Primary focus shifts to Europe; Barry Callebaut slates; overall junk market remains weak

By Paul Deckelman and Paul A. Harris

New York, June 4 - The high-yield primary market's focus shifted exclusively to Europe on Tuesday, with all of the new-deal news originating either in Britain or on the Continent, while the American half of the primary seemed to have taken an early summer vacation.

With the new-deal arena so Eurocentric, there was little going on in the dollar-denominated market, aside from the news that Swiss chocolate manufacturer Barry Callebaut Services NV was shopping a $600 million 10-year issue around to prospective investors. However, with roadshows scheduled for both Europe and the United States, that deal is not expected to come to market before sometime next week at the earliest.

Other than that, the new-deal arena was all sterling, euro and Swedish kroner oriented.

British financial services company Equiniti, which had priced a £440 million two-part 5.5-year offering back in mid-May, brought that same deal back on Tuesday because the original deal failed to pass muster with market regulators, who did not allow the transaction to settle.

The repricing came at more expensive levels than the original, reflecting the deterioration seen in Junkbondland in the interim.

And Bravida Holding AB, a Swedish company that installs electrical, plumbing and HVAC systems, priced a two-part six-year floating-rate note deal, consisting of tranches of euro- and kroner-denominated bonds.

Several other European companies were heard by syndicated sources to have begun roadshows for deals, including British food provider Bakkavor, French clothing manufacturer SMCP SAS and Swiss scientific firm Unilabs.

Back in the United States, traders saw a little bit of activity in Epic Software Corp.'s new PIK toggle notes, which priced very late on Monday.

Other recent deals, however, were mostly idle, although Ball Corp.'s battered 10-year issue from early May continued to trade actively, remaining many points down from its par issue price.

Traders said the overall junk market was quiet and felt weak, and statistical indicators continued to head lower across the board.

Bravida prices two tranches

All the primary market news came out of Europe on Tuesday. The dollar-market put up a goose egg.

Sweden's Bravida price two tranches of five-year notes.

The company priced €225 million floating-rate notes due June 15, 2019 at par to yield 500 basis points over three-month Euribor, on top of yield talk.

There was also a SEK 1.3 billion tranche of floating-rate notes, which priced at 537.5 bps spread over three-month Stibor, at the tight end of the Stibor plus 550 bps spread talk.

Proceeds will be used to refinance existing debt and for general corporate purposes.

Joint bookrunner Deutsche Bank will bill and deliver for the euro-denominated tranche, while joint bookrunners Morgan Stanley and Nordea will bill and deliver for the kroner-denominated tranche.

Equiniti reprices deal

It was back to the drawing board for British financial services provider Equiniti on Tuesday, as the company revisited the primary market with a £440 million two-part 5.5-year notes deal (B3/B/) because of a regulatory snag.

The original deal priced in late May but was prevented from settling when the United Kingdom's Financial Conduct Authority (FCA) held up a regulatory approval that the issuer and its underwriters expected to be a mere formality.

The glitch arose because the company is moving a subsidiary into its corporate structure, and that subsidiary is subject to regulation by the FCA, thus requiring prior approval, said a London-based sellside source.

They proceeded with the original deal on the assumption that the move would be waved through quickly by the FCA, as it is a technicality.

But that was apparently not the case, the sellsider added.

Tranche sizes and structures were the same, but rates were higher in what the source referred to as a concession to the market.

A £250 million tranche of fixed-rate notes priced at par to yield 7 1/8%. The new yield printed at the tight end of yield talk in the 7¼% area, but 37.5 basis points higher than the 6¾% yield that the company printed on the bonds that priced on May 23.

Meanwhile, a £190 million tranche of floating-rate notes priced at par to yield Libor plus 575 basis points, on top of spread talk, but 25 bps higher than the spread on the floating-rate notes, which were priced on May 23.

The issuing entity on the revisited deal was Equiniti Newco 2 plc. The issuer on the deal, which failed to settle, was Equiniti Bondco plc.

As before, joint bookrunner JPMorgan will bill and deliver. Lloyds TSB and Citigroup were also joint bookrunners.

