Coty, Charles River price; McDermott widens talk; Tronox trades down; Tesla dominates

By Paul A. Harris and Abigail W. Adams

Portland, March 28 – The clock is ticking for the primary market to clear a cluttered pre-holiday calendar with $2.696 billion in four deals still in the works.

Dealers toiled Wednesday to work through a busy roadshow calendar of deals expected to clear the market ahead of the pre-holiday close.

Ply Gem Holdings Inc., Wyndham Hotels & Resorts, Inc. and W/S Packaging Holdings set price talk with Ply Gem and Wyndham scheduled to price on Thursday.

McDermott International Inc. downsized its offering of senior notes (B2/B-) to $1.3 billion from $1.5 billion and set price talk that was dramatically wider than initial guidance. The deal is also scheduled to price on Thursday.

While W/S Packaging was scheduled to price Wednesday, terms were not available by press time.

Charles River Laboratories International Inc. priced a $500 million issue of eight-year senior notes (B1/BB+) at par to yield 5½%. The new notes were immediately seen up at 101 3/8 bid.

Coty Inc. priced a downsized, revised $1.5 billion three tranche offering of senior notes (B2/BB) on Wednesday. While the dollar denominated tranche saw heavy trading volume on a quiet day in the secondary space, the new 6½% paper closed the day at par.

Boyne USA, Inc.’s 7¼% senior secured second-lien notes due 2025 (B2/B) continued to soar on Wednesday while Tronox Inc.’s 6½% senior notes due 2026 (B3/B-) were seen trading below their issue price.

While the new paper was active in Junkbondland, Tesla Inc.’s 5.3% senior notes due 2025 (Caa1) dominated trading activity in the space as investor confidence in the electric car manufacturer wanes amidst an onslaught of negative publicity.

The notes were highly volatile during Wednesday’s session. However, they were only down about 5/8-point at market close, a market source said.

Coty prices downsized offering, USD notes active

Coty Inc. completed a downsized, revised $1.5 billion three-part senior notes transaction (B2/BB) on Wednesday, according to market sources.

The deal included €550 million of five-year notes that priced at par to yield 4%. The yield printed in the middle of yield talk in the 4% area.

The deal also included €250 million in eight-year notes priced at par to yield 4¾%. The yield printed 12.5 basis points beyond the wide end of yield talk in the 4½% area.

In the deal’s sole dollar-denominate tranche, Coty priced $550 million of eight-year notes at par to yield 6½%. The yield printed 25 bps beyond the wide end of the 6% to 6¼% yield talk.

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

Joint bookrunner Morgan Stanley will bill and deliver for the dollar-denominated notes.

Joint bookrunner BNP Paribas will bill and deliver for the euro-denominated notes.

Proceeds, together with new credit facilities, will be used to repay in full and refinance the existing credit facilities. The $500 million amount by which the bond offering is reduced will be made up by means of a draw on the revolving credit facility.

The dollar-denominated 6½% notes were going out a tad better on Wednesday, at par bid, par ¼ offered, a trader said.

The new 6½% notes were among the most heavily traded of Wednesday’s session with $53.5 million in play. However, the notes were relatively unchanged at the market close with the final trade of the day at par, according to a market source.

Charles River prices, trades higher

Charles River priced $500 million in eight-year senior notes (B1/BB+) at par to yield 5½%.

The yield printed at the tight end of official yield talk and initial guidance, both of which had been set at 5½% to 5¾%.

The acquisition financing deal went pretty well, according to a bond trader. The par-pricing notes were seen at 101 3/8 bid on Wednesday.

J.P. Morgan, BofA Merrill Lynch, Citigroup, TD and Wells Fargo Securities LLC were the joint bookrunners.

McDermott downsizes, widens talk

McDermott International downsized its offering of senior notes (B2/B-) to $1.3 billion from $1.5 billion and set talk in the 10½% area. Price talk is dramatically wider than the initial guidance of 8 3/8% to 8½%.

The Houston-based engineering and design company also 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 bonds are expected to price on Thursday.

Joint global coordinator and joint bookrunner Barclays will bill and deliver.

The deal is coming in connection with the merger of McDermott and Chicago Bridge and Iron (CB&I). Proceeds will be used to repay debt at both entities and for general corporate purposes.

