Rexnord, Navient add-on, revived NRG price, new issues active; funds snap skid, gain $310 million

By Paul Deckelman and Paul A. Harris

New York, Nov. 30 – The high-yield primary sphere closed out a busy month of November on Thursday with a trio of new dollar-denominated and fully junk-rated deals generating $1.6 billion of new paper, syndicate sources said.

NRG Energy, Inc. opportunistically returned to the market with an $870 million issue of 10.25-year notes – just a few weeks after having pulled the same kind of issue from the forward calendar, citing less favorable market conditions. This time around, the power generating company was able to get investors to accept the kind of yield that it had wanted to achieve earlier but could not.

That NRG deal was the busiest credit of the day in Junkbondland, firming smartly from its issue price when freed to trade.

Industrial manufacturer Rexnord Corp. priced a regularly scheduled $500 million offering of eight-year notes, which also traded actively in the aftermarket, producing modest gains.

Financial services company Navient Corp. did a quickly shopped $250 million add-on to the five-year notes that it had sold earlier this year.

Besides the day’s new deals, traders saw considerable activity in recently priced offerings from issuers such as James Hardie Industries plc, PQ Corp. and Endeavor Energy Resources, LP.

Away from the new or recently priced issues, domestic wireline telecommunications names like Frontier Communications Corp. and CenturyLink, Inc. were seen better on the day but European telecom operator Altice’s various issues were broadly and deeply lower.

Statistical market performance measures were trending higher on Thursday, after having been mixed for the previous three consecutive sessions.

Another numerical indicator – flows of investor cash into or out of high-yield mutual funds and exchange-traded funds, which are considered a reliable barometer of overall junk market liquidity trends – broke out of its month-long negative rut this week, as $310 million more came into those weekly-reporting-only domestic funds than left them in the form of investor redemptions during the week ended Wednesday. The funds had lost more than $6 billion over the previous four weeks (see related story elsewhere in this issue).

NRG plants its feet

News volume remained vigorous in the high-yield primary market on Thursday.

NRG Energy demonstrated that it can pay to plant your feet when issuing junk bonds.

The company returned to the primary market on Thursday to price an $870 million issue of senior notes due Jan. 15, 2028 (B1/BB-) at par to yield 5¾%.

The yield printed at the tight end of the 5¾% to 6% yield talk.

The company abandoned a similar offering earlier in November when it postponed an $870 million offering of 10.25-year notes, citing market conditions.

At that time the company had targeted an interest rate of 5¾%, sources said, and added that investors were willing to buy the earlier 10.25-year bonds at 6% but NRG declined to pay the extra 25 basis points.

With Thursday’s new issue NRG achieved the cost of capital it was seeking earlier in the month when it walked away from that 10.25-year notes offer.

Citigroup was the left bookrunner for the 5¾% note issue that priced Thursday.

As with the withdrawn early November offer, the Princeton, N.J.-based wholesale power-generation company plans to use the proceeds from the newly printed 5¾% notes to fund a tender for its 6 5/8% senior notes due 2023.

Rexnord prices tight

Rexnord priced a $500 million issue of eight-year senior notes (B3/B+) at par to yield 4 7/8%.

The yield printed at the tight end of yield talk that was set in the 5% area.

Credit Suisse was the left bookrunner. BMO, Citigroup, Deutsche Bank, Barclays, Goldman Sachs and Mizuho were the joint bookrunners.

Proceeds, along with approximately $300 million of cash from the balance sheet, will be used to pay down the company’s term loan B.

Navient taps 6½% notes

Navient priced a $250 million add-on to its 6½% senior notes due June 15, 2022 (Ba3/B+/BB) at 105, resulting in a 5.244% yield to worst.

The reoffer price came at the rich end of the 104.75 to 105 price talk.

BofA Merrill Lynch, Credit Suisse and JP Morgan were the joint bookrunners.

The Wilmington, Del.-based financial services company plans to use the proceeds for general corporate purposes including debt repurchases.

Icahn $1.26 billion in 3 tranches

Icahn Enterprises LP and Icahn Enterprises Finance Corp. set price talk for a $1.26 billion offering of senior notes that launched on a Thursday afternoon conference call with investors.

The notes are coming in three tranches, including: a $380 million add-on to the company’s 6¼% senior notes due Feb. 1, 2022 that is talked at 103 to 103.25; a $380 million add-on to the 6¾% senior notes due Feb. 1, 2024 that is talked at 103.75 to 104; and $500 million of new senior notes due 2025 that are talked to yield 6¼% to 6½%.

