Pulte megadeal, Navient, Ineos and Xerium price in $2.7 billion session; Post busy, Freeport up on results

By Paul Deckelman and Paul A. Harris

New York, July 26 – The high yield primary saw its busiest session in well over a month on Tuesday, as four issuers combined to bring some $2.74 billion of new dollar-denominated and fully junk-rated paper to market.

The day’s biggest deal was a quickly shopped, upsized $1 billion two-part offering from homebuilder Pulte Group, Inc. consisting of a $400 million add-on to its existing 2021 notes plus a new stand-alone $600 million of 10.5-year notes.

Financial services company Navient Corp. also drove by with an upsized $750 million of five-year notes.

A pair of deals priced as regularly scheduled forward calendar offerings.

Swiss chemical company Ineos Group Holdings SA did $500 million of eight-year notes as part of a dual-currency two-part transaction totaling €1.1 billion equivalent that also included an eight-year euro-denominated tranche.

And back in the domestic market, industrial textile manufacturer Xerium Technologies, Inc. priced $480 million of five-year secured notes at a discount to par.

Tuesday’s issuance was the heaviest volume of new paper seen in Junkbondland since June 13, when five issuers priced $4.905 billion in seven tranches, according to data compiled by Prospect News.

The day’s total topped the most recent heavy-volume day, which took place one month later, on July 13, when four issuers each brought a single-tranche deal, adding up to $2.225 billion.

When they hit the Tuesday aftermarket, traders said the Navient bonds firmed solidly, with only more modest gains seen for the Ineos dollar issue.

They meantime saw heavy trading in Monday’s upsized big deal from breakfast cereal maker Post Holdings, Inc., with the new bonds not straying far from their issue price.

Away from new or recently-priced offerings, market participants said, continued weakness in oil prices again greased the skids under such energy names as Whiting Petroleum Corp. or Oasis Petroleum Inc.

But Freeport-McMoRan Inc. – a combined metals-mining and energy production company – gained across its capital structure after reporting quarterly numbers and outlining plans to raise capital and continue cutting debt.

Statistical market performance measures turned lower across the board on Tuesday after having been mixed on Monday and higher on Friday. It was the first all-around weaker session since July 15 and only the second in the last eight trading days.

Pulte upsizes

A big Tuesday in the primary market saw four issuers bring a combined five tranches of dollar-denominated junk to raise an overall total of $2.74 billion.

Two of the four issuers came with drive-by deals.

Three of the five tranches were upsized.

Executions appeared uniformly tight, bearing witness to color heard roundabout the market, that there is a great deal of cash to be put to work in high yield bonds.

All four of the tranches that were talked at yields came at the tight ends of yield talk, with two of those four coming well inside of initial guidance. Of the two that were talked at dollar prices (one of which was talked at both a yield and a dollar price) one came at the rich end while the other came in line with talk.

PulteGroup, Inc. priced an upsized $1 billion amount of senior notes (Ba1/BB+) in two bullet tranches, in a quick-to-market transaction.

The deal included an upsized $400 million add-on to the existing 4¼% senior notes due March 1, 2021, which priced at 103.50 to yield 3.419%. The tranche size was increased from $300 million. The reoffer price came at the rich end of the 103 to 103.5 price talk. Initial guidance was 102 to 103.

In addition PulteGroup priced $600 million of new 10.5-year senior notes at par to yield 5%. The tranche size was increased from $300 million. The yield printed at the tight end of both yield talk and initial guidance: 5% to 5¼%.

The overall size of the two-part transaction was increased to $1 billion from $600 million.

J.P. Morgan, BofA Merrill Lynch, BB&T, SunTrust, Citigroup and Wells Fargo were the joint bookrunners.

The Bloomfield Hills, Mich.-based homebuilder plans to use the proceeds, including those resulting from the $400 million upsizing of the deal, to repay the remaining $400 million outstanding under its term loan Facility, to repay any debt outstanding under its revolver and for general corporate purposes, which may include share repurchases, repayment of other debt, and to fund the acquisition and development of land.

Navient upsized and tight

Navient Corp. priced an upsized $750 million issue of non-callable five-year senior notes (Ba3/BB-/BB) at par to yield 6 5/8%.

The issue size was increased from $500 million.

The yield printed at the tight end of yield talk in the 6¾% area, and well inside of the 7% initial guidance. =

BofA Merrill Lynch, JP Morgan and Barclays were joint bookrunners for the deal that came in an investment grade-style execution, sources said.

