Ally, Restaurant Brands, Spectrum Brands lead $5.9 billion primary; funds off by $89 million

By Paul A. Harris and Paul Deckelman

New York, May 14 – After four consecutive sessions characterized by only modest new issuance, the high-yield primary sphere exploded into a fireball of virtually non-stop pricing action on Thursday, syndicate sources said.

By the time it was all over, $5.9 billion of new dollar-denominated and fully junk-rated paper from domestic or industrialized-country borrowers had been brought to market by seven issuers in nine tranches.

It was the busiest day in Junkbondland since April 9, when eight issuers priced nine tranches totaling $6.6 billion.

Ally Financial Inc. had the biggest deal of the session, pricing $1.4 billion of notes in a two-part offering broken into three- and seven-year tranches. Though junk-rated, the lender’s deal was done off the investment-grade desks.

Restaurant Brands International Inc., the parent company of popular restaurant chains Burger King and Tim Hortons, served up $1.25 billion of 6.75-year paper.

Consumer products manufacturer Spectrum Brands Inc. brought a $1 billion 10-year offering to market.

Apart from those megadeals, CNO Financial Group, Inc. priced an upsized $825 million of five- and 10-year notes.

Several smaller deals also got done: PPL Energy Supply, LLC’s $600 million and FelCor Lodging LP’s $475 million of 10-year notes as well as Genesis Energy, LP’s $400 million of eight-year notes.

Secondary market activity was dominated by trading in the new deals, with particularly heavy volume in Restaurant Brands and brisk activity as well in PPL, Spectrum Brands, FelCor and CNO.

Statistical market performance indicators were mixed for a second consecutive session on Thursday after having been lower across the board on Tuesday.

Another numerical gauge – the flow of cash into or out of high-yield mutual funds and exchange-traded funds, considered a reliable barometer of overall junk market liquidity trends – saw its fourth straight weekly outflow on Thursday, a growing losing streak that has followed, and has offset, the four consecutive weeks of inflows seen before that, market sources said. Some $89 million more left those finds than came into them during the most recent reporting week.

Ally upsizes

A big Thursday in the primary market saw seven issuers bring a combined nine tranches of junk, raising an overall total of $5.9 billion.

Two of the seven issuers upsized their deals.

Four of the seven came with drive-bys.

All nine tranches came at the tight ends of talk.

In a drive-by deal that priced on the investment grade desk, Ally Financial sold an upsized $1.4 billion issue of senior notes (/BB+/BB+) in two tranches.

The company sold a $1 billion 3.6% note due May 21, 2018 at 99.437 to yield 3.8%, or Treasuries plus 289.5 basis points.

Pricing was at the tight end of guidance set in the 3.85% area plus or minus 5 bps.

A second tranche was $400 million of 4.625% notes due May 19, 2022 priced at 98.387 to yield 4.9%, or Treasuries plus 295 bps.

The notes sold at the tight end of guidance set in the 4.95% area plus or minus 5 bps.

A planned three-year floating-rate tranche was dropped prior to the deal’s launch.

Citigroup Global Markets Inc., Deutsche Bank Securities Inc., Goldman Sachs & Co. and Morgan Stanley & Co. LLC were the joint bookrunners for the debt refinancing deal.

Restaurant Brands secured deal

Restaurant Brands International, the parent of Burger King and Tim Hortons, priced a $1.25 billion issue of first-lien senior secured notes due Jan. 15, 2022 (Ba3/B+) at par to yield 4 5/8%.

The yield printed at the tight end of yield talk in the 4¾% area and tight to initial guidance in the 5% area, sources said.

J.P. Morgan Securities LLC, Wells Fargo Securities LLC and RBC Capital Markets were the joint bookrunners for the debt refinancing deal.

Spectrum Brands at tight end

Spectrum Brands priced a $1 billion issue of 10-year senior notes (B2/B) at par to yield 5¾%.

The yield printed at the tight end of the 5¾% to 5 7/8% yield talk.

Credit Suisse Securities (USA) LLC, Deutsche Bank and Jefferies LLC were the joint bookrunners for the drive-by acquisition financing.

CNO upsizes

CNO Financial Group priced an upsized $825 million amount of senior notes (Ba1/BB+/BB+) in two bullet tranches.

A $325 million tranche of five-year notes priced at par to yield 4½%, at the tight end of yield talk in the 4 5/8% area.

A $500 million tranche of 10-year notes priced at par to yield 5¼%, at the tight end of yield talk in the 5 3/8% area.

The overall amount of issuance was upsized from $800 million.

Goldman Sachs was the left bookrunner. RBC was the joint bookrunner.

The Carmel, Ind.-based financial services company plans to use the proceeds, together with proceeds from a new revolver, to repay its existing credit agreement and senior secured notes in full, with any remaining proceeds to be used for general corporate purposes, including share repurchases.

PPL prices tight

PPL Energy Supply priced a $600 million issue of 10-year senior notes (Ba3/BB) at par to yield 6½%.

The yield printed at the tight end of the 6½% to 6¾% yield talk.

