Enova prices to cap $12 billion pre-holiday week but struggles in secondary, recent deals firm

By Paul Deckelman and Paul A. Harris

New York, May 23 - Enova International, Inc. priced a $500 million issue of seven-year notes on Friday, bringing to a close out one of the busiest new-issuance weeks of the year in Junkbondland.

The online financial services provider's new deal, a regularly scheduled forward calendar issue that priced after an investor roadshow, brought the week's total of new U.S. dollar-denominated and fully junk-rated paper from domestic or industrialized-country issuers to $12 billion, in 18 tranches, according to data compiled by Prospect News - eclipsing the $8.76 billion that came to market in 17 tranches the previous week, ended May 16.

The week's total surpassed the $11.75 billion that had priced in 21 tranches during the week ended March 7, and was just a little shy of the two most active weeks of the year, so far - the $12.07 billion that came to market in nine tranches during the week ended April 25, and the reigning champion, the week ended April 11, when some $12.89 billion got done in 20 tranches, according to the data.

The week's issuance brought the year-to-date total volume of new junk paper to $143.24 billion in 266 tranches, running about 6.7% behind the pace seen a year ago, when $153.6 billion of new junk bonds had priced in 336 tranches by this point on the calendar.

Traders said that the new Enova notes lost ground when they began trading in a quiet, illiquid and under-populated aftermarket - many participants left early ahead of the abbreviated session's mid-afternoon close leading into the three-day Memorial Day holiday break, if they had bothered coming in at all.

However, other recently priced issues for the most part seemed to be at least holding their own, if not actually firming a little.

These included Thursday's new offerings from Teekay Offshore Partners LP and DriveTime Automotive Group, Inc., which had not seen any aftermarket activity after their respective pricings on Thursday. Other Thursday deals which had seen some initial secondary trading and which were unchanged -to-higher versus Thursday included Post Holdings, Inc. and Energy Transfer Equity, LP.

Statistical indicators of market performance were mixed for a sixth consecutive session on Friday, and were finishing out the week mixed versus where they had been the previous Friday for a second week in a row.

Enova prices $500 million

Friday's sole dollar-denominated deal came from Enova International which priced a $500 million issue of 9¾% seven-year senior notes (B3/B) at 98.762 to yield 10%.

The yield printed at the wide end of the 9¾% to 10% yield talk.

That talk backed up 100 basis points from early guidance of 8¾% to 9%, a trader said early Friday afternoon. At that point in the session, the new Enova 9¾% notes due 2021 were trading below issue price at 98 bid, 98¼ offered, the source added.

Jefferies was the bookrunner.

Proceeds will be used to repay inter-company loans and to fund a distribution in connection with the spinoff of Enova, a Fort Worth-based provider of online financial services, from Cash America International, Inc.

Heat Exchangers prices tight

In the euro-denominated market Galapagos SA and Galapagos Holdings SA priced a €775 million three-part offering of notes.

Two of the three tranches came at the tight end of talk, and the third came inside of talk.

The deal will help to finance Dusseldorf, Germany-based GEA Group AG's spinoff of its heat exchangers business to Triton Advisers Ltd.

It included a €325 million tranche of seven-year senior secured floating-rate notes (B1/B) which priced at par to yield Euribor plus 475 basis points. The reoffer price came on top of price talk. The spread came at the tight end of the Euribor plus 475 to 500 bps spread talk.

The deal also included a €200 million tranche of seven-year senior secured fixed-rate notes (B1/B) which priced at par to yield 5 3/8%. The yield printed 12.5 bps inside the 5½% to 5¾% yield talk.

The junior portion was a €250 million tranche of eight-year senior unsecured notes (Caa1/CCC+) which priced at par to yield 7%. The yield printed at the tight end of the 7% to 7¼% yield talk.

Joint bookrunner Deutsche Bank will bill and deliver. Commerzbank, ING, RBC, Royal Bank of Scotland and UniCredit were also joint bookrunners.

