International Wire deal prices, calendar keeps building; market stronger, Claire’s dives on projections

By Paul Deckelman and Paul A. Harris

New York, July 12 – The high yield primary sphere saw its first pricing of the week on Tuesday – and only the second so far this month – as International Wire Group, Inc. priced $260 million of five-year senior secured notes, at a deep discount from par.

Traders did not immediately report any initial aftermarket activity in the electrical wire products maker’s new issue.

They did see continued busy activity in the only other new deal to price so far in July – Transocean, Ltd.’s seven-year issue, which came to market this past Thursday. The Swiss deep-water drilling company’s megadeal continues to firm from its own sizable discounted pricing level.

Away from the issues that have already come to market, syndicate sources heard a pair of offerings being shopped around to prospective investors.

Specialty chemicals and motor oil manufacturer Valvoline, Inc. plans to sell $375 million of eight-year notes to help fund its coming spinoff from chemical maker Ashland Inc.

Holly Energy Partners, LP, a petroleum pipeline operator, hopes to complete a $300 million eight-year offering.

Both of those deals are expected to price later in the week.

Among established issues, traders said that the overall junk bond market was strong, in tandem with stocks and oil prices, both of which notched hefty gains on Tuesday.

However, Claire’s Stores Inc.’s notes nosedived in busy dealings after the specialty retailer released bearish second-quarter EBITDA and sales projections.

Back on the upside, bonds of R.R. Donnelley & Sons Co. shot up on news reports that Xerox Corp. is in talks aimed at acquiring the printing and electronic publishing company. However, with those negotiations still in the early stages, most investors didn’t get too excited about the possibility, racking up just a relative handful of large-sized trades in its bonds.

Statistical market performance measures were higher across the board for a fourth consecutive session on Tuesday; those indicators had strengthened on Thursday and Friday, and again on Monday, after having been mixed for three straight days before that. Including four consecutive stronger sessions last week, Tuesday marked the indicators’ eighth higher session in the last 11 trading days.

International Wire tight to yield talk

International Wire Group, Inc. priced Tuesday's sole deal, a $260 million issue of 10¾% five-year senior secured notes (B3/B) that came at 96.286 to yield 11¾%.

The yield printed at the tight end of the 11¾% to 12% yield talk. The reoffer price came in line with discount talk of 3.5 points to 4 points.

Jefferies was the left bookrunner for the debt refinancing deal. Wells Fargo and KKR were the joint bookrunners.

International Wire is just the second dollar-denominated junk deal to clear the market in July, as the market spent much of the month sidelined by Brexit-related volatility.

On July 7, Transocean Inc. (RIG) priced the first dollar-denominated post-Brexit issue, a downsized, restructured $1.25 billion issue of 9% seven-year senior notes (B1/BB-) which, like International Wire, came at a significant discount, pricing at 97.5 to yield 9.499%.

Valvoline starts roadshow

However the market lately has caught the same tailwind that is propelling equities to colossal levels, sources say.

And the forward calendar is back.

Two deals took places on the active forward calendar on Tuesday.

Valvoline Inc. began a roadshow for a $375 million offering of eight-year senior notes related to Ashland Inc.’s spinoff of Valvoline.

Citigroup is the left bookrunner for the debt refinancing. BofA Merrill Lynch, Morgan Stanley, Scotia, Deutsche Bank, Goldman Sachs J.P. Morgan are the joint bookrunners.

Holly Energy eight-year deal

Elsewhere Holly Energy Partners, LP, along with co-issuer Holly Energy Finance Corp., began a roadshow on Tuesday for a $300 million offering of eight-year senior notes (expected ratings B1/BB).

Again Citigroup is the left bookrunner for the debt refinancing deal. BofA Merrill Lynch, BBVA, MUFG, US Bancorp and Wells Fargo are the joint bookrunners.

Both Valvoline and Holly Energy are slated to price on Thursday.

All told, the active forward calendar contained six dollar-denominated offerings totaling $2.3 billion, all of it expected to price before this coming Friday's close.