Books close at 11 a.m. ET Friday and the deal is set to price subsequently.

Jefferies is the sole bookrunner.

The New York-based diversified holding company plans to use the proceeds to refinance its 4 7/8% senior notes due 2019.

Mountain Province sets talk

Mountain Province Diamonds Inc. talked a $325 million offering of five-year senior secured second-lien notes (B3/B-/BB-) with an all-in yield of 8¼% to 8½%, including an original issue discount of approximately 1 point.

Books close at 11 a.m. ET Friday and the offering is set to price thereafter.

Credit Suisse and Scotia are the joint bookrunners.

The Toronto-based diamond mining company plans to use the proceeds to refinance bank debt.

CeramTec prices LBO deal

News volume in the European high-yield market also remained heavy on Thursday.

CeramTec priced a €406 million issue of eight-year senior notes (Caa2/CCC+) at par to yield 5¼%.

The yield printed at the tight end of talk announced in the 5 3/8% area.

BofA Merrill Lynch, Morgan Stanley, Deutsche Bank, Nomura and UBS managed the sale.

Proceeds will be used to help fund the buyout of the Plochingen, Germany-based developer and manufacturer of advanced ceramic components by BC Partners from Cinven.

Thomas Cook at the tight end

Thomas Cook Group plc priced €400 million guaranteed senior notes due July 15, 2023 (expected B1/expected B/confirmed BB-) at par to yield 3 7/8%.

The yield printed at the tight end of talk for a yield in the 4% area. Initial guidance was 4% to 4¼%.

Global coordinator UniCredit will bill and deliver. Barclays and DNB were also global coordinators. BNP Paribas, BofA Merrill Lynch, Lloyds, NatWest Investments and SG CIB were joint bookrunners.

The London-based travel company plans to use the proceeds to redeem its guaranteed senior notes due June 2021.

Lowen talked at 5¼% to 5½%

Germany’s Lowen Play GmbH talked its €350 million offering of five-year senior secured notes (B2/B) to yield 5¼% to 5½%.

The offer is set to price on Friday.

JPMorgan and ING are leading the deal.

The Bingen am Rhein, Germany-based casino operator plans to use the proceeds to repay existing notes and shareholder loans.

Elsewhwere Anglian Water (Osprey) Financing plc talked a £240 million offering of medium-term notes (Ba3/BB+) at a yield of 3% to 3¼%.

The deal is expected to play to both high-yield and investment-grade investors, a London-based sellside source said.

Barclays, HSBC and NatWest Investments are leading the deal.

The record-setting year in the European new issue market still has at least one week to run, according to the sellside source who expects the euro primary market to be active in the Dec. 4 week.

Issuance picked up in November

Thursday’s busy session swelled the ranks of new deals which came to market in November, according to data compiled by Prospect News.

When the dust had settled, $30.06 billion of new dollar-denominated and fully junk-rated paper from domestic or industrialized-country borrowers had successfully priced in 56 tranches in November, the data indicated.

That was up from the $25.36 billion of such paper which had gotten done in 44 tranches during October.

And it was more than twice the $14.23 billion of such paper which had priced in 27 tranches in November 2016.

J.P. Morgan remains the top high yield underwriter in both the U.S. and European junk markets (see related story elsewhere in this issue).

With 11 months of 2017 now in the books, year-to-date new issuance continues to run a healthy 27% ahead of the pace seen at this time last year, the data indicated.

NRG jumps in busy dealings

Traders said that the new NRG Energy 5¾% notes due January 2028 – which priced after the power generating company pulled that deal off the shelf it had occupied since it had been pulled from the market earlier in the month – generated considerable interest among junk investors Thursday.

One quoted the new paper in a 101¼ to 101½ bid context, up from its par pricing level.

A second trader described “tons of trading, almost $100 million,” seeing the bonds go out at 101 3/8 bid.

At another shop a market source estimated that some $90 million of the new issue had changed hands, also seeing it ending around 101 3/8 bid.

The company’s existing 7¼% notes due 2026 were seen to have gained ½ point on the day, ending at 110¼ bid on more than $12 million of volume.

Rexnord on the rise

Traders also saw gains in the new RBS Global Inc./Rexnord LLC 4 7/8% notes due 2025 after the Milwaukee-based industrial manufacturer’s regularly scheduled forward calendar deal priced at par.

One pegged the new notes in a 100 3/8 to 100 7/8 bid range, while a second located them between 100½ and 100¾ bid.

A market source quoted the notes at 100 5/8 bid, with over $39 million having traded on the day.

