Morning Commentary: New deals trade higher; ELIS launches €850 million two-part offering

By Paul A. Harris

Portland, Ore., Sept. 24 – Junk opened 1/8 of a point higher on Tuesday, a trader said.

Deals priced during a busy Monday session were turning in secondary market performances that were solid or better, sources said.

New bonds placed by Inmarsat plc were more than 2 points above their new issue price at mid-morning, a trader said, marking the Connect Finco Sarl/Connect Finco LLC 6¾% senior secured notes due October 2026 (B1/B+) at 102¼ bid.

The upsized $2,075,000,000 issue (originally from $1,125,000,000, then from $1,825,000,000) priced at par, at the wide end of talk, in a deal that ultimately saw $950 million shifted to the bonds from the bank loan.

The new BidFair/Sotheby's 7 3/8% senior secured notes due October 2027 (B1/B+) were 101 5/8 bid on Tuesday morning. The upsized $600 million issue (from $550 million) of new BidFair MergeRight Inc. bonds priced at par on Monday, on top of final talk.

Add-on paper priced Monday by CSC Holdings LLC was also trading at a smart premium on Tuesday morning, the trader said.

The CSC Holdings add-on notes to the 5¾% senior notes due Jan. 15, 2030 (expected ratings B3/B) were 104.875 bid, the trader said.

The $1.25 billion add-on, which came in a drive-by, priced at 104, the rich end of price talk.

Tuesday primary

The dollar-denominated primary market was largely quiet on Tuesday morning.

Shutterfly Inc. is on deck with an upsized $785 million offering (from $500 million) of seven-year senior secured notes (B1/B).

Talk of 8¼% to 8½% was affirmed on Monday, as the issuer made concessions to lenders by way of changes to the deal's covenant package.

Meanwhile, it's a dollar-denominated market in which sometimes-challenging deals are playing to resolute investors, sources say.

Numerous deals are facing investor pushback. Some are being pulled.

Stelco Holdings Inc. cited current bond market conditions as it withdrew its $300 million offering of five-year senior secured notes (B3/B-).

Elsewhere the Howden deal has been heard to be struggling, market sources say. The latest on that offer, the Granite US Holdings Corp. $300 million eight-year senior notes (Caa1), has them coming this week, with guidance widened to 10¾% to 11% from the 10% area, amid covenant changes.

Meanwhile the Calumet Specialty Products $550 million offering of 5.5-year senior notes (Caa1/B-/B-), expected to price ahead of the coming weekend, has sparked some selling among holders of Calumet's existing bonds, which are not being addressed in the current deal.

The Calumet Specialty Products Partners, LP/Calumet Finance Corp. 7 5/8% senior notes due January 2022 traded as low as 96½ on Tuesday, a trader said, noting those bonds were 98 3/8 bid last week.

The specialty chemical company is using the proceeds from the current deal to redeem its 6½% senior notes due April 2021.

So, upon completion of the new offer the 2022 paper will be the next maturity, the trader observed.

ELIS launches

In the European market, France-based supplier of sanitation products and services ELIS SA launched €850 million of senior notes (BB+/BB) in two fixed-rate bullet tranches on Tuesday.

The offering includes €500 million of notes due April 3, 2025 (long five-year paper) launched to yield 1%, at the tight end of final yield talk in the 1 1/8% area. Initial talk was in the 1 3/8% area.

In addition, ELIS launched €350 million of notes due April 3, 2028 (long eight-year paper) to yield 1 5/8%, at the tight end of the 1 5/8% to 1¾% final yield talk. Initial talk was in the 2% area.

Allocations were expected on Tuesday.

Monday inflows

The dedicated high-yield bond funds saw positive cash flows on Monday, according to a market source.

High-yield ETFs saw $250 million of inflows on the day.

Actively managed high-yield funds saw $55 million of inflows on Monday.

The combined high-yield funds are tracking $542 million of inflows for the week that will conclude with Wednesday's close, the source said.

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