Schweitzer-Mauduit, Carvana, Enova, Fortress price; Refinitiv, AkzoNobel on tap; AMC down

By Paul A. Harris and Abigail W. Adams

Portland, Me., Sept. 14 – Friday marked the busiest day of the week for new deal activity with four deals totaling $1.38 billion pricing.

Enova International, Inc. priced a $375 million issue of seven-year senior notes, Carvana Co. priced an upsized $350 million issue of five-year senior notes, Schweitzer-Mauduit International, Inc. priced a $350 million issue of eight-year senior notes, and Fortress Transportation and Infrastructure Investors priced a $300 million issue of seven-year senior notes.

The European primary market was also busy with Arqiva Broadcast Finance plc pricing £625 million of five-year senior notes and Garrett Motion Inc. and Together Financial Services Ltd. joining the forward calendar.

However, all eyes will be on Refinitiv and AkzoNobel NV with both expected to price their mega-deals in the coming week.

As attention turned towards the deals that broke for trade on Friday, the flurry of trading activity surrounding Pacific Drilling SA’s 8 3/8% senior secured first-lien notes due 2023 (Caa1/B) tempered with the notes largely unchanged.

Outside of the new deals, AMC Entertainment Holdings Inc. junk bonds were down in active trading after a shakeup in the company’s controlling shareholders.

Oversubscribed Carvana upsized, tight

Carvana priced an upsized $350 million issue of five-year senior notes (Caa2/CCC+) at par to yield 8 7/8% on Friday.

The deal was increased from $300 million.

The yield printed at the tight end of yield talk that was set in the 9% area. Initial price talk was in the low 9% area.

The deal was heard to be three-times oversubscribed, a trader said.

Wells Fargo was the left bookrunner. Citigroup and Deutsche Bank were the joint bookrunners.

The Tempe, Ariz.-based e-commerce used car platform plans to use the proceeds for general corporate purposes.

The new notes dominated activity in the secondary space with the notes shooting up after breaking for trade. The 8 7/8% notes were seen trading between 102 and 102¼, a market source said.

More than $55 million of the bonds had traded by the late afternoon.

Schweitzer-Mauduit at a discount

Schweitzer-Mauduit International priced $350 million of 6 7/8% eight-year senior notes (B2/B+) at 99.241 to yield 7%.

The yield printed in the middle of yield talk that was announced in the 7% area.

Official talk came wide of initial talk for a yield of 6½% to 6¾%, a bond trader said, adding that the market heard the order book was around only two-thirds done at midday Thursday.

J.P. Morgan Securities LLC was the lead.

The Alpharetta, Ga.-based provider of engineering solutions and advanced materials for the tobacco industry plans to use the proceeds to refinance its existing senior secured credit facilities.

The notes were also seen well above their issue price after breaking for trade. They were seen changing hands between par and par ¾.

About $13 million of the bonds had traded by late afternoon.

Enova prices tight

Enova International priced a $375 million issue of seven-year senior notes (B3/B-) at par to yield 8 ½%.

The yield printed at the tight end of yield talk set in the 8 5/8% area.

Official talk came wide of initial guidance in the low to mid 8% area, a trader said.

Credit Suisse was the left bookrunner. Jefferies was the joint bookrunner.

The Chicago-based online financial services provider plans to use the proceeds to refinance debt and for general corporate purposes.

Fortress’ seven-year deal

Fortress Transportation and Infrastructure Investors priced $300 million of 6½% seven-year senior notes (B1/B+) at 98.5 to yield 6.771%.

The yield came in line with discount talk set in the 6 ¾% area. The reoffer price came on top of the 1.5 points of discount talk.

Initial price talk was for a yield in the 6½% area, a trader said, adding that the deal was heard to have been playing to a $400 million order book.

Morgan Stanley, Barclays and J.P. Morgan were the joint bookrunners.

The New York-based company plans to use the proceeds to repay $125 million of borrowings under its revolver, with the remainder to be used for general corporate purposes.

Arqiva prices £625 million

Arqiva Broadcast Finance priced £625 million of five-year senior notes (expected B2//confirmed B-) at par to yield 6¾%.

The yield printed 12.5 basis points inside official price talk in the 7% area, according to a London-based sellside source.

Physical bookrunner BofA Merrill Lynch will bill and deliver. HSBC was also a physical bookrunner.

Garrett Motion to roadshow

Garrett Motion plans to start a roadshow on Monday for a €450 million offering of eight-year senior notes (B2/B).

The roadshow wraps up on Thursday.

Goldman Sachs, JPMorgan, Citigroup and Deutsche Bank are the joint bookrunners.

Proceeds will be used to help fund the spinoff of the company from Honeywell International Inc.

Together Financial roadshow

Bracken Midco1 plc, the indirect parent of Together Financial Services, plans to run a roadshow from Monday to Wednesday for £350 million of senior PIK toggle notes due 2023 (Fitch: B).

Global coordinator Credit Suisse will bill and deliver. Citigroup is also a global coordinator. Barclays and JPMorgan are joint bookrunners.

Proceeds, together with cash from Together Financial Services Ltd., will be used to repurchase or redeem the issuer’s senior PIK toggle notes due 2021, as well as to provide Bracken Topco Ltd. with the funds required to pay off outstanding vendor notes and make a distribution to Topco’s shareholder, including payment of accrued interest on certain shareholder debt and making a dividend payment to shareholders.

Spotlight on Europe

Much of the news carrying over the weekend bears upon the European new issue market.

Monday has a save-the-date flag for a potential issue of floating-rate notes from a company in the mechanical sector, a market source said, adding that Goldman Sachs and BNP Paribas are leading the effort.

