Ineos, Stena, Fresenius, BlueLine price as Europeans dominate primary; Sprint paper better

By Paul Deckelman and Paul A. Harris

New York, Feb. 11 - European issuers took over the high-yield primary sphere on Tuesday, syndicate sources said.

Besides a number of outright euro-denominated new issues that priced during the session, the European borrowers brought three out of the four U.S. dollar-denominated tranches of new junk-rated paper that appeared, accounting for most of the $1.49 billion that came to market.

That included $590 million of five-year notes that Swiss chemical manufacturer Ineos Group Holdings SA brought to market along with a tranche of similar euro-denominated notes.

There was also $350 million of 10-year secured notes from Swedish shipping and energy concern Stena International SA and $300 million of seven-year notes from German health-care credit Fresenius SE & Co. KgaA via a financing subsidiary.

The day's lone domestic deal was a quick-to-market $252.5 million offering of five-year PIK toggle notes from BlueLine Rental, a construction equipment rental and leasing company.

BlueLine and Stena arrived too late in the session for any kind of an aftermarket, traders said. However, they saw the new Ineos and Fresenius bonds firm a little from their respective issue prices.

They also saw continued aftermarket strength in the three deals that came to market on Monday - telecommunications operator B Communications Ltd., automotive components manufacturer Meritor Inc. and real estate enterprise Hunt Cos. Meritor's new bonds, in particular, have been actively traded since the issue priced.

Away from the new deals, Sprint Corp.'s paper was better, helped by relatively favorable numbers the Number-Three U.S. wireless carrier reported for the 2013 fourth quarter.

Statistical market performance measures improved for a fourth consecutive session.

Ineos' dollar/euro deal

The primary market news volumes in both the United States and Europe intensified on Tuesday.

The dollar-denominated primary saw four tranches from four issuers for a combined total of $1.49 billion.

Executions tended to be tight, with two deals coming at the tight end of yield talk, one coming at the wide end of yield talk and the other coming at the tight end of coupon talk and on top of price talk.

One deal came as a drive-by.

None were upsized.

Switzerland-based Ineos Group Holdings was one of three European issuers to raise cash with dollar-denominated bonds on Tuesday.

The specialty chemical company priced €1,032,646,477 equivalent of five-year senior notes (B3/B-) in two tranches.

Ineos priced a €600 million tranche of the notes at par to yield 5¾%. The yield printed 12½ basis points inside of yield talk in the 6% area. The deal launched earlier on Tuesday at a target size of €500 million to €600 million and came at the high end of that range.

Joint global coordinator and bookrunner J.P. Morgan will bill and deliver for the euro-denominated tranche.

In addition, the company priced a $590 million tranche of the notes at par to yield 5 7/8%, at the tight end of yield talk, which, like the euro-denominated tranche, had been set in the 6% area.

Joint global coordinator and bookrunner Citigroup will bill and deliver for the dollar-denominated tranche.

Earlier guidance had the notes in both tranches coming in at a low 6% yield context.

Barclays, BofA Merrill Lynch, Goldman Sachs and UBS were joint bookrunners.

The specialty chemicals company plans to use the proceeds to repay its outstanding senior notes due 2016.

Stena prices dollar notes

Sweden-based Stena International SA priced a $350 million issue of non-callable 10-year senior secured notes (Ba2/BB+) at par to yield 5¾%, at the wide end of the 5½% to 5¾% yield talk.

Citigroup was the left bookrunner for the debt refinancing. JPMorgan was the joint bookrunner.

Fresnius $300 million deal

Fresenius US Finance II Inc., a unit of Germany-based dialysis equipment and services company Fresenius SE & Co. KgaA, also did a dollar deal.

Fresenius priced a $300 million issue of non-callable seven-year senior notes (confirmed Ba1/expected BB+) at par to yield 4¼%, at the tight end of the 4¼% to 4½% yield talk.

JPMorgan, BofA Merrill Lynch, and DnB were the joint bookrunners for the debt refinancing deal.

BlueLine PIK toggle deal

Vander Intermediate Holding II, issuing for BlueLine Rental, formerly Volvo Rents, priced a $252.5 million issue of five-year senior PIK toggle notes due Feb. 1, 2019 (Caa2/CCC+) at 99 to yield 10.013%.

The notes pay a 9¾% cash coupon, which steps up by 75 bps to 10½% for PIK interest payments.

