Primary pace slackens as Mercer brings sole dollar deal; recent issues lead actives list; Claire’s climbs on results

By Paul Deckelman and Paul A. Harris

New York, Dec. 6 – The high-yield primary market took a breather on Wednesday, as a lone, modest-sized dollar-denominated deal priced – in sharp contrast to Monday and Tuesday, which had each seen more than $3.5 billion of new paper emerge from multiple issuers.

Canadian forest products company Mercer International Inc. priced a quickly shopped $300 million of eight-year notes – which were heard to have firmed smartly on brisk aftermarket volume.

Primaryside players meantime were anticipating Thursday pricings from payments processing company Vantiv, LLC and education materials provider McGraw-Hill Education, Inc. – the former deal a two-part, dual-currency megadeal, the latter a single-tranche PIK toggle notes offering.

Besides the robust activity in the new Mercer International paper, secondary market traders saw likewise hefty trading volumes in recently priced credits such as Cleveland-Cliffs Inc., Springleaf Finance Corp., Quicken Loans, Inc. and Owens-Illinois Inc., all of them Tuesday pricings, as well as Monday’s big deal from Valeant Pharmaceuticals International, Inc.

Away from the new issues, Claire’s Stores, Inc.’s bonds were solidly better after the specialty retailer reported positive fiscal third-quarter results.

Statistical market performance measures turned lower on Wednesday for the first time in three weeks, after having been mixed on Tuesday after having been stronger all around on Monday. The last previous time the indicators were seen heading south was back on Nov. 15.

Mercer drives by

While Wednesday's primary market news flow was by no means light, the volume let up noticeably, relative the torrid pace of the Monday and Tuesday sessions.

Mercer International Inc. priced the session's sole dollar deal, a $300 million issue of eight-year senior notes (B1/BB-) at par to yield 5½%.

The yield printed at the tight end of the 5½% to 5¾% yield talk.

Credit Suisse, Barclays and RBC were the joint bookrunners for the drive-by debt refinancing deal.

A busy Thursday

News volume should pick up on Thursday with an active calendar sporting $3.65 billion of proposed issuance, most of it expected to clear before Friday's close.

Dealers set the stage with price talk on a pair of offerings set to price Thursday.

Vantiv, LLC set price talk in a $1.13 billion offering of eight-year senior notes to be split between dollar- and sterling-denominated tranches.

A $500 million minimum amount is talked to yield 4½% to 4¾%.

A to-be-determined amount of sterling-denominated notes is talked to yield in the 3 7/8% area.

McGraw-Hill Education, Inc. talked a $250 million offering of senior PIK toggle notes due 2022 (Caa1/CCC+) to yield in the 9½% area.

Credit Suisse is the lead bookrunner for the debt refinancing deal. Jefferies LLC is the joint bookrunner.

Picard prices

The European primary market remained highly active on Wednesday.

France-based Picard priced €1.5 billion.

The deal included €1.19 billion of Picard Groupe SAS Euribor plus 300 basis points six-year senior secured floating-rate notes (B2/B+) which priced at par. Credit Suisse was the lead for the secured floating-rate notes tranche.

Meanwhile Picard Bondco SA priced €310 million of seven-year senior unsecured fixed-rate notes (Caa1/B-) at par to yield 5½%. JPMorgan led the unsecured tranche.

The Fontainebleau, France-based frozen food company plans to use the proceeds to fund a dividend to its shareholders and repay debt.

Perstorp two-part deal

Perstorp Holdings AB priced €485 million of notes in two tranches.

The deal included Perstorp Holdings’ €250 million Euribor plus 425 basis points floating-rate senior secured notes due Sept. 15, 2022 (expected B3/confirmed B), which priced at par. The spread came at the tight end of the Euribor plus 425 bps to 450 bps spread talk. Proceeds will be used to refinance existing senior secured floating-rate notes and to partially redeem existing senior secured fixed-rate notes.

In addition, the deal included Prague CE Sarl’s €235 million 10% senior subordinated notes due December 2022 (S&P: CCC-), which priced at 98.00. The tranche was talked in the 10% area, including two points of original issue discount. Proceeds will be used to acquire loans under the mezzanine facility agreement.

Goldman Sachs International was the bookrunner.

PVH launches Thursday

PVH Corp. plans to launch a €500 million offering of non-callable 10-year senior notes on a Thursday conference call with investors.

Joint bookrunner Barclays will bill and deliver. BofA Merrill Lynch, Citigroup, JPMorgan and RBC are also joint bookrunners.

The New York-based apparel company plans to use the proceeds to refinance its 4½% notes due 2022.

Elsehwere Burger King France announced two proposed issues of notes backing the acquisition of the stake of its biggest shareholder and franchisee, in a Wednesday press release.

Burger King France intends to issue €50 million of senior secured floating-rate notes due 2023.

NewCo GB, a special purpose vehicle, intends to issue €210 million senior PIK toggle notes due 2022.

Proceeds from both issues would be used to help fund the acquisition of BDBK, a company indirectly wholly owned by Groupe Bertrand, Burger King France's controlling shareholder and biggest franchisee. Some of the proceeds from the floating-rate notes may be used as cash on the balance sheet for general corporate purposes.

Slowing primary?

The high volume of the Dec. 4 week is unlikely to carry over into the week ahead, market sources continued to forecast on Wednesday.

With $8 billion already in the book, for the week, and another $3.65 billion situated on the active forward calendar the Dec. 4 week will certainly rank among the year's top five issuance weeks.

Beyond the coming weekend most – though not all – market watchers are forecasting a slowdown into year-end.

Some report hearing of fatigue on the buyside.

