Upsized HanesBrands drive-by, U.S. Steel, Vector Group price; Sprint eases amid earnings

By Paul Deckelman and Paul A. Harris

New York, May 3 – The high yield primary sphere churned out its first deals of the new month of May on Tuesday in a busy session that saw more than $3 billion of new dollar-denominated and fully junk-rated paper price.

The big deal of the day was apparel maker HanesBrands Inc.’s upsized $1.8 billion two-part drive-by offering, equally split into a pair of $900 million eight- and 10-year notes, which were seen trading around or a little above their respective issue prices in the aftermarket.

Metal manufacturer United States Steel Corp. brought an upsized $980 million secured five-year deal to market following a short roadshow; the new Steel bonds surged in heavy trading when they were freed for secondary market dealings.

Tobacco and real estate company Vector Group, Ltd. came to market with an upsized $235 million add-on to its existing secured 2021 notes a day after that prospective deal was announced, with the new bonds quoted higher.

Among recently priced new issues, there was brisk trading in Friday’s 10-year offering from equipment rental company United Rentals, Inc. and metal products maker BlueScope Steel’s five-year deal from Thursday, both off slightly from their recent highs.

Away from the new-deal arena, traders saw Sprint Corp.’s notes softer after the wireless operator posted a wider net loss and reduced revenues for its fiscal fourth quarter and full year, although it did report solid liquidity numbers.

Statistical market performance measures turned lower across the board on Tuesday after having been mixed for three straight sessions before that, the second lower session in the last seven trading days.

Hanesbrands drives by

Three issuers brought a combined four tranches to raise $3.02 billion during the Tuesday session in the dollar-denominated primary market.

All three issuers upsized their offerings.

One issuer came with a drive-by, while the other two came at the heels of brief, foreshortened roadshows.

Executions were solid, with three of the four tranches pricing at the tight ends of talk, while the fourth priced atop talk.

HanesBrands Inc. priced $1.8 billion of non-callable senior notes (Ba2/BB) in two tranches.

The deal, which was upsized from $1.5 billion, featured $900 million of eight-year notes which priced at par to yield 4 5/8%. The yield printed at the tight end of yield talk in the 4 ¾% area, and inside of the initial 4 ¾% to 5% guidance, a source said.

In addition HanesBrands priced $900 million of 10-year notes at par to yield 4 7/8%. The yield printed at the tight end of yield talk in the 5% area, and inside of the initial 5% to 5 ¼% guidance.

Half the deal was said to have been spoken for by way of reverse inquiry, sources said.

The deal was 1.5-times oversubscribed, with both tranches “hanging in” in the secondary market, according to a trader who saw them both at par ¼ bid, par ½ offered.

J.P. Morgan, BofA Merrill Lynch, Barclays, HSBC, SunTrust and Goldman Sachs were the joint bookrunners.

The Winston Salem, N.C.-based marketer of everyday basic apparel plans to use the proceeds, including those resulting from the upsizing of the deal, to refinance its 6 3/8% senior notes due Dec. 15, 2020 and to repay revolver debt.

U.S. Steel upsizes

United States Steel Corp. priced an upsized $980 million issue of five-year senior secured notes (B1/BB-) at par to yield 8 3/8%.

The deal was upsized from $500 million.

The yield printed at the tight end of yield talk in the 8½% area.

The offer was playing to $3 billion in orders when price talk was announced, a trader said.

Dealers also accelerated timing. At the time the deal was announced it was scheduled to price on Wednesday.

J.P. Morgan, Morgan Stanley, Barclays, BofA Merrill Lynch, Wells Fargo, PNC and Scotia were the joint bookrunners.

The Pittsburgh-based steel company plans to use the proceeds, including those resulting from the $480 million upsizing of the issue, to repay debt, focusing on near-term maturities, and for general corporate purposes.

Vector upsizes tap

Vector Group Ltd. priced an upsized $235 million add-on to its 7¾% senior secured notes Feb. 15, 2021 (Ba3/BB-) at 103.50 to yield 6.345%.

