Ardagh, GEMS price; Advisor on deck; Select Medical gains; McDermott, DISH drop

By Paul A. Harris and Abigail W. Adams

Portland, Me., July 30 – While European fixed income markets were under pressure prior to the market open in the United States, the European high-yield primary market saw two deals with tight pricing clear during Tuesday’s session.

Ardagh Group SA priced approximately $1.79 billion equivalent of notes in three tranches.

And Iqvia Inc. priced a €720 million issue of senior notes due Jan. 15, 2028 (Ba3/BB) at par to yield 2¼%.

ContourGlobal plc also priced a €100 million add-on to the ContourGlobal Power Holdings SA 4 1/8% senior secured notes due 2025 at 106.

In dollar-denominated new issue news, Dubai-based GEMS Education priced an upsized $900 million issue of seven-year senior secured notes (B2/B/B+) at par to yield 7 1/8%.

And Advisor Group Inc. set official price talk in a downsized $350 million offering of eight-year senior notes (Caa1/B-) with pricing expected on Wednesday.

Meanwhile, the secondary space was again largely unchanged on Tuesday with all eyes on the Federal Reserve and China-U.S. trade talks for indications of the future direction of the market.

New paper was again in focus with Ardagh’s dollar-denominated tranches wrapped around their issue price.

Select Medical Corp.’s 6¼% senior notes due 2026 (B3/B-) continued to post gains on Tuesday after a strong start out of the gate.

Outside of the new paper, earnings related news sparked activity in several outstanding issues.

McDermott International, Inc.’s 10 5/8% senior notes due 2024 dropped in high-volume activity on Tuesday after a second-quarter earnings miss and weak forward guidance.

DISH Network Corp.’s 7¾% senior notes due 2026 gave back nearly all of their recent gains with the notes again dropping below par following its earnings report.

Cash to put to work

Prior to the Tuesday American open, a huge swath of European fixed income was under pressure, sources there said.

High-grade corporate bonds were 2 basis points wider on the day, as were banks, a buyside source said.

Names with exposure to news headlines, in particular Italy and the United Kingdom, were 8 to 10 bps wider.

In junkland, cash bonds were down ¼ point to ¾ point ahead of the American open, a source said.

“That may be,” said a London-based senior syndicate official. “However, it's very difficult to find anyone who wants to sell anything.”

High-yield investors in Europe are flush with cash they need to put to work, the official said.

They are putting that cash to work in the new issue calendar, which is the reason for the ultratight new issue executions that took place amid the Tuesday turmoil being generated by topics such as global trade and scares related to a so-called “no-deal Brexit.”

Indeed, two companies raising money in the euro-denominated junk market on Tuesday walked away with two-handle prints.

Ardagh upsizes euro

Ardagh Group priced approximately $1.79 billion equivalent of notes in three tranches, a transaction that saw about $100 million equivalent of proceeds shifted to the euro-denominated secured tranche from the dollar-denominated secured tranche.

An upsized €440 million amount of seven-year senior secured notes (Ba3/BB) priced at par to yield 2 1/8%.

The tranche size increased from €350 million. The yield printed at the tight end of yield talk in the 2¼% area.

A downsized $500 million amount of seven-year senior secured notes (Ba3/BB) priced at par to yield 4 1/8%.

The tranche size decreased from $600 million. The yield printed in the middle of the 4% to 4¼% yield talk.

The size of the sole unsecured tranche remained unchanged at $800 million.

The senior unsecured notes (B3/B) priced at par to yield 5¼%. The yield printed at the tight end of the 5¼% to 5½% yield talk.

Iqvia prices, too

Meanwhile, Durham, N.C.-based Iqvia Inc. also walked away from the European primary with a two-handle print on Tuesday.

The health information technology company, formerly Quintiles Transnational Corp., priced a €720 million issue of senior notes due Jan. 15, 2028 (Ba3/BB) at par to yield 2¼%.

The yield came below both the official talk, which was set in the 2½% area, and initial talk of 2½% to 2¾%.

GEMS tight, ContourGlobal adds

Elsewhere, Dubai-based GEMS Education priced an upsized $900 million issue of seven-year senior secured notes (B2/B/B+) at par to yield 7 1/8%.

The yield printed at the tight end of revised yield talk in the 7¼% area. Earlier talk was in the 7½% area.

The tranche size increased from $500 million with the withdrawal of a $300 million equivalent tranche of euro-denominated notes.