The cash coupon came at the tight end of the 9¾% to 10% coupon talk. The reoffer price came on top of price talk.

The dividend-funding deal came less than a month on the heels of the BlueLine $760 million issue of 7% second-lien senior secured notes due Feb. 1, 2019 (B3/B/) backing the leveraged buyout of Volvo Rents by Platinum Equity.

With the proceeds from Tuesday's PIK toggle deal, Platinum essentially covers its equity stake in the buyout, according to a market source who remarked that for Platinum the turnaround time for recovering that stake was rapid in the extreme.

As with the January deal, BofA Merrill Lynch, Goldman Sachs & Co., Morgan Stanley & Co. LLC and Barclays were the joint bookrunners for Tuesday's PIK toggle deal.

Astaldi upsizes tap

In addition to raising cash in the dollar market, European companies also priced euro-denominated bonds on Tuesday.

Including the above-mentioned Ineos €600 million tranche, three issuers completed single-tranche transactions to raise a combined total of €966 million.

As with the dollar-denominated primary action, the euro executions were notable, with one deal, Ineos, coming inside of yield talk and the other two coming at the rich end of price talk.

Two came quick-to-market.

One was upsized.

Rome-based construction group Astaldi SpA priced an upsized €150 million add-on to its 7 1/8% senior notes due Dec. 1, 2020 (expected ratings B1/B+/B+) at 105 to yield 6.21%.

The quick-to-market deal was upsized from €100 million.

The reoffer price came at the rich end of the 104½ to 105 price talk.

Deutsche Bank was the sole bookrunner.

Proceeds will be used to repay debt, diversify sources of financing and lengthen the group's average debt maturity.

SPCM at the rich end

SPCM SA, the parent of Andrezieux, France-based specialty chemicals producer SNF Floerger, priced a €100 million add-on to its 5½% senior notes due June 15, 2020 (/BB+/) at 108 to yield 4.054%.

The reoffer price came at the rich end of the 107¾ to 108 price talk.

BNP Paribas ran the books for the quick-to-market deal. BofA Merrill Lynch and Credit Agricole were the co-managers.

Proceeds will be used to refinance drawn amounts under the company's revolver and for general corporate purposes.

New Ineos, Fresenius better

In the secondary market, a trader said that the new issues from Ineos Group Holdings and Fresenius U.S. Finance "were just sort of bouncing around" not far from their respective par issue levels.

At another desk, a trader saw the new Ineos 5 7/8% notes due 2019 at 100 5/8 bid, 101 offered, up from their par pricing level.

He also saw the Fresenius 4¼% notes due 2022 at 100¼ bid, 100½ offered, up from their par issue price.

Yet another trader pegged the new Ineos bonds as high as 100 7/8 bid, 101 1/8 offered. He saw the Fresenius paper at 100 1/8 bid, 100½ offered.

One of the traders meanwhile said that "people were just hanging around, waiting for Stena and BlueLine to price," which they eventually did, although too late in the session for any kind of an aftermarket.

Monday's deals move up

While Tuesday's new deals were seen having gained modestly from their respective par issue levels, Monday's deals were seen building on the solid gains they had garnered when they began trading after pricing.

A trader said that B Communications' 7 3/8% senior secured notes due 2021 gained 7/8 point on the day to finish at 102 3/8 bid, 102 5/8 offered. The Israeli telecommunications company's $800 million deal had priced on Monday at par after having been increased from an originally planned $775 million. After pricing, they jumped to around a 101½ bid, 102 offered context.

Meritor's 6¼% notes due 2024 moved up by 3/8 point on Tuesday to end at 100 3/8 bid, 100¾ offered, a trader said, while a second trader saw those bonds at 100 5/8 bid, 100 7/8 offered.

A market source at another desk said that for a second consecutive session, activity in the Troy, Mich.-based automotive components manufacturer's quick to market $225 million issue was brisk, estimating round-lot volume in the new deal at over $23 million, putting it right at the top of the Junkbondland Most Actives list. That followed even busier dealings on Monday, when more than $51 million of the new notes had changed hands after pricing at par. He saw the notes having gained ½ point on Tuesday to end at 100½ bid.

One of the other traders, though, opined that while "it seemed like there was a lot of trading, it may have been just a couple of people. They seemed to be trading, but the Street's not involved in it. At least I'm not seeing it."

