Downsized Virtu deal caps $2 billion primary week; new Virtu trades up busily in aftermarket

By Paul Deckelman and Paul A. Harris

New York, June 2 – The high-yield primary sphere closed out a considerably more relaxed week on Friday with one dollar-denominated and fully junk-rated pricing getting done, as Virtu Financial Inc., an electronic trading firm and market maker on numerous exchanges and digital marketplaces in equities, fixed income, currencies and commodities, priced a downsized $500 million of five-year secured notes.

Traders said that the new notes firmed smartly in very active dealings when they hit the aftermarket.

The Virtu transaction capped a holiday-shortened week in the new-deal arena which saw only $2 billion of new dollar-denominated junk bonds price in three tranches – just a small fraction of the nearly $10 billion which got done the week before, according to data compiled by Prospect News.

For a second day in a row, Wednesday’s new issue of five-year secured notes from car-rental giant Hertz Corp. was the most actively traded credit in Junkbondland, traders said, noting that the new deal stayed modestly above its issue price.

Away from the names which have already priced, primaryside players were looking for a busy week ahead, with a trio of international issuers planning dollar-denominated new deals – Britain’s KIRS Group, Canada’s Taseko Mines Ltd. and Australia’s Pilbara Minerals – while domestic issuer Superior Industries International, Inc. was heard getting ready to price a euro-denominated offering.

Statistical market performance measures were higher across the board for a second consecutive session on Friday after four mixed sessions.

The indicators meantime finished out the week higher all around versus where they had closed last Friday, May 26. It was their second straight week of stronger performances, following two successive mixed weeks and a lower week before that.

Virtu prices downsized deal

Virtu Financial completed Friday’s sole dollar-denominated deal, a downsized $500 million issue of five-year senior secured second-lien notes (B1/B-/B+) which priced at par to yield 6¾% at the conclusion of a roadshow.

The issue size was decreased from $825 million, with $325 million shifted to the term loan, increasing its size to $1.15 billion from $825 million.

Prior to downsizing, the notes were talked at 7% to 7¼%. Initial guidance on the deal was 7½% to 7¾%.

J.P. Morgan ran the books for the acquisition and debt refinancing deal.

The week ahead

Looking to the June 5 week, the dollar-denominated primary market is expected to be active, according to a sellside source, who added that there is modest deal pipeline.

A couple of offers that ran roadshows during the past have been carried over into the week ahead, sources say.

KIRS Group is in the market with dollar-denominated tranche of five-year fixed-rate senior secured notes (B3//B-) which has been whispered in the 8% area, according to a trader.

The dollar notes are part of an £800 million equivalent three-part deal helmed by Barclays which also includes sterling-denominated five-year fixed-rate notes and sterling-denominated five-year floating-rate notes, all secured paper.

An international roadshow was expected to wrap up in the latter part of the past week.

Taseko Mines Ltd. marketed a $250 million offering of five-year senior secured notes (B3/B-) via sole bookrunner Jefferies during the past week.

Elsewhere from the mining sector, Australia’s Pilbara Minerals is guiding $80 million to $100 million of five-year secured notes in the 12% area, according to a bond trader.

There is no specific timing on the deal which has been marketed by means of an international investor roadshow, the source said.

The mining and exploration company plans to use the proceeds to fund the development of its Pilgangoora lithium and tantalum project in Western Australia.

Ardagh extends maturity

In European drive-by action, Ardagh Group launched and priced a restructured £400 million issue of 10-year senior notes at par to yield 4¾% on Friday.

The tenor of the notes was increased to 10 years from eight years.

Call protection was increased to five years from three years.

Prior to the restructuring that lengthened the maturity the notes had been talked in the 4¾% area, the source said.

“We are very pleased with the continued support we have received from a broad investor base in our first sterling bond issue,” Ardagh Group chairman Paul Coulson stated in a company press release.

“We have issued 10-year unsecured financing on favorable terms which provide us with attractive sterling hedging. We have also increased the strength and flexibility of our capital structure and further reduced risk from future market volatility. We have also reduced our exposure to potential U.S. dollar interest rate rises.”

Citigroup was the lead in a syndicate of banks that also included Barclays and Credit Suisse.

Superior plans euro deal

Superior Industries plans to start a roadshow on Monday for a €240 million offering of eight-year senior notes.

Initial guidance has the deal yielding in the low 6% area.

The roadshow wraps up on Wednesday, and the offer is set to price subsequently.

JP Morgan is leading the notes sale, which is intended to take out a bridge loan.

Thursday inflows

Daily cash flows for dedicated high-yield bond funds were positive on Thursday, the most recent session for which data was available at press time, according to a trader.

High-yield ETFs saw a robust $479 million of inflows on the day.

Actively managed funds saw $50 million of inflows on Thursday.

Those daily flows follow Thursday afternoon’s news that dedicated high-yield bond funds saw $521 million of inflows during the week to last Wednesday’s close.

The dedicated bank loan funds also put up positive daily numbers on Thursday, albeit more modest ones than those of either of the high-yield classes, the trader said.

The loan funds saw $25 million of inflows on the day, all of it going into actively managed funds, with 0% of that daily amount going into the bank loan ETFs.

A much quieter week

Friday’s new bond deal from Virtu Financial, which will actually be issued via the New York-based firm’s Orchestra Borrower LLC and Orchestra Co. Co-Issuer, Inc. funding subsidiaries, raised the amount of new dollar-denominated and fully junk-rated paper pricing on the week to $2.05 billion in just three tranches, according to data compiled by Prospect News.

This week was one session shorter than usual due to the full shutdown of the debt markets on Monday, May 29, in observance of Memorial Day in the United States.

The week’s total was down sharply from the $9.7 billion which had priced in 18 tranches the week before, ended May 26, which was itself the biggest new-issuance week seen since the week ended March 10, which was, in turn, the biggest primary week ever, when some $17.54 billion of junk bonds had priced in 26 tranches.

The latest week’s activity was also down from the $3.98 billion which priced in nine tranches the week before last, ended May 19.

This week’s primary activity, as modest as it was, still pushed year-to-date issuance for 2017 so far up to $126.38 billion in 235 tranches – considerably more than the $94.53 billion which had priced in 135 tranches by this point on the 2016 calendar, the Prospect News data indicated.

Full-year issuance in 2016 finished at $226.78 billion in 359 tranches –which ran 12.9% behind the $260.02 billion which had gotten done in 408 tranches in 2015.

New Virtu notes jump

When the new Virtu 6¾% senior secured second-lien notes due 2022 hit the aftermarket following their pricing earlier in the session, a trader saw the bonds get as good as 102 7/8 bid, up sharply from their par issue price.

He saw the paper come off that peak just before the end of the day, with final prints in the still-impressive 102½ bid area.

Activity in the new deal was intense, a market source said, estimating that more than $79 million of the new bonds had changed hands by the close.

© 2015 Prospect News.
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