Icahn megadeal leads busy day, caps $13 billion week; new deals active; oil names surge

By Paul Deckelman and Paul A. Harris

New York, Dec. 1 – The high-yield primary market closed out the November-December crossover week – and moved into the homestretch for 2017 – with a flourish on Friday as five issuers brought six tranches of dollar-denominated and fully junk-rated issues to market, pricing a total of $2.52 billion of paper.

Diversified holding company Icahn Enterprises LP had the big deal of the day, selling $1.26 billion of new paper in two tranches – an add-on to its existing 6¼% notes due 2022 and a new stand-alone issue of 2025 notes. Both tranches were upsized after plans for a proposed third tranche were abandoned.

Boiler-room equipment manufacturer Cleaver-Brooks, Inc. priced a downsized $375 million offering of 5.25-year notes.

Canadian precious stones mining company Mountain Province Diamonds Inc. brought $330 million of five-year secured notes to market.

Diversified manufacturer Matthews International Corp. did a $300 million issue of 2025 notes.

And specialty chemicals maker Platform Specialty Products Corp. drove by with an upsized $250 million tap of its existing 2025 notes which it had priced just last month.

Secondary market traders saw brisk aftermarket activity in the Matthews deal and some of the day’s other new issues.

Those deals raised the week’s total junk new issuance to more than $13 billion, making it one of the busiest primary weeks of this or any other year.

There were also considerable dealings in other recently priced offerings such as NRG Energy, Inc. and Rexnord Corp.

Away from the new issues, energy sector names like California Resources Corp., Denbury Resources, Inc. and Sanchez Energy Corp. firmed smartly in line with a second straight upturn in world oil prices.

Statistical market performance measures were mixed on Friday for the fourth time in the last five sessions, after trending higher on Thursday.

And they ended the week mixed versus where they had closed out last week, when they had been higher across the board.

Icahn prices $1.26 billion

A busy Friday session capped a robust post-Thanksgiving week in the primary market.

Icahn Enterprises LP and Icahn Enterprises Finance Corp. priced $1.26 billion of senior notes (expected ratings Ba3/BB+) in a revised two-part transaction.

The debt refinancing deal included an upsized $510 million add-on to the issuers’ 6¼% senior notes due Feb. 1, 2022 which priced at 103 to yield 5.431%. The tranche size was increased from $380 million. The reoffer price came at the cheap end of the 103 to 103.25 price talk.

In addition, Icahn Enterprises priced an upsized $750 million of new eight-year senior notes at par to yield 6 3/8%. The tranche size was increased from $500 million. The yield printed at the wide end of the 6¼% to 6 3/8% yield talk.

A proposed $380 million add-on to the 6¾% senior notes due Feb. 1, 2024 was withdrawn, with proceeds shifted to the two remaining tranches.

The preponderance of investor interest was in the new 6 3/8% notes, a trader said.

Jefferies was the sole bookrunner.

Cleaver-Brooks downsizes

Cleaver-Brooks priced a downsized $375 million issue of five-year senior secured notes (B2/B) at par to yield 7 7/8% on Friday, according to a syndicate source.

The amount was decreased from $395 million.

The yield printed in the middle of the 7¾% to 8% yield talk.

There were also covenant changes.

Joint bookrunner RBC will bill and deliver. SunTrust and Credit Suisse were also joint bookrunners for the debt refinancing deal.

Mountain Province prices

Mountain Province Diamonds priced $330 million of 8% five-year senior secured second lien notes (B3/B-/BB-) at 97.992 to yield 8 ½%.

The yield printed at the wide end of the 8¼% to 8½% yield talk. The reoffer price came cheap to discount talk of approximately 1 point.

Credit Suisse and Scotia were the joint bookrunners for the bank debt refinancing deal.

Matthews oversubscribed

Matthews International priced a $300 million issue of eight-year senior notes (B2/B+) at par to yield 5¼%.

The yield printed at the tight end of the 5¼% to 5½% yield talk. Initial talk was 5½% to 5¾%.

