Europe primary active; Charter, Speedway, Merlin trading up; Netflix moves higher

By Paul A. Harris and James McCandless

Portland, Ore., Oct. 17 – In the junk bond market, the spotlight was on Europe at the end of the Oct. 14 week.

VodafoneZiggo, Rossini Sarl and Hornbach-Baumarkt AG all priced new paper.

The domestic market was quieter with an issue from Saracen Development, LLC and a shift to an add-on by Neptune Energy.

The high yield secondary space continued to be fixed on the steady stream of new issuance.

A trio of new notes from Charter Communications, Inc., Speedway Motorsports, LLC and Merlin Entertainments plc were active and trending higher.

Drug maker Teva Pharmaceutical Industries Ltd.’s issues varied on news that the company is inching closer to a settlement over all claims against it.

Meanwhile, Netflix, Inc.’s paper was lifted after reporting an overall positive third-quarter earnings report.

The dedicated high-yield bond funds saw $1.792 billion of inflows in the week to Wednesday's close and indexes were moving higher.

Europe remains in spotlight

The European high-yield primary market, where the biggest week of 2019 is now unfolding, continued to generate heavy news volume on Thursday.

Among the headlines, Netherlands-based cable operator VodafoneZiggo priced two tranches of 10.25-year senior secured notes (expected ratings B1/B+/BB).

The deal included $500 million of notes that priced at par to yield 4 7/8%, 12.5 basis points inside of the tight end of yield talk in the 5 1/8% area, and €425 million of notes that priced at par to yield 2 7/8%, also 12.5 bps inside of the tight end of yield talk in the 3 1/8% area.

Noting the 2 7/8% print on Ziggo's euro paper – a long 10-year bond – a sellside source remarked that the deal was driven by an appetite for risk among European high-yield bond investors that is uncharacteristically, perhaps historically, high.

Elsewhere, Milan-based pharma company Rossini Sarl priced a €650 million issue of Euribor plus 387.5 bps eight-year senior secured floating-rate notes (B3/B) at par.

The spread came at the tight end of the Euribor plus 400 bps spread talk. Initial talk was in the 450-bps area.

And German “do-it-yourself” retail operator Hornbach-Baumarkt AG priced a €250 million issue of 3¼% seven-year fixed-rate notes (Ba2/BB) at 99.232 to yield 3 3/8%.

The yield printed at the tight end of the 3 3/8% to 3½% talk.

The deal was heard to be playing to orders in excess of €800 million (see related stories in this issue).

Stateside primary

Notwithstanding the $500 million of dollar-denominated bonds that Ziggo priced Thursday (above), it was a quieter session in the dollar-denominated market.

Terms surfaced on a tribal gaming deal.

Saracen Development, LLC priced a $285 million issue of six-year senior secured notes, a project financing.

The notes, which priced at par, will pay a coupon comprised of 11% cash and 3% PIK.

Meanwhile Neptune Energy downsized its senior notes offering to $300 million from $500 million.

The London-based energy exploration and production company also abandoned the seven-year non-call for three years structure that it announced earlier in the week.

Instead Neptune Energy plans to price a $300 million add-on the Neptune Energy Group Midco Ltd./Neptune Energy Bondco plc 6 58% senior notes due 2025 (see related stories in this issue).

New notes trade

A trio of new issuance saw the lion’s share of activity on Thursday, traders said.

Stamford, Conn.-based telecommunications and mass media name Charter’s new $1.5 billion 4.8% senior secured notes due 2050 rose ¾ point to close at 101 bid.

Approximately $43 million of the notes changed hands.

The quick-to-market Tuesday trade priced at 101.25 initially in a deal placed by Charter Communications Operating, LLC and Charter Communications Operating Capital Corp.

Elsewhere, Concord, N.C.-based racing facilities owner Speedway’s new $350 million 4 7/8% senior notes due 2027 were pushed under to land at 99¾ bid.

The notes, upsized from an initial $300 million, priced at par of Wednesday.

Poole, England-based family entertainment company Merlin’s new $410 million 6 5/8% senior paper due 2027 finished at 101¾ bid.

The paper priced in tranches of dollar-denominated notes and euro-denominated notes on Wednesday.

Both tranches were priced via Motion Bondco DAC.

Teva varies

In the pharma space, Teva’s notes moved in different directions on Thursday, market sources said.

The 6¾% senior notes due 2028 lost 1 point to close at 87 bid. The 3.15% senior notes due 2026 added 1 point to close at 73½ bid.

Both tranches combined had about $76 million on the tape by the close.

On Thursday, reports indicated that the Petach Tikva, Israel-based generic drug producer is inching closer to a settlement on all legal claims against it related to the opioid epidemic.

The company is offering to give away $15 billion in medication to the entities that have pursued legal action against it, along with a ten-year distribution deal that it values at $28 billion.

The news comes on the heels of a federal trial that Teva is a defendant in that is set to begin on Monday.

Despite the wide reporting, attorneys representing the accusers have denied that a deal is close to being reached.

“I would be surprised to see this end without them handing over a large amount of money,” a trader said. “I don’t know why they’re not just doing that. It would make the process go quicker.”

Netflix lifted

Meanwhile, Netlfix’s issues were lifted, traders said.

The 5 3/8% senior notes due 2029 picked up ¼ point to close at 105½ bid.

After the close on Wednesday, the Los Gatos, Calif.-based streaming giant released a better-than-expected third-quarter earnings report.

The company reported a $1.47 per share profit, higher than what analysts predicted at $1.05 per share.

Revenues were slightly underwhelming at $5.24 billion.

Where the company surprised the most was its subscriber metrics, which saw a gain of 6.8 million for the quarter, a 12% increase from this time last year.

“It’s a little short of their guidance but it’s a huge boost for them,” a trader said. “There have been worries of it shedding subscribers.”

Funds see $1.792 billion inflows

The dedicated high-yield bond funds saw $1.792 billion of inflows in the week to Wednesday's close, according to information posted on the internet late Thursday by Lipper US Fund Flows.

The inflow represents a reversal of fortune for the junk funds which sustained outflows of $1.5 billion in the previous week, ending Oct. 9.

Much of the present week's burst of cash came courtesy of the high-yield ETFs, a market source said, noting that the junk ETFs saw $357 million of daily inflows on Wednesday, the final day of the most recent reporting period.

Prior to Wednesday, the ETFs saw $838 million of inflows on Tuesday, $10 million of inflows on Monday, $482 million of inflows last Friday, and $272 million of inflows on Thursday, Oct. 10, the opening day of the most recent reporting period, the source said.

Indexes positive

Three high-yield indexes trended positive during Thursday’s session.

The KDP High Yield Daily index went unchanged, closing at the previous day’s level of 71.23 with the yield remaining at 5.55%.

The index shifted up 7 bps on Wednesday, added 5 bps on Tuesday and shot up 11 bps on Friday.

The ICE BofAML US High Yield index rose 7.9 bps with the year-to-date return now at 11.748%.

The index added 9.1 bps on Wednesday, gained 15.2 bps on Tuesday and improved by 22.8 bps on Friday.

The CDX High Yield 30 index picked up 33.92 bps to land at 107.1556.

The index was positive by 34.04 bps on Wednesday, grew by 34.15 bps on Tuesday and gained 34.82 bps on Friday.

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