No pricings, but roadshow calendar builds; new Aradagh, United Rentals busy; Midstates up after filing

By Paul Deckelman and Paul A. Harris

New York, May 2 – The high yield primary sphere stopped for a breather on Monday – the first trading day of May – after Friday’s big session that saw some $3.9 billion of new dollar-denominated and fully junk-rated paper price in four tranches, capping a busy $6.255 billion week.

Syndicate sources said that no such new deals priced on Monday – but there was considerable news going on behind the scenes, with a trio of potential issuers heard to have hit the road to market their transactions to prospective investors.

Probably the best-known upcoming issuer is United States Steel Corp., which plans to sell $500 million of fiver-year secured notes.

Software maker PTC, Inc. began marketing $500 million of eight-year notes.

And Vector Group Ltd., a tobacco company, plans to do fungible $200 million add-on to its existing 2021 secured notes.

Back among the junk deals that have actually priced, the various dollar-denominated tranches of Friday’s giant-sized multi-part offering from glass packaging producer Ardagh Group were among the busiest credits in Junkbondland on Monday, with the unsecured notes doing especially well.

Friday’s other offering, from equipment rental and leasing company United Rentals, Inc., was seen actively trading at a solid premium to where those bonds had priced.

On the other hand, traders reported little real action in the trio of deals that priced earlier last week, from BlueScope Steel, McGraw-Hill Global Education Holdings LLC and Kaiser Aluminum Corp.

Away from the new or recently priced deals, Midstates Petroleum Co. Inc.’s bonds were actively trading at higher levels following the energy company’s Chapter 11 filing.

Statistical market performance measures were mixed for a third consecutive session on Monday, their fourth such session in the last five trading days.

PTC guiding 6% to 6¼%

No deals were priced as May got underway in the high yield primary market on Monday.

There were roadshow announcements.

PTC, Inc. began a roadshow on Monday for a $500 million offering of eight-year senior notes (expected ratings Ba3/BB-).

The offer, which is in the market with initial yield guidance of 6¼% to 6½%, is expected to price on Wednesday.

Bookrunner J.P. Morgan is part of a syndicate of underwriters that includes Barclays, Fifth Third, HSBC, Janney Montgomery, KeyBanc, RBC, RBS, Santander, SunTrust, TD, Huntington and U.S. Bancorp Investments Inc.

The Needham, Mass.-based software company plans to use the proceeds to pay down its revolver.

U.S. Steel brings secured notes

United States Steel Corp. began a roadshow on Monday for a $500 million offering of five-year senior secured notes.

The deal, which is in the market with initial guidance in the low 9% yield context, is expected to price Wednesday, a trader said.

J.P. Morgan, Morgan Stanley, Barclays, BofA Merrill Lynch, Wells Fargo, PNC and Scotia are the joint bookrunners.

The Pittsburgh-based steel company plans to use the proceeds to repay debt, focusing on near-term maturities, with any remaining proceeds to be used for general corporate purposes.

Vector tapping 7¾% secured

Vector Group Ltd. began a roadshow on Monday for a $200 million fungible add-on to its 7¾ % senior secured notes Feb. 15, 2021.

The offer is set to price on Wednesday morning via sole bookrunner Jefferies.

Early price guidance is 103 to 103.5, a trader said.

The Miami-based tobacco holding company plans to use the proceeds for general corporate purposes including additional investments in real estate through its wholly owned subsidiary New Valley LLC and in its existing tobacco business.

The original $450 million issue priced at par in February 2013. A previous $150 million add-on priced at 106.75 to yield 6.113% in April 2014.

Mixed flows on Friday

The dedicated high yield bond funds saw mixed flows on Friday, the most recent session for which data was available at press time, a trader said.

High yield ETFs sustained $862 million of outflows on the day.

However actively managed funds were positive, seeing $100 million of inflows on Friday.

New Ardagh issues active

In the secondary arena, traders saw brisk volume in the three dollar-denominated tranches of new bonds that Dublin, Ireland-based glass packaging manufacturer Ardagh Group priced on Friday as part of a $4.5 billion equivalent five-part transaction, which also included two euro-denominated tranches. That deal –upsized sharply from the originally announced $2.85 billion equivalent – priced as a regularly scheduled forward calendar offering via the company’s Ardagh Holdings USA Inc. and Ardagh Packaging Finance plc subsidiaries.

“Ardagh was doing good,” one trader said, seeing its7¼% senior unsecured notes due 2024 at 101¾ bid, and its 4 5/8% senior secured notes due 2023 and senior secured floating-rate notes due 2021 both trading around 100¼ bid.

“All were trading well,” he said.

