Greif, Transdigm price; Colfax, Dun & Bradstreet on tap; Studio City improves; energy on the rise

By Paul A. Harris and Abigail W. Adams

Portland, Me., Jan. 30 – Wednesday marked another busy day for the high-yield new issue market with a cumulative $4.3 billion pricing over two single tranche deals.

Both deals priced after an investor roadshow and at the tight end of talk.

TransDigm, Inc. priced an upsized $3.8 billion issue of seven-year senior secured notes (Ba3/B+) at par to yield 6¼%.

Greif Inc. priced a $500 million issue of eight-year senior notes (B1/BB-) at par to yield 6½%.

The forward calendar remains robust with Colfax Corp. expected to price its $1 billion two-tranche offering on Thursday.

Dun & Bradstreet Corp. remains on the road with its $1.35 billion two-part offering with pricing expected on Friday.

In the European primary market, Stonegate Pub Co. Financing plc priced a £150 million issue of non-fungible Libor plus 625 basis points senior secured floating-rate notes.

And Smurfit Kappa Group plc priced a €400 million add-on to the Smurfit Kappa Acquisitions Unlimited Co. 2 7/8% senior notes due 2026.

Meanwhile, the secondary space was strong on Wednesday with the market on the rise following the Federal Reserve’s hiatus on future rate hikes.

As Transdigm’s new offering hit the secondary space, the company’s outstanding junk bonds were mixed in active trading in the secondary space.

While volume was light, Studio City Co. Ltd.’s newly priced 7¼% senior notes due 2024 (B2/B+) were trading at a slight premium to their issue price.

Energy names were again on the rise as crude oil future continued their upward momentum.

California Resources Corp.’s 8% senior notes due 2022, Whiting Petroleum Corp.’s 6 5/8% senior notes due 2026 and Chesapeake Energy Co.’s 8% senior notes due 2027 rose 1 to 2 points during Wednesday’s session.

TransDigm upsized and tight

TransDigm priced an upsized $3.8 billion issue of seven-year senior secured notes (Ba3/B+) at par to yield 6¼%.

The deal priced tight to yield talk in the 6 3/8% area.

The issue size increased from $3.7 billion after having previously increased from $2.7 billion when a proposed $1 billion tranche of eight-year senior subordinated notes was withdrawn from the market and the proceeds shifted to the secured tranche.

The withdrawal of the unsecured or subordinated portion of the deal is one of several indications that investors are presently demonstrating preferences for secured paper, a fund manager asserted on Wednesday.

“Everybody is trying to move up in the capital structure,” the investor said.

For example, Dun & Bradstreet is presently having a roadshow for a $1.35 billion two-part offering of notes.

The deal includes $500 million of 7.5-year senior secured notes (expected ratings B2/B/BB) with initial guidance in the mid 7% area, and $850 million of eight-year senior unsecured notes (expected ratings Caa2/CCC/B-) with initial guidance in the 10¼% to 10½% area.

While the buzz in the market is that the $500 million secured tranche is playing to $700 million of demand, there has been no indication as to the demand for the unsecured portion, the investor said.

The deal is expected to price Friday.

Meanwhile, the CommScope Inc. $3 billion offering is running a roadshow set to cross the coming weekend and continue into the Feb. 4 week.

The deal is coming in three tranches sized at $1 billion apiece: a five-year secured tranche whispered in the 6% area, a seven-year secured tranche talked in the 6½% area and an eight-year unsecured tranche talked in the high 8% area.

Although the deal is still in the early stages, the buzz in the market is that demand is already $1 billion for the $2 billion of secured notes being offered, the source said.

However, for the $1 billion of unsecured notes early demand was heard to be only $150 million, the investor said.

Hence TransDigm, Dun & Bradstreet and CommScope, each hitting the market with both secured and unsecured notes, appear to be encountering a decided preference among investors for the secured portions of their deals, the source remarked.

Greif prices tight

Elsewhere in Wednesday's primary market session, Greif priced a $500 million issue of eight-year senior notes (B1/BB-) at par to yield 6½% on Wednesday, according to market sources.

The yield printed at the tight end of the 6½to 6¾% yield talk and inside of initial guidance in the 6¾% to 7% area.

The deal was at least four times oversubscribed, market sources said.

Wells Fargo was the left bookrunner for the acquisition financing.

Meanwhile, talk is due out Thursday on the Colfax Corp. $1 billion offering, coming in two tranches of unsecured notes (Ba2/BB+): Five-year notes whispered in the 6½% area, and seven-year notes whispered in the 7% area.

Demand for the Colfax paper stood at near $1.3 billon across both tranches on Wednesday morning, the investor said.

Colfax could also price on Thursday, sources say.

Stonegate Pub prices £150 million

In the sterling-denominated market, Stonegate Pub Co. Financing priced a £150 million issue of non-fungible Libor plus 625 basis points senior secured floating-rate notes due March 15, 2022 (B2/B-) at 99.50.

