Ardagh prices; SpringLeaf/OneMain trade up; Chesapeake Energy sell-off intensifies; Venator jumps

By Paul A. Harris and Abigail W. Adams

Portland, Me., Nov. 6 – European high-yield issuers dominated primary market activity on Wednesday with Dublin-based Ardagh pricing two tranches of ARD Finance SA senior secured toggle notes.

Wesco PattonAir’s upsized $2,175,000,000 acquisition/merger deal remains in the market with pricing expected on Friday. However, the deal may be subject to further revisions, sources said.

Meanwhile, the secondary space was slightly soft on Wednesday. Recent issues and earnings remained the major drivers of trading activity.

Springleaf Finance Corp.’s recently priced 5 3/8% senior notes due 2029 (Ba3/BB-/BB+) and Dana Inc.’s 5 3/8% senior notes due 2027 (B2/BB-/BB+) were active and trading at a premium to their issue price.

Venator Materials plc’s 5¾% senior notes due 2025 jumped more than 5 points after a surprise earnings beat.

Cheniere Energy Inc.’s split-rated senior notes were lifted on the heels of a new offering.

However, the sell-off of Chesapeake Energy Corp.’s junk bonds intensified on Wednesday as concern mounted about the company’s ability to meet the covenants on its debt.

Ardagh dollar notes price

Ardagh priced two tranches of ARD Finance SA senior secured toggle notes due June 30, 2027 (Caa2/B-), with executions suggesting that European risk appetite may have waned, somewhat, from its notable October vigor.

The deal included $1.13 billion of notes that priced at par with a cash yield of 6½%, 12.5 basis points inside of yield talk in the 6¾% area; initial talk was in the 7% area.

The cash coupon is 6½%. The PIK coupon steps up to 7¼%.

The Dublin-based glass and metal packaging company also priced €1 billion of the notes at par to yield 5%, in the middle of yield talk in the 5% area.

The cash coupon is 5%. The PIK coupon steps up to 5¾%.

PIK coupons step up by 75 bps.

With respect to dollar-denominated issuance, November is running at a vigorous pace of just under $1 billion per day ($3.92 billion, month-to-date).

On-the-run issuers continue to enjoy tight executions, sources say.

Economic data has been favorable and earnings season was probably better that expected, an investor asserted.

Also, the market is expecting positive developments on the trade situation between China and the United States, the source added, noting that the U.S. is understood to be contemplating postponing or removing tariff increases set to take effect on Dec. 15.

Wesco possible Friday business

Away from middle-of-the-fairway deals, issuers continue to meet resistance, sources say.

The Wesco PattonAir upsized $2,175,000,000 acquisition/merger deal, marketed on a roadshow that got underway in mid-October, remains in the market, but may face further revisions, sources say.

Although books were heard to become subject on Wednesday, pricing is now expected on Friday, according to traders.

The deal was upsized from $1.6 billion with the withdrawal of a proposed $600 million bank loan tranche, earlier in the week.

The revised bond deal includes senior secured notes (B3/B) coming in two tranches with minimum sizes of $500 million apiece. They include five-year notes talked to yield 8¼% to 8½% and seven-year notes talked to yield 8¾% to 9%.

The secured portion of the deal was originally a single $1 billion tranche of seven-year notes that had been in the market with early guidance in the high 7% area.

There were also covenant changes.

The financing also includes a $575 million tranche of eight-year senior unsecured notes (Caa2/CCC+) talked at 425 bps to 450 bps behind the seven-year secured notes, implying a yield in the range of 13% to 13½%.

Earlier guidance had the unsecured notes coming 350 bps behind the seven-year secured notes (then talked in the high 7% area) that would have implied a yield in the low-to-mid 11% area.

The unsecured portion is proving to be the toughest part of the deal, a trader said.

At a premium

The paper to price during Tuesday’s session was in focus on Wednesday and trading at a premium to its issue price.

Springleaf Finance’s recently priced 5 3/8% senior notes due 2029 were among the most actively traded in the secondary space.

They stood poised to close the day at 101 with more than $137 million in reported volume by the late afternoon, according to a market source.

The serial issuer of junk bonds priced an upsized $750 million of the 5 3/8% notes at par in a Tuesday drive-by.

The yield printed in the middle of yield talk in the 5 3/8% area. Initial guidance was in the mid-to-high 5% area.

The issue size increased from $500 million.

Dana’s 5 3/8% senior notes due 2027 also stood poised to close the day at 101 with more than $32 million in reported volume.

The yield printed at the tight end of yield talk in the 5½% area.

Venator’s surprise

Venator’s 5¾% senior notes due 2025 jumped in active trading on Wednesday following an earnings beat.

The notes gained more than 5 points to close the day at 86½. They were trading on an 80 handle earlier in the week, a market source said.

Venator’s earnings were a “big surprise to the upside,” a source said.

The chemical manufacturer reported earnings of 8 cents per share on revenue of $526 million and an adjusted EBITDA of $50 million.

Analysts had expected earnings per share of 3 cents and revenue of $512 million.

Cheniere lifted

Cheniere’s split-rated senior notes were lifted after the company announced it was prepping a new $1 billion offering.

The energy company’s 5 1/8% senior notes due 2027 traded up 1½ point to 109 3/8, according to a market source.

The notes saw more than $40 million in reported volume.

The 5 7/8% senior notes due 2025 gained more than 1 point to 112. The notes saw more than $20 million in reported volume.

The notes were making gains on the back of a new $1 billion offering, which was announced on Tuesday. Proceeds from the offering will be used to repay a portion of the company’s term loan.

Chesapeake sell-off intensifies

The sell-off in Chesapeake Energy’s junk bonds intensified on Wednesday with the capital structure dropping 7 to 16 points.

The 5¾% senior notes due 2023 dropped 16 points to 54½ on decent volume, according to a market source.

The 6 5/8% senior notes were down 9 points to 86.

The 8% senior notes due 2025 dropped another 8¾ points to close the day at 55¼ with more than $25 million in reported volume.

They shaved off 6 points during Tuesday’s session.

The 7% senior notes due 2024 dropped 8 points to 56¾.

The 8% senior notes due 2027 were down another 7 points to 53¼ with $32 million in reported volume. They also traded off 7 points on Tuesday.

The sell-off in the notes was sparked by a third-quarter earnings miss.

It intensified on Wednesday as concern mounted about the company’s ability to meet the covenants on its debt, a market source said.

However, those that were shorting the name must be loving the movement in the notes, a source said.

Tuesday inflows

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

High-yield ETFs saw $25 million of inflows on the day.

Actively managed high-yield funds saw $30 million of inflows on Tuesday, the source said.

Indexes down

Indexes were down on Tuesday.

The KDP High Yield Daily index dropped 10 bps to 71.21 with the yield 5.38%. The index was down 1 bp on Tuesday after a 14 bps gain on Monday.

The ICE BofAML US High Yield index slid 10.2 bps with year-to-date returns now 12.015%.

The index was down 6.4 bps on Tuesday after a 5.8 bps gain on Monday.

The CDX High Yield 30 index was down 5 bps to close Wednesday at 107.65. The index was down 1 bp on Tuesday after a 37 bps on Monday.

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