Prior to being withdrawn, the euro-denominated notes were talked to yield in the 5% area.

The overall size of the transaction grew to $900 million from $800 million equivalent.

And ContourGlobal plc priced a €100 million add-on to the ContourGlobal Power Holdings 4 1/8% senior secured notes due 2025 at 106.

The reoffer price came at the rich end of the 105.75 to 106 price talk, and rich to initial talk in the 105.5 area.

Advisor Group revised

Tuesday's action left a thin calendar in its wake.

One holdover from the July 22 week, Advisor Group turned up Tuesday with a downsized deal on deck to price Wednesday.

Advisor Group talked the downsized $350 million offering of eight-year senior notes (Caa1/B-) with a 10¾% coupon at a discount to yield 11½% to 11¾%.

The offer size decreased from $400 million.

Initial talk had been in the 10% area, market sources said.

There were also document changes.

Ardagh at issue

Ardagh’s newly priced dollar-denominated tranches were active in the secondary space. However, the notes were largely trading around their issue price.

The 5¼% senior notes due 2027 traded in a range between 99 7/8 and 101 on Tuesday.

However, most prints were at par 1/8, a market source said.

The notes saw more than $78 million in reported volume by the late afternoon.

Ardagh’s 4 1/8% senior notes due 2026 were trading between par to par ¾. However, the majority of prints were also around par 1/8, a market source said.

There was about $37 million in reported volume by the late afternoon.

The lackluster performance of the notes after breaking for trade was attributed to their tight pricing.

Select Medical gains

Select Medical’s 6¼% senior notes due 2026 continued their upward momentum in secondary trading on Tuesday.

The notes traded up another ½ point to 101¼ by the late afternoon, according to a market source.

The notes saw almost $40 million in reported volume by the late afternoon.

The notes saw a strong start out of the gate on Monday and quickly traded up to par 5/8 bid, 101 1/8 offered, sources said.

Select Medical priced an upsized $550 million issue of the 6¼% notes in a Monday drive-by.

The yield priced well inside of initial guidance in the high 6% area. The issue size was increased from $500 million.

McDermott drops

McDermott’s 10 5/8% senior notes due 2024 were trading off in high-volume activity on Tuesday following an earnings miss and weak forward guidance.

The 10 5/8% notes traded down 2 points to 79 by the late afternoon, according to a market source.

More than $69 million of the bonds were on the tape by the late afternoon.

The engineering, procurement, construction and installation company reported a non-GAAP loss per share of 7 cents on revenue of $2.14 billion for the second quarter.

McDermott also slashed its forward guidance and is now projecting a loss of $310 million in 2019 as opposed to previous projections for a profit of $170 million.

DISH gives back gains

DISH’s 7¾% senior notes due 2026 gave back most of its recent gains following the satellite broadcaster’s second-quarter earnings report.

The 7¾% notes dropped 2 points to close Tuesday below par.

They traded down to 98 7/8 shortly before the market close, according to a market source.

More than $25 million of the bonds were on the tape by the late afternoon.

DISH’s junk bond was trading down after reporting earnings.

The notes returned to their previous level, giving back nearly all of the gains made due to news the satellite broadcaster would be launching a wireless network with divested assets from T-Mobile and Sprint.

Mixed Monday flows

The daily cash flows of the dedicated high-yield bond funds were mixed on Monday, the most recent session for which data was available at press time, according to a market source.

High-yield ETFs sustained $38 million of outflows on the day.

However actively managed high-yield funds saw $120 million of inflows on Monday, the source said.

With three of the present week's five market sessions in the tally, the combined funds are tracking $535 million of net inflows, so far, in the week that will conclude with Wednesday's close, the source added.

Indexes down

Indexes were flat to down on Tuesday after a mixed start to the week.

The KDP High Yield Daily index shaved off 1 basis point to close Tuesday at 71.67 although the yield remained flat at 5.46%.

The index sank 3 bps on Monday after a cumulative gain of 16 bps on the week last week.

The ICE BofAML US High Yield index dropped 9.9 bps on Tuesday with the year-to-date return now 10.628%.

The index rose 3 bps on Monday after a cumulative gain of 55.8 bps on the week last week.

The CDX High Yield 30 index dropped 9 bps to close Tuesday at 107.78. The index was down 17 bps on Monday after a cumulative gain of 109 bps on the week last week.

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