Upsized Petra Diamonds and Zayo, downsized USI lead $2.67 billion session; oils gain, Hertz steadies after drop

By Paul Deckelman and Paul A. Harris

New York, April 5 – Activity picked up on Wednesday in the high-yield primary market, with a total of five issuers each doing a single-tranche deal, generating some $2.67 billion of new U.S.-dollar-denominated and fully junk-rated paper from domestic or industrialized-country borrowers..

That was in sharp contrast to Tuesday, when no such bonds were priced, and beat Monday’s session, when $1 billion got done in one two-tranche offering.

Syndicate sources said that European issuer Petra Diamonds Ltd. had the big deal of the day, pricing an upsized $650 million of five-year secured notes as a regularly scheduled forward calendar offering.

Insurance brokerage and consulting company USI Inc. did a downsized $615 million of eight-year notes, also off the forward calendar.

And industrial components manufacturer and supply-chain outsourcing services provider Park-Ohio Holdings Corp. priced $350 million of 10-year paper via a subsidiary as a scheduled offering.

Wednesday also saw a pair of quick-to-market same-day deals.

Communications infrastructure services provider Zayo Group, LLC did an upsized $550 million fungible add-on to the existing issue of 10-year notes that it sold back in January.

And CNH Industrial Capital LLC, a financing unit of global heavy equipment manufacturer CNH Industrial NV, priced $500 million five-year notes.

Traders saw the Zayo notes a little firmer after their pricing, but said that the other deals came too late in the day for any effective aftermarket.

They also reported busy activity, at firm levels, in such recently priced issues as Anglo American Capital plc, Chobani, LLC and Ascent Resources Utica Holdings LLC.

Away from the new deals, energy names such as California Resources Corp. were seen better amid a second straight session of stronger crude oil prices.

And they saw vehicle-rental giant Hertz Global Holdings Inc.’s bonds put the brakes on the sharp slide on active volume seen on Tuesday.

Statistical market performance measures were mixed for a second straight session on Wednesday; they had turned mixed on Tuesday after having improved across the board on Monday. The indicators had also been quoted ending mixed on Friday following three more consecutive sessions on the upside.

Petra Diamonds upsizes

Petra Diamonds Ltd. priced an upsized $650 million issue of 7¼% five-year senior secured second-lien notes (B2/B+) at 99.993 to yield 7¼% on Wednesday, according to a market source.

The issue size was increased from $600 million.

The yield printed inside initial yield talk in the 7½% area.

The offering played to both emerging-markets and high-yield accounts, sources say.

Joint global coordinator and joint bookrunner Barclays will bill and deliver. RBC was also a joint global coordinator and joint bookrunner. BMO was also a joint bookrunner.

The St. Helier, Jersey-based company plans to use the proceeds to refinance $300 million of 8¼% senior secured second-lien notes due 2020 and to repay all of its drawn bank facilities.

Petra Diamonds mines, processes and sells rough diamonds and is focused on mines in Tanzania and South Africa.

USI downsizes

In Wednesday’s primary market USI Inc. priced a downsized $615 million issue of eight-year senior notes (Caa2/CCC+) at par to yield 6 7/8%.

The issue size was decreased from $705 million, with $90 million of proceeds shifted to the concurrent term loan.

The yield printed at the tight end of yield talk in the 7% area.

BofA Merrill Lynch was the left bookrunner for the buyout deal.

Zayo upsizes tap

Zayo Group, LLC and Zayo Capital, Inc. priced an upsized $550 million add-on to their 5¾% senior notes due Jan. 15, 2027 (B3/B) at 104.00.

The reoffer price came on top of price talk.

The pricing renders a 5.118% yield to worst.

Morgan Stanley was the sole bookrunner.

The Boulder, Colo.-based communications infrastructure services provider plans to use the proceeds to partially repay its term loan B-2 and its acquisition financing term loan pro rata.