The issue size was increased from $200 million.

The reoffer price came on top of price talk, and at the rich end of the 103 to 103.5 early guidance.

Jefferies was the bookrunner.

The Miami-based tobacco holding company plans to use the proceeds for general corporate purposes, including additional investments in real estate through the its wholly owned subsidiary New Valley LLC and in its existing tobacco business. The additional $35 million of proceeds resulting from the upsizing of the deal will be used for general corporate purposes.

People still long cash

In the wake of Tuesday's deals, only one dollar-denominated offering remained on the active forward calendar.

PTC, Inc. began roadshowing a $500 million offering of eight-year senior notes (expected ratings Ba3/BB-) on Monday.

The deal is scheduled to price on Wednesday.

The market awaits formal price talk, however early guidance has it coming to yield 6¼% to 6½%.

The market looked so-so to one high yield investor on Tuesday.

Earnings season has produced its share of disappointments, the investor said, noting that Community Health Systems, Inc. reported 2016 first quarter financial results that fell well short of analysts’ expectations.

Also high yield ETFs sustained two consecutive days of substantial outflows, the investor noted.

On Monday, the most recent session for which data was available at press time, the ETFs sustained $314 million of outflows. That followed a whopping $862 million of outflows the ETFs saw last Friday.

High yield asset managers saw $145 million of outflows on Monday, the investor said.

Nevertheless, the accounts seem to have money to put to work in the junk bond market.

“People are long cash, and trying to figure out what to do,” the manager said.

Gestamp €400 million deal

In the European market Spain-based Gestamp Funding Luxembourg SA plans to hold conference calls with investors on Wednesday and Thursday ahead of a planned offering of €400 million senior secured notes due 2023.

Joint bookrunner Deutsche Bank will bill and deliver. CaixaBank, BBVA, Bankia, BNP Paribas, BofA Merrill Lynch, Santander and SG CIB are also joint bookrunners.

The Abadino, Spain-based manufacturer of automotive components and structural systems plans to use the proceeds to redeem or repurchase its 5 7/8% senior secured notes due 2020.

Gestamp climbs aboard a European active calendar that also contains offerings from Inovyn (€300 million five-year secured notes) and Travis Perkins plca (£300 million senior notes).

No talk was available at the Tuesday London close, according to a debt capital markets banker, there.

Steel bonds show strength

In the secondary market, a trader said that the new U.S. Steel 8 3/8% senior secured notes due in July of 2021 “dominated the market,” with over $220 million of those notes seen having changed hands when the issue moved into the aftermarket.

He quoted the bonds at 101 ½ bid, well up from their par issue price earlier in the day.

A second trader also pegged the bonds at 101 ½.

At another shop, a trader quoted the bonds at 101 3/8 bid, 101 ¾ offered.

With the company planning to use the new-deal proceeds to repay debt, focusing on its near-term maturities, Steel’s existing bonds also showed strength, with a market source locating its 7% notes due in 2018 at 103 ½ bid, up 1 ½ points on the day.

HanesBrands slightly higher

Traders saw both tranches of the new HanesBrands notes trading a little above their respective par issue prices.

One trader saw the company’s 4 5/8% notes due 2024 and its 4 7/8% notes due 2026 between par and 100 1/8 bid, while a second saw the bonds in a 100¼ to 100¾ bid context.

Yet another market participant said that the eight-year notes had moved up to 100 5/16 bid on very active volume of more than $80 million, but he did not have an immediate reading on the 10-years.

Vector Group firms in aftermarket

A trader quoted the day’s third new deal – Vector Group’s 7¾% senior secured add-on due 2021 – at 104¾ bid, 105¾ offered.

That was up from the 103.5 level at which the additional notes priced.

Recent deals a little easier

Among some of the recently priced new issues, traders saw a slightly easier tone, in line with the day’s generally down market.

United Rentals’ 5 7/8% notes due 2026 were among the day’s busier issues, with over $12 million having changed hands; a trader saw the bonds going home at 101¼ bid, calling that down 1/8 point on the day, although a second said that the issue was “kind of hanging right in there, basically unchanged” at 101 3/8 bid.

