Parsley, Symantec gain as new issues hit market; Cengage mover of the day after results; retailers mixed

By Colin Hanner and Paul A. Harris

Chicago, Feb. 8 – Several new issues were trading higher in the high-yield market on Wednesday, traders said, and an education company stole the session’s attention with its own multi-point gain.

“There’s a bunch of new issues, so obviously a lot of focus on those,” a trader said.

Parsley Energy, LLC’s new issue, which priced a little later Wednesday, was up more than a point on the session, and an older issue joined in on the gains.

Mountain View, Calif.-based technology company Symantec Corp.’s new issue was even more active than the Parsley new issue, a trader said, but mirrored similar gains.

Educational content, technology and services company Cengage Learning Inc. exceeded quarterly expectations, a reversal of the performance of fellow education publishing company Pearson plc, which fell dramatically last month after announcing it was cutting its profit forecast going forward.

A set of retailers – L Brands Inc. and Neiman Marcus Group, Inc. – traded mixed on the day in the ever-declining traditional retail landscape. News surrounding the latter may have come into play.

Bombardier, Inc. was up on the session, a new deal from Post Holdings, Inc. was unchanged on the day and several other high-yield names traded tight on a session that brought more new issues into a busy primary market for the week.

Peabody $1 billion prices tight

The dollar-denominated primary market saw four issuers bring a combined five tranches to raise an overall total of $2.25 billion on Wednesday.

Two of the four issuers came with drive-by deals.

One of the four issuers upsized the amount of bonds it sold.

Executions were solid, roundabout, with four tranches coming at the tight ends of guidance, while the fifth (the upsized deal) came on top of guidance.

Peabody Energy Corp. priced a restructured $1 billion two-part offering of first-lien senior secured notes (Ba3).

The deal included $500 million of five-year notes that priced at par to yield 6%, the tight end of yield talk in the 6 1/8% area.

The deal also included $500 million of eight-year notes that priced at par to yield 6 3/8%, the tight end of yield talk in the 6½% area.

Order books were closed two hours early.

At the time it was announced, the Peabody senior notes offer was structured as a single $1 billion tranche of five-year notes.

Goldman Sachs was the left bookrunner. J.P. Morgan, Credit Suisse and Macquarie Capital were the joint bookrunners.

The notes were issued in connection with the restructuring of Peabody as part of the second amended joint plan of reorganization filed with the U.S. Bankruptcy Court for the Eastern District of Missouri on Jan. 27.

If Peabody's plan of reorganization is confirmed and certain other conditions are satisfied on or before Aug. 1, the proceeds from the notes will be released from escrow to fund a portion of the distributions to creditors provided for under the plan of reorganization, and Peabody will become the obligor under the notes.

Summit Midstream drives by

Summit Midstream Partners, LP priced a $500 million issue of eight-year senior notes (B2/B+) at par to yield 5¾%.

The yield printed at the tight end of the 5¾% to 6% initial guidance, a trader said.

BofA Merrill Lynch, Deutsche Bank, RBC, TD and Wells Fargo were the joint bookrunners for the debt refinancing.

Parsley Energy upsizes

Parsley Energy and Parsley Finance Corp. priced an upsized $450 million issue of 8.5-year senior notes (B2//B+) at par to yield 5¼%.

The issue size was increased from $350 million.

The yield printed on top of yield talk in the 5¼% area.

Credit Suisse and Wells Fargo were the joint bookrunners for the acquisition financing deal which was in the market overnight.

Silgan prices two tranches

Silgan Holdings Inc. priced two tranches of senior notes due March 15, 2025 (BB-) in an upsized deal that saw both tranches come at the tight ends of yield talk.

The notes in an upsized €650 million tranche priced at par to yield 3¼%. The tranche was upsized from €450 million. The yield printed at the tight end of the 3¼% to 3½% yield talk, and tight to early guidance in the mid-to-high 3% area.

The notes in a $300 million tranche prices at par to yield 4¾%. The yield printed at the tight end of the 4¾% to 5% yield talk and tight to early guidance in the 5% area

BofA Merrill Lynch was the lead.

