TTM, Wabash, SemGroup, Wild Horse cap nearly $12.4 billion week; Toys tumbles anew

By Paul Deckelman and Paul A. Harris

New York, Sept. 15 – The high-yield primary sphere finished out one of its biggest weeks ever with a flourish, as four issuers brought a total of $1.15 billion of new dollar-denominated and fully junk-rated paper to market in four tranches.

That capped a week which saw more than $12 billion get done in two-dozen tranches, according to data compiled by Prospect News – the second-heaviest new-issue week so far this year.

Three of the four issues were regularly scheduled deals coming off the forward calendar.

High-tech manufacturer TTM Technologies, Inc. priced $375 million of eight-year notes while diversified industrial manufacturer Wabash National Corp. also did an eight-year deal, weighing in at $325 million.

Midstream energy company SemGroup Corp. priced $300 million of 8.5-year securities.

Also out of the energy patch, oil and gas exploration and production operator WildHorse Resource Development Corp. did a quick-to-market $150 million add-on to its existing 2025 notes.

All three scheduled deals moved up in active aftermarket dealings.

There was also considerable secondary activity in recent deals, including Thursday’s offerings from Delphi Powertrain, Avolon Holdings Ltd. and iStar Inc.

Away from the new deals, traders noted a renewed slide in Toys ‘R’ Us, Inc. bonds on new talk of a possible Chapter 11 filing down the road and vendor reluctance to ship to the retailer.

Statistical market performance measures were mixed for a second consecutive session on Friday.

For the week, the indicators were up across the board from where they had finished last Friday, Sept. 8, after having been mixed that week. It was the third week in the last four in which the indicators were higher across the board.

TTM prices inside talk

A busy Friday session saw four issuers complete single tranche deals – three at the conclusions of roadshows – to raise $1.15 billion.

All four deals cleared at their announced sizes.

Executions continue to point to an issuer-friendly market. One deal priced inside of talk. One came at the tight end. The remaining two priced on top of talk.

TTM Technologies priced a $375 million issue of eight-year senior notes (B2/BB) at par to yield 5 5/8%.

The yield printed 12.5 bps inside the 5¾% to 6% yield talk.

J.P. Morgan was on the left for the debt refinancing.

Wabash National prices tight

Wabash National priced a $325 million issue of eight-year senior notes (B1/B+) at par to yield 5½%.

The yield printed at the tight end of yield talk that was set in the 5 5/8% area.

Morgan Stanley and Wells Fargo were the joint bookrunners for the acquisition deal.

SemGroup at a discount

SemGroup priced a $300 million issue of 7¼% 8.5-year senior notes (B3/B+) at 98.453 to yield 7½%.

The yield printed on top of yield talk that was fixed in the 7½% area.

Credit Suisse, Scotia, Wells Fargo, ABN Amro, Barclays, BBVA, BMO and BNP Paribas were the joint bookrunners for the debt refinancing.

WildHorse gallops by

In the Friday session’s sole drive-by, WildHorse Resource Development priced a $150 million add-on to its 6 7/8% senior notes due Feb. 1, 2025 (Caa1/B) at 98.26 to yield 7.181%.

The reoffer price came in line with the 98.25 initial guidance.

Wells Fargo was the left bookrunner for the debt refinancing. BMO, Barclays, BofA Merrill Lynch, Citigroup and JP Morgan were the joint bookrunners.

Bigger than advertised

With Friday’s $1.15 billion in the tally the torrid Sept. 11 week saw total issuance of $12.38 billion in 24 junk-rated, dollar-denominated tranches.

That pace is unsustainable, a trader asserted on Friday.

Heading into the Labor Day holiday weekend, some market-watchers were anticipating a moderate, below-average September in the high-yield new issue market, the trader recounted.

Some September estimates called for as little as $15 billion in the run-up to October.

However that number has been left in the dust. With Friday’s business in the book, September to date has seen $18 billion in 32 tranches.

Not everyone was looking for such muted September issuance, however.

Some estimates were more or less in line with the average September issuance during the past half decade: $36.6 billion, according to Prospect New data.