The Newark, Del.-based financial services company plans to use the proceeds for general corporate purposes.

Ineos dual-tranche deal

Ineos Group Holdings SA priced approximately €1.11 billion equivalent of eight-year senior notes (B3/B-) in two tranches.

The debt refinancing deal included $500 million of notes that priced at par to yield 5 5/8%. The yield printed at the tight ends of both yield talk and initial guidance, both of which were set in the 5¾% area.

In addition Ineos priced a €650 million tranche of notes at par to yield 5 3/8%. The yield printed at the tight end of yield talk in the 5½% area, and on top of initial guidance.

The issue played to good demand, according to an investor.

Global coordinator BofA Merrill Lynch is the left bookrunner for the dollar-denominated tranche and will bill and deliver for that tranche.

Global coordinator JPMorgan is the left bookrunner for the euro-denominated tranche and will bill and deliver for that tranche.

Barclays, Credit Suisse, HSBC, Lloyds and Royal Bank of Scotland are the joint bookrunners.

Xerium secured deal

Xerium Technologies, Inc. priced a $480 million issue of 9½% five-year senior secured notes (B2/B) at 98.54 to yield 9 7/8%.

The yield printed at the tight end of yield talk in the 10% area. The reoffer price came in line with original issue discount talk of 1.5 points.

Official yield talk came well wide of earlier guidance, sources said, adding that the deal was initially in the market with yield guidance of 8¼%.

Jefferies was the left bookrunner for the debt refinancing deal. Macquarie was the joint bookrunner.

Proceeds will be used to refinance an existing term loan and unsecured notes.

Foundation Building roadshow

Foundation Building Materials LLC plans to start a roadshow on Wednesday for its $575 million offering of five-year senior secured notes.

Initial guidance has the notes coming with a yield in the 8½% area.

Goldman Sachs is the left bookrunner.

Jefferies, Credit Suisse and RBC are the joint bookrunners.

The Tustin, Calif.-based building materials company plans to use the proceeds, together with other sources including its ABL facility, to repay its existing credit facilities and other debt, as well as to partly fund the acquisition of the Winroc construction products division of Superior Plus Corp., to pay fees and expenses incurred in connection with other transactions and for general corporate purposes.

Elsewhere Athens, Greece-based FAGE International SA, along with Johnstown, N.Y.-based FAGE USA Dairy Industry Inc., talked a $420 million offering of 10-year senior notes (B1/BB-) to yield 5¾% to 6%.

Books close at 10:30 a.m. ET on Wednesday, and the debt refinancing deal, in the market via Citigroup, is set to price thereafter.

Beyond the thin active calendar is a pipeline about as big around as a soda straw, an investor quipped on Tuesday afternoon.

Some issuers have been constrained by earnings blackouts. However a big slate of Tuesday earnings calls featured some extremely familiar high yield names including Sirius XM Holdings Inc., Nielsen Holdings plc, Ally Financial Inc. and Freeport-McMoRan Inc., a trader pointed out.

And also, in spite of a good deal of reverse inquiry reported to be afoot in the market, a number of issuers that the buyside would like to lend to presently have no pressing uses of proceeds, a banker said.

Flat Monday flows

Although mixed, the cash flows of the dedicated high yield bond funds were essentially flat on Monday, the most recent session for which numbers were available at press time, a trader said.

High yield ETFs saw $7 million of inflows on the day.

Asset managers sustained $5 million of inflows.

Dedicated bank loan funds saw a slightly higher volume of cash, with $10 million of inflows on Monday.

New Navient, Ineos issues better

In the secondary arena, traders saw sizable activity in the new Navient Corp. 6 5/8% notes due 2021.

One trader said the bonds moved around between 100½ and 101¼ bid, before settling in a range of 100¾ to 101¼ bid, well up from their par issue price.

At another desk, a market source pegged those bonds at 101 1/8 bid near the end of the day, seeing more than $42 million having changed hands.

That put the credit high up on the day’s Most Actives list.

Ineos Group’s dollar-denominated 5 5/8% notes due 2024 did not see the same kind of upside movement.

One trader located Ineos’ new deal “right around par,” where the bonds had priced.

A second said he didn’t think the bonds had done very well, putting them in a par-to-100 5/8 bid range, with around $45 million having traded.

The traders did not immediately report any initial aftermarket dealings in either the Pulte Group or the Xerium Technologies bonds.

Post trades actively

Monday’s big new issue of 5% notes due 2026 from Post Holdings were the top-trading junk bond on Tuesday, at least from a volume standpoint, with turnover of more than $108 million.

