Primary quiet as $4.58 billion week concludes; Transocean terms emerge

By Paul Deckelman

New York, May 5 – The high-yield primary sphere closed out the first trading week in May on a quiet note on Friday, with no dollar-denominated and fully junk-rated issues pricing during the session.

That was a far cry from Thursday’s busy day, when $2.15 billion got done in four tranches – the highest volume session seen in Junkbondland in a month, since $2.66 billion priced in five tranches back on April 5, according to data compiled by Prospect News.

The day’s sole pricing activity took place in the European market, as Norican A/S, a Danish provider of metal parts machining and preparation equipment and services, priced €340 million of six-year secured notes.

While no dollar pricings actually occurred on Friday, the sources said that partial terms emerged on a recent private placement by Swiss global maritime energy drilling contractor Transocean Ltd. That company sold $410 million of five-year secured paper to help fund the construction of a deepwater drilling rig.

Avantor, a materials supplier to the pharmaceutical and biotech industries, was heard to be in the process of lining up at least $5 billion of bank debt and bond financing for its planned acquisition of sector peer VWR International Inc. However, while the bank debt is rapidly taking shape, details on the bond portion of the financing have yet to emerge.

In the secondary arena, traders said that Thursday’s deals, including Wynn Resorts Ltd., New Gold Inc. and AV Homes, Inc. all continued to trade at a premium to their issue prices.

Statistical market performance measures turned mixed on Friday after being lower across the board on Thursday – their first losing session since April 18.

For the week, the indicators moved lower versus where they had finished last Friday.

Norican prices in euro market

The day’s sole pricing was heard to have come out of Europe, as Denmark’s Norican (B2/B) priced €340 million of 4.5% senior secured notes due 2023 at par via bookrunners JPMorgan and SEB.

The company – a Copenhagen-based provider of metal parts machining and preparation equipment and services – plans to use the proceeds from that Regulation S offering, along with cash on hand, to refinance bank debt and to repay shareholder loans used to fund the April 28 acquisition of Light Metal Casting Solutions Group GmbH.

Transocean terms emerge

Back in the dollar-denominated world, offshore oil and drilling contractor Transocean Ltd. said its subsidiary Transocean Conqueror Ltd. completed a $410 million private placement of 5.52% senior secured notes due 2022.

Full terms on the deal via sole arranger Pareto Securities were not available.

The Zug, Switzerland-based company plans to use the approximately $403 million of new-deal proceeds to partially fund the construction of its newest drilling rig, the Deepwater Conqueror.

Avantor planning bond deal

Elsewhere, market sources said that Avantor Performance Materials, Inc., a Center Valley, Pa.-based supplier of ultra-high-purity materials for the life sciences and advanced technology industries, is lining up at least $5 billion of bank and bond-debt financing for its planned acquisition of sector peer VWR International LLC.

That transaction, including assumed debt, is valued at $6.4 billion.

The sources said that the company is first moving on the bank debt financing, including $5 billion in U.S. and euro first-lien term loans and a $500 million revolver, which may be reduced by the amount of commitments under the company’s receivables securitization facility.

Bonds will also be a part of the final capital structure, although their timing and precise structure is still nebulous at this point.

The financing is being done via Goldman Sachs Bank USA, Barclays, and Jefferies LLC.

A busier week

With no new deals pricing in the dollar-denominated market on Friday, issuance for the week remained where it was at the close of Thursday’s big session, with $4.59 billion of new dollar-denominated and fully junk-rated paper from domestic and industrialized-country borrowers having priced in eight tranches, according to data compiled by Prospect News.

That was well up from the $1.72 billion in five tranches which priced the previous week, ended April 28, and was about on a par with the $4.48 billion in 10 tranches for the week before that, ended April 21.

This week’s primary activity raised year-to-date issuance for 2017 so far to $104.74 billion in 192 tranches – considerably more than the $68.06 billion which had priced in 90 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 deals hold their own

Friday’s secondary market was meanwhile calmer than Thursday’s had been.

A trader said Friday morning that “the only notable thing is that all these deals are pricing at the tight end to the price talk and trading to premiums.” The deals continued to hold their own in Friday’s dealings.

A trader said that New Gold’s 6 3/8% notes due 2025 had firmed to around the 102 bid area, up around ½ point on the day.

A second trader pegged the bonds in a 101¾ to 102¼ bid context.

The Toronto-based gold-mining company priced a quick-to-market $300 million of 6 3/8% notes due 2025 at par on Thursday. Those bonds firmed in initial aftermarket dealings to 101 3/8 bid on busy volume of over $17 million and continued to rise on Friday.

The new Wynn Resorts 5¼% notes due 2027 were “slightly better,” a trader said Friday, seeing the Las Vegas-based gaming and hospitality company’s new deal above the 101 bid mark.

Another market source had it at 100 7/8 bid, 101 1/8 offered.

Wynn priced a quickly shopped $900 million of those bonds at par – Thursday’s single largest deal – and they were quoted later in the session in a 100¾ to 101 bid range.

AV Homes’ 6 5/8% notes due 2022 “did some volume today” a trader said, seeing them move up to around the 101¾ bid level, which he called better by ¼ point on the day.

The Scottsdale, Ariz.-builder priced $400 million of the notes at par in Thursday’s sole regularly scheduled forward calendar deal. It was upsized from $300 million.

He said the notes had moved up around 1½ points on the break Thursday, though on not much volume, “so they had their move.”

On Friday, in contrast, the deal “had volume – but not much in the way of price movement.”

A lackluster session

One of the traders called the day’s dealings “lackluster”

For instance, he said, there had been little or no real market reaction to better-than-expected April jobs numbers released Friday morning by the U.S. Labor Department – non-farm payrolls rose by 211,000 jobs, exceeding Wall Street’s expectations of around 190,000 new jobs, while the unemployment rate fell to 4.4%, its lowest point since May 2007, versus the 4.6% which had been expected.

Even so, “it didn’t seem to move the needle much,” he declared.

A second trader said that “it has been a quiet day, with not much reaction to the good employment numbers. I believe people are waiting for the development in Europe over the weekend [i.e. the French presidential election]. I thought the jobs numbers were surprisingly good – but there were not many fireworks.”

Indicators turn mixed

Statistical market performance measures turned mixed on Friday after being lower across the board on Thursday – their first losing session since April 18. The indicators had also been mixed on Tuesday and Wednesday, and were higher all around for three consecutive sessions before that.

For the week, though, the indicators moved lower versus where they had finished last Friday, when they had strengthened all around.

The KDP High Yield Daily Index moved up by 1 basis point Friday to 72.11, after nosediving by 13 bps on Thursday, its second straight loss after one unchanged session. Before that it had firmed for six consecutive sessions.

Its yield came in by 1 bps to 5.16% on Friday after widening by 5 bps on Thursday and being unchanged on Wednesday.

But those levels compared unfavorably with the 72.19 index reading and 5.12% yield last Friday.

The Markit CDX Series 28 Index was up 1/8 point on Friday at 107½ bid, 107 17/32 offered. It had ended down for a third session in a row on Thursday, backtracking by over ¼ point.

It was about unchanged on the week.

The Merrill Lynch North American High Yield Index was off for a second straight session on Friday, retreating by 0.056%, on top of Thursday’s 0.233% loss, which had broken an 11-session winning streak.

The loss dropped the index’s year-to-date return to 3.687% on Friday from Thursday’s 3.745% – which itself was down from Wednesday’s close at 3.987%, which had been its eighth straight new year-to-date high.

For the week, the index was down by 0.144%, its first weekly loss after five straight weekly gains.

© 2015 Prospect News.
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