Primary quiet but upsized PQ deal on tap, other deals hit the road; recent pricings trade busily

By Paul Deckelman and Paul A. Harris

New York, April 25 – The high yield primary market turned quiet on Monday, breaking a long string of sessions during which at least one dollar-denominated and fully junk-rated pricing had been seen.

However, things are expected to pick back up, starting on Tuesday, when syndicate sources said that chemical manufacturer PQ Corp.’s now upsized offering of 6.5-year secured notes could price late in the session; besides upsizing the deal, the issuer put out price talk on the deal during Monday’s session.

Also in the pipeline are several new deals being marketed to investors via roadshows starting this week.

The sources said that metal products manufacturer BlueScope Steel Co. began marketing a $100 million five-year offering on Monday.

And they said that glass packaging maker Ardagh Group and education materials provider McGraw-Hill Global Education Holdings LLC were scheduled to hit the road on Tuesday with their respective proposed deals.

Among names that have already successfully survived the pricing process, traders saw busy trading in Friday’s offerings from food retailer Fresh Market, Inc. and healthcare operator Regional Care Hospital Partners Holdings, Inc., as well as Wednesday’s deal from security services provider Protection 1.

Statistical market performance measures turned lower across the board on Monday for the first time in more than two weeks. That downturn follows two straight sessions during which the indicators were mixed and two sessions before that which saw them higher all around.

Ardagh starts Tuesday

In the primary market Ardagh Group plans to start a roadshow on Tuesday in London for a $2.85 billion equivalent four-part offering of notes.

The deal includes $2 billion equivalent of seven-year senior secured notes and $850 million equivalent of eight-year senior unsecured notes.

The deal is expected to price on May 4.

Citigroup the sole bookrunner.

Proceeds will be used to help finance the acquisition of assets from Ball Corp. and Rexam plc. The acquisitions include certain metal beverage can manufacturing assets and support locations in Europe, the U.S. and Brazil, when Ball’s proposed acquisition of Rexam becomes complete.

PQ upsizes, sets talk

PQ Corp. upsized its offering of 6.5-year springing-maturity senior secured notes (B2/B+) to $625 million from $500 million.

In addition, the notes were talked to yield 7% to 7¼%.

Commitments are due at 2:30 p.m. ET Tuesday, and the offering is set to price thereafter.

Citigroup is the left bookrunner. Credit Suisse, Morgan Stanley, J.P. Morgan, Jefferies, Goldman Sachs, Deutsche Bank and KeyBank are the joint bookrunners.

Proceeds will be used to refinance the existing PQ and Eco Services credit facilities and PQ’s second-lien notes concurrent with the merger of PQ and Eco Services. As a result of $125 million upsize, $25 million will be added to the balance sheet, and $100 million will be used to reduce senior unsecured debt.

McGraw-HILL starts Tuesday

McGraw-Hill Global Education Holdings LLC plans to start a roadshow on Tuesday for a $670 million offering of eight-year senior notes.

The deal is set to price later this week.

Credit Suisse, Morgan Stanley, BMO, Jefferies, Barclays, Goldman Sachs, RBC and Wells Fargo are the joint bookrunners.

The New York-based provider of education materials plans to use the proceeds for debt refinancing in order to extend its maturity profile, as well as to merge McGraw-Hill School Education into the McGraw-Hill Global Education credit group, and to fund a dividend.

BlueScope Steal roadshow

BlueScope Steel Co. began a roadshow on Monday for a $300 million offering of five-year senior notes.

The offer is set to price late this week.

Credit Suisse and HSBC are the bookrunners.

The Melbourne-based manufacturer of flat steel products and building product solutions plans to use the proceeds to refinance short term acquisition facilities previously drawn when BlueScope acquired Cargill Inc.’s stake in their U.S. joint venture, North Star.

Friday inflow

The cash flows of the dedicated high yield funds were positive on Friday, a trader said.

High yield ETFs saw $35 million of inflows on the day.

Actively managed funds, meanwhile, saw $80 of inflows on Friday.

Friday deals trade actively

In the secondary market a trader described things as “pretty slow today,” with no new-deal pricings to spur things.

He said overall volume was fairly light.

He said that the busiest credit in Junkbondland was St. Louis-based specialty food retailer Fresh Market’s 9¾% senior secured first-priority notes due 2023, with over $53 million of those notes traded.

Her saw the paper “all over the place” between 99 7/8 and just a shade over the 99 level, where the $800 million of paper had priced on Friday via special financing vehicle Pomegranate Merger Sub, Inc., as a regularly scheduled forward calendar offering.

Another market source saw the paper finishing the day at just over 99 bid.

The bonds had traded actively in initial aftermarket dealings on Friday, hanging around their issue price on volume of over $48 million.

Friday’s other transaction – Brentwood, Tenn.-based acute-care facilities owner and operator Regional Care’s 8¼% senior secured notes due 2023 – “traded well,” one of the market sources said, pegging the bonds on Monday at 102¼ bid, 103 offered.

That offering – also $800 million – had priced at par on Friday off the forward calendar and had immediately jumped to around the 102 bid level, when they were freed, with over $46 million of initial aftermarket activity after pricing.

On Monday, a market source saw them moving up further, rising to 102¾ bid, on volume of more than $40 million.

Protection 1 rebounds

Wednesday’s big secured bond offering from Chicago-based alarm monitoring and security services provider Protection 1 was also one of the most actively traded issues on Monday, with over $20 million changing hands.

The bonds were quoted going out at 102½ bid, up 1 full point from Friday’s levels.

The company had priced a mammoth $3.14 billion of those notes on Wednesday at par in a regularly scheduled transaction off the forward calendar.

However, terms on the deal – done through special-purpose vehicles Prime Security Services Borrower LLC and Prime Financing, Inc. – did not hit the market until Thursday.

More than $225 million of the notes traded on Thursday, rising as high as above the 103 bid level during the morning, before coming back in to settle around 101 7/8 bid later in the day.

On Friday, another $46 million changed hands, with the bonds coming in from the previous day’s highs to end at 101½ bid, setting the stage for Monday’s gains.

Indicators turn lower

Statistical market performance measures turned lower across the board on Monday for the first time in more than two weeks. That downturn – the first since April 7 – follows two straight sessions during which the indicators were mixed and two sessions before that which saw them higher all around.

The KDP High Yield Daily index was down by 10 basis points on Monday to close at 67.30, its second straight loss after three straight gains. On Friday, it had fallen back by 4 bps.

Its yield was unchanged on the session, closing at 6.21%. On Friday, the yield had widened by 3 bps, after having tightened for seven straight sessions before that.

The Markit Series 26 CDX North American High Yield index slid by 11/32 point on Monday, ending at 103 1/8 bid, 103 5/32 offered, in contrast to Friday’s more than 3/32 point rise. Monday’s loss was the index’s second in the last three sessions.

The Merrill Lynch North American High Yield Master II index suffered its second straight loss on Monday, retreating by 0.087%, after having ended off by 0.024% on Friday, which was its first loss after 10 consecutive gains before that.

Monday’s setback lowered the index’s year-to-date return to 6.446%, down from 6.539% on Friday and from 6.564% ion Thursday, which had been the ninth consecutive new 2016 year-to-date peak level.

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