New Enterprise, Forterra price; thyssenkrupp, Winnebago trade up; Occidental gains continue

By Paul A. Harris and Abigail W. Adams

Portland, Me., July 1 – The U.S. high-yield primary market was slow on Wednesday, slowing down since the start of the week, sources said.

The biggest of Wednesday's pair of deals, while dollar-denominated, came from a Britain-based company.

Forterra plc priced an upsized $500 million issue of five-year senior secured notes (B3/B-).

New Enterprise Stone & Lime Co., Inc. became possibly the last U.S.-based company to do a deal before the holiday weekend with its $200 million issue of eight-year senior notes (Caa1/CCC+).

While the domestic high-yield market was quiet, the European market was active.

Algeco Global Finance plc and B&M European Value Retail SA joined Titan Cement International SA and RENK AG on the forward calendar with euro- and sterling-denominated offerings.

Meanwhile, the secondary space was equally quiet with many already checked out ahead of Thursday’s early close.

While volume was light, the market was poised for a strong end to the week after a soft beginning.

The overall market closed the day up about ¼ point after opening the day in the red, sources said.

The dollar-denominated notes of Germany-based thyssenkrupp Elevator were putting in a strong performance in the secondary space.

Winnebago Industries, Inc.’s 6¼% senior notes due 2028 (B2/BB) were also trading with a large premium.

Occidental Petroleum Corp.’s three tranches of senior notes (Ba2/BB+/BB) continued to gain in active trading.

Wednesday’s session

Quiet pervaded the U.S. high-yield primary market on Wednesday, as it has since the beginning of the week, sources said.

Monday, Tuesday and Wednesday were like vacation days, said a trader in New York, working from home.

After posting the biggest month in the history of the market, dealers generally appeared to be catching their breath, as high yield wound its way toward the extended Independence Day weekend in the United States, set to get underway following Thursday's recommended early close.

The European market, however, has been another story.

Indeed, much of the June 29 week in the new issue market has come with a European cachet, including the week's two megadeals from Germany's thyssenkrupp Elevator and Austria's ams AG, both of which came with sizable dollar-denominated tranches.

During Wednesday's session, Forterra plc priced an upsized $500 million issue of five-year senior secured notes at par to yield 6½%.

The issue size increased from $400 million.

The yield came 12.5 basis points through yield talk in the 6¾% area. Early guidance was in the high 6% area to 7%.

New Enterprise Stone & Lime priced a $200 million issue of eight-year senior notes at par to yield 9¾% on Wednesday.

The yield printed at the tight end of the 9¾% to 10% yield talk.

European primary active

As the U.S. new issue market will pause for the rockets' red glare, high-yield syndicates in Europe figure to be busy.

Algeco Global Finance plc pitched a €150 million offering of notes mirroring its 6½% senior secured notes due March 15, 2023 (expected ratings B2/B-/B+) on a call with investors.

And B&M European Value Retail SA announced a £350 million offering of five-year senior secured notes (Ba3/BB-).

Meanwhile Greece's Titan Cement International SA is already on the road with €250 million of seven-year senior notes (BB).

And German drivetrain manufacturer RENK AG is shopping a €300 million offering five-year senior secured notes (B1/B) on a roadshow set to wrap up Thursday.

thyssenkrupp in demand

The dollar-denominated tranches from thyssenkrupp Elevator’s megadeal were trading with large premiums on Wednesday with the demand seen during bookbuilding for the notes following them into the secondary space.

Vertical U.S. Newco Inc.’s 5¼% senior notes due 2027 were marked at par ¼ bid, 101¼ offered in the early afternoon, according to a market source.

Vertical Holdco GmbH’s 7 5/8% notes due 2028 were marked at 101¾ bid, 102½ offered.

Germany-based thyssenkrupp priced a $1.56 billion tranche of the 5¼% notes and a $445 million tranche of the 7 5/8% notes at par as part of a €4.05 billion equivalent five-tranche offering.

The deal also included a €1.1 billion tranche of seven-year notes that priced at par to yield 4 3/8%, a €500 million tranche of seven-year senior secured floating-rate notes that priced at 99.5 with a coupon of Euribor plus 475, and a €650 million tranche of eight-year notes that priced at par to yield 6 5/8%.

The deal was heard to have played to massive demand with $23 billion equivalent in orders across the five tranches.

Proceeds will be used to fund the leveraged buyout of the elevator technology company.

Winnebago trades up

Winnebago’s 6¼% senior notes due 2028 were also putting in a strong performance in the secondary space.

The notes shot up to 102 in active trading, according to a market source.

While the issue was small, the bonds were active with more than $20 million in reported volume heading into the market close.

Winnebago priced a $300 million issue of the 6¼% notes at par in a Tuesday drive-by.

The yield printed at the tight end of the 6¼% to 6½% yield talk and tighter than the 6½% to 6¾% initial talk.

The offering from the RV maker was heard to have played to $2.2 billion in orders.

Occidental gains

Occidental’s recently priced senior notes continued to gain in active trading on Wednesday.

Occidental’s 8 7/8% senior notes due 2030, the largest and most liquid of the recently priced tranches, traded up to a 101-handle heading into the market close.

They were poised to end the day at 101¾, according to a market source.

The bonds were active with more than $17 million on the tape.

Occidental’s 8½% senior notes due 2027 also gained 1 point to close Wednesday at 101 1/8 with more than $13 million in reported volume.

While volume was light, Occidental’s 8% senior notes due 2025 gained 5/8 point to close the day at 101.

While each tranche priced at par on June 26, they were weak their initial days in the market with each tranche trading in the 98 to 99 range.

The weakness in the notes was attributed to the overall weakness in the market.

However, the market was firmer on Wednesday.

The energy space was also improved as crude oil futures ticked higher on a surprise inventory decline. WTI crude oil futures settled at $39.82 on Wednesday, an increase of 55 cents or 1.4%.

Indexes gain

Indexes were on the rise on Wednesday.

The KDP High Yield Daily index gained 10 basis points to close the day at 64.84 with the yield now 6.6%.

The index dropped 4 points on Tuesday and was down 34 points on Monday.

The ICE BofAML US High Yield index gained 28.7 bps with the year-to-date return now negative 4.491%.

The index gained 44 bps on Tuesday after dropping 39.1 bps on Monday.

The CDX High Yield 30 index gained 22 bps to close Wednesday at 99.53. The index gained 81 bps on Tuesday after falling 39 bps on Monday.

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