Navient add-on quietly firmer

A market participant saw the new Navient 6½% notes due June 15, 2022 going out in a 105 1/8 to 105 5/8 bid context.

That was up a little from the 105 level at which the education loan servicer spun off in 2014 from the former Sallie Mae had priced its quick-to-market $250 million add-on to the existing $750 million of those notes that it had sold back in March.

The participant saw “considerably less” volume in the smallish add-on than in the larger stand-alone issues from NRG and Rexnord.

Recent deals busy

As has been the case in the high-yield space all though the week, trading in new and recently priced issues dominated investor attention.

“There have been a lot of those recently,” a trader said, “and they’ve taken up a majority” of the trading interest.

For instance, he saw both tranches of Wednesday’s split-rated (Ba1/BB/BBB-) offering from Dublin-based building materials company James Hardie Industries plc “very active” and “up significantly” from their par issue price.

He quoted the company’s 4¾% notes due January 2025 around 102 bid, while its 5% notes due January 2028 firmed to 101½ bid.

A market source said that more than $67 million of the 10-years had traded and more than $55 million of the seven-year piece.

The company had priced $400 million of each, after the overall size of the deal had been increased to $800 million from an originally announced $700 million.

PQ Corp.’s 5¾% notes due 2025 edged up around 1/8 point to close at 102¼ bid on turnover of more than $31 million a trader said.

The Malvern, Pa-based chemicals manufacturer priced a quickly shopped $300 million of those notes at par on Wednesday, with the new paper heard to have jumped to the 102 bid level in heavy initial aftermarket trading.

Going back to Tuesday’s two-part megadeal from Midland, Texas-based oil and natural gas exploration and production company Endeavor Energy Resources, both tranches traded up on Thursday, adding to the already solid aftermarket gains notched on Tuesday and added to on Wednesday.

Its 5½% notes due January 2026 gained more than ½ point to end just shy of 101½ bid, with around $17 million traded.

Its 5¾% notes due January 2028 “were up again,” one of the traders said, ending the session at 101 3/8 bid, a gain of 5/8 point on the day, with around $20 million of volume.

Endeavor had priced $500 million of each at par on Tuesday after enlarging the overall deal size to $1 billion from $800 million originally.

Wireline names firm up

Away from the new deals, the recently weakened wireline telecommunications sector was mostly better on Thursday, led by Stamford, Conn.-based Frontier Communications’ 11% notes due 2025, which gained 5/8 point on the day to end at 77 3/8 bid, on brisk volume of more than $17 million.

The company’s 8½% notes due 2020 were 1½ points better at 92 ¾ bid.

Little Rock, Ark.-based sector peer Windstream Services’ 7¾% notes due 2021 were seen by a trader to have jumped as much as 3 points on the day, closing at 78 bid, while Monroe, La.-based CenturyLink’s 7.6% bonds due 2039 were up some 2¼ points to 86 9/32 bid.

While those domestic operators popped, European telecom operator Altice’s various bonds dropped.

Its financing unit’s 7¾% notes due 2022 slid by 2¾ points on the day to 95¼ bid, with over $31 million traded, while its 7 5/8% notes due 2025 were down by the same amount to 91¾ bid, on over 414 million of volume.

The company’s SFR Group subsidiary’s 7 3/8% notes due 2026 lost ¾ point on the session to close at 100¾ bid, while over $34 million of those notes changed hands.

Indicators turn better

Statistical market performance measures were trending higher on Thursday after being mixed for the previous three consecutive sessions.

The KDP High Yield Daily Index ended Thursday unchanged on the session at 71.83, after having edged upward by 1 basis point on Wednesday following another unchanged finish on Tuesday.

Its yield meantime crept up by 1 bp to 5.32%, after having come in by 1 bp on Wednesday following an unchanged session on Tuesday.

But the Markit CDX Series 29 index was up by almost 1/8 point on Thursday, ending at 107 29/32 bid, 107 15/16 offered, in contrast to Wednesday’s 3/16 point loss, which had mostly erased Tuesday’s nearly ¼ point rise.

The Merrill Lynch North American High Yield Master II Index advanced by 0.041% on Thursday, having also moved up by 0.052% Wednesday, in contrast to Tuesday’s 0.063% pullback – its first loss after eight gains in a row.

Thursday’s upturn raised the index’s year-to date return to 7.171% from Wednesday’s close at 7.127%. The year-to-date return still remains down from the 7.636% posted on Oct. 24 – the peak cumulative return for 2017 so far.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.