Ardagh megadeal, TransDigm drive by cap $4 billion week, new bonds rise; Thursday deals busy

By Paul Deckelman and Paul A. Harris

New York, Feb. 24 – The high-yield primary sphere had a second relatively busy day in a row on Friday, with a pair of issuers bringing three quickly shopped tranches totaling $1.72 billion of new U.S. dollar-denominated and fully junk-rated paper to market, on top of the $1.9 billion which got done on Thursday – also in two unscheduled deals consisting of three tranches.

Irish glass and metals packaging producer Ardagh Group brought an upsized $1.42 billion of new notes in two tranches: a $700 million add-on to the company’s existing 2025 notes as well as an upsized $715 million stand-alone issue of new 5.5-year paper. Ardagh also brought a euro-denominated seven-year secured tranche.

Traders said both of the dollar tranches firmed when they hit the aftermarket.

The day’s other deal came from aircraft components manufacturer TransDigm Inc., which priced a $300 million add-on to its subordinated 2025 notes. That paper was also quoted up a little later on in the day.

The two deals closed out a $4.13 billion primary week, according to data compiled by Prospect News – busier than last week’s $2.5 billion, even though this week was one trading day shorter than last due to the Presidents Day holiday on Monday.

Traders meantime saw active volume on the two deals which came to market on Thursday from CDW Corp. and Viacom Inc.

Statistical market performance measures were mixed for a second consecutive session on Friday; they had turned mixed on Thursday, after being higher across the board on Tuesday and again on Wednesday.

However, those indicators were higher all around versus where they had finished out last week. It was their second straight week-over-week gain after one mixed week.

Ardagh three-part megadeal

An ultra-familiar name throughout the high-yield market made Friday a big day for new issue activity.

In a drive-by, Ireland’s Ardagh Group priced $2.22 billion equivalent of high-yield notes in a three-part deal.

The transaction included an upsized €750 million of seven-year senior secured notes (Ba3/BB-) which priced at par to yield 2¾%. The amount was increased from €500 million. The yield printed on top of yield talk and tight to early guidance that was set in the high 2% area to 3%.

The secured portion of the deal also included an upsized $715 million of restructured 5.5-year notes (Ba3/BB-) which priced at par to yield 4¼%. The size was raised from $700 million. The maturity was increased to 5.5 years from five years.

The yield for the dollar secured notes printed on top of yield talk that was announced in the 4¼% area. Early guidance had the tranche pricing in the low 4% area.

The unsecured portion of the deal came as a $700 million add-on to Ardagh Packaging Finance plc and Ardagh Holdings USA Inc.’s 6% senior notes due Feb. 15, 2025 (B3/CCC+).

It priced at 101.5 to yield 5.761%. The reoffer price came at the rich end of the 101.25 to 101.5 price talk. Early guidance was 101.25 to 101.75, a trader said.

The overall transaction was increased from $1.9 billion equivalent.

Citigroup was the left bookrunner for all three tranches of the debt refinancing transaction.

TransDigm brings tack-on

Also on Friday, TransDigm priced a $300 million tack-on to its 6½% senior subordinated notes due May 15, 2025 at 105.5 to yield 6.156%.

The reoffer price came at the cheap end of the 101.5 to 101.75 price talk.

Credit Suisse, Citigroup, Morgan Stanley and UBS were the joint bookrunners.

The Cleveland-based aircraft components producer plans to use the proceeds for general corporate purposes including potential acquisitions, dividends and share repurchases, as well as to replenish $90 million of cash used to acquire Schroth Safety Products GmbH.

Crew Energy oversubscribed

In the Canadian new issue market, Crew Energy Inc. priced a C$300 million issue of seven-year senior notes (/B/DBRS: B) at par to yield 6½%.

The deal went very well, playing to an order book that was multiple-times oversubscribed, a market source said.

National Bank Financial and Scotia were the joint bookrunners.

TD Securities and BMO Nesbitt Burns Inc. were the co-lead managers.

The Calgary, Alta.-based oil and natural gas exploration, development and production company plans to use the proceeds to redeem all $150 million of its 8 3/8% senior notes due 2020, with the excess proceeds to make a non-permanent repayment of debt under its credit facility and for general corporate purposes.

LPL to price in week ahead

LPL Holdings Inc. plans to market a $500 million offering of 8.5-year senior notes in the early part of the Feb. 27 week.

The deal is expected to price late in the week.

Morgan Stanley, JP Morgan, Goldman Sachs, Wells Fargo, BofA Merrill Lynch, Citigroup, Citizens, Credit Suisse and SunTrust are the joint bookrunners for the debt refinancing deal.

The primary market is expected to be active during the February-March crossover week, sources said on Friday.

No one had specific deal tips.

New issue supply will be somewhat curtailed by the JP Morgan Global High Yield & Leveraged Finance Conference, scheduled to take place from Feb. 27 through March 1 in Miami, sources said.

Thursday inflows

Daily cash flows of 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 $83 million of inflows on the day.

Actively managed funds saw $40 million of inflows on Thursday.

Dedicated bank loan funds, meanwhile, saw greater inflows than both of the high-yield bond classes combined.

The loan funds saw $196 million of cash come in on Thursday, $4 million of which went to bank loan ETFs, the trader said.

A busier week

Friday’s pair of bond deals brought the week’s tally of new U.S. dollar-denominated and fully junk-rated paper from domestic or industrialized-country borrowers up to $4.13 billion in eight tranches, according to data compiled by Prospect News.

The week’s total was up from the $2.51 billion which had priced in three tranches the week before, ended Feb. 17, even though the latest week had one fewer trading day with the junk bond market and other fixed-income markets in the United States being closed this past Monday in observance of Presidents Day.

However, the data indicated, this week’s total was still well down from the $8.94 billion which had priced in an eye-popping 19 tranches the week before, ended Feb. 10 – the heaviest new-issuance week so far this year.

This week’s primary activity brought year-to-date issuance for 2017 to $41.91 billion in 77 tranches – almost four times the $11.90 billion which had gotten done in 21 tranches by this point on the 2016 calendar, the Prospect News data indicated.

The data also showed that 2017’s year-to-date volume so far is the biggest seen in the January through mid-February timeframe in the past four years.

Day’s deals move up

In the secondary market, traders saw modestly firmer levels for both of Friday’s new issues.

A trader said that “Ardagh has been trading around,” seeing the packaging maker’s add-on to its 6% notes due February 2025 getting as good as a 102¼ to 102½ bid context, up from their 101.5 issue price.

However, at another desk, a market source – while seeing the notes at that same 102½ bid level – noted that the existing paper had been trading “maybe a point higher than that” before news of the new deal hit the market.

About $32 million of those notes changed hands, putting the credit high up on the day’s Most Actives list.

Ardagh’s new stand-alone 4¼% senior secured notes due September 2022 were meantime seen by a trader at 100¾ bid, 101¼ offered, up from their par issue price.

A second trader saw the bonds bid between 100 3/8 and 100¾.

Over $27 million of those notes traded.

TransDigm’s new 6½% senior subordinated notes due May 2025 – an add-on to its existing $450 million sold two years ago – edged up to 101¾ bid, 102 offered a trader said, versus their 101.5 issue price.

He saw around $12 million of the notes trading.

Viacom is volume leader

The traders meantime saw intense activity in the new 40-year fixed-rate-to-floating-rate junior subordinated debentures that New York-based television and motion pictures giant Viacom had priced on Thursday.

The busiest of the two tranches was Viacom’s 6¼% debentures due 2057 that come with 10 years of call protection and a fixed-rate coupon for all of that non-call period.

A trader saw those bonds at 100¾ bid, calling it a 3/8 point gain on the day, with over $134 million having traded, easily the busiest bond in Junkbondland on Friday.

He meantime saw the other half of that deal – Viacom’s 5 7/8% notes due 2057, which come with five-years of call protection and a fixed-rate coupon during that time, at a little bit above the 100¾ bid level, pegging the bonds just under ½ point better, on turnover of more than $100 million.

Viacom had priced both $650 million tranches at par on Thursday.

CDW’s more conventional 5% senior notes due September 2025 “did pretty well,” a trader said, seeing them at a 101 to 101¼ bid context, while a second trader located them at 101½ bid, well up from the par level at which the Lincolnshire, Ill.-based technology solution provider had priced its upsized $600 million drive-by deal on Thursday.

More than $34 million of the notes traded on Friday.

Indicators stay mixed

Statistical market performance measures were mixed for a second consecutive session on Friday; they had turned mixed on Thursday after being higher across the board on Tuesday and again on Wednesday.

However, those indicators were higher all around on Friday versus where they had finished out last week. It was their second straight week-over-week gain after one mixed week.

The KDP High Yield Daily Index gained 2 basis points on Friday to close at 72.57, its fourth straight advance after one loss and six gains in a row before that. It had pushed upward by 6 bps on Thursday. Friday’s finish also marked its fourth successive new high point for the year and over the past 52 weeks.

Its yield came in by 1 bp to end at 4.98%, its fourth narrowing in a row. It had also narrowed by 2 bps on Thursday.

Friday’s levels compared favorably to last Friday’s 72.34 index reading and 5.06% yield.

While the KDP index rose on Friday, the Markit CDX Series 27 High Yield Index saw its second loss in a row, retreating by nearly 3/32 point to end at 107 19/32 bid, 107 5/8 offered, after having ended marginally lower on Thursday.

However, the index finished up from last Friday’s close at 107 7/16 bid, 107 15/32 offered.

The Merrill Lynch High Yield Index rose by 0.011% on Friday, its fifth consecutive improvement after one loss. The index rose 0.157% on Thursday.

The latest gain upped its year-to-date return to 2.675% – its fifth straight new peak level for 2017, up from the previous zenith of 2.664% on Thursday.

For the week, the index rose by 0.567% – its fifth straight weekly gain after one weekly loss and its ninth improvement in the last 10 weeks.

Last week, the index had gained 0.197%, finishing with a year-to-date return of 2.097%.

© 2015 Prospect News.
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