Citigroup, BNP Paribas, BofA Merrill Lynch, Goldman Sachs, JPMorgan and Morgan Stanley were the joint bookrunners for the debt refinancing.

FelCor drives by

FelCor Lodging priced a $475 million issue of 10-year senior notes (B3/B) at par to yield 6%.

The yield printed at the tight end of the 6% to 6¼% yield talk.

BofA Merrill Lynch was the left physical bookrunner for the drive-by. JPMorgan was the joint physical bookrunner. Deutsche Bank, Goldman Sachs and Scotia Capital were joint bookrunners.

Genesis Energy eight-year deal

Genesis Energy and Genesis Energy Finance Corp. priced a $400 million issue of eight-year senior notes (B1/B) at par to yield 6%.

The yield printed at the tight end of yield talk in the 6 1/8% area.

Deutsche Bank, BofA Merrill Lynch, BMO, Citigroup, RBC, Scotia, US Bancorp and Wells Fargo were joint bookrunners.

The Houston-based midstream energy master limited partnership plans to use the proceeds to repurchase or redeem all of its 7 7/8% notes due 2018 and for general partnership purposes, including a paydown of its revolver.

Bellatrix talk: 9% at discount

Bellatrix Exploration Ltd. talked its $250 million offering of five-year senior notes (B3/B-) to price at a two-point discount and yield 9%.

The deal is expected to price Friday.

Official talk comes wide of initial guidance that had the deal coming with a yield of 8½% to 8¾%, a market source said.

JPMorgan and BMO are the joint bookrunners.

Restaurant Brands tops actives

In the secondary realm, a trader said that new deals “were the focus today, both in terms of people waiting around for them to price and then in terms of trading afterward.”

This was particularly true of Restaurant Brands International’s new 4 5/8% senior secured first-lien notes due January 2022.

Both he and another trader saw the deal holding in a par-to-100¼ bid context after having priced at par.

At another desk, a market source noted the hearty investor appetite for the Oakville, Ont.-based quick-service restaurant chain operator’s new paper, with over $145 million having changed hands by the close. He quoted the credit at 100 1/8 bid.

The Burger King and Tim Hortons parent company’s established 6% notes due 2022 were meanwhile up 3/8 point, to 103¼ bid, with over $16 million having traded.

Day’s deals trade actively

The day’s other new issues also generated ample investor interest, the traders said.

PPL Energy Supply’s 6½% notes due 2025 jumped to 101½ bid, 101¾ offered, one of them said, well up from the credit’s par pricing level. A second trader had the notes in a 101¼-to-101½ bid context.

A trader saw more than $63 million of the Allentown, Pa.-based power generating company’s new bonds trading, pegging them at 101 5/8 bid.

Elsewhere, Spectrum Brands’ 5¾% notes due 2025 were seen up about ½ point from their par issue price, with over $31 million of the Middleton, Wis.-based consumer products maker’s new issue having traded.

Genesis Energy’s 6% notes due 2023 traded between 100½ and 101½ bid, a market source said.

A second trader saw the notes get as good as 101 1/8 bid, on volume of over $28 million.

Irving, Texas-based hospitality industry real estate investment trust FelCor Lodging’s 6% notes due 2025 were heard to have traded up to 101 bid, with more than $13 million of the notes moving around.

CNO Financial Group’s 5¼% notes due 2025 gained 1 point when the Carmel, Ind.-based financial services provider’s new $500 million issue hit the aftermarket, on turnover of more than $12 million.

Indicators stay mixed

Statistical market performance indicators were mixed for a second consecutive session on Thursday after having been lower across the board on Tuesday.

Thursday’s session was its third mixed finish in the last four trading days.

The KDP High Yield Daily index dipped by 3 basis points on Thursday to end at 71.43, its first loss after Wednesday’s 2-bps gain. Thursday was the index’s second loss in the last three sessions.

Its yield meantime was unchanged at 5.26% after having come in by 2 bps on Wednesday.

The Markit Series 24 CDX North American High Yield index rose by 3/8 point on Thursday to close at 107 bid, 107 1/32 offered, its first gain after three consecutive losses and six losses in the prior seven sessions, including Wednesday’s 1/8 point downturn.

The Merrill Lynch North American Master II High Yield index was also higher on the day, rising by 0.047%, its second successive improvement and its fourth in the last five sessions. On Wednesday, it had finished up by 0.173%.

Thursday’s advance raised its year-to-date return to 3.778% from 3.73% on Wednesday. However, it remained below its peak level for the year of 3.952%, set on April 27.

Fund flows extend slump

High-yield mutual funds and ETFs saw their fourth straight weekly outflow on Thursday, a growing losing streak that has followed, and has offset, the four consecutive weeks of inflows seen before that, market sources said.

Sources familiar with the fund-flow statistics generated by AMG Data Services Inc. said that $89 million more left those weekly-reporting-only funds than came into them during the week ended Wednesday.

That downturn brought the year-to-date net inflow position further off its 2015 high, although that cumulative total still remained solidly positive. (See related story elsewhere in this issue.)

Aleesia Forni contributed to this review

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