BlueLine, Navient, Goodyear lead as primary explodes for $4.2 billion; funds out $240 million

By Paul Deckelman and Paul A. Harris

New York, March 2 – After three days of inactivity, the dollar-denominated part of the high-yield primary market came roaring back to life on Thursday, producing one of its heaviest new-issue volumes of the year so far.

Syndicate sources said that $4.2 billion of U.S. dollar-denominated and fully junk-rated paper from domestic borrowers came to market in six single-tranche issues, all but one of them opportunistically timed and quickly shopped drive-by transactions.

That volume was exceeded only by the $4.26 billion which got done in seven tranches back on Jan. 12, according to data compiled by Prospect News.

Construction equipment rental and leasing company BlueLine Rental’s upsized $1.1 billion of seven-year secured paper was the day’s big deal and the only one of the six offerings that was in the market overnight.

Financial services company Navient Corp. did $750 million of five year notes, a deal which, like BlueLine was upsized during the session.

CommScope Technologies LLC, a provider of goods and services to wireless networks, brought $750 million of 10-year notes to market.

Familiar issuer Goodyear Tire & Rubber Co. priced $700 million of 10-year notes.

Commercial real estate finance company Ladder Capital Corp. chimed in with a $500 million issue of five-year paper.

And waste-management processor Covanta Holding Corp. did a $400 million issue of 8.25-year notes.

Traders said the new Covanta paper moved up when it hit the aftermarket, while the Goodyear and Navient issues stayed around their respective issue prices.

Away from the new deals, traders said that Intelsat SA’s bonds were once again among the busiest issues in Junkbondland – but unlike the previous three sessions, when the communications satellite operator’s paper was solidly higher, results on Thursday were mixed, with some issues actually finally weakening.

Statistical market performance measures turned mixed on Thursday for the second time in the last three sessions. They turned higher across the board on Wednesday and had also been stronger on Monday.

Another numerical indicator – flows of investor cash into or out of high-yield mutual funds and exchange-traded funds, considered a reliable barometer of overall junk market liquidity trends – fell into negative territory in the most recent reporting week, their first setback after four weeks of gains. Some $240 million more left the weekly reporting-only domestic funds in the form of investor redemptions than came into them during the week ended Wednesday, versus the $726 million net inflow reported last Thursday for the seven-day period ended Feb. 22 (see related story elsewhere in this issue).

BlueLine upsizes

Primary market news volume skyrocketed on Thursday.

Six issuers, each bringing single tranche deals, took $4.2 billion of proceeds.

Only one of the six deals was in the market overnight.

And only two of the six were upsized.

BlueLine Rental priced an upsized $1.1 billion issue of seven-year senior secured second-lien notes (Caa1/B) at par to yield 9¼%.

The amount was increased from $1,025,000,000.

The yield printed inside initial guidance in the high 9% to 10% area.

BofA Merrill Lynch, Goldman Sachs, Morgan Stanley, Barclays and Wells Fargo were the joint bookrunners for the debt refinancing deal.

CommScope prices tight

CommScope Technologies LLC, a wholly owned subsidiary CommScope Holding Co., Inc., priced a $750 million issue of 10-year senior notes (Ba3/BB-) at par to yield 5%.

The yield printed at the tight end of the 5% to 5¼% yield talk. Initial guidance was also 5% to 5¼%.

BofA Merrill Lynch, JP Morgan, Wells Fargo and Deutsche Bank were the joint bookrunners for the debt refinancing deal.

Navient brings upsized issue

Navient priced $750 million of five-year 6½% senior bullet notes at 99.958.

Initial price talk had the deal coming with a yield in the 6¾% area.

The Wilmington, Del.-based financial services company’s issue was upsized from an originally shopped $500 million.

JP Morgan, Barclays and RBC Capital Markets Corp. were the active bookrunners.

Goodyear sells 10-year bullet

Goodyear Tire & Rubber priced a $700 million issue of 10-year senior bullet notes (Ba3//BB) at par to yield 4 7/8% on Thursday.