CNH drive-by

CNH Industrial Capital LLC priced a $500 million issue of five-year senior bullet notes at par to yield 4 3/8%.

The deal was announced at benchmark size and talked to yield in the 4 3/8% area on Wednesday morning.

BofA Merrill Lynch, BNP Paribas and Goldman Sachs & Co. were the active joint bookrunners for the public offer. MUFG and UniCredit were the passive joint bookrunners.

Park-Ohio prices tight

Park-Ohio Industries, Inc. priced a $350 million issue of 10-year senior notes (B3/B) at par to yield 6 5/8%.

The yield printed at the tight end of yield talk in the 6¾% area.

Barclays was the lead left bookrunner for the debt refinancing deal. J.P. Morgan and KeyBanc were the joint bookrunners.

Barminco starts roadshow

Barminco Finance Pty Ltd. began an international roadshow on Wednesday for a $300 million offering of five-year senior secured notes.

Goldman Sachs is the left bookrunner for the debt refinancing deal.

Zayo notes edge upward

In the aftermarket, a trader said that Zayo Group’s newly priced 5¾% add-on notes due Jan. 15, 2027 were quoted in a 104¼ -to-104½ bid context.

That was up from the 104 level at which the tap priced.

The company’s existing $800 million of those notes were sold in January, pricing at par on Jan. 12.

Other deals not seen

The traders meantime did not report any initial aftermarket dealings in the day’s other new issues, owing to the relative lateness of the hour at which those transactions hit the tape.

However, a market source did see CNH Industrial NV’s existing 4½% notes due 2023 up ¼ point on the day, at 101¾ bid.

Recent deals holding their own

Looking at some of the recently priced high-yield deals, a trader said that the names that have been trading at a premium “have all been holding in very well.”

For instance, Norwich, N.Y.-based yogurt maker Chobani’s 7½% notes due 2025 traded around a 103-to-103½ bid context, up about ½ point on the day.

London-based mining concern Anglo American’s 3¾% notes due 2022 and 4¾% notes due 2027 were both seen by a trader to have moved up by around 3/8 point on the day, to around 100 ½ bid, 100 7/8 offered.

Oklahoma City-based energy company Ascent Resources’ 10% notes due 2022 gained ¾ point on the day, moving up to 103¾ bid, 104½ offered.

A trader saw the recently priced Charter Communications Inc. 5 1/8% notes due 2027 up 3/8 point to 100¾ bid, noting that the issue “was pretty active.”

A second trader also saw the Stamford, Conn.-based cable and broadband provider’s deal ending at 100¾ bid, calling that a ¼ point gain.

Bucking the generally firmer trend, a trader saw West Chester, Ohio-based metals company AK Steel Holding’s recently priced 7% notes due 2027 down 5/8 point to 99 bid, on “pretty decent volume.”

Energy names improve

Away from the new or recently priced offerings, a trader said that “all of the energy stuff was snapping back, with oil briefly over $52 [per barrel] at one point.”

Crude eventually came off that peak level, with the benchmark U.S. crude grade, West Texas Intermediate for May delivery, ending up 12 cents a barrel, at $51.15, on the New York Mercantile Exchange, its second consecutive rise after a loss on Monday; WTI had also firmed by 79 cents per barrel on Tuesday.

The trader saw Los Angeles-based oil and natural gas operator California Resources’ 8% notes due 2022 up 3/8 point at 82 3/8 bid on heavy volume.

Another trader said the 8s “were pretty busy today – they were up about ½ point. They probably pulled off a little bit [from their highs] but everything was pretty well-bid for.”

Elsewhere in the sector, the first trader saw Spring, Texas-based Southwestern Energy Co.’s 6.70% notes due 2025 up 5/8 point, trading up to 100 3/8 bid.

Canada’s MEG Energy’s 7% notes due 2024 were better by a deuce on the day, at just over 92½ bid.

Plano, Texas-based energy operator Denbury Resources’ 6 3/8% notes due 2021 were ½ point better at 83 ½ bid.