Yet another trader suggested that "it's one of the few new issues that's Traceable," perhaps accounting for its initial popularity.

Monday's third deal - a $525 million Regulation D private placement of El Paso-based real estate enterprise Hunt Cos.'s 9 5/8% notes due 2021 - gained ½ point, a trader said, to go out at 100¾ bid, 101¾ offered.

Those bonds had priced at 98.752 to yield 9 7/8% and had firmed to 100¼ bid, 100¾ offered in initial aftermarket dealings.

'Wait and see' session

Away from the new deals, a trader characterized Tuesday's session as "one of those wait-and-see days."

He said that "most of the activity was in 3, 4 and 5B credits - crossover accounts were more active than high-yield accounts."

A second trader said that "everyone was watching [new Federal Reserve chief Janet] Yellen's questioning" as she appeared before the House Financial Services Committee and essentially said that under her direction, the central bank would, for now, pretty much continue the mostly expansive policies of her predecessor, Ben Bernanke, since "by a number of measures our economy is not back, the labor market is not back, to normal." The financial markets were heartened by the pledge of continuity, with all of the major equity indexes seen up by more than 1% on the session.

Apart from the Fed-watching, he said that "there was a flurry of activity when theses first two new issues [Ineos and Fresenius] priced - and that's kind of been it."

Sprint seen stronger

Among specific non-new-deal names, a trader noted that Sprint's 6 7/8% bonds due 2028 gained 1½ points on the session to end at 96½ bid. "They were the most active of the Sprint issues," he said, with over $19 million having changed hands by the close, putting the credit near the top of the actives list.

A second trader saw those bonds - issued by the Overland Park, Kan.-based wireless provider's Sprint Capital Corp. financing subsidiary - at 96 5/8 bid, calling them up 1 5/8 points in heavy dealings.

The first trader saw the company's legacy Sprint Nextel Corp. 7% notes due 2020 at 107¾ bid, which he called pretty much unchanged on the day, although more than $10 million traded.

He saw the Sprint Capital 8¾% bonds due 2032 up 1½ points at 109½ bid on volume of over $6 million.

Parent Sprint's 6% notes due 2022 gained 2½ points to end at 101¼ bid.

The bonds, and the company's New York Stock Exchange-traded shares - up 21 cents, or 2.73%, to $7.90 on volume of over 44 million, twice the norm - rose after Sprint reported a narrower-than-expected fourth-quarter loss of 26 cents per share, versus the roughly 33 cents per share Wall Street was expecting and down from 44 cents a year ago. Revenues rose 1.5% to $9.14 billion, also topping expectations of just under $9 billion. The 477,000 net subscriber additions it reported easily beat forecasts in the 160,000 neighborhood.

Sprint also reported ending the quarter with over $7.5 billion of cash and over $9.5 billion of total liquidity, while eliminating over $3 billion of high-coupon bond debt it inherited when it acquired Clearwire Corp. last year and pushing its nearest significant debt maturities out to nearly 2017 (see related story elsewhere in this issue).

Market indicators move up

Statistical junk-market performance indicators were higher across the board for a fourth consecutive session on Tuesday after having been mixed the two sessions before that.

The Markit Series 21 CDX North American High Yield gained 5/16 point to end at 107½ bid, 107 5/8 offered, after having been unchanged on Monday.

The KDP High Yield Daily index rose for a fourth straight session on Tuesday, improving by 8 bps to finish at 74.64, after climbing by 10 bps on Monday.

Its yield declined by 3 bps to 5.49% after having fallen by 5 bps for a second straight session on Monday.

And the widely followed Merrill Lynch High Yield Master II index meanwhile notched its fifth consecutive gain on Tuesday, rising by 0.178%, on top of Monday's 0.149% advance.

The gain raised its year-to-date return to 1.32% - a new high for the year so far - from Monday's 1.14%, which had been the first time the index reading had moved above the 1% mark since Jan. 23. It was also up from the 1.185% it had reached on Jan. 22, its previous high point of the year so far.

The index's yield to worst declined to 5.55% from Monday's 5.608% and from last Tuesday's 5.735%, its peak level for the year so far. Those levels remained well above the low yield for the year, 5.386% on Jan.22.

Its spread to worst came in to 423 bps over comparable Treasuries, versus 431 bps on Monday and last Tuesday's 444 bps, the wide point for the year so far. Those levels remained well above the tight spread for the year, 398 bps, on Jan. 22.

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