Freeport-McMoRan, MSCI, Silgan price; Zayo megadeal on deck; Tallgrass, Forestar active

By Paul A. Harris and Abigail W. Adams

Portland, Me., Feb. 19 – The domestic high-yield primary market saw three drive-by deals clear the market on Wednesday.

Freeport-McMoRan Inc. priced an upsized $1.3 billion two-tranche offering of senior notes (Ba1/BB).

MSCI Inc. priced a $400 million issue of 10.5-year senior notes (Ba2/BB+).

And Silgan Holdings, Inc. priced a two-tranche dual-currency offering of senior notes (Ba3/BB), which included a $200 million add-on to the company's 4 1/8% senior notes due Feb. 1, 2028.

However, focus will be on Zayo Group Holdings Inc. (Front Range Bidco, Inc.) on Thursday when its $3.08 billion megadeal is expected to price.

Meanwhile, it was another sideways day in the secondary space with the market largely unchanged.

Trading activity was concentrated around new issues and news items, a market source said.

Tallgrass Energy Partners LP’s newly priced 6% senior notes due 2027 (B1/BB-/BB) and Forestar Group Inc.’s 5% senior notes due 2028 (B2/B+) were active on Wednesday.

While both issues were trading at a slight premium to their issue price, they did not move much in secondary activity, a source said.

L Brands Inc.’s junk bonds continued their upward momentum in active trading on news of the imminent sale of their Victoria’s Secret brand.

Diamond Sports Group LLC’s 5 3/8% senior notes due August 2026 and 6 5/8% senior notes due 2027 were also active and making slight gains as the market awaits earnings.

Wednesday drive-bys

The high-yield drive-through window reopened Wednesday, with three issuers bringing deals that bore the earmarks of hot market executions, including tight pricings and foreshortened timelines.

Freeport-McMoRan priced an upsized $1.3 billion amount of senior notes in two tranches.

The Phoenix, Ariz.-based mining company priced a $700 million tranche of eight-year notes at par to yield 4 1/8%. The yield printed at the tight end of the 4 1/8% to 4 3/8% yield talk.

In addition, Freeport-McMoRan priced a $600 million tranche of eight-year notes at par to yield 4¼%, at the tight end of the 4¼% to 4½% yield talk.

The overall amount of issuance increased from $1 billion.

MSCI priced a $400 million issue of 10.5-year senior notes at par to yield 3 5/8%.

The yield printed at the tight end of yield talk in the 3¾% area. Initial talk had the deal coming to yield in the 3 7/8% area.

And Silgan Holdings priced two tranches of senior notes.

The dual-currency offer featured a $200 million add-on to the company's 4 1/8% senior notes due Feb. 1, 2028 which priced at 99.5, with a 4.2% yield to maturity.

The issue price came at the rich end of the 99.25 to 99.5 price talk, and rich to initial talk in the 99 area.

Silgan also priced a €500 million issue of new senior notes due June 1, 2028 at par to yield 2¼%, tight to yield talk in the 2 3/8% area.

Timing on both tranches was accelerated. When announced, both tranches were expected to remain in the market until Thursday.

Big book for Zayo

On deck for Thursday, Zayo Group Holdings (Front Range Bidco, Inc.) plans to price $3.08 billion of notes that were playing to $5 billion of orders on Wednesday morning, an investor said.

The deal includes $1 billion of seven-year senior secured notes (B1/B) guided in the 4½% area, and $2.08 billion of eight-year senior unsecured notes (Caa1/CCC+) guided in the 6¾% area.

And look for Advantage Solutions Co. to kick off a $1.4 billion two-part deal, structured similar to the Zayo offer, with a secured tranche and an unsecured tranche.

The Austin, Texas-based company is expected to sell $340 million of secured paper and $800 million of unsecured, the investor said.

BofA Securities Inc. will lead.

Tallgrass active

While well below par in the aftermarket, Tallgrass Energy’s newly priced 6% senior notes due 2027 were changing hands at a premium to their issue price on Wednesday.

The 6% notes were trading in the 99 to 99½ context in active trading, a market source said.

The deal struggled during bookbuilding. The deal was downsized and priced with a steep discount at the wide end of talk.

The oil and natural gas pipeline company priced a downsized $430 million issue at 98.591 to yield 6¼% in a Tuesday drive-by.

The issue size decreased from $500 million and the yield priced wider than the 5¾% to 6% yield talk.

The deal comes as crude oil futures flirt with the $50 a barrel threshold and several recent deals from the energy sector are underwater.

Forestar at a premium

Forestar’s 5% senior notes due 2028 were also trading with a slight premium in the secondary space, although the notes were coming in after a strong break.

The 5% notes were range bound between par ¼ and par ¾ in active trading, sources said.

Despite the small size of the issue, the notes were active on Wednesday. However, “they really didn’t go anywhere,” a source said.

The notes lost steam after a strong break that saw them trade in the par ½ to 101 context Tuesday afternoon.

Forestar priced a $300 million issue of the 5% notes at par in a Tuesday drive-by.

Pricing came at the tight end of the 5% to 5¼% yield talk.

L Brands gains

L Brands’ junk bonds continued their upward momentum in active trading on Wednesday.

The 6¾% senior notes due 2036 gained more than 2 points to close the day at 104½, sources said.

L Brands’ 6 7/8% senior notes due 2035 were also up about 2 points to close the day around 105.

The notes have been active and posting gains since news broke last week about the imminent sale of L Brands’ struggling lingerie retailer Victoria’s Secret to private equity firm Sycamore Partners for more than $3 billion.

While the deal has not yet been finalized, the notes were still trading on that news, a source said.

There is speculation proceeds from the asset sale will be used to pay down debt.

L Brands’ junk bonds have been on the rise since late January when the news initially broke that embattled chief executive officer Leslie Wexner was considering stepping down and selling the Victoria’s Secret brand.

Diamond Sports active

Diamond Sports’ 5 3/8% senior notes due August 2026 and 6 5/8% senior notes due 2027 were active and slightly firmer on Wednesday as market players eye the upcoming earnings announcement of parent company Sinclair Broadcast Group Inc.

The 5 3/8% senior secured notes were up about ½ point to close Wednesday at 99½.

The 6 5/8% senior unsecured notes due 2027 gained about ¼ point to close the day around 91½.

The tranches are both large liquid issues that are usually active.

The unsecured notes, in particular, are a high beta name that tend to move with the market, a source said.

However, the notes are expected to see increased activity in the run-up to Sinclair’s earnings report.

The company has been involved in a contract dispute with DISH Network that is expected to impact earnings.

$142 million Tuesday outflows

The dedicated high-yield bond funds sustained $142 million of net outflows on Tuesday, according to a market source.

High-yield ETFs were actually flat to slightly positive, posting $8 million of inflows on the day.

However actively managed high-yield funds sustained $150 million of outflows on Tuesday, the source said.

With only Wednesday's flow numbers left to go into the tally, the combined funds are tracking $308 million of net outflows for the week to Wednesday's close, the market source added.

Indexes

Indexes were flat to firm on Wednesday after a mixed start to the week.

The KDP High Yield Daily index was flat at 71.62. However, the yield gained 1 bp to 4.86%. The index rose 5 bps on Tuesday.

The ICE BofAML US High Yield index gained 10.9 bps with the year-to-date return now 1.241%. The index was up 1 bp on Tuesday.

The CDX High Yield 30 index rose 6 bps to close Wednesday at 109.16. The index dropped 18 bps on Tuesday.

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