Proceeds from the dollar-denominated notes will be used to prepay a portion of the company’s dollar-denominated term loans and repay a portion of the revolving loans under its senior secured credit facility. Proceeds from the euro-denominated notes will be used to prepay all euro term loans and repay a portion of the revolving loans under its senior secured credit facility and to repay foreign bank revolving and term loans of some of the company’s non-U.S. subsidiaries.

The additional proceeds resulting from the €200 million upsizing of the deal will be used to redeem an equivalent dollar amount the company's 5% senior notes due 2020.

Ferroglobe talk 9½% area

Looking ahead to Thursday's session Ferroglobe plc talked its $350 million offering of five-year senior notes (B3//B+) to yield in the 9½% area on Wednesday.

Books close at noon ET on Thursday, and the deal is set to price thereafter.

Goldman Sachs is the bookrunner.

Gateway Casinos roadhow

Gateway Casinos & Entertainment Ltd. began a roadshow on Wednesday in New York for a $225 million offering of seven-year second priority senior secured notes (Caa1/CCC+).

The deal is set to price in the middle part of the Feb. 13 week.

Morgan Stanley, SunTrust, BMO, Macquarie, CIBC and National Bank of Canada are the joint bookrunners.

The Burnaby, B.C.-based owner of gaming properties plans to use the proceeds to refinance debt, as well as to fund the acquisition of two “Gaming Bundles” from the Ontario Lottery and Gaming Corp., fund a dividend to shareholders and for general corporate purposes including capital expenditures.

ContourGlobal upsized and rich

Away from the above-mentioned Silgan euro-denominated tranche, the European primary market generated other news on Wednesday.

ContourGlobal Power Holdings SA priced an upsized €100 add-on to its 5 1/8% senior secured notes due June 15, 2021 at 105.75.

The reoffer price came rich to price talk in the 105.375 area.

The deal was upsized from €50 million.

Goldman Sachs and BNP Paribas managed the quick-to-market sale. Goldman Sachs will bill and deliver.

Verallia returns with PIK toggle

Horizon Parent Holdings Sarl, a holding company of Verallia, plans to market a €350 million senior secured PIK toggle note due 2022 (CCC+) on a roadshow set to run on Wednesday and Thursday in London.

Credit Suisse is the lead left global coordinator. Barclays and Goldman Sachs are joint global coordinators. BofA Merrill Lynch and Deutsche Bank are joint bookrunners.

The Paris-based glass packaging manufacturer plans to use the proceeds to pre-fund the payment of cash interest on the notes, as well as for general corporate purposes and to make a distribution to shareholders.

Last October the company withdrew a €500 million offering of five-year PIK toggle notes, a deal that faced resistance from investors, according to market sources.

Mixed Tuesday flows

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

High yield ETFs sustained hefty outflows of $521 million on the day.

Actively managed funds saw $35 million of inflows on Tuesday.

Dedicated bank loan funds were also positive, with $150 million of inflows on the day Tuesday.

New deal highs

Oil and natural gas company Parsley Energy brought a new issue to market rather late in the day on Wednesday, a trader said, but saw 70 trades in its 5¼% notes due 2025, which finished 1¾ points higher to 101¾.

A market source said the same notes went out with a 101 5/8 bid, 102 1/8 offer, while another trader said the notes finished with a 102 handle.

The new issue was upsized to $450 million from $350 million. Credit Suisse will lead the acquisition financing, along with others yet to be named.

Existing Parsley notes were also higher, a trader said, as the 5 3/8% notes due 2025 saw a 5/8-point gain to 103 1/8, and the 6¼% notes due 2024 were unchanged at 107¼.

Symantec’s new 5% notes due 2025 were again among the most active issues of the day, a trader said, and were up 1½ points to 101½, while another trader said they were trading in the 101 to 101¼ context.

Not seeing nearly as much movement was the newest issue from Post Holdings, the 5½% notes due 2025, which a trader said were unchanged at 101 1/8.

A market source said the notes went out with a 100 7/8 bid, 101 1/8 offer, adding that the 5¾% notes due 2027 finished with a 100¾ bid, 101 offer.