International Wire initially unseen

In the secondary sphere, several traders queried by Prospect News did not immediately report any aftermarket dealings in International Wire Group’s new 10¾% senior secured notes due 2021.

The Camden, N.Y.-based manufacturer and marketer of wire products slightly upsized its second-day regularly scheduled forward calendar deal from its originally announced $250 million.

Transocean keeps trading up

A trader said that the new Transocean 9% notes due 2023 “were again pretty active” in Tuesday’s dealings.

He saw the bonds move up 1 full point, to 99½ bid.

At another desk, a trader saw the notes up by ¾ point on the day, pegging them at 99¼ bid.

He saw more than $41 million of the notes having changed hands, calling them the busiest purely junk-rated issue. That was on top of the more than $46 million of that paper which had traded on Monday.

Transocean, a Vernier, Switzerland-based provider of deep-water drilling services to the energy industry, priced $1.25 billion of those notes late in the day on Thursday at 97.5, to yield 9.499%, after the regularly scheduled forward calendar offering had been downsized from its originally planned $1.5 billion.

The new bonds, issued by the company’s Houston-based wholly-owned Transocean, Inc. subsidiary, had traded actively on Friday, when they were freed for aftermarket dealings, generating more than $126 million in volume, easily topping Friday’s Most Actives list. The bonds had initially fallen back from their issue price, coursing as low as 96¾ bid, before rebounding to end in a 97¾ to 97 7/8 bid context, the traders said.

On Monday, they continued to firm, moving up to around a mid-98 bid level, setting the stage for Tuesday’s additional gains.

Dell, DISH stay busy

Among other recently priced deals, traders noted continued activity in the issues that computer manufacturer Dell, Inc. and satellite television broadcaster DISH Network Corp. brought to market a little over a month ago.

A trader said that Dell’s 5 7/8% notes due 2021 and its 7 1/8% notes due 2024 both traded more than $20 million on Tuesday.

While the eight-year notes were seen having gained ½ point on the day, ending at 109½ bid, the five-year paper bucked the generally positive trend seen in the junk market on Tuesday, retreating by around 7/16 point to end at 105¼ bid.

Round Rock, Texas-based Dell, though its Diamond 1 Finance Corp. and Diamond 2 Finance Corp. funding subsidiaries, priced a total of $3.25 billion of the notes at par back on June 8 in a regularly scheduled forward calendar offering, split into a pair of equal-sized $1.625 tranches.

A trader saw meantime saw DISH Network’s 7¾% notes due 2026 gain some 1¾ points Tuesday on volume of more than $20 million to end at 108½ bid, on top of similarly sized gain recorded during Monday’s session.

The Englewood, Colo.-based satellite television broadcaster priced $2 billion of those notes at par, also on June 8 via its DISH DBS Corp. subsidiary, after that quick-to-market issue was greatly upsized from an originally announced $750 million.

Energy issues improve

Away from new or recently priced bond deals, a trader noted that “all of the energy names” continued to climb in Tuesday’s dealings, helped generally by the firmer market as well as getting a boost from surging world crude oil prices.

The benchmark U.S. crude grade, West Texas Intermediate for August delivery, jumped by $2.04 per barrel, to $46.80, in Tuesday dealings on the New York Mercantile Exchange, versus Monday’s 65-cent per barrel slide.

Likewise, the global benchmark grade, Brent crude for September delivery, zoomed by $2.22 on Tuesday, settling at $48.47 per barrel on the London ICE Futures Exchange, after having fallen back by 51 cents per barrel on Monday.

Accordingly, Los Angeles-based California Resources Corp.’s 8% notes due 2022 – considered something of a bellwether for the oil and gas sector because of its great size and liquidity – gained 1 3/8 points, a market source said, ending at 75 1/8 bid, with over $21 million traded.

Whiting Petroleum Corp.’s 5% notes due 2019 gained 7/8 point on the day to 95¼ bid, with over $18 million of the Denver-based exploration and production company’s paper having changed hands.