But the bonds – which had reached initial aftermarket highs between 100½ and 101 bid in late trading on Monday – traded well below those levels on Tuesday.

One trader saw them in a par to 100¼ bid level, while a second said they were finishing at 100 7/32 bid, calling that down 1/8 point on the day from Monday’s close.

Another trader used a vulgar euphemism to describe the Post bonds’ performance, adding the adjective “big time.”

Seeing the bonds between 99 7/8 and 100 1/8 bid, he demanded “how pathetic is that?”

Post, a St. Louis-based producer of well-known breakfast cereals and other food brands, priced $1.75 billion of the notes at par in a quick-to-market offering Monday, after upsizing its deal from an originally announced $1.5 billion.

Meanwhile, Post’s existing 7 3/8% notes due 2022 – which shot up by 1½ points on Monday, on volume of over $26 million, on the news that Post will tender for those bonds at a price of $1,070.83 per $1,000 principal amount plus accrued interest, ending around the takeout price – were seen having given back some of those gains on Tuesday.

A trader said the bonds eased marginally, falling to just above 107 bid, with about $16 million traded.

Post’s tender offer for the $1.375 billion of existing bonds will run through this Friday, July 29.

Oil issues weaker

Away from the new deals, a trader said that “the E&P [oil and natural gas] names were off, in line with a continued slippage in world oil prices.

He saw Oasis Petroleum’s 6 7/8% notes due 2022 off by 3 points on the day, at 88½ bid, with more than $20 million of the Houston-based exploration and production company’s paper traded.

And he said that Denver-based Whiting Petroleum’s 5¾% notes due 2021 lost 1½ points, ending at 86½ bid, with over $27 million traded.

“They are heavily co-related to oil prices,” he said.

The benchmark U.S. crude grade, West Texas Intermediate for September delivery lost 21 cents per barrel on Tuesday on the New York Mercantile Exchange, settling in at $42.92. That loss following Monday’s $1.06 per barrel plunge and Friday’s 56-cent retreat.

Freeport seen firmer

One energy name that bucked the trend on Tuesday was Freeport-McMoRan, although it should be noted that the Phoenix-based company is not a pure-play energy company, also having substantial gold, copper and molybdenum mining and processing operations in the United States and abroad.

A trader saw its most widely traded issue, the 3.55% notes due 2022 up by “½ point or so,” ending around the 86 5/8 bid mark, with over $50 million of the notes having changed hands.

Freeport was “the name of the day,” another trader said.

“He deemed the 3.55% notes up almost a point at 86¾, while seeing its 5.45% notes due 2043 up over half a point at 78, on volume of more than $22 million.

Its 5.40% notes due 2034 were also up nearly a point at 78¾, on volume of over $11 million.

Freeport-McMoRan said its second-quarter loss narrowed as the company reported fewer write-downs related to its oil-and-gas business.

And company executives said in its conference call following the release of its results that Freeport had eliminated some $269 million principal amount of face amount of bond debt during the just-concluded 2016 second quarter, and $369 million so far this year.

They also spoke of the company’s ambitious plans to bring its total net debt load down to around the $10 billion mark by the end of next year – a nearly 50% reduction (see related story elsewhere in this issue).

Indicators lose ground

Statistical market performance measures turned lower across the board on Tuesday after having been mixed on Monday and higher on Friday. It was the first all-around weaker session since July 15 and only the second in the last eight trading days.

The KDP High Yield index lost 9 basis points on Tuesday to close at 69.20, on top of Monday’s 6-bps retreat. It was the index’s third loss in the last four sessions.

Its yield meantime rose by 3 bps, to 5.54% – its second straight 3 bps rise – after having come in by those same 3 bps on Friday. It was the third widening in the last four sessions.

The Markit Series 26 CDX index was down by 14 points Tuesday to end at 104 5/32 bid, 104 3/16 offered, after having fallen back by 11/32 point on Monday, versus Friday’s 7/32 point gain. It was the index’s third loss in the last four sessions.

And even the heretofore robust Merrill Lynch High Yield index was not immune to the negative bug, falling by 0.197%, its first downturn after six straight advances, including Monday’s 0.022% improvement. It was the second loss in the last eight sessions.

Tuesday’s reversal lowered the index’s year-to-date return to 12.324% from Monday’s close at 12.546%, a fifth consecutive new peak year-to-date return.

Stephanie N. Rotondo contributed to this review.

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