Elsewhere in the new issue space, a trader said there is eagerness around a new issue from an emerging coal company.

“I think everyone is waiting for the new [Peabody Energy Corp.] new issue, which should be coming late in the day,” a trader said.

The deal in question, via left bookrunner Goldman Sachs, includes five-year notes that become callable after two years at par plus 50% of the coupon, talked to yield in the 6 1/8% area.

Cengage aces session

Arguably the most notable mover of the day was education publisher Cengage Learning, which defied quarterly earnings projections with the announcement of its third quarter results.

“There was concern about how weak their numbers would be, and I think they obviously exceeded people’s worst-case scenarios,” a trader said.

Its 9½% notes due 2024 were up “6 to 7” points to 89 7/8, a trader said, while another trader said they were trading in the 90 to 91 context.

The company talked about authorizing a buyback of debt in the open market, a trader said, adding that that was what “probably what helped give the bonds a boost as well.”

Nearly a month ago, Cengage, along with McGraw Hill Education, tumbled in the bond market feeling a contagion effect after Pearson plc revised its outlook and announced disappointing quarterly earnings.

On Wednesday, the rising tide of Cengage lifted McGraw Hill “almost 5 points” in its 7 7/8% notes due 2024, which were up to 96¼, a trader said.

Retailers mix on the day

For the second-consecutive session, Neiman Marcus saw similar declines in its two sets of distressed notes.

“Neiman continues to be under pressure,” a trader said. “There continues to be a lot of weakness in retailers in general.”

For instance, Michael Kors Holdings Ltd. announced disappointing figures during Tuesday’s session, which brought down the company’s stock. The company cited “reduced traffic trends in shopping malls” as one of the headwinds the company will face going into the spring, according to a news release.

“Every time a retailer comes out with poor numbers, maybe it continues to have pressure on the whole sector. It’s one [company] after the other.”

And, of course, the geopolitical atmosphere may have something to do with it, a trader said, hinting that a tweet by President Trump aimed at Nordstrom, Inc.’s recent decision to abandon daughter Ivanka Trump’s brand may have had something to do with Neiman’s movement, though Nordstrom stock and bonds were both up in the session.

Neiman’s 8% notes due 2020 were off 1½ points to 66½, a trader said, while the 8¾% notes due 2021 were down 1¼ points to 53¾.

On the other hand, L Brands’ 6 7/8% notes due 2035 were up ½ point to 100¼, a trader said.

Intelsat weaker

Satellite communications company Intelsat Jackson Holdings SA continued to turn on the session, though traded tight yet again.

The 7¼% notes due 2020 were down ½ point to 78½, a trader said, while another trader said the same notes were down 5/8 point to the same level.

Seeing a steeper loss were the 5½% notes due 2023, which were down “about a point” to 69, a trader said.

In health and pharma

For a hospital group and a pharmaceutical company, movement drifted downward on Wednesday.

Community Health Systems, Inc.’s 8% notes due 2019 were down 1 point to 88 7/8, a trader said.

Global specialty biopharmaceutical company Mallinckrodt Pharmaceuticals, which a trader said had been down over the past few sessions, was down again on the session in its 5¾% notes due 2022, which fell 1/8 point to 95 3/8.

High-yield mixers

There were a series of idiosyncratic movers in the high-yield market on the session, including equipment rental company United Rentals, Inc.’s 4 5/8% notes due 2023, which were unchanged at 102 7/8, a trader said.

Bombardier’s 7½% notes due 2025 were up 1 point to 102 7/8 on “pretty active trading,” a market source said.

Indicators down

Statistical market performance measures were down on Wednesday, a retreat from other days of mixed indicators.

The KDP High Yield index declined by 9 basis points on the session to close at 72.14, snapping a five-day rising streak. On Tuesday, it had risen by 1 bp.

Yield was up 2 bps at 5.1%, snapping three sessions of unchanged movement.

The Markit CDX Series 27 High Yield index was down just under 7/32 point on the day to end at 107 6/32 bid, 107¼ offered. It was the indicator’s third straight retreat.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.