Morning Commentary: McDermott downsized, heard to be widening; Boyne bonds soar

By Paul A. Harris

Portland, Ore., March 28 – The high-yield new issue bazaar commanded most of the market's attention early Wednesday as dealers toiled to clear a busy pre-holiday calendar against a backdrop of ongoing chop in the global capital markets, and ahead of an early close on Thursday.

McDermott International Inc. downsized its offering of senior notes (B2/B-) to $1.3 billion from $1.5 billion.

In addition, the Houston-based engineering and design company withdrew its long-dated tranche of notes, which would have come with an eight-year maturity, from the bond deal it has in the market.

The revised offering now features $1.3 billion of six-year notes, upsized from $950 million.

Official price talk is pending. Initial talk had the deal coming to yield 8 3/8% to 8½%; however, that talk is moving wider, a trader said on Wednesday morning.

The bonds are expected to price on Thursday.

Elsewhere in Wednesday morning developments, W/S Packaging Holdings Inc. talked its $250 million offering of five-year senior secured notes (B3/B) to yield 8¾% to 9%.

Official talk comes on top of early guidance.

Books close at 3 p.m. ET on Wednesday and the deal is set to price thereafter.

McDermott and W/S Packaging join Coty Inc., in the market with a downsized $1.5 billion (from $2 billion) offering of senior notes (B2/BB).

On Tuesday the New York-based beauty company revised its dual currency, multi-tranche deal and set formal price talk.

The revised offer features three tranches of notes instead of the four that the company launched into the market last week.

The revised deal includes euro-denominated five-year notes talked to yield in the 4% area.

It also includes euro-denominated eight-year notes talked to yield in the 4½% area.

The sole remaining dollar-denominated portion of the deal is also coming as a tranche of eight-year notes talked to yield 6% to 6¼%, on top of initial guidance.

A proposed tranche of dollar-denominated 10-year notes has been withdrawn.

Wyndham, a big Thursday

The new issue market customarily remains quiet on Holy Thursday, in anticipation of an early bond market close ahead of Good Friday and the extended holiday weekend.

However, this time around dealers are setting the stage for what figures to be a busy, albeit foreshortened Thursday session.

Wyndham Hotels & Resorts, Inc. talked its $500 million offering of eight-year senior notes (Ba2/BB-) to yield 5¼% to 5½%.

Books close at 4 p.m. ET on Wednesday, except for accounts on the West Coast of the United States with arrangements to meet with the company.

The acquisition financing deal is set to price on Thursday.

Along with Wyndham, Charles River Laboratories International Inc. is expected to price $500 million of eight-year senior notes (expected ratings B1/BB+) on Thursday, although it had previously been expected to clear on Wednesday, sources say.

Initial guidance has the deal coming to yield 5½% to 5¾%, a trader said.

And Ply Gem Holdings Inc. is expected to price a $645 million offering of eight-year senior notes (expected ratings Caa1/CCC+) before the Thursday close.

Initial price talk is 7% to 7¼%.

Boyne bonds soar

With volatility rocking equities on Wednesday morning, junk was flat and unchanged, a trader said.

The new Boyne USA, Inc. 7¼% senior secured second-lien notes due May 2025 (B2/B) were active and sharply higher in the secondary market at 102 bid on Wednesday morning.

The $400 million issue priced at par on Tuesday, at the tight end of the 7¼% to 7½% yield talk, and inside of the 7½% to 7¾% initial guidance.

It played to an order book that was four times the deal size, sources said.

The deal, which was helmed by bookrunner Wells Fargo Securities LLC, was perceived to be priced relatively cheap and came with second-lien security and decent assets, a trader remarked on Wednesday morning.

Away from recent issues, the unsecured bonds of CHS/Community Health Systems, Inc. were modestly higher on news that the Franklin, Tenn.-based company signed a definitive agreement to sell three Tennessee hospitals, according to a bond trader.

The CHS 7 1/8% senior notes due July 2020 were 80¾ bid, ups ¼ to ½ point.

However, sale news failed to move the needle on the secured paper, the trader said, spotting the CHS 6¼% senior secured notes due March 2023 at 93¼ bid, unchanged on the day.

Elsewhere Permian-focused energy names were catching a bid on Wednesday, as news circulated that Concho Resources Inc. will buy shale oil producer RSP Permian Inc. in an $8 billion all-stock deal, a trader said.

Mixed Tuesday flows

The daily cash flows of the dedicated high-yield bond funds were mixed on Tuesday, a trader said.

High-yield ETFs saw $223 million of inflows on the day.

However, actively managed funds sustained $75 million of outflows on Tuesday, the source added.

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