Moy Park downsizes

In the sterling-denominated primary, Ireland-based poultry producer Moy Park (Bondco) plc priced a £200 million issue of seven-year senior notes (B1//) at par to yield 6¼%.

The yield printed at the wide end of the 6% to 6¼% yield talk.

The transaction was downsized from £250 million with the withdrawal of a proposed £50 million tranche of three-year floating-rate notes.

Barclays, Deutsche Bank and Goldman Sachs were the lead managers.

Proceeds will be used to fund a distribution to Marfrig Group for repayment of debt, as well as to pay a deferred consideration for the purchase of the Keystone Foods assets in Europe, and for general corporate purposes.

Baytex announces roadshow

There was one deal announcement on Friday.

Baytex Energy Corp. plans to start a roadshow on Monday in Toronto for a $780 million two-part offering of senior notes.

The deal is coming in tranches of seven-year notes and 10-year notes.

Barclays is the lead left bookrunner for the debt refinancing and general corporate purposes deal. BofA Merrill Lynch and RBC are the joint bookrunners.

Baytex Energy takes its place aboard a thin calendar that includes three deals announced earlier in the week.

Interface Security Systems is in the market with a $100 million offering of contingent cash-pay notes due 2018 (/CCC/) via Imperial Capital.

Sunshine Oilsands Ltd. plans to sell $325 million of five-year senior secured notes in Early June, also via Imperial.

And in the Canadian market Northern Frontier Corp. conducted a Toronto-based roadshow for a C$75 million offer of five-year senior secured second-lien notes via GMP and BMO.

A quiet session

With just one new issue coming out of the primaryside, and with the Securities industry and Financial Markets Association recommending a 2 p.m. ET early close ahead of the three-day Memorial Day holiday weekend that will shutter U.S. financial markets on Monday, traders said that secondary market dealings were light

If they were even in the office at all, many market participants were making a beeline for the exits well before the official early closing time, putting a further damper on activity.

"Liquidity was pretty bad, with so few people being in," one trader said.

"There's not much today," a second trader opined.

"The market feels a little better, with stocks up a little bit - but it's just a very light trade."

Queried around mid-day, he said that "most guys are calling it quits - if not now, then very soon."

New Enova treads water

When Enova International's 9¾% notes were freed for secondary market dealings, traders said the financial services company's new issue ran into some trouble, a situation exacerbated by the overall thinness in the market as a whole and lack of liquidity.

"That thing wasn't doing well," one trader said. "It was actually trading below the issue price," which was 98.762.

He said that at one point about an hour or so before he talked to Prospect News the bonds were offered as low as 98; after that, he said, "they either traded [up] or the offering got pulled."

He last saw the bonds at 98¼ bid, "so best case now is that they're trading right around the issue price."

He added that "part of the reason for the thing not performing all that well is there are so few people around."

A second trader said that he had not seen any kind of activity in the bond, while a third pegged them trading at bid levels between 97¾ and 983/4.

Thursday deals do well

But it was a different story for the deals which had priced on Thursday.

A trader said that DriveTime Automotive Group's new 8% senior secured notes due 2024 were trading as high as a 101½ to 102½ context. That was well up from the par level at which the Phoenix-based used-car and truck retailer, along with its DT Acceptance Corp. co-issuer, tapped the market for $400 million via a regularly scheduled forward calendar offering.

The trader said that St. Louis-based breakfast cereal manufacturer Post Holdings' $630 million of 6% notes due in December of 2022 "were trading up around 101," after having come to market at par in a scheduled forward calendar deal and then having traded in a 100½ to 100¾ offered range when they moved into the aftermarket Thursday after pricing.

Another trader said that the Post notes were trading between 100¾ and 1011/4, which he called up ¼ point on the day.

A trader saw Dallas-based midstream services provider Energy Transfer Equity's 5 7/8% notes due 2024 at 103 bid, 103½ offered, while a second pegged the bond trading between 102¾ and 1031/4.