The spread came at the tight end of the 625 basis points to 650 bps spread talk and on top of price talk.

Barclays was the bookrunner.

The maturity of the notes is coterminous with the company’s existing senior secured floating-rate notes due March 15, 2022. However, the new notes will not become fungible with the existing notes.

In the euro-denominated market, Smurfit Kappa Group priced a €400 million add-on to the Smurfit Kappa Acquisitions Unlimited Co. 2 7/8% senior notes due 2026 at 100.75 to yield 2.756%.

Citigroup and NatWest were the global coordinators. Credit Agricole, Danske Bank and HSBC were the bookrunners.

Greif dominates

Greif’s newly priced 6½% senior notes due 2027 dominated activity in the secondary space with the notes trading up out of the gate.

The 6½% notes were quoted at par ¾ bid, 101 offered and traded up to par 5/8 in the late afternoon, sources said.

More than $150 million of the bonds changed hands after the notes freed for trade.

Transdigm mixed

Transdigm’s newly priced 6¼% senior notes due 2026 were also in focus in the secondary space with the notes trading sharply above their issue price after breaking for trade.

The notes were quoted at par 5/8 bid, par 7/8 offered shortly after breaking for trade.

They quickly rose to 101¼ bid, 101½ offered, according to a market source.

They were seen changing hands around 101 3/8 in the late afternoon.

More than $140 million of the bonds changed hands after breaking for trade.

While focus was on Transdigm’s new offering, the aerospace component maker’s outstanding senior notes were active with mixed performances.

The 6 3/8% senior notes due 2026 rose ½ point to close the day at 95½ with more than $26 million of the bonds on the tape by the late afternoon.

The rally came after the bonds dropped 3 3/8 points during Tuesday’s session, a market source said.

Transdigm’s 6½% senior notes due 2024 were largely unchanged in active trading on Wednesday. The notes closed the day at 99.

More than $19 million of the bonds were on the tape by the late afternoon. The notes dropped about 1 point on Tuesday as bookbuilding for the new offering was taking place.

Transdigm’s 6 7/8% notes dropped about 3/8 point to close the day at 96 7/8. More than $15 million of the bonds changed hands during Wednesday’s session.

The notes dropped 2 points on Tuesday.

Studio City at a premium

Trading was light of Studio City’s new 7¼% senior notes due 2024. However, the notes were seen trading at a premium.

The 7¼% notes were quoted at par bid, par 5/8 offered and were seen changing hands between par 3/8 and par ½, sources said.

However, only $5 million of the bonds changed hands during Wednesday’s session.

The deal was primarily allocated to Asian investors, sources said.

Studio City priced an upsized $600 million issue of the 7¼% notes at par on Wednesday.

The yield printed tight to the 7¼% to 7 3/8% final price talk. Earlier talk was in the 7½% area. The issue size increased from $425 million.

Energy on the rise

Wednesday marked another strong day for the energy sector with crude oil futures continuing their upward momentum.

California Resources 8% senior notes due 2022 again saw active trading with the notes rising more than 1 point.

The 8% notes were quoted at 80 3/8 bid, 80 7/8 offered. They were poised to close the day at 80 3/8, according to a market source.

More than $18 million of the bonds were on the tape by the late afternoon.

Whiting Petroleum’s 6 5/8% senior notes rose 2 points to close Wednesday at 98, according to a market source. More than $8 million of the bonds changed hands during the session.

Chesapeake Energy’s 8% senior notes due 2027 also rose 2 points. The notes closed the day at 96 with about $5 million on the tape, according to a market source.

Crude oil futures saw another day of strong gains on Wednesday. The barrel price of WTI crude oil futures for March delivery rose to $54.23, an increase of 92 cents, or 1.73%.

The price marked a two-month high for crude oil with prices buoyed by concerns over supply disruptions due to political turmoil in Venezuela.

Mixed Tuesday flows

The daily cash flows of the dedicated high-yield bond funds were mixed on Tuesday, the most recent session for which data was available at press time, according to a trader.

High-yield ETFs sustained $163 million of outflows on the day.

However, actively managed high-yield funds saw $40 million of inflows on Tuesday, the trader said.

The dedicated junk funds are off to a robust start in 2019, posting a hefty $3.9 billion of net inflows in the year to Tuesday's close, the source noted.

Indexes jump

Indexes posted strong gains on Wednesday.

The KDP High Yield Daily index rose 21 basis points to close Wednesday at 69 with the yield now 6.38%. The index was up 2 bps on Tuesday after a 3 bps drop on Monday.

The ICE BofAML US High Yield index jumped past 4% returns on Wednesday.

The index rose 24.4 bps with the year-to-date return now 4.137%.

The index was up 15.5 bps on Tuesday after dropping 16.7 bps on Monday.

The CDX High Yield 30 index jumped 72 bps to close Wednesday at 105.72. The index was up 8 bps on Tuesday after a 22 bps drop on Monday.

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