That could still materialize, a syndicate banker said on Friday.

And although the Sept. 18 week is unlikely to put up the kind of numbers seen in the week past, it will still be a decent week, the banker asserted, forecasting another $10 billion in the week ahead.

A quick look at the forward calendar suggests that $10 billion is absolutely doable. The Sept. 18 week will get underway with $4.66 billion of announced business, including Avantor, Inc.’s massive $4.25 billion three-part acquisition financing deal.

The U.S. roadshow for the deal was scheduled to start on Thursday. Two of the three tranches are dollar-denominated: $1,401,000,000 of seven-year secured notes guided at 5¼% to 5½% and $2.25 billion of eight-year unsecured notes guided at 7 3/8% to 7 5/8%. The deal also features €500 million of seven-year secured notes.

Stada starts Monday

In the European session, Stada Arzneimittel AG held management calls with investors on Friday and plans to start a European roadshow on Monday for an €825 million two-part offering of high-yield notes backing the buyout of the German pharmaceutical company by Bain Capital and Cinven.

Two special-purpose vehicles will be the issuing entities for the Rule 144A and Regulation S deal.

Nidda Healthcare Holding AG is selling €485 million of seven-year senior secured notes (expected ratings B2/B+/BB-).

Nidda BondCo GmbH is selling €340 million of eight-year senior unsecured notes (expected ratings Caa1/B-/B-).

The roadshow is scheduled to wrap up on Wednesday.

Global coordinator Citigroup is the left lead for the secured tranche. Global coordinator JPMorgan is the left lead for the unsecured tranche.

Barclays, Commerzbank, Deutsche Bank, ING, Jefferies, Nomura, SG CIB and UBS are the bookrunners.

Proceeds will be used to refinance the bridge loan backing the buyout.

Thursday inflows

Cash flows for dedicated high-yield bond funds were moderately positive on Thursday, the most recent session for which data was available at press time, a trader said.

High-yield ETFs saw $63 million of inflows on the day.

Actively managed funds saw $15 million of inflows on Thursday.

However bank loan fund were negative on the day, sustaining $10 million of outflows on Friday, the trader said.

Issuance ramps up

Friday’s four deals, totaling $1.15 billion of new paper, brought the week’s total issuance of junk bonds to $12.38 billion in 24 tranches, according to data compiled by Prospect News.

That was well up from last week, ended Sept 8, when $5.61 billion of new paper had gotten done in eight tranches.

It was one of the biggest new-issuance weeks of this or any other year, second only in 2017 to the $17.54 billion which priced in 26 tranches during the week ended March 10 – which was also the heaviest one-week junk market volume ever.

The week’s new deals raised year-to-date issuance for 2017 so far to $192.54 billion in 357 tranches, running about 15% ahead of the $165.97 billion which had priced in 248 tranches by this point on the 2016 calendar, the Prospect News data indicated.

Day’s deals trade actively

A trader said Friday that the heavy pace of new issuance this week was enough to make one’s head spin, while another said “this market is just non-stop. I hate it,” explaining that there was so much new paper floating around that it was difficult to gain a focus on any one issuer.

A trader said that more than $60 million of the new TTM Technologies 5 5/8% notes due 2025 changed hands when that issue hit the aftermarket.

He saw the Costa Mesa, Calif.-based printed circuit-board manufacturer’s bonds trading in a par to 101¾ bid range, with the final prints in a 101 to 101½ bid area. They priced earlier at par.

He saw more than $50 million of SemGroup’s 7¼% notes due March 2026 having traded, with the Tulsa, Okla.-based midstream energy company’s new notes finishing in a 99 to par context, up from their 98.435 issue price.

And more than $40 million of Lafayette, Ind.-based diversified industrial manufacturer Wabash National’s new 5½% notes due 2025 moved around, with that paper moving up to a 101 to 101 3/8 bid context from its par issue price.

The trader said, however, that he had seen little in the way of aftermarket action in Houston-based oiler WildHorse Development’s 6 7/8% add-on notes due 2025.