In the contract drilling space, London-based global contract drilling services provider Ensco plc’s 5.20% notes due 2025 were up by 1 point , to 89½ bid.

London-based Noble Holding International’s 5 ¼% long bonds due 2042 ended just under 70 bid, up more than 2 points on the day.

But Houston-based contract driller Pacific Drilling SA’s 5 3/8% notes due 2023 finished down 1 point at 49¾ bid, while it’s 7¼% notes due 2017 were down ¼ point at 55¾ bid.

Hertz halts slide

Traders said that car-rental giant Hertz’s notes – which had skidded badly in active trading on Tuesday –managed to put the brakes on that downward slide.

A trader said “people were looking for news on that one” that might explain the fall of 1½ to 2 points across the Estero, Fla.-based company’s capital structure.

Some suggested that notes were off in line with weaker March sales reported by Detroit’s no-longer-so-Big Three.

The trader opined that “some thought processes that I had heard were that the used-car market is really soft, so there could be a glut [of vehicles]. Hertz buys lots of cars and turns over its fleet every two years. The valuation of those assets – those cars – may be going lower if the used-car market continues to soften. That’s one kind of theory.”

He also suggested that “people aren’t renting cars as much because Uber is so cheap. It’s more convenient and as cost-effective to go with Uber as it is to rent a car. That’s another part of the overall challenge their business feels.”

Of the notes themselves, he said that “I didn’t see them as active today, not as active [as Tuesday] and relatively unchanged.

Another trader said that the Hertz 6¾% notes due 2019 were “kind of unchanged,” ending around 98 3/8 bid, although he noted that “they’re short,”, i.e., a near-maturity, and thus not likely to move very much.

He saw the company’s other bonds as “kind of mixed,” with the 5 7/8% notes due 2020 unchanged around 92½ bid, while its 6¼% notes due 2022 were unchanged at 92½, while the 7 3/8% notes due 2021 were down ½ point, to 96¾ bid.

But he said that “all of this was in minimal trading,” versus the considerably more active dealings which had been seen on Tuesday.

He meantime saw Hertz arch-rival Avis Budget Car Rental’s 5½% notes due 2023 trading up 1 point, at 95¼ bid.

The Parsippany, N.J.-based company’s 5¼% notes due 2025 were up by 1¾ points, at 91¼ bid.

Better tone seen

A trader said that “overall, for most of the day, the high yield market was better – there was a pretty good bid under the market.”

Among the go-go names, he saw Stamford, Conn.-based telecom company Frontier Communications Corp.’s 11% of 2025 “very active, over $50 million traded,” finishing up 5/8 point at 97 1/8 bid.

Detroit-based financial services company Quicken Loans Inc.’s 5 ¾% notes due 2025, which he called “kind of a go-go name,” were up ¾ point at 99 ¾ bid.

Indicators stay mixed

Statistical market performance measures were mixed for a second straight session on Wednesday; they had turned mixed on Tuesday after having improved across the board on Monday. The indicators had also been quoted ending mixed on Friday following three more consecutive sessions on the upside.

The KDP High Yield Daily index rose by 9 basis points on Wednesday to 71.92. On Tuesday, it had been unchanged, after having edged up by 1 basis point to that level on Monday, its fifth straight gain after one loss.

Its yield came in by 4 bps on Wednesday, to 5.24, after having been unchanged for two consecutive sessions that followed six consecutive tightenings, including Friday’s 1 bp narrowing.

But the Markit CDX Series 28 index fell back by around 1/8 point on Wednesday at 3/16 bid, 107 7/32 offered.

However, the Merrill Lynch North American High Yield index bounced back on Wednesday after having suffered its first loss after five consecutive gains on Tuesday. It rose by 0.202%, after easing by 0.011% on Tuesday. Wednesday’s gain raised the index’s year-to-date return to 2.933% from Tuesday’s 2.725% close.

Those levels remain below the 2017 peak of 3.19%, set on March 1.

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