The company had priced $1 billion of the 4 5/8% notes and $1.65 billion of the 7¼% notes both at par, while the $500 million of floaters, carrying an initial coupon of 325 basis points over Libor, priced at 99.5

A second trader said that over $36 million of the 4 5/8% notes were finishing the day at 100¼ bid, which he called actually off by more than ¼ point from the 100 9/16 lever at which the bonds had gone home on Friday, when over $24 million had traded.

He said that the7¼s were unchanged on the day at 101½ bid on volume of over $30 million, on top of the more than $52 million of that paper which had traded in initial aftermarket dealings after Friday’s pricing.

And he said that the floaters gained 1/8 point on the session, to 100¼ bid, on volume of over $19 million. More than $12 million of the notes had traded on Friday.

At another desk, a market source saw two-sided markets between par and 100 3/8 bid for the 4 5/8s, between 101¼ and 101¾ for the 7¼’s, and between 100 1/8 and 100½ for the floating-rate notes.

United Rentals firms

One of the traders said that the three Aradagh dollar-denominated tranches, “trading fairly well, given the size and the breadth of the deal, were among the day’s most actively traded junk issues.

He said that meantime Friday’s other deal – Stamford, Conn.-based equipment rental and leasing company United Rental’s 5 7/8% notes due 2026 – “were pretty active as well,” seeing those notes ending at 101¼ bid, “up slightly from where they were going out on Friday.”

More than $15 million of the notes changed hands on Monday, although that was a fall-off from the more than $49 million of turnover seen on Friday, after the $750 million drive-by issue had priced at par via the company’s United Rentals (North America) Inc. subsidiary, racking up a solid 1 1/8 point gain in those initial aftermarket dealings.

Other deals less traded

With Friday’s new offerings attracting most of the attention in the secondary realm, market participants saw relatively little trading in the three new issues which had come to market last Thursday.

Around $4 million of McGraw-Hill Global Education Holdings’ 7 7/8% notes due 2024 traded on Monday, with the bonds finishing up 3/8 on the day at 103 bid.

The New York-based provider of education materials priced $400 million of those notes at par, after the forward calendar offering was downsized from an originally planned $670 million. The bond shot up to above the 102 bid mark in initial aftermarket dealings, and then continued to firm on Friday, and again on Monday.

BlueScope Steel’s 6½% notes due 2021 eased by ¼ point on the session Monday, ending at 102 bid, with around $3 million traded.

The Melbourne, Australia-based manufacturer of flat steel products priced $500 million of the notes at par via its BlueScope Steel (Finance) Ltd. and BlueScope (Americas) LLC subsidiaries after the forward calendar offering was upsized from $300 million originally.

The bonds initially traded as well as 103 bid, before falling back a little later to around the 102 bid mark.

Kaiser Aluminum’s 5 7/8% notes due 2024 were seen Friday at 102 3/8 bid, about unchanged on the day, with around $2 million traded.

The Foothill Ranch, Calif.-based aluminum products manufacturer priced $375 million of the notes at par on Thursday, after the quickly shopped offering was upsized from $325 million originally.

The bonds moved up to 102 bid in initial aftermarket dealings and stayed around that level on Friday and again on Monday.

Midstates up after filing

Away from the new deals, a trader said that Midstates Petroleum’s 10% second-lien notes due 2020 were meantime trading up to a 53 to 54 context, which compared to previous levels in the mid-40s, the trader said.

That rise followed the Tulsa, Oka.-based oil and natural gas exploration and production company’s weekend Chapter 11 filing.

Another trader said that the bonds were “fairly active,” around 53 bid, trading flat, versus 45 bid last week. Over $26 million of the notes traded.

“These are second-lien – so obviously there’s a little bit more value than where they had been trading,” he concluded.

Indicators turn mixed

Statistical market performance measures were mixed for a third consecutive session on Monday, their fourth such session in the last five trading days, with only an across the board gain last Wednesday as the exception to the rule.

The KDP High Yield Daily index notched its first loss after three consecutive gains, its fourth loss in the last seven sessions.

However, its yield, atypically, came in by 1 bp, tightening to 6.13%, its fourth straight narrowing. It had also tightened by 1 bps on Friday.

Yields typically rise when the index reading falls, or vice versa.

The Markit Series 26 CDX North American High Yield index gained 1/32 point on Monday, ending at 102 15/16 bid, 102 31/32. On Friday, it had retreated by 3/16 point.

The Merrill Lynch North American High Yield Master II index advanced on Monday, by 0.024%, after having lost 0.04% on Friday.

The latest upside move lifted the index’s year-to-date return to 7.398%, a new peak level for the year so far.

That topped the previous high point of 7.391%, set this past Thursday.

On Friday, it had closed at 7.348%.

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