The company brought a $700 million same-day add-on offering of those 10-year bonds to market, upsizing that deal from an originally announced $500 million and pricing it at 102 to yield 5.602%.

One of the traders was quoting Teekay Offshore Partners' 6% notes due 2019 "right around par," where the Hamilton, Bermuda-based provider of maritime transportation services to the offshore energy industry had priced its $275 million issue on Thursday after an investor roadshow.

A second trader saw the bonds doing even better than that, seeing them in a 100¾ to 101½ bid context.

And a trader saw Telecom Italia's 5.303% notes due 2024 trading as well as a 101 bid. The Rome-based telecommunications company had brought a quickly shopped $1.5 billion of those notes to market, pricing them at par, with the bonds quoted in Thursday's aftermarket at par bid, 100¼ offered.

Rosetta calms down

Market sources did not see any dealings on Friday in Rosetta Resources Inc.'s 5 7/8% notes due 2024, which had been the standout secondary market performer over the previous two sessions.

The Houston-based oil and natural gas exploration and production company's quick-to-market $500 million of the notes had priced at par on Wednesday after having been upsized from an originally announced $400 million, and the new bonds immediately jumped to around the 101½ bid level when they were freed for secondary dealings, with over $79 million having traded.

They continued the upward march Thursday, moving above the 102 bid area, as another $67 million changed hands.

That activity dried up on Friday, but traders still quoted the bonds at those lofty levels, with two of them putting the bonds around 101¾ to 1021/4.

A trader saw a locked market - bid and offered levels the same - around 102 1/8.

He said of Rosetta: "That's a solid story."

New deals dominate

There wasn't much going on in general on Friday - and pretty much as they had been all week, new deals were the dominant factor.

"New issuance has attracted a lot of people's attention," one trader said, adding that while there was some non-new-deal secondary market activity - mostly people buying short-duration paper - "some people are selling stuff - so they can buy the new deals."

At another shop, a trader declared that "the market had a big week. We had a lot of new issues."

He said that with just so much new paper sloshing around out there, "there seemed to be a little bit of indigestion going on," in terms of most new deals venturing not far from their respective issue prices, although he did note that there was cash coming into the market to buy some of that new paper.

Overall, he theorized, "it's fine - everything is kind of humming along here."

With the market closed Monday because of the holiday, he predicted that Tuesday would be another quiet session, "because everybody's just getting back."

As for what happens after that, he said: "We'll see. That was a lot of new issuance for the market to digest over a very short time."

But he predicted that junk will see continued new issuance as spring turns into summer, "particularly in oil and gas."

Indicators mixed on day, week

Statistical junk performance indicators were seen by market sources as having been mixed for a sixth consecutive session on Friday, and were also mixed versus where they had finished the previous Friday for a second straight week.

The Markit Series 22 index saw a third consecutive improvement, moving up by 1/8 point to 107 2//32 bid, 108 1/32 offered, after having jumping more than 1 full point on Thursday.

It was also up versus the 106 12/16 bid, 106 7/8 offered level at which it had finished the previous week on Friday, May 16.

However, the KDP High Yield Daily Index suffered its third straight loss, easing by 2 basis points to 74.87, after having dropped by 4 bps on Thursday.

Its yield, meanwhile, was unchanged at 5.11% after having risen by 2 bps on Thursday.

Those levels compared unfavorably to the previous Friday's 74.93 index reading and its 5.09% yield.

The widely followed Merrill Lynch High Yield Master II Index saw a rare unchanged session on Friday, after having lost 0.018% on Thursday, its second straight downturn after three consecutive sessions before that on the upside.

The index's year-to-date return thus stayed at Thursday's 4.385% level, down from Wednesday's 4.404% and down as well from the 4.443% recorded on Tuesday, its peak level for 2014 so far.

For the week, the index was up by 0.055% - its 10th consecutive week-over-week gain.

During the week ended May 16, it had been up by 0.222% on the week, leaving its year-to-date return at 4.328%.

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