Airxcel, Ferrellgas add-on price, Atotech, Hexion deals on tap; Sabine Pass stays busy; Neiman Marcus rebounds

By Paul Deckelman and Paul A. Harris

New York, Jan. 24 – The high yield primary market continued to move along in a relatively relaxed groove for a second straight session on Tuesday, with syndicate sources again seeing only a modest amount of new paper coming down the chute, after several very busy sessions last week.

Airxcel, Inc., a maker of heating and cooling equipment for the industrial and recreational vehicle markets, priced a slightly upsized $310 million offering of five-year secured notes as a regularly scheduled forward calendar deal.

Meanwhile, propane distributor Ferrellgas Partners, LP did an upsized $175 million add-on to its existing 2020 notes, also as a regularly scheduled deal.

Both issues were quoted higher in the aftermarket, though on no great volume.

Tuesday’s $468 million of proceeds in two tranches follows the $775 million which got done in three deals on Monday – in contrast to multi-billion-dollar primaryside sessions on Tuesday, Thursday and Friday of last week.

Looking ahead, the syndicate sources are seeing possible pricings Wednesday from Atotech BV, a German manufacturer of specialty plating chemicals and equipment, and from domestic specialty chemical maker Hexion Inc.

Away from the new-deal arena, secondary traders noted the continued heavy trading in natural gas company Sabine Pass Liquefaction LLC’s bonds following a recent ratings upgrade.

And they saw continued gyrations in the paper of retailer Neiman-Marcus Group Inc.

Statistical market performance measures turned higher on Tuesday after having been lower across the board on Monday and mixed on Friday. It was the indicators’ second higher session in the last seven trading days.

Airxcel prices tight

Two issuers raised $468 million by pricing single-tranche deals on Tuesday.

Both deals were in the market at least overnight.

Both were upsized.

Airxcel, Inc. priced a $310 million issue of five-year senior secured notes (B2/B) at par to yield 8½%.

The size was increased from $300 million.

The yield printed at the tight end of the 8½% to 8¾% yield talk.

Jefferies was the left bookrunner. Deutsche Bank was the joint bookrunner.

The Cordele, Ga.-based company plans to use the proceeds to refinance debt and fund a distribution.

Ferrellgas upsizes

Ferrellgas Partners, LP and Ferrelgas Partners Finance Corp. priced an upsized $175 million add-on to their 8 5/8% senior notes due June 15, 2020 (Caa1/CCC+) at 96 to yield 10.04%.

The deal was upsized from $150 million.

The reoffer price came on top of price talk.

BofA Merrill Lynch was the left bookrunner for the debt refinancing deal. Capital One, Fifth Third, JP Morgan and Wells Fargo were the joint bookrunners.

Atotech talk 6¼% to 6½%

Looking ahead, Germany’s Atotech BV talked its $425 million offering of eight-year senior notes (CCC+) to yield 6¼% to 6½%.

The deal is set to price Wednesday.

J.P. Morgan, Barclays, Citigroup, Credit Suisse, HSBC, Nomura and RBC are the joint bookrunners.

Meanwhile Hexion’s secured bond deal remains in the market another day, sources say.

The deal, a $460 million offering of five-year first-priority senior secured notes, is talked to yield in the 10½% area (initial guidance was in the high 10% to 11% area), and expected to price on Monday.

Market sources told Prospect News on Tuesday that Hexion is contemplating splitting off part of the deal into a 1.5-lien tranche that would price at 13¾%.

The deal – in the market via J.P. Morgan, Citigroup, BofA Merrill Lynch, Citizens Bank, Credit Suisse, Deutsche Bank, Goldman Sachs and Wells Fargo – is now set to price Wednesday.

Jacobs Entertainment roadshow

The deal pipeline is presently looking a mite thin, syndicate bankers said on Tuesday.

Chalk it to an earnings blackout, at least partly, one advised.

One new deal was announced.

Jacobs Entertainment, Inc. began a roadshow on Tuesday for a $340 million offering of seven-year second lien senior secured notes (B2).

The deal is set to price late this week.

Credit Suisse, Capital One and Wells Fargo are the joint bookrunners.

The Golden, Colo.-based owner and operator of gaming properties plans to use the proceeds to retire its first- and second-lien term loans and to fund select acquisitions and development opportunities.

Monday outflows

The cash flows of the dedicated high yield bond funds were negative on Monday, the most recent session for which data was available at press time, a trader said.

High yield ETFs saw $58 million of outflows on the day.

Actively managed high yield funds sustained $205 million of outflows on Monday.

However in the world of floating-rate debt cash flows remain firmly positive.

Dedicated bank loan funds saw $210 million of inflows on Monday, the trader said.

Airxcel, Ferrellgas seen higher

In the secondary market, a trader saw Airxcel’s new 8½% secured notes due 2022 in a 101 to 102 bid context, after the HVAC equipment manufacturer’s offering had priced at par.

Another trader meantime quoted the Ferrellgas Partners add-on to its existing 8 5/8% notes due in June of 2020 moving around between 96½ and 97½ bid, after the Overland Park, Kan.-based propane distributor’s issue had priced at 96 bid.

Those levels were down, however, from the 99-to-101 bid range at which the existing paper had been trading recently, in mostly small odd-lot transactions.

United holds around issue price

Looking at Monday’s new deals, a trader saw United Continental Holdings, Inc.’s 5% notes due 2024 “struggling a little, just wrapped around par.”