However, all eyes will be on a pair of megadeals set to price early in the week.

Refinitiv, the new name for what is currently Thomson Reuters’ financial & risk division, is set to wrap up marketing early in the Sept. 17 week for the euro-denominated tranches of its $5.5 billion equivalent deal to help fund the acquisition of a 55% stake in the company by Blackstone, Canada Pension Plan Investment Board and GIC.

The euro tranches include $1 billion equivalent of euro-denominated 7.5-year senior secured notes (B2/B/BB+) with initial talk in the 5% area, and $700 million equivalent of euro-denominated eight-year senior unsecured notes (Caa2/B-/B+) with initial price talk in the 7% area.

The dollar-denominated tranches – playing to massive demand, according to market sources – feature $2 billion of 7.5-year senior secured notes (B2/B/BB+) with initial price talk in the low 7% area, and $1.8 billion of eight-year senior unsecured notes (Caa2/B-/B+) with initial price talk in the low 9% area.

Price talk has yet to change but almost certainly will, especially on the dollar-denominated tranches, sources say.

Meanwhile, AkzoNobel NV is marketing €1,385,000,000 of eight-year senior notes, including €900 million equivalent of dollar-denominated notes, with initial price talk in the 9% area, and €485 million of notes with initial price talk in the high 6% area to 7%.

Pacific Drilling unchanged

After dominating trading activity, Pacific Drilling’s tranche of 8 3/8% senior notes due 2023 saw relatively light trading volume on Friday with the notes largely unchanged.

The 8 3/8% notes were trading between 102 1/8 and 102 3/8 on Friday and stood poised to close the day at 102¼, sources said.

About $16 million of the bonds were on the tape by late afternoon.

The 8 3/8% notes traded up to 103 early Thursday but the notes came in during the afternoon to trade in a 102 1/8 to 102 3/8 context.

The strong performance of the notes was attributed to speculation the company will be acquired.

The potential acquisition was a “foregone conclusion” that drove demand during bookbuilding, a market source said.

There is currently a lot of M&A activity in the oil and gas sector with Transocean Ltd. recently acquiring Ocean Rig.

The valuation of Ocean Rig made Pacific Drilling look good in comparison, a source said.

Pacific Drilling’s tranche of 12% second-lien PIK toggle notes due 2024 continued to see light trading volume, which sources attributed to ad hoc lenders that took down the tranche.

The PIK notes were also unchanged at 102¾ bid, 103¼ offered. Every distressed guy was eyeing the notes, the source said.

Pacific Drilling priced an upsized $1 billion two-tranche offering of secured notes on Wednesday.

The deal included an upsized $750 million tranche of the 8 3/8% notes, which priced at par, and $250 million of second-lien PIK toggle notes, which priced at par to yield 11%.

The cash coupon is 11% while the PIK coupon steps up by 100 basis points to 12%.

The Luxembourg-based drillship operator plans to use proceeds from the offering to refinance or repay a portion of its pre-bankruptcy debt and for general corporate purposes.

Pacific Drilling filed for bankruptcy on Nov. 12, 2017 under Chapter 11.

AMC drops

AMC’s junk bonds were active and trading down on Friday after a shakeup in the company’s ownership.

The Leawood, Kan.-based operator of move theaters’ 5 7/8% notes due 2026 were down about 1½ points to close the day at 96, according to a market source.

About $14 million of the bonds were on the tape by late Friday afternoon. The notes were trading in the 97¼ to 97 5/8 range prior to Friday’s session.

AMC’s 6 1/8% notes due 2027 were down about 1¼ points on Friday. The notes were seen trading between 96½ and 96¾. About $6 million of the bonds were on the tape by the late afternoon.

The notes were trading around 98¼ and 98½ in the run up to Friday’s session.

The activity in the notes came amid a shareholder shakeup.

AMC sold $600 million six-year convertible notes to private equity firm Silver Lake in a private placement on Friday.

Approximately $421 million of the proceeds will be used to repurchase 24,057,143 class B common shares from Chinese conglomerate Dalian Wanda Group Co., Ltd.

Upon the full conversion of the convertible notes, Wanda’s stake in the company will be reduced to 38%.

As part of the transaction, Silver Lake will appoint one director to the AMC board of directors with AMC agreeing to add an independent director with support from Silver Lake, according to a company news release.

Thursday inflows

The 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 $213 million of inflows on the day.

Asset managers saw $65 million of inflows on Thursday, the trader said.

News of Thursday’s daily inflows follows a report from Lipper US Fund Flows that the dedicated junk funds sustained $862 million of outflows in the five sessions ending with the Wednesday, Sept. 12 close.

Indexes gain

Three benchmarks for the high-yield secondary market rounded out was largely a mixed week with gains.

The KDP High Yield Daily index rose 6 basis points to close Friday at 70.36 with the yield now 5.85%.

The index rose 1 basis point on Thursday and 6 bps on Wednesday after dropping 4 bps on Tuesday and 3 bps on Monday.

The index posted a 6 bps gain on the week.

The Merrill Lynch High Yield index marked a solid week of gains on Friday. The index was up 4.4 bps with the year-to-date return now 2.273%.

The index was up 13.9 bps on Thursday, 14.3 bps on Wednesday, 5.3 bps on Tuesday and 10.3 bps on Monday.

The index crossed the 2% year-to-date threshold on Wednesday. It was up 48.2 bps on the week.

The CDX High Yield 30 index was up 7 bps to close Friday at 107.39. The index was up 21 bps on Thursday, 14.3 bps on Wednesday, 5 bps on Tuesday and 17 bps on Monday for a 55 bps gain on the week.

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