The Stamford, Conn.-based construction and industrial equipment rental and leasing company had priced $750 million of the notes at par on Friday in a quickly shopped deal via its United Rentals (North America) Inc. subsidiary.

BlueScope Steel’s 6½% notes due 2021 were seen down 3/8 point at 101 5/8 bid on Tuesday, also on volume of over $12 million.

However, another trader said the bond bonds were unchanged at 101¾ bid, 102¼ offered.

The Melbourne, Australia-based manufacturer of flat steel products priced $500 million of the notes at par in a scheduled forward calendar offering on Thursday via its BlueScope Steel (Finance) Ltd. and BlueScope Finance (Americas) LLC subsidiaries.

One of the traders called Ardagh Group’s recently priced bonds “a little weaker today,” quoting the Dublin, Ireland-based glass packaging company’s 7¼% senior unsecured notes due 2024 at 101, and its 4 5/8% senior secured notes due 2023 and its floating-rate senior secured notes due 2021 both around the par level. All three were thus slightly off from the levels at which they had traded on Monday.

Ardagh had priced $1.65 billion of the 7¼% notes and $1 billion of the 4 5/8% notes, both at par, and $500 million of the floaters at 99.5 for an initial yield of 325 basis points over Libor, on Friday as part of a $4.5 billion equivalent five-part transaction, which also included two euro-denominated tranches.

That deal –upsized sharply from the originally announced $2.85 billion equivalent – priced as a regularly scheduled forward calendar offering via the company’s Ardagh Holdings USA Inc. and Ardagh Packaging Finance plc subsidiaries.

Sprint notes softer

Away from the new deals, traders saw Sprint Corp. notes mostly easier after the Overland Park, Kan.-based No. 3 U.S. wireless carrier reported fiscal fourth-quarter and full year numbers, including net operating revenue of $8.07 billion, down from $8.28 billion a year earlier, and a net loss of $554 million, or 14 cents per share, versus year-earlier red ink of $224 million, or 6 cents per share. Wall Street had been expecting a loss of about 12 cents per share.

A trader said Sprint’s 7 7/8% notes due 2023 and its 6 7/8% bonds due 2028 were both down 1 point on the day at 75 and 73 bid, respectively.

He allowed that “the market was weaker today” and suggested that with earnings “not as strong, and with the market weakness, they just didn’t hang in there.”

Another trader saw the 7 7/8s off 1¼ points, at 74¾ bid, with over $15 million traded and the 6 7/8s likewise off 1¼ points, at 73 bid, with over $12 million of volume.

Despite the reduced revenues and wider loss, Sprint sounded an upbeat note on the liquidity front, telling analysts on its conference call following the earnings results release that it had completed device and network financing transactions in April to raise an additional $5.3 billion and now has $11 billion of current committed liquidity (see related story elsewhere in this issue).

Indicators turn lower

Statistical market performance measures turned lower across the board on Tuesday after having been mixed for three straight sessions before that, the second lower session in the last seven trading days.

The KDP High Yield Daily index notched its second straight loss after three consecutive gains, dropping by 20 basis points to close at 67.53, after having eased by 1 bp on Monday. Tuesday’s loss was its fifth in the last eight sessions.

Its yield widened out by 6 bps to 6.18% its first rise after four straight narrowings and its second such widening in the last six sessions. On Monday, it had come in by 1 bp – an atypical move since the index reading was lower and yields usually rise when the index reading falls, or vice versa.

The Markit Series 26 CDX North American High Yield index lost 9/16 point on Tuesday, finishing at 102 11/32 bid, 102 3/8 offered; on Monday, it had gained 1/32 point. Tuesday was its third loss in the last four sessions.

The Merrill Lynch North American High Yield Master II index retreated by 0.353% on Tuesday, its second setback in the last three sessions, after having advanced by 0.024% on Monday.

The latest downside move cut the index’s year-to-date return to 7.019% from Monday’s close of 7.398%, a new peak level for the year so far.

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