A second saw the issue trading between 99 7/8 and 100 3/8 bid, while a third also saw them around par, on sizable volume of more than $26 million.

That’s the level at which the Chicago-based corporate parent of United Airlines had priced its quickly shopped $300 million offering on Monday, after the deal was downsized from an originally announced $500 million.

Monday’s other two deals saw considerably less aftermarket action than the UAL issue.

Canadian mining concern Baffinland Iron Mines Corp.’s 12% senior secured notes due 2022 were at 97½ bid, 99 offered in morning trading; that $350 million deal had priced on Monday 97.5 to yield 12.69%, after having lingered literally for weeks on the forward calendar, waiting to get done.

And a trader pegged Greenwood Village, Colo.-based homebuilder Century Communities, Inc.’s new 6 7/8% notes due in May of 2022 at 102¾ bid, though on small volume; the company had priced its quick-to-market $125 million add-on to its existing notes at 102 to yield 6.192%, after the offering was twice upsized, from first $50 million and then from $100 million.

Avolon megadeal moves up

Looking back a little further, both halves of Avolon Holdings Ltd.’s massive $3 billion bond offering were moving higher on Tuesday.

A trader quoted its 5¼% notes due in August of 2022 at 102 bid, 102½ offered, a gain of ¼ point, and its 5½% notes due 2024 at 102 1/8 bid, 102 3/8 bid, also up ¼ point.

At another shop, a trader saw the 5¼% notes at 102 1/8 bid, up ¼ point, on volume of over $21 million, while the 5½% paper had gained 5/8 point to end at 102 ¼, with more than $18 million changing hands.

Avolon, a Hong Kong and Dublin-based aircraft leasing company, priced $1.75 billion of the 5¼% notes and $1.25 billion of the 5½% notes, both at par on Friday as a regularly scheduled forward calendar deal via its Park Aviation Holdings Ltd. subsidiary. It was the biggest bond deal seen in Junkbondland since Round Rock, Texas-based computer manufacturer Dell Inc. had done a $3.25 billion offering of five-year and eight-year notes last June.

Sabine Pass again most active

Away from the new deals a trader noted that as has been the case over a number of recent sessions, “once again, CQP” – Houston-based natural gas processing company Sabine Pass Liquefaction LLC – “is dominating as far as its structure goes, in activity,” with several issues of its bonds high up on the day’s Most Actives List.

He saw the company’s paper anywhere from unchanged to up ¼ point on the day.

Its 5 5/8% notes due 2025 was the busiest junk bond issue of the session, with nearly $60 million traded as it ended at 108 bid.

Over $42 million of its 5¾% notes due 2024 moved around, ending just below 109 bid, while its 5 5/8% notes due 2021 saw more than $37 million changing hands, the bonds ending at 108¼ bid.

Sabine’s 5% notes due 2027 closed above the 105 bid level, on turnover of more than $33 million.

The trader said that Sabine’s capital structure “continues to trade well” and is “pretty active, day in and day out,” in the wake of the recent announcement by Fitch Ratings assigning a BBB- rating to the $13.5 billion of outstanding senior secured debt issued by Sabine, a unit of Houston-based Cheniere Energy Inc. That followed a similar announcement in September by Standard & Poor’s.

“They’re going to move into the investment grade index in a couple of weeks,” – sparking a buying frenzy among high yield and high –grade investors alike, the trader said.

Neiman-Marcus comes back

Neiman-Marcus Group’s 8% notes due 2021 shot up by some 4½ points on the day to end at 64½ bid, a market source said, on volume of more than $20 million.

That gain pretty much wiped out Monday’s drop of nearly 5 points, also on more than $20 million.

The company’s paper has been struggling lately as the Dallas-based high-end department store operator and catalog retailer tries to overcome the general problems of the retailing industry, including weak sales at traditional brick-and-mortar stores, with on-line retailing increasingly snapping up traditional department store customers.

The company recently shelved plans for an initial public stock offering.

As far as Monday and Tuesday’s gyrations, a trader suggested Monday was a “knee-jerk down” move, followed by Tuesday’s “knee-jerk up move.”

Indicators show improvement

Statistical market performance measures turned higher on Tuesday after having been lower across the board on Monday and mixed on Friday. It was the indicators’ second higher session in the last seven trading days.

The KDP High Yield index was unchanged on the day Tuesday, closing at 71.81, after having fallen over the previous four sessions, including Monday’s 9 basis points retreat. It was the index’s second unchanged finish in the last six sessions.

Its yield came in by 1 bp, to 5.2%, its first narrowing after four straight sessions of widening out, including Monday’s 1 bp rise. It was only the second such narrowing in the last eight sessions.

The Markit Series 27 CDX index finished up 3/16 point on Tuesday at 106 13/32 bid, 106 15/32 offered, versus its nearly 3/32 point loss on Monday. It was the index’s second advance in the last three sessions.

And the Merrill Lynch High Yield index broke out of its recent rut, rising by 0.107%, after having racked up five losses in a row before that, including Monday’s 0.01% easing. Tuesday was the third gain in the last eight sessions.

That raised its year-to-date return to 1.032% from 0.924% on Monday, although that cumulative gain remains below last Monday’s 1.127% finish – its peak level for the year so far.

© 2015 Prospect News.
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