Morning Commentary: TransDigm, Greif, Stonegate on deck; new Studio City bonds gain

By Paul A. Harris

Portland, Ore., Jan. 30 – The new issue market took the spotlight on Wednesday morning with at least three roadshow deals poised to price during the mid-week session.

TransDigm, Inc. is in the market with a rejiggered megadeal.

On Tuesday the company talked an upsized $3.7 billion tranche of eight-year senior secured notes (expected ratings Ba3/B+/BB) to yield in the 6 3/8% area.

The secured tranche was increased from $2.7 billion. At the same time, a proposed $1 billion tranche of eight-year senior subordinated notes was withdrawn from the market.

The Cleveland-based producer of aircraft components plans to use the proceeds to fund its acquisition of Esterline Technologies Corp.

Greif Inc. is expected to price its $500 million offering of eight-year senior notes (B1/BB-) before midday.

The deal is talked to yield 6½% to 6¾%, tight to initial guidance in the 6¾% to 7% area, a trader said.

The Greif offer, backing its acquisition of Caraustar Industries Inc., was playing to orders four-times deal size late Tuesday afternoon, an investor said.

In the sterling-denominated market, Stonegate Pub Co. Financing plc talked its £150 million offering of senior secured floating-rate notes due March 15, 2022 (B2/B-) at Libor plus 625 basis points to 650 bps at a reoffer price of 99.5 on Wednesday morning.

The acquisition financing deal was set to price later in the day.

Studio City trades higher

The signals on the high-yield track were green on Wednesday morning, according to market sources.

With stock prices up sharply at mid-morning, high-yield ETF share prices were higher. The iShares iBoxx $ High Yield Corporate Bd (HYG) was up 0.3%, or 25 cents, at $84.49 per share.

Oil was up a buck.

The barrel price of West Texas Intermediate crude for March 2019 delivery was up $1.07, or 2%, at $54.38.

The California Resources Corp. 8% senior secured second-lien notes due December 2022, a big liquid issue which investors use to track crude oil in the high-yield index, was 79¾ bid, 80¼ offered on Wednesday morning, up from 79¼ bid, 80 offered on Tuesday, according to a hedge fund manager.

The new Studio City Co. Ltd. 7¼% senior notes due February 2024 (B2/B+) were trading higher in the secondary market on Wednesday at par bid, par 5/8 offered, the manager said.

The upsized $600 million issue (from $425 million) priced at par on Tuesday in a deal that played to a big audience of investors in Asia, sources said.

Mixed Tuesday flows

The daily cash flows of the dedicated high-yield bond funds were mixed on Tuesday, 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.

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