The yield printed at the tight end of yield talk that was set in the 5% area and tighter than initial guidance of 5% to 5¼%.

J.P. Morgan, Barclays, BNP Paribas, Citigroup, Credit Agricole, Deutsche Bank, Goldman Sachs, HSBC, BofA Merrill Lynch, and Wells Fargo were the joint bookrunners.

The Akron, Ohio-based tire manufacturer plans to use the proceeds to redeem its 7% senior notes due 2022 in full.

Ladder Capital prices bullet

Ladder Capital priced a $500 million issue of five-year bullet notes (Ba3/B+/BB) at par to yield 5¼%.

Early guidance has the deal coming with a yield in the low 5% area, the source added.

Deutsche Bank was the left bookrunner. JP Morgan, BofA Merrill Lynch, Barclays, Citigroup, Wells Fargo and US Bancorp were the joint bookrunners for the debt refinancing deal.

Covanta prices tight

Covanta Holding priced a $400 million issue of 8.25-year senior notes (Ba3/B) at par to yield 5 7/8%.

The yield printed at the tight end of yield talk that was fixed in the 6% area and tighter than initial guidance of 6% to 6¼%.

J.P. Morgan, BofA Merrill Lynch, Credit Agricole, Citizens and MUFG were the joint bookrunners.

The Morristown, N.J.-based provider of waste management and energy solutions plans to use the proceeds, along with cash on hand and/or direct borrowings under Covanta Energy, LLC’s revolving credit facility to take out its 7¼% senior notes due 2020.

Howard Hughes for Friday

Howard Hughes Corp. is expected to price an $800 million offering of eight-year senior notes on Friday.

Initial guidance has the deal coming with a yield in the mid-5% area.

JP Morgan is the lead.

The Dallas-based property management company plans to use the proceeds to repurchase its 6 7/8% senior notes due 2021, with any remaining proceeds to be used for general corporate purposes.

CyrusOne two-part deal

CyrusOne LP, the operating partnership of CyrusOne Inc., is expected to price $800 million of senior notes in two tranches on Friday.

The deal includes $450 million of seven-year notes which come with initial guidance of 5¼% to 5½%.

In addition CyrusOne plans to sell $350 million of 10-year notes guided with a yield in the 5¾% area.

JP Morgan, BofA Merrill Lynch, RBC, Barclays, Deutsche Bank, Goldman Sachs, Jefferies, KeyBanc, Morgan Stanley, Stifel Nicholas, SunTrust and TD are managing the debt refinancing deal.

Stonegate upsizes

In the European primary market, Stonegate Pub Co. Financing plc priced an upsized £595 million of five-year senior secured notes (B2/B) in two tranches.

The deal included an upsized £405 million of fixed-rate notes that priced at par to yield 4 7/8%. The tranche size was increased from £395 million. The yield printed at the tight end of yield talk that was set in the 5% area and below initial price talk of 5% to 5¼%.

In addition, Stonegate Pub priced a £190 million tranche of Libor plus 437.5 basis points floating-rate notes at par. The spread came at the tight end of the Libor plus 450 bps area at par price talk. The price came on top of price talk. Initial guidance was Libor plus 450 to 475 bps spread at par.

The overall deal size was increased from £585 million.

The order book for the fixed-rate notes was four-times oversubscribed, the source said, adding that the book for the floating-rate notes was three-times oversubscribed.

Barclays was the sole bookrunner.

The Luton, England-based privately owned managed pub company plans to use the proceeds to fully redeem its existing secured notes due 2019, as well as to return capital invested in relation to the acquisition of intertain Ltd. and other acquisitions, and to finance a distribution to sponsor TDR Capital LLP.

The additional proceeds resulting from the £10 million upsizing of the deal will be used to increase the distribution to TDR Capital.

Nyrstar for Friday

Nyrstar NV talked its €350 million offering of seven-year senior notes (B3) to yield in the 7% area.