Oklahoma City oiler Chesapeake Energy Corp.’s 8% notes due 2022 were up more than a deuce on the day, ending at an even 90 bid, on volume of more than $17 million.

R.R. Donnelley rises

The biggest gainers on the day were the several series of bonds from Chicago-based printer and electronic publisher R.R. Donnelley.

They got a boost on news reports that copy machine and information processing giant Xerox Corp. was in talks to buy the company, although those negotiations were said to still only be in the early stages.

But while there was considerable price movement, a trader said that “the structure didn’t look that active, volume-wise.”

For instance, he saw “just a couple of prints” in the company’s 6% notes due 2024 pushing them up to the 102 bid level from the lower 90s.

He said the 6½% notes due 2023 saw “just very small trades” rather than more meaningful round lots.

At another desk, the 6% notes were seen ending at 102½ bid, up 8 points on the day, but only on a pair of round-lot trades.

He saw perhaps $4 million of the 6½’s trading, plus numerous odd lots, as the bonds rose nearly 9 points to 103 3/8 bid.

Its 7 5/8% notes due 2020 were up 4 points on the day, at 110¾ bid, with about $4 million traded.

Claire’s gets clobbered

On the downside, “Claire’s missed on EBITDA and sales,” a trader said, in seeing the retailer’s 9% notes due 2019 slide by 9 points.

The Hoffman Estates, Ill.-based company warned that second-quarter EBITDA, as well as same-store sales, would be worse than expected.

In the wake of that announcement, the company’s 9% notes swooned to 55 bid, according to a trader.

The trader added that volume in the name was quite large – well over $26 million.

In an 8-K filed on Monday, it said that as of July 10, same-store sales were down 5.9%, consisting of a decline of 4.2% in North America and an 8.6% decrease in Europe. Expectations for adjusted EBITDA were placed between $37 million and $41 million for the second fiscal quarter, which compared to $59.9 million the year before.

Operating income was also forecast lower, in a $25 million to $29 million range. By comparison, operating income was $38.7 million the previous year.

While the gloomy forecast was deemed in line with expectations by Gimme Credit LLC analyst Evan Mann in an afternoon comment, he noted that there were certainly negative implications.

“Liquidity has now become a defining issue,” he wrote. “At a minimum, a broader distressed debt exchange offer is required sooner rather than later.”

Mann also suggested that private equity owner Apollo Capital Management was “positioning itself to actively participate in what is becoming an increasing likelihood of a bankruptcy filing.”

Claire’s has $260 million of 10½% senior subordinated notes coming due on June 1, 2017.

Indicators extend gains

Statistical market performance measures were higher across the board for a fourth consecutive session on Tuesday; those indicators had strengthened on Thursday and Friday, and again on Monday, after having been mixed for three straight days before that. Including four consecutive stronger sessions last week, Tuesday marked the indicators’ eighth higher session in the last 11 trading days.

The KDP High Yield index posted its 10th consecutive gain and its 11th advance in the last 13 sessions, firming by 39 basis points to close at 69.28. It had also been up by 37 bps on Monday.

Its yield came in by 13 bps on Tuesday to 5.53% – its fourth straight new low for the year. The old mark was Monday’s 5.66%. Tuesday marked its 10th straight narrowing after having widened for two sessions before that. It had also tightened by 19 bps on Monday.

The Markit Series 26 CDX index rose by 17/32 point on Tuesday to end at 104 ¾ bid, 104 7/8 offered, after having risen by 11/32 point on Monday. It was the fifth straight upturn after two sessions on the downside last week. Counting four straight gains before that, Tuesday was the index’s ninth upturn in the last 11 sessions.

And the Merrill Lynch High Yield index rose by 0.558%, its fourth straight gain, on top of Monday’s 0.644% improvement. Monday was ninth upturn in the last 10 sessions.

That gain raised its year-to-date return to 12.223%, its fourth consecutive new peak level for the year, from Monday’s 11.60%, the previous zenith.

It was also the first time the index had finished above the 12% mark since Dec. 31, 2012, when it closed out that year at 15.583%.

Stephanie N. Rotondo contributed to this review.

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