The Dec. 11 week, which should be the final active week of 2017, could see around $5 billion of business in the dollar-denominated market, a syndicate official said Wednesday, and added that this amount might come in four to five deals, most of which should clear by the middle of the week.

The Dec. 18 week will be a dormant one in the primary market, the official said.

However there are some who forecast that new issue business could indeed carry into the Dec. 18 week.

With Christmas Eve falling on a Sunday (Dec. 24), players should be able to remain at their desks well into the Dec. 18 week, a banker said.

And buyside fatigue notwithstanding, there is a sense that if the dealers bring something interesting they shouldn't have too much difficulty in scaring up a crowd, the source added.

Mercer moves up

In the secondary sphere, traders saw Mercer International’s new 5½% notes due Jan. 15, 2026 having firmed in active dealings after the Vancouver-based pulp producer’s quick-to-market offering had priced at par.

One trader pegged those new notes in a 101 3/8-to-101 7/8-bid context.

A second called them “one of the better performers” on the day, while at yet another desk, they were quoted going home at 101¾ bid, with over $43 million seen having changed hands, putting the new deal high up on the day’s Most Actives list.

Recent deals are volume leaders

Tuesday’s new deal from Cleveland-Cliffs, Inc. was even busier on the day, a market source said, seeing more than $52 million of those 4 7/8% senior secured notes due Jan. 15, 2024 having traded.

He saw the notes finishing at 99 11/16 bid, up only modestly from the 99.347 level at which the Cleveland-based iron ore producer had priced its $400 million regularly scheduled forward calendar offering to yield 5%.

Other recently priced new issues were also seen among the busiest bonds in Junkbondland on Wednesday.

These included Springleaf’s 5 5/8% notes due March 15, 2023, seen at 100¼ bid, which a trader called about unchanged on the day, with over $42 million of volume.

The Evansville, Ind.-based consumer finance company had priced its $875 million drive-by deal at par to yield 5.627% on Tuesday, after sharply upsizing that issue from an originally announced $500 million.

Another Tuesday offering – Detroit-based online lender Quicken Loans’ 5¼% notes due 2028 – was seen trading around 99 bid, off slightly from the 99.027 issue price for that $1.1 billion forward calendar offering, yielding 5 3/8%.

That issue was upsized from an originally shopped $1 billion.

More than $39 million were seen trading on Wednesday.

Toledo, Ohio-based glass container maker Owens-Illinois’ new 4% notes due March 15, 2023 were finishing the day at 100 3/8 bid, up from their par issue level, on volume of more than $30 million.

A second trader located those notes in a 100¼-to-100½ bid context.

The company’s OI European Group BV had priced the $310 million quick-to-market deal on Tuesday.

Valeant paper slips

Going back a little further, a trader said that Valeant Pharmaceuticals International’s new 9% notes due 2025 “lost a little ground,” seeing the notes at 99¼ bid, which he called down 5/8 point on the day.

But he noted that even though the bonds had eased, they were “still better than where they had priced.”

The Laval, Que.-based drug manufacturer had priced its quickly shopped $1.5 billion offering at 98.611 on Monday, to 9.25%, after that deal was massively upsized from an originally announced $1 billion.

But another trader saw them a little bit better than that at 99¾ bid, calling that only a 1/8 point loss.

More than $27 million had traded on Wednesday.

Claire’s climbs after numbers

Away from the new issues, a trader said that Claire’s Stores’ bonds “were up again,” gaining more than 1 full point on the day to end in a 65-to-66 context “after they posted some decent earnings.”

He had also seen those 9% notes due 2019 up by several points on Tuesday, when the numbers were reported.

Another market source said the bonds had improved by as much as 1¾ points Wednesday to end at 65½ bid, with over $24 million traded.

Claire’s, a Hoffman Estates, Ill.-based retailer specializing in jewelry and other accessories aimed at young women, teens, tweens and kids, said that in the fiscal 2017 third quarter ended Oct. 28, net sales rose to $314.6 million, an increase of $2.5 million, or 0.8% compared to the year-ago period, although that was largely due to the favorable effects of foreign currency exchange rate changes.

Its consolidated same-store sales – the retailing industry’s key economic metric – increased 1.1%, with North America same-store sales increasing 2.4%, although Europe same-store sales decreased by 1%.

Adjusted EBITDA in the fiscal 2017 third quarter was $42.4 million, an increase of $5.4 million, or 14.8% compared to the fiscal 2016 third quarter.

Indicators turn lower

Statistical market performance measures turned lower on Wednesday for the first time in three weeks, after having been mixed on Tuesday after having been stronger all around on Monday. The last previous time the indicators were seen heading south was back on Nov. 15.

The KDP High Yield Daily Index was unchanged on Wednesday, staying at 71.88, after having fallen by 4 basis points on Tuesday, its first loss after two consecutive gains of 3 bps on Friday and another 6 bps on Monday.

Its yield meantime came in by 1 bp, to 5.27%, after having risen by 1 bp on Tuesday following two consecutive narrowings before that.

The Markit CDX Series 29 index was down by 1/8 point on Wednesday, its second straight loss, ending at 107 11/32 bid, 107 23/32 offered. On Tuesday, it had eased by 1/16 point.

And the Merrill Lynch North American High Yield Master II Index was also in retreat for the first time after five straight better sessions, dropping by 0.098%, in contrast to Tuesday’s 0.015% rise.

The downturn cut the index’s year-to date return to 7.228% from Tuesday’s 7.333% close.

The year-to-date return remains off from the 7.636% posted on Oct. 24 – the peak cumulative return for 2017 so far.

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