The deal is set to price on Friday.

Global coordinator Deutsche Bank will bill and deliver. Goldman Sachs is also a global coordinator.

NatWest and SG CIB are joint bookrunners.

BMO and Credit Suisse are co-managers.

Primaryside revival

In the secondary market, traders noted the new-deal sphere’s strong comeback after three consecutive essentially comatose sessions.

One noted that many portfolio managers and other investment decision makers had been away from their offices for the first three days of the week, attending the annual J.P. Morgan Global High Yield and Leveraged Finance Conference in Florida. With that now in the rearview mirror, issuers returned to the market with a vengeance.

“Things were fast and furious,” another trader commented about the staccato pace of the new issues hitting the tape one after the other.

“And last week, there wasn’t that much going on either,” with just a handful of deals actually totaling less new paper than Thursday’s session generated, “so the market is finally starting to come around.”

Covanta climbs in secondary

Traders said that Covanta Holding’s issue of 5 7/8% notes due July 2025 did the best among the new deals which managed to reach the aftermarket later Thursday.

One trader saw the notes get as good as 101 bid.

A second saw them going home in a 101 to 101¼ bid context, up from their par issue price.

Navient notes trade busily

Several traders saw brisk activity in the new Navient 6½% notes due 2022, with one estimating that as much as $79 million of those bonds may have changed hands by the close.

However, the Wilmington, Del.-based consumer finance company’s quickly shopped offering was not seen going too far from its 99.958 issue price.

One trader pegged the bonds at 100½ bid.

A second said that the notes were moving around in a 100¼ to 100 5/8 bid context.

However, a third trader saw them a little better than that, setting the range between 100 5/8 and 1007/8 bid.

Goodyear clings to issue

There was even less price movement in Goodyear’s new 4 7/8% notes due 2027, with one trader seeing the giant tire manufacturer’s new deal “wrapped around par,” in a 99 7/8 to 100 1/8 bid context.

A second quoted it right at its par issue price, on fairly active volume of over $16 million.

The company’s existing 5 1/8% notes due 2023 meantime were seen off by 3/16 point, going out at 104 3/8 bid, on volume of over $11 million.

Intelsat turns mixed

Away from the new deals, Intelsat’s bonds turned mixed after three straight days of strong gains powered by its planned merger with sector peer One Web LLC, widely seen as a deleveraging transaction.

The Luxembourg-based communications satellite company’s 5½% notes due 2023 continued to rise, firming by 1/8 point to end at 85 5/8 bid, with over $48 million trading.

But its 8 1/8% notes due 2023 plunged by nearly 4 points on the day to 57¼ bid on over $20 million of volume.

Indicators turn mixed

Statistical market performance measures turned mixed on Thursday for the second time in the last three sessions. They turned higher across the board on Wednesday and had also been stronger on Monday.

The KDP High Yield Daily Index rose by 6 basis points on Thursday to end 72.72, its second straight advance. It had also gained 3 bps on Wednesday after losing 4 bps on Tuesday – which had been its first downturn after five sessions of gains.

Thursday’s close set a new year-to-date and 52-week high close, eclipsing the old mark of 72.67, set on Monday.

Its yield came in by 2 bps to close at 4.91% after tightening by 1 bp on Wednesday and being unchanged on Tuesday. The yield had narrowed over the five consecutive sessions before that unchanged finish.

However, the Markit CDX Series 27 High Yield Index turned southward after three consecutive gains, losing 3/32 point to go out at 108 1/16 bid, 108 3/32 offered. On Wednesday, it had improved by 7/16 point.

And the Merrill Lynch High Yield Index also ended on the downside for the first time after eight straight gains, retreating on Thursday by 0.047%, versus Wednesday’s 0.258% rise.

The loss lowered its year-to-date return to 3.142% from Wednesday’s 3.19%, which had been its eighth straight new peak level for 2017, as well as the first time so far this year that the year-to-date gain had topped the 3% mark.

© 2015 Prospect News.
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