Proceeds will be used to repay bank debt, as was the case with the previous deal. However, those proceeds will be escrowed until the regulatory requirements are satisfied.

Barry Callebaut deal

Zurich-based chocolate maker Barry Callebaut Services is running an international roadshow for its $600 million offering of non-callable 10-year senior notes expected ratings Ba1/BB+).

A roadshow is presently underway in Europe, and the company will roadshow the deal in the United States during the week ahead.

Joint bookrunner Credit Suisse will bill and deliver. Goldman Sachs, ING, Jefferies, RBS, Rabobank and UBS are also joint bookrunners.

Proceeds will be used to help fund the acquisition of Petra Foods coca ingredients division.

Unilabs' three tranches

Swiss medical diagnostics and laboratory services provider Unilabs is running an international roadshow for its €685 million three-part notes offer.

The deal involves two separate issuing entities.

Unilabs SubHolding AB has two of the three tranches, representing €510 million of the overall total: a tranche of five-year senior secured fixed-rate notes and a tranche of five-year senior secured floating-rate notes, sizes remain to be determined.

Unilabs MidHolding AB has the remaining €175 million, coming in the form of 5.5-year second-lien PIK toggle notes.

The debt refinancing deal is being marketed this week in Europe and will roadshow in the United States in the week ahead.

Joint bookrunner JPMorgan will bill and deliver. Lloyds, Nordea and SEB are also joint bookrunners.

SMCP starts Wednesday

France-based apparel maker SMCP plans to start a roadshow on Wednesday for its €290 million offering of seven-year senior secured notes (expected ratings B3/B), according to a market source.

Joint bookrunner Credit Suisse will bill and deliver. Goldman Sachs, KKR and UBS are also joint bookrunners.

Proceeds will be used to fund the acquisition of SMCP by KKR and management.

Bakkavor starts roadshow

Bakkavor Finance plc began a roadshow in London on Tuesday for its £150 million offering of seven-year senior secured notes (existing ratings B2/B-).

The deal is expected to price late in the present week.

Joint bookrunner Barclays will bill and deliver. BofA Merrill Lynch, HSBC, Mizuho, Rabobank and Royal Bank of Scotland are also joint bookrunners.

The London-based manufacturer of prepared foods plans to use the proceeds, along with proceeds from a new credit facility, to refinance debt. Bakkavor also announced a tender for its notes due 2018 on Tuesday.

'A disgusting day'

In the secondary market, a trader lamented that Tuesday was "a disgusting day. I'm just trying to get the hell out of here and forget today."

He said that there was "not much activity," chalking it up to "a lack of new issues, that's for sure," with no dollar-denominated, fully junk-rated paper from domestic or industrialized-country borrowers having priced during the session.

Epic quoted higher

The sole deal fitting that criteria, which has come to market so far this week, was Epic Software's 9%/9¾% senior PIK toggle notes due 2018.

A trader quoted those bonds Tuesday at 98¾ bid, 99¾ offered, up a little from their heavily discounted issue price.

The Dublin, Calif.-based provider of enterprise application software was shopping its quick-to-market deal around on Monday, and expectations were that the pricing would take place on Tuesday.

But timing was moved up and the pricing took place on Monday well after the close. The offering - brought to market by the company's Eagle Midco Inc. subsidiary - priced at 98 to yield 9.51%, after it was upsized to $400 million from an initially shopped $350 million.

Little recent deal activity

Apart from Epicor, not much was seen of recent deals.

A market source said that last week's offering of 6½% notes due 2022 from Nationstar Mortgage Holdings Inc. lost a quarter-point on the day, closing at 99¾ bid. Some $6 million of the notes changed hands.

The Lewisville, Texas-based mortgage origination and servicing company priced $300 million of those notes at par last Wednesday in a quickly shopped transaction from its Nationstar Mortgage LLC and Nationstar Capital Corp. subsidiaries.

One recent deal, which has remained fairly active nearly every day since its pricing, though, is Ball Corp.'s 4% notes due 2023 - and Tuesday was no exception. A market participant saw over $14 million of the notes traded, one of the busier junk bond names, with the bonds losing 3/16 of a point to go home at 94¾ bid.