The debt refinancing deal was said to be six- to seven-times oversubscribed, a market source said.

J.P. Morgan, SunTrust and BofA Merrill Lynch managed the sale.

Platform Specialty upsizes

Platform Specialty Products priced an upsized $250 million tack-on to its 5 7/8% senior notes due Dec. 1, 2025 (Caa1/B+) at par to yield 5.874% in a quick-to-market Friday trade.

The sale was increased from $200 million.

The reoffer price came at the cheap end of the par to par ¼ price talk.

Credit Suisse and Barclays were joint bookrunners for the debt refinancing.

Pro-Gest plans roadshow

In news from the European primary market, Pro-Gest SpA plans to roadshow €250 million of seven-year senior notes due 2024 (B2/BB-) in the Dec. 4 week.

Credit Suisse is the global coordinator.

The Itranta, Italy-based producer of containerboard, corrugated cardboard and packaging solutions plans to use the proceeds to repay bank debt and for general corporate purposes including the prefunding of capital expenditures.

The week ahead

The post-Thanksgiving week saw a torrid $15.3 billion of issuance clear the primary market, making it the second biggest week in 2017 to date, coming in well behind the $17.5 billion that priced during the March 6 week.

Look for the week ahead to be as big or bigger, sources said as the post-Thanksgiving week wound down.

Aside from announced business, look for one big deal from the services sector to show up as a drive-by, a sellside source advised.

The Dec. 4 week ought to be a big one in the European new issue market, sources there say.

Forecasts for the week beyond – the Dec. 11 week – have been mixed.

Some market watchers expect the primary market to begin winding down in earnest, following the Friday, Dec. 8 close.

Others, however, say the Yuletide calendar is tailor made for the primary market to keep cranking late in the year, with Christmas Eve falling on a Sunday.

The Dec. 11 and Dec. 18 weeks could be active ones, they say.

Thursday inflows

Daily cash flows for 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 $503 million of inflows on the day.

Actively managed funds saw $110 million of inflows on Friday.

Retail money fled the bank loan asset class on Thursday, however, with the dedicated bank loan funds sustaining $120 million of outflows on the day.

A monumental week

Friday’s busy session brought the amount of new dollar-denominated and fully junk-rated paper from domestic or industrialized-country borrowers priced during the week up to $13.12 billion in 23 tranches, according to data compiled by Prospect News.

That was well up from the meager $3.38 billion which had priced in seven tranches the week before, ended Nov. 24, which had seen a full market close last Thursday for the Thanksgiving Day holiday break in the United States, sandwiched in between shortened pre- and post-holiday sessions.

It was also up from the fairly busy week before that, when $8.35 billion had priced in 16 tranches as some issuers rushed to do their deals before the following week’s holiday hiatus.

Friday’s new deals put this week over the top as the second-busiest week so far this year, blowing past the week ended Sept. 15, when a total of $12.38 billion had come to market in 24 tranches.

This week lagged only the week ended March 10, which saw an eye-popping $17.53 billion of new junk priced in 26 tranches – not only the biggest new issuance week this year, but the heaviest week ever, according to the data.

This week’s slew of new deals raised year-to-date issuance for 2017 so far to $266.41 billion in 492 tranches, running 28.1% ahead of the $207.97 billion which had priced in 325 tranches by this point on the 2016 calendar, the Prospect News data indicated.

Matthews tops Most Actives

The new 5¼% notes from Matthews International were the clear volume leader on Friday, a trader said, seeing more than $47 million of those notes traded and going home at 101 1/8 bid, up from the par issue price at which the forward calendar offering had gotten done.

A second trader saw the Pittsburgh-based diversified manufacturer’s new paper in a 101¼ to 101 5/8 bid context.

Day’s new issues trade around

A trader said that Mountain Province Diamonds’ 8% second-lien notes had moved up a little from their heavily discounted issue price of 97.992, calling the Canadian diamond mining concern’s new paper up a little more than ½ point on the day at 98½ bid.