Thursday deals stay busy

A trader said that “the market’s focus remains the new deals” and those which have priced during the week.

“All were pretty well-received,” he said, “up around at least ¼ to ½ point in initial trading, some more, although there really were no screamers” jumping multiple points.

The only underperformer he could think of was Golden Nugget, Inc.’s two-part offering, which came to market in two parts on Tuesday and was “a little sloppy” at first.

But he said that the underwriters for the Las Vegas-based gaming and hospitality company’s deal “stepped in and scooped up supply and helped to stabilize it.”

At another desk, Golden Nugget’s 8¾% senior subordinated notes due 2025 were seen in a par to 100¾ bid context.

Among the deals which priced on Thursday, a trader saw Avolon Holdings’ 4½% notes due 2023 trading between par and 100 5/8 bid, with around $34 million changing hands, while the Hong Kong and Dublin-based aircraft leasing company’s 3 3/8% notes due 2021 finished at 100¼ bid, 100 5/8 offered, with over $17 million traded.

He marveled that “this was ridiculous – the coupon is so low yet how come people are still buying it?”

He said New York-based financial services firm iStar’s 4 5/8% notes due 2020 ended at 101 1/8 bid, 101 13/16 offered, with over $47 million traded, while its 5¼% notes due 2022 were even busier, with turnover of over $72 million. Those bonds ended in a par to 100¾ bid context.

And he saw more than $60 million of automotive components maker Delphi Powertain’s 5% notes due 2025 changing hands, between 101 and 101½ bid.

Toys gets trashed

Away from the new deals, Toys ‘R’ Us’ bonds were not faring well in Friday trading, extending the hefty losses seen on Thursday into the final trading session of the week.

A trader said the 7 3/8% notes due 2018 fell into the mid-40s, a loss of 10 to 15 points on the day.

“I guess we’ll see how much longer they can survive before they have to file,” he said.

At another desk, a trader called the 7 3/8% notes off 12 to 13 points at 46. That compared to 51 at the open, he noted.

The trader also added that the paper is down 35 to 30 points from the beginning of the week.

On Thursday, Bloomberg reported that some of the Wayne, N.J.-based toy retailer’s vendors were cutting shipments amid concerns that a bankruptcy filing is imminent. Additionally, the costs to insure shipments have become too expensive, the article said.

The article also said that financial advisor Lazard was trying to talk banks into supplying the company with a loan – possibly of the debtor-in-possession variety – that it can use while it tries to hammer out a restructuring plan.

Another trader noted the persistent Chapter 11 rumors that have floated around since the recent news of the hiring of Kirkland and Ellis for legal restructuring advice.

Indicators remain mixed

Statistical market performance measures were mixed for a second consecutive session on Friday. They had turned mixed on Thursday after being unchanged to higher on Wednesday. The indicators had also been mixed on Tuesday and higher across the board on Monday.

For the week, the indicators were up across the board from where they had finished last Friday, Sept. 8, after being mixed that week. It was the third week in the last four in which the indicators have been higher across the board.

The KDP Daily High Yield Index lost 6 basis points on Friday, ending at 72.28, after rising by 8 bps on Thursday and being unchanged on Wednesday.

Its yield widened by 3 bps to 5.16% after coming in by 2 bps on Thursday and finishing unchanged on Wednesday.

Last Friday, the index reading was 72.24 and the yield was 5.16%.

But the Markit CDX Series 28 High Yield Index edged up by 1/16 point Friday to end at 107¼ bid, 107 9/32 offered, after having lost nearly 7/32 point Thursday.

It was up from last Friday’s 106 25/32 bid, 106 27/32 offered finish.

The Merrill Lynch North American High Yield Index made it five advances in a row on Friday, firming by 0.004% on top of gains of 0.07% Thursday and Wednesday’s 0.014% improvement.

The latest upturn raised the index’s year-to-date return to 6.494% from 6.49% on Thursday, establishing a fifth straight new 2017 year-to-date peak level.

For the week, the index rose by 0.215%, its fifth straight weekly gain.

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