That's well down from the par level at which the Broomfield, Colo.-based packaging company had priced its $1 billion issue back on May 9, after upsizing the transaction from an originally announced $600 million to meet heavy investor demand.

But while the bonds were initially popular, reflecting the deal's benchmark size and Ball's status as a well-respected and well-run company, the bonds have been steadily hammered down day after day for nearly the past month, hurt by overall fixed-income market fears of higher interest rates should the Federal Reserve Board decide to end its expansive policies that have kept interest rates near historic lows over the last several years.

Overall market struggling

A trader said on Tuesday that overall, "the caution flag is really up."

He said: "There's a rumor that [exchange-traded funds] are shorting high-yield bonds now. There's nervousness with what's going on in the stock market," where all of the major indexes were down across the board, "and over whether the Fed is going to cut back on the bond-buying it's been doing."

"That's really put the brakes on our market - it's been weaker," he added.

Another market observer said that "there were bid lists out there. Lots of stuff was being offered."

Market indicators off again

Statistical junk performance indicators lost ground lower across the board for a third consecutive session on Tuesday.

The Markit Series 20 CDX North American High Yield index fell by 11/16 of a point to end the session at 104 bid, 104 1/16 offered, its third straight loss. On Monday, it had eased by 1/32 of a point.

The KDP High Yield Daily index posted its eighth consecutive loss on Tuesday, dropping by 15 basis points to close at 75.01 - its lowest level since last Dec. 10, when it finished at an even 75.00. On Monday, it had plummeted by 27 bps.

The yield rose Tuesday, also for an eighth consecutive session, gaining 6 bps to go home at 5.60%, after having ballooned out by 11 bps on Monday.

And the widely followed Merrill Lynch High Yield Master II index retreated by 0.144% on Tuesday, its sixth consecutive setback. That followed Monday's 0.356% loss.

The latest downturn lowered its year-to-date return to 3.728%, down from Monday's 3.878%, which had been its first time under 4% since April 23, when it read 3.913%. The latest level remained well down from the index's peak level for the year of 5.835%, set on May 9.

A couple of gainers

While most names were lower, here and there were credits that bucked the generally heavier trend.

One such name was chronic underperformer Exide Technologies, whose 8 5/8% notes due 2018 were seen by a market source to have moved up to around 62½ bid, from prior levels at 603/4, although the bonds finished below their day's peak level of 64.

The Milton, Ga.-based automotive and industrial storage battery maker's paper was one of the most heavily traded issues of the day, racking up over $23 million of round-lot dealings alone, plus millions more in odd-lot transactions, the source said.

The company's beleaguered Nasdaq-traded shares gained 1 cent on the day, or 3.19%, to close at 47 cents. Volume of 2.8 million shares was about one-third higher than normal.

Exide was seen having gotten got a jump-start from the news that North American shipments of new automotive batteries rose by 18% year over year in April, reflecting higher sales of new cars and trucks. The data from Battery Council International, an industry trade group, indicated that sales were at their highest levels in more than a year.

Also bucking the overall negative trend was Travelport LLC's 11 7/8% notes due 2016.

The bonds were up by several points from Monday's closing levels, although on a round-lot basis, the gain was a more conservative ¾ of a point, with the bonds ending at 95½ bid. Late in the session, there were a few smaller trades at levels as high as par, although those odd-lot pieces probably were not representative.

Volume was over $13 million.

News reports indicated that the Atlanta-based provider of computerized reservation services and other travel-related products was trying to arrange refinancing for its current debt, looking to borrow as much as $1.65 billion

The company is scheduled to hold a bank meeting in New York on Wednesday to launch its credit facility, according to a market source.

The facility consists of a $100 million five-year revolver and a $1.55 billion six-year first-lien term loan, the source said.

Price talk on the term loan is Libor plus 450 basis points with step-downs, a 1.25% Libor floor and an original issue discount of 99, the source continued.

Proceeds will be used to refinance the company's existing first-lien loan.

Sara Rosenberg contributed to this review

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