The $200 million amount by which the bond offer is downsized will be made up by increasing the term loan by the same amount, moving the loan size to $2.26 billion from a revised amount of $2.06 billion.

The loan had previously been downsized from $2.15 billion.

Price talk

Ply Gem Holdings talked its $645 million offering of eight-year senior notes (expected Caa1/confirmed CCC+) to yield 7¾% to 8%, according to market sources.

Official talk comes well wide of the 7% to 7¼% initial guidance.

Books close at 9:30 a.m. ET on Thursday. The Rule 144A for life deal is set to price thereafter.

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

The deal is also set to price Thursday.

Joint bookrunner Barclays will bill and deliver.

Finally, W/S Packaging Holdings 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 were scheduled to close Wednesday afternoon and the deal was expected to price shortly thereafter. However, no terms were available at press time.

Mixed Tuesday flows

The daily cash flows of the dedicated high-yield bond funds were mixed on Tuesday, the most recent session for which data was available at press time, a trader said.

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

Boyne bonds soar

Boyne’s 7¼% senior secured second-lien notes due 2025 (B2/B) were active and sharply higher in the secondary market at 102 bid on Wednesday morning. The notes continued to trade up as the session progressed.

They were seen at 102¼ bid, 103 offer in the early afternoon and closed the day at 102¼, according to market sources.

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 said.

The mountain resort company is using proceeds to finance its previously announced acquisition of seven resorts, including Brighton Resort near Salt Lake City, Utah, Cypress Mountain in Vancouver, B.C., Gatlinburg Sky Lift in Tennessee, Loon Mountain Resort in New Hampshire, Sugarloaf and Sunday River Resort in Maine, and The Summit at Snoqualmie near Seattle, Wash.

Tronox trades down

Tronox’s 6½% senior notes due 2026 (B3/B-) were active but trading down in the secondary space. The notes saw steady trading volume with about $40 million traded during Wednesday’s session. However, most trades were below their issue price, a market source said.

Most of the prints were in the 99¾ to 99 7/8 range. “They’re trading pretty poorly,” the source said. “The pricing wasn’t cheap enough and the coupon wasn’t high enough.”

Tronox priced the $615 million issue in a quick-to-market Tuesday trade.

The yield printed at the wide end of yield talk in the 6 3/8% area, which was also the initial guidance.

Proceeds will be used to refinance the Stamford, Conn.-based mining and inorganic chemical company’s 7½% senior notes due 2022.

Tesla dominates

Tesla’s 5.3% senior notes due 2025 (Caa1) dominated Junkbondland during Wednesday’s session. The notes were volatile in high-volume trading. The 5.3% notes traded to a low of 86 and a high of 88 3/8, a market source said.

Despite the volatility, the notes closed the day down just 5/8 of a point. Almost $70 million of the bonds traded on what market sources described as a quiet day.

“Those will probably bounce around the 80s for a while but I wouldn’t be surprised if they trade higher eventually," a trader said.

With a recent onslaught of negative publicity, investor confidence in the electric car manufacturer is waning.

“People are reading the headlines and getting concerned,” a source said.

Moody’s Investors Service downgraded the 5.3% notes to Caa1 from B3 on Tuesday and changed the outlook to negative citing Tesla’s large negative free cash flow.

Hedge fund manager John Thompson of Vilas Capital Management has publicly stated he expects Tesla to be bankrupt within four months.

The National Transportation Safety Board announced Tuesday it is investigating the fatal accident involving a Tesla Model X in California on March 23 to determine whether the semi-automated driving system was engaged at the time of the accident.

And, investors challenging Tesla’s $2.6 billion acquisition of SolarCity were given the greenlight on Wednesday to push forward with their lawsuit alleging the acquisition of the renewable energy company was flawed.

CHS gains

CHS/Community Health Systems, Inc. 7 1/8% senior notes due July 2020 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, up ¼ to ½ point, early in the session. The notes continued to climb to close the day at 81¾.

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

Indexes down

The KDP High Yield Daily index was down to 70.20 on Wednesday with the yield gaining 1 bps to 5.91%.

The Merrill Lynch High Yield index lost 88 bps on Wednesday with its negative year-to-date return now 0.979%.

The CDX high yield 29 index was down 25.7 bps on Wednesday.

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