At another shop, a market source pegged the bonds in a 98¼ to 99¼ bid context, with over $21 million of that regularly scheduled issue having traded.

Thomasville, Ga.-based boiler equipment manufacturer Cleaver-Brooks’ 7 7/8% senior secured notes due March 2023 were seen by a market source to have moved up to a 101 5/8 to 102 1/8 trading range, well up from that forward calendar deal’s par pricing level.

A second trader located the notes at the end of the day at 101 7/8 bid on more than $18 million of turnover.

Icahn Enterprises’ 6¼% add-on notes due February 2022 edged up to 103 1/8 bid on more than $10 million of trading volume.

Another trader meantime saw the other half of the New York-based diversified holding company’s forward calendar megadeal, the stand-alone 6 3/8% notes due 2025, going home in a 99¾ to 100¼ bid range.

West Palm Beach chemical manufacturer Platform Specialty Products’ 5 7/8% quick-to-market add-on senior notes due 2025 were seen by two separate traders ending the day between 100¼ and 100½ bid.

NRG gains continue

Thursday’s 5¾% notes offering due January 2028 from NRG Energy “continued to shine” in Friday’s trading, a market source said, seeing the Princeton, N.J.-based power generating company’s deal rising to 102 bid on heavy trading of more than $40 million.

He said that represented a 5/8 point gain on the session.

NRG had priced its $870 million quick-to-market offering at par and the new bonds firmed smartly when they hit the aftermarket, moving up to a 101¾ bid level in initial trading.

Meanwhile Rexnord’s 4 7/8% notes due 2025 were ending the day down 1/8 point at 100 7/8 bid.

More than $34 million of the Milwaukee-based industrial manufacturer’s notes were trading around.

That forward calendar deal priced at par on Thursday and the notes had firmed up to 101 bid when they were freed to trade.

Energy names get a boost

In the energy sphere, oil and gas names were riding a wave of upside momentum, helped by a second straight session of higher world crude oil prices.

California Resources’ 8% notes due 2022 shot up by 1 7/8 points to 76¼ bid, with over $33 million traded.

Elsewhere in that sector, Denbury Resources’ 5½% notes due 2022 gained nearly 4 points on the day to finish at 71¼ bid, with over $11 million having traded, while Sanchez Energy’s 6 1/8% notes due 2023 were nearly 2 point gainers, closing at 86 5/8 bid, also with over $11 million traded.

The sector got a boost from higher crude prices, with January-delivery West Texas Intermediate better by 96 cents a barrel in New York Mercantile Exchange trading, ending at $58.36, while the February North Sea Brent crude contract, the new front month, rose to $63.73 per barrel in London futures trading, up $1.10 on the day.

Indicators end mixed

Statistical market performance measures were mixed on Friday for the fourth time in the last five sessions, after trending higher on Thursday.

And they ended the week mixed versus where they had closed out the previous week, when they had been higher across the board. It was the second mixed week in the last three.

The KDP High Yield Daily Index was up by 3 basis points on Friday to 71.86, after having ended Thursday unchanged on the session.

Its yield narrowed by 1 bp to 5.31% after creeping up by 1 bp Thursday.

Those levels compared favorably with last Friday’s 71.76 index reading and 5.34% yield.

But the Markit CDX Series 29 index eased by 1/8 point Friday to 107 13/16 bid, 107 7/8 offered, after having moved up by almost 1/8 point on Thursday.

It was also down from last Friday’s 108 bid, 108 1/32 offered.

The Merrill Lynch North American High Yield Master II Index advanced by 0.012% on Friday, its third successive gain. It had also improved by 0.041% on Thursday and by 0.052% on Wednesday.

Friday’s upturn raised the index’s year-to date return to 7.184% from 7.171% at the close Thursday. The year-to-date return still remains down from the 7.636% posted on Oct. 24, the peak cumulative return for 2017 so far.

For the week, the index gained 0.135%, its third straight weekly advance.

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