yield 7%. The tranche was downsized from $400 million. The yield printed at the tight end of the 7% to 7¼% yield talk.

CEVA also priced a downsized $325 million tranche of first-and-a-half-lien notes (Caa2/CCC) at par to yield 9%. The tranche was downsized from $425 million. The yield printed at the tight end of the 9% to 9¼% yield talk.

The overall transaction was decreased from $825 million. At the same time, the seven-year first-lien covenant-light term loan was increased to $1,015,000,000 from $875 million, and a €50 million seven-year first-lien covenant-light term loan was added to the capital structure.

Credit Suisse Securities (USA) LLC, Deutsche Bank, Goldman Sachs & Co., Morgan Stanley and UBS Securities LLC were the joint bookrunners for the debt refinancing deal.

BIS PIK toggles price

Artsonig Pty. Ltd., the indirect owner of BIS Industries priced a $250 million issue of five-year PIK toggle notes (Caa1/CCC+) at 98.5.

The notes pay a cash coupon of 11½% and a PIK coupon of 12%. The cash yield is 11.906%. The PIK yield is 12.41%.

The reoffer price came at the rich end of the 98 to 98.5 price talk. The cash coupon came at the wide end of the 11¼% to 11½% coupon talk.

One market source noted that the deal pushed the envelope because the PIK coupon only steps up by 50 basis points from the cash coupon, whereas the traditional step-up, seen in nearly every deal, is 75 bps.

Goldman Sachs, BofA Merrill Lynch, KKR Capital Markets and UBS Investment Bank managed the sale.

The Sydney, Australia-based mining services company plans to use the proceeds to repay its existing PIK notes.

AuRico restructures, sets talk

AuRico Gold Inc. talked its restructured $300 million offering of six-year senior secured second-lien notes to price with three to four points of original issue discount and to yield 8½% to 8¾%.

The deal is set to price on Friday.

In the restructuring, the maturity of the notes was reduced to six years from eight years. Also the ranking on the capital structure was improved to senior secured second-lien status, whereas the deal had previously been in the market as a senior unsecured note.

An investor said that with the restructuring, the deal is being well received.

Joint global coordinator and joint bookrunner RBC will bill and deliver. Credit Suisse is also a joint global coordinator and joint bookrunner. Scotia is a joint bookrunner.

SunGard eight-year deal

SunGard Availability Services plans to participate in an investor call on March 20 to discuss a proposed offering of eight-year senior notes (Caa1/B-), according to a market source.

The deal is expected to come sized between $400 million and $500 million.

Deutsche Bank, Citigroup and BofA Merrill Lynch are the joint bookrunners.

CNH tight to revised talk

The euro-denominated high-yield market turned out an exceptionally high news volume on Thursday. Three issuers completed single tranche deals to raise a combined total of €2 billion.

One of the three came as a drive by.

One was upsized.

Two priced on top of price talk while the third came at the tight end of downwardly revised spread talk.

CNH Industrial NV priced a €1 billion issue of 2¾% five-year senior notes (Ba2/BB+) at a 190 bps spread to mid-swaps.

The spread came at the tight end of the 190 bps to 195 bps spread talk, which had been revised tighter from earlier talk of 205 bps.

SG CIB will bill and deliver.

Banca IMI, Commerzbank, Mediobanca, Santander, SG CIB and UBS were the bookrunners.

Isolux Corsan upsizes

Grupo Isolux Corsan Finance priced an upsized €600 million issue of seven-year senior notes (/B/B+) at par to yield 6 5/8%.

The deal was upsized from €400 million.

The yield printed on top of yield talk.

Joint global coordinator Morgan Stanley will bill and deliver. BofA Merrill Lynch and SG were also joint global coordinators. Santander, Bankia and Deutsche Bank were joint bookrunners.

Proceeds will be used to refinance bank debt and to put cash on the balance sheet.

Grupo Antolin, atop talk

Spain-based automotive interior components supplier Grupo Antolin priced a €400 million issue of seven-year senior notes (Ba3/BB-) at par to yield 4¾%.

The yield printed on top of yield talk.

Joint bookrunner Deutsche Bank will bill and deliver. Banco Popular Español, Bankia, Bankinter, BBVA, BNP Paribas, CaixaBank, Sabadell and Santander are also joint bookrunners.

The Brugos, Spain-based company plans to use the proceeds to refinance debt and for general corporate purposes.

Virgin Media for Friday

Virgin Media Secured Finance plc plans to price a £915 million equivalent two-part offering of senior secured notes due Jan. 15, 2025 (expected ratings Ba3/BB-) on Friday.

Joint bookrunner Deutsche Bank will bill and deliver for the debt refinancing deal. Barclays, Credit Suisse, Goldman Sachs and UBS are also joint bookrunners.

BIS bonds gain

In the secondary market, BIS Industries' new issue of 11½%/12% PIK toggle notes due 2019 was the only one of the day's new issues to be seen trading around.

A market source pegged that paper at 99¼ bid, 99¾ offered, up from the 98½ level at which the notes had priced.

The CEVA Group and Wynn Macau deals priced too late during the session for any immediate aftermarket activity, traders said.

Heavy United Rentals trading

The big two-part transaction from United Rentals (North America) easily dominated the high-yield Most Actives list when those bonds were finally freed for trading Thursday. They priced too late in Wednesday's session for any secondary dealings.

A trader saw its 5¾% notes due 2024 trading in a 100 1/8 to 100 3/8 bid context on volume of more than $117 million, including at least $106 million of round-lot trades.

A second trader saw those bonds trading between 100¼ and 101 bid, while a third had them going out in a range of par to 1001/2.

The Greenwich, Conn.-based construction and industrial equipment rental and leasing company priced $850 million of those notes at par in a quick-to-market transaction.

It also did a $525 million add-on to its existing 6 1/8% notes due 2023. Those bonds came to market at 105.25 to yield 5.188%.

In Thursday's dealings, a trader said that at least $53 million of the 6 1/8% notes had traded including at least $46 million in round lots. He saw those bonds going home at 105¾ bid, 106 offered, up ½ point on the day.

A second trader quoted them a little lower than that, with bonds between 105¼ and 106, while a third had them at 105 5/8 bid, 106 1/8 offered.

Aircastle around issue price

There was also some fairly busy trading in Aircastle's 5 1/8% notes due 2021, with a trader seeing more than $40 million of those bonds having changed hands. He quoted them at par to 1001/4, calling that up 1/8 point from levels slightly below par at which the bonds traded late Wednesday.

A second trader had them up at par bid, 101 offered, while a third said they were unchanged from Wednesday's late levels at 100 1/8 bid, 100 3/8 offered.

Stamford, Conn.-based Aircastle, which leases commercial jetliners to various domestic and international airlines, priced $500 million of the bonds at par in a quick-to-market deal on Wednesday. The issue was upsized from an originally announced $400 million.

Mediacom a little firmer

One of the traders also saw Mediacom Broadband LLC's 5½% notes due 2021 at 100¾ bid, 101½ offered.

That was up slightly from the 100½ bid, 101 offered level at which the bonds had traded late Wednesday.

The Middletown, N.Y.-based provider of cable, phone and internet service, along with Mediacom Broadband Corp., had priced $200 million of the notes at par in a drive-by deal earlier Wednesday.

Hercules holds steady

Hercules Offshore Inc.'s 6¾% notes due 2022 were being quoted around 100 1/8 bid, 100 5/8 offered on Thursday.

Traders said that was around the levels seen late Wednesday, after the Houston-based provider of drilling equipment and services to the offshore energy industry priced a quickly shopped $300 million of the notes at par.

Caesars trading continues

Away from the new issues, traders said that not much was happening, although Caesars Entertainment Corp.'s various bond issues remained actively traded on brisk volume. They were at mostly lower levels in the wake of the Las Vegas-based gaming giant's release of disappointing fourth-quarter and full-year numbers earlier in the week.

A market source saw its 11¼% notes due 2017 around 94½ bid, calling that little changed, on volume of over $39 million, while its 8½% notes due 2020 lost 3/8 point to close at 87 bid, with over $9 million changing hands.

An easier market

A trader called Thursday's junk market "pretty boring all around," quoting it as generally off about ½ point.

A second called it "a little softer, in line with equities," which fell on renewed investor angst over the situation in Ukraine and on a slowing Chinese economy.

The first trader opined that "it's hard to tell if we're on the edge of something here."

He said that "with high yield, you can't really go up much higher, since everything is trading against their call prices, and if rates back up or the market turns, there's a lot of downside."

With the average junk bond price around or slightly above the 104 mark, according to major statistical gauges, there's not much room for an upward run, "and the average first call price is somewhere around 103, so you're not going to have a portfolio manager wanting to pay a negative yield to the call in case those bonds do get taken out in a year or two," he said.

"And if rates go the other way [and bond prices fall], guys will say, 'Why the hell were we buying these things above the call prices?'"

Market indicators turn mixed

Despite the softer market tone, statistical junk-market performance indicators turned mixed on Thursday after having been lower on Wednesday.

The Markit Series 21 CDX North American High Yield index was down by another ½ point, its sixth loss in a row, finishing at 107 bid, 107 1/8 offered. On Wednesday, it lost 3/16 point.

The KDP High Yield Daily index also posted its sixth consecutive loss in a row, dropping by 4 bps to 74.89, after having retreated by 6 bps on Wednesday.

Its yield, meanwhile, rose by 1 bp to 5.24% after having been unchanged on Tuesday and again on Wednesday.

But the widely followed Merrill Lynch High Yield Master II index bucked the trend, gaining 0.036%, versus Wednesday's 0.063% loss.

That raised its year-to-date return to 2.544% from Wednesday's 2.507%. But it was still down from the previous Wednesday's 